/GIL_annualreport_2005_06 by Godrej

Annual Report 2005 -2006

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 & President (Group Corporate Affairs)

T.A. Dubash

Executive Director & President (Marketing)

M. Eipe

Executive Director & President (Chemicals)

M.P. Pusalkar

Executive Director & President (Corporate Projects)

COMPANY SECRETARY S.K. Bhatt

AUDITORS Kalyaniwalla & Mistry, Chartered Accountants

Godrej Industries Limited 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

CONTENTS

Mandideep

Page Nos.

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

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

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

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

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

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

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

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

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

BRANCHES

Delhi

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

SUBSIDIARIES

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

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

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

Krithika Agro Farm Chemicals and Engineering Industries Private Limited ......................................

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

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

100

Girikandra Holiday Homes & Resorts Limited ....

107

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

110

Godrej Waterside Properties Private Limited ......

113

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

115

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

121

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

126

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

128

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

132

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

137

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

141

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

London

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 2005 -2006

GODREJ INDUSTRIES LIMITED – FINANCIAL HIGHLIGHTS (Rs. Lac) 2005-06

2004-05

2003-04

2002-03

2001-02

2919 34216

2919 30618

2919 26197

2919 21511

3699 21030

24911 7803 3818 73667

22075 3557 2502 61671

16814 4235 2972 53137

14815 7432 3466 50143

15051 13456 1347 54583

28594 37135 5719 2219

25100 33577 2868 126

25656 26533 739 209

28130 18646 2944 423

29099 14619 9987 878

73667

61671

53137

50143

54583

Total Income Expenditure other than Interest and Depreciation

80270 69660

82353 70117

73355 64243

67780 57737

53465 43408

Profit before Interest, Depreciation and Tax Interest (net)

10610 2837

12236 2582

9112 580

10043 2024

10057 3218

7773 2260

9654 2148

8532 2150

8019 2211

6839 2154

5513 (3106) 82

7506 — 401

6382 — 365

5808 — 421

4685 624 150

8537 1417

7105 (470)

6017 (494)

5387 2119

3911 923

(2)

(57)

(153)

(121)

7112

7577

6568

3421

3109

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

Profit before Depreciation and Tax Depreciation Profit before Tax and exceptional items Exceptional items - expense/(income) Provision for Current Tax Net Profit after Tax Provision for Deferred Tax Adjustment in respect of prior years - (income) Net Profit after taxes and adjustments

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

Total Income 2005-2006 Break-up of Total Income Rs. Lac

Total Expenditure 2005-2006 Break-up of Total Expenditure Rs. Lac

Godrej Industries Limited NOTICE TO SHAREHOLDERS NOTICE is hereby given that the EIGHTEENTH ANNUAL GENERAL MEETING of the members of GODREJ INDUSTRIES LIMITED will be held on Monday, July 24, 2006 at 4.30 P.M. at Y B Chavan Centre, Nariman Point, Mumbai – 400 021, to transact the following business:ORDINARY BUSINESS : 1.

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

2. 3. 4. 5. 6. 7.

To declare dividend for the financial year ended March 31, 2006. To appoint a Director in place of Mr. J.N. Godrej, who retires by rotation and being eligible offers himself for re-appointment. To appoint a Director in place of Ms. T.A. Dubash, who retires by rotation and being eligible, offers herself for re-appointment. To appoint a Director in place of Mr. V.F. Banaji, who retires by rotation and being eligible offers himself for re-appointment. To appoint a Director in place of Mr. M. Eipe, who retires by rotation and being eligible offers himself for re-appointment. To appoint Auditors to hold office from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting, and to authorize the Board of Directors of the Company to fix their remuneration. M/s. Kalyaniwalla & Mistry, Chartered Accountants, the retiring Auditors are eligible for re-appointment.

SPECIAL BUSINESS : 8.

To consider and, if thought fit, to pass with or without modification(s), the following resolution as a SPECIAL RESOLUTION :RESOLVED THAT subject to the provisions of Sections 269, 309, Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956, approval of the Company be and is hereby accorded for the re-appointment and remuneration payable to Ms. T.A. Dubash as a Whole-Time Director of the Company designated as Executive Director & President (Marketing), for a period of three years from April 1, 2007 to March 31, 2010 on the terms and conditions as contained in the Agreement to be entered into between the Company and Ms. T.A. Dubash, a draft of which is placed before the meeting and for the purpose of identification, initialed by the Chairman.

To consider and, if thought fit, to pass with or without modification(s), the following resolution as a SPECIAL RESOLUTION :RESOLVED THAT subject to the provisions of Sections 269, 309, Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956, approval of the Company be and is hereby accorded for the re-appointment and remuneration payable to Mr. V. F. Banaji as a Whole-Time Director of the Company designated as Executive Director & President (Group Corporate Affairs) for a period of three years from April 1, 2007 to March 31, 2010, on the terms and conditions as contained in the Agreement to be entered into between the Company and Mr. V. F. Banaji, a draft of which is placed before the meeting and for the purpose of identification, initialed by the Chairman.

10. To consider and, if thought fit, to pass with or without modification(s), the following resolution as a SPECIAL RESOLUTION :RESOLVED THAT subject to the provisions of Sections 269, 309, Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956, approval of the Company be and is hereby accorded for the re-appointment and remuneration payable to Mr. M. Eipe as a Whole-Time Director of the Company designated as Executive Director & President (Chemicals), for a period of three years from April 1, 2007 to March 31, 2010 on the terms and conditions as contained in the Agreement to be entered into between the Company and Mr. M. Eipe, a draft of which is placed before the meeting and for the purpose of identification, initialed by the Chairman. 11. To consider and, if thought fit, to pass with or without modification(s), the following resolution as a SPECIAL RESOLUTION :RESOLVED THAT subject to the provisions of Sections 269, 309, Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956, approval of the Company be and is hereby accorded for the remuneration payable to Mr. M. P. Pusalkar as a Whole-Time Director of the Company designated as Executive Director & President (Corporate Projects), for a period of three years from April 1, 2007 to March 31, 2010 on the terms and conditions as contained in the Agreement to be entered into between the Company and Mr. M. P. Pusalkar, a draft of which is placed before the meeting and for the purpose of identification, initialed by the Chairman. 12. To consider and, if thought fit, to pass with or without modification(s), the following resolution as a SPECIAL RESOLUTION :RESOLVED THAT subject to the provisions of Section 314 and other applicable provisions, if any of the Companies Act, 1956, approval of the Company be and is hereby accorded to the revision in remuneration payable to Mr. Pirojsha A. Godrej, son of Mr. A.B. Godrej, Chairman of the Company, with effect from April 1, 2006 on the terms and conditions as detailed in the Explanatory Statement hereto. 13. To consider and if deemed fit, to pass, with or without modification(s), the following resolution as an ORDINARY RESOLUTION: RESOLVED THAT pursuant to Section 13, 16 and 94 and any other applicable provisions of the Companies Act, 1956, the provisions contained in Articles of Association of the Company and any other applicable law for the time being in force and as may be amended from time to time and subject to such conditions and modifications, if any, as may be prescribed or imposed while granting such approvals, permissions and sanctions, if any, which may be agreed to, by the Board of Directors of the Company (which term shall be deemed to include any Committee which the Board may constitute, to exercise its powers including the powers conferred by this resolution), the existing Equity Shares of the face value of Rs.6/- (Rupees Six) each in the Share Capital of the Company be sub-divided into 6 (Six) Equity Shares of the face value Re.1 (Rupee one) each and consequently, the Equity Share Capital of the Company of Rs. 80,00,00,000/- (Rupees Eighty Crore only) comprising of 13,33,33,333 (Thirteen Crore Thirty Three Lac Thirty Three Thousand Three Hundred Thirty Three) equity shares of Rs.6/- (Rupees Six) each be divided into 80,00,00,000 (Eighty crore) equity shares of the face value of Re.1 (Rupee one) each, with effect from the ‘Record Date’ to be determined by the Board of Directors of the Company for the purpose. 4

Annual Report 2005-2006

RESOLVED FURTHER THAT the issued, subscribed and fully paid–up Equity Share Capital of the Company, as on the Record Date that may be fixed by the Board of Directors of the Company (hereinafter referred to as “the Board” which expression shall be deemed to include any duly authorized committee thereof), be sub-divided from 4,86,41,942 equity shares of the face value of Rs. 6/- each into 29,18,51,652 (Twenty nine crore eighteen lac fifty one thousand six hundred fifty two) equity shares of the face value of Re.1/- (Rupee one) each. RESOLVED FURTHER THAT the Board be and is hereby authorised to inform the Registrar and Transfer Agents of the Company and the depositories to take necessary action to give effect to the above and also to issue new share certificates representing the sub-divided shares with new distinctive numbers (except in case of shares held in the demat form), in the aforesaid proportion subject to the rules as laid down in the Companies (Issue of Share Certificates) Rules 1960 with an option to either exchange the new share certificates in lieu of cancellation of the old share certificates or without physically exchanging the share certificates, by treating the old share certificates, as deemed to be cancelled or by credit of sub-divided equity shares in shareholders’ demat accounts in exchange of old share certificate/s. RESOLVED FURTHER THAT the Board be and is hereby severally authorised to do all such acts, deeds, matters and things and execute all such documents, instruments and writings as may be required in the said connection and to delegate all or any of the powers herein vested in them to give effect to the above. 14. To consider and if deemed fit, to pass, with or without modification(s), the following resolution as an ORDINARY RESOLUTION: RESOLVED THAT pursuant to the provisions of Section 16 of the Companies Act, 1956 and any other provisions as may be applicable the existing Memorandum of Association of the Company be altered by deleting the existing Clause V and substituting in place thereof the following Clause as Clause V: The Authorised Capital of the Company is Rs.180,00,00,000/- (Rupees One Hundred Eighty Crore) divided into 80,00,00,000 (Eighty crore) Equity Shares of Re.1/- (Rupee one) each, and 10,00,00,000 (Ten Crore) Unclassified Shares of Rs.10/-each. 15. To consider and if deemed fit, to pass, with or without modification(s), the following as SPECIAL RESOLUTION: RESOLVED THAT pursuant to the provisions of Section 31 and other applicable provisions, if any, of the Companies Act, 1956 and the provisions of any other law as may be applicable for the time being in force, the Articles of Association of the Company be altered by deleting the existing Article 3 and substituting in place thereof the following as Article 3: 3.

The Authorised share capital of the company is Rs.180,00,00,000/- (Rupees One Hundred Eighty Crore) divided into 80,00,00,000 (Eighty crore) Equity Shares of Re.1/- (Rupee one) each, and 10,00,00,000 (Ten Crore) Unclassified Shares of Rs.10/- each with power to the Board of Directors of the Company to divide the shares in the capital of the Company for the time being into several classes therein and to make such modifications therein as the Board may deem fit, and with power to increase or reduce the capital of the Company and to divide the shares in the capital for the time being into several classes and to attach thereto respectively such preferential, deferred qualified or special rights, privileges or conditions as may be determined by or in accordance with the Articles of Association of the Company and to vary modify, amalgamate or abrogate any such rights, privileges or conditions in such manner as may for the time being be provided by the Articles of Association of the Company and as may be thought expedient. Notwithstanding anything contained herein, the Company shall be entitled to dematerialise its shares, debentures and other securities pursuant to the Depositories Act, 1996 and to offer its shares, debentures and other securities for subscription in a dematerialised form. By Order of the Board of Directors S. K. BHATT Executive Vice-President (Corporate Services) & Company Secretary

Mumbai, May 26, 2006 Registered Office : Pirojshanagar, Eastern Express Highway, Vikhroli (East), Mumbai 400 079. NOTES : 1.

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

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.

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

Those Members who have so far not encashed their dividend warrants for the below mentioned financial years, may claim or approach the Company for the payment thereof as the same will be transferred to the ‘Investor Education and Protection Fund’ of the Central Government, pursuant to Section 205C of the Companies Act, 1956 on the respective dates mentioned thereagainst. Please note that as per Section 205C of the Companies Act, 1956, no claim shall lie against the Company or the aforesaid Fund in respect of individual 5

Godrej Industries Limited amounts which remain unclaimed or unpaid for a period of seven years from the date the dividend became due for payment and no payment shall be made in respect of such claims. Dividend for the Financial Year ended 31.03.2000

Due date for transfer 01.07.2007

31.03.2001

28.07.2008

31.03.2002

14.08.2009

31.03.2003

25.08.2010

31.03.2004

26.07.2011

31.03.2005

26.07.2012

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

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

EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956 Item nos.8 to 11 The tenure of the following Whole-time Directors with the Company will expire on March 31, 2007. Ms. T.A. Dubash – Executive Director & President (Marketing) Mr. V.F.Banaji – Executive Director & President (Group Corporate Affairs) Mr. M. Eipe – Executive Director & President (Chemicals) It is proposed to re-appoint Ms. T.A. Dubash, Mr. V.F. Banaji, and Mr. M. Eipe for a further period of three years from April 1, 2007 to March 31, 2010. Mr. M.P. Pusalkar was reappointed by the Shareholders at their Meeting held on July 26, 2005, as a director liable to retire by rotation pursuant to Section 255 of the Companies Act, 1956. However, the approval of shareholders to the remuneration payable to him as a Whole-time Director will expire on March 31, 2007. Hence, it is proposed to approve his remuneration as a Whole-time Director for a period of three years from April 1, 2007 to March 31, 2010 along with the other Whole-time Directors. The proposed remuneration and terms and conditions of appointment of each of the aforementioned Whole-time Directors are given below :1.

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

Period of appointment of Ms. T.A. Dubash – from 1/4/2007 to 31/3/2010 Mr. V.F. Banaji - from 1/4/2007 to 31/3/2010 Mr. M. Eipe – from 1/4/2007 to 31/3/2010 Mr. M.P. Pusalkar – from 1/4/2007 to 31/03/2010

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

Fixed Compensation: Fixed Compensation shall include Basic Salary and the Company’s Contribution to Provident Fund and Gratuity Fund. The Basic Salary shall be in the range of Rs.1,70,000/- to Rs. 5,00,000/- per month, payable monthly. The Annual increments will be decided by the Compensation Committee/Board of Directors depending on the performance of the Whole-time Director, the profitability of the Company and other relevant factors. The Basic Salary approved for the year 2006-07 for each of the above Whole- time Director is within the range of Rs.1,70,000 – Rs.3,00,000 per month.

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

Flexible Compensation: In addition to the Fixed Compensation and PLVR, each Whole-time Director will be entitled to the following allowances, perquisites, benefits, facilities and amenities as per rules of the Company and subject to the relevant provisions of the Companies Act, 1956 (collectively called “perquisites and allowances”). These perquisites and allowances may be granted to each Whole-time Director in the manner as the Board may decide.

Annual Report 2005-2006

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

Furnishing at residence as per rules of the Company;

Supplementary Allowance;

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

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

Payment/reimbursement of Food Vouchers, petrol reimbursement;

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

Payment/reimbursement of telephone expenses;

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

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

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

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

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

ii)

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

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

5. Loans (a) Granting of loans according to Company’s Scheme subject to Central Government’s approval, if applicable. (b) Continuation of Loans already availed: Contingency Loan to Mr. M.P. Pusalkar as on March 31, 2006 – Rs.24,999/-. Notes : I.

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

II.

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

III. The limits specified above are the maximum limits and the Compensation Committee / Board may in its absolute discretion pay to Wholetime Directors lower remuneration and revise the same from time to time within the maximum limits stipulated above. IV. In the event of any re-enactment or re-codification of the Companies Act, 1956 or the Income Tax Act, 1961 or amendments thereto, the foregoing shall continue to remain in force and the reference to various provisions of the Companies Act, 1956 or the Income Tax Act, 1961 shall be deemed to be substituted by the corresponding provisions of the new Act or the amendments thereto or the Rules and notifications issued thereunder. V.

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

VI. Whole-time Directors are appointed by virtue of their employment in the Company and their appointment is subject to the provisions of Section 283(1) of the Companies Act, 1956 while at the same time the Whole-time Directors are liable to retire by rotation. The appointment is terminable by giving three months’ notice in writing on either side. Draft of the agreements to be entered into with each of the above referred Whole-time Directors is available for inspection at the Registered Office of the Company from 10.00 A.M. to 12.00 Noon, Monday to Friday (except public holidays) upto the date of the Annual General Meeting. 7

Godrej Industries Limited The particulars given above constitute the abstract of the terms of the agreement which is required to be given to every member under the provisions of Section 302 of the Companies Act, 1956. The Board of Directors of the Company recommends passing of the resolution as set out at Item no.8 to 11 of the Notice. Ms. T.A. Dubash, Mr. V.F. Banaji, Mr. M. Eipe and Mr. M.P. Pusalkar may be deemed to be interested in the resolutions at Item no.8 to 11 respectively. Mr. A.B. Godrej, being relative of Ms. T.A. Dubash, may be deemed to be interested in the resolution at item no.8. None of the other Directors of the Company are concerned or interested in the resolutions. Item no.12 Mr. Pirojsha A. Godrej was appointed as an employee of the Company with effect from June 1, 2004. It is proposed to revise the remuneration payable to Mr. Pirojsha A. Godrej with effect from April 1, 2006 on the following terms and conditions :1.

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

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

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

Furnishing at residence as per rules of the Company;

Supplementary Allowance;

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

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

Payment/reimbursement of Food Vouchers, petrol reimbursement;

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

Payment/reimbursement of telephone expenses;

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

The maximum limit of cost to the Company per annum for all the heads of flexible compensation payable to Mr. Pirojsha A. Godrej shall be Rs.50,000/- plus 55% of the annual basic salary. For the year 2006-07 the cost to the Company under all the heads of flexible compensation payable to Mr. Pirojsha A. Godrej shall be Rs.3,06,000/- plus 55% of annual basic salary. In addition to the above, Mr. Pirojsha A. Godrej will be eligible to encashment of leave, group insurance cover, group mediclaim cover, and/or any other allowances, perquisites and facilities as per the Rules of the Company. Notes: 1.

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

The following shall not be included in the computation of perquisites : (a) Provision for use of Company’s car with driver for official use. (b) Provision of free telephone facilities or reimbursement of telephone expenses at residence including payment of local calls and long distance official calls.

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

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

Mr. A.B. Godrej and Ms. T.A. Dubash being relatives may be deemed to be interested in the resolution. None of the other Directors of the Company are concerned or interested in the resolution. 8

Annual Report 2005-2006

Item nos.13 to 15 At present the Company’s paid up and listed equity Share Capital is Rs. 29,18,51,652/- which is divided into 4,86,41,942 equity shares of Rs.6/- each. The Board is of the view that the liquidity of the equity shares of the Company in the stock markets should be increased. Towards this end, it is proposed to reduce the nominal value of equity shares of the Company by sub-dividing the equity shares to make it more affordable to the retail investors. Therefore, it is proposed that the nominal value of equity shares of the Company be reduced from Rs. 6/- each to Rs. 1/- each. Consequent to the sub-division of shares, it is necessary to alter the Capital Clause of the Memorandum and Articles of Association of the Company. The Ordinary Resolution in Item No. 14 and Special Resolution in Item No. 15 seek to make corresponding amendments in Clause V of the Memorandum of Association and Article 3 of the Articles of Association of the Company to give effect to the above. The Board of Directors believes that such issue is in the interest of the Company and therefore recommends the resolutions for your approval. The Directors of the Company may be deemed to be interested in this Resolution to the extent of their respective shareholdings in the Company. The Board of Directors of the Company recommends the passing of the resolutions as set out at Items no. 13 to 15 of the Notice. By Order of the Board of Directors S. K. BHATT Executive Vice-President (Corporate Services) & Company Secretary Mumbai, May 26, 2006 Registered Office : Pirojshanagar, Eastern Express Highway, Vikhroli (East), Mumbai 400 079. Details of the Directors seeking appointment/reappointment at the forthcoming Annual General Meeting (in pursuance of Clause 49 of the Listing Agreement) Mr. J.N. Godrej (57) : Mr. J.N. Godrej holds a bachelor’s degree in Mechanical Engineering and a masters’ degree in Business Administration from the Illinois Institute of Technology, USA. He is a Director on the Board of the Company from 7-3-1988. He joined the Board of Directors of Godrej & Boyce Mfg Co Ltd. (G&B) in 1974. He was appointed Managing Director of G&B in 1990 and became Chairman of the Board of G&B in 2000. Mr. Godrej is President of World Wide Fund for Nature, India, Vice President of World Wide Fund for Nature-International, past President of Confederation of Indian Industry and past President of the Indian Machine Tool Manufacturer’s Association.

Directorship in other Companies : Chairman & Managing Director: Godrej & Boyce Mfg Co Ltd. Chairman: Geometric Software Solutions Co. Ltd., 3D PLM Software Solutions Ltd., Lawkim Ltd. Director: Bajaj Auto Ltd., Godrej Agrovet Ltd., Godrej Foods Ltd., Godrej Sara Lee Ltd., Godrej Properties Ltd., Godrej Consumer Products Ltd., Godrej Beverages & Foods Ltd., Godrej Upstream Ltd., Haldia Petrochemicals Ltd., Breach Candy Hospital Trust, Antrix Corporation Ltd., Godrej Investments Pvt. Ltd., Tata Trustee Company Pvt. Ltd., Illinois Institute of Technology (India) Pvt. Ltd., Godrej (Malayasia) Sdn. Bhd., Godrej (Singapore) Pte. Ltd., Godrej (Vietnam) Company Ltd., Godrej & Khimji (Middle East) LLC. Committee position held: Chairman – Investor Grievances & Redressal Committee, Compensation Committee-Geometric Software Solutions Ltd. Member – Audit Committee, Shareholders/Investors Grievances Committee-Bajaj Auto Ltd. Member – Compensation Committee-Haldia Petrochemicals ltd. Trustee – General Committee-Breach Candy Hospital Trust. Ms. T.A. Dubash (37): Ms. T.A. Dubash, Executive Director & President (Marketing), is a graduate in Economics & Political Science from Brown University, USA and has completed an Advanced Management Program from the Harvard Business School. She looks after the Group wide marketing function which involves: A supervisory role in all marketing initiatives, including being in charge of marketing of new initiatives of the Group. Heading a Marketing Council comprising of heads of marketing of all Group companies to capitalize on synergies such as sharing of best practices and development of standardized processes through training and knowledge management. Directorship in other Companies : Chairperson: Ensemble Holdings & Finance Ltd., Director: Tahir Properties Ltd., Girikandra Holiday Homes & Resorts Ltd. Godrej Global Mideast FZE, Godrej Agrovet Ltd., Keyline Brands Ltd., Godrej Holdings Pvt. Ltd. Committee position held: Member: Shareholders Committee-Godrej Industries Ltd. 9

Godrej Industries Limited V. F. Banaji (52): Mr. V.F. Banaji is B.A. from Nagpur University. His responsibilities as ED & President (Group Corporate Affairs) include leadership of the Group HR function for Godrej Industries and Associate Companies as well as Corporate Strategy and Corporate Communications. Before joining the Company he was based in Paris as leader of ALSTOM’s global project for re-engineering key HR processes and supporting them through the deployment of a state-of-the-art HR Management System. Prior to his international assignment, he worked as Executive Director (HR) for ALSTOM in India. His earlier career was with the Tatas, where his last assignment was as Head of the Corporate HR function for Telco (now Tata Motors).

Directorship in other Companies : Nil Committee position held: Member – Shareholders Committee-Godrej Industries Ltd. Mr. Mathew Eipe (53) : Mr. Mathew Eipe graduated in Chemical Engineering from the Indian Institute of Technology, Mumbai, in 1975. He is a Management graduate from the Indian Institute of Management, Kolkata. He joined the erstwhile Godrej Soaps Limited, as a Management Trainee in 1977. Currently, he heads the Chemicals, Medical Diagnostics and Estate businesses of the Company and is designated as Executive Director & President (Chemicals). Mr. Eipe has been a member of the Committee of Administration of Basic Chemicals, Pharmaceuticals & Cosmetics Export Promotion Council (CHEMEXCIL) for the last two years. Directorship in other Companies : Director: Godrej Hicare Ltd., Ensemble Holdings & Finance Ltd. Committee position held: Member – Shareholders Committee-Godrej Industries Ltd.

Annual Report 2005-2006

DIRECTORS’ REPORT To the Shareholders,

SUBSIDIARY AND ASSOCIATE COMPANIES

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

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.

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, 2006 2005 Sales of products and services Other Income

74542 5728

76335 6018

Total Income Total Expenditure other than Interest and Depreciation

80270

82353

69660

70117

Profit before Interest, Depreciation and Tax Depreciation

10610 2260

12236 2148

8350 2837

10088 2582

5513 82 5431 1417

7506 401 7105 (470)

Profit after Current and Deferred Taxation 4014 Profit on sale of undertaking, extraordinary item (Net of tax) 3106 Net Profit 7120 Adjustments in respect of prior years (8) Surplus brought forward 20082 Profit after Tax available for appropriation 27194 Appropriation Your Directors recommend appropriation as under: Dividend on Equity Shares 2432 Tax on distributed profits 341 Transfer to General Reserve 711 Surplus Carried Forward 23710

7575

Profit before Interest and Tax Interest and Financial Charges (net) Profit before Tax Provision for Current Tax Profit after Current Tax Provision for Deferred Tax

Total Appropriation

27194

– 7575 2 15481 23058

1946 273 758 20082 23058

The total income reduced by 1.8% from Rs. 82353 lac to Rs. 80270 lac. The Net Profit for the year was Rs.7120 lac as compared to Rs. 7575 lac, in the previous year, a decrease of 5.95%. DIVIDEND The Board of Directors of your Company recommends a final dividend of Rs. 5/- per equity share of Rs. 6/- each, aggregating to Rs.2432 lac, as against final dividend of Rs. 4/- per equity share of Rs. 6/- each aggregating to Rs. 1,945 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 Developments Discussion on financial performance with respect to operational performance Segment-wise performance Human Resources and Industrial Relations Opportunities and Threats Internal Control Systems and their adequacy Risks and Concerns Outlook The same is appended as Annexure A to the Directors’ Report.

Godrej Agrovet Limited (GAVL) : The Operations of the Company was impacted due to the detection of Avian influenza in some parts of the country and unfavourable raw material prices due to delayed monsoon. The cumulative effect was a marginal increase of 7% in total income from Rs.56852 lac in the previous year to Rs.60556 for the year ended 31.03.06. The Profit after Tax however declined sharply from Rs.1417 lac to Rs.683 lac, a fall of 52%. As against a total dividend payment of 88% last year GAVL declared a dividend of 40%. GAVL has the following businesses viz. Animal feeds, Integrated poultry business, Agri inputs, Oil palm plantations and Plant biotech. The prolonged monsoon and detection of Avian influenza had its effect on the operations of the Animal Feeds and Integrated poultry business of the Company. As against this, the Agri Input business recorded a 40% growth in top line and a 49% growth in the bottom line. The ‘Aadhaar’ initiative to provide a complete solution to Agri Sector opened 7 new centres taking the total number of Aadhaars to 23. The Division also undertook a new initiative ‘Nature’s Basket’ in providing gourmet fresh fruits and vegetables through this retail chain. This initiative has also received a good response. GAVL acquired a majority stake in Krithika Agro Farm Chemicals & Engineering Industries Pvt. Ltd., Orissa during the year. GAVL has also formed a Joint Venture in UAE in the poultry business with a 70% stake in the company which operates under the name of Al-Rahba International Trading LLC which has commenced production in the second half of 2005-06. Goldmohur Foods and Feeds Limited (GFFL), a wholly owned subsidiary of GAVL was also impacted by the prolonged monsoon and Avian influenza detected in some parts of the country. The Total Income was marginally lower at Rs.29,588 lac as against Rs.30,860 lac in the previous year. The Profit after Tax however was Rs.538 lac as against Rs. 345 lac in the previous year. GFFL declared an interim dividend of 168% in the current year as compared to interim dividend of 163% in the previous year. Golden Feed Products Limited (GFPL) commenced operations during the year. It acquired the shrimp feed marketing business of Higashimaru Feeds India Ltd. effective 31st October, 2005. The postponement of the shrimp farming season affected the business and GFPL reported a revenue of Rs. 346 lac and a loss of Rs. 140 lac for 2005-06. Godrej Properties Limited (GPL) recorded an increase in Total Income of Rs. 2,862 lac from Rs. 4,185 lac in the previous year to Rs.7,046 lac in the current year. The Profit after Tax increased from Rs. 583 lac in the previous year to Rs.1,339 lac, an increase of 130%. GPL has declared an interim dividend of 96% as compared to 39.56% in the previous year. During the year, two commercial projects undertaken in Pune-Godrej Eternia C & Godrej Castlemaine were completely sold out. Phase-I of Godrej Collesium in Mumbai was also sold out. Commencement of Phase II is in full swing and is expected to be completed by December, 2006. The Company also commenced a residential complex in Bangalore which was well received. The projects in Thane and Kalyan are progressing as per schedule. The Company also acquired two private companies viz., Casablanca Properties Pvt. Ltd. and Bridgestone Properties Pvt. Ltd. during the year and has changed their names to Godrej Realty Pvt. Ltd. and Godrej Waterside Properties Pvt. Ltd. respectively. Godrej International Limited (GINL) has posted a net profit of US$ 382,566 in the current year as compared to US$ 399,262 in the previous year. GINL has proposed a final ordinary dividend of 6 US cents per ordinary share of £1 aggregating to US$ 156,300 on the entire

Godrej Industries Limited share capital including the increased share capital of about US$ 1.9 million raised during the year, as against a final dividend aggregating US$ 150,500 in the previous year. Godrej Global MidEast FZE (GGME), a 100% subsidiary of GINL registered a Net Profit of AED 191167 as compared to AED 190379 in the previous year. GGME has started exporting to Sudan and hopes to enter Pakistan soon.

On a consolidated basis GCPL earned a Total Income of Rs.70849 lac and PAT of Rs.12080 lac for the year ended March 31, 2006 GCPL is aggressively pursuing organic and inorganic growth opportunities consistent with EVA focus. The macro environment too is encouraging with increasing spend being witnessed by both urban and rural consumers. GCPL is expected to continue delivering strong growth and stakeholder value.

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

FINANCIAL POSITION

Godrej Global Solutions Ltd. (GGSL), a back-office transaction processing service company earned Total Income of Rs. 966.30 lac as against Rs. 290.57 lac in the previous year. During the year under review, GGSL acquired through its US subsidiary Godrej Global Solutions, Inc, the business of Outsource Offshore Inc. a US based healthcare forms processing service provider. GGSL also acquired the data conversion business of Softpage Data Conversion Private Ltd. During the year GGSL has set up a state of the art service delivery capability at Chennai and Navi Mumbai which can support customers in areas of Healthcare such as Medical transcription, medical billing, claims processing and document management services.

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

Godrej Beverages & Foods Ltd. (Formerly Godrej Tea Limited) (GBFL) earned a Total Income of Rs. 783 lac as compared to Rs. 1579 lac in the previous year. GTL recorded loss of Rs. 1717 lac as compared to loss of Rs. 2142 lac in the previous year. W.e.f. the close of business hours on March 31, 2006 GBFL acquired Foods Division (excluding Wadala factory) from Godrej Industries Ltd. under a slump sale agreement for a total consideration of Rs.70 crore. Further, IL&FS Investment Managers Ltd. invested Rs.60 crore in the equity share capital of GBFL for a 40% stake in the Company. Post this acquisition, GTL changed its name to GBFL. Post the acquisition, GBFL is expected to perform better in the coming years as its activities will broaden through both organic and inorganic growth and synergy. Godrej Sara Lee Limited (GSLL) experienced a good year both in terms of sales & profits. The Total Income increased by 12% and Profit after Tax registered an increase of 41% as compared to the previous year. The Company’s continuous focus on value engineering and cost reduction has shown good results. The exports business of the company has more than doubled during the year. The Company has launched Mini Jumbo coils under the brand “Good Knight” and Home fresheners under the brand “Ambipur” during the year. The Company has remained a dominant player in household insecticide market with mat market share of 35%. Godrej Consumer Products Limited (GCPL), a Company in which your company holds 11.93% has declared dividends aggregating to 350% in the current year as compared to 300% in the previous year. GCPL is a focused FMCG company. On a standalone basis GCPL earned a Total Income of Rs.66598 lac in the current year as compared to Rs. 56908 lac in the previous year. GCPL’s PAT in the current year increased to Rs.12070 lac as compared to Rs. 8606 lac in the previous year. In October 2005, GCPL acquired 100% ownership interest in Keyline Brands Ltd. (UK) through a 100% subsidiary SPV structure. Keyline is one of U.K.’s admired FMCG companies engaged in the manufacture, marketing, sales and distribution of cosmetics and toiletries with a strong portfolio of brands and a well developed customer base in numerous supermarket chains and discount stores. This transaction gives GCPL ownership of several international brands and trademarks including ‘CUTICURA’, ‘ERASMIC’ and ‘AAPRI’ in many countries. The Acquisition enables GCPL to widen geographical presence and access trade channels in key developed markets including Europe, Australia and Canada.

The financial position of your Company continues to be sound. The loan funds as at the end of the year is at Rs.32638 lac as compared to Rs. 25575 lac as at the end of the previous year. 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. MANUFACTURING FACILITIES Chemicals Division :

Valia : During the year under review, Export Oriented Unit (EOU) at Valia started commercial production. The factory has commissioned a “Pastillation plant” to cater to the domestic and international demand for long chain fatty alcohol in pastille form. The Pastillation plant is a fully automated plant. The factory won the National Award for Excellence in Water Management in Excellent Category in a competition organised by CII at Hyderabad for effecting water recycling mechanism and conservation of natural resources. Vikhroli : Various initiatives for de-bottlenecking, reducing costs and quality improvement has improved the throughput in the various plants. Considering the increasing demand for fractionated fatty acids, your Company has decided to increase the fractionation capacity at Vikhroli. During the year, the Vikhroli factory offered Voluntary Retirement Scheme (VRS) to the workers. 322 workers opted for VRS and as a result the workers strength has reduced to 678. The factories of the Chemicals Division at Vikhroli and Valia are already ISO 9001 certified for their quality management systems. Both factories have also 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. Foods Division : Foods Division had two manufacturing facilities; viz Wadala (Mumbai), and Mandideep near Bhopal. On 14th March, 2006, your Company signed a slump sale agreement for the Foods division with Godrej Tea Ltd. (Now known as Godrej Beverages & Foods Ltd.). As per the agreement, the foods division (except the Edible fats Wadala factory) has been sold to Godrej Tea Ltd. with effect from the close of working hours on 31st March, 2006. Post the restructuring Wadala factory is renamed as the Veg Oils Division of Godrej Industries Ltd. The factory at Mandideep is certified under ISO-14001 standards. The Mandideep Factory was awarded the ‘Best Outsourced Manufacturer Award’ in culinary category for the year 2005 by Hindustan Lever Ltd. RESEARCH AND DEVELOPMENT During the year under review, amongst the achievements of R & D of your Company the notable ones include collaborative research approach with detergent manufacturers to develop new generation detergent blends, developing the technology for the manufacture, transportation and storage of high active surfactant products and value addition to some by-products manufactured by your Company so as to enter certain niche markets. R & D efforts of your Company also focused on increasing intellectual property by filing four new patent applications.

Annual Report 2005-2006

INFORMATION SYSTEMS The e-CRM (electronic customer relationship management) module is being extended to cover International Customers which reinforces the organization’s commitment to provide top quality service to all its stakeholders. The Chemicals Division has also put in place a knowledge portal ensuring that important tacit knowledge amongst key employees is retained and reused by the organization. A number of new initiatives/modules have been added to the employee portal ‘Godrejite’ for the benefit of employees. These include the online access for GOLD (Godrej Organisation for Learning & Development) and Legal Online, etc. EMPLOYEE STOCK OPTION PLAN The shareholders at their Extraordinary General Meeting held on 1st December, 2005 had approved Godrej Industries Limited Employee Stock Option Plan (GIL ESOP) for grant of 15,00,000 (Fifteen Lac) Options convertible into 15,00,000 (Fifteen Lac) equity shares of the nominal value of Rs.6/- each to the employees/directors of the Company and/or its subsidiaries. To start with the Compensation Committee of the Company in its meeting held on 14th February, 2006 approved the grant of Options to the members of the Group Management Committee (GMC) which currently consists of Managing, Executive and Whole-Time Directors of the Company and/or its subsidiary companies. Details of the Options allotted under GIL ESOP, as also the disclosures in compliance with clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in the Annexure B to this Report.

Company will be entitled to the benefits of CDM in the form of Certified Emission Reduction units (CERs) on the basis of power units generated through windmills. FIXED DEPOSITS Your Company has stopped accepting Fixed Deposits from the public. Public Deposits of an aggregate amount of Rs. 180.09 lac which matured, have been repaid during the year. DEPOSITORY SYSTEM Your Company’s equity shares are available for dematerialisation through National Securities Depository Limited & Central Depository Services (India) Limited. As of 31st March, 2006, 99.39% of the equity shares of your Company were held in demat form. SUB-DIVISION OF EQUITY SHARES With a view to improve liquidity of Equity Shares of the Company on Stock Markets, the Board of Directors of your Company has, subject to approval of the Members in the forthcoming Annual General Meeting, recommended Sub-Division of Equity Shares of Rs.6/- each into Equity Shares of Rs.1/- each. The Company will separately announce the record date for sub-division in due course. DIRECTORS In accordance with Article 127 of the Articles of Association of the Company, Mr. J.N. Godrej, Ms. T.A. Dubash, Mr. M. Eipe and Mr. V.F. Banaji retire by rotation at the ensuing Annual General Meeting. They are eligible and offer themselves for re-appointment.

GROUP FOR INTERSE TRANSFER OF SHARES

AUDITORS

As required under Clause 3(1)(e) of the Securities and Exchange Board 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.

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.

ENVIRONMENT AND SOCIAL CONCERN Your Company continues its efforts for the betterment of the environment and conservation of scarce natural resources.

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

Your Company continued “Rain water harvesting” initiatives undertaken during the previous year at its factories at Vikhroli and Valia and in the staff quarters at Vikhroli. “Rain water harvesting” is a process by which rain water is collected and channelised into tanks for domestic consumption. So far 7655 Sq.Meter of roof area has been covered under the rain water harvesting initiative and 13,300 M3 of water has been collected at Vikhroli factory and staff quarters. This process has resulted in saving water and consequently, the costs, thereof.

AUDIT COMMITTEE

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

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

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 31st March, 2006. The members of the Audit Committee are Mr. F.P. Sarkari (Chairman), Mr. V. N.Gogate and Mr. S.A. Ahmadullah. DIRECTORS’ RESPONSIBILITY STATEMENT

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;

that such accounting policies have been selected and applied consistently, and such judgements 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.

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;

that the annual accounts have been prepared on a going concern basis.

The factories focused on waste elimination and also continued their energy conservation measures. Your Company also commissioned 5 windmills of 1.25 MW each in JulyAugust, 2005 at Dhule in Maharashtra. Windmills generate electricity from wind energy and are encouraged for augmenting the power generation in the country on account of their non-polluting nature. Wind power producing clean energy is a potential candidate for Clean Development Mechanism (CDM) benefits under the Kyoto Protocol of United Nations Framework Convention on Climate Change (UNFCCC). Your Company has already got approval from the Ministry of Environment and Forest for the project. Once approved by the UNFCCC, your

Godrej Industries Limited 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 D 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 (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 forms a part of the Directors’ 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 u/s 217(2A) of the

Companies Act, 1956. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary at the Registered office of the Company. The Notes 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 26, 2006

Annual Report 2005-2006

ANNEXURE "A" FORMING PART OF THE DIRECTORS’ REPORT MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENTS

CHEMICALS DIVISION

The Indian economy maintained its growth momentum in F.Y 2005-06 thanks to industrial resurgence, moderate inflation, growth in international trade, as well as, improving physical infrastructure. The index of industrial production and the growth trend for the last 2-3 years indicates an upswing in the economy and a steady growth of industry and services sector. The positive investor sentiment, evidenced by rise in stock market indices will also induce investment inflow into the country and augurs well for the economy.

The Chemicals division operates in the oleo-chemicals and surfactants industries. The division has a blend of domestic and international operations and continued its leadership position in the Indian market. With its strong manufacturing base and integrated systems, the division has been able to manufacture quality products and offer them at competitive prices. The sales of the division dropped about 6% in value terms during the year largely on account of a significant drop in the selling prices internationally, coupled with reduction in customs duty, which affected the domestic prices.

The overall performance of your Company has been satisfactory. Except the Chemicals division, most of the businesses performed better than the previous year. The division-wise performance and outlook have been covered separately in this report. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE The highlights of overall performance excluding extraordinary items are as follows: Rs. Lac Particulars 2005-06 2004-05 Sales 74548 76335 Total Income 80270 82353 Profit Before Taxation 5513 7506 Profit After Current Taxation 5431 7105 Profit After Current & Deferred Taxation 4014 7575 Earnings per Equity Share (Rupees) 8.24 15.58 Profitability ratios are as follows: PBDIT/Total Income 13.22% 14.86% PBT/ Total Income 6.87% 9.11% PAT/ Total Income 8.87% 9.20% Return on Capital Employed 11.76% 17.58% Return on Net Worth 12.31% 24.31% Basic EPS (Rs.) 8.24 15.58 The Financial risk ratios are as follows: Debt/Equity 0.94 0.77 Interest coverage 2.94 3.91 SEGMENT PERFORMANCE 1. Segment Revenue Chemicals Foods Estate Finance & Investments Others Total 2. Segment Results (PBIT) Chemicals Foods Estate Finance & Investments Others Total Less: Interest (Net) Less: Unallocated expenses (Net) Profit Before Tax 3. Segment Capital Employed Chemicals Foods Estate Finance & Investments Others Unallocated Total

2005-06

(Rs. Lac) 2004-05

51178 21117 2282 4575 1118 80,270

54307 19197 2158 5823 868 82,353

4,760 (341) 1472 4575 (112) 10354 (2837) (2004) 5513

6,230 (857) 1361 5373 115 12222 (2582) (2134) 7506

24448 3277 2331 40239 3413 (41) 73667

17732 4733 2750 36123 304 30 61672

The products category-wise review follows: Fatty Alcohol Fatty Alcohol accounted for 47% of the turnover of the division. The category declined 8% in value, both on account of lower selling prices and lower volumes. Effective pricing strategies, customer relationships and initiatives in the areas of product development, packaging and logistics, helped maintain good share in the domestic and international market, despite increased competition. The division is now working with major multi nationals to become their preferred global supplier. The capacity expansion through an Export Oriented Unit (EOU) was achieved in late March 2006, which will increase the capacity in this product category by about 60% and is expected to increase the revenue in the coming year. Glycerin Glycerin accounted for 7% of the turnover of this division. Revenue declined 8% over last year, owing to the sharp decline in the international price of refined glycerin, though there was a volume growth of over 7%. Prices having bottomed out, the opportunity now lies in market expansion as glycerin could possibly substitute other polyols on account of its competitive price. Surfactants Your Company is the pioneer, as well as, market leader in the production of Alpha Olefin Sulphonate (AOS) in India, a surfactant used in several well-known shampoos and detergent brands in the country. Surfactants contributed 10% to the turnover of Chemicals division. Sales of surfactant category declined 23% in volume and 20% in value terms on account of the steep increase in the price and paucity of Alpha Olefin (AO) which is petroleum based raw material. The increased cost of AOS has affected the margin, as also the off-take. The division is looking at alternative uses of the sulphonation capacity available and is exploring other value added products in this segment. High AO prices have now made manufacture of oleo chemical AO viable and the division is planning to produce AO - C16 from vegetable oils in the coming year. Fatty Acids The fatty acids portfolio comprising stearic acid, oleic acid, as well as, specialty fatty acids accounted for about 35% of the turnover of the division. Continuous cost reduction and market development initiatives have helped grow this category by about 9% in volume and 3% in value terms. The division is taking necessary steps to strengthen its position in this category and counter competition from imports, as well as, small players. Other initiatives The division has engaged Goldratt Consulting, well-known for their ‘Theory of Constraints’, to apply these principles for business improvement. This is expected to benefit the division in terms of improved plant throughput, better supply chain and project management.

Godrej Industries Limited Outlook The outlook for the coming year 2006-07 is mixed at this point in time. Internationally, new capacities have been announced for oleo chemical fatty alcohols, which is likely to increase the availability. At the same time, steep increase in the price of mineral oil is impacting petrochemical fatty alcohol plants which are expected to be under cost and margin pressure, which may curtail output. The increase in bio-diesel manufacturing capacity is expected to impact vegetable oil prices. The strong growth in demand for fast moving consumer goods (FMCG) and the other industry segments that the division caters to, augurs well for the products of the Chemicals division. The business initiatives to strengthen distribution, improve supply chain and customer relationship management, backed by expansion in capacity are expected to help grow revenue, as well as, profits of the business. FOODS DIVISION The Foods Division recorded sales of Rs. 21,117 lac during the year under review as compared to Rs.19197 lac in the previous year clocking a growth of about 10%. Industry Outlook The Prices of Edible oils continued to show a bearish trend in view of higher domestic production and in spite of a growing demand for bio diesel in the international markets. Intense competition in the category and underutilization of plant capacities prevented a rise in selling prices. Heavy imports of cheap Sri Lankan Vanaspati impacted the domestic industry adversely. The Processed Foods Division saw the Fruit Juice category register good growth rates in light of increasing consumer preference over carbonated soft drinks. In spite of a good mango crop, higher prices of pulp led to lower off takes and a pressure on margins. There are two categories in this Division, viz., Edible Fats and Processed Foods. Edible Fats Division The turnover during the year under review was Rs. 14,228 lac. Intense competition by large players impacted this business. The division continued to focus on increasing margins and selling only in profitable areas. As a result, the growth in sales of edible oils and Vanaspati during the year was marginal. Processed Foods Division The turnover of products in this category was Rs. 5,985 lac as compared to Rs. 4,223 lac during the previous year, recording a growth of 41%. The Division produces and markets fruit drinks, fruit nectars and juices in Tetrapak, undertakes processing for third parties and also sells fruit pulp. The fruit drinks category in Tetrapak saw intense competitive pressures with a number of new players launching their brands this year. In this scenario, the division focused on the trade sales segment to improve the sale of “Jumpin” fruit drink. This year the division invested in brand building activities (e.g. media advertising) on Xs and Sofit which was essential to improve sales in the highly competitive segment of the beverages market. This helped in growing the sales value of Xs by 39% and of “Sofit” by 18%. The division launched two new flavours under its ‘SOFIT’ brand viz., Kesar Pista and Malt Chocolate, for which the response has been good. The division saw a good growth over last year in third party processing of pulp/squash/jam at the Mandideep Factory. The factory was also adjudged ‘Best Outsourced Manufacturer- Culinary category’ by Hindustan Lever Limited. Over all, the focus of the Division continued to be predominantly on improving profitability in both the above categories during the year by focusing on high margin products, restricting sale to profitable areas,

tight control on working capital usage and engaging the National Productivity Council for productivity improvements at the Mandideep factory. This division too is applying the relevant principles of Theory of Constraints to improve its business. Restructuring On 14th March, 2006, your company signed an agreement with Godrej Tea Ltd. (now known as Godrej Beverages & Foods Ltd.) for the sale of the Foods division. As per the agreement, the foods division (except the Edible fats Wadala factory) has been sold to Godrej Tea Ltd. for a consideration of Rs 70 crore with effect from close of working hours of 31st March, 2006. Post the restructuring, Wadala factory is renamed as the Veg Oils Division of Godrej Industries Ltd. Future Outlook As per the above restructuring, the Vegoils division of Godrej Industries Ltd is expected to sell oil in bulk and also carry out processing for third parties. Estate Management Mumbai continues to be perceived as a suitable location with good infra structure and availability of skilled manpower by the BPO sector. Increase in real estate prices and the rentals has made the CBD area less affordable and the suburbs are now more in demand. Your Company continues to effectively utilize the available space by giving the unutilized space on leave and licence basis to reputed corporates for their back office operations. The green environment and good infrastructure with close proximity to the CBD, airport and surburbs are major advantages making Vikhroli a preferred location. The total income from this business for the year was about Rs. 2,280 lac as compared to Rs.2,166 lac previous year an increase of 5%. 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.958 lac for the year, recording a growth of 19% in value terms over the previous year. The focus of the Division was on implementation of rigorous sales and operation planning (S&OP) process and reduction in Net Working Capital. The division plans to increase its product portfolio by introduction of a new range of Biochemistry Analysers. The Division also plans to extend its sales activities to SAARC countries, particularly Sri Lanka and Bangladesh. FINANCE AND INVESTMENTS Dividend income for the year was Rs. 2,275 lac (previous year Rs.2,236 lac) and profit on sale of investment Rs. 2120 lac (mainly arising out of 1% stake sold in Godrej Consumer Products Limited). Your Company invested Rs.866 lac in its 100% subsidiary Godrej International Limited which is into international trading to strengthen its base. Your Company also invested in Boston Analytics LLC (a KPO in research and analysis) for a stake of 18.5%. Your Company sold its stake in Godrej Remote Services Ltd. which was into medical transcription business to CBay Systems Ltd. and also consolidated its stake in CBay systems Ltd. Your Company now holds 16.63% stake in CBay Systems Ltd. HUMAN RESOURCES, INDUSTRIAL RELATIONS Industrial Relations at all locations were cordial. At the Chemicals’ plant in Vikhroli a restructuring exercise was initiated and as a result workers strength has reduced by 32%. Following restructuring exercise, long term settlement was signed with the workers amicably settling all the pending industrial disputes. Similar long term settlement was also signed with the Valia unit.

Annual Report 2005-2006

Your Company formed the Godrej Industries Limited Employees’ Group Gratuity Trust to manage the gratuity funds. Rs. 12 crore of the gratuity liability of the company has been funded and has been invested in the group gratuity schemes of reputed insurance companies. The investments have yielded an average return of 11.8% p.a. for the period ended March 31, 2006. The total number of persons employed in your Company as on March 31, 2006 was 1711. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY 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. Recently, the Corporate Audit and Assurance Department of your Company got certified under ISO 9001: 2000. It issues well documented operating procedures and authorities with adequate built-in controls at the beginning of any activity and any time there is a major change. The internal control is supplemented by an extensive programme of internal, external audits and periodic review by the management. Consequent to the amendment in Clause 49 of the Listing Agreement by SEBI, the Corp Audit and Assurance Dept. facilitated formal documentation, implementation and review of Internal Controls at all locations. The system is designed to adequately ensure that financial and other records are reliable for preparing financial information and other data and for maintaining accountability of assets. OPPORTUNITIES AND THREATS Increased global demand fuelled by growth in end-user industries coupled with your Company’s standing for consistent quality and product delivery customized to the needs of the clients, provides good opportunity for growth for the Chemicals division. At the same time, new capacity addition in the industry is likely to increase competition from the supply side. 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 Your Company had undertaken a comprehensive review of its risk management process and has put a risk management framework in place. The review involved understanding the existing risk management initiatives, zero-based identification and assessment of risks in the various businesses as also the relative control measures and developing appropriate risk response strategy for various risks identified while keeping in mind the risk appetite of the organization. A risk committee has been constituted to periodically review the risks and develop appropriate response strategies to ensure achievement of company’s objectives. The commodity based businesses are likely to be affected by vagaries of the weather, demand for edible oil, oilseed production, etc. The business is exposed to commodity price risks relating to raw materials which account for the largest portion of the costs of both these businesses. The Chemicals business growth will also depend on the growth of end user industries like polymer, detergent, cosmetics and personal care. As a significant employer and chemical producer, to ensure occupational safety, employment standards, production safety, and environmental protection, your Company maintains strict safety, health, environmental protection and quality control programs to monitor and control these operational risks. 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. 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 industry, significant changes in political and economic environment in India, tax laws, import duties, litigation and labour relations.

Godrej Industries Limited ANNEXURE B FORMING PART OF THE DIRECTORS’ REPORT As per the Securities & Exchange Board of India (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 following information is disclosed in respect of Godrej Industries Limited Employee Stock Option Plan : Sr. No.

Heading

Particulars

Options granted

3,50,000

The pricing formula

Market Price plus Interest at such rate not being less than the Bank Rate then prevailing, compoundable on an annual basis for the period commencing from the date of Grant of the Option and ending on the date of intimating Exercise of the Option to the Company

Options vested

NIL

Options exercised

NIL

The total number of shares arising as a result of exercise of option

3,50,000 equity shares of nominal value of Rs.6/- each

Options lapsed

NIL

Variation of terms of options

NIL

Money realized by exercise of options

NIL

Total number of options in force

3,50,000

Employee wise details of options granted to: i) senior managerial personnel ii) any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year. iii) identified employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant

}

As per attached statement

NIL

Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 ‘Earnings Per Share’.

There is no fresh issue of shares hence, not applicable.

Where the company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed. The impact of this difference on profits and on EPS of the company shall also be disclosed.

The company has calculated the employee compensation cost using the intrinsic value of stock options. Had the fair value method been used, in respect of stock options granted the employee compensation cost would have been higher by Rs. 2.06 crore, Profit after tax lower by Rs. 2.06 crore and basic EPS would have been lower by Rs. 0.42

Weighted-average exercise prices and weighted-average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock.

Exercise price Rs. 392.35 plus interest as mentioned in pricing formula Fair Value Rs. 175.99

A description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted-average information:

The fair value of the options granted on 14th Feb 2006 has been calculated using Black–Scholes Options pricing formula and the significant assumptions made in this regard are as follows:

risk-free interest rate

7.11%

ii)

expected life

4 years

iii)

expected volatility

65%

iv)

expected dividends

1.27% Rs. 5 per share

the price of the underlying share in market at the time of option grant

Rs. 392.35

Statement attached to Annexure B to the Directors’ Report for the year ended 31st March, 2006. Name of senior managerial persons to whom stock options have been granted Mr. Mathew Eipe Mr. Visty Banaji Mr. Mohan Pusalkar Mr. C. K. Vaidya Mr. Hoshedar Press Mr. Milind Korde Mr. A. Mahendran

Number of options granted 50,000 50,000 50,000 50,000 50,000 50,000 50,000

Annual Report 2005-2006

ANNEXURE "C" FORMING PART OF THE DIRECTORS’ REPORT The following is the list of persons constituting Group (within the meaning as defined in the Monopolies and Restrictive Trade Practices Act, 1969) for the purpose of availing exemption from applicability of the provisions of Regulation 10 to 12 of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (“the said Regulations”), as provided in Clause 3(1)(e) of the said Regulations: 1 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 28 29

Godrej & Boyce Mfg. Co. Ltd. Godrej Consumer Products Ltd. Ensemble Holdings & Finance Ltd. Godrej Hicare Ltd. Godrej Agrovet Ltd. Goldmohur Foods & Feeds Ltd. Golden Feed Products Ltd. Godrej Properties Ltd. Girikandra Holiday Homes & Resorts Ltd. Godrej Beverages & Foods Ltd. Godrej Global Solutions Ltd. Godrej Global Solutions (Cyprus) Limited Godrej Global Solutions, Inc. Godrej International Ltd. Godrej Global Mid East FZE Swadeshi Detergents Ltd. Vora Soaps Ltd. Godrej Foods Ltd. Tahir Properties Ltd. Bahar Agrochem & Feeds Pvt. Ltd. Prashant Metal Forming Industries Pvt. Ltd. Godrej Investments Pvt. Ltd. Godrej Infotech Ltd. Godrej (Malaysia) Sdn Bhd Godrej (Singapore) Pte Ltd. Godrej Appliances Ltd. Lawkim Ltd. Godrej Realty Pvt. Ltd. Godrej Waterside Properties Pvt. Ltd.

Krithika Agro Farm Chemicals & Engineering Industries Pvt. Ltd.

Aadhaar Retailing Ltd.

Mercury Mfg. Co. Ltd.

Godrej Efacec Automation & Robotics Ltd.

Godrej Upstream Ltd.

Godrej Holdings 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

Mrs Tanya 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

Mr Rishad K Naoroji

ANNEXURE 'D' 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

(A) Energy Conservation measures undertaken:

Installation of Vapor Absorption Chilling System at Flakers replacing mechanical chillers to get power saving. Installation of Vapor Absorption Chilling System in AOS plant in place of conventional mechanical chilling system to get power saving.

Automation of High Pressure Boiler by installing PLC based controls along with Variable Frequency drive in pump and blowers to increase efficiency as well as power saving.

Installation of UP FLOW Anaerobic Sludge Blanket reactor to reduce COD load on affluent water without surface aerators.

Energy Audit by CII and implementation of 32 projects suggested thereat

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

Installation of 15 variable frequency drives (VFD) on Cooling Tower Fans.

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

Installation of energy-efficient motors in Plants.

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

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

Energy audit by National Productivity Council

Godrej Industries Limited (B) Proposed energy conservation measures Recovery of flash steam from Co-generation Plant Blow down. This steam will be used to heat Boiler feed water in deaerator. Scheduled monitoring of stacks of all furnaces to further improve efficiency. Improvement in heat recovery of steam condensate collection from tank farms. Energy saving light fixtures Energy efficient motors VFD for process Pumps in Plants II.

Technology Absorption, Adaptation and Innovation

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 : Oils & Fatty Acids

Fatty Alcohols

Surfactants

Impact of measures on reduction of energy consumption and consequent impact on the cost of production of goods:-

Glycerin

Product Application Group

Saving in energy costs during the period under consideration.

Fruit Juices/ Soymilk

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

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

Collaborative research with detergent manufacturers to develop new generation detergent blends.

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

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

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

Patent applications for four processes

This Year Previous Year i)

ii)

Electricity Purchased Units (kWh in lac) Total Amount (Rs. in lac) Rate per Unit (Rs.)

198.78 1037.53 5.22

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 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)

166.45 849.27 5.10

19.83 131.65 6.64

47.10 239.83 5.09

277.91 988.29 3.56

269.91 900.87 3.34

4510.42 802.68 17.80

3994.67 565.67 14.16

401.30 3460.90 8.62

341.50 2738.6 8.02

650.09 44.67 6870.67

294.00 21.40 7278.91

Consumption per unit of production Natural Gas 3

(SM /MT)

Electricity

Furnace Oil

(kWh/MT)

(Litre/MT)

2005-06

Pitches

2005-06

2004-05

2005-06

2004-05

2005-06 2004-05

Fatty Acid

77.78

78.12

Fatty Alcohol

94.77

79.88

93.41

86.88

10.04

5.34

8.79

4.931

408.29

369.11

6.86

3.93

–

49.33

47.92

104.61

90.82

8.99

5.86

1.14

0.45

Fruit Juice/ Pulp

–

149.42

70.49

36.20

15.27

–

Oils/Vanaspati

–

182.49

160.36

77.52

74.00

6.64

–

458.40

524.18

588.72

610.02

53.01

32.37

25.85

13.56

Future Plan of Action a.

Developing different variants of surfactant products.

Developing speciality surfactants for niche markets.

Developing cost effective, mixed active detergent formulations.

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

No technology has been imported during the year. 4.

Expenditure on R&D (a) (b) (c) (d)

Capital Recurring Total Total R & D expenditure as a percentage of total sales turnover

Glycerin

Nil 139.39 139.39

Nil 108.38 108.38

0.19%

0.14%

Foreign Exchange earnings and outgo: The Chemicals Division’s exports were Rs. 17561 lac in the current year (including deemed exports of Rs. 2889 lac) as compared to Rs. 17570 lac in the previous year (including deemed exports Rs. 2716 lac) to. 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. ThisYear Previous Year Rs. lac Rs. lac

Alpha Olefin Sulphonate

ThisYear Previous Year Rs. lac Rs. lac

Foreign exchange used

26049

18091

Foreign exchange earned

15150

15373

Annual Report 2005-2006

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.

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 Godrej Industries Limited (GIL) comprises thirteen Directors, which include one Managing Director and four Whole-Time Executive Directors. The remaining eight are NonExecutive 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 atleast 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 six Board meetings were held on May 30, 2005, July 26, 2005 October 24, 2005, December 13, 2005, January 31, 2006 and March 7, 2006. The details are given below. 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 Whether Directormeetings attended ships attended last AGM held in during public the compyear anies incorporated in India as at year end

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

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. d)

ChairmMemanship bership

A.B. Godrej J.N. Godrej N.B. Godrej S.A. Ahmadullah V.M. Crishna K.K. Dastur V.N. Gogate K.N. Petigara F.P. Sarkari V.F. Banaji T.A. Dubash M. Eipe M.P. Pusalkar

Chairman – Non-Executive Non-Executive Managing Director Non-Executive Independent Non-Executive Non-Executive Independent Non-Executive Independent Non-Executive Independent Non-Executive Independent Whole-time Whole-time Whole-time Whole-time

6 6 6

6 4 6

Yes Yes Yes

12(3) 14 (5) 13(4)

3 1 4

1 3 3

6 6

6 2

Yes No

3(1) 7(2)

Nil Nil

1 Nil

Yes

6(2)

Nil

Yes

1(1)

Nil

Yes

6(1)

Nil

6 6 6 6 6

5 5 5 4 6

Yes No Yes Yes Yes

3(1) 1(1) 5(1) 3(1) 2(2)

2 1 Nil Nil 1

1 1 1 1 2

Notes : 1.

Figures in ( ) denote listed companies.

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

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. c)

Information supplied to the Board Among others, this includes:

Annual operating plans and budgets, capital budgets, and any updates thereon,

Quarterly results of the Company, Minutes of meetings of audit committee and other committees, Information on recruitment and remuneration of senior officers just below the Board level, Materially important show cause, demand, prosecution and penalty notices, Fatal or serious accidents or dangerous occurrences, Any materially significant effluent or pollution problems, Any materially relevant default in financial obligations to and by the Company or substantial non-payment for goods sold 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.

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

Remuneration of Directors: sitting fees, salary, perquisites and commissions and Number of Shares held by Non-Executive Directors The details of remuneration package of Directors and their relationships with each other are given in Table 2. The number of shares held and dividend paid are given in Table 3. Table 2 : Remuneration in Rupees paid or payable to Directors for the year ended March 31, 2006 Name of Director Relationship with Directors

Sitting Commission fees on profits

Brother of N.B.Godrej Father of T.A. Dubash 240000 J. N. Godrej None Nil N. B. Godrej Brother of A.B.Godrej Nil S. A. Ahmadullah None 160000 V. M. Crishna None 40000 K. K. Dastur None 100000 V . N. Gogate None 160000 K. N. Petigara None 140000 F. P. Sarkari None 120000 V. F. Banaji None Nil T. A. Dubash Daughter of A.B.Godrej Nil M. Eipe None Nil M. P. Pusalkar None Nil

Salary Perquisites Provident Fund

Total

A. B. Godrej

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

Nil Nil 7381877 Nil Nil Nil Nil Nil Nil 6990186 4666877 5498193 4374888

Nil Nil 340000 Nil Nil Nil Nil Nil Nil 414432 94467 383957 313727

Nil Nil 489600 Nil Nil Nil Nil Nil Nil 302400 295200 374400 204480

240000 Nil 8211477 160000 40000 100000 160000 140000 120000 7707018 5056544 6256550 4893095

Godrej Industries Limited Notes :

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.

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

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

Table 3: Number of shares held by Non-Executive Directors and dividend paid

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.

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 variable remuneration of Rs. 853877, Rs. 3390210, Rs. 853877 and Rs. 846693 and Rs. 1475000 respectively for the year ended March 31, 2006 payable in 2006-07.

Name of Non-Executive Director

Shares held as on March 31, 2006

Dividend paid during the year (Rupees)

F.P. Sarkari

3265

13060

S.A. Ahmadullah

1000

4000

V.M. Crishna

75013

300052

V.N. Gogate

313

1252

Reviewing the Company’s financial and risk management policies.

K.K. Dastur

351

1404

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

Reviewing the functioning of Whistle Blower mechanism.

Committees of the Board Audit Committee GIL’s audit committee comprises of three Independent & Non-Executive Directors. They are Mr. F.P. Sarkari (Chairman), Mr. S.A. Ahmadullah and Mr. V.N. Gogate. Mr. F.P. Sarkari is the Chairman of the Committee. Mr. 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. Mr. S.K. Bhatt, Executive Vice-President (Corporate Services) & Company Secretary acts as secretary to the audit committee. The audit committee met four times during the year. Table 4 gives the attendance record. Table 4: Attendance record of audit committee members No. of meetings held

Meetings attended

Mr. F.P. Sarkari

Name of Director

Mr. S.A. Ahmadullah

Mr. V.N. Gogate

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

Matters required to be included in the Directors Responsibility Statement to be included in the Boards Report in terms of Clause (2AA) of Section 217 of the Companies Act, 1956. Any changes in accounting policies and practices. Major accounting entries based on exercise of judgement by the management. Qualifications in draft audit report. Significant adjustments arising out of audit. The going concern assumption. Compliance with accounting standards. Compliance with stock exchanges and legal requirements concerning financial statements. Any related party transactions, i.e. transactions of the Company of material nature, with promoters or the management, their subsidiaries or relatives, etc. that may have potential conflict with the interests of Company at large.

Compensation Committee Setting up of a Compensation 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 of management. The Remuneration Committee was renamed as Compensation Committee by the Board of Directors at its meeting held on October 24, 2005. GIL’s Compensation Committee consists of the following directors: Mr. S.A. Ahmadullah (Chairman and Independent Director); Mr. N.B. Godrej (Managing Director); Mr. V.N. Gogate (Independent Director) and Mr. K.N. Petigara (Independent Director). During the year ended March 31, 2006, the committee met four times. The attendance details are given in Table 5. Table 5: Attendance record of Compensation Committee members Name of Director

No. of meetings held

Meetings attended

Mr. S.A. Ahmadullah

Mr. V.N. Gogate

Mr. K.N. Petigara

Mr. N.B. Godrej

Mr. S.K. Bhatt, Executive Vice-President (Corporate Services) & Company Secretary acts as the secretary to the Committee. GIL has adopted EVA as a tool for driving performance, and has linked improvements in EVA to performance linked variable remuneration (PLVR) of Managing Director, Whole-Time Directors, managers and officers of the company. Shareholders Committee 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. V.F. Banaji, Ms. T.A. Dubash, Mr. M. Eipe and Mr. M.P. Pusalkar. During the year, 18 meetings of the Committee were held. Mr. S.K. Bhatt, Executive Vice-President (Corporate Services) & Company Secretary acts as secretary to the Committee. Name and designation of Compliance Officer Mr. S. K. Bhatt, Executive Vice-President (Corporate Services) & Company Secretary.

Annual Report 2005-2006

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

Number of complaints regarding shares for the year ended March 31, 2006 Complaints outstanding as on April 1, 2005

Nil

Complaints received during the year ended March 31, 2006

Complaints resolved during the year ended March 31, 2006

Complaints outstanding as on March 31, 2006

Nil

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

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 Economic Times, Business Standard, Business Line, etc.

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

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

Whistle Blower Policy

Details of compliance with mandatory requirement Particulars I. (A) (B) (C) (D) II. (A) (B) (C) (D) (E) III. IV. (A) (B) (C)

Clause of Listing Agreement

Board of Directors Composition of Board Non-executive Directors’ compensation & disclosures Other provisions as to Board and Committees Code of Conduct Audit Committee Qualified & Independent Audit Committee Meeting of Audit Committee Powers of Audit Committee Role of Audit Committee Review of Information by Audit Committee Subsidiary Companies Disclosures Basis of related party transactions Board disclosures Proceeds from public issues, rights issues, preferential issues etc. (D) Remuneration of Directors (E) Management (F) Shareholders V. CEO/CFO Certification VI. Report on Corporate Governance VII. Compliance

49 I 49 (IA) 49 (IB) 49 (IC) 49 (ID) 49 (II) 49 (IIA) 49 (IIB) 49 (IIC) 49 II(D) 49 (IIE) 49 (III) 49 (IV) 49 (IV A) 49 (IV C) 49 (IV D) 49 (IV E) 49 (IV F) 49 (IV G) 49 (V) 49 (VI) 49 (VII)

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

Compliance Status Yes / No Yes Yes Yes Yes

g) Yes Yes Yes Yes Yes Yes Yes Yes Not Applicable at present Yes Yes Yes Yes Yes Yes

Share transfer 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.

DISCLOSURES With a view to establish a mechanism for protecting the employees reporting unethical behaviors, frauds, violation of Company’s Code of Conduct, the Board of Directors has adopted a Whistle Blower Policy. During the year 2005-06, no personnel has been denied access to the Audit Committee.

Investor grievances As mentioned before, the Company has constituted a Shareholders Committee to look into and redress Shareholders and investor complaints. Mr. S.K. Bhatt, Executive Vice-President (Corporate Services) & Company Secretary is the compliance officer.

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.

Communication to shareholders

General body meetings Year

Venue

Date

2002-03

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

August 25, 2003 3.00 P.M.

2003-04

- do -

July 26, 2004

4.00 P.M.

2004-05

- do -

July 26, 2005

4.00 P.M.

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

Sr. Date of No. announcement of results

Nature Item of resolution

February 2, 2006

Ordinary To sell, lease or otherwise 1080 dispose of the whole, or substantially the whole of the Foods Division of the Company; Special To invest in securities of 1107 and/or place intercorporate deposits with and/or invest in debentures of and/or give guarantee(s) to and/or make loans or any other form of debt to Godrej Upstream Limited under Section 372A of the Companies Act, 1956, in addition to the current limits, a further sum of Rs.10 crore; Special To invest in securities of and/or 1074 place intercorporate deposits with and/or invest in debentures of and/or give guarantee(s) to and/or make loans or any other form of debt to View Group LP under Section 372A of the Companies Act, 1956, a sum of Rs.14 crore.

Details of Non-compliance There has not been any non-compliance by the Company and no penalties or strictures were imposed on the Company by the Stock Exchanges or SEBI or any statutory authority, on any matter related to capital markets. Declaration by Managing Director The declaration by the Managing Director stating that all the Board Members and senior management personnel have affirmed their compliance with the said code of conduct for the year ended March 31, 2006, is annexed to the Corporate Governance Report. SHAREHOLDERS a)

Disclosures regarding appointment or re-appointment of Directors According to the Articles of Association of GIL, at every annual general meeting of the Company one-third of the Directors are liable to retire by rotation. Thus, Mr. J.N. Godrej, Mr. V.F. Banaji, Ms. T.A. Dubash

Time

Total no. of votes polled

No. of votes in favour %

No. of No. of votes invalid against votes %

99.96

0.02

99.98

0.01

99.96

0.02

Godrej Industries Limited Declaration by Managing Director I, N.B. Godrej, Managing Director of Godrej Industries Limited (GIL), hereby confirm pursuant to clause 49(1)(D) of the listing agreement that : The Board of Directors of GIL has laid down a code of conduct for all Board members and senior management of the Company. The said code of conduct has also been posted on the Companyâ&#x20AC;&#x2122;s website viz. www.godrejinds.com. All the Board members and senior management personnel have affirmed their compliance with the said code of conduct for the year ended March 31, 2006.

N.B. Godrej Managing Director Mumbai, May 26, 2006

Auditorsâ&#x20AC;&#x2122; Certificate on Corporate Governance To the Members of, Godrej Industries Limited We have examined the compliance of conditions of Corporate Governance by Godrej Industries Limited for the year ended on March 31, 2006, as stipulated in Clause 49 of the Listing Agreement of the said Company with the stock exchanges. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to a review of procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance stipulated in Clause 49 of the above mentioned Listing Agreement. We state that such compliance is neither an assurance as to the future viability of the Company nor of the efficiency or effectiveness with which the management has conducted the affairs of the Company. For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants

Mumbai, May 26, 2006.

V. R. Mehta Partner Membership No. 32083

Annual Report 2005-2006

SHAREHOLDERS’ INFORMATION Annual General Meeting Date : Time : Venue :

Note :

July 24, 2006 4.30 P.M. Y.B. Chavan Centre, General Jagannath Bhosale Marg, Nariman Point, Mumbai 400 021.

Financial Calendar For the year ended March 31, 2006, results were announced on: July 26, 2005

October 24, 2005 : Half year

January 31, 2006 : Third quarter

May 26, 2006

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

Financial year: April 1 to March 31

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.

: First quarter

: Fourth quarter and annual

Record Date/Book Closure A dividend of Rs. 5/- 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 17, 2006 to July 24, 2006 (both days inclusive). Listing information The Company’s equity shares are listed on The Bombay Stock Exchange Ltd., The National Stock Exchange of India Ltd. and the Calcutta Stock Exchange Association Ltd. Name of the Stock Exchange

Stock code

The Bombay Stock Exchange Ltd. (BSE)

500164

The National Stock Exchange of India Ltd. (NSE)

GODREJIND

April-05 May-05 June-05 July-05 August-05 September-05 October-05 November-05 December–05 January–06 February-06 March-06

High (Rs.)

Low (Rs.)

Volume traded (No. of Shares)

123.30 267.95 238.80 249.40 247.45 272.75 273.85 260.35 399.05 384.85 415.30 643.05

106.60 123.60 205.45 225.40 229.50 232.35 219.45 225.10 258.95 365.75 365.95 442.45

984844 26359665 7658630 1981097 713266 1120630 376538 243094 11921783 751313 853984 1713153

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 2005-2006

The Calcutta Stock Exchange Association Ltd. 17038 (for physical) 10017038 (for demat) The ISIN Number of GIL on both NSDL and CDSL is INE233A01027. The Company had applied to the Calcutta Stock Exchange Association Ltd. for voluntary delisting of equity shares under the Securities and Exchange Board of India (Delisting of Securities) Guidelines, 2003. The permission for delisting is awaited. Stock Data Tables 1 and 2 respectively give the monthly high and low prices and volumes of equity shares of GIL at BSE and the NSE for the year ended March 31, 2006. Chart A compares GIL’s share price at the BSE versus the sensex. Table 1 : Monthly high and low prices and trading volumes of equity shares of GIL at BSE for the year ended March 31, 2006 Month

Low (Rs.)

April-05

126.00

104.00

606612

May-05

278.80

116.10

9150145

June-05

248.90

201.50

2567483

July-05

262.00

225.00

893303

1 - 500

12754

91.87%

1065043

2.19%

292735

501 - 1000

523

3.77%

385558

0.79%

1001 - 2000

290

2.09%

390640

0.80%

2001 - 3000

113

0.81%

278064

0.57%

3001 - 4000

0.24%

116544

0.24%

4001 - 5000

0.17%

109414

0.22%

5001 - 10000

0.40%

393088

0.81%

0.64%

45903591

94.37%

13882

100.00%

48641942

100.0 0%

August-05

253.00

215.15

Volume traded (No. of Shares)

Distribution of shareholding

High (Rs.)

Tables 3 and 4 give the distribution pattern of shareholding of GIL by size class and ownership respectively as on March 31, 2006. Table 3 : Distribution of shareholding by size class as on March 31, 2006 Number of shares

September-05

284.00

225.00

594544

October-05

279.90

214.15

241317

November-05

271.00

220.00

128074

December-05

417.00

250.50

5336337

January-06

397.00

344.65

346736

10001 & above

February-06

434.00

360.05

497743

Total

March-06

674.00

396.65

979933

Number of Shareholders Number of Shareholding shareholders % shares held %

Godrej Industries Limited Table 4 : Distribution of shareholding by ownership as on March 31, 2006 Category (as being reported to stock exchanges)

Shares held % of holding (Nos.)

Promoter’s holding Promoters

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

Total Folios

Total Shares

13882

48641942

4300780

88.40%

–

–%

148505

0.31%

Banks, financial institutions & insurance companies

77929

0.16%

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

Foreign institutional investors

590024

1.21%

Investor correspondence should be addressed to:

Private corporate bodies

1182751

2.43%

Indian public

3501471

7.20%

Persons deemed to act in concert with promoters Institutional investors Mutual funds & UTI

Others

NRI/OCBs Total

140482

0.29%

48641942

100.00%

4605

9277

297791

48344151

Share Transfer

Computech Sharecap Ltd. 147, M.G. Road, Opp. Jehangir Art Gallery, Mumbai 400 023. Tel : 022-22671824/22671825 E-mail : helpdesk@computechsharecap.com Fax : 022-22670380

Annual Report 2005-2006

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ INDUSTRIES LIMITED 1.

We have audited the attached Balance Sheet of Godrej Industries Limited as at March 31, 2006 and also the Profit and Loss Account and Cash Flow Statement of the Company for the year ended on that date, both 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 misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

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

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

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

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

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. 1,033 lac being contingent upon the transfer and/or disposal of the shares pledged against the loan. The said shares were lodged for transfer which application was rejected and the Company has preferred an appeal to the Company Law Board. The impact thereof on the profit for the year could not be ascertained.

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, 2006;

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 for the year ended on that date. 5.

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

For and on behalf of Kalyaniwalla & Mistry Chartered Accountants

V.R. Mehta Partner M. No.: 32083 Mumbai, May 26, 2006

Godrej Industries Limited ANNEXURE TO THE AUDITORâ&#x20AC;&#x2122;S REPORT Referred to in Paragraph (3) of our report of even date on the accounts of Godrej Industries Limited for the year ended March 31, 2006. 1.

(a) The Company is generally maintaining proper records showing full particulars, including quantitative details and situation of fixed assets, except in case of certain continuous process plants where item-wise values are not available and in case of furniture, fittings and equipment at Vikhroli where the records maintained show quantitative details with their situation and values based on valuation by an approved valuer.

an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. In our opinion and according to the information & explanation given to us, there is no continuing failure to correct major weaknesses in the internal control system. 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. No material discrepancies between the book records and physical inventory were reported for the assets verified during the year.

(b) In our opinion and according to the information and explanations given to us, having regard to the explanation that some 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 Rs. 5 Lac in respect 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 fixed assets disposed off during the year were not substantial and do not effect the going concern assumption. 2.

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

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

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 or any other relevant provisions of the Act and the rules framed there under in respect of the deposits accepted from the public.

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.

We have broadly reviewed the books of account maintained by the Company in respect of 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.

(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, Employeesâ&#x20AC;&#x2122; State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess and other statutory dues applicable to it with the appropriate authorities.

(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. (c) The loans outstanding at the year end are at call and have not been recalled during the year. The companies are generally regular in payment of interest. (d) There are no overdue amounts exceeding Rs. one lac. (e) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. 4.

In our opinion and according to the information and explanations given to us, having rearded to the explanation that some of the items purchased are of a special nature and suitable alternative sources do not exist for obtaining comparable quotations, there is

(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 the particulars of contracts or arrangements referred to in Section 301 of the Act have been entered in the register required to be maintained under that section.

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

Annual Report 2005-2006

Name of statute

Amount Rs. in lac

Period to which the amount relates

Forum where dispute is pending

Central Excise Act, 1944

43.32 0.87 393.40 0.09 241.20 87.39 683.33

1999 – 2000 2003 – 2005 1992 – 1997 1994 – 1999 1978 – 1983 1997 – 1999 1986 – 1998

Assistant Commissioner Assistant Commissioner Commissioner (Appeals) CEGAT High Courts High Courts The Supreme Court of India

Customs Act, 1962

8.77 111.88 26.28 109.12 570.86 8.23

1978 – 1983 1987 – 1993 2003 – 2004 1978 – 1993 1991 – 1992 1978 – 1979

Assistant Commissioner Commissioner of Customs Dy. Commissioner High Court High Court CESTAT

50.53 518.53 70.62 1084.95

1992 – 1995 1996 – 2001 1985 – 1991 1995 – 1996

ITAT ITAT High Court High Court

0.16 19.60 68.19 14.15 1.83 30.55 62.39

1997 – 1998 1998 – 2005 2003 – 2004 1996 – 2002 1998 – 1989 1990 – 1992 1994 – 1996

Appellate Tribunal Sales Tax Officer Commissioner (Appeals) Dy. Commissioner Sales Tax Tribunal Sales Tax Tribunal Sales Tax Tribunal

182.23 815.61 28.85

2000 1984 – 2005 1997 – 2003

Controlling Revenue Authority The Bombay High Court Tribunal

Income Tax Act, 1961

Central Sales Tax Act, 1956 Sales Tax

Others Stamp Duty Municipal Taxes Entry Tax

5,232.96 10. The Company has no 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.

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

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 as at the balance sheet date.

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.

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) of Schedule 22- Notes to Accounts.

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.

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.

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

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.

19. The Company did not issue any debentures 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 V.R. Mehta Partner M. No.: 32083 Mumbai, May 26, 2006

Godrej Industries Limited BALANCE SHEET AS AT MARCH 31, 2006 Schedule

Rs. lac

This Year Rs. lac

Previous Year Rs. lac

SOURCES OF FUNDS 1.

Shareholdersâ&#x20AC;&#x2122; Funds (a) Share capital

2918.52

(b) Reserves & surplus

34216.68

30617.83 37135.20

33536.35

Loan Funds (a) Secured loans

24910.89

22075.67

(b) Unsecured loans

7803.24

3557.13

Deferred Tax Liability

32714.13 3818.00

25632.80 2502.00

TOTAL

73667.33

61671.15

APPLICATION OF FUNDS 4.

Fixed Assets

(a) Gross block

53640.20

49728.83

(b) Less : Depreciation/Impairment

25568.23

26192.14

28071.97

23536.69

522.38

1563.09

(d) Capital work-in-progress

Investments

Current Assets, Loans and Advances

28594.35

25099.78

37134.67

33577.28

(a) Inventories

11892.38

10751.76

(b) Sundry debtors

5806.56

8604.44

1259.63

1377.88

(d) Loans and advances

7688.73

4132.23

26647.30

24866.31

Less : Current Liabilities and Provisions (a) Liabilities

15726.32

17050.24

(b) Provisions

5202.03

4948.28

20928.35 Net Current Assets 7.

Miscellaneous Expenditure (To the extent not written off or adjusted)

TOTAL Significant Accounting Policies

Notes to Accounts

21998.52 5718.95

2867.79

2219.36

126.30

73667.33

61671.15

The Schedules referred to above form an integral part of the Balance Sheet. As per our Report attached

For and on behalf of Kalyaniwalla & Mistry Chartered Accountants

V. R. Mehta Partner Mumbai, May 26, 2006

Signatures to Balance Sheet and Schedules 1 to 13, 21 and 22

A.B. Godrej Chairman

N.B. Godrej Managing Director

M. Eipe Executive Director & President (Chemicals)

S.K. Bhatt Executive Vice President (Corporate Services) & Company Secretary

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

V. Srinivasan Executive Vice President (Finance & Estate)

Annual Report 2005-2006

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

Rs. lac

INCOME Turnover (gross) Less: Excise duty Turnover (net) Other Income

EXPENDITURE Materials consumed and purchase of goods Expenses Inventory change Interest and financial charges (net) Depreciation (Net of transfer from Revaluation Reserve Rs. 168.43 lac, Previous year Rs. 223.80 lac)

15 16 17 18

Profit before Taxation and Extraordinary Items Profit from continuing operations before tax Income tax – current tax – fringe benefit tax – deferred tax Profit from continuing operations after tax Loss from discontinuing operations before tax Income tax – current tax – fringe benefit tax – deferred tax

This Year Rs. lac

Previous Year Rs. lac

80054.20 5505.94

82198.93 5863.69

74548.26 5721.62

76335.24 6017.78

80269.88

82353.02

50228.83 20627.41 (1196.08) 2837.43 2259.43

50794.93 20204.43 (882.46) 2581.67 2148.43

74757.02

74847.00

5512.86

7506.02

4266.95

8022.03 (401.00) — 444.00 8065.03 (516.01) — — 26.00

(252.77)

(490.01)

4014.18 3105.80 (7.56) 7112.42 20081.61

7575.02 — 2.20 7577.22 15480.67

27194.03

23057.89

2432.10 341.10 711.24 23709.59 27194.03

1945.68 272.88 757.72 20081.61 23057.89

8.24 14.62

15.58 15.58

5813.39 — (67.44) (1479.00) (300.53) — (14.24) 62.00

Loss from discontinuing operations after tax Profit after Taxation and before Extraordinary Items Extraordinary Items (Net of Tax) Prior Period adjustments (net) Net Profit Surplus brought forward

19 20

Amount Available For Appropriation APPROPRIATIONS Proposed Dividend - Final Tax on distributed profits Transfer to General Reserve Surplus carried forward TOTAL Basic & Diluted Earnings per share before Extraordinary Items Basic & Diluted Earnings per share after Extraordinary Items (refer note 19) Significant Accounting Policies Notes to Accounts

21 22

The Schedules referred to above form an integral part of the Profit and Loss Account. As per our Report attached

For and on behalf of Kalyaniwalla & Mistry Chartered Accountants

V. R. Mehta Partner Mumbai, May 26, 2006

Signatures to Profit and Loss Account and Schedules 14 to 22

A.B. Godrej Chairman

N.B. Godrej Managing Director

M. Eipe Executive Director & President (Chemicals)

S.K. Bhatt Executive Vice President (Corporate Services) & Company Secretary

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

V. Srinivasan Executive Vice President (Finance & Estate)

Godrej Industries Limited CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006

This Year Rs. lac

Previous Year Rs. lac

5512.86

7506.02

2259.43

2148.43

294.21

939.30

Cash Flow from operating Activities : Profit before tax Adjustments for : Depreciation Foreign exchange Profit on sale of investments (Profit) / Loss on sale of fixed assets Dividend income

(2155.37)

(3491.26)

(309.13)

123.78

(2212.91)

(2236.06)

Interest income

(508.39)

(115.87)

Interest expense

2430.95

1745.16

(2685.07)

(100.42)

592.01

182.75

Voluntary retirement compensation paid Deferred expenditure written off Provision for diminution in value of investments

â&#x20AC;&#x201D;

450.02

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

(2.87)

(87.96)

Others

(0.42)

2.99

Operating profit before working capital changes

3215.30

7066.88

Adjustments for : Inventories Trade and other receivables

(1443.92)

23.70

(807.91)

Cash generated from operations

2009.05

5007.64

Direct taxes paid

(604.30)

(547.32)

124.08

139.70

1528.83

4600.02

(9503.94)

(2799.64)

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 before extraordinary item Proceeds from sale of Undertaking (Refer Note 3) Net Cash used in investing activities after extraordinary item

192.59

1463.87

Trade payables

(2693.82)

1339.31

197.25

(51582.27)

(57714.35)

50167.75

53425.24

(500.02)

456.50

497.56

138.25

2275.33

2236.06

(7306.28)

(4060.69)

4000.00

â&#x20AC;&#x201D;

(3306.28)

(4060.69)

Annual Report 2005-2006

This Year Rs. lac C.

Previous Year Rs. lac

Cash Flow from financing activities : Proceeds from borrowings

39331.95

23560.07

Repayments of borrowings

(32515.29)

(17995.22)

(62.36)

(1920.40)

Bank overdrafts (net) Interest paid

(2631.58)

(1703.81)

Dividend paid

(1951.09)

(1473.49)

Tax on distributed profits

(272.88)

(186.97)

Net Cash from financing activities

1898.75

280.18

121.30

819.51

1377.88

558.37

Net increase in cash and cash equivalents Cash and cash equivalents (Opening Balance) Less : Cash and cash equivalents transferred to Godrej Beverages & Foods Limited Cash and cash equivalents (Closing Balance)

239.55

â&#x20AC;&#x201D;

1259.63

1377.88

1266.79

1384.97

Notes: 1.

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

(7.16)

Cash and cash equivalents

(7.09)

1259.63

1377.88

To finance working capital requirements, the Companyâ&#x20AC;&#x2122;s Bankers have sanctioned a total fund-based limit of Rs. 5,800 lac. Of this, limits utilised as on March 31, 2006 is Rs. 1,518.44 lac.

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

The figures of previous year have been regrouped wherever necessary.

As per our Report attached

For and on behalf of Kalyaniwalla & Mistry Chartered Accountants

V. R. Mehta Partner Mumbai, May 26, 2006

Signatures to Cash Flow Statement

A.B. Godrej Chairman

N.B. Godrej Managing Director

M. Eipe Executive Director & President (Chemicals)

S.K. Bhatt Executive Vice President (Corporate Services) & Company Secretary

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

V. Srinivasan Executive Vice President (Finance & Estate)

Godrej Industries Limited SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006

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

This Year Rs. lac

Previous Year Rs. lac

8000.00 10000.00

18000.00

2918.52

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

Rs. lac SCHEDULE 2 : RESERVES AND SURPLUS Securities Premium Account As per last balance sheet Capital Investment Subsidy Reserve As per last balance sheet Revaluation Reserve As per last balance sheet Less : Depreciation on revalued component and deduction due to sale/discard of fixed assets Capital Redemption Reserve As per last balance sheet General Reserve As per last balance sheet Add : Transferred from profit & loss account Less : Accumulated impairment loss as on April 1, 2004 Profit & Loss Account

SCHEDULE 3 : SECURED LOANS Term loans from banks Bank overdrafts, packing credit, etc.

This Year Rs. lac

Previous Year Rs. lac

8.51

25.00

3031.76

3256.59

(740.37)

(224.83) 2291.39

3031.76

3125.00

4345.95 711.24 —

4301.33 757.72 (713.10) 5057.19 23709.59

4345.95 20081.61

34216.68

30617.83

23392.45 1518.44

20494.87 1580.80

24910.89

22075.67

SCHEDULE 4 : UNSECURED LOANS Fixed deposits Short term loans from banks

— 5803.24

101.72 3455.41

Other loans from banks

2000.00

—

7803.24

3557.13

7803.24

3557.13

Particulars of securities (refer note 4)

Amount repayable within one year

Annual Report 2005-2006

SCHEDULE 5 : FIXED ASSETS Rs. lac ASSETS

GROSS BLOCK As on 01.04.2005

Tangible Assets Land Buildings Plant & Machinery Research Centre Furniture & Fixtures Office & Other Equipments Vehicles Intangible Assets Trademarks Assets acquired under Finance Lease Vehicles TOTAL - This Year - Previous Year Capital Work-in-Progress

DEPRECIATION/IMPAIRMENT

NET BLOCK

Additions

Deductions/ Adjustments

As on 31.03.2006

Upto 31.03.2005

Deductions/ Adjustments

For the Year

Upto 31.03.2006

As on 31.03.2006

As on 31.03.2005

252.90 8961.76 36588.54 113.51 1117.84 1034.34 631.69

50.00 952.82 9516.74 — 52.62 46.58 61.13

33.35 1683.12 4563.09 — 57.63 83.41 83.77

269.55 8231.46 41542.19 113.51 1112.83 997.51 609.05

21.48 2307.80 21985.58 43.41 635.49 472.24 294.88

1.88 263.28 2511.33 — 21.71 55.53 35.03

1.64 241.26 1869.98 3.30 61.86 51.96 50.33

21.24 2285.78 21344.23 46.71 675.64 468.67 310.18

248.31 5945.68 20197.96 66.80 437.19 528.84 298.87

231.42 6653.96 14602.96 70.10 482.35 562.10 336.81

754.00

—

291.00

463.00

314.17

150.35

75.40

239.22

223.78

439.83

274.25 49728.83 48949.68

58.80 10738.69 1402.49

31.95 6827.32 623.34

301.10 53640.20 49728.83

117.09 26192.14 24117.03

12.66 3051.77 297.12

72.13 2427.86 2372.23

176.56 25568.23 26192.14

124.54 28071.97

157.16 23536.69

TOTAL 1. 2. 3. 4. 5. 6. 7. 8.

522.38

1563.09

28594.35

25099.78

Land includes leasehold land of Rs.126.72 lac (Previous Year Rs.136.18 Lac) which is being amortised over the period of lease. 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. Depreciation for the year includes Rs.168.43 Lac (Previous Year Rs.223.80 Lac) being depreciation on revalued component of the fixed assets. Gross block deductions includes Rs. 571.94 lac (Previous Year Rs.1.03 lac) being the revalued component of assets sold/discarded during the year. Buildings include Rs.0.01 lac (previous year Rs.0.01 lac) being the value of investment in shares of Co-operative Housing Society. Buildings include Rs. 1701.74 lac (previous year Rs. 2651.08 lac) being the cost of equity shares in Tahir Properties Ltd., representing the right of the Company to three (previous year five) flats in the property. Accumulated depreciation includes impairment loss of Rs. 509 lac on plant & machinery in an earlier year. Capital work-in-progress is net of impairment loss of Rs. 204.10 lac provided on an infructuous asset under construction.

SCHEDULE 6 : INVESTMENTS Investee Company/Institutions

Face Value (Rs.)

LONG TERM INVESTMENTS - At Cost A. TRADE INVESTMENTS Equity Shares : Fully Paid Bharuch Eco-Aqua Infrastructure Ltd. 10 Preference Shares : Partly Paid Godrej Foods Ltd. 10 (8% Redeemable Cumulative, 2012) Tahir Properties Ltd. (Class-A) 100 B. OTHER INVESTMENTS : Equity Shares : Fully Paid Quoted : Godrej Consumer Products Ltd. 4 Unquoted : Compass Connections Ltd. £0.25 Gharda Chemicals Ltd. 100 Godrej Sara Lee Ltd. 4 Swadeshi Detergents Ltd 10 Avestha Gengraine Technologies Pvt. Ltd. 10 Tahir Properties Ltd. (Partly Paid) 100 Boston Analytics LLC (Partly Paid) $1 Common Stock : Unquoted : C Bay Systems Ltd. $0.01 Convertible Debentures : Unquoted : Avestha Gengraine Technologies Pvt. Ltd. 10000000 Government Securities Unquoted : Kisan Vikas Patra — Shares in Co-operative Societies - Fully Paid Unquoted : The Saraswat Co-op Bank Ltd 10 Balance carried forward

Qty. as on 01.04.05

Acquired during Year

Number Sold during Year

Qty. as on 31.03.06

4,40,000

—

4,40,000

50,00,000

—

50,00,000

—

73,24,027

—

5,90,000

67,34,027

13,692 114 51,07,125 2,09,370 1,05,500 25 —

— — — — 14,744 — 78,250

— — — — — — —

13,692 114 51,07,125 2,09,370 1,20,244 25 7,81,250

9,03,798

31,87,275

—

40,91,073

—

1,000

—

Notes

Amount As on As on 31.03.06 31.03.05 Rs. lac Rs. lac

44.00

(b)

450.00

(b)

0.02

10,730.01

11670.12

(b) (b)

124.55 11.57 4,729.79 191.33 516.76 0.01 258.76

124.55 11.57 4729.79 191.33 450.25 0.01 —

(c)

4,062.82

845.70

300.00

—

0.32

—

1,000

(a)

0.10

21419.72

18517.76

Godrej Industries Limited Investee Company/Institutions

Face Value (Rs.)

Qty. as on 01.04.05

Acquired during Year

Number Sold during Year

Qty. as on 31.03.06

Notes

Balance brought forward C.

INVESTMENTS IN SUBSIDIARY COMPANIES : Equity Shares: Fully Paid Unquoted: Ensemble Holdings & Finance Ltd. Godrej Agrovet Ltd. Godrej Global Solutions Ltd. Godrej International Ltd. Godrej Beverages & Foods Ltd. (formerly Godrej Tea Ltd.) Godrej Hicare Ltd. Godrej Properties Ltd. Godrej Remote Services Ltd.

10 37,70,160 10 41,12,956 10 5,76,96,500 £1 15,05,000 10 97,49,996

— — — 11,00,000 —

— — 1,00,23,761 — 1,25,000

37,70,160 41,12,956 4,76,72,739 26,05,000 96,24,996

10 10 10

35,40,000 1,90,680 —

— — 77,12,642

66,47,100 52,64,645 —

31,07,100 50,73,965 77,12,642

(b),(d)

(b)

Less : Provision for diminution in value of Investments

Aggregate Book Value of Investments Quoted Unquoted

Market Value of Quoted Investments

Amount As on As on 31.03.06 31.03.05 Rs. lac Rs. lac 21419.72

18517.76

1318.14 3377.34 5589.65 1826.94 963.22

1318.14 3377.34 5379.65 960.83 975.72

364.83 4027.61 —

193.23 3836.46 771.25

38887.45 (1752.78)

35330.38 (1753.10)

37134.67

33577.28

10730.01 26404.66

11670.12 21907.16

37134.67

33577.28

48875.57

22708.15

NOTES : (a) The said shares have been refused for registration by the investee company. (b) Uncalled liability on partly paid shares - Tahir Properties Ltd. - Equity - Rs. 80 per share - Boston Analytics LLC - Equity - USD 440,000 - Godrej Foods Ltd. - Preference - Re. 1 per share - Tahir Properties Ltd. - Preference - Rs. 30 per share - Godrej Global Solutions - Equity - Rs. 3 per share on 60 lac shares - Godrej Hicare Ltd. - Equity - Rs. 6 per share on 30.4 lac shares. (c) Preferred Stock - series E & F has been converted into Common Stock during the year. (d) Reduction of shares held pursuant to Capital Reduction under a Scheme of Arrangement.

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 Considered doubtful

Less : Provision for doubtful debts

This Year Rs. lac

Previous Year Rs. lac

1156.47 5300.52 1961.02 3474.37

526.57 5192.87 1126.27 3906.05

11892.38

10751.76

— 233.99

1.67 262.05

233.99

263.72

5806.56 —

8602.77 33.53

5806.56

8636.30

233.99

295.58

5806.56

8604.44

Annual Report 2005-2006

SCHEDULE 9 : CASH AND BANK BALANCES Cash and cheques on hand Balance 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) Loans to GIL ESOP Trust Advances recoverable in cash or in kind or for value to be received (net of provision for doubtful advances Rs. 382.41 lac, previous year Rs.656.49 lac) Consideration Receivable from Godrej Beverage & Foods Ltd. for sale of Foods Division Intercorporate deposits – Subsidiary companies – Others Deposits and balances with – Customs & excise authorities – Others Advance payment of taxes (Net of Provision for tax, Previous year Rs. 1220 lac) SCHEDULE 11 : CURRENT LIABILITIES (refer note 9) Acceptances Sundry creditors – due to small scale industrial undertakings – others Advances from customers Sundry deposits Investor Education & Protection Fund * – Unclaimed dividend – Unpaid Matured Deposits – Interest accrued on above Other liabilities Interest accrued but not due on loans

This Year Rs. lac

Previous Year Rs. lac

19.37

19.62

386.71 853.55

621.10 737.16

1259.63

1377.88

1091.34 556.50

1127.86 —

1663.15 3000.00

1302.54 —

— 41.80

46.48 51.80

849.59 486.35 —

1008.60 564.76 30.19

7688.73

4132.23

—

1429.49

56.82 13750.58

72.05 12101.83

13807.40 305.13 555.64

12173.88 964.05 951.76

46.29 24.80 0.20 829.03 157.83

51.70 103.17 58.70 1224.50 92.99

15726.32

17050.24

2432.10 341.10 2388.08 40.75

1945.68 272.88 2729.72 —

5202.03

4948.28

126.30 2685.07 (592.01)

208.63 100.42 (182.75)

2219.36

126.30

* There is no amount due and outstanding to be credited to the Investor Education and Protection Fund. SCHEDULE 12 : PROVISIONS Proposed dividend Provision for tax on distributed profits Provision for retirement benefits Provision for taxation (Net of Advance Tax Rs. 1270.25 lac) SCHEDULE 13 : MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) Deferred revenue expenditure Voluntary retirement compensation Balance at the beginning of the year Add : Expenditure Incurred during the year Less : Amortised during the year

Godrej Industries Limited This Year Rs. lac

Previous Year Rs. lac

— 9.62 140.56 307.00

16.90 — 8.10 —

508.20 1704.71 309.13 2120.35

646.66 1589.40 — 3422.22

35.02 587.03

69.04 265.46

5721.62

6017.78

SCHEDULE 15 : MATERIALS CONSUMED AND PURCHASE OF GOODS Raw materials consumed : Stocks at the commencement of the year Add : Purchases (net)

5192.87 40385.71

6096.76 44007.83

Less : Stocks as at the close of the year

45578.58 5300.52

50104.59 5192.87

Raw Materials consumed during the year Purchase of goods for resale

40278.06 9950.77

44911.72 5883.21

50228.83

50794.93

5772.39 326.13 636.19 631.87 4164.79 80.85 295.90

6004.11 354.20 513.37 814.31 3569.68 456.75 236.69

389.57

447.83

882.25 263.65 402.36 133.90 2012.54 282.86 456.93 250. 96 47.93 1108.67 170.79 10.87 — — 284.99 182.62 2376.48 (538.08)

1200.36 247.19 431.63 135.89 1606.78 383.90 203.06 154.04 97.55 772.78 0.57 7.00 450.02 123.78 (50.70) 809.09 1812.28 (577.73)

20627.41

20204.43

SCHEDULE 14 : OTHER INCOME Interest : – Government Securities – Debentures – Income tax refund – Deposits (refer Note 17) Dividend – from subsidiary companies – from long term investments Profit on sale of fixed assets (Net) Profit on sale of long term investments (refer Note 17) Profit on sale of current investments Miscellaneous income (refer Note 17)

SCHEDULE 16 : 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 (refer Note 16) 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 Provision for depletion in value of investments Loss on sale of fixed assets Excise duty on inventory change Foreign exchange loss Miscellaneous expenses Less : Expenses recovered under cost sharing agreement for use of common facilities

Annual Report 2005-2006

Rs. lac SCHEDULE 17 : INVENTORY CHANGE Stocks at the commencement of the year – Finished goods – Work-in-progress Stock adjustment on sale of Foods Division Less : Stocks at the close of the year : – Finished goods – Work-in-progress

3906.05 1126.27

Less : Interest during construction period capitalised Less : Interest received – on loans & deposits – on Customer balances, etc.

Net Interest Brokerage and other financial charges Foreign exchange loss

SCHEDULE 19 : EXTRAORDINARY ITEMS Profit on sale of Foods division

Previous Year Rs. lac

3113.51 1036.35 5032.32 (793.01)

(3474.37) (1961.02)

(Increase)/Decrease in Inventory

SCHEDULE 18 : INTEREST AND FINANCIAL CHARGES (Net) Interest paid – on fixed loans – on bank overdrafts – other interest

This Year Rs. lac

4149.86 — (3906.05) (1126.27)

(5435.39)

(5032.32)

(1196.08)

(882.46)

1702.34 114.71 485.72

817.65 121.46 497.72 2302.77 265.47

33.13 18.08

1436.83 14.25 56.41 34.46

51.21

90.87

1986.09 393.65 457.69

1331.71 322.58 927.38

2837.43

2581.67

3510.80

—

Less : Taxation on above –

current tax

–

deferred tax

SCHEDULE 20 : PRIOR PERIOD ADJUSTMENTS Excess provision for Income-tax Dividend for previous year Provision for pension payments

(506.00)

—

101.00

—

3105.80

—

42.52

2.20

62.42

—

(112.50)

—

(7.56)

2.20

Godrej Industries Limited SCHEDULE 21 : SIGNIFICANT ACCOUNTING POLICIES 1. 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. 2. 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 from a country outside India 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. 3. Intangible Assets The cost of acquisition of trade marks is amortised equally over a period of ten years. 4. Asset Impairment The Company reviews the carrying values of tangible and intangible assets for any possible impairment at each balance sheet date. An impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount. In assessing the recoverable amount, the estimated future cash flows are discounted to their present value at appropriate discount rate. 5. 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. 6. 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 investeeâ&#x20AC;&#x2122;s assets and results and the expected cash flows from the investment. Current investments are carried at lower of cost and fair value. 7. Inventories Inventories are valued at lower of cost and net realisable value. Cost is computed on weighted average basis and is net of modvat. Finished goods and work in progress include cost of conversion 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. 8. Provisions and Contingent Liabilities Provisions are recognised in the accounts in respect of present probable obligations, the amount of which can be reliably estimated. Contingent Liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company. 9. Foreign Exchange Transactions Transactions in foreign currency are recorded at the exchange rates prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currency are translated at the period end exchange rates. Forward exchange contracts, remaining unsettled at the period end, backed by underlying assets or liabilities

10.

11.

12.

13.

14.

are also translated at period end exchange rates. Premium or discount on forward exchange contracts is amortised over the period of the contract and recognized as income or expense for the period. Exchange gains / losses are recognised in the Profit and Loss Account except for exchange differences relating to fixed assets acquired from a country outside India, which are adjusted in the cost of the asset. Non Monetary foreign currency items like investments in foreign subsidiaries are carried at cost and expressed in Indian currency at the rate of exchange prevailing at the time of making the original investment. Revenue Recognition Sales are recognised when goods are supplied and are recorded net of returns, trade discounts, rebates, sales taxes and excise duties. Income from processing operations is recognised on completion of production / dispatch of the goods, as per the terms of contract. Export incentives receivable under the Duty Entitlement Pass Book Scheme and Duty Drawback Scheme are accounted on accrual basis. Dividend income is recognised when the right to receive the same is established. 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. Research and Development Expenditure Revenue expenditure on Research and 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 and Development is included under as additions to fixed assets. Depreciation Leasehold land is amortised equally over the lease period. Leasehold improvements are amortised over five 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 which 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. 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. Retirement Benefits Retirement benefits to employees comprise payments under defined contribution plans like provident fund and family pension as well as payments under defined benefit schemes like leave encashment benefit on retirement and gratuity to eligible employees. Payments under defined contribution plans are charged to revenue. The liability in respect of defined benefit schemes is provided on the basis of an actuarial valuation at the end of each financial year. 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 and 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.

Annual Report 2005-2006

15. 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 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. 16. 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. 17. Taxes on Income Current tax is the amount of tax payable on the assessable income for the year determined in accordance with the provisions of the Income Tax Act, 1961. 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 on unabsorbed tax losses and tax depreciation are recognized only when there is virtual certainty of their realisation and on other items when there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. The tax effect is calculated on the accumulated timing differences at the year end based on the tax rate and laws enacted or substantially enacted on the balance sheet date. 18. 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.

SCHEDULE 22 : 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 Companyâ&#x20AC;&#x2122;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 Companyâ&#x20AC;&#x2122;s name was changed to Godrej Industries Limited on April 2, 2001. The Company is engaged in the businesses of manufacture and marketing of oleo-chemicals, their precursors and derivatives, bulk edible oils, trading in medical diagnostic products, estate management and investment activities. 2.

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

Claims against the Company not acknowledged as debts : i) Excise duty demands relating to disputed classification, post manufacturing expenses, assessable values, etc. which the Company has contested and is in appeal at various levels 1537.41 ii) Customs Duty demands relating to less charge, differential duty, classification, etc. 844.53 iii) Sales Tax demand relating to purchase tax on Branch Transfer/ Non availability of C Forms, etc. at various levels 207.13 iv) Octroi demand relating to classification issue on import of Palm Stearine and interest thereon 844.46

d) 3.

Stamp duties claimed on certain properties which are under appeal by the Company 182.23 vi) Income Tax demands against which the Company has preferred appeals 1724.64 vii) Industrial relations matters under appeal 518.06 viii) Others 217.26 Guarantees issued by banks, excluding guarantees issued in respect of matters reported in (a) & (b) above 1558.31 Guarantees given by the Company in respect of credit/ guarantee limits sanctioned by banks to subsidiary and other companies 3085.00 Uncalled liability on partly paid shares/debentures 579.15

182.23

586.85 486.08 262.58

1789.77

5385.00 440.03

Capital Commitments This year Previous Year Rs. lac Rs. lac

3386.52

1062.93

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

2059.91

Secured Loans a)

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

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

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

200.96

722.01

133.99

Godrej Industries Limited SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) 5.

Investments

CBay Systems Limited, USA (CBay USA) has carried out an organizational restructuring during the year, consequent to which, all the businesses of CBay Group have been consolidated under CBay Systems Limited, India (CBay India), a wholly owned subsidiary. The Shares of CBay India have been distributed in specie on a pro-rata basis to all the stockholders of CBay USA under the above scheme. The Indian Stockholders will be allotted the shares in CBay India on receipt of approval from the Reserve Bank of India (RBI). No effect has been given to the aforesaid scheme in the accounts, pending approval of RBI and allotment of shares in CBay India.

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

Maximum balance during the year This year Previous year Rs. lac Rs. lac Rs. lac c)

45,66,794 3,74,97,975

500.00 4047.00

— 4,74,84,632

600.00 4445.00 9791.00 9994.00 6364.00 11990.00

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

19.60

18.50

36.04

Loans and Advances a)

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

—

11.00

35.48

—

35.48

57.80

47.80

57.80

1033.00

7000.00

3000.00

—

Loans and Advances to associate companies Swadeshi Detergents Ltd.

Loans and Advances where there is no repayment schedule or repayment is beyond seven years : D. Kavasmanek and Others (refer (b) above)

Consideration receivable for sale of Foods divisions : Godrej Foods & Beverages Ltd. a subsidiary Company

Liabilities a)

No amount has been claimed from the Company under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993.

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

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.

Cash and Bank Balances Balances with Scheduled Banks in Deposit Accounts include deposits held by bank as security against guarantees issued

175.45

35.00

iii) Godrej Hicare Ltd.

— 4970.00

This year Previous Year Rs. lac Rs. lac 6.

Previous Year No. of Purchase Units Cost Rs. lac

3,93,85,339 4365.00 34,54,371 3,18,68,947 4912.00 2,76,48,845 9,19,66,703 12598.00 7,57,03,162 — — 7,08,398 5,29,34,599 5608.00 5,88,05,678 13,07,93,874 14271.00 11,41,25,847

Ensemble Holdings & Finance Ltd.

Mutual Funds - Liquid Funds - Growth Plan

Birla Cash Plus Liquid Prudential ICICI Liquid KMMF Liquid Templeton India Liquid ING Vysya Liquid SBI Magnum Liquid Deutsche Insta Cash Plus Fund JMMF Liquid

Loans and Advances to subsidiary companies i)

The Company has acquired and sold the following investments during the year: This Year No. of Purchase Units Cost Rs. lac

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 has enforced its security and lodged the shares for transfer in its name, however, the transfer application has been rejected by Gharda Chemicals Ltd. and the Company has filed an appeal before the Company Law Board against the rejection. Interest on the aforesaid loan 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 the said shares. In the opinion of the management, the value of the said shares is greater than the amount of the loans.

Annual Report 2005-2006

10. Employee Stock Option Plans

The Company has during the year instituted an Employee Stock Option Plan (GIL ESOP) approved by the Board of Directors and the shareholders on October 24, 2005 and December 1, 2005 respectively. The Plan provides for the allotment of 15,00,000 options convertible into 15,00,000 equity shares to eligible employees of the participating companies. The compensation committee comprising independent members of the Board of Directors administers the plan. The scheme is administered by an independent ESOP Trust which has purchased shares equivalent to the number of options granted from the market, out of the finance provided by the participating companies to the Trust. The number and weighted average exercise price of options granted, exercised and forfeited are as under: No. of Options

Wt. average exercise price

Options outstanding at the beginning of the year Options granted

— 350,000

Less : Exercised Forfeited / expired Options outstanding at the year end

— — 350,000

— 392.35 (plus interest) — — 392.35 (plus interest)

The options granted shall vest after three years from the date of grant of option, provided the employee continues to be in employment and the option is exercisable within two years after vesting. The employee share based payment plans have been accounted based on the intrinsic value method and no compensation expense has been recognized since the market price of the underlying share at the grant date is the same / less than the exercise price of the option, the intrinsic value being Nil.

Period

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

12. Leases The Company has entered into leave and licence agreements in respect of its commercial and residential premises. These are not non-cancellable 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:

Gross carrying amount of premises Accumulated depreciation Depreciation for the period

Un-matured Interest

Present value of minimum lease payments

Rs. Lac 13.06

Rs. Lac 81.76

65.59 152.46

9.74 22.80

54.72 136.48

14. Hedging Contracts a.

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: This Year

Details

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

Total minimum lease payments outstanding as on March 31, 2006 Rs. Lac 86.87

13. Deferred Tax Major components of deferred tax arising on account of timing differences as at the year end are: Assets This Year Previous Year Rs. lac Rs. lac Provision for retirement benefits 294 806 Provision for doubtful debts/advances 209 307 VRS Expenses 77 — Others 210 228 790 1,341 Liabilities Depreciation 4,608 3,798 VRS Expenses — 45 4,608 3,843 Net Deferred Tax Liability 3,818 2,502

Had the fair value method of accounting been used, the employee compensation cost would have been Rs. 204 lac. 11. Incentive Plans

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, 2006, in respect of vehicles acquired under lease are as under:

This Year Rs. lac

Previous Year Rs. lac

2857.79 995.81 115.71

3816.04 957.72 120.20

Purchase

Previous Year

Sale Purchase

Sale

Total number of contracts entered during the year

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

595

Future contracts not settled as on March 31, 2006

—

Number of units under above contracts

—

The Company uses forward exchange contracts to hedge its foreign exchange exposure in accordance with its forex policy as determined by a Forex Committee. The particulars of the forward exchange contracts for the year are as under: This Year

Details Total number of contracts entered during the year Foreign currency value covered US Dollar (million) Euros (million) Total number of contracts outstanding as at the year end

Purchase 171

Previous Year

Sale Purchase 77

101.25 33.68 — 3.34 54

184

Sale 36

105.48 20.59 — 0.18 39

Godrej Industries Limited SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) This Year Details

Purchase

Previous Year

Sale Purchase

Sale

Foreign currency value US Dollar (million) Euros (million)

37.30 13.00 — 0.94

39.61 —

5.84 —

Uncovered Foreign exchange exposure as at the year end US Dollar (million)

12.41

16.92

—

16. Turnover Turnover includes: i)

Processing charges

ii)

Export Incentives

iii) Licence fees and service charges —

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

Continuing Operation

Discontinuing Operation (Foods Division)

ii)

2005-06 2004-05 2005-06 2004-05 2005-06 2004-05 54,226

57,174

20,322

19,161

74,548

76,335

Other Income

5,487

5,962

235

5,722

6,018

51,372

52,845

20,548

19,420

71,920

72,265

Operating Profit

8,341

10,291

(203)

8,350

10,088

Interest

2,527

2,269

310

313

2,837

2,582

Profit / (loss) before tax

5,814

8,022

(301)

(516)

5,513

7,506

(1,547)

(1,499)

Profit / (loss) after tax

4,267

8,065

(253)

(490)

4,014

7,575

Total Assets

94,596

76,825

5,079

6,845

94,596

83,670

Total Liabilities

54,687

47,743

1,589

2,390

54,687

50,133

Income Tax

Cash Flow from operating activity

6,559

1,310

(1,959)

from investing activity

219

(2,843) (3,934)

(463)

(127)

from financing activity

2,724 (1,602)

(825)

1,882

1,529

4,600

2,125.86

554.42

573.27

2,194.51

2,148.27

4,752.86

4,847.40

This Year Previous Year Rs. lac Rs. lac

Total

Turnover

2,003.93

17. Exceptional Items

The Foods Division is a separate segment as per AS 17, Segment Reporting. The carrying amounts of the total assets disposed, the total liabilities settled and the amounts of revenues and expenses in respect of the ordinary activities attributable to the discontinued operations for the current financial year are as under: Rs. in lac

Operating Expenses

This Year Previous Year Rs. lac Rs. lac

Included under Other Income - Profit on sale of long term investments

2,119.81

3,422.22

- Reversal of provision for claims payable on culmination of disputes

175.00

—

- Interest received on deposit placed against above claim on execution of decree

307.00

—

89.00

—

Payment to Mumbai Port Trust for regularization of lease included in Rent paid.

18. Profit and 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. 0.42 lac (Previous year Rs. 0.90 lac). The exchange difference included in the Profit and Loss Account is a loss of Rs. 640.31 lac (Previous year Rs. 1,736.08 lac). The exchange difference in respect of forward exchange contracts to be recognised in subsequent accounting periods is Rs. 24.68 lac (Previous year Rs. 715.88 lac).

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

(3,306) (4,061) 1,899

280

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

This Year

Previous Year

4,86,41,942 4,86,41,942 4,86,41,942 4,006.62 7,112.42 8.24 14.62

4,86,41,942 4,86,41,942 4,86,41,942 7,577.22 7,577.22 15.58 15.58

19. Earnings per share: a.

b. c. d. e.

Calculation of weighted average number of equity shares Number of shares at the beginning of the year 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 excluding extraordinary items Net profit after tax available for equity shareholders (including extraordinary items) Basic and diluted earnings per share of Rs.6 each excluding extraordinary Items Basic and diluted earnings per share of Rs.6 each including extraordinary Items

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

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

Annual Report 2005-2006

SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) 20. Segment Information Information about primary business segments Chemicals

Rs. lac

Foods

Estate

Finance & Investments

Others

Total

This Year Previous Year This Year Previous Year This Year Previous Year This Year Previous Year This Year Previous Year This Year Previous Year Revenue External Sales

51177.71

Add : Unallocated Income Total Income

—

54306.55 21116.55 —

—

19197.24 2282.52 —

2158.44 4574.90

—

5822.96

1118.20

—

867.83 80269.88 —

82353.02

—

— 82353.02

51177.71

54306.55 21116.55

19197.24 2282.52

2158.44 4574.90

5822.96

1118.20

867.83 80269.88

4760.35

6230.43 (341.38)

(856.81) 1471.62

1361.05 4574.90

5372.94

(111.58)

Results Segment result before interest and tax

114.87 10353.91

12222.48

Unallocated expenses

(2003.63)

(2134.79)

Interest Expense (net)

(2837.42)

(2581.67)

5512.86

7506.02

(1498.68)

69.00

4014.18

7575.02

Profit before tax Taxes Profit after taxes and before extraordinary items Add : Extraordinary Items (Net of taxes) Add/(Less) : Prior period items Net Profit Segment Assets

44348.01

34793.82 3701.03

8628.96 2768.09

3699.98 40283.49

36151.10

3495.06

Unallocated Assets Total Assets Segment Liabilities

19899.83

17062.14

423.86

3896.27

437.17

950.20

44.86

27.85

81.88

3105.80

—

(7.56)

2.20

7112.42

7577.22

365.62 94595.68

83,639.48

—

30.19

94595.68

83669.67

62.06 20887.60

21998.52

Unallocated Liabilities

36572.88

28134.80

Total Liabilities

57460.48

50133.32

Total Cost incurred during the year to acquire segment assets

7276.38

915.21

297.77

426.08

12.72

Segment depreciation

1784.09

1741.79

239.82

240.22

128.06

61.20 3,557.39

7,494.02

3,151.82

— 14296.08

8,896.51

450.02

107.46

33.36 2259.43

2598.45

India

65120.34

66979.67

Outside India

15149.54

15373.35

Total

80269.88

82353.02

94595.68

83669.67

133.06

—

Information about Secondary Business Segments Revenue by Geographical markets

Carrying Amount of Segment assets India Outside India Total

—

94595.68

83669.67

Notes: 1.

The Company has disclosed Business Segment as the primary segment. Segments have been identified taking into account the nature of the products, the different risks and returns, the organisational structure and the internal reporting system.

Chemicals segment includes Oleo Chemicals such as Fatty Alcohols, Fatty Acids, Alfa Olefin Sulphonates and Refined Glycerin. Foods segment includes refined vegetable oils and vanaspati, fruit and vegetable puree, pulp juices and fruit beverages. Estate segment comprises the business of giving premises on leave and license basis. Finance and Investments segment comprises of investment in subsidiaries, associate companies and other investments.

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.

Godrej Industries Limited 21. Related Party Disclosures List of Related Parties and Relationships a) Parties where control exists Godrej & Boyce Mfg. Co. Ltd., the holding company. Subsidiary companies: Ensemble Holdings & Finance Ltd. Godrej Agrovet Ltd. Goldmohur Foods & Feeds Ltd. Golden Feed Products Ltd. Godrej Global Solutions Ltd. Godrej Global Solutions (Cyprus) Limited Godrej Global Solutions, Inc. Godrej International Ltd. Godrej Global Mideast FZE Godrej Properties Ltd. Girikandra Holiday Homes & Resorts Ltd. Godrej Hicare Ltd. Godrej Beverages & Foods Ltd. (formerly known as Godrej Tea Ltd.) Godrej Realty Pvt. Ltd. Godrej Waterside Properties Pvt. Ltd. Krithika Agro Farm Chemicals & Engineering Industries Pvt. Ltd. Fellow Subsidiaries: Godrej Appliances Ltd. Godrej Foods Ltd. Godrej Infotech Ltd.

Mercury Mfg. Co. Ltd. Godrej (Malaysia) Sdn. Bhd. Godrej (Singapore) Pte. Ltd. JT Dragon Pte. Ltd. Other related parties with whom the Company had transactions: Associate / Joint Venture Companies Godrej SaraLee Ltd. Godrej Upstream Ltd. Key Management Mr. A. B. Godrej Mr. N. B. Godrej Ms. T. A. Dubash

Personnel - Chairman (Non-Executive) - Managing Director - Executive Director & President (Marketing) Mr. Mathew Eipe - Executive Director & President (Chemicals) Mr. V. Banaji - Executive Director & President (Group Corporate Affairs) Mr. M. P. Pusalkar - Executive Director & President (Corporate Projects) Enterprises over which key management personnel exercise significant influence Godrej Consumer Products Ltd. Swadeshi Detergents Ltd.

Annual Report 2005-2006

SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) c)

Transactions with Related Parties Rs. lac

Associate/ Fellow Joint Venture Subsidiaries Companies

Relative Key of Key Management Management Personnel Personnel

Enterprises over which Key Management Personnel exercise significant influence

Total

890.83 — 264.19 — — — 1,033.81 — 23.15 —

921.94 930.87 265.64 1.46 7000.00 — 1767.28 1422.40 75.44 25.55

Holding Company

Subsidiary Companies

Sale of Goods 17.08 Previous Year 22.14 Sale of Fixed Assets 0.05 Previous Year — Sale of undertaking (Foods Division) — Previous Year — Purchase of goods & equipment 30.77 Previous Year 60.60 Commission received — Previous Year — Recovery of establishment & Other Expenses 1.43 Previous Year 13.82 Establishment & other exps paid 228.68 Previous Year 225.68 Sale of Investments — Previous Year 4950.00 Purchase of Investments — Previous Year — Interest received — Previous Year — Interest paid — Previous Year — Dividend income — Previous Year — Dividend paid 1,248.02 Previous Year 936.01 Remuneration — Previous Year — Finance provided including loans & equity contributions — Previous Year — Finance repaid during the year — Previous Year — Guarantees & collaterals given — Previous Year — Balance Outstanding as on March 31, 2006 Receivables 1.42 Previous Year 69.12 Payables 0.01 Previous Year 4.33 Guarantees Outstanding — Previous Year —

1.53 0.59 1.40 — 7000.00 — 0.14 263.54 30.01 —

— 904.96 — 1.46 — — 695.87 1086.77 2.50 21.05

12.50 3.18 — — — — 6.69 11.49 19.78 4.50

— — — — — — — — — —

271.58 362.57 19.60 26.31 — — 190.68 — 1.18 33.47 — — 508.20 646.66 — 2.97 — —

12.52 898.07 10.50 112.17 — — — — — — — — 25.28 562.72 — — — —

229.64 216.83 14.03 7.35 — — — — — — — — 536.25 1010.33 — — — —

— — — — — — — — — — — 0.27 — — 47.61 75.60 330.85 402.01

— — — — — — — — — — — — — — 424.41 272.64 — —

815.74 1330.91 0.06 1491.35 89.66 362.47 0.13 371.64 — — — 4,950.00 — 190.68 10.20 10.20 4.99 6.17 5.85 39.32 — — — 0.27 1,007.66 2077.39 — 2219.71 — 1720.04 — 1287.22 — 330.85 — 402.01

1,294.46 4,292.37 103.48 1,558.50 (2,300.00) (700.00)

— (3.08) — — — —

(3.30) (24.10) — — — 1,350.00

— — — — — —

(10.00) 1,281.16 — 4265.19 — 103.48 8.00 1,566.50 — (2,300.00) — 650.00

3016.15 91.92 113.57 198.98 667.00 2,967.00

— 19.76 — 61.80 1,000.00 1,000.00

18.54 10.67 42.60 35.29 1,350.00 1,350.00

— — — — — —

222.25 — 102.85 0.11 — —

Nature of Transaction

3258.36 191.47 259.03 300.51 3017.00 5317.00

Godrej Industries Limited d)

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

Nature of Transaction Sale of goods - Godrej Consumer Products Ltd. Sale of fixed assets - Godrej Consumer Products Ltd. Sale of undertaking (Foods Division) - Godrej Beverages & Foods Ltd. Purchase of goods & equipment - Godrej Consumer Products Ltd. - Godrej Foods Ltd. Commission received - Godrej Consumer Products Ltd. - Godrej Beverages & Foods Ltd. - Godrej Upstream Ltd.

Amount 890.83 264.19

7,000.00

1,033.81 692.34

23.15 24.85 19.78

Recovery of establishment & other expenses - Godrej Consumer Products Ltd. - Godrej Saralee Ltd. - Godrej Agrovet Ltd.

815.74 229.64 175.10

Establishment & other exps paid - Godrej & Boyce Mfg. Co. Ltd. - Godrej Consumer Products Ltd.

228.68 89.66

Purchase of Investments - Ensemble Holdings & Finance Ltd.

190.68

Rs. lac Nature of Transaction Interest received - Swadeshi Detergents Ltd.

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

Less : Depreciation under Section 350 of the Companies Act, 1956 Profit/(loss) on sale of assets as per books Profit on sale of investments Profit on sale of Foods division

68.00 35.48

Guarantees & collaterals given - Godrej Beverages & Foods Ltd. - Godrej Global Solutions Ltd.

(2,800.00) 500.00

Dividend income - Godrej Consumer Products Ltd. - Ensemble Holdings & Finance Ltd.

1,007.66 306.67

Dividend paid - Godrej & Boyce Mfg. Co. Ltd.

1,248.02

Remuneration - Mr. N. B. Godrej - Ms. T. A. Dubash - Mr. Mathew Eipe - Mr. V. F. Banaji - Mr. M. P. Pusalkar

82.11 50.57 62.56 77.07 48.93

Finance provided including loans & equity contributions - Godrej Global Solutions Ltd. - Godrej International Ltd. - Godrej Hicare Ltd.

210.00 866.15 171.60 This Year Rs. lac

Previous Year Rs. Lac

7112.42 2259.43 330.85 294.00

7575.52 2148.43 402.01 (127.31)

10.87 1903.68

457.02 (69.00) 4798.83

2811.15

11911.25

10386.67

2240.45 309.13 2155.37 3510.80

2093.73 (123.78) 3491.26 â&#x20AC;&#x201D; 8215.75

5461.21

3695.50

4925.46

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

369.55

492.55

Managerial remuneration paid/payable

330.85

402.01

Net Profit for the purpose of Directorsâ&#x20AC;&#x2122; Remuneration

4.99

Finance repaid during the year - Ensemble Holdings & Finance Ltd. - Godrej Hicare Ltd.

Rs. lac 22.

Amount

Annual Report 2005-2006

SCHEDULE 22 : NOTES TO ACCOUNTS (contd.)

23.

24.

25.

This Year Rs. lac

Previous Year Rs. lac

Managerial Remuneration Salaries and allowances Contribution to Provident Fund Estimated Monetary value of perquisites Directors’ Fees

289.12 16.66 15.47 9.60

342.48 13.64 39.44 6.45

TOTAL

330.85

402.01

Auditors’ Remuneration Audit fees (including Rs. 0.92 lac to branch auditors, Previous Year Rs. 0.98 lac) Tax audit fees Certification and other services Tax Consultation and representation Consultation and management services Out of pocket expenses

30.92 5.50 7.65 9.20 4.30 0.71

25.48 4.50 11.47 3.15 2.99 0.13

TOTAL

58.28

47.72

Turnover (Net) 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 Soya Milk Medical Diagnostic Products Others

Previous Year Quantity Value Rs. lac

Unit

Quantity

Value Rs. lac

MT MT

56110 8997

17447.97 3491.25

51369 8390

17014.51 3796.68

MT MT MT KL MT

62657 38048 4285 8586 631

28311.15 14461.23 1724.44 2289.06 249.29 958.02 5615.85

71967 27597 3951 8645 591

31517.63 13652.66 1616.33 2264.50 224.64 803.33 5444.96

TOTAL

74548.26

76335.24

26. 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 Soya Milk Medical Diagnostic Products Others TOTAL

Unit

March 31, 2006 Quantity Value

MT MT

2278 638

MT MT MT KL MT

5710 — — — —

Rs. lac 817.98 236.59 2,300.62 — — — — 119.18 — 3474.37

March 31, 2005 Quantity Value 1665 202 1649 1075 5338 748 68

Rs. lac 629.54 90.16 499.65 509.64 1714.67 165.04 15.45 180.20 101.70 3906.05

March 31, 2004 Quantity Value 2245 121 1867 1098 1576 650 —

Rs. lac 878.39 63.46 723.39 575.99 343.99 153.89 — 307.60 66.80 3113.51

Godrej Industries Limited SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) 27.

Raw Materials Consumed This Year

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

Unit

Quantity

Value Rs. lac

MT MT KL

126174 19942 1070

31036.70 4550.73 1073.90 3616.73

TOTAL

Previous Year Quantity Value Rs. lac 126151 21314 5170

40278.06

32793.15 4546.98 2639.87 4931.72 44911.72

Raw materials consumption includes consumption for production of captively consumed items. 28.

Purchase of Goods This Year

Fatty Acids Oils & Vanaspati Pulp Medical Diagnostic Products Others TOTAL

Unit

Quantity

Value Rs. lac

MT MT MT

134 29063 1011

42.63 8910.68 473.88 461.33 62.25 9950.77

Previous Year Quantity Value Rs. lac 1002 11914 254

380.73 4,292.97 112.18 379.51 717.82 5883.21

29. Licensed, Installed and Utilised Capacity Item

Unit

SCHEDULED Fatty Acids Glycerin Alpha Olefin and its precursors and derivatives Soaps Cosmetics Fruit Beverages & Fruit based products Fruit & Vegetable Puree, Pulp & Juices. Refined Oils & Vanaspati Dietetic & Geriatic foods U.H.T./Sweetened Flavoured Milk Instant Tea/Coffee Plant Synthetic Detergents Hydrogen (Captive consumption) Oxygen (By-Product)

MT MT MT MT MT KL MT MT MT KL MT MT NM3 NM3

Licensed Capacity

} } } } } } } } } } } } } } } } }

Installed Capacity

Actual Production This Previous Year Year

This Year

Previous Year

32000 8280

46307 9434

37014 8448

35000 26381 1200

66933 10338 –

72699 10944 –

30000

18467

46509

5000 38700 250 1800 3000 11250 1224000 612000

3222 10099 4155 1182 879 14699 518091 259046

8581 14390 – 1,136 690 16888 411412 205706

N.A

Notes :

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

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

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.

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

Annual Report 2005-2006

SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) This Year Previous Year Rs. lac Rs. lac 30.

31.

Value of Imports on CIF Basis (includes only Imports directly made) Raw materials 23326.81 Goods for resale 50.13 Stores & spares 290.72 Capital goods 731.15

15240.87 1136.45 270.46 36.89

TOTAL

24398.81

16684.67

352.82 83.98 399.93

833.15 80.37 353.17

87.17 20.80 38.07

84.91 21.96 32.64

982.77

1406.20

Expenditure in Foreign Currency Interest Travelling expenditure Other expenditure Expenses for Foreign Branch: - Salaries and allowance - Rent - Others TOTAL This year Rs. lac

32.

Value of Consumption of Raw Materials & Spares Raw Materials Imported (including duty content) Indigenous

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

26138.87 14139.19

65 35

28354.38 16557.34

63 37

40278.06

100

44911.72

100

240.15 391.72

38 62

373.04 441.27

46 54

631.87

100

814.31

100

Dividends Remitted in Foreign Currency (subject to deduction of tax, as applicable) Final Dividend for Financial Year 2004-05 to 6 shareholders on 1110 shares

0.04

0.01

TOTAL

0.04

0.01

Earnings in Foreign Exchange Export of goods (F.O.B. : this year Rs.14150.42 lac previous year Rs.14793.04 lac) Dividend Others TOTAL

15082.08

15309.42

65.80 1.66

62.21 1.72

15149.54

15373.35

967.17 —

862.07 —

898.23 375.64 577.36 0.22 463.50

894.18 255.10 865.31 0.24 378.54

70.98 —

96.19 —

1251.71 127.05 21.02

1640.83 52.64 23.03

III. INCOME 1. Turnover (Net of excise) 2. Other Income

8911.43 152.84

9757.50 124.16

IV. EXPENSES 1. Material consumed and purchase of goods 2. Expenses 3. Inventory change 4. Depreciation 5. Interest 6. Provision for Taxation

4970.02 2724.80 119.20 91.38 12.12 117.79

4837.66 4039.40 (43.57) 137.11 20.55 63.77

207.02 2.48

262.35 0.52

2. Current Liabilities and Provisions a) Liabilities b) Provisions 3. Deferred Tax- Net

V. OTHER MATTERS 1. Contingent Liabilities 2. Capital Commitments

This year Previous year Rs. lac Rs. lac 34.

ASSETS 1. Fixed Assets 2. Investments 3. Current Assets, Loans and Advances a) Inventories b) Sundry Debtors c) Cash and Bank Balances d) Other Current Assets e) Loans and Advances

II. LIABILITIES 1. Loan Funds a) Secured Loans b) Unsecured Loans

This year Previous year Rs. lac Rs. lac 33.

Interest in Joint Ventures: The Company’s interests, as a venturer, in jointly controlled entities are: Name Countries Principal Percentage of of activities Ownership Incorporation interest as at 31st March, 2006 Godrej India Household 20.00% SaraLee Ltd. Insectisides 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. related to its interests in this joint venture are:

Previous year Rs. lac %

Spares Imported (including duty content) Indigenous

35.

36.

Figures for the previous year have been regrouped wherever necessary.

Godrej Industries Limited SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) 37.

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

Registration Details Registration No State Code Balance Sheet Date

: : :

97781 11 31/3/2006

Capital raised during the year (Amount in Rs. lac) Public Issue : Rights Issue : Bonus Issue : Private Placement (Preference) : Position of mobilisation and deployment of funds (Amount in Rs. lac) Total Liabilities : Total Assets : Sources of Funds Paid-up Capital : Reserves & Surplus : Secured Loans : Unsecured Loans : Deferred Tax Liability : Application of Funds Net Fixed assets : Investments : Net Current Assets : Misc. Expenditure : Accumulated Losses : Performance of Company (Amount Turnover (Income from Operations) Total Expenditure (Net of Other Income) Profit/(Loss) before tax Profit/(Loss) after tax Earning per Share in Rs. (on an annualised basis) Dividend rate % Generic Names of three principal products/services of Company Item Code No. Product description Item Code No. Product description Item Code No. Product description

in Rs. lac) :

Nil Nil Nil Nil

73,667.33 73,667.33 2,918.52 34,216.68 24,910.89 7,803.24 3,818.00 28,594.35 37,134.67 5,718.95 2,219.36 â&#x20AC;&#x201D; 74,548.26

: : :

69,035.40 5,512.86 4,014.18

: :

8.24 83.33%

: : : : : :

38.23 * Fatty Acids/Fatty Alcohols 15.16 * Vanaspati/Refined Oils 22.02 * Fruit Drinks

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

Godrej Industries Limited – Consolidated Accounts REPORT OF THE AUDITORS TO THE BOARD OF DIRECTORS OF THE GODREJ INDUSTRIES LIMITED ON CONSOLIDATED FINANCIAL STATEMENTS 1.

We have audited the attached Consolidated Balance Sheet of Godrej Industries Limited and its subsidiaries as at March 31, 2006, and also the Consolidated Profit and Loss Account and the Consolidated Cash Flow Statement for the year then ended, both annexed thereto. These consolidated financial statements are the responsibility of Godrej Industries Limited’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 whether the financial statements 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 some subsidiaries and joint ventures whose financial statements reflect the Group’s share of total assets of Rs. 7,326 lakhs as at March 31, 2006 and the Group’s share of total revenues of Rs. 25,348 lakhs and net cash outflow amounting to Rs. 38 lakhs for the year ended on that date as considered in the consolidated financial statements. These financial statements have been audited by other auditors whose reports have been furnished to us and our opinion, insofar as it relates to the amounts included in respect of the subsidiaries and joint ventures is based solely on the report of the other auditors. As stated in Note 2 of Schedule 21 to the Consolidated Financial Statements, a joint venture whose Financial Statements reflect the Group’s share of total assets of Rs. 703 lakhs as at March 31, 2006 and the Group’s share of total revenues of Rs. 242 lakhs and net cash inflow amounting to Rs. 70 lakhs and associates insofar as it relates to the Group’s share of the associates’ net profit of Rs. 56 lakhs for the year ended on that date have not been audited and have been considered in the consolidated financial statements based solely on the un audited seprate financial statements certified by the management. We report that the consolidated financial statements have been prepared by the management of Godrej Industries Limited in

accordance with the requirements of Accounting Standard (AS) 21 – Consolidated Financial Statements, Accounting Standard (AS) 23 – Accounting for Investments in Associates in Consolidated Financial Statements and Accounting Standard (AS) 27 – Financial Reporting of Interests in Joint Ventures issued by the Institute of Chartered Accountants of India. 6.

Reference is invited to note 10 of Schedule 21- Notes to Accounts, regarding the recoverability of advances given to certain individuals amounting to Rs. 1033 lakh being contingent upon the transfer and/or disposal of the shares pledged against the loan. The said shares were lodged for transfer which application was rejected and the Company has preferred an appeal to the Company Law Board. The impact thereof on the profit for the year could not be ascertained.

Based on our audit and on consideration of the reports of other auditors on separate financial statements, and the management’s certification of the unaudited financial statements, in our opinion, the consolidated financial statements, subject to the observations in para (6) 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 the Godrej Industries Limited Group as at March 31, 2006;

in case of the Consolidated Profit and Loss Account, of the consolidated results of operations for the year ended on that date; and

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

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants

Mumbai, May 26, 2006

Viraf R. Mehta Partner Membership No.: 32083

Godrej Industries Limited – Consolidated Accounts CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2006 Schedule SOURCES OF FUNDS 1. Shareholders’ Funds (a) Share capital (b) Share Application Money (c) Reserves & surplus 2. 3.

1 2

2918.52 6000.00 33481.41

3 4

–

32177.16

29982.41 27140.40 57122.81 3876.13

40265.92 2409.81

107024.54

81156.42

(c) Net block (d) Capital work-in-progress Goodwill (on consolidation) Investments Current Assets, Loans and Advances (a) Inventories (b) Sundry debtors (c) Cash and bank balances (d) Other Current Assets (e) Loans and advances

77659.89 32997.46

67005.18 32523.15

44662.43 2274.89

34482.03 1819.61 46937.32 11275.93 24100.96

6 7 8 9 10

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

11 12

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

22617.01 20744.80 5343.11 – 16320.73

77897.54

65025.65

49278.68 6127.98

43302.23 5455.60 22490.87 2219.46

48757.83 16267.81 139.49

107024.54

81156.42

TOTAL Significant Accounting Policies

Notes to Accounts

36301.64 10967.94 17479.53

28500.97 23052.69 9106.59 24.96 17212.32

55406.67 9.

35089.74 3390.95 27970.40 12295.52

Deferred Tax Liability

APPLICATION OF FUNDS 5. Fixed Assets (a) Gross block (b) Less : Depreciation/Impairment

Previous Year Rs. lac

2912.58

42399.93 3625.67

Minority Interest Loan Funds (a) Secured loans (b) Unsecured loans

TOTAL

6. 7. 8.

This Year Rs. lac

Rs. lac

The Schedules referred to above form an integral part of the Balance Sheet. As per our Report attached

For and on behalf of Kalyaniwalla & Mistry Chartered Accountants

V. R. Mehta Partner Mumbai, May 26, 2006

Signatures to Balance Sheet and Schedules 1 to 13, 20 and 21

A.B. Godrej Chairman

N.B. Godrej Managing Director

M. Eipe Executive Director & President (Chemicals)

S.K. Bhatt Executive Vice President (Corporate Services) & Company Secretary

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

V. Srinivasan Executive Vice President (Finance & Estate)

Annual Report 2005-2006

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006 This Year Rs. lac

Previous Year Rs. lac

209816.33 5519.15 204297.18 6319.73

200999.17 5863.69 195135.48 4781.82

210616.91

199917.30

150164.44 46763.12 (2220.73) 4528.44 3766.77

142231.77 43866.10 (784.23) 3496.47 3360.55

203002.04

192170.66

7614.87

7746.64

1197.49 114.85 1242.82

1359.87 – (718.79)

5059.71 (14.38)

7105.56 4.17

Share of Loss in Associates

5045.33 (78.09)

7109.73 (137.70)

Profit before Minority Interest Share of Minority Interest

4967.24 (67.47)

6972.03 (504.91)

Profit After Minority Interest Surplus brought forward

4899.77 17913.78

6467.12 15317.18

Profit Available For Appropriation

22813.55

21784.30

106.15 2552.25 683.27 1251.61 18220.27

209.00 2044.86 547.10 1069.56 17913.78

22813.55

21784.30

10.09

12.05

Schedule INCOME Turnover (gross) Less : Excise Duty Turnover (net) Other Income

EXPENDITURE Materials consumed and cost of sales Expenses Inventory change Interest and financial charges (net) Depreciation (Net of transfer from Revaluation Reserve Rs. 168.43 lac, Previous year Rs. 223.80 lac)

15 16 17 18

Profit Before Tax Provision for taxation - Current Tax - Fringe benefit Tax - Deferred Tax Profit For The Year After Taxation Prior Period adjustments (net)

APPROPRIATIONS: Dividend on Equity Shares – Interim – Final Tax on distributed profits Transfer to General Reserve Surplus carried forward TOTAL Basic and Diluted Earnings per share (Face Value Rs. 6 per share) (refer note 17) Significant Accounting Policies

Notes to Accounts

The Schedules referred to above form an integral part of the Profit and Loss Account. As per our Report attached

For and on behalf of Kalyaniwalla & Mistry Chartered Accountants

V. R. Mehta Partner Mumbai, May 26, 2006

Signatures to Profit & Loss Account and Schedules 14 to 21

A.B. Godrej Chairman

N.B. Godrej Managing Director

M. Eipe Executive Director & President (Chemicals)

S.K. Bhatt Executive Vice President (Corporate Services) & Company Secretary

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

V. Srinivasan Executive Vice President (Finance & Estate)

Godrej Industries Limited – Consolidated Accounts CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 A.

Cash Flow from operating activities : Profit before tax Adjustments for : Depreciation Foreign exchange Profit on sale of investments Loss/(Profit) on sale of fixed assets Dividend income Interest income Interest expense Voluntary retirement compensation paid Deferred expenditure written off Provision for diminution in value of investments 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 B. Cash Flow from investing activities : Purchase of fixed assets Proceeds from sale of fixed assets Acquisition of new businesses Purchase of investments Proceeds from sale of investments Intercorporate deposits/Loans (net) Interest received Dividend received Net Cash used in investing activities C. Cash Flow from financing activities : Proceeds from share capital Proceeds from issue of debentures Proceeds from borrowings Repayments of borrowings Bank overdrafts (net) Interest paid Dividend paid Tax on distributed profits Net Cash from/(used) in financing activities Net increase in cash and cash equivalents Cash and cash equivalents (Opening Balance) Cash and cash equivalents (Closing Balance) (including share in jointly controlled entities - Rs. 675.15 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 cash flow statement includes share of cash flows 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 As per our Report attached For and on behalf of Kalyaniwalla & Mistry Chartered Accountants V. R. Mehta Partner Mumbai, May 26, 2006

This Year Rs. lac 7614.87

Previous Year Rs. lac 7746.65

3766.77 119.45 (2299.64) (373.81) (1299.75) (945.81) 4352.16 (2685.07) 704.02 (364.79) (6.04) 264.97 8847.33

3360.55 946.54 (3458.14) 182.24 (580.27) (746.62) 3214.73 (100.42) 209.22 531.76 (99.86) (273.48) 10932.90

(5828.97) (7115.65) 8257.31 4160.02 (1554.31) 125.75 2731.46

1043.25 (2545.85) 2590.17 12020.47 (1392.52) 140.11 10768.06

(16143.97) 1523.12 (1246.10) (57587.86) 54265.71 1289.31 953.84 1284.18 (15661.77)

(5270.97) 687.69 – (56076.53) 53425.25 457.08 795.29 583.21 (5398.98)

6579.40 1154.46 55685.42 (37498.41) (2135.52) (4587.88) (2036.10) (467.58) 16693.79 3763.48 5343.11 9106.59

– – 25812.12 (21935.24) (3379.95) (3227.87) (1571.79) (448.82) (4751.55) 617.53 4725.58 5343.11

This Year Rs. lac

Previous Year Rs. lac

9113.75 (7.16) 9106.59

5343.23 (0.12) 5343.11

680.73 (642.92) (353.35)

Signatures to Cash Flow statement A.B. Godrej Chairman

N.B. Godrej Managing Director

M. Eipe Executive Director & President (Chemicals)

S.K. Bhatt Executive Vice President (Corporate Services) & Company Secretary

M.P. Pusalkar Executive Director & President (Corporate Projects) V. Srinivasan Executive Vice President (Finance & Estate)

Annual Report 2005-2006

SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006 This Year Previous Year Rs. lac

Rs. lac

8000.00 10000.00 18000.00

2918.52 2918.52

2912.58 2912.58

Additions

Deductions

– 0.11 – 14.45 – – 117.39 – – 1251.61 1069.56 23.29 – 306.48 2596.61 345.98 – 2044.75 3680.73

0.10 – 0.03 – 740.37 224.83 – – – – 912.00 – – – – – 102.14 740.50 1238.97

As at 31.03.2006 1099.17 1099.27 80.39 80.42 2291.39 3031.76 117.39 3125.00 3125.00 7561.51 6309.90 35.58 12.29 18220.27 17913.79 950.71 604.73 33481.41 32164.87

This Year Rs. lac 565.68 27577.29 1768.46 70.98 29982.41

Previous Year Rs. lac 1155.98 23303.20 3415.03 96.19 27970.40

158.59 1828.10 21777.87 2337.17 – 1038.67 27140.40

471.45 3663.10 7691.41 – 316.43 153.13 12295.52

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 3,12,00,398 shares are held by Godrej & Boyce Mfg. Co. Limited, the holding Company SCHEDULE 2 : RESERVES AND SURPLUS

As at 1.4.2005 1099.27 1099.16 80.42 65.97 3031.76 3256.59 – 3125.00 3125.00 6309.90 6152.34 12.29 12.29 17913.79 15317.18 604.73 706.87 32177.16 29723.11

Securities Premium Account Capital Investment Subsidy Reserve Revaluation Reserve Special Reserve u/s. 451C of RBI Act, 1934 Capital Redemption Reserve General Reserve Foreign Exchange Fluctuation Reserve Profit & Loss Account Share in Jointly Controlled Entities Total Reserves – This Year – Previous Year SCHEDULE 3 : SECURED LOANS Term loans from financial institutions Term loans from banks Bank overdrafts Share in jointly controlled entities SCHEDULE 4 : UNSECURED LOANS Fixed deposits Intercorporate deposits Short term loans from banks Other loans from banks Sales tax deferment facility Share in jointly controlled entities

SCHEDULE 5 : FIXED ASSETS

Rs. lac

ASSETS

Tangible Assets Land Buildings Plant & Machinery Research Centre Furniture & Fixtures Office & Other Equipments Vehicles Trees Development Cost Intangible Assets Technical Know-how Fees Goodwill Trademarks Assets Acquired Under Finance Lease Plant & Machinery Vehicles Share in jointly controlled entities TOTAL - This Year - Previous Year Capital Work-in-Progress TOTAL 1. 2. 3. 4. 5. 6. 7.

GROSS BLOCK

DEPRECIATION/IMPAIRMENT

As on 1.4.2005

Deductions/ Additions Adjustments

As on 31.03.2006

Upto Deductions/ 31.03.2005 Adjustments

1303.87 11430.62 43849.60 150.39 1483.35 1403.91 1264.62 454.69

130.00 1246.01 11553.81 – 198.82 261.32 316.54 –

24.18 1265.25 3178.38 – 73.69 285.31 232.93 –

1409.69 11411.38 52225.03 150.39 1608.48 1379.92 1348.23 454.69

60.50 2988.99 24636.36 59.25 831.93 733.16 631.62 209.22

200.00 – 3211.99

– 1116.02 450.00

– – 152.27

200.00 1116.02 3509.72

52.31 274.25 1925.59 67005.19 65238.97

442.11 69.74 162.49 15946.86 3786.87

– 31.95 48.20 5292.16 2020.65

494.42 312.04 2039.88 77659.89 67005.18

NET BLOCK

For the Year

Upto 31.03.2006

As on As on 31.03.2006 31.03.2005

16.30 314.75 2,564.15 – 42.07 208.43 130.22 –

3.82 359.73 2523.21 5.05 106.61 124.44 154.02 30.33

48.02 3033.97 24595.42 64.30 896.47 649.17 655.42 239.55

1361.67 8377.41 27629.61 86.09 712.01 730.75 692.81 215.14

1243.37 8441.63 19213.24 91.14 651.42 670.75 633.00 245.47

195.69 – 995.82

– – 150.35

4.29 182.73 261.03

199.98 182.73 1106.50

0.02 933.29 2403.22

4.31 – 2216.17

– 117.09 1063.52 32523.15 29845.11

– 12.66 26.52 3465.45 906.30

20.99 72.13 91.38 3939.76 3584.34

20.99 176.56 1128.38 32997.46 32523.15

473.43 135.48 911.50 44662.43

52.31 157.16 862.07 34482.04

2274.89 46937.32

1819.61 36301.65

Land includes leasehold land of Rs.291.75 lac (Previous Year Rs.232.16 lac) which is being amortised over the period of lease. 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. Depreciation for the year includes Rs.168.43 Lac (Previous Year Rs.223.80 Lac) being depreciation on revalued component of the fixed assets. Buildings includes Rs.0.01 lac (Previous Year Rs.0.01 lac) being the value of investment in shares of Co-operative Housing Society. Buildings include Rs. 1701.74 lac (Previous year Rs. 2651.08 lac) being the cost of equity shares in Tahir Properties Ltd., representing the right of the Company to three (previous year five) flats in the property. Accumulated depreciation includes impairment loss of Rs. 707.90 lac on plant & machinery in an earlier year. Capital work-in-progress is net of impairment loss of Rs. 204.10 lac provided on an infructuous asset under construction.

Godrej Industries Limited – Consolidated Accounts SCHEDULE 6 : INVESTMENTS FACE VALUE

Investee Company/Institutions

LONG TERM INVESTMENTS - At cost A. TRADE INVESTMENTS Equity Shares : Fully Paid Bharuch Eco-Aqua Infrastructure Ltd. Preference Shares : Partly Paid Godrej Foods Ltd. (8% Redeemable Cumulative Preference Shares, 2012) Tahir Properties Ltd. (Class-A) B. OTHER INVESTMENTS Equity Shares : Fully Paid Quoted : Godrej Consumer Products Ltd. Godrej Foods Ltd. Others Equity Shares : Fully Paid Unquoted : Associate Companies Compass Connections Ltd. Godrej Upstream Ltd. Swadeshi Detergents Ltd. Creamline Dairy Products Ltd. Creamline Nutrients Ltd. Polychem Hygiene Laboratories Pvt. Ltd. Personalitree Academy Ltd. Other Companies Gharda Chemicals Ltd. Avestha Gengraine Technologies Pvt. Ltd. karROX Technologies Ltd. Krithika Agro Farm Chemicals & Engg. Inds. Ltd. Tahir Properties Ltd. (Partly Paid) Boston Analytics LLC (Partly Paid) Common Stock : Unquoted : C Bay Systems Ltd. Preferred Stock: Fully Paid Unquoted : Verseon LLC - Class A preferred units Convertible Debentures : Unquoted : Avestha Gengraine Technologies Pvt. Ltd. Government Securities Unquoted : Kisan Vikas Patra National Saving Certificate Indira Vikas Patra Shares in Co-operative Societies - Fully Paid Unquoted : Sachin Industrial Co-op. Society The Saraswat Co-op. Bank Ltd.

NUMBER Acquired Sold During During Year Year

(Rs.)

Qty As on 01.04.05

4,40,000

–

4,40,000

50,00,000

–

50,00,000

100

–

4 1

73,24,027 14,84,864 –

– 5,90,000 – 14,84,864 – –

£0.25 10 10 10 10 10 10

13,692 9,000,000 2,09,370 23,90,911 3,51,352 4,55,000 3,89,269

– – – – – – –

100 10 10 10 100 $1

114 1,05,500 2,50,000 – 25 –

– 70,244 – 7,600 – 7,81,250

$0.01

13,98,798

$1.90

44.00

(b)

450.00

(b)

0.02

67,34,027 – –

10730.01 – 1.19

11670.12 13.64 1.08

– – – – – – –

13,692 9,000,000 2,09,370 23,90,911 3,51,352 4,55,000 3,89,269

159.18 457.06 50.28 1014.23 95.96 170.98 68.24

142.99 591.86 49.54 971.88 90.79 178.72 68.24

– – – – –

114 1,75,744 2,50,000 7,600 25 7,81,250

(b) (b)

11.57 767.13 100.50 0.76 0.01 258.76

11.57 450.25 100.50 – 0.01 –

31,87,275

–

45,86,073

(c)

5430.14

2177.23

–

13,15,789

–

13,15,789

1142.34

–

10000000

–

300.00

–

– 92,000 2,000

– – –

– 1.37 0.01

0.32 0.92 0.03

500 10

3 2,000

– –

3 2,000

0.02 0.20

1368.01

802.44

160.29 63.53 – 2.06 1800.00 23.00 24670.85 (569.89) 24100.96

200.55 30.33 0.69 – – – 18047.94 (568.41) 17479.53

10731.20 13369.76

11684.84 5794.69

24100.96 48875.57

17479.53 22958.08

Less: Provision for diminution in value of Investments Aggregate Book Value of Investments Quoted Unquoted

Notes : a ) The said shares have been refused for registration by the investee company b) Uncalled liability on partly paid shares: Tahir Properties Ltd. - Equity - Rs. 80 per share. Boston Analytics LLC - Equity - USD 440,000 Godrej Foods Ltd. - Preference - Re. 1 per share. Tahir Properties Ltd. - Preference - Rs. 30 per share. c ) Preferred Stock - series E & F has been converted into Common Stock during the year.

Notes

AMOUNT As on As on 31.03.06 31.03.05 Rs. lac Rs. lac

44.00

Investment in partnership Firm View Group LP Current Investments Units of Mutual Fund : Unquoted Templeton India Treasury Fund Kotak Liquid Scheme Franklin Templeton Mutual Fund Prudential ICICI Liquid Plan Grindlays Floating Rate Fund Magnum Institutional Income Fund-Savings Growth

Market Value of Quoted Investments

Qty As on 31.03.06

(a)

Annual Report 2005-2006

SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.) This Year Previous Year Rs. lac Rs. lac SCHEDULE 7 : INVENTORIES (at lower of cost and net realisable value) Stores and spares Raw materials Construction work-in-progress Work-in-progress Finished Goods Share in jointly controlled entities

1594.27 12829.31 2316.09 3607.67 7134.83 1018.80

670.80 10306.42 1928.28 1509.69 6892.88 1308.94

28500.97

22617.01

2115.24 522.90

1492.28 536.20

2638.14

2028.48

Other debts Considered good

20450.21

19001.66

Less : Provision for doubtful debts

23088.35 (522.90)

21030.14 (536.20)

Share in jointly controlled entities

22565.45 487.24

20493.94 250.86

23052.69

20744.80

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

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

SCHEDULE 10 : LOANS AND ADVANCES (Unsecured and considered good unless otherwise stated) Loans and Advances (refer note 9) Loans to GIL ESOP Trust Advances recoverable in cash or in kind or for value to be received (net of provision for doubtful advances Rs. 382.41 lac, Previous Year Rs. 934.18 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. 3863.58 lac) Share in jointly controlled entities

218.84

138.48

2917.49 5295.11 675.15

1685.51 2528.41 990.71

9106.59

5343.11

4152.72 742.00

2166.54 —

8642.30

8545.54

41.80 —

2148.69 55.76

850.90 1834.65 153.75

1008.65 1951.90 —

794.21

443.65

17212.32

16320.73

This Year Previous Year Rs. lac Rs. lac SCHEDULE 11 : CURRENT LIABILITIES Acceptances Sundry creditors Advances from customers Sundry deposits Investor Education & Protection Fund – Unclaimed Dividend – Unpaid Matured Deposits – Interest accrued on above Other liabilities Interest accrued but not due on loans Share in jointly controlled entities

SCHEDULE 12 : PROVISIONS Proposed dividend Provision for tax on distributed profits Provision for taxation (Net of advance tax, Previous year Rs. 3205.94 lac) Provision for retirement benefits Share in jointly controlled entities

SCHEDULE 13 : MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) Deferred revenue expenditure – Voluntary retirement compensation – Preliminary Expenses – Others

SCHEDULE 14 : OTHER INCOME Interest : – Government Securities – Debentures – Income tax refund – Deposits (refer note 15) Dividend Profit on sale of fixed assets (Net) Profit on sale of long term investments (refer note 15) Provision for depletion in value of long term investments written back Provision for doubtful debts and advances written back Miscellaneous income (refer note 15) Share in jointly controlled entities

3843.20 27983.12 9174.61 1865.90

6176.37 24966.50 5231.65 2049.12

46.29 65.15 0.20 4504.59 168.21 1627.41

51.70 139.24 58.70 2876.41 107.76 1644.78

49278.68

43302.23

2658.37 473.16 —

2044.86 305.83 23.36

2869.40 127.05

3028.91 52.64

6127.98

5455.60

2219.46 — —

126.30 9.59 3.60

2219.46

139.49

— 9.62 140.83 486.54 1237.33 373.81

16.90 — 8.10 53.05 580.27 —

2299.64

3458.14

364.89

—

— 1253.00 154.07

3.05 538.15 124.16

6319.73

4781.82

Godrej Industries Limited – Consolidated Accounts SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.) This Year Previous Year Rs. lac Rs. lac SCHEDULE 15 : MATERIALS CONSUMED AND COST OF SALES 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 Cost of Sales - Property Development Stocks at the commencement of the year Add : Construction Expenditure during the year Less : Stocks as at the close of the year Purchase of goods for resale Share in jointly controlled entities SCHEDULE 16 : 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 (refer note 15) Rates and taxes Repairs and maintenance – 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 Provision for depletion in the value of long term investments Loss on Sale of Fixed Assets Excise duty on inventory change Foreign Exchange loss Miscellaneous expenses Share in jointly controlled entities SCHEDULE 17 : 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

10306.42 125106.17 135412.59 12829.30 122583.29

11610.63 121494.78 133105.41 10306.42 122798.99

1928.28 4640.33 6568.61 2316.09 4252.52 18085.57 5243.06 150164.44

2406.54 2135.31 4541.85 1928.28 2613.57 11981.55 4837.66 142231.77

10318.84

9995.87

601.90 981.81 1242.06 5988.09 3795.24 728.76 560.80

608.71 826.33 1526.50 5068.20 3838.17 527.02 692.40

1046.90 294.61 519.84 243.23 3535.04 3355.81 467.55 1465.11 303.84 1465.84 620.33 40.78

1363.37 261.55 453.54 222.02 2718.63 3107.74 203.06 1427.64 280.52 819.63 630.88 —

0.10 — 284.99 182.62 5654.87 3064.16 46763.12

449.98 182.24 (50.70) 809.09 3864.31 4039.40 43866.10

6892.88 1509.69 757.55 9160.12

6137.86 1340.45 897.58 8375.89

7134.83 3607.67 638.35 11380.85 (2220.73)

6892.88 1509.69 757.55 9160.12 (784.23)

This Year Previous Year Rs. lac Rs. lac SCHEDULE 18 : INTEREST AND FINANCIAL CHARGES (Net) Interest paid – on debentures and fixed loans – on bank overdrafts – on Inter Corporate Deposits – other interest Less : Interest during construction period capitalised Less : Interest received – on loans & deposits – on Customer balances, etc. – projects and landlords – others Net Interest Brokerage and other financial charges Foreign exchange loss Share in jointly controlled entities SCHEDULE 19 : PRIOR PERIOD ADJUSTMENTS Excess provision for Income-tax Provision for pension payments Dividend for previous year

2289.97 441.92 190.10 1093.59

1019.42 755.63 176.40 770.29

4015.58

2721.74

265.47

14.25

39.19 18.08 225.23 26.32

285.90 43.74 335.77 3.16

308.82

668.57

3441.29 602.05 457.69 27.41

2038.92 507.24 927.38 22.93

4528.44

3496.47

35.70 (112.50) 62.42

4.17 — —

(14.38)

4.17

SCHEDULE 20 : 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.

Fixed Assets 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 from a country outside India, are 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.

Intangible Assets The cost of acquisition of trademarks is amortised equally over a period of four to fifteen years depending on the expected utilisation.

Asset Impairment The Company reviews the carrying values of tangible and intangible assets for any possible impairment at each balance sheet date. An impairment loss is recognized when the carrying amount of an asset exceed its recoverable amount. In assessing the recoverable amount, the estimated future cash flows are discounted to their present value based on appropriate discount rates.

Annual Report 2005-2006

SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.) e)

in proportion to the actual cost incurred as against the total estimated cost of projects under execution with the Company.

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.

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.

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 investeeâ&#x20AC;&#x2122;s assets and results and the expected cash flows from the investment.

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

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

Inventories

Leasehold land is amortised equally over the lease period. Leasehold improvements are amortised over five years.

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.

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.

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

Depreciation

Provisions are recognised in the accounts in respect of present probable obligations, the amount of which can be reliably estimated.

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.

Contingent Liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company.

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.

Provisions and Contingent Liabilities

Foreign Exchange Transactions

Retirement Benefits

Transactions in foreign currency are recorded at the exchange rates prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currency are translated at the period end exchange rates. Forward exchange contracts, remaining unsettled at the period end, backed by underlying assets or liabilities are also translated at period end exchange rates. Premium or discount on forward exchange contracts is amortised over the period of the contract and recognised as income or expense for the period. Exchange gains/losses are recognised in the Profit and Loss Account except for exchange differences relating to fixed assets acquired from a country outside India, which are adjusted in the cost of the asset. Non Monetary foreign currency items like investments in foreign subsidiaries are carried at cost and expressed in Indian currency at the rate of exchange prevailing at the time of making the original investment.

m) Deferred Revenue Expenditure

Revenue Recognition

Retirement benefits to employees comprise payments under defined contribution plans like provident fund and family pension as well as payments under defined benefit schemes like leave encashment benefit on retirement and gratuity to eligible employees. Payments under defined contribution plans are charged to revenue. The liability in respect of defined benefit schemes is provided on the basis of an actuarial valuation at the end of each financial year. 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. Preliminary Expenses and Share issue expenses are amortised in ten equal instalments. 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 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 unrealised profit is ignored.

Sales are recognised where goods are supplied and are recorded net of returns, trade discounts, rebates, sales taxes and excise duty. Income from processing operations is recognised on completion of production / dispatch of the goods, as per the terms of contract. Export incentives receivable under the Duty Entitlement Pass Book Scheme and the Duty Drawback Scheme are accounted on accrual basis. Revenue from construction activity is recognised on â&#x20AC;&#x153;Percentage of Completion Methodâ&#x20AC;? of accounting. As per this method, revenue in Profit & Loss Account at the end of the accounting year is recognised

Hedging

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

Godrej Industries Limited – Consolidated Accounts SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.) reporting date as of the Company i.e. year ended March 31, 2006, except in respect of Personalitree Academy Ltd., an associate company whose accounts for the year ended March 31, 2006 have not been received till date. The investment not being significant and fully provided for in the previous year, there is no impact on the profit & loss account.

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 on unabsorbed tax losses and tax depreciation are recognized only when there is virtual certainty of their realisation and on other items when there is 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. p)

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.

SCHEDULE 21 : NOTES TO ACCOUNTS 1.

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 accounts of Al Rahba International Trading Ltd., a joint venture company with Godrej Agrovet Ltd., Compass Connections Ltd., UK, Creamline Dairy Products Ltd., Creamline Nutrients Ltd. and Polychem Hygiene Laboratories Pvt. Ltd., associate companies have not been audited for the year ended March 31, 2006 as of date and have been consolidated on the basis of the accounts as certified by their respective management.

The financial statements of the subsidiaries, joint ventures and associates used in the consolidation are drawn upto the same

Information on subsidiaries, joint ventures and associates :

(a) 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. Godrej Agrovet Ltd. India 57.80% 57.78% 2. Goldmohur Foods & Feeds Ltd. India 57.80% 57.78% (100% subsidiary of Godrej Agrovet Ltd.) 3. Golden Feed Products Ltd. India 57.80% 57.78% (100% subsidiary of Godrej Agrovet Ltd.) 4. Godrej Properties Ltd. India 82.88% 82.85% 5. Girikandra Holiday Homes & Resorts Ltd. India 82.88% 82.85% (100% subsidiary of Godrej Properties Ltd.) 6. Godrej Realty Pvt. Ltd. India 42.27% — (51% subsidiary of Godrej Properties Ltd.) 7. Godrej Waterside Properties Pvt. Ltd. India 82.88% — (100% subsidiary of Godrej Properties Ltd.) 8. Godrej Hicare Ltd. India 85.91% 86.44% 9. Godrej Remote Services Ltd. India — 99.99% 10. Ensemble Holdings & Finance Ltd. India 99.95% 99.95% 11. Godrej International Ltd., UK U.K. 100.00% 100.00% 12. Godrej Global Mid-East FZE, UAE U.A.E. 100.00% 100.00% (100% subsidiary of Godrej International Ltd.) 13. Godrej Beverage & Foods Ltd. India 70.00% 70.91% 14. Godrej Global Solutions Ltd. India 100.00% 100.00% 15. Godrej Global Solutions (Cyprus) Ltd. Greece 100.00% — (100% subsidiary of Godrej Global Solutions Ltd.) 16. Godrej Global Solutions Inc U.S.A. 100.00% — (100% subsidiary of Godrej Global Solutions Ltd.) Note: Krithika Agro Farm Chemicals & Engineering Pvt. Ltd., a company in which Godrej Agrovet Ltd. acquired a 76% interest during the year is excluded from consolidation as the control is intended to be temporary since Godrej Agrovet Ltd. intends to dispose of its holding in the near future.

Annual Report 2005-2006

SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.) (b) Interests in Joint Ventures: S. No. Name of the company

6. Country of Incorporation

Percentage of Ownership Interest This Previous Year Year 20.00% 20.00%

i) ii)

Godrej SaraLee Ltd. India Godrej SaraLee Bangladesh Pvt. Ltd. Bangladesh iii) Godrej SaraLee Sri Lanka Pvt. Ltd. Sri Lanka iv) Al Rahba International Trading Limited (held by U.A.E. Godrej Agrovet Ltd.) v) ACI Godrej Agrovet Pvt. Ltd. (held by Bangladesh Godrej Agrovet Ltd.) (c) Investments in Associates:

20.00%

70.00%

—

50.00%

S. No.

Name of the company

Swadeshi Detergents Ltd.

India

41.08%

ii)

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

India

40.43%

iii)

Compass Connections Ltd.

U.K.

20.74%

21.16%

iv)

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

India

26.00%

Creamline Dairy Products Ltd. (held by Godrej Agrovet Ltd.)

India

26.00%

vi)

Creamline Nutrients Ltd. (held by Godrej Agrovet Ltd.)

India

26.00%

vii)

Polychem Hygiene Laboratories Pvt. Ltd. (held by Godrej Agrovet Ltd.)

India

26.00%

Rs. in lac Cost of Acquisition

Swadeshi Detergents Ltd. (ii) Godrej Upstream Ltd. (iii) Compass Connections Ltd. (iv) Personalitree Academy Ltd.

Goodwill Share in Provision included profits/ for in cost of (loss) of diminution acquisition associatesin the value post of acquisition investments

Carrying cost of Investments

(i)

191.34 900.00

91.48 95.27

(141.05) (442.94)

50.28 —

Nil 457.06

124.54

80.56

34.63

—

159.17

110.28

42.84

(42.04)

68.24

Nil

950.16

364.53

64.07

—

1014.23

(vi) Creamline Nutrients Ltd. 87.84

33.89

8.12

—

95.96

(v)

Creamline Dairy Products Ltd.

(vii) Polychem Hygiene Lab. Pvt. Ltd. Total

This Year Previous Year Rs. lac Rs. lac a)

Country of Percentage of holdings Incorporation This year Previous year

The accounting policies of certain subsidiaries, joint ventures & associates especially regarding the method of depreciation, amortisation of technical know-how and accounting for retirement benefits are not in consonance with the group accounting policies. No effect has been given in the consolidated financial statements on account of such differing accounting policies, where the impact is not expected to be material. The break-up of Investment in Associates is as under:

162.75

88.99

8.23

—

170.98

2526.91

797.56

(510.98)

118.52

1897.40

Contingent Liabilities

b) c)

d) e) 7.

Claims against the Company not acknowledged as debts: i) Excise duty demands relating to 1537.41 3386.52 disputed classification, post manufacturing expenses, assessable values, etc. which the Company has contested and is in appeal at various levels. ii) Customs Duty demands relating to 844.53 1036.65 less charge, differential duty, classification, etc. iii) Sales Tax demand relating to 512.37 532.21 purchase tax on Branch Transfer/ Non availability of C Forms, etc. at various levels. iv) Octroi demand relating to 844.46 722.01 classification issue on import of Palm Stearine and interest thereon. v) Stamp duties claimed on certain 182.23 182.23 properties which are under appeal by the Company vi) Income Tax demands against which 1785.83 726.95 the company has preferred appeals vii) Industrial relations matters under appeal 518.06 486.08 viii) Others 704.18 649.69 Guarantees issued by banks, excluding 2062.14 2207.42 guarantees issued in respect of matters reported in (a) above Guarantees given by the Company in 15269.59 14855.00 respect of credit/guarantee limits sanctioned by banks to subsidiary and other companies. Uncalled liability on partly paid 673.97 534.85 shares/debentures Share in Jointly Controlled Entities 207.02 262.35 Capital Commitments Estimated value of contracts remaining 688.61 3105.92 to be executed on capital account, to the extent not provided Share in Jointly Controlled Entities 2.48 0.52 Investments a) CBay Systems Limited, USA (CBay USA) has carried out an organizational restructuring during the year, consequent to which, all the businesses of CBay Group have been consolidated under CBay Systems Limited, India (CBay India), a wholly owned subsidiary. The Shares of CBay India have been distributed in specie on a pro-rata basis to all the stockholders of CBay USA under the above scheme. The Indian Stockholders will be allotted the shares in CBay India on receipt of approval from the Reserve Bank of India (RBI). No effect has been given to the aforesaid scheme in the accounts, pending approval of RBI and allotment of shares in CBay India. b) As per the share purchase agreement dated 29th October, 2004, the Parent Company had agreed to sell its entire holding (7712642 equity shares) in Godrej Remote Services Limited , a subsidiary company to CBay Systems Limited, USA for a consideration of Rs. 842.81 lac, to be satisfied by issue of 704691 common stock of CBay Systems Limited, USA (par value USD 0.01 per comon stock) valued at USD 2.6 per common stock. The agreement was conditional upon receipt of approval from Foreign Investment Promotion Board (FIPB) and the Reserve Bank of India (RBI). The sale of the subsidiary company was

Godrej Industries Limited – Consolidated Accounts SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.) completed during the year on receipt of the necessary The options granted shall vest after three years from the date of approvals in July 2005. The profit on sale amounting to Rs. 71 grant of option, provided the employee continues to be in lac is included under Profit on sale of long term investments, employment and the option is exercisable within two years after an exceptional item. vesting. 9. Deferred Tax The employee share based payment plans have been accounted based on the intrinsic value method and no compensation expense Major components of Deferred Tax arising on account of timing has been recognized since the market price of the underlying share differences as at March 31, 2006 are : This Year Previous Year at the grant date is the same / less than the exercise price of the Rs. lac Rs. lac option, the intrinsic value being Nil. Assets Had the fair value method of accounting been used, the employee Provision for retirement benefits 324.14 806.00 compensation cost would have been Rs. 204 lac. Provision for doubtful debts/advances 295.09 399.24 12. Leases : Business Losses 1338.33 1123.50 VRS Expenses 77.00 (45.00) a) The group has entered into leave and licence agreements in Others 346.20 334.95 respect of its commercial and residential premises. These are Share in Jointly Controlled Entities 35.53 60.17 not non-cancelable and range between 11 months to 35 months and are renewable by mutual consent on mutually acceptable 2416.29 2723.86 terms. Leave and licence arrangements being similar in Liabilities substance to operating leases, the particulars of the premises Depreciation 6214.53 5005.47 under leave and licence arrangement are as under: Deferred Revenue Expenditure 21.34 — This Year Previous Year Share in Jointly Controlled Entities 56.55 83.20 Rs. lac Rs. lac 6292.42 5133.67 Gross carrying amount of premises 3357.79 4253.85 Net Deferred Tax Liability 3876.13 2409.81 995.81 965.30 Accumulated depreciation 10. Loans and Advances : Depreciation for the period 115.71 120.58 Loans and Advances include Rs. 1033 lac (Previous Year Rs. 1033 b) The total of future minimum lease payments under non lac) advanced by the Company to certain individuals against pledge, cancelable operating leases for each of the following periods : by way of deposit, of equity share of Gharda Chemicals Ltd. The Company has enforced its security and lodged the shares for transfer Period Minimum future Jointly in its name, however, the transfer application has been rejected by lease rentals controlled Gharda Chemicals Ltd. and the Company has filed an appeal before entities the Company Law Board. Interest on the aforesaid loans and advances Rs. lac Rs. lac amounting to Rs. 315 lac was accrued upto March 31, 2000 and has been fully provided for, no interest is being accrued thereafter. The Within one year 177.34 5.35 recoverability of the advance is contingent upon the transfer and/ or Later than one year and not later disposal of said shares. In the opinion of the management, the value than five years 221.07 57.46 of the said shares is greater than the amount of the loans and advances. Later than five years — 2.40 11. Employee Stock Option Plans : Total 398.41 65.21 The Parent Company has during the year instituted an Employee Amount recognised during the year 182.76 61.09 Stock Option Plan (GIL ESOP) approved by the Board of Directors and the shareholders on 24th October, 2005 and 1st December, c) Finance Leases : 2005 respectively. The Plan provides for the allotment of 15,00,000 The group has acquired assets under Finance Lease. Liability options convertible into 15,00,000 equity shares to eligible employees for minimum lease payment is secured by hypothecation of the of the participating companies. The compensation committee vehicles acquired under the lease. The minimum lease payments comprising of independent members of the Board of Directors outstanding as on March 31, 2006, in respect of vehicles administers the plan. acquired under lease are as under : The scheme is administered by an independent ESOP Trust which Period Total Unmatured Present value has purchased shares equivalent to the number of options granted minimum Interest of minimum from the market, out of the finance provided by the participating lease payments lease companies to the Trust. outstanding as on payments The number and weighted average exercise price of options granted, March 31, 2006 exercised and forfeited are as under: Rs. lac Rs. lac Rs. lac No. of Wt. average Within one year 86.87 13.06 81.76 Options exercise price Later than one year Options outstanding at the and not later than five years 65.59 9.74 54.72 beginning of the year — — 152.46 22.80 136.48 Options granted 350000 392.35 (plus interest) 13. Hedging : Less: Exercised — — a) Reserve Bank of India has permitted the Parent Company to Forfeited/expired — — hedge its exposure on Crude Palm Oil on offshore exchanges Options outstanding at the year end 350000 392.35 to the extent of its imports. Accordingly, the Company is hedging (plus interest) import of crude palm oil on the Malaysian Commodities

Annual Report 2005-2006

SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.) Exchange by way of futures contracts. The particulars of the 16. Profit & Loss Account futures contracts for the year are as under: The amount of exchange loss on account of fluctuation of the rupee Details

This Year Previous Year Purchase Sale Purchase Sale

Total number of contracts entered during the year

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

595

Future contracts not settled as on March 31, 2006

—

Number of units under above contracts

—

The Group uses forward exchange contracts to hedge its foreign exchange exposure in accordance with its forex policy as determined by a Forex Committee. The particulars of the forward exchange contracts for the year are as under: Details

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. 0.42 lac (Previous year Rs. 0.90 lac). The exchange difference included in the Profit & Loss Account is a loss of Rs. 669.94 lac (Previous year Rs. 1806.29 lac). The exchange difference in respect of forward exchange contracts to be recognised in subsequent accounting periods is Rs. 24.68 lac (Previous year Rs. 739.48 lac). 17. Earnings Per Share This Year Previous Year a.

This Year Previous Year Purchase Sale Purchase Sale

Total number of contracts entered during the year Foreign currency value covered US Dollar (million) Euros (million) Total number of contracts outstanding as at the year end Foreign currency value US Dollar (million) Euros (million) Uncovered Foreign exchange exposure as at the year end US Dollar (million)

179

184

103.30 –

33.68 3.36

105.48 20.59 – 0.18

37.30 –

13.00 0.94

39.61 –

5.84 –

Calculation of weighted average number of equity shares Number of shares at the beginning of the year

Nos.

48542952

Number of equity shares outstanding at the end of the year

Nos.

48641942

48542952

Weighted average number of equity shares outstanding during the year Nos.

48570344

48542952

4899.77

6467.14

10.09

13.32

Net profit after tax available for equity shareholders

Rs. lac

Basic and diluted earnings per share of Rs.6 each

Rupees

18. Related Party Disclosures List of Related Parties and Relationships a)

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

15.10

–

17.50 0.20

Fellow Subsidiaries: Godrej Appliances Ltd.

14. Turnover

Godrej Foods Ltd.

Turnover includes:

This year Previous Year Rs. lac Rs. lac

Processing charges

2003.93

2125.86

Mercury Mfg. Co. Ltd.

ii)

Export Incentives

554.42

573.27

Godrej (Malaysia) Sdn. Bhd.

2561.11

2191.75

Godrej (Singapore) Pte. Ltd.

767.40

515.02

9308.70

9757.50

15195.55

15163.40

iii) Licence fees and service charges iv) Project/Development Management Fees v)

Share in jointly controlled entities

JT Dragon Pte. Ltd.

This Year Previous Year Rs. Lac Rs. Lac

ii)

Other related parties with whom the Company had transactions: Associate/Joint Venture Companies Godrej SaraLee Ltd.

15. Exceptional Items

Godrej Infotech Ltd.

Godrej Upstream Ltd. Key Management Personnel

Included under Other Income

Mr. A. B. Godrej

- Profit on sale of long term investments

Mr. N. B. Godrej - Managing Director

2119.81

3422.22

- Reversal of provision for claims payable on culmination of disputes 175.00

—

- Interest received on deposit placed against above claim on execution of decree

307.00

—

89.00

—

Payment to Mumbai Port Trust for regularization of lease included in Rent paid.

Ms. T. A. Dubash

- Chairman (Non-Executive) - Executive Director & President (Marketing)

Mr. Mathew Eipe - Executive Director & President (Chemicals) Mr. V. Banaji - Executive Director & President (Group Corporate Affairs) Mr. M. P. Pusalkar - Executive Director & President (Corporate Projects) Enterprises over which key management personnel exercise significant influence Godrej Consumer Products Ltd. Swadeshi Detergents Ltd.

Godrej Industries Limited – Consolidated Accounts c) Transactions with Related Parties Nature of Transaction Holding Company

Sale of Goods 20.17 Previous Year 22.14 Sale of Fixed Assets 0.05 Previous Year — Purchase of goods and equipment 30.77 Previous Year 60.60 Commission received — Previous Year — Recovery of establishment and Other Expenses 1.48 Previous Year 13.82 Establishment & other exps paid 230.49 Previous Year 225.68 Sale of Investments — Previous Year 4950.00 Purchase of Investments — Previous Year — Interest received — Previous Year — Interest paid — Previous Year — Dividend income — Previous Year — Dividend paid 1248.02 Previous Year 936.01 Remuneration — Previous Year — Finance provided including loans & equity contributions 0.42 Previous Year — Finance repaid during the year — Previous Year — Guarantees & collaterals given — Previous Year — Balance Outstanding as on March 31, 2006 Receivables 1.42 Previous Year 69.12 Payables 2.81 Previous Year 4.33 Guarantees Outstanding — Previous Year —

Rs. lac Fellow Subsidiaries

Associate/ Joint Venture Companies

— 904.96 — 1.46 695.87 1086.77 2.50 21.05

12.50 3.18 — — 6.69 11.49 19.78 4.50

12.52 898.07 10.50 112.17 — — — — — — — — 25.28 562.72 — — — —

229.64 216.83 14.03 7.35 — — — — — — — — 536.25 1010.33 — — — —

— — — — — — — — — — — 0.27 — — 47.61 75.60 330.85 402.01

— — — — — — — — — — — — — — 424.41 272.64 — —

816.13 0.06 89.91 0.13 — — — 10.20 4.99 5.85 — — 1,007.66 — — —

1059.77 1128.78 344.93 345.33 — 4950.00 — 10.20 4.99 5.85 — 0.27 1569.19 1573.05 1720.04 1284.25 330.85 402.01

— (3.08) — — — —

(3.30) (24.10) — — — 1350.00

— — — — — —

(10.00) — — 8.00 — —

(12.88) (27.18) — 8.00 — 1350.00

— 19.76 — 61.80 1000.00 1000.00

18.54 10.67 42.60 35.29 1350.00 1350.00

— — — — — —

222.25 — 103.93 0.11 — —

242.21 99.55 149.34 101.53 2350.00 2350.00

d ) The significant Related Party transactions are as under: Nature of Transaction Rs. lac Sale of goods - Godrej Consumer Products Ltd. 890.83 Sale of fixed assets - Godrej Consumer Products Ltd. 264.19 Purchase of goods & equipment - Godrej Consumer Products Ltd. 1,262.28 - Godrej Foods Ltd. 692.34 Commission received - Godrej Consumer Products Ltd. 23.15 - Godrej Upstream Ltd. 19.78 Recovery of establishment & other expenses - Godrej Consumer Products Ltd. 815.74 - Godrej Saralee Ltd. 229.64

Key Relative of Key Enterprises Management Management over which Key Personnel Personnel Management Personnel exercise significant influence — — 976.74 — — — — — 264.19 — — — — — 1262.28 — — — — — 23.15 — — —

Nature of Transaction Establishment & other exps paid - Godrej & Boyce Mfg. Co. Ltd. - Godrej Consumer Products Ltd. Dividend income - Godrej Consumer Products Ltd. Dividend paid - Godrej & Boyce Mfg. Co. Ltd. Remuneration - Mr. N. B. Godrej - Ms. T. A. Dubash - Mr. Mathew Eipe - Mr. V. F. Banaji - Mr. M. P. Pusalkar

Total 1009.41 930.28 264.24 1.46 1995.61 1158.86 45.43 25.55

Rs. lac 228.68 89.66 1,007.66 1,248.02 82.11 50.57 62.56 77.07 48.93

170.77 178.82

13355.60

20137.20

3613.43

94.78 166.26

11283.63

17422.14

2391.61

6138.94 212.39 6351.33 (212.39) 6138.94

194.53 100.05

3436.97

4553.76

1312.34

11176.46 – 11176.46 – 11176.46

184.80 149.15

3646.09

4056.21

839.89

11087.50 – 11087.50 – 11087.50

11.98 30.06

7132.86

7725.44

(740.24)

782.92 – 782.92 – 782.92

34.97 32.53

5208.61

1554.11

(1353.58)

1579.13 – 1579.13 – 1579.13

Previous Year

3557.39 –

44.86

29363.30

3496.44

3496.29 1078.61 4574.90 (1078.61) 3496.29

– –

27.85

25455.30

3636.65

3674.60 1694.44 5369.04 (1694.44) 3674.60

Finance & Investments This Previous Year Year

10229.32 915.18

5756.06

28095.60

1385.97

46107.60 4394.19 50501.79 (4394.19) 46107.60

This Year

1797.08 531.89

4344.58

17967.95

1379.65

38684.97 72.04 38757.01 (72.04) 38684.97

Previous Year

Others

3786.87 3360.54

94824.52

60168.21 34656.31

199917.30

162431.20

129914.27

This Year Previous Year 158380.95 127218.51 4050.25 2695.76

210616.91

This Year Previous Year 186840.48 180430.58 23776.43 19486.72

Total

22569.77 3766.77

120031.28

66148.26 53883.02

129914.27

6467.12

162431.20

(504.91) 4899.77

126704.74 3209.53

6972.03 (67.47)

153409.94 9021.26

(137.70)

4.17 7109.73

(14.38) 5045.33 (78.09)

(3144.16) (3496.47) 7746.64 (641.08)

4967.24

14387.27 (2928.29) (4528.44) 7614.87 (2555.16)

199917.30 3575.91 203493.21 (3575.91) 199917.30

Previous Year

(Rs. lac)

15071.60

210616.91 7750.69 218367.60 (7750.69) 210616.91

This Year

Total

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.

426.08 240.22

3896.27

8628.96

(856.81)

9151.15 177.15 9328.30 (177.15) 9151.15

This Year

Tea

297.77 239.82

423.86

701.03

(342.91)

19191.97 – 19191.97 – 19191.97

Previous Year

Household Insecticides This Previous Year Year

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 and environmental pest control solutions. Finance and Investments includes investments in subsidiaries, associates companies and other investments. Others includes Medical Diagnostics, Agri Inputs, Integrated Poultry, Oil Palm Plantations and energy generation through windmills.

333.95 498.70

14699.04

16883.73

2157.42

21115.02 1.53 21116.55 (1.53) 21115.02

This Year

Estate & Property Development This Previous Year Year

831.63 518.75

16100.77

18497.48

1586.22

65399.74 1559.05 66958.79 (1559.05) 65399.74

Previous Year

Foods

915.21 1741.79

17062.14

34736.34

6192.44

67609.76 2099.21 69708.97 (2099.21) 67609.76

This Year

Animal Feed

Notes:

Total

India Outside India

Carrying Amount of Segment assets

Total

Revenue by Geographical markets India Outside India

Segments

Information about Secondary Business

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

Total Liabilities

7276.38 1784.09

19897.28

Segment Liabilities Unallocated Liabilities

Total Assets

44336.13

Segment Assets Unallocated Assets

4760.35

54160.45 37.99 54198.44 (37.99) 54160.45

(A) Revenue External Sales 51177.71 Intersegment Sales – Total Sales 51177.71 Less: Intersegment Sales – Total Revenue 51177.71

(B) Results Segment result before interest and tax Unallocated expenses net of unallocated income Interest Expense (net) Profit before tax Taxes Add/(Less) prior period adjustment Profit after taxes Share of loss in associates Profit before Minority Interest Share of Minority Interest Net Profit after Minority Interest

Previous Year

Chemicals

This Year

Information about primary business segments

19. Segment Information

Annual Report 2005-2006

Dealt with in the books of Account of the Company

Mumbai, May 26, 2006

M. Eipe Executive Director & President (Chemicals)

S.K. Bhatt Executive Vice President (Corporate Services) & Company Secretary

N.B. Godrej Managing Director

V. Srinivasan Executive Vice President (Finance & Estate)

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

26,240,229 equity shares of the face value of USD 1 each fully paid up in Godrej Global Solutions (Cyprus) Ltd. ( representing 100% of the share capital) are held by Godrej Global Solutions Ltd., a subsidiary of the Company.

A.B. Godrej Chairman

50,000equity shares of the face value of Rs.10 each fully paid up in Godrej Waterside Properties Pvt. Ltd. (representing 100% of the share capital)are held by Godrej Properties Ltd., a subsidiary of the Company.

1,000 equity shares of the face value of US 1 cent each fully paid up in Godrej Global Solutions Inc. (representing 100% of the share capital) are held by Godrej Global Solutions (Cypurs) Ltd., a sub-subsidiary of the Company.

510,000 equity shares of the face value of Rs.10 each fully paid up in Godrej Realty Pvt. Ltd. are held by Godrej Properties Ltd., a subsidiary of the Company.

7,600 equity shares of the face value of Rs.10 each fully paid up in Krithika Agro Farm Chemicals and Engineering Industries Pvt. Ltd. are held by Godrej Agrovet Ltd., a subsidiary of the Company.

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

–

14 below)

18,38,170 equity shares of Rs.10 each fully paid up in Goldmohur Foods & Feeds Ltd. (representing 100% of the share capital) are held by Godrej Agrovet Ltd., a subsidiary of the Company. During the year, 3,20,000 equity shares were bought back by Gold Mohur Foods & Feeds Ltd. under a buyback scheme.

–

13 below)

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.

–

12 below)

(see note

–

10 below) 11 below)

(see note

Godrej Global Solutions (Cyprus) Limited

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.

–

9 below)

(see note

Godrej Global Solutions Inc.

–

8 below)

(see note (see note

Godrej Waterside Properties Pvt.Ltd.

4,800 Equity Shares of Rs.10 each in Godrej Hicare Ltd. are held by Ensemble Holdings and Finance Ltd., a subsidiary of the Company.

–

7 below)

(see note)

Godrej Realty Pvt. Ltd.

–

6 below)

(see note

Krithika Agro Farm Chemicals & Engineering Industries Pvt. Ltd.

41,251 equity shares of Rs.10 each in Godrej Global Solutions Ltd. are held by Ensemble Holdings & Finance Ltd., a subsidiary of the Company.

N.A

Nil

87.79

Rs. lac

84.14%

(See note

Godrej Goldmohur Girikandra Global Foods & Holiday MidEast Feeds Home & FZE Limited Resorts Limited

Nil

(598.52)

Nil

(1,201.84)

Rs. lac

70.00%

(See note

Golden Feed Products Limited

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

Nil

(163.07)

Nil

(6.18)

Rs. lac

99.91%

6647100 7900000

Godrej Hicare Limited

1,127,905

2,083,054

Nil

382,566

US$

100%

9624996 13750000

Godrej Beverages & Foods Limited

76,795 Equity Shares of Rs.10 each fully paid up in Godrej Properties Ltd. are held by Ensemble Holdings & Finance Ltd., a subsidiary of the Company.

Nil

(741.66)

30,700.00

259.11

Rs. lac

99.89%

47672739 47714038

Godrej Global Solutions Limited

1,205.76

872.17

2605000 2605000

Godrej International Limited

10 £1 (US$1.52)

3770160 3774160

Ensemble Holdings & Finance Limited

The Financial Year of all subsidiary companies have ended on March 31, 2006.

2,219.48

2,207.00

–

1,088.18

Rs. lac

81.69%

5264645 6444545

Godrej Properties Limited

Dealt with in the books of Account of the Company

Nil

394.34

Rs. lac

57.78%

4112956 7118752

Godrej Agrovet Limited

ii.

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

ii.

For the financial year ended on March 31, 2006 i. Not dealt with in the books of Account of the Company

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

Extent of Holding

Notes:

Face Value

The company’s interest in the subsidiaries as on March 31, 2006 a. Number of Equity Shares Total Number of Shares

Name of the Company

STATEMENT REGARDING SUBSIDIARY COMPANIES PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956

Godrej Industries Limited – Consolidated Accounts

Annual Report 2005-2006

Godrej Agrovet Limited DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006 To The Shareholders

HOLDING COMPANY

Your Directors have pleasure in submitting their Report along with the audited Accounts for the financial year ended on March 31, 2006.

Your Company continues to be a subsidiary of Godrej Industries Limited as defined under Section 4(1)(b) of the Companies Act, 1956.

Financial Results

SUBSIDIARY COMPANIES

Your Company’s performance during the year as compared with that during the previous year is summarised below: -

Total Income

For the year ended 31/3/2006 Rs. lac

For the year ended 31/3/2005 Rs. lac

60555.90

56851.81

Profit Before Taxation (PBT) Less : Provision for Taxation Profit After Taxation (PAT) Balance brought forward from previous year

761.23 78.70 682.53 2696.74

1949.63 532.45 1417.18 2132.13

Total

3379.27

3549.31

Appropriations: Interim Dividend Final Dividend Tax on Dividend General Reserve Balance Carried Forward to Balance Sheet

– 284.75 39.94 70.00 2984.58

391.53 234.92 84.12 142.00 2696.74

Total

3379.27

3549.31

Review of Operations The year under review was one of the toughest years your company has experienced. Adverse environmental factors put heavy pressure on costs while announcement of Avian Influenza impacted sales growth. Many new initiatives and investments made during the year also impacted the bottom line, which declined by 52% compared to previous year. The top line grew by about 7% compared to previous year. The business-wise performance is reviewed hereunder: ANIMAL FEEDS The Animal Feeds Business continued to operate under challenging external environment. The prolonged monsoon had its impact on key raw materials such as de-oiled rice bran, maize resulting in increased cost for your Company, which could not be passed on to the customers due to increased competition. Avian influenza detected in Western parts of the country impacted the Poultry Feed sales of your Company. Golden Feed Products Limited, a subsidiary of your company, acquired the Shrimp Feed Marketing business of Higashimaru Feeds (India) Limited, with effect from October 31, 2005. INTEGRATED POULTRY BUSINESS The detection of Avian Influenza had severe impact on off take of the poultry products. However, your Company has been able to control the cost by continuing to achieve breakthrough performance in its breeding business. Your Company’s new TV Commercial for Real Good Chicken drew in new customers and helped the business report good growth in the face of such adversities. AGRICULTURAL INPUTS The Agri Inputs Division has continued to show excellent performance with growth in the top line of 40% and growth in the bottom line of 49%. Aadhaars have been positioned as centres of “Khushion ka, Khushhali ka”, i.e. centres of Happiness and Prosperity. Your Company plans to have strategic tie-ups with other corporates for bringing this vision to fruition. Recently, an MOU was signed with Apollo Pharmacy, a member of Apollo Hospital group to bring Health solutions to the customers of Aadhaar. Similar efforts are on to find partners for Finance/Credit needs, Insurance and a host of other critical requirements. We draw inspiration from the appeal made by our Honorable President to bring Urban Amenities to Rural India. The product offering at Aadhaars has also been considerably expanded and includes most items of daily needs. Nine new Aadhaars were opened during the year taking the total to 23. Your Company’s initiative in retailing of fresh foods, especially fresh fruits and vegetables through “Nature’s Basket” has been expanding. The Company has opened two more stores during the year in Mumbai. OIL PALM PLANTATIONS During the year, the Division has brought over 3500 Hectares under Oil Palm. Your Company received allocation of fresh area in Andhra Pradesh for development of Oil Palm. An MOU has been signed with Government of Mizoram for development of Oil Palm in that State. The development activities in the state of Gujarat and Mizoram have started. Your Company acquired majority stake in “Krithika Agro Farm Chemicals and Engineering Industries Pvt. Ltd,”, which has its presence in the Oil Palm cultivation activities in the state of Orissa.

Your Company continues to be the holding Company of Goldmohur Foods and Feeds Ltd (GFFL), Golden Feed Products Ltd (GFPL). By virtue of acquisition of 76% stake in the equity share capital of “Krithika Agro Farm Chemicals and Engineering Industries Pvt. Ltd.” (Krithika) as stated elsewhere in this report, Krithika Agro Farm Chemicals and Engineering Industries Pvt. Ltd has become a subsidiary of your Company with effect from April 27, 2005. Your Company has advanced an amount of Rs.42.05 lacs to Krithika during the current year. The Auditors in their Report have stated that they are unable to comment on the recoverability of the said loan. The Board of Directors feel that the said loan is recoverable in view of the proposed oil palm plantation activities to be carried out by Krithika in Orrisa. The audited Balance Sheet of GFFL, GFPL and Krithika as at 31st March, 2006 together with their audited Profit & Loss Account, Directors’ Report and Auditors’ Report is attached to the Balance Sheet and Profit & Loss Account of your Company. Also annexed hereto is the Statement required under Section 212(1) of the Companies Act, 1956 relating to GFFL, GFPL and Krithika. JOINT VENTURES ACI Godrej Agrovet Pvt Ltd, your Company’s Joint Venture with ACI in Bangladesh has commissioned its Feed Mill in October, 2005. The feeds have been receiving very good response. The hatchery has also been commissioned and is expected to add significant value in the coming years. Your company has acquired management control in Al Rahba International Trading LLC, United Arab Emirates for carrying on the business of Poultry. This Joint Venture has 70% (stake in profit and 45% stake in equity) participation from your Company. This Joint Venture has already commenced production during the second half of the year 2005-06. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The information in respect of these matters, required under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 and forming part of this Report, is annexed hereto (Annexure - A). DIRECTORS Dr. S.L. Anaokar and Ms. Tanya Dubash, Directors retire by rotation at the ensuing Annual General Meeting in accordance with Article 124 of the Articles of Association of the Company and the provisions of the Companies Act, 1956 and being eligible offer themselves for reappointment. AUDITORS You are requested to appoint Auditors for the current year and fix their remuneration. The retiring Auditors M/s. Kalyaniwalla & Mistry, Chartered Accountants, Mumbai are eligible for re-appointment. ADDITIONAL INFORMATION The additional information required to be given under the Companies Act, 1956, has been laid out in the Schedules attached to and forming part of the Accounts. The Notes to the Accounts referred to the Auditors’ Report are self-explanatory and therefore do not call for any further explanation . AUDIT COMMITTEE Pursuant to the provisions of Section 292-A of the Companies Act, 1956, your Company has constituted the Audit Committee of the Board of Directors. During the year, the Audit Committee was reconstituted in view of the resignation of Mr. N.B. Godrej, a Member and the Chairman of the Committee. The reconstructed Audit Committee comprises of the following Directors of the Company :(1) (2) (3)

The Audit Committee, pursuant to the terms of reference specified by the Board from time to time has made recommendations to the Board in respect of internal control systems, half-yearly & annual financial statements, standard accounting principles, Risk Management polices, etc. The Board of Directors has since accepted the recommendations of the Audit Committee. 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 ;

that they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of 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 ;

that they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company for preventing and detecting fraud and other irregularities ;

that they have prepared the annual accounts on a going concern basis.

PLANT BIOTECH BUSINESS The Plant Biotech Division has introduced Banana plants in the states of UP and Bihar. It has also undertaken an ambitious plan to help substantially increase the yield of Sugarcane. FINANCE AND INFORMATION SYSTEMS Despite overall hardening of interest rates in the economy, your Company was able to reduce the cost of funds during the year by efficient treasury operations. The Company’s Commercial Paper programme continues to carry the Apex rating of A1 + from ICRA for Rs 15 crore. However, after detection of Avian Influenza, ICRA has put your Company’s rating under “rating watch with developing implication”. IT continues to play a crucial role in the operations of your Company. During the year, your Company provided IT solutions for the retail businesses. OTHER INITIATIVES Your Company has invested in one more 1.25 MW windmill, which was commissioned during the first quarter of the year at Dhule, Maharashtra. The Maharashtra State Electricity Distribution Company Ltd has agreed to purchase all the power produced by this Windmill on terms attractive to your Company. DIVIDEND

Mr. K.N. Petigara – Chairman Dr. S.L. Anaokar – Member Mr. C.K. Vaidya - Member

HUMAN RESOURCES Your company continues to focus on development of Human Resources. The industrial relations at all units continued to be cordial. The Board would like to place on record its sincere appreciation for the unstinted support it continues to receive from all associates. PARTICULARS OF EMPLOYEES Details of the employees covered under the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) (Amendment) Rules, 2002, are attached (ANNEXURE B) For and on behalf of the Board of Directors

Your Directors recommend a Final Dividend for 2005-06 amounting to Rs. 4.00 per share of face value of Rs. 10/-each i.e.40% (Previous year – Interim 55%, Final 33%).

C.K. Vaidya Managing Director

FIXED DEPOSITS Your Company has not accepted any public deposits during the financial year under review.

A.B. Godrej Director

Mumbai, May 25, 2006.

Godrej Agrovet Limited ANNEXURE ‘A’ ANNEXURE 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 The Companies continues its policy of encouraging energy conservation measures. The regular review of energy consumption and the systems installed to control utilization of energy is undertaken. Some of the measures adopted by your Company towards conservation of energy were as follows :1. Pneumatic system for main plant change to elevator system 2. Pipeline of higher diameter provided for the boiler to the pellet mill 3. Adequate steam straps provided 4. Provision of automatic control meters and capacitors 5. Replacement of 40W tube lights with 36W fluorescent candle lamps. Technology absorption, Adaptation and Innovation I. During the year under review, in-house research in quality systems and standards was continuously carried out. Some of the key measures undertaken are follows :(a) Hammer Mill design change. (b) Post conditioning tank design change . (c) Use of CNG in place of HSD (d) Circulation of sludge water through centrifugal separator II. The benefits derived as a result of various measures undertaken are as follows :(a) Better quality while grinding and saving in time

(b) Reduction in process loss, improvement in efficiency in respect of post grinding operations (c) Clean fuel, low fuel cost, zero storage, zero volatile losses (d) Improved oil extraction rate at oil palm mill (e) Improvement in energy efficiency and power factory III. The Company’s expenditure on R&D is given below :Expenditure on R & D 2005-2006 2004-2005 Rs. lac Rs. lac. (a) Capital – 0.31 (b) Recurring 90.31 107.30 (c) Total 90.31 107.61 (d) Total R & D expenditure as 0.15% 0.19 % a percentage of total turnover Foreign Exchange earnings and outgo I. Your Company’s efforts to export agricultural inputs (Vipul – liquid, Achook, Nimin) to South Asian countries continued during the year. The efforts to export agricultural inputs to other countries are continuing. 2005-2006 2004-2005 Rs. lac Rs. lac II. Foreign exchange used 1582.48 687.77 III. Foreign exchange earned 108.03 55.34 For and on behalf of the Board of Directors C.K. Vaidya A.B. Godrej Managing Director Director

Mumbai, May 25, 2006.

REPORT OF THE AUDITORS' TO THE MEMBERS OF GODREJ AGROVET LIMITED 1.

3. 4.

We have audited the attached Balance Sheet of Godrej Agrovet Limited, as at 31st March 2006 and also the Profit and Loss Account and the 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 auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 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 annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to in paragraph (3) above, we report that: a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit. b) We are unable to comment on the recoverability of a loan amounting to Rs. 4,205 thousand given to a Company. c) As referred to in note 16 of notes to accounts, the managerial remuneration paid to the managing director is in excess of the limits laid down under Section 198 read with Schedule XIII of the Companies Act, 1956, by Rs.3,056 thousand. The Company is in the process of making an application to the Central Government for approval of the limits in excess of the prescribed limits. d) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of these books.

ANNEXURE TO THE AUDITORS’ REPORT Referred to in paragraph (3) of our report of even date. 1) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. (b) As explained to us, the Company has a program for physical verification of fixed assets at periodic intervals. In our opinion, the period of verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies have been reported on such verification. (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 and no material discrepancies were noticed on physical verification. 3) (a) The Company has granted three unsecured loans amounting to Rs. 78,198 thousand, to three parties covered in the register maintained under section 301 of the Companies Act, 1956. (b) The Company has not charged interest on the loan of Rs. 33,600 thousand given to one party which is prima facie prejudicial to the interests of the Company. The rate of interest and the other terms and conditions of the other loans is not prejudicial to the interests of the Company. (c) The Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under section 301 of the Act. (d) Consequently, the question of commenting on the rates of interest and the other terms and conditions of the loans taken being prejudicial to the interests of the Company and payment of regular principal and interest does not arise. 4) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business, for the purchases of inventory, fixed assets and for the sale of goods and services. During the course of our audit, we have not observed a continuing failure to correct major weaknesses in internal controls. 5) (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the particulars of contracts and arrangements referred to in section 301 of the Companies Act, 1956 have been entered into the register required to be maintained under that section. (b) The transactions made in pursuance of such contracts or arrangements, were made at prices which are reasonable having regard to prevailing market prices at the relevant time, except for certain transactions for which, there are no similar services rendered to other parties or have been entered into on an reciprocal basis and hence the prices are not comparable. 6) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public and hence the provisions of section 58A, 58AA or any other provision of the Companies Act, 1956, read with the rules framed thereunder are not applicable. 7) In our opinion and according to the information and explanations given to us, the internal audit system is commensurate with the size of the Company and nature of its business. 8) We have broadly reviewed the books of account maintained by the Company in respect of the Oil Palm Plantation Division pursuant to the order made by the Central Government for maintenance of cost records prescribed under section 209 (1)(d) of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We, have not, however, made a detailed examination of the records with a view to determining whether they are accurate or complete. To the best of our knowledge and according to the information given to us, the Central

The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account. f) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956. g) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements read with the notes thereon, subject to (b) and (c) above, 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 31st March, 2006; and ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date. iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. 5. On the basis of the written representations received from the Directors as on 31st March, 2006, and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants K. M. Elavia Partner Place : Mumbai Dated : May 25, 2006 Membership No. 12737 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. (a) According to the information and explanations given to us and on the basis of our examination of the books of account, during the year, the Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess and other statutory dues applicable to it with the appropriate authorities. According to the information and explanations given to us, there are no undisputed dues payable in respect of above as at 31st March 2006 for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us, there are no dues outstanding of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on account of any dispute, other than the following: Name of Statute Amount (Rs.) Forum where dispute is pending Sales Tax Act 29,517,000 Commissioner, Appellate Tribunal and High Court Income Tax Act 6,119,000 Commissioner of Income Tax (Appeals) 10) The Company does not have accumulated losses at the end of the financial year and it has not incurred any cash losses in the current and immediately preceding financial year. 11) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not defaulted in repayment of dues to banks. There are no dues to financial institutions or debenture holders. 12) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13) In our opinion and according to the information and explanations given to us, the nature of activities of the Company does not attract any special statute applicable to chit fund and nidhi/ mutual benefit fund/ societies. 14) The Company does not deal in shares, securities, debentures and other investments. 15) According to the information and explanations given to us, the Company has given corporate guarantees for loans taken by its subsidiary/joint venture companies from banks. The terms and conditions are not prima facie prejudicial to the interest of the Company. 16) According to the information and explanations given to us, term loans were applied for the purpose for which the loans were obtained. 17) According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flows of the Company, we report that the Company has not utilized funds raised on shortterm basis for long term investment. 18) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Companies Act, 1956. 19) The Company did not issue any debentures during the year. 20) The Company has not raised any money through a public issue during the year. 21) Based on the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the year. For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants K. M. Elavia Place : Mumbai Partner Dated : May 25, 2006 Membership No. 12737 9)

Annual Report 2005-2006

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

BALANCE SHEET AS AT MARCH 31, 2006 Schedule

This Year Rs. ’000

Previous Year Rs. ’000

SOURCES OF FUNDS

Schedule

This Year Rs. ’000

11 12

6,027,586 28,004

This Year Rs. ’000

Shareholders’ Funds Share Capital Reserves & Surplus

1 2

71,188 554,821

71,188 519,036 626,008

Loan Funds Secured Loans Unsecured Loans

3 4

1,259 1,333,526

139,598 180,243 1,334,785 50,556

319,841 51,785

TOTAL

2,011,350

961,850

APPLICATION OF FUNDS Fixed Assets Gross Block Less : Depreciation Less : Provision for Impairment

1,194,189 418,931 19,890

1,031,495 360,255 19,890

755,369 146,415

651,349 7,959 901,784

Investments

Less : Current Liabilities and Provisions Liabilities Provisions

515,868

698,849 639,825 267,412 59 338,914

549,737 504,782 82,864 71 88,462

1,945,059

1,225,916

1,303,021 48,339

1,219,020 39,541

1,351,360

1,258,561

Net Current Assets Miscellaneous Expenditure (to the extent not written off or adjusted)

TOTAL NOTES TO ACCOUNTS

334,963

593,699

(32,645)

–

224

2,011,350

961,850

5,685,181

EXPENDITURE Materials Expenses Interest and Financial Charges Depreciation Miscellaneous Expenditure written off

13 14 15

4,358,477 1,495,255 51,885 73,626 224

PROFIT BEFORE TAXATION Provision for Taxation Current ( including Fringe Benefit Tax) MAT Credit entitlement Deferred

4,163,547 1,228,645 32,364 65,575 87 5,979,467

5,490,218

76,123

194,963

12,509 (3,410) (1,229)

48,000 – 5,245 7,870

53,245

PROFIT AFTER TAXATION Surplus brought forward

68,253 269,674

141,718 213,213

AMOUNT AVAILABLE FOR APPROPRIATION

337,927

354,931

659,308

8 9

5,671,833 13,348 6,055,590

Net Block Capital Work-in-Progress/advances

Current Assets, Loans and Advances Inventories Sundry Debtors Cash and Bank Balances Other Current Assets Loans and Advances

From Operations Other Income

590,224

Deferred Tax Liability

APPROPRIATION : Dividend Interim Final (Proposed)

– 28,475

Tax on Dividend Transfer to General Reserve Surplus carried forward TOTAL

39,153 23,492 28,475 3,994 7,000 298,458

62,645 8,412 14,200 269,674

337,927

354,931

9.59

19.91

Earnings per share (Basic/Diluted) in Rs. (Refer note 25)

NOTES TO ACCOUNTS

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

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

As per our Report attached

Signatures to Balance Sheet and Schedules 1 to 10 and 16

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants K.M. ELAVIA Partner Membership No. 12737 Mumbai, May 25, 2006.

Previous Year Rs. ’000

INCOME

V.V. CHAUBAL Company Secretary

Signatures to Profit and Loss Account and Schedules 11 to 16

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants

A.B. GODREJ

Director

C.K. VAIDYA

Managing Director K.M. ELAVIA Partner Membership No. 12737 Mumbai, May 25, 2006.

V.V. CHAUBAL Company Secretary

A.B. GODREJ

Director

C.K. VAIDYA

Managing Director

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 This Year Rs. ’000 AUTHORISED 1,00,00,000 Equity Shares of Rs. 10 each ISSUED, SUBSCRIBED AND PAID UP 71,18,752 Equity Shares of Rs. 10 each fully paid

This Year Rs. ’000

Previous Year Rs. ’000

SCHEDULE 1 : SHARE CAPITAL

(b)

41,06,956 Equity Shares of Rs. 10/- each are held by Godrej Industries Limited, the Holding Company. 52,47,600 Equity Shares of Rs. 10/- each have been issued as fully paid Bonus Shares by capitalising Securities Premium Account.

Previous Year Rs. ’000

189,290

9,602

7,102 2,500 9,602

SCHEDULE 2 : RESERVES & SURPLUS 100,000 71,188

100,000 71,188

SECURITIES PREMIUM ACCOUNT As per last Balance Sheet CAPITAL INVESTMENT SUBSIDY As per last Balance Sheet Add : Amount received during the year

9,602 –

Of the above Shares (a)

This Year Rs. ’000

GENERAL RESERVE As per last Balance Sheet Less : Provision for impairment

50,470 –

48,850 12,580

Add : Transferred from Profit & Loss Account

50,470 7,000

36,270 14,200

PROFIT AND LOSS ACCOUNT TOTAL

57,470 298,458

50,470 269,674

554,821

519,036

Godrej Agrovet Limited SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 This Year Rs.’000

Previous Year Rs.’000

SCHEDULE 3 : SECURED LOANS

This Year Rs.’000

Previous Year Rs.’000

1,299,809

148,600

SCHEDULE 4 : UNSECURED LOANS

FROM BANKS Term Loans (amount due within a year Rs. Nil, Previous year Rs. 23,922 thousand) Cash Credit/Working Capital Demand Loans TOTAL Note : Refer Note (4)

–

115,598

1,259 1,259

24,000 139,598

FROM BANKS Term Loans (amount due within a year Rs. 1,216,476 thousand, Previous year Rs. 148,600 thousand) SALES TAX DEFERMENT FACILITY TOTAL

33,717

31,643

1,333,526

180,243

SCHEDULE 5 : FIXED ASSETS

(Rs. ’000) GROSS BLOCK

DEPRECIATION

IMPAIRMENT

NET BLOCK

ASSETS

As at 1.4.2005

Additions

Deductions

As at 31.3.2006

Upto 1.4.2005

For the Year

On Deductions

Upto 31.3.2006

As at 31.3.2006

As at 31.3.2005

Goodwill Freehold Land Leasehold Land Buildings Staff Quarters Plant & Machinery Furniture & Fixtures Leasehold Improvements Office & Other Equipments Vehicles Research Centre Trees, Development Costs Technical Know-How Fees

– 86,493 9,841 220,824 1,003 546,059 19,476 – 25,512 53,130 3,688 45,469 20,000

– 6,777 – 12,913 – 115,724 9,985 9,409 7,461 22,465 – – –

– – – – 485 6,802 120 – 326 14,308 – – –

– 93,270 9,841 233,737 518 654,982 29,341 9,409 32,647 61,287 3,688 45,469 20,000

– – 845 59,302 491 202,914 12,225 – 13,335 29,069 1,584 20,922 19,569

– – 112 7,745 19 46,829 2,487 859 2,888 9,049 175 3,033 429

– – – – 244 5,246 106 – 224 9,132 – – –

– – 956 67,047 267 244,496 14,607 859 16,000 28,986 1,759 23,955 19,999

– – – – – 19,890 – – – – – – –

– 93,270 8,885 166,691 251 390,595 14,734 8,550 16,647 32,300 1,929 21,514 1

– 86,493 8,996 161,522 512 323,255 7,251 – 12,177 24,061 2,104 24,547 431

1,031,495

184,734

22,041

1,194,189

360,256

73,626

14,951

418,931

19,890

755,368

–

919,249

136,645

24,399

1,031,495

307,941

65,575

13,260

360,255

–

651,349

TOTAL Previous Year Capital Work-in-Progress / Advances

This Year Rs. ’000 SCHEDULE 6 : INVESTMENTS LONG TERM UNQUOTED (AT COST) IN GOVERNMENT SECURITIES (All the Securities have been deposited with various Government Authorities) (a ) National Savings Certificates (Face value Rs. 112 thousand; Previous year Rs. 92 thousand) (Rs. 20 thousand purchased during the year) (b) Indira Vikas Patra (Face value Rs. 2 thousand; Previous year Rs. 3 thousand) (Rs. 1 thousand matured during the year) IN SUBSIDIARY COMPANY In Goldmohur Foods and Feeds Limited 18,38,170 (Previous year 21,58,170) equity shares of Rs. 10/- each In Golden Feeds Products Limited 50,000 equity shares of Rs. 10/- each IN JOINT STOCK COMPANIES (a) 4,000 Fully-paid Equity Shares of Rs.10/each in Ensemble Holdings & Finance Limited (a company under the same management) (b) 4,00,000 Fully-paid Equity Share of Tk. 100/- each in ACI Godrej Agrovet Private Limited (c) 675 Fully-paid Equity Share of AED. 100/- each in Al Rahba International Trading Limited Liability Company (acquired during the year) (d) 23,90,911 fully paid Equity Shares of Rs.10/- each in Creamline Dairy Products Limited (e) 3,51,352 fully paid Equity Shares of Rs.10/- each in Creamline Nutrients Limited (f) 4,55,000 fully paid Equity Shares of Rs.10/- each in Polchem Hygiene Laboratories Private Limited IN CO-OPERATIVE SOCIETY 3 Shares of Rs.500/- each in Sachin Industrial Co-operative Society Limited Aggregate Cost of Unquoted Investments CURRENT NON-TRADE UNQUOTED 1,78,74343.368 units of Grindlays Floating Rate Fund Short term (Plan B) - Daily Dividend. TRADE UNQUOTED IN SUBSIDIARY COMPANY In Krithika Agro Farm Chemicals and Engineering Industries Private Limited 7,600 Fully-paid Equity Share of Rs. 10/- each (acquired during the year) TRADE UNQUOTED In subsidiary company TOTAL

This Year Rs. ’000

Previous Year Rs. ’000 SCHEDULE 7 : CURRENT ASSETS, LOANS AND ADVANCES (A) INVENTORIES : Raw Materials Finished Products Poultry Stock Stores and Spares Stock under Cultivation

112

2 113

183,398

500

30,814

810

–

95,016

8,784

16,275 151,779

16,275 150,969

2 335,792

2 334,962

180,000

–

515,868

334,963

(B) SUNDRY DEBTORS Debts outstanding for a period exceeding six months Considered Good Considered Doubtful Other Debts TOTAL Less: Provision for doubtful debts [Debts amounting to Rs. 12,263 thousand (Previous year Rs. 12,263 thousand) are secured by equitable mortgage/ hypothecation of assets/deposit of title deeds, Rs. 17,366 thousand (Previous year Rs.118 thousand against Security Deposits and Rs. 25,392 thousand (Previous year Rs. 12,494 thousand) against Bank Guarantees] (C) CASH AND BANK BALANCES Cash and Cheques on hand Balances with Scheduled Banks i) In Current Accounts ii) In Fixed Deposit Accounts (Rs. 75 thousand pledged with government authorities) (D) OTHER CURRENT ASSETS (E) LOANS AND ADVANCES (Unsecured and considered good unless otherwise stated) Loans and Advances recoverable in cash or in kind or for value to be received Considered Good Considered Doubtful Less: Provision for doubtful advances Other Deposits i) Government Authorities ii) Others Advance payment of Taxes including MAT Credit Entitlement Rs. 3,410 thousand (Net of provision for taxation Rs. 73,294 thousand; Previous year Rs. 73,294 thousand) TOTAL

146,415

7,959

901,783

659,308

This Year Rs. ’000

Previous Year Rs. ’000

698,849

316,869 108,490 93,941 12,067 18,370 549,737

639,825

95,172 23,682 118,854 409,610 528,464 23,682 504,782

351,305 201,993 106,282 14,816 24,454

130,489 21,500 151,989 509,336 661,325 21,500

12,713

7,375

98,827 155,872

64,530 10,959 267,412

82,864

292,449 3,361

76,273 3,674

295,810 3,361 292,449

79,947 3,674 76,273

131 35,050

5 25,289

11,284 338,914

(13,105) 88,462

1,945,058

1,225,916

Annual Report 2005-2006

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 This Year Rs. ’000 SCHEDULE 8 : LIABILITIES Acceptances Sundry Creditors Dues to Small Scale Undertakings (refer Note 10) Others

Previous Year Rs. ’000

273,048

424,140

724 854,398

Advances from Customers Sundry Deposits TOTAL SCHEDULE 9 : PROVISIONS Dividend Tax on Dividend Gratuity Leave Encashment TOTAL SCHEDULE 10 : MISCELLANEOUS EXPENDITURE (To the extent not written off) Front end Fee on Term Loans TOTAL SCHEDULE 11 : INCOME FROM OPERATIONS Net Sales Other Business Operations Claims & Compensations Rent and Storage Charges

This Year Rs. ’000

5,051 597,996 855,122 69,212 105,638

603,047 96,522 95,311

1,303,021

1,219,020

28,475 3,994 1,439 14,431

23,492 3,295 416 12,338

48,339

39,541

–

224

–

224

5,955,461 32,167 –

Previous Year Rs. ’000

8,330 27,314 1,929 59,136 83,620 301,345 42,940 80,390 16,594 65,114

6,193 21,819 1,675 17,770 64,504 254,636 37,489 58,355 33,906 52,832

Less: Shared Expenses recovered

1,521,655 (26,400)

1,255,045 (26,400)

TOTAL

1,495,255

1,228,645

36,505

18,885

SCHEDULE 15 : INTEREST AND FINANCIAL CHARGES (a) (b)

5,627,822 851 390

This Year Rs. ’000

SCHEDULE 14 : EXPENSES (Contd.) 10 Insurance 11 Postage, telephone and stationery 12 Auditor's Remuneration 13 Legal & Professional Fees 14 Freight, Coolie and Cartage 15 Discount, Commission and Selling expenses 16 Advertisement and publicity 17 Travelling expenses 18 Bad Debts/Advances written off 19 General Expenses

(c)

32,167 Financial Operations Dividend on Investments (Gross) Interest (Gross) (Tax at Source Rs.114 thousand; Previous year Rs.144 thousand) Profit on sale of Investments

This Year Rs. ’000

Interest paid on fixed loans - Banks Interest paid on other loans i) Banks ii) Others

3,012 2,157

1,394 4,796

Other Financial Charges

5,169 10,212

6,190 7,289

TOTAL

51,885

32,364

SCHEDULE 16 : NOTES TO ACCOUNTS 1.

SIGNIFICANT ACCOUNTING POLICIES

1,241

The accounts have been prepared on historical cost convention. The Company follows mercantile system of accounting and recognises income and expenditure on accrual basis.

35,609

30,000

4,349 –

4,696 8,074

Fixed assets have been stated at cost and include incidental and/or installation/development expenses incurred in putting the asset to use and interest on borrowing incurred during construction period. Pre-operative expenses for major projects are also capitalised, where appropriate.

Carrying amount of cash generating units/assets are reviewed at balance sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognized whenever carrying amount exceeds the recoverable amount.

Depreciation /Amortisation has been provided for as under :

TOTAL SCHEDULE 12 : OTHER INCOME Profit/(Loss) on sale of Fixed Assets (Net) Provision for Doubtful Debts and Advances no longer required Miscellaneous Income TOTAL

39,958

42,770

6,027,586

5,671,833

1,273 2,175 24,556

(431) 1,420 12,359

28,004

13,348

(a)

The Company has grouped additions and disposals in appropriate time periods of a month/quarter for the purpose of charging pro rata depreciation in respect of additions and disposals of its assets keeping in view the materiality of the items involved.

(b)

Building, Plant & Machinery, Computers and Research Centre: On Straight Line Method basis at the rates prescribed by Schedule XIV to the Companies Act, 1956.

SCHEDULE 13 : MATERIALS a) RAW MATERIALS CONSUMED Opening stock Add : Purchases during the year

316,869 3,910,803

256,523 3,852,505

Other assets: On Written Down Value basis at the rates prescribed by Schedule XIV to the Companies Act, 1956.

Less : Sales during the year

4,227,671 54,881

4,109,028 35,322

Amortizations

Less : Closing Stocks

4,172,789 351,305

4,073,706 316,869

PURCHASE FOR RESALE

INVENTORY CHANGE Opening Stock Finished Goods Work-in-progress Stock under cultivation Poultry Stock Less : Closing Stock Finished Goods Work-in-progress Stock under cultivation Poultry Stock

3,821,484 648,921

3,756,837 429,398 e)

108,490 – 18,370 93,941 220,801

105,297 124 5,714 86,978 198,113

201,993 – 24,454 106,282

108,490 – 18,370 93,941

220,801

332,729 TOTAL SCHEDULE 14 : EXPENSES 1 Salaries, Wages, Bonus, Gratuity and Allowances 2 Contribution to Provident Fund and Other Funds and Administration Charges 3 Employee Welfare Expenses 4 Processing charges 5 Consumable Stores 6 Power and Fuel 7 Rent 8 Rates and Taxes 9 Repairs & Maintenance Building Plant & Machinery Other Assets

Asset type (i) (ii) (iii) (iv) (v)

(ii) (iii)

(22,688)

4,358,477

4,163,547

274,449

243,118

15,852 28,220 266,225 55,783 141,032 25,870 9,596

11,458 22,532 228,804 49,453 118,999 11,803 7,193

17,914

1,189 9,683 1,635 12,507

2,815 10,014 5,086

Period Primary lease period 15 years 10 years 6 years 3 years

Grants/Subsidies : (i)

(111,928)

Leasehold Land, improvements and equipments Tress Development cost Nursery/Greenhouse building Technical Kno-whow of a capital nature Poultry Equipments

Investment Subsidy under the Central/State investment incentive scheme is credited to Capital Investment Subsidy Reserve and treated as a part of the shareholders’ funds. Grants/Subsidies related to specific fixed assets are shown as a deduction from the gross value of the asset concerned in arriving at its book value. Grants/Subsidies related to revenue are presented as a credit to the profit and loss statement or are deducted in reporting the related expense.

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. Current investments are stated at lower of cost and net realizable value. Raw materials and Poultry Stock are valued at weighted average cost. Finished goods and work-in-progress are valued at lower of cost and net realisable value. These costs include cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Stores and spares are valued at cost using the First-InFirst-Out method Retirement benefits to employees comprise payments under defined contribution plans like provident fund and family pension. Payments under defined contribution plans are charged to the profit and loss account. The liability in respect of defined benefit schemes like gratuity and leave encashment benefit on retirement is provided on the basis of acturial valuation at the end of each year. The liability for retirement gratuity is funded through a trust created for the purpose. Miscellaneous expenditure : i)

Non-Compete fee is amortised over a period of five years or the period of the agreement (wherever applicable).

ii)

Front-end fee paid on loans raised from financial institutions is amortised over the period of the loan.

iii)

Expenditure incurred on study of business is amortised over the period for which the business plan is evolved.

iv)

Expenditure incurred on glow-sign board is amortised over a period of two accounting years.

Godrej Agrovet Limited SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 j)

Revenue is recognised when goods are despatched to external customers. Sales are inclusive of realised exchange fluctuations on export receivables but net of returns, sales tax, rebates,etc.

Revenue expenditure on Research and Development is charged to Profit and Loss Account of the year in which it is incurred. Capital Expenditure incurred during the year on Research and Development is shown as an addition to Fixed Assets under the head “Research Centre”.

78,899

43,827

Liablities

78,899

16,151

Income

15,612

–

Expense

19,758

–

70%

–

Abu Dhabi

The company has a 45% share in the Equity capital of Al Rahaba International LLC but a 70% share in the profits and in future investments. Al Rahaba Trading International LLC is in the Poultry business Assets

40,227

Liablities

40,227

Income

24,114

Expense

39,883 This Year Rs.’000

CURRENT ASSETS, LOANS AND ADVANCES

(a)

Loans and Advances include due from Companies under the same management

Previous Year Rs.’000

45,000

Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.

Krithika Agro Farm Chemicals and Engineering Industries Private Limited

4,205

–

Maximum balance during the year

4,205

Previous Year Rs.’000

CONTINGENT LIABILITY Income Tax Matters

Sales Tax Matters

(b) 6,119

14,010

Al Rahba International Trading Limited Liablity Company

33,075

Maximum balance during the year

33,075

30,317

40,085

18,219

7,841

Godrej Consumer Products Limited

–

Godrej Industries Limited

–

ACI Godrej Agrovet Private Limited 8.

It is the opinion of the management that the following are parties which can be classified as Small Scale Industrial Undertakings to whom the Company owes sums which is outstanding for more than 30 days. The Auditors have accepted the representations of the management in this matter. Name of the party

–

Sundry Debtors include due from Companies under the same management Goldmohur Foods and Feeds Limited

Rs.’000

Name of the party

Rs.’000

Wardhaman Trading Company

Pharmline Industries

Shivshant Industries

Laxmi Solvent (P) Ltd.

Yashoraj Industries

171

422

Deferred Tax : The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities are :

858,459

590,000

Guarantees issued by the Banks and counter guaranteed by the company (other than those mentioned in (c) above) Rs.3,182 thousand (Previous year Rs. 672 thousand) have been secured by deposit with bank

47,815

41,387

Case / Claim filed by Processors for claiming various expenses

24,764

–

55,462

4,601

Depreciation on Fixed Assets

CAPITAL COMMITMENTS The estimated value of contracts remaining to be executed on Capital Account to the extent not provided for

This Year Rs.’000

Previous Year Rs.’000

(82,407)

(74,200)

Provision for Impairment of Fixed Assets

7,310

Provision for Doubtful Debts

8,368

8,983

Carry Forward unabsorbed depreciation

17,576

–

Others

(1,403)

6,122

(50,556)

(51,785)

Deferred Tax Liability This Year

SECURED LOANS / UNSECURED LOANS

Previous Year

Unit

Quantity

Value Rs. ‘000

Quantity

Value Rs. ‘000

Term Loans from Banks are secured by an equitable mortgage of specified immovable properties and hypothecation of specified movable assets of the Company.

Cash Credit and other facilities from banks are secured by hypothecation of stocks and book debts of the Company (both present and future).

Animal Feeds

467,343

3,689,176

470,227

3,790,036

Agro Inputs

–

924,208

–

659,175

Sales Tax Deferment includes Rs. 2,780/- thousand which has been disputed by Sales Tax authorities. The Company has filed an appeal with the Andhra Pradesh High Court on this count.

Integrated Poultry Business

–

884,002

–

778,887

Oil Palm Plantation

–

323,862

–

298,361

Others

–

134,213

–

FIXED ASSETS Legal formalities relating to the transfer of title of immovable assets situated at Chennai (acquired as a part of the take over of Agrovet business from Godrej Industries Limited), Hyderabad (as part of the merger of Godrej Plant Biotech Limited) and at Coimbatore are being complied with. Stamp duty payable thereon is not presently determinable.

Assets

40,393

(d)

50%

Maximum balance during the year

Guarantee issued to a Bank on behalf of the subsidiary company

50%

Golden Feed Products Limited

(c)

Bangladesh

Percentage Holding This Year Previous Year

Provisions are recognized in the accounts in respect of present probable obligations, the amount of which can be reliably estimated.

The Company has filed Appeal with the Sales Tax tribunal in Tamilnadu for F.Y. 1993-94 to 1995-96, for classifying branch transfer as sales. (Against the above the Company has paid advance of Rs. 800 thousand) The Company has filed an appeal in Mumbai High Court in connection with Agricultural Produce Market Committee(APMC) in respect of poultry business. The Company has preffered an appeal with the Commissioner of Commercial Taxes, Karnataka against the order of the Joint Commissioner of Commercial Taxes, Karnataka, for classifying chicken sold in crimp pack as chicken sold in sealed container. (Against the above the Company has paid advance of Rs. 14,300 thousand) The Company has filed writ petition in Andhra Pradesh High Court, seeking direction to the CTO, to accept the “C” forms and waive the differential liability

(e)

ACI Godrej Agrovet Private Limited

Al Rahaba Trading International LLC

The Income Tax Department has filed an appeal against the order of CIT (A), for A.Y. 1998-99, 1999-2000, 2000-2001 and has raised a demand for A.Y.2003-04 (b)

Country of Incorporation

Interest in Assets, Liablities, Income and Expense with respect of jointly controlled entity

Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets, subject to consideration of prudence, are recognised and carried forward only to the extent that there is a reasonable certainty that 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 difference at the year-end, based on the tax rates and laws enacted or substantially enacted on the balance sheet date.

In respect of : (a)

Name

Poultry businesses etc.

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 translated at the year end exchange rates. Forward exchange contracts, remaining unsetteled at the year end, backed by underlying assets or liabilities are also translated at year end exchange rates.The premium payable on foreign exchange contracts is amortised over the period of 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.

The basic earnings per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period, except where the results would be anti-dilutive.

INFORMATION IN RESPECT OF JOINT VENTURE (JOINTLY CONTROLLED ENTITY)

ACI Godrej Agrovet Private Limited has started its operations in the fields of Animal Feed,

Interest and commitment charges incurred in connection with borrowing of funds, which are directly attributable to the acquisition, construction or production of an asset that necessarily takes substantial period of time to get ready for its intended use, upto the time the said asset is put to use are capitalised, as a part of the cost of that asset. Other borrowing costs are recognised as an expense in the period in which they are incurred.

This Year Rs.’000 2.

10.

SALES TURNOVER

TOTAL

5,955,461

101,363 5,627,822

Note: Sales Turnover includes sale of items processed by third parties, and items purchased by the Company for resale.

Annual Report 2005-2006

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 11.

FINISHED GOODS INVENTORIES Animal Feeds

(b) MT

Agro Inputs Synthetic pesticides

Natural pesticides

Processed Chicken Others TOTAL

62,699 (44,451)

4,978 (4,851)

44,451 (34,411)

Salaries

Contribution to Provident fund

168 (151) 4 (22) 40,360 (8,612) 62,606 (32,797)

35,848 (19,153) 480 (3,477)

151 (79) 22 (5)

19,153 (13,880) 3,477 (753)) 8,612 (32,522) 32,797 (23,731)

Estimated monetary value of perquisites

201,993

108,490

(108,490)

(105,297)

PURCHASES FOR RESALE MT

5,220

69,987

2,379

25,848

KL MT MT KL

285 5,713 13 1,298 346,130

21,407 65,185 2,621 143,591

293 5,749 45 1,100

22,395 65,647 3,149 128,486 183,873

TOTAL 13.

648,921

RAW MATERIALS CONSUMED Cakes & Brans Extractions Others

MT MT

TOTAL 14.

697,964 1,276,327

112,066 265,412

3,821,484

i. ii. iii. b.

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

Minimum lease payments

Item a)

Capacity Per Annum Registered Installed MT MT

For the year Ended

Animal Feeds (Non-Scheduled) Processed Chicken (Non-Scheduled) Palm Oil (Non-Scheduled)

31.3.2006 31.3.2005 31.3.2006 31.3.2005 31.3.2006 31.3.2005

Tissue Culture Plants (Non-Scheduled)

31.3.2006 31.3.2005

(a)

Computation of Profit for the purpose of mangerial remuneration

b) c)

16.

1,115

Not Not Not Not Not Not

Applicable Applicable Applicable Applicable Applicable Applicable Million Plants 4.25 4.25

306,645 306,645 15,566 13,336 11,490 11,490 Million Plants 5.00 5.00

Profit after tax as per Profit and Loss account Add : Depreciation as per accounts Managerial Remuneration Provision for Doubtful Debts / Advances Profit / (Loss) on sale of fixed assets referred to in Proviso to Sec. 349 (3)(d) of the Companies Act, 1956 Provision for Tax (including Deffered tax) Less : Depreciation as per Section 350 of the Companies Act, 1956 Provision for Dimunition in value of investments written back Profit / (Loss) on sale of Fixed assets (net) Profit for the purpose of Directors remuneration 5% thereof

Third Party Production MT

185,938 188,156 12,298 9,422 7,112 7,638 Million Plants 4.21 4.21

338,577 279,819 – – – –

19.

Previous Year Rs.’000 141,718

73,626

65,575

6,708

5,086

(2,175)

(1,420)

1,273

(431)

7,870

53,245

87,302

122,054

73,626

65,575

–

1,273

(431)

74,899

65,144

80,656

198,629

4,033

9,931

AUDITORS’ REMUNERATION 1,122 337

220

Tax representation before Authorities

196

217

Capital Goods

127 1,675

This Year Rs.’000

Previous Year Rs.’000

103,040

60,234

1,129

762

29,990

–

134,159

60,996

EXPENDITURE IN FOREIGN CURRENCY Others

2,523

1,852

21,567

5,929

24,089

7,780

10,803

5,534

EARNINGS IN FOREIGN EXCHANGE F.O.B value of goods exported Others

22.

44 187

1,929

Travelling Expenses

21.

73 172

VALUE OF IMPORTS ON CIF BASIS (INCLUDES DIRECT IMPORTS ONLY ) Raw Materials

20.

880

Audit under Other Statutes

Spares

1,837

334

12,641

5,868

VALUE OF CONSUMPTION OF RAW MATERIALS, SPARES & TOOLS (INCLUDING CANALIZED ITEMS ) This Year Rs. ’000 %

Previous Year Rs. ’000 %

RAW MATERIALS :

– –

This Year Rs.’000 68,253

During the year, the Company shared the services of some of it’s employees and facilities with its subsidairy Company. Consequently the value of share of costs attributable to that Company calculated in accordance with the service agreement has been recovered, amounting to Rs. 26,400 thousands (Previous year Rs. 26,400 thousands)

TOTAL

1,373

Actual Production MT

72 5,158

Reimbursement of Expenses

Lease payments recognised in the statement of Profit & Loss for the period :

LICENSED & INSTALLED CAPACITY AND ACTUAL PRODUCTION

72 6,780

Expenses (Schedule 14) include Rs 16,602 thousand (Previous Year Rs 10,846 thousand) charged by Godrej Industries Limited, the Holding Company

Certification

The total of future minimum lease payments under non - cancelable operating leases for each of the following periods : Previous Year Rs.’000 1,373 2,746 –

5,086

Management Consultancy

3,756,837

This Year Rs.’000 1,115 2,230 –

101

6,708

COMMON EXPENSES SHARED BY THE COMPANIES :

Audit fees

DISCLOSURE IN RESPECT OF LEASES:

15.

18.

582,799 1,378,058 1,795,980

The Company’s leasing arrangements are in respect of operating leases for premises occupied by the Company. These leasing arrangements are cancellable, and are renewable on a periodic basis by mutual consent on mutually acceptable terms.

235

(c) The remuneration paid to the Managing Director is in excess of the remuneration prescribed under Section 198 read with Schedule XIII to the Companies Act, 1956 by Rs.3056 thousands. The company is in the process of making necessary application to the Central Government for approval of the remuneration in excess of the prescribed limits.

429,398

122,403 262,515 1,847,193

4,751

341

(b) Salaries include performance linked variable remuneration on provisional basis

17.

Animal Feeds Agro Inputs Plant Growth Promoter Spray Granules Urea coating agent Synthetic pesticides Others

Directors’ Sitting Fees

6,339

Note: (a) All the above items have been included under respective heads under “Expenses” in Schedule 14

Note : Figures in bracket pertain to the Previous Year(34,332) 12.

MANAGERIAL REMUNERATION

7,258 (4,978)

Imported items (including duty content)

43,946

47,085

Indigenous

3,777,538

3,709,752

TOTAL

3,821,484

100

3,756,837

100

SPARES & TOOLS : 750

599

Indigenous

55,033

48,854

TOTAL

55,783

100

49,453

100

Imported items

23.

Research & Development Expenditure of revenue nature charged to the Profit and Loss Account amounts to Rs.9,031 thousand (previous year Rs.10,620 thousand).

24.

The amount of exchange difference included in the Profit and Loss Account, under the related heads of expenses / income, is Rs. 1,742 thousand (Previous year expense Rs.1,598 thousand). The amount of exchange difference in respect of forward exchange contracts to be recognised in the profit and loss account of subsequent accounting periods Rs. Nil (previous year Rs. 940 thousand)

25.

EARNINGS PER SHARE Profit after tax and prior period expenses (Rs.’000) Weighted average number of equity shares outstanding Basic earnings per share Diluted earnings per share Nominal value of shares

This Year 68,253 7,118,752 9.59 9.59 10.00

Previous Year 141,718 7,118,752 19.91 19.91 10.00

Godrej Agrovet Limited SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2005 26.

RELATED PARTY DISCLOSURES Related party disclosures as required by AS - 18, “Related Party Disclosures”, are given below “ 1.

Relationships : (i)

(ii)

Nature of Tansactions

Holding Companies : Godrej Industries Limited (GIL) holds 57.69% in the Company. GIL is the subsidiary of Godrej & Boyce Mfg. Co. Limited, the ultimate Holding Company.

Purchase/Transfer of fixed assets

Subsidiary companies

2 3

Sales/Transfer of fixed Assets Sale of Investments

Investment in share capital

4 5

Advances given during the year Intercorporate deposits placed during the year

Intercorporate deposits taken during the year

Sale of materials/finished goods

Goldmohur Foods and Feeds Limited Golden Feed Products Limited Krithika Agro Farm Chemicals and Engineering Industries (iii)

Fellow Subsidaries : Godrej Consumer Products Limited Godrej Infotech Limited Godrej Tea Limited Godrej Properties & Investments Limited Godrej Hicare Limited

(iv)

(v)

(v) (vi)

Purchase of materials/finished goods

Expenses charged to other companies

ACI Godrej Agrovet Private Limited Al Rahaba Trading International LLC

Expenses charged by other companies

Associates

Interest income on loan given

Creamline Dairy Products Limited Creamline Nutrients Limited Polchem Hygiene Laboratories Private Limited

Interest expense on intercorporate deposits taken

Dividend Income

Other related parties where persons mentioned in (vii) below exercise significant influence Bahar Agrochem & Feeds Private Limited

Dividend paid

Outstanding receivables, net of (payables)

Guarantees issued in favour of

Joint Ventures

Key management personnel Mr. C.K.Vaidya

(vii) Individuals exercising control or significant influence (and their relatives) Mr. A.B. Godrej Mr. N.B. Godrej

The following transactions were carried out with the related parties in the ordinary course of business : (i) Details relating to parties referred to in items 1(i), (ii), (iii), (iv) and (v) above

4,000 886 – 79,230

797 30 – – – – – –

– – 5,667 – – – – 34,511

– – – – – – – –

– –

– – 216,412 181,579 82 122,745 59 137,378

– – – – 1,107 1,865

– – 5,667 – – –

– – – – 10,553 –

– – – 122,374 152,898

Subsidiaries

3,594 4,483 – – – – – –

– – 47

– 1,166

(ii)

– – –

Fellow Joint Subsi- Ventures diaries (iii) (iv)

Associates

– 12

26,592 27,210

– –

1,287 847

– –

– 50

16,470 11,166 – –

1,307 2,102 1,787 –

3,403 587 – –

– – – –

– 168 – –

– – – – 13,573 22,621

– – 31,000 30,000 – –

– – 33 – – –

– – – – – –

– – 4,576 – – –

– – – – – –

– (13) 77 847 – 123,459 – –

(1,173)

(1,373) (11,019) –

8 35,552 4,754 5,966 – 145,000 – 590,000

(ii) Details relating to persons referred to in items 1 (vi) & (vii) above 1 2 3

Remuneration Interest income on loans given Dividend paid

(Rs.'000)

Nature of Transactions

Holding Company (i)

Godrej Industries Ltd

Purchase/Transfer of fixed assets

Sale of Investments

Investment in share capital

Amount 3,594 3,558 654 925 – – – – –

Advances given during the year

– – – – – Godrej Industries Ltd.

Intercorporate deposits taken during the year

Godrej Industries Ltd.

Sale of materials/finished goods

Godrej Industries Ltd.

Purchase of materials / finished goods

Godrej Industries Ltd.

Expenses charged to other companies

Godrej & Boyce Mfg. Co. Ltd.

Expenses charged by other companies

Godrej Industries Ltd. –

– 59 – 12 16,470 10,846 –

Interest income on loan given

–

Subsidiaries (ii) – – Goldmohur Foods & Feeds Ltd. Kritika Agro Farm Chemical & Engineering Industries Pvt. Ltd. – Kritika Agro Farm Chemical & Engineering Industries Pvt. Ltd.

1,166 – – –

Golden Feeds Products Ltd. – – Goldmohur Foods & Feeds Ltd. – Kritika Agro Farm Chemical & Engineering Industries Pvt. Ltd. Goldmohur Foods & Feeds Ltd. Goldmohur Foods & Feeds Ltd. Goldmohur Foods & Feeds Ltd.

Interest expense on intercorporate deposits taken Dividend Income

Godrej Industries Ltd. – –

–

Goldmohur Foods & Feeds Ltd.

Dividend paid

Godrej Industries Ltd.

Outstanding receivables, net of (payables)

Godrej Industries Ltd.

13,573 22,621 – 4,754

– – Goldmohur Foods & Feeds Ltd.

Guarantees issued in favour of

–

Amount – – –

Fellow subsidiaries (iii)

Golden Feeds Products Ltd. Kritika Agro Farm Chemical & Engineering Industries Pvt. Ltd. Goldmohur Foods & Feeds Ltd Golden Feed Products Ltd.

Amount

Godrej Tea Ltd. –

30 –

– 40,000

–

Godrej Properties & Investments Ltd.

–

– –

–

4,205 – 40,393 – – 215,661 181,579 458 111,120 137,378 26,592 27,210 1,307 2,102

Godrej Consumer Products Ltd. – – Godrej Consumer Products Ltd. Godrej Tea Ltd. –

Kritika Agro Farm Chemical & Engineering Industries Pvt. Ltd. Golden Feeds Products Ltd. –

– –

Current Previous Year Year 5,724 5,419 – – 1,935 3,226

Significant Related Party Transactions :

Godrej & Boyce Mfg. Co. Ltd.

(v)

Rs.’000 Other related Parties (vi)

Holding Companies (i)

230 1,557 –

– – –

31,000 30,000 –

– –

18,219 5,917 16,468

Godrej Consumer Products Ltd.

865 70,000 590,000 75,000

– 1,865 – 495 563 – 708 – –

– –

(10)

Annual Report 2005-2006

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2005 3.

Significant Related Party Transactions : (Contd.)

(Rs.'000)

Nature of Transactions

27.

Joint Ventures (iv)

Amount

810 5,667 33,075 – – – – 60,683 62,776

1. 2. 3. 4. 5. 6.

Investment in share capital Sales /Transfer of fixed Assets Advances given during the year Intercorporate deposits taken during the year Sale of materials/finished goods Dividend Income

Al Rahaba Trading International LLC ACI Godrej Agrovet Private Ltd. Al Rahaba Trading International LLC – ACI Godrej Agrovet Private Ltd. –

Guarantees issued in favour of

Al Rahaba Trading International LLC ACI Godrej Agrovet Private Ltd.

Associates

Amount

(v)

– – – Creamline dairy Products Ltd. Creamline Nutrients Ltd.

3,776 527

SEGMENT INFORMATION FOR THE YEAR ENDED MARCH 31, 2006 (i)

Information about Primary Business Segments For the year ended 31st March, 2006 Animal Feeds

Revenue Total Sales

Agri Inputs

Rs. ’000

Integrated Oil Poultry Palm Business Plantations

Other Unallocated Business

3,991,907

936,825

887,978

328,882

33,759

Less : Inter-segment

(209,921)

(16,335)

(12,003)

14,369

–

External Sales

3,781,986

920,490

875,975

343,251

33,759

105,267

65,551

(46,806)

87,613

(1,539)

Total

– 6,179,352 –

(223,890)

– 5,955,461

For the year ended 31st March, 2005 Animal Feeds

Agri Inputs

3,945,941 659,175

Integrated Oil Poultry Palm Business Plantations 783,111

299,160

101,363

–

(4,224)

(798)

–

3,790,036 659,175

778,887

298,362

101,363

(63,532)

75,916

(155,905)

Rs. ’000

Other Unallocated Business

Total

5,788,750 (160,927) –

5,627,822

Result Segment Result Unallocated expenditure net of unallocated income Interest expenses Interest Income Dividend Income and Profit on sale of Investments Profit before taxation and exceptional items

105,267

65,551

(46,806)

87,613

(1,539)

Provision for taxation Profit after taxation and before exceptional items

–

210,086

(122,034)

(37,390)

(51,887)

(32,364)

4,349

4,696

35,609

30,000

(133,963)

76,123

(35,058)

194,963

7,870

7,870 68,253

105,267

65,551

(46,806)

87,613

(1,539)

(141,833) –

–

105,267

65,551

(46,806)

87,613

(1,539)

(141,833)

68,253

956,282 847,930 32,056 27,030

389,216 66,230 24,102 2,202

628,642 171,650 138,396 20,121

194,537 27,983 3,429 10,731 19,890

29,646 602 415 1,413

173,630

43,982

(63,532)

75,916

230,021

53,245

53,245 141,718

173,630

43,982

(63,532)

75,916

(88,303) –

–

173,630

43,982

(63,532)

75,916

(88,303)

141,718

910,212 257,831 869,451 82,517 26,386 2,228 25,457 1,188

459,865 178,566 36,976 20,009

187,679 27,383 5,299 10,748 19,890

27,486 5,357 1,230 1,214 –

377,338 466,915 70,872 6,960 – 87

2,220,412 1,630,188 142,990 65,575 19,890 87

Total

India

Outside India

Total 5,788,750

Exceptional Items Prior years adjustments Net profit Other Information Segment assets Segment liabilities Capital expenditure Depreciation Impairment loss Non-cash expenses other than depreciation

(ii)

1,164,386 3,362,709 1,580,794 2,695,188 124,793 323,191 12,128 73,626

Information about Secondary business Segments Rs. ’000 Revenue by Geographical segments

India

Outside India

Rs. ’000

Total Sales

6,166,711

12,641 6,179,352

5,782,882

5,868

Less : Inter-segment

(223,890)

– (223,890)

(160,928)

–

(160,928)

External Sales

5,942,821

12,641 5,955,461

5,621,954

5,868

5,627,822

Carrying amount of segment assets

3,362,709

– 3,362,709

2,220,412

–

2,220,412

142,991

–

142,991

Additions to fixed assets

323,191

–

323,191

Notes : (i) The Company is organized into four main business segments, namely (a) Animal Feeds - comprising of compound feed for cattle, poultry, aqua etc. (b) Agri business - comprising of plant growth promoters, pesticides vegetables etc. (c) Integrated Poultry business (d) Oil Palm Plantation business Segments have been identified and reported taking into account, the nature of products and services, the differing risks and returns, the organisation structure, and the internal financing reporting systems. (ii) The Segment revenue in each of the above business segments consists of sales (net of returns, sales tax, rebates etc.) (iii) The Segment revenue in the geographical segments considered for disclosure are as follows : (a) Revenue within India includes sales to customers located within India (b) Revenue outside India includes sales to customers located outside India (iv) Segment Revenue,Results,Assets and liabilities include the respective amounts identifiable to each of the segments and amounts allocated on a reasonable basis.

Godrej Agrovet Limited 28.

INFORMATION REQUIRED TO BE FURNISHED UNDER PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956

Registration Details Registration No.

16655 04

Balance Sheet Date

31/3/2006

Capital raised during the year (Rupees ‘000)

iii)

Rs. ’000

Application of Funds

State Code ii)

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006

iv)

Net Fixed Assets

901,784

Investments

515,868

Net Current Assets

593,699

Misc. Expenditure

Nil

Accumulated Losses

Nil

Public Issue

Nil

Rights Issue

Nil

Bonus Issue

Nil

Turnover

6,055,590

Private Placement

Nil

Total Expenditure

5,979,467

Performance of Company (Rupees ‘000)

Position of mobilisation and deployment of funds

(Rupees ‘000)

Profit before tax

76,123

Profit after tax

68,253

Total Liabilities

3,362,710

Earning Per Share in Rs.

9.59

Total Assets

3,362,710

Dividend rate

79%

71,188

Reserves & Surplus

Adjustments for: Inventories Debtors and Other Receivables Creditors and Other Payables

Generic Names of three principal

554,821

Secured Loans

Item Code No.

1,333,526

23099010

Product Description

Animal Feeds B.

STATEMENT REGARDING SUBSIDIARY COMPANIES PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956. 1. Name of the Subsidiary

Goldmohur Foods and Feeds Ltd.

Golden Feed Products Ltd.

Kritika Agro Farm Chemicals & Engineering Industries Pvt. Ltd.

2. Date on which it became a Subsidiary

January 1, 2001

July 14, 2003

3. Financial Year ending

March 31, 2004

2,158,170 Rs. 10 100%

50,000 Rs. 10 100%

7,600 Rs. 10 76%

(Rs.’000)

4. The Company’s interest in the Subsidiary as on 31.3.2005 a) Number of fully paid Equity Shares held b) Face Value c) Extent of holding 5. Net aggregate Profit/(Loss)of the subsidiary Company so far as it concerns the members of the Company : A) For the Financial Year ended on March 31, 2005 : i) Not dealt with in the Books of Account of the Company ii) Dealt with in the Books of Account of the Company B) For the subsidiary company’s previous Financial Years since it became a subsidiary i) Not dealt with in the Books of Account of the Company ii) Dealt with in the Books of Account of the Company

V.V. CHAUBAL Company Secretary Mumbai, May 25, 2006

76,123

194,963

73,626 (1,273) – (35,609) (4,349) 51,885 224 – –

April 27, 2006

(149,113) (361,105) 87,117

–

47,500

–

40,590

N.A.

81,801

N.A.

A.B. GODREJ Director

C.K. VAIDYA Managing Director

55,687 250,649

(84,781) (48,400) 247,209 (423,101)

114,028

Cash Generated from Operations Direct Taxes paid (net of refund received)

(262,474) (33,489)

364,678 (19,731)

Net Cash Flow from Operating Activities

(295,963)

344,947

Cash Flow from Investing Activities : Capital subsidy received Acquisition of fixed assets Proceeds from sale of fixed assets Purchase of Investments Proceeds from sale/maturity of investments Interest Received Dividend Received

– (323,191) 8,363 (180,904)

2,500 (142,991) 10,708 (150,894) 40,001 4,691 30,000

4,361 35,609 (455,762)

Net Cash used in Investing Activities Cash Flow from Financing Activites : Proceeds from Borrowings Repayment of Borrowings Increase/(Decrease) in Cash Credit/WCDL Interest Paid Dividend Paid Dividend Tax Paid

(455,762) 1,153,283 (115,598) (22,741) (51,885) (23,492) (3,295)

(205,985) 4,997 (80,932) 24,000 (32,364) (39,153) (5,117)

Net Cash used in Financing Activities

936,273

(128,570)

Net increase in Cash and Cash equivalents

184,548

10,392

82,864

72,471

267,412

82,864

Cash and Cash equivalents (Opening balance) Cash and Cash equivalents (Closing balance)

18,519

65,575 431 (8,074) (30,000) (4,696) 32,364 87 – – 84,504 160,627

products services of Company

1,259

Unsecured Loans

Previous Year Rs. ’000

Operating Profit Before Working Capital Changes

Sources of Funds Paid-up Capital

Cash Flow from Operating Activities : Net Profit Before Taxes Adjustment for: Depreciation Loss/(Profit) on sale of fixed assets Profit on sale of Investments Dividend income Interest income Interest expenses Miscellaneous expenditure written off Expenditure in respect of prior years Investments Written off Promotion expenses

Current Year Rs. ’000

Notes: 1. The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting Standard (AS) 3 on “CashFlow Statements”, and presents cash flows by operating, investing and financing activities. 2. Figures in brackets are outflows/deductions. 3. Figures for the previous year have been regrouped/restated wherever necessary to conform to this year’s classification. For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants K.M. ELAVIA Partner Membership No. 12737 Mumbai, May 25, 2006.

V.V. CHAUBAL Company Secretary

A.B. GODREJ

Director

C.K. VAIDYA

Managing Director

Annual Report 2005-2006

Goldmohur Foods & Feeds Limited DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006 To The Shareholders

Your Directors have pleasure in submitting their Report along with the audited Accounts for the financial year ended on 31st March, 2006.

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;

Your Company’s performance during the year as compared with that during the previous year is summarised below:

that they have selected such Accounting Policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period;

For the year ended 31.3.2006

Rs. Lac For the year ended 31.3.2005

that they have prepared the annual accounts on a going concern basis.

29587.69 618.00 80.00 538.00 96.10

30860.71 515.37 170.00 345.37 124.48

634.10

469.85

310.00 – 43.48 53.80 226.82

300.00 – 39.21 34.54 96.10

634.10

469.85

FINANCIAL RESULTS

Total Income Profit before Taxation (PBT) Less: Provision for Taxation Profit after Taxation Balance Brought Forward from previous year TOTAL Appropriations : Interim Dividend Final Dividend Tax on Dividend General Reserve Balance Carried Forward to Balance Sheet TOTAL

HUMAN RESOURCES During the year, the Human Resource Organisation was considerably strengthened by induction of Managers with varied experience. The Industrial Relations at all units continued to be cordial.

For and on behalf of the Board of Directors C. K. Vaidya Director

V. Srinivasan Director

Mumbai, May 22, 2006.

REVIEW OF OPERATIONS The year 2005-06 was a challenging year for your Company. The prolonged monsoon had its impact on key raw materials like de-oiled rice bran, maize, etc. resulting in cost pressure for your Company. However, the Company got some respite in view of favourable prices for certain raw materials like soya etc. The detection of Avian influenza in certain pockets of the country impacted the Poultry feed sales of your Company. The Company’s Aqua Feed Business suffered a setback due to postponement of the shrimp farming season. DIVIDEND Your Directors have paid an interim dividend of Rs. 16.86 per (on 18,38,170 shares) share for the year 200506 (previous year Rs. 13.89 per share on 21,58,170 shares). Your directors do not recommend any final dividend. DIRECTORS Mr. A.R. Subbarao and Mr. V. Srinivasan, Directors, retire by rotation at the ensuing Annual General Meeting in accordance with the provisions of the Companies Act, 1956 and being eligible, offer themselves for reappointment.

ANNEXURE ‘A’ ANNEXURE 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 AND OUTGO : A.

AUDITORS You are requested to appoint Auditors for the current year and fix their remuneration. The retiring Auditors M/s. Kalyaniwalla & Mistry, Chartered Accountants, Mumbai are eligible for re-appointment and a certificate as required u/s 224 (1-B) of the Companies Act, 1956 has been received from them.

Your Company is constantly endeavouring to conserve and optimize the use of energy through new and improved methods. B.

ADDITIONAL INFORMATION The additional information required to be given under the Companies Act, 1956, has been laid out in the Schedules attached to and forming part of the Accounts. The Notes to the Accounts referred to in the Auditors’ Report are self-explanatory and therefore do not call for any further explanation. Conservation of Energy, Technology absorption and Foreign Exchange earnings and outgo The information in respect of these matters, required under Section 217 (1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 and forming part of the Directors’ Report is given in the Annexure ‘A’ to this report. B)

Particulars of Employees

Technology absorption, adaptation and innovation I.

Your Company has also been making constant efforts for upgradation of technology and also carries out in-house Research & Development activities in relation to maintenance of efficacy and quality of products manufacture.

II.

The benefits derived as a result of the above efforts are: a)

STATUTORY INFORMATION A)

Conservation of Energy

Reduction in per ton cost of manufacture.

Improved quality of products through new formulation.

Savings in raw material and process costs.

Foreign Exchange earnings and outgo Your Company did not have any foreign exchange earnings. Foreign Exchange expenditure during the year under consideration was Rs.2267.26 lac (Previous year Rs. 3709.71 lac).

None of the employees is covered under the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) (Amendment) Rules, 2002. C)

For and on behalf of the Board of Directors

Directors’ Responsibility Statement Pursuant to the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors of your Company confirm :-

C. K. Vaidya Director

V. Srinivasan Director

Mumbai, May 22, 2006.

Goldmohur Foods & Feeds Limited REPORT OF THE AUDITORS TO THE MEMBERS OF GOLDMOHUR FOODS & FEEDS LIMITED

ANNEXURE TO THE AUDITORS’ REPORT Referred to in paragraph (3) of our report of even date.

We have audited the attached Balance Sheet of Goldmohur Foods & Feeds Limited, as at 31st March, 2006 and also the Profit and Loss Account and the Cash Flow Statement of the Company for the 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 auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 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 annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to in paragraph (3) above, we report that: a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit. b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of these books. c) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account. d) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956. e) Without qualifying our opinion, we draw attention to Note 4 of Schedule 12 – Notes to Accounts, in respect of amortization of Trademarks. The same are amortized over a period of 15 years as compared to the recommended period of 10 years mentioned in Accounting Standard 26 – Intangible Assets since, in the opinion of the management, the Trademarks will have a useful life matching the amortization period. Being a technical matter, we have relied upon the management’s estimates stated in Note 4, which forms the basis of this assumption. f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements 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 31st March, 2006; and ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date. iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. On the basis of the written representations received from the Directors as on 31st March, 2006, and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets. As explained to us, the Company has a program for physical verification of fixed assets at periodic intervals. In our opinion, the period of verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies have been reported on such verification. c) In our opinion, the disposal of fixed assets during the year does not affect the going concern assumption. a) The Management has conducted physical verification of inventory at reasonable intervals. b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification. a) The Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. b) Consequently, the question of commenting on the rates of interest and the other terms and conditions of the loans granted being prejudicial to the interests of the Company, receipt of regular principal and interest and reasonable steps taken for recovery of principal and interest does not arise. c) The Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Act. d) Consequently, the question of commenting on the rates of interest and the other terms and conditions of the loans taken being prejudicial to the interests of the Company and payment of regular principal and interest does not arise. 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 purchases of inventory, fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal controls. 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 the particulars of contracts and arrangements referred to in Section 301 of the Companies Act, 1956 have been entered into the register required to be maintained under that section. b) The transactions made in pursuance of such contracts or arrangements, were made at prices which are reasonable having regard to prevailing market prices at the relevant time, except for service transactions for which, there are no similar services received from other parties and hence the prices are not comparable. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public and hence the provisions of Section 58A, 58AA or any other provision of the Companies Act, 1956, read with the rules framed thereunder are not applicable. In our opinion and according to the information and explanations given to us, the internal audit system is commensurate with the size of the Company and nature of its business. According to the information and explanation given to us, the maintenance of cost records has not been prescribed by the Central Government, under Section 209(1)(d) of the Companies Act, 1956 for any of the Company’s products. a) According to the information and explanations given to us and on the basis of our examination of the books of account, during the year, the Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess and other statutory dues applicable to it with the appropriate authorities. According to the information and explanations given to us, there are no undisputed dues payable in respect of above as at 31st March 2006 for a period of more than six months from the date they became payable. b) According to the information and explanations given to us, there are no dues outstanding of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on account of any dispute. The Company does not have accumulated losses at the end of the financial year and it has not incurred any cash losses in the current and immediately preceding financial year. According to the information and explanations given to us and based on the documents and records produced to us, the Company has not defaulted in repayment of dues to banks. There are no dues to financial institutions or debenture holders. According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 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. The Company does not deal in shares, securities, debentures and other investments. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks and financial institutions. The Company has not taken any term loan during the year. According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flows of the Company, we report that the Company has utilized funds raised on shortterm basis for long term investment. 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. The Company did not issue any debentures during the year. The Company has not raised any money through a public issue during the year. 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. b)

7. 8.

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants K. M. ELAVIA Partner Membership No. 12737 Place : Mumbai Dated : May 22, 2006

10. 11.

12.

13.

14. 15. 16. 17.

18. 19. 20. 21.

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants K. M. ELAVIA Partner Membership No. 12737 Place : Mumbai Dated : May 22, 2006

Annual Report 2005-2006

BALANCE SHEET AS AT MARCH 31, 2006 Schedule

As at March 31, 2006 Rs. '000

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

As at March 31, 2006 Rs. '000

As at March 31, 2005 Rs. '000

SOURCES OF FUNDS

Schedule

For the year 31/03/2006 Rs. '000

For the year 31/03/2005 Rs. '000

INCOME

Shareholders' Funds Share Capital Reserves and Surplus

1 2

18,382 189,181

Loan Funds Secured Loans Unsecured Loans

3 4

8,440 100,000

Sales 18,382 170,729 207,563

– – 108,440 54,900

– 49,000

TOTAL

370,903

238,111

APPLICATION OF FUNDS Fixed Assets Gross block Less : Depreciation

2,944,439

Other Income

Net Block Fixed Assets Held for Disposal at Net Realisable Value

391,938 95,864

336,314

296,074

7 336,321

Current Assets, Loans and Advances Inventories Sundry Debtors Cash and Bank Balances Loans and Advances

296,081

LESS : Current Liabilities and Provisions Liabilities Provisions

323,619 191,830 8,410 46,910

251,202 252,257 11,611 28,955

570,769

544,025

17,155 2,958,769

3,086,071

EXPENDITURE Materials Expenses Interest and Financial Charges Depreciation/Amortisation Miscellaneous Expenditure Written Off

9 10 11

2,484,063 377,453 7,155 28,298 –

5 460,282 123,968

3,068,916

14,330

189,111

Deferred Tax Liability

PROFIT BEFORE TAXATION

2,635,134 367,235 7,629 24,536 – 2,896,969

3,034,534

61,800

51,537

Provision for Taxation Current Minimum Alternate

5,300 (5,300) – 2,100 5,900

Fringe Benefit Deferred

PROFIT AFTER TAXATION Profit Brought Forward AMOUNT AVAILABLE FOR APPROPRIATION

10,000 – 10,000 – 7,000 8,000

17,000

53,800

34,537

9,610

12,448

63,410

46,985

31,000 4,348 5,380 22,682

30,000 3,921 3,454 9,610

63,410

46,985

29.27

16.02

APPROPRIATION

7 529,525 6,662

592,530 9,465

536,187

601,995

Net Current Assets

34,582

(57,970)

TOTAL 0 Notes to Accounts

370,903

238,111

Interim Dividend Tax on Dividend Transfer to General Reserve Surplus Carried Forward TOTAL Earnings per share (Basic/Diluted) in Rs. (Refer Note 21)

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

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

Signatures to Balance Sheet and Schedules 1 to 7 and 12 As per our Report attached For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants K.M. Elavia Partner Membership No. 12737 Mumbai, May 22, 2006.

For the year 31/03/2006 Rs. '000

S.P. Karmarkar Company Secretary

C. K. Vaidya

Director

V. Srinivasan

Director

Signatures to Profit and Loss Account and Schedules 8 to 12 As per our Report attached For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants K.M. Elavia Partner Membership No. 12737 Mumbai, May 22, 2006.

S.P. Karmarkar Company Secretary

C. K. Vaidya

Director

V. Srinivasan

Director

SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 As at March 31, 2006 Rs. '000

SCHEDULE 1 : SHARE CAPITAL Authorised 5,000,000 Equity Shares of Rs .10 each Issued, Subscribed and Paid-up 1,838,170 (Previous Year) 2,158,170 Equity Shares of Rs.10 each fully paid Less : 320,000 Equity Shares bought back and extinguished as at the year end in accordance with Section 77A of the Companies Act, 1956 All the above shares are held by Godrej Agrovet Ltd. (Holding Company) & its nominees 558,170 shares have been issued pursuant to a contract without payment being received in cash SCHEDULE 2 : RESERVES AND SURPLUS SECURITY PREMIUM ACCOUNT As per last Balance Sheet Less : Utilised in accordance with Section 77A of the Companies Act, 1956 (Refer note 2) GENERAL RESERVE ACCOUNT As per last Balance Sheet Add : Transfer from Profit & Loss Account PROFIT AND LOSS ACCOUNT TOTAL

As at March 31, 2006 Rs. '000

As at March 31, 2005 Rs. '000

50,000

18,382

21,582

– 18,382

3,200 18,382

As at March 31, 2006 Rs. '000

As at March 31, 2005 Rs. '000

SCHEDULE 3 : SECURED LOANS

136,233

FROM BANKS Cash Credit

8,440

–

TOTAL

8,440

–

SCHEDULE 4 : UNSECURED LOANS Short Term Loans from Banks

100,000

–

TOTAL

100,000

–

Security : Refer Note (3)

173,033

– 136,233

36,800 136,233

30,266 22,682 189,181

21,432 3,454 24,886 9,610 170,729

24,886 5,380

Goldmohur Foods & Feeds Limited SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 SCHEDULE 5 : FIXED ASSETS

(Rs. '000)

ASSETS

GROSS BLOCK As at April 1, 2005

DEPRECIATION

NET BLOCK

Additions

Deductions

As at March 31, 2006

As at April 1, 2005

For the period

On Deductions

As at March 31, 2006

As at March 31, 2005

1,000 – – 1,832 62,643 244 1,218 1,766

– – – – – – 133 – 226

236,789 5,191 2,563 6,105 64,148 123,168 4,710 11,016 6,592

67,090 – 1,651 1,261 16,675 122 1,757 5,932 1,376

15,786 – 70 162 4,338 5,328 420 1,613 581

– – – – – – 89 – 105

82,876 – 1,721 1,423 21,013 5,450 2,088 7,545 1,852

153,913 5,191 842 4,682 43,135 117,718 2,622 3,471 4,740

169,699 4,191 912 4,844 45,641 60,403 2,842 3,866 3,676

Trade Marks Land-Freehold Leasehold improvements Buildings Plant & Machinery Power Generating Wind Mill Furniture, Fittings & Fixtures Computers Motor Vehicles

236,789 4,191 2,563 6,105 62,316 60,525 4,599 9,798 5,052

TOTAL

391,938

68,703

359

460,282

95,864

28,298

194

123,968

336,314

296,074

Previous Year Assets Held for Disposal at Net Realisable Value

340,908

68,590

17,560

391,938

82,550

24,536

11,222

95,864

296,074

–

As at March 31, As at March 31, 2006 2006 Rs. '000 Rs. '000

As at March 31, 2005 Rs. '000

SCHEDULE 6 : CURRENT ASSETS , LOANS AND ADVANCES A)

INVENTORIES : Raw Materials and Packing Material Stores & Spares Finished Goods Raw Material in Transit

247,215 527 65,076 10,801

166,336 281 68,564 16,021 323,619

SUNDRY DEBTORS : (Unsecured and considered good unless otherwise stated) Debts outstanding for a period exceeding six months Other Debts

15,982 175,848

251,202

191,830

CASH AND BANK BALANCES : Cash and cheque on hand Balances with Scheduled Banks In Current Accounts

3,223

2,804

8,388

38,706 715

21,234 715

Less : Provision for Doubtful Advances

39,421 715

21,949 715

Deposits

38,706 8,204

21,234 7,721

TOTAL

28,955

570,769

544,025

SCHEDULE 7 : CURRENT LIABILITIES AND PROVISIONS A) CURRENT LIABILITIES Acceptances 111,272 Sundry Creditors (Note 5) 416,080 Deposits 2,091 Interest accrued but not due on loans 82

187,817 402,051 2,662 – 529,525

PROVISIONS Provision for Taxation (Net of Advance Tax Rs. 50,708 thousand; Previous Year Rs. 44,778 thousand) For Gratuity For Leave Encashment TOTAL

592,530

(2,291)

1,540

7,192 1,761

6,810 1,115 6,662

9,465

536,187

601,995

52 8,222 2

51 16 12,871

6,054

4,217

14,330

17,155

Less : Sales during the year

2,606,631 27,946

2,664,906 26,422

Less : Closing stocks

2,578,685 247,215

2,638,484 166,336

PURCHASE FOR RESALE STOCK DESTROYED WRITTEN OFF INVENTORY CHANGE Opening Stock of Finished Goods Less : Closing Stock of Finished Goods

SCHEDULE 10 : EXPENSES 1. Salaries, Wages, Bonus 2. Provident and other funds 3. Workmen and staff welfare expenses 4. Processing charges 5. Power, light, fuel and water 6. Rent 7. Rates and taxes 8. Repairs and maintenance – Buildings – Plant – Other Assets 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21.

2,331,470 149,105 – 68,564 65,076

TOTAL SCHEDULE 11 : INTEREST AND FINANCIAL CHARGES (a) Interest paid on fixed loans i) Banks (b) Interest paid on other loans – Banks (c) Other Financial Charges

2,472,148 157,446 12,697 61,407 68,564

3,488

(7,157)

2,484,063

2,635,134

78,124 2,962 6,927 88,889 35,283 12,994 3,799

64,977 5,703 6,194 88,365 27,472 14,621 14,141 247 6,389 1,973

7,677 1,417 8,488 1,447 1,478 58,074 3,422 25,494 – 22,500 41 –

279 5,627 1,771

Insurance Postage, telephone and stationery Auditors’ Remuneration Legal and Professional charges Carriage and freight Advertisement and Sales Promotion Travelling and motor car expenses Provision for Advances Bad Debts Written Off Loss on Sale of Fixed Assets (Net) Fixed Assets Destroyed Written Off Provision for Assets Held for Disposal Miscellaneous Expenses

TOTAL

For the year ended March 31, 2005 Rs. '000

181,499 2,483,407

TOTAL

46,910

For the year ended March 31, 2006 Rs. '000

166,336 2,440,295

11,611

LOANS AND ADVANCES : (Unsecured and considered good unless otherwise stated) Loans and Advances recoverable in cash or in kind or for value to be received : Considered Good Considered Doubtful

7 296,081

SCHEDULE 9 : MATERIALS RAW MATERIALS CONSUMED Opening Stock Add : Purchases during the year

252,257

5,606

8,410 D)

SCHEDULE 8 : OTHER INCOME Interest Income Income from wind mill Insurance Claim Received Miscellaneous Income (Tax Deducted at source Rs .30 thousand; Previous year Rs. 38 thousand)

22,717 229,540

[Debts amounting to Rs.135,409 thousands (Previous Year Rs.125,498 thousands) are secured against Bank Guarantees/Security Deposit] C)

For the year ended March 31, 2006 Rs. '000

7 336,321

18,437

8,609 1,060 8,682 1,134 1,732 41,631 4,928 21,373 415 29,005 544 682 3,804 22,163

377,453

367,235

5,149 – 2,006

– 3,642 3,987

7,155

7,629

Annual Report 2005-2006

SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 SCHEDULE 12 : NOTES TO ACCOUNTS 1. SIGNIFICANT ACCOUNTING POLICIES a) The accounts have been prepared on historical cost convention. The Company follows mercantile system of accounting and recognises income and expenditure on accrual basis. b) Fixed assets have been stated at cost and include incidental and/or installation/development expenses incurred in putting the asset to use and interest on borrowing incurred during construction period. Pre-operative expenses for major projects are also capitalised, where appropriate. c) Carrying amount of cash generating units/assets are reviewed at balance sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognized whenever carrying amount exceeds the recoverable amount. d) Depreciation/Amortisation has been provided for as under : (a) Depreciation has been provided on Straight Line Method at rates specified in Schedule XIV of the Companies Act ,1956. The Company has grouped additions and disposals in appropriate time periods of a month/quarter for the purpose of charging prorata depreciation in respect of additions and disposals of its assets keeping in view the materiality of the items involved. (b) 1) Leasehold Improvements: At a rate which will reduce the principal value of each asset to “Nil” over the primary lease period. 2) Trademarks are amortised over the period of 15 years. e) Long Term investments are carried at cost. Provision for diminution, if any, in the value of each long term investment is made to recognise a decline, other than of a temporary nature. Current investments are stated at lower of cost and net realizable value. f) Raw materials are valued at moving weighted average cost. Finished goods are valued at lower of cost and net realisable value after providing for cost of obsolescence and other anticipated losses, wherever considered necessary. Cost is computed on weighted average basis. Finished goods include cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Stores and spares are valued at cost using the First-In-First-Out method. g) The liability in respect of future payments of gratuity and leave encashment payable to employees on retirement is provided based on actuarial valuation. h) Revenue is recognised on despatch of goods to external customers. Sales are net of returns, trade discounts, rebates and sales tax. i) Revenue expenditure on Research and Development is charged to Profit and Loss Account of the year in which it is incurred. Capital Expenditure incurred during the year on Research and Development is shown as an addition to Fixed Assets. j) Interest & Commitment Charges incurred in connection with borrowings of funds which are directly attributable to the acquisition, construction or production of an asset that necessarily takes substantial period of time to get ready for its intended use, upto the time the said asset is put to use are capitalised, as a part of the cost of that asset. Other borrowing cost are recognised as an expense in the period in which they are incurred. k) Transactions in foreign currency are recorded at the exchange rates prevailing on the date of the 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 amortized 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. l) Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred Tax assets, subject to consideration of prudence, are recognised and carried forward only to the extent that there is a reasonable certainty that sufficent future taxable income will be available against which such deferred tax assets can be realised. The tax effect is calculated on the accumulated timing difference at the year-end, based on the tax rates and laws enacted or substantially enacted on the balance sheet date. m) The basic earnings per share is computed using the weighted average number of common share outstanding during the period. Diluted earning per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period, expect where the results would be anti-dilutive. n) Miscellaneous Expenditure: Front-end fee paid on loans raised is amortised over the period of loan. o) Provisions and Contingent Liabilities. Provisions are recognized in the accounts in respect of present probable obligations, the amount of which can be reliably estimated. Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. 2. BUY BACK OF SHARES The Company has utilised securities premium account Nil (Previous Year Rs. 36,800/- thousand) for adjusting the difference between the buy-back price and face value of equity shares bought back. 3. SECURED LOANS Working Capital Demand Loans and Cash Credit from Banks are secured by way of hypothecation of the entire Inventory, Book Debts Receivables (Present & Future) ranking on a pari passu basis and also by Corporate Guarantee from the Holding Company, Godrej Agrovet Limited. 4. TRADEMARKS The Trademarks of the Company have a huge market potential, strong market position and Research & Development set-up, which constantly refurbishes the products to avoid technoloical obsolecence. The management is of the opinion that the useful life of the brands is much beyond 15 years. On a conservative basis the management has decided to amortise the brand acquisition cost over a 15 years period. 5. SSI CREDITORS In spite of the absence of a data-base identifying creditors as Small Scale Industrial Undertakings, it is the opinion of the management that there are no parties which can be classified as Small Scale Industrial Undertakings to whom the Company owes any sum. The Auditors have accepted the representations of the management in this matter.

For the Year 31/03/06 Unit 6

Quantity

Value Rs. ‘000

Quantity

Value Rs. ‘000

11,217 35,579 228,196 474 – 275,466

320,624 216,282 2,396,162 3,815 7,556 2,944,439

11,206 44,068 222,855 218 – 278,347

372,700 305,877 2,388,017 2,322 – 3,068,916

FINISHED GOODS INVENTORIESMT Aqua Feed Cattle Feed Poultry Feed Lab Feeds Others

1,007 1,024 3,088 46 –

32,236 5,785 25,834 377 844

1,280 896 2,700 30 –

41,419 5,066 21,722 357

TOTAL

5,165

65,076

4,906

68,563

86 19,874 3,054 –

1,314 113,731 28,958 – 5,101

904 21,581 2,307 –

9,937 125,437 22,071 –

23,014

149,104

24,792

157,446

421 92,126 22,189 10,361 64,700 –

64,937 605,050 71,032 61,019 619,358 910,074

701 75,792 23,325 13,117 55,093 –

109,150 463,255 58,026 72,362 685,329 1,084,025

189,797

2,331,470

168,028

2,472,148

SALES TURNOVER Aqua Feed Cattle Feed Poultry Feed Lab Feeds Others TOTAL

PURCHASE FOR RESALE Aqua Feed Cattle Feed Poultry Feed Lab Feeds Others

TOTAL 9

RAW MATERIALS CONSUMED DLM Maize Rice Bran Extraction Rice Bran Soya Others

TOTAL 10.

For the Year 31/03/05

LICENSED AND INSTALLED CAPACITY AND ACTUAL PRODUCTION Item

For the

Actual

Capacity Per Annum

Registered MT

Installed MT

Production* MT

Registered MT

Aqua, Cattle 31.03.06 and Poultry Feed

Not Applicable

232,000

252,710

Not Applicable

Aqua, Cattle and 31.03.05 Poultry Feed

Not Applicable

232,000

253,620

Not Applicable

Year

Capacity Per Annum

* Actual production includes production at third party processing locations. 11.

12.

COMMON EXPENSES ALLOCATED BY THE HOLDING COMPANY : For the Year 31/03/06 Rs. ‘000s Expenses (Schedule 12) include amounts charged by Godrej Agrovet Limited, the Holding Company 26,400

For the Year 31/03/05 Rs. ‘000s 26,400

AUDITORS’ REMUNERATION

Statutory Audit Audit under other statutes Certification Taxation Representation Before Authorities TOTAL

For the Year 31/03/06 Rs. ‘000s

For the Year 31/03/05 Rs. ‘000s

898 393 44 112

702 270 38 124

1,447

1,134

13.

Revenue expenditure on scientific research debited to respective expense heads Rs. 2,594 thousands (Previous Year Rs.2,902 thousands).

14.

VALUES OF IMPORTS ON CIF BASIS Raw Materials

246,138

258,833

TOTAL

246,138

258,833

EXPENDITURE IN FOREIGN CURRENCY Travelling Expenses Bank Charges Interest

618 1,017 –

124 1,143 –

TOTAL

1,635

1,267

15.

16.

VALUE OF CONSUMPTION OF RAW MATERIALS

Raw Materials : Imported Items (Including Duty Content) Indigenous TOTAL

For the Year 31/03/06 % Value Rs. ‘000

For the Year 31/03/05 % Value Rs. ‘000

10 90

225,141 2,106,329

15 85

369,704 2,104,748

100

2,331,470

100

2,474,452

Goldmohur Foods & Feeds Limited SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 17.

The amount of exchange difference included in the Profit and Loss Account under the related heads of income/expense is Rs. 740 thousands (net expense) (Previous Year Rs. 264 thousands, net income). The amount of exchange difference in respect of forward exchange contracts to be recognised in the Profit or Loss of subsequent accounting periods is Rs. 12 thousands (Previous Year - Rs. 10 thousands ).

18.

SEGMENT REPORTING The Company is primarily engaged in the business of manufacturing and distribution of Animal Feeds, like Aqua Feed, Poultry Feed, Cattle Feed, Lab Feed, etc. Accordingly, in the opinion of the management, it has only one primary segment and no further disclosure is deemed necessary pursuant to Accounting Standard 17 on Segment Reporting, issued by the Institute of Chartered Accountants of India.

19.

DEFERRED TAX In accordance with the Accounting Standard 22 on Accounting for Taxes on Income, the Company has made adjustments in its accounts for deferred tax liabilities/assets. The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities are : For the Year For the Year 31/03/06 31/03/05 Rs. ‘ 000 Rs. ‘ 000 Depreciation on Fixed Assets Carried forward loss Provision for Doubtful Debts Others

20.

(61,732) 3619 241 2972

(51,809) 241 – 2,568

54900

(49,000)

RELATED PARTY DISCLOSURE Related party disclousere as required by AS-18 “Related Party Disclosure” are given below : 1. Relationships : Holding Company Godrej Agrovet Limited (GAVL) holds 100% in the Company. GAVL is the subsidiary of Godrej Industries Limited (GIL). GIL is the subsidiary of Godrej & Boyce Mfg. Co. Limited, the ultimate Holding Company. 2. The following transactions were carried out with the related parties in the ordinary course of business : (i) Details relating to parties referred to in 1 above Rs. ‘000s Holding Company 1 Sale of Materials/Finished Goods 111,120 137,378 2 Purchase of Materials/Finished Goods 215,661 181,579 3 Expenses charged to other companies 1,307 (Inclusive of sale of services) 2,102 4

Expenses charged by other companies

Dividend paid

Outstanding payables, net of receivables

Guarantees taken

Amount paid for Buy Back of Equity Share Capital

26,592 27,210 31,000 30,000 18,219 5,922 70,000 590,000 – 40,000

25.

S.P. Karmarkar Company Secretary Place : Mumbai Date : May 22, 2006

Significant Related Party Transactions

For the Year 31/03/05

53,800

34,537

Profit after tax as per Profit & Loss Account (Rs. ‘000) Weighted average number of equity shares outstanding

22.

1,838,200

2,155,540

Basic earnings per share

29.27

16.02

Diluted earnings per share

29.27

16.02

Nominal value of shares

10.00

DISCLOSURES IN RESPECT OF LEASES The Company’s leasing arrangements are in respect of operating leases for premises occupied by the Company. These leasing arrangements are cancellable, and are renewable on a perodic basis by mutual consent on mutually acceptable terms. The aggregate lease rental payable by the Company and charged to Profit and Loss Account (Schedule 10) is as follows : For the Year Particulars 31/03/06 Rs. ‘ 000 Lease rental paid during the year Future Lease Obligations Due within one year of balance sheet date Due after one year and with in five years of balance sheet date Due after five years of balance sheet date

13,262 4,387 – –

23.

Information required under Schedule VI to the Companies Act, 1956 has been given to the extent applicable.

24.

Figures for the previous financial year have been regrouped wherever necessary.

Cash Flow from Operating Activities: Profit before Tax and Operational Items Adjustment for: Depreciation Loss/(Profit) on sale of Fixed Assets Exchange Difference Interest Income Interest Expense Provision for Fixed Assets Held for Disposal Fixed Assets written off Operating Profit before Working Capital Changes Adjustments for : Inventories Debtors and Other receivables Creditors and Other payables

EARNINGS PER SHARE For the Year 31/03/06

V. Srinivasan Director

Rs. '000 A.

All the transactions mentioned above are with Godrej Agrovet Limited. 21.

C.K. Vaidya Director

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006

Note : Figures in italics pertains to the previous year. 3.

INFORMATION REQUIRED TO BE FURNISHED UNDER THE PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956 Balance Sheet Abstract and Company’s General Business Profile. i) Registration Details Registration No. 17887 State Code 11 Balance Sheet 31st March, 2006 ii) Capital raised during the period (Rupees ‘000) Public Issue Nil Rights Issue Nil Bonus Issue Nil Private Placement Nil iii) Position of mobilisation and deployment of funds (Rupees ‘000) Total Liabilities 370,903 Total Assets 370,903 Source of Funds Paid up Capital 18,382 Reserve & Surplus 189,181 Secured Loans 8,440 Unsecured Loans 1000,000 Deferred Tax Liability 54,900 Application of Funds Net Fixed Assets 336,321 Investments – Net Current Assets 34,582 Misc. Expenditure – iv) Performance of the Company (Rupees ‘000) Turnover 2,958,769 Total Expenditure 2,896,969 Profit Before Tax 61,800 Profit After Tax 53,800 Earnings Per Share in Rs. 29.27 Dividend Rate 169% v) Generic Names of three Principal Products/Services of the Company Item Code No. 23099001 Product Description Animal Feeds

Cash Generated from Operations Direct taxes Paid Net Cash Generated from Operating Activities Cash from Investing Activities: Acquisition of Fixed Assets Proceeds from sales of Fixed Assets Interest Income Net Cash used in Investing Activities Cash from Financing Activities: Proceeds from Borrowings (Decrease)/Increase in Cash Credit/ WCDL from Banks (net) Short Term Loans Paid Interest Paid Amount Paid for Buy-Back of Equity Share Capital Dividend Paid Tax on distributed profits Other Financial Charges Net Cash used in Financing Activities

S.P. Karmarkar Company Secretary

For the Year Ended 31-03-2005 Rs. '000

61,800

51,537

26,566 88,366

24,536 544 (5,816) (51) 7,629 3,804 682 31,328 82,865

(83,128) 5,237 (5,930) (693)

8,776 18,936 68,572 96,284 179,149 (16,897) 162,252

28,298 41 (8,876) (52) 7,155 – –

(72,417) 42,472 (53,183)

(68,703) 124 52 (68,527)

(68,534) 1,308 50 (67,176)

100,000

–

8,440 – (5,067) – (31,000) (4,348) (2,006) 66,019

(41,144) (17,000) (3,814) (40,000) (30,000) (3,921) (3,987) (139,866)

(3,201) 11,611 8,410

(44,790) 56,401 11,611

Net Increase/(Decrease) in Cash and Cash Equivalents Cash and Cash equivalents (Opening Balance) Cash and Cash equivalents (Closing Balance) As per our Report attached For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants K.M. Elavia Partner Membership No. 12737 Mumbai, May 22, 2006.

For the Year Ended 31-03-2006 Rs. '000

C. K. Vaidya

Director

V. Srinivasan

Director

Annual Report 2005-2006

Golden Feed Products Limited DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006 To The Shareholders Your Directors have pleasure in submitting their Report along with the audited Accounts for the financial year ended on 31st March, 2006. FINANCIAL RESULTS As the company has commenced operations in the current year, no previous year figures have been given: Rs. Lac For the year ended 31/3/2006 Total Income 345.00 Loss before Taxation 140.06 Add: Provision for Taxation NIL Loss after Taxation 140.06 Balance Brought Forward from previous year Nil Balance Carried Forward to Balance Sheet 140.06 REVIEW OF OPERATIONS In the current year, your company has acquired Shrimp Feed Marketing Business of Higashimaru Feeds India Limited (HFIL) effective 31st October, 2005. HFIL were the pioneer in the aqua feed sector. HFIL commenced commercial production from 1992, in technical and financial collabration with Higashimaru Foods Inc. of Japan. This acquisition is expected to consolidate the presence in the shrimp feed segment of your company alongwith other Godrej group companies engaged in the shrimp feed business. Your company alongwith other Godrej group companies engaged in similar businesses are also expected to benefit through better market penetration available through the distribution network of HFIL and joint sourcing of critical raw materials. The Company’s business suffered a setback due to delay in the shrimp farming season. DIRECTORS Dr. S.S. Sindhu, Director, retires by rotation at the ensuing Annual General Meeting in accordance with the provisions of the Companies Act, 1956 and being eligible, offers himself for re-appointment. AUDITORS You are requested to appoint Auditors for the current year and fix their remuneration. The retiring Auditors M/ s. Kalyaniwalla & Mistry, Chartered Accountants, Mumbai are eligible for re-appointment and a certificate as required u/s 224 (1-B) of the Companies Act, 1956 has been received from them. QUALIFICATIONS BY AUDITORS The auditors have qualified in the Auditors report that the accumulated losses as at March 31, 2006 exceeds its paid up capital, resulting in the erosion of its net worth. Your company still remains

a “Going Concern” as the finance will continue to be available to the company for its working capital requirements from its holding company Godrej Agrovet Limited. ADDITIONAL INFORMATION The additional information required to be given under the Companies Act, 1956, has been laid out in the Schedules attached to and forming part of the Accounts. The Notes to the Accounts referred to in the Auditors’ Report are self-explanatory and therefore do not call for any further explanation. STATUTORY INFORMATION A ) Conservation of Energy, Technology absorption and Foreign Exchange earnings and outgo The information in respect of these matters, required under Section 217 (1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 and forming part of the Directors’ Report is given in the Annexure “A” to this report. B) Particulars of Employees None of the employees is covered under the provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) (Amendment) Rules, 2002. C ) Directors’ Responsibility Statement Pursuant to the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors 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 they have selected such Accounting Policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period ; c) that they have taken proper and sufficient care for the maintenance of adequate accounting 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 they have prepared the annual accounts on a going concern basis. HUMAN RESOURCES The Board would like to place on record its sincere appreciation of the dedicated performance turned in by the employees of your Company. For and on behalf of the Board of Directors C.K. Vaidya Dr. P.N. Narkhede Director Director Mumbai, May 22, 2006.

Foreign Exchange earnings and outgo Your Company had no foreign exchange earning as well as outgo.

Conservation of Energy

For and on behalf of the Board of Directors

The Company has not established any manufacturing facility this year. B.

C.K. Vaidya Director

Technology absorption, adaptation and innovation Not Applicable since the Company does not have any manufacturing facility at present.

Dr. P.N. Narkhede Director

Mumbai, May 22, 2006.

REPORT OF THE AUDITORS TO THE MEMBERS OF GOLDEN FEED PRODUCTS LIMITED 1.

We have audited the attached Balance Sheet of Golden Feed Products Limited, as at 31st March 2006 and also the Profit and Loss Account and the 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 auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 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 annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to in paragraph (3) above, we report that: a) The accumulated losses of the Company as at March 31, 2006 exceeds its paid up capital resulting in the erosion of its net worth. The accounts for the year have been prepared on the ‘Going Concern’ basis on the understanding that finance will continue to be available to the Company for working capital requirements. b) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit. c) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of these books. d) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account.

In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956. In our opinion and to the best of our information and according to the explanations given to us, the said financial statements read with the notes thereon, subject to para (a) above, give 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 31st March, 2006; and ii) in the case of the Profit and Loss Account, of the loss for the year ended on that date. iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

On the basis of the written representations received from the Directors as on 31st March, 2006, and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants K. M. ELAVIA Partner Membership No. 12737 Place : Mumbai Dated : May 22, 2006

Golden Feed Products Limited ANNEXURE TO THE AUDITORSâ&#x20AC;&#x2122; REPORT Referred to in paragraph (3) of our report of even date. 1)

(a)

The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b)

As explained to us, the Company has a program for physical verification of fixed assets at periodic intervals. In our opinion, the period of verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies have been reported on such verification.

(c)

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

(a)

The Management has conducted physical verification of inventory at reasonable intervals.

(b)

In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c)

The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

(a)

The Company has not granted any loans, secured or unsecured to companies, firms or parties covered in the register maintained under section 301 of the Companies Act, 1956.

(b)

Consequently, the question of commenting whether the rates of interest and other terms and conditions are not prejudicial to the interests of the Company does not arise.

(c)

The Company has taken an unsecured loan, from a company covered in the register maintained under Section 301 of the Act.

(d)

The rate of interest and the other terms and conditions of the loan taken is not prejudicial to the interests of the Company.

(b)

According to the information and explanations given to us, there are no dues outstanding of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on account of any dispute.

10)

The Company has accumulated losses at the end of the financial year and it has incurred cash losses in the current financial year. There were no operations in the immediately preceding year.

11)

According to the information and explanations given to us and based on the documents and records produced to us, the Company has not defaulted in repayment of dues to banks. There are no dues to financial institutions or debenture holders.

12)

According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

13)

In our opinion and according to the information and explanations given to us, the nature of activities of the Company does not attract any special statute applicable to chit fund and nidhi/ mutual benefit fund/ societies.

14)

The Company does not deal in shares, securities, debentures and other investments.

15)

According to the information and explanations given to us, the Company has not given any guarantee.

16)

According to the information and explanations given to us, term loans were applied for the purpose for which the loans were obtained.

17)

According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flows of the Company, we report that the Company has utilized funds raised on shortterm basis for long term investment.

(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 the particulars of contracts and arrangements referred to in section 301 of the Companies Act, 1956 have been entered into the register required to be maintained under that section.

18)

The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Companies Act, 1956.

19)

The Company did not issue any debentures during the year.

(b)

The transactions made in pursuance of such contracts or arrangements, were made at prices which are reasonable having regard to prevailing market prices at the relevant time, except for certain transactions for which, there are no similar services rendered to other parties or have been entered into on a reciprocal basis and hence the prices are not comparable.

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.

In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public and hence the provisions of section 58A, 58AA or any other provision of the Companies Act, 1956, read with the rules framed thereunder are not applicable.

In our opinion and according to the information and explanations given to us, the Company is in the process of setting up an internal audit system.

The Central Government has not prescribed maintenance of cost records under section 209(1)(d) of the Companies Act, 1956, for any of the products of the Company.

(a)

undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employeesâ&#x20AC;&#x2122; State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess and other statutory dues applicable to it with the appropriate authorities. According to the information and explanations given to us, there are no undisputed dues payable in respect of above as at 31st March 2006 for a period of more than six months from the date they became payable.

According to the information and explanations given to us and on the basis of our examination of the books of account, during the year, the Company has been generally regular in depositing

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants K. M. ELAVIA Partner Membership No. 12737 Place : Mumbai Dated : May 22, 2006

Annual Report 2005-2006

BALANCE SHEET AS AT MARCH 31, 2006 This Year Rs.

Schedule SOURCES OF FUNDS SHAREHOLDERS’ FUNDS Share Capital LOAN FUNDS Unsecured Loans

LESS : CURRENT LIABILITIES AND PROVISIONS Liabilities Provisions NET CURRENT ASSETS MISCELLANEOUS EXPENDITURE (to the extent not written off or adjusted) PROFIT & LOSS ACOUNT TOTAL NOTES TO ACCOUNTS

Previous Year Rs.

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON MARCH 31, 2006 This Year Rs.

Schedule 1

500,000

500,000 500,000

70,393,120 70,893,120

– – 500,000

70,393,120

TOTAL APPLICATION OF FUNDS FIXED ASSETS 3 Gross Block Less: Depreciation Net Block Capital work-in-progress/advances INVESTMENTS CURRENT ASSETS,LOANS AND ADVANCES Inventories Sundry debtors Cash and Bank Balances Other current assets

This Year Rs.

Previous Year Rs.

INCOME From Operations

34,550,891

Other income

–

48,940

– 34,599,831

–

EXPENDITURE 45,046,967 1,875,000 43,171,967 –

– – – – – –

43,171,967 25,000

Materials

22,980,279

Expenses

21,606,761

–

Interest and financial charges

2,080,190

–

1,875,000

–

Depreciation Miscellaneous Expenditure written off

–

64,508

5 27,832,117 30,671,000 2,604,347 166,999

– – 487,187 –

61,274,462

487,187

47,335,216 250,000

51,695 –

47,585,216 13,689,246 –

51,695 435,492 64,508

14,006,907 70,893,120

– 500,000

LOSS BEFORE TAXATION Provision for Taxation LOSS AFTER TAXATION Surplus/Deficit Brought Forward

– –

–

(14,006,907)

–

Deficit carried forward 6 7

48,606,738 (14,006,907)

(14,006,907)

TOTAL

(14,006,907)

–

(280)

–

Earnings per share (Basic/Diluted) in Rs. (Refer Note 12) NOTES TO ACCOUNTS

The Schedules referred to above form an integral part of the Balance Sheet As per our Report attached Signatures to Balance Sheet and Schedules 1 to 8 and 12 For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants C.K. VAIDYA Director DR. P.N. NARKHEDE Director K. M. ELAVIA Partner Membership No. 12737 Place : Mumbai Date : May 22, 2006.

The Schedules referred to above form an integral part of the Profit and Loss Account As per our Report attached Signatures to Profit and Loss Account Schedules 9 to 12 For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants C.K. VAIDYA Director DR. P.N. NARKHEDE Director K. M. ELAVIA Partner Membership No. 12737 Place : Mumbai Date : May 22, 2006.

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 This Year Rs. SCHEDULE 1 : SHARE CAPITAL Authorised 1,00,000 Equity Shares of Rs.10 each *(Previous year 1,00,000) Issued, Subscribed and Paid up 50000 Equity Shares of Rs.10 each fully paid *(Previous year 50,000) The entire share capital is held by Godrej Agrovet Limited, the Holding Company (and its nominees) SCHEDULE 2 : UNSECURED LOANS From Banks Term Loans (amount due within a year Rs. 3,00,00,000, Previous year NIL) From Godrej Agrovet Ltd.(including interest accured Rs. 15,57,118, Previous year Rs. Nil.) TOTAL

Previous Year Rs.

1,000,000

500,000

30,000,000

–

40,393,120

–

70,393,120

–

This Year Rs. SCHEDULE 4 : INVESTMENTS LONG TERM UNQUOTED (AT COST) IN GOVERNMENT SECURITIES (All the Securities have been deposited with various Government Authorities) (a ) National Savings Certificates (Face value Rs. 25,000 ; Previous year NIL) TOTAL SCHEDULE 5 : CURRENT ASSETS, LOANS & ADVANCES (A) INVENTORIES : Raw Materials Finished Products

This Year Rs.

Previous Year Rs.

25,000 25,000

– –

27,832,115

– – –

25,444,477 2,387,638

(B) SUNDRY DEBTORS *(Refer note 2) Debts outstanding for a period exceeding six months Considered Good 9,825,161 Considered Doubtful – 9,825,161 Other Debts 20,845,839 Total 30,671,000 Less: Provision for doubtful debts –

– – – – – (Rs.)

30,671,000

SCHEDULE 3 : FIXED ASSETS GROSS BLOCK ASSETS

As at 1.4.2005

Additions

– –

TOTAL Previous Year

Intellectual property, Technical Know-how etc. *(Refer note 2) Plant & Machinery

DEPRECIATION

Deductions

As at 31.3.2006

45,000,000

–

46,967

–

45,046,967

–

NET BLOCK

Upto 1.4.2005

For the Year

On Deductions

Prior Period Adjustments

Upto 31.3.2006

As at 31.3.2006

As at 31.3.2005

45,000,000

–

1,875,000

46,967

–

1,875,000

43,125,000

–

46,967

–

45,046,967

–

1,875,000

–

1,875,000

43,171,967

–

Golden Feed Products Limited SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 Previous Year Rs.

Carrying amount of cash generating units /assets are reviewed at balance sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognized whenever carrying amount exceeds the recoverable amount.

53,072

–

Intellectual property, Technical Know-how etc. are amortised over a period of 10 years.

2,551,275

2,604,347 166,999

487,187 487,187 –

61,274,462

487,187

37,637,147 9,698,069

51,695 -

47,335,216

51,695

200,000 50,000

– –

250,000

–

This Year Rs. SCHEDULE 5 : INVESTMENTS (Contd.) (C) CASH AND BANK BALANCES : Cash and Cheques on hand Balances with Scheduled Banks in current account (D) OTHER CURRENT ASSETS : TOTAL SCHEDULE 6 : LIABILITIES Sundry Creditors Advances from Customers TOTAL SCHEDULE 7 : PROVISIONS Gratuity Leave Encashment TOTAL SCHEDULE 8 : MISCELLANEOUS EXPENDITURE (To the extent not written off) Preliminary expenses TOTAL SCHEDULE 9 : MATERIALS a) RAW MATERIALS CONSUMED Opening stock Add : Purchases during the year Less : Sales during the year Less : Closing Stocks b) PURCHASE FOR RESALE c) INVENTORY CHANGE Opening Stock Finished Goods taken over *(Note 2) Less : Closing Stock Finished Goods

10 11 12 13 11 12 13 14 15 16

–

64,508

–

64,508

– 41,177,837 41,177,837 89,554 41,088,281 25,444,477

– – – – – – 15,643,804 8,049,679

– 1,674,434

– –

22,980,279

–

TOTAL

Revenue is recognised when goods are despatched to external customers.

Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets, subject to consideration of prudence, are recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such Deferred tax liability is recognised, if material. Deferred tax assets can be realised. The tax effect is calculated on the accumulated timing difference at the year- end, based on the tax rates and laws enacted or substantially enacted on the balance sheet date.

Provisions are recognized in the accounts in respect of present probable obligations, the amount of which can be reliably estimated.

ACQUISITION OF SHRIMP FEED BUSINESS During the year, the Company has acquired the shrimp feed Marketing Business of Higashimaru Feeds on a slump sale basis,effective from 31st October, 2005. The break-up of consideration is: Rs. Intellectual property, Technical Know-how etc. 45,000,000 Debtors taken over 37,900,000 Inventory taken over 1,600,000 Less: Deposits taken over (9,500,000) Total consideration 75,000,000 This Year

2,365,840

–

191,663 61,477 12,058,653 – 252 40,700 19,142

– – – – – – –

4,260 22,575 116,827 112,240 2,765,733 1,153,010 1,556,745 64,979 1,062,483 – 10,182

– – – – – – – – – – – – – –

21,606,761

–

Quantity

Previous Year Value Rs.

Quantity

Value Rs.

1,933 – 2,327

SALES TURNOVER Aqua Feed MT 1,228 34,550,891 Note: Sales Turnover includes sale of items processed by third parties, and items purchased by the Company for resale. 4. FINISHED GOODS INVENTORIES Aqua Feeds MT 92 2,387,638 – – 5. PURCHASES FOR RESALE Aqua Feed MT 365 8,049,679 – – 6. RAW MATERIALS CONSUMED Animal Proteins MT 445 10,217,648 Others 5,426,156 TOTAL

2,080,190

The accounts have been prepared on historical cost convention. The Company follows mercantile system of accounting and recognises income and expenditure on accrual basis.

Registered Installed Production Production MT MT

–

– –

Actual Production MT

Third Party Production MT

– –

1,189.5 –

– –

This Year Rs.

Previous Year Rs.

84,180 28,060

6,612 –

112,240

6,612

VALUE OF CONSUMPTION OF RAW MATERIALS, SPARES & TOOLS This Year Rs. % RAW MATERIALS : Indigenous 15,643,804 100 TOTAL

15,643,804

100

Previous Year Rs. % 0 0

10.

SEGMENT INFORMATION The Company is in the business of manufacturing and distribution of Aqua Feed, which is its single primary business segment. All its operations are located in India & so no secondary segment disclosures are required under AS - 17 segment Reporting

11.

RELATED PARTY DISCLOSURES Related party disclosures as required by AS - 18, “Related Party Disclosures”, are given below “ 1. Relationships : (i) Holding Companies : Godrej Agrovet Limited (GAVL) holds 100% in the Company. GAVL is the subsidiary of Godrej Industries Limited(GIL). GIL is the subsidiary of Godrej & Boyce Mfg. Co. Limited, the ultimate holding company.

SIGNIFICANT ACCOUNTING POLICIES a)

31.03.2006 31.03.2005

AUDITORS’ REMUNERATION Audit fees Audit under Other Statutes TOTAL

– – – – –

For the year Ended

This Year Rs. 8.

–

LICENSED & INSTALLED CAPACITY AND ACTUAL PRODUCTION

Aqua Feeds

1,959,744 120,446

15,643,804

Item

SCHEDULE 12 : NOTES TO ACCOUNTS 1.

Retirement benefits to employees comprise payments under defined contribution plans like provident fund and family pension. Payments under defined contribution plans are charged to the profit and loss account. The liability in respect of defined benefit schemes like gratuity and leave encashment benefit on retirement is provided on the actual basis.

Insurance Postage, telephony and stationery Auditor’s Remuneration Legal & Professional fees Freight, Coolie and Cartage Discount, Commission and Selling expenses Advertisement and publicity Travelling expenses Bad Debts/Advances written off General Expenses

Other Financial Charges

Unit

SCHEDULE 11 : INTEREST AND FINANCIAL CHARGES (a) Interest paid on fixed loans From:i ) Banks 4,808 ii ) Others 1,954,936 (b)

These costs include cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

–

(713,204)

Raw materials are valued at weighted average cost. Finished goods and work-in-progress are valued at lower of cost and net realisable value.

–

2,387,638

TOTAL SCHEDULE 10: EXPENSES 1 Salaries, Wages, Bonus, Gratuity and Allowances 2 Contribution to Provident Fund and Other Funds and Administration Charges 3 Employee Welfare Expenses 4 Processing charges 5 Consumable Stores 6 Power and Fuel 7 Rent 8 Rates and Taxes 9 Repairs & Maintenance Building Plant & Machinery Other assets

This Year Rs.

Annual Report 2005-2006 2.

The following transactions were carried out with the related parties in the ordinary course of business : Rs. Holding Nature of Transactions Company * (i) 1 Sale of materials / finished goods 2 Purchase of Fixed Assets 3 Purchase of materials / finished goods 4 Loan taken 5 Interest expense on loan taken 6 Outstanding payables, net of (receivables) 7 Guarantees issued by * All transaction are with Godrej Agrovet Limited.

12.

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006

1,072,000 46,987 293,000 40,393,120 1,557,118 16,467,562 75,000,000

EARNINGS PER SHARE

Profit after tax and prior period expenses Weighted average number of equity shares outstanding Basic earnings per share Diluted earnings per share Nominal value of shares

This Year Rs.

Previous Year Rs.

(14,006,907) 50,000 (280) (280) 10.00

– 50,000 – – 10.00

Balance Sheet Abstract and Company’s General Business Profile Registration Details Registration No State Code Balance Sheet ii) Capital raised during the period Public Issue Rights Issue Bonus Issue Private Placement iii) Position of mobilisation and deployment of funds Total Liabilities Total Assets Source of Funds Paid up Capital Reserve & Surplus Secured Loans Unsecured Loans Application of funds Net Fixed Assets Investments Net Current Assets Misc Expenditure iv) Performance of the Company Turnover Total Expenditure Profit Before Tax Profit After Tax Earnings Per Share in Rs. Dividend Rate v) Generic Names of three Principal products services of the company Item Code No Product Description

Place : Mumbai Date : May 22, 2006

C.K.Vaidya Director

140599 11 31/3/2006 (Rupees) Nil Nil Nil Nil (Rupees) 118,478,336 118,478,336 500,000 – – 70,393,120 43,171,967 25,000 13,689,246 Nil (Rupees) 34,599,831 48,606,738 -14,006,907 -14,006,907 -280.14

23099010 Animal Feeds

Cash Flow from Operating Activities : Net Profit Before Taxes Adjustment for: Depreciation Loss / (Profit) on sale of fixed assets Profit on sale of Investments Dividend income Interest income Interest expenses Miscellaneous expenditure written off Expenditure in respect of prior years Investments Written off

Previous Year Rs.

(14,006,907)

(14,968)

1,875,000 – – – – 2,080,190 64,508 – –

Operating Profit Before Working Capital Changes Adjustments for: Inventories (27,832,115) Debtors and Other Receivables (30,837,998) Creditors and Other Payables 47,533,521

INFORMATION REQUIRED TO BE FURNISHED UNDER THE PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956

Current Year Rs.

Rs.

Cash Generated from Operations Direct Taxes paid (net of refund received) Net Cash Flow from Operating Activities Cash Flow from Investing Activities : Capital subsidy received Acquisition of fixed assets Proceeds from sale of fixed assets Purchase of Investments Proceeds from sale/maturity of investments Interest Received Dividend Received Net Cash used in Investing Activities Cash Flow from Financing Activites : Proceeds from Borrowings Repayment of Borrowings Increase/(Decrease) in Cash Credit/WCDL Interest Paid Dividend Paid Dividend Tax Paid Net Cash used in Financing Activities

4,019,698

–

(9,987,209)

(14,968)

(11,136,592) (21,123,801)

2,755 2,755 (12,213)

(21,123,801)

(12,213)

(45,071,967) (45,071,967)

–

– (45,046,967) – (25,000) – –

70,393,120 – – (2,080,190) – –

Net increase in Cash and Cash equivalents Cash and Cash equivalents (Opening balance) Cash and Cash equivalents (Closing balance) Notes:

68,312,930

–

2,117,160

(12,213)

487,187

499,400

2,604,347

487,187

Figures in brackets are outflows/deductions.

Figures for the previous year have been regrouped/restated wherever necessary to conform to this year’s classification.

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants

C.K. VAIDYA DR. P.N. NARKHEDE

Director Director

K. M. ELAVIA Partner Membership No. 12737 Place : Mumbai Date : May 22, 2006.

DR. P.N. NARKHEDE Director

Krithika Agro Farm Chemicals and Engineering Industries Private Limited DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006 To The Shareholders Your Directors have pleasure in submitting their Report along with the audited Accounts for the financial year ended on 31st March, 2006. FINANCIAL RESULTS As the company’s activities are in the developmental stage, hence no income has been earned in the current year. The revenue expenditure (loss) incurred in the current year is Rs. 7,63,956 (including Fringe Benefit Tax of Rs. 13,555). AUDITORS You are requested to appoint Auditors for the current year and fix their remuneration. The retiring Auditors M/s. Kalyaniwalla Mistry & Associates, Chartered Accountants, Mumbai are eligible for re-appointment and a certificate as required u/s 224 (1-B) of the Companies Act, 1956 has been received from them. QUALIFICATIONS BY AUDITORS The auditors have qualified in the Auditors' Report that the accumulated losses as at March 31, 2006 exceeds its paid up capital, resulting in the erosion of its net worth. Your Company still remains a “Going Concern” as the finance will continue to be available to the company for its working capital requirements from its holding company Godrej Agrovet Limited. Also, the auditors have qualified that the Company’s Capital Work in Progress of Rs. 1.99 Crores is overstated and the accumulated deficit of the Profit and Loss Account is understated by Rs. 1.99 Crores. Your Directors are of the opinion that as this is the expenditure incurred on the Oil mill project and the interest thereon, it has been correctly capitalized. ADDITIONAL INFORMATION The additional information required to be given under the Companies Act, 1956, has been laid out in the Schedules attached to and forming part of the Accounts. The Notes to the Accounts referred to in the Auditors’ Report are self-explanatory and therefore do not call for any further explanation. STATUTORY INFORMATION A) Conservation of Energy, Technology absorption and Foreign Exchange earnings and outgo The information in respect of these matters, required under Section 217 (1)(e) of the

Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 and forming part of the Directors’ Report is given in the Annexure “A” to this report. B)

Particulars of Employees None of the employees is covered under the provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) (Amendment) Rules, 2002.

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;

that they have prepared the annual accounts on a going concern basis.

HUMAN RESOURCES The Board would like to place on record its sincere appreciation of the dedicated performance turned in by the employees of your Company. For and on behalf of the Board of Directors R.S. Vijan Director

S. Varadaraj Director

Mumbai, May 22, 2006.

Foreign Exchange earnings and outgo Your Company had no foreign exchange earning as well as outgo. For and on behalf of the Board of Directors

Conservation of Energy The Company has not established any manufacturing facility this year.

R.S. Vijan Director

Technology absorption, adaptation and innovation Not Applicable since the Company does not have any manufacturing facility at present.

S. Varadaraj Director

Mumbai, May 22, 2006.

REPORT OF THE AUDITORS TO THE MEMBERS OF KRITHIKA AGRO FARM CHEMICALS AND ENGINEERING INDUSTRIES PRIVATE LIMITED 1.

We have audited the attached Balance Sheet of Krithika Agro Farm Chemicals and Engineering Industries Private Limited, as at 31st March 2006 and also the Profit and Loss Account and the 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 auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. This report does not include a statement on the matters specified in paragraph 4 of the Companies (Auditor’s Report) Order, 2003, issued by the Department of Company Affairs, in terms of section 227(4A) of the Companies Act, 1956, since in our opinion and according to the information and explanations given to us, the said Order is not applicable to the Company. Further we report that: a) The accumulated losses of the Company as at March 31, 2006 exceed its paid up capital resulting in the erosion of its net worth. The accounts have been prepared on ‘Going Concern’ basis on the understanding that finance will continue to be available to the Company for Working Capital requirements from the promoters. b) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit. c) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of these books. d) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account. e) The Company’s Capital Work in Progress of Rs. 1,99,99,000/- comprise of revenue expenses and interest allocated on the same. These revenue expenses are neither fixed assets as defined under

Accounting Standard 10 – Fixed Assets nor comply with the definition of a qualifying asset under Accounting Standard 16 – Borrowing Costs on which interest can be allocated. Consequently, in our opinion, the Capital Work in Progress is overstated and the accumulated deficit of the Profit and Loss Account is understated by Rs. 1,99,99,000/-. f) In our opinion, subject to para (e) above, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956. g) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements read with the notes thereon, subject to (a) and (e) above, 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 31st March, 2006; and ii) in the case of the Profit and Loss Account, of the loss for the year ended on that date. iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. On the basis of the written representations received from the Directors as on 31st March, 2006, and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants B.S. DASTOOR

Partner Membership No. 48936 Mumbai; Dated : May 22, 2006

Annual Report 2005-2006

BALANCE SHEET AS AT MARCH 31, 2006 This Year Rs.

This Year Rs.

Previous Year Rs.

100,000

25,000

20,205,849

19,975,000

20,305,849

20,000,000

Schedule

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON MARCH 31, 2006 This Year Rs.

SOURCES OF FUNDS Shareholders Funds Share Capital Loan Funds Unsecured Loans TOTAL APPLICATION OF FUNDS FIXED ASSETS Gross Block Less: Depreciation

Net Block Capital Work-in-progress/advances

29,789 14,422

– –

15,367 19,999,000

– 19,999,000 20,014,367

Current Assets, Loans and Advances Inventories Cash and Bank Balances Other current assets

19,999,000

4 457,687 1,105 10,000

– 1,000 – 468,792

Advance payment of taxes (net of provison of taxation 13555; Previous year NIL) Less : Current Liabilities and Provisions 5 Liabilities Net Current Assets Profit and loss account Notes to Accounts

1,000

–

941,266 (472,474) 763,956

– –

20,305,849

20,000,000

INCOME EXPENDITURE Salaries, Wages, Bonus, Gratuity and Allowances Travelling expenses Seminar / Training expenses Interest and financial charges Auditor’s Remuneration Advertisement & Publicity Rent Communication expenses General Charges Depreciation

This Year Rs.

Previous Year Rs.

75,423 237,852 61,174 229,849 22,848 18,702 28,750 26,787 34,594 14,422

PROFIT/(LOSS) BEFORE TAXATION PROVISION FOR TAXATION FRINGE BENEFIT TAX DEFFERRED

13,555 –

750,401

– – – – – – – – – – –

(750,401)

–

13,555

–

PROFIT AFTER TAXATION Balance Brought Forward

(763,956) –

–

BALANCE CARRIED FORWARD

(763,956)

–

(81)

–

Earning per share (Basic/Diluted) in Rs. (Refer Note 4)

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 6 For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants R. S. VIJAN Director S. VARADARAJ Director B. S. DASTOOR Partner Membership No. 48936 Place : Mumbai Date : May 22, 2006.

The Schedules referred to above form an integral part of the Profit and Loss Account As per our Report attached For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants

R. S. VIJAN S. VARADARAJ

Director Director

B. S. DASTOOR Partner Membership No. 48936 Place : Mumbai Date : May 22, 2006.

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 This Year Rs. SCHEDULE 1 : SHARE CAPITAL Authorised 10,000 Equity Shares of Rs.10 each

This Year Rs.

Previous Year Rs.

This Year Rs.

100,000

25,000

(A) INVENTORIES Stock under cultivation

100,000

25,000

(B) CASH AND BANK BALANCES CASH IN HAND Balances with scheduled banks in current account

This Year Rs.

Previous Year Rs.

457,687

–

1,105

1,000

SCHEDULE 4 : CURRENT ASSETS, LOANS & ADVANCES

Issued, Subscribed and Paid up 10,000 Equity Shares of Rs.10 each 7,600 Shares are held by Godrej Agrovet Ltd. (Previous year NIL) SCHEDULE 2 : UNSECURED LOANS From holding company From others

4,204,849 16,001,000

TOTAL

500,000 19,475,000 20,205,849

19,975,000

105 1,000

10,000

–

468,792

1,000

864,449 76,817

–

941,266

–

SCHEDULE 3 : FIXED ASSETS

(Rs.) GROSS BLOCK

ASSETS

DEPRECIATION

NET BLOCK

As at 1.4.2005

Additions

Deductions

As at 31.3.2006

Upto 1.4.2005

For the Year

On Deductions

Prior Period Adjustments

Upto 31.3.2006

As at 31.3.2006

As at 31.3.2005

– –

28,589 1,200

– –

28589 1200

– –

13,222 1,200

– –

13,222 1,200

15,367 –

– –

TOTAL

–

29,789

–

29789

–

14,422

–

14,422

15,367

–

Previous Year

–

19,999,000 20,014,368

19,999,000 19,999,000

Furniture & Fixtures Office & Other Equipments

Capital Work-In-Progress /Advances TOTAL

Krithika Agro Farm Chemicals and Engineering Industries Private Limited SCHEDULE 6 : NOTES TO ACCOUNTS

Balance Sheet Abstract and Company's General Business Profile

ii)

Registration Details Registration No. State Code Balance Sheet Date Capital raised during the year

iii)

Public Issue Rights Issue Bonus Issue Private Placement Position of mobilisation and deployment of funds

SIGNIFICANT ACCOUNTING POLICIES The accounts have been prepared on historical cost convention. The Company follows mercantile system of accounting and recognises income and expenditure on accrual basis.

Fixed assets have been stated at cost and include incidental and / or installation/development expenses incurred in putting the asset to use and interest on borrowing incurred during construction period. Pre-operative expenses for major projects are also capitalised, where appropriate.

Provisions are recognized in the accounts in respect of present probable obligations, the amount of which can be reliably estimated.

Total Liabilities Total Assets

Sources of Funds Paid-up Capital Reserves & Surplus Secured Loans Unsecured Loans Application of Funds Net Fixed Assets Investments Net Current Assets Misc. Expenditure Accumulated Losses Performance of Company Turnover Total Expenditure Profit before tax Profit after tax Earning Per Share in Rs. Dividend rate Generic Names of three principal products services of Company Item Code No. Product Description

The Company has not commenced operations.

AUDITORS’ REMUNERATION Audit fees

EARNINGS PER SHARE Profit after tax and prior period expenses (Rs.) Weighted average number of equity shares outstanding Basic earnings per share Diluted earnings per share Nominal value of shares

22,848

6,612

This year (763,956) 9,375 (81) (81) 10.00

Previous year – 2,500 – – 10.00

RELATED PARTY DISCLOSURES Related party disclosures as required by AS - 18, “Related Party Disclosures”, are given below : 1.

016679 18 31/3/2006

Relationships : (i) Holding Companies : Godrej Agrovet Limited (GAVL) holds 76% in the Company. GAVL is the subsidiary of Godrej Industries Limited (GIL). GIL is the subsidiary of Godrej & Boyce Mfg. Co. Limited, the ultimated holding company. The following transactions were carried out with the related parties in the ordinary course of business : Rs. Holding Nature of Transactions Companies (i)

Purchase of materials / finished goods

Loan taken

Interest expense on loan taken

Outstanding payables, net of (receivables)

Share Capital invested by

iv)

(Rupees ) 20,305,849 20,305,849

R.S. Vijan Director

100,000 – – 20,205,849 20,014,367 – (472,474) 763,956 – 750,401 -750,401 -763,956 -81.49 – 23099010 Oil palm plantation S. Varadaraj Director

Mumbai, May 22, 2006. CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 Rs. A.

457,687 – 4,204,849 – 229,849 – 864,449 – 76,000

Cash Flow from Operating Activities : Net Profit Before Taxes Adjustment for: Depreciation Interest expenses Operating Profit Before Working Capital Changes Adjustments for: Inventories Debtors and Other Receivables Creditors and Other Payables

14,422 229,849

Net Cash Flow from Operating Activities Cash Flow from Investing Activities : Acquisition of fixed assets

Current year Rs.

Previous year Rs.

(750,401)

–

244,271

– –

(506,130)

–

(457,687) (10,000) 941,266

Cash Generated from Operations Direct Taxes paid (net of refund received)

Prior period financial statements have been audited by a firm of Chartered Accountants other than Kalayaniwala Mistry & Associates. The opening balances are being taken as per the last year accounts, which have been regrouped and reclassified wherever necessary to conform to current year’s classification.

(Rupees ) Nil Nil Nil 75,000

473,579

–

(32,551) (13,555)

– –

(46,106) (29,789)

– (7,147,035)

(29,789) C.

Net Cash used in Investing Activities Cash Flow from Financing Activities : Proceeds from issuance of share capital Proceeds from Borrowings Repayment of Borrowings Interest Paid Net Cash used in Financing Activities

(29,789)

(7,147,035)

– 7,148,035 –

75,000 3,630,849 (3,400,000) (229,849) 76,000

7,148,035

105

1,000

–

Net increase in Cash and Cash equivalents Cash and Cash equivalents (Opening balance)

Cash and Cash equivalents (Closing balance) 1,105 1,000 Notes : 1 The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting Standard (AS) 3 on “Cash Flow Statements”, and presents cash flows by operating, investing and financing activities. 2 Figures in brackets are outflows/deductions. 3 Figures for the previous year have been regrouped/restated wherever necessary to conform to this year’s classification. For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants B. S. DASTOOR Partner Membership No. 48936 Place : Mumbai Date : May 22, 2006.

R. S. VIJAN S. VARADARAJ

Director Director

Annual Report 2005-2006

Godrej Beverages & Foods Limited (Formerly Godrej Tea Limited) DIRECTORS’ REPORT FOR THE YEAR ENDED ON MARCH 31, 2006 To The Shareholder, Your Directors have pleasure in submitting their Report along with the Audited Accounts for the year ended March 31, 2006. FINANCIAL RESULTS Your Company’s performance during the year 2005-06 as compared with that during the previous year is summarized below. This Year Rs. ‘000

Last Year Rs. ‘000

77,729 621

156,563 1,350

Total Income Total expenditure other than Interest and Depreciation Profit / (Loss) before Interest, Depreciation and Taxation Depreciation

78,350 210,144 (131,794) 3,004

157,913 342,525 (184,612) 3,254

Profit / (Loss) before Interest and Taxation Interest and financial charges

(134,798) 47,985

(187,866) 39,292

Profit / (Loss) before Taxation Provision for Current Tax Provision for Deferred Tax

(182,783) (481) 11,572

(227,158) – 12,900

Profit / (Loss) for the year after Taxation Surplus brought forward

(171,692) (348,858)

(214,258) (134,600)

Profit / (Loss) After Tax carried forward

(520,549)

(348,858)

Sale of Tea Other Income

REVIEW OF OPERATIONS The Total Income for the year under review was Rs. 7.83 Crore compared to Rs.15.79 Crore in the previous year. The total expenses reduced was Rs. 21 Crore as compared to Rs. 34.25 Crore in the previous year mainly due to the active steps taken towards control of the fixed expenses. As a restructuring strategy, the Company has taken a one time additional write off amount to Rs.1.28 Crore of its deferred expenses and hence to that extent loss is higher. The year under review was quite eventful for your Company in many respects. The Company has entered into a distribution agreement with Jyothy Laboratories Ltd. for distribution of tea products and the performance is satisfactory. Towards the end of the year, your Company has restructured its business and is also leveraging its products under the ‘Godrej’ brand. RESTRUCTURING Your Company’s long-term plan is to be a significant player in the FMCG sector through organic as well as inorganic growth. Business strategies have been developed in consonance with the growth objective, focusing on the three key elements – partnership, acquisition & innovation. In this effort IL&FS Investment Managers Limited has decided to be a Strategic Investor by participating in equity capital of the Company. With a view to achieve the above goal, the Board of Directors of your Company had on 14th March, 2006, signed a slump sale agreement for the acquisition of Foods Division (except the Wadala factory) of Godrej Industries Ltd. w.e.f. the close of working hours on 31st March, 2006 for a total consideration of Rs.70 Crore of which Rs. 40 Crore was paid in cash and Rs.30 Crore in the form of equity shares. To facilitate the above deal, IL&FS Investment Managers Ltd. invested Rs.60 Crore in the equity capital of the company. This will help in improving both the top and bottom line of your Company. The major brands acquired by the Company under the terms of the above referred slump sale agreement include brands like Jumpin, Xs, Sofit, Cooklite, Sunshakti and Sunrice. Xs & Jumpin operate in Rs. 440 Crore Tetrapack fruit drinks and nectar category. The brand Xs operates in high growth nectar segment with an exotic range of flavours like Berry Blast, Triple Tickle, Litchi Leap, Santra Swing, Kiwi Kraze and 100% natural juices of Orange and Apple. Jumpin caters to popular and economy segment of the market with Mango, Apple and Pineapple drinks in tetrapak and PET bottle. With health consciousness among consumers gaining importance, Soymilk brand Sofit is positioned as “the New Taste of Health” and promises “Wellness for Now and Health Forever”. Godrej Tomato Puree is another major player that operates in the nascent category of tomato puree. The edible oils are marketed under the brands Godrej Sunflower Oil, Godrej Groundnut Oil, and Vanaspati (Hydrogenated Vegetable Oil) under “Godrej Vanaspati”. Mandideep factory, acquired as part of the deal, is one of the major aseptic packaging facilities in India. The factory is ISO 9000: 2001 and HACCP certified and has been the winner of “National Productivity Award certificate 2003-04”. DIVIDEND Since the profits of the Company are insufficient, your Directors do not recommend payment of equity dividend.

DIRECTORS Mr. A.B. Godrej retires by rotation at the ensuing Annual General Meeting in accordance with the provisions of the Companies Act, 1956 and being eligible, offers himself for re-appointment. During the year under review, Mr. Pranab Barua resigned from the Board of the Company w.e.f. 14th March, 2006. The Board wishes to record its appreciation of his efforts during his tenure with the Company. In the Board Meeting held on March 27, 2006, Mr. Rahul Shah was appointed as an Additional Director who is the nominee director of IL&FS Investment Managers Limited and he holds office as such upto the forthcoming Annual General Meeting. HUMAN RESOURCES AND INDUSTRIAL RELATIONS The relations with the employees were cordial. As mentioned above, as per the acquisition of the foods business, 232 experienced employees were added by smooth transition taking the total employees strength of your Company at 246 as on 31st March, 2006. AUDITORS The Auditors, M/s. Kalyaniwalla & Mistry, Chartered Accountants, retire at the ensuing Annual General Meeting and are eligible for re-appointment for which they have given their consent. AUDIT COMMITTEE The Audit Committee, which was appointed pursuant to the provisions of Section 292A of the Companies Act, 1956 has reviewed the Accounts for the year ended 31st March, 2006. DIRECTORS’ RESPONSIBILITY 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 they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period; c) that they have taken proper and sufficient care for the maintenance of adequate accounting 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 they have prepared the annual accounts on a going concern basis. ADDITIONAL INFORMATION 1. 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 AND OUTGO (A) The additional information required to be given under the Companies Act, 1956 in respect of Conservation of Energy, Technology Absorption as per Section 217(1)(e), read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 has not been given, since such requirement is not applicable to the Company. (B) Rs.’000 Rs.’000 Foreign exchange used Nil Nil Foreign exchange earned Nil Nil 2.

STATEMENT UNDER SECTION 217(2A) READ WITH THE COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975 (A)

Persons employed for a part of the financial year under review and each of whom was in receipt of remuneration for that part which, in the aggregate, was not less than Rs. 2,00,000 per month.

Sr. Name No.

Designation

Chief Operating Officer

Mr. Zozden Lobo

b) c) d)

We have audited the attached Balance Sheet of Godrej Beverages & Foods Limited (formerly known as Godrej Tea Limited), as at 31st March, 2006 and the Profit and Loss Account 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 auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 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 annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to in para (3) above, we report that: The accumulated losses of the Company along with miscellaneous expenditure (to the extent not written off or adjusted) as at March 31, 2006 exceed its paid up capital resulting in the erosion of its net worth. The accounts for the year have been prepared on the ‘Going Concern’ basis on the understanding that finance will continue to be available to the Company for working capital requirements. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of these books. The Balance Sheet and the Profit and Loss Account dealt with by this report are in agreement with the books of account.

4,331

Age Particulars of (years) Previous Employment

B.Tech, MMS

Godrej Sara Lee, 4 years

For and on behalf of the Board of Directors A.B. Godrej Chairman Mumbai, May 19, 2006

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ BEVERAGES & FOODS LIMITED 1.

Gross Qualification Remuneration (Rs.’000)

(Formerly Godrej Tea Limited)

e) During the current year, the Company changed its accounting policy with respect to amortization on promotion of products, publicity and brand building from 36 months to 30 months. Had there been no change in the period of amortization, the charge for the year would have been lower by Rs. 12,848 thousands. Consequently the losses for the year and accumulated losses are higher by Rs. 12,848 thousands. f) In our opinion, the Balance Sheet and the Profit and Loss Account dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956. g) In our opinion and to the best of our information and according to the explanations given to us, subject to para (a) above, the said financial statements 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 31st March, 2006; and ii) in the case of the Profit and Loss Account, of the loss for the year ended on that date. iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. 5. On the basis of the written representations received from the Directors as on 31st March, 2006, and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants K. M. ELAVIA Partner Membership No. 12737 Mumbai, May 19, 2006

Godrej Beverages & Foods Limited (Formerly Godrej Tea Limited) ANNEXURE TO THE AUDITORS’ REPORT Referred to in paragraph (3) of our report of even date. 1) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. (b) As explained to us, the Company has a program for physical verification of fixed assets at periodic intervals. In our opinion, the period of verification is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies have been reported on such verification. (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 and no material discrepancies were noticed on physical verification. 3) (a) The Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. (b) Consequently, the question of commenting on the rates of interest and the other terms and conditions of the loans granted being prejudicial to the interests of the Company, receipt of regular principal and interest and reasonable steps taken for recovery of principal and interest does not arise. (c) The Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Act. (d) Consequently, the question of commenting on the rates of interest and the other terms and conditions of the loans taken being prejudicial to the interests of the Company and payment of regular principal and interest does not arise. 4) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business, for the purchases of inventory, fixed assets and for the sale of goods. There are no sales of services. During the course of our audit, we have not observed a continuing failure to correct major weaknesses in internal controls. 5) (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the particulars of contracts and arrangements referred to in Section 301 of the Companies Act, 1956 have been entered into the register required to be maintained under that section. (b) The transactions made in pursuance of such contracts or arrangements, were made at prices which are reasonable having regard to prevailing market prices at the relevant time. 6) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public and hence the provisions of Section 58A, 58AA or any other provision of the Companies Act, 1956, read with the rules framed there under are not applicable. 7) In our opinion and according to the information and explanations given to us, the internal audit system is commensurate with the size of the Company and nature of its business. 8) We have broadly reviewed the cost records maintained by the Company pursuant to the order made by the Central Government for maintenance of cost records prescribed under Section 209(1)(d) of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not however, made a detailed examination of the records with a view to determining whether they are accurate or complete. 9) (a) According to the information and explanations given to us and on the basis of our examination of the books of account, during the year, the Company has been generally regular in depositing undisputed

BALANCE SHEET AS AT MARCH 31, 2006 SOURCES OF FUNDS Shareholders’ Funds Share Capital Reserves & Surplus Share Application Money Loan Funds Secured Loans Unsecured Loans TOTAL APPLICATION OF FUNDS Fixed Assets Gross Block Less : Depreciation Net Block Capital Work in Progress Deferred Tax Asset Investments Current Assets, Loans and Advances Inventories Sundry Debtors Cash & Bank Balances Loans & Advances Less : Current Liabilities and Provisions Liabilities Purchase consideration payable (Refer Note No. 2) Provisions

Schedule

Rs. ’000

137,500 –

2 3

This Year Rs. ’000

Previous Year Rs. ’000

137,500 600,000

137,500 – 137,500 –

490,090 1,227,590

193,833 300,000 493,833 631,333

587,664 99,272 –

25,957 7,609 18,348 41 18,389 87,700 –

340,090 150,000

596,749 10,585 586,164 1,500

246,053 128,690 130,406 31,922 537,071

73,147 27,758 30,510 5,572 136,987

210,187

26,181

300,000 13,117 523,305 13,767 6,338

– 919 27,100 109,887 66,498

520,549 1,227,590

348,858 631,333

Net Current Assets Miscellaneous Expenditure 8 (To the extent not written off or adjusted) Profit and Loss Account TOTAL NOTES TO ACCOUNTS 14

10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20) 21)

statutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess and other statutory dues applicable to it with the appropriate authorities. According to the information and explanations given to us, there are no undisputed dues payable in respect of above as at 31st March 2006 for a period of more than six months from the date they became payable (b) According to the information and explanations given to us, there are no dues outstanding of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on account of any dispute, other than the following: Name of the Statute Amount (Rs.’000) Forum where dispute is pending Sales Tax Act 121 West Bengal Sales Tax Authority Sales Tax Act 16 Appellate Tribunal Sales Tax Act 70 Assistant Commissioner The Company’s accumulated losses at the end of the financial year are in excess of fifty percent of its net worth and it has incurred cash losses in the current as well as the immediately preceding financial year. According to the information and explanations given to us and based on the documents and records produced to us, the Company has not defaulted in repayment of dues to banks. There are no dues to financial institutions or debenture holders. According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 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. The Company does not deal in shares, securities, debentures and other investments. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks and financial institutions. According to the information and explanations given to us, the term loans were applied for the purpose for which the loans were obtained. According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flows of the Company, we report that the Company has not utilized funds raised on shortterm basis for long-term investment. 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. The Company did not issue any debentures during the year. The Company has not raised any money through a public issue during the year. Based on the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the year. For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants K.M. ELAVIA Partner Membership No. 12737

Mumbai, May 19, 2006

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006 Schedule INCOME Sale of Tea Other Income

EXPENDITURE Materials Processing and Handling Charges Expenses Interest and Financial Charges Inventory Change Depreciation

10 11 12 13

This Year Rs. ’000

Previous Year Rs. ’000

77,729 621

156,563 1,350

78,350

157,913

46,052 2,589 163,159 47,986 (1,657) 3,005

85,050 23,075 206,536 39,292 27,864 3,254

261,134

385,071

LOSS BEFORE TAX Provision for taxation Current Tax Deferred Tax

(182,783)

(227,158)

(481) 11,572

– 12,900

LOSS AFTER TAXATION Deficit brought forward

(171,692) (348,858)

(214,258) (134,600)

Deficit carried forward

(520,549)

(348,858)

(12.49)

(15.58)

Basic/Diluted Earnings per share Rs. NOTES TO ACCOUNTS

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

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

As per our Report Attached

Signatures to Balance Sheet and Schedules 1 to 8 & 14

K.M. ELAVIA Partner Mumbai, May 19, 2006

Signatures to Profit & Loss Account and Schedules 9 to 14

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants A.B. GODREJ Chairman

A. MAHENDRAN Director

K.M. ELAVIA Partner Mumbai, May 19, 2006

A.B. GODREJ Chairman

A. MAHENDRAN Director

Annual Report 2005-2006

SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 This Year Rs. ’000

Previous Year Rs. ’000

AUTHORISED : 5,00,00,000 Equity Shares of Rs. 10 each (Previous year, 1,50,00,000 Equity Shares of Rs. 10 Each)

500,000

150,000

ISSUED, SUBSCRIBED AND PAID-UP : 1,37,50,000 Equity Shares of Rs. 10 each fully paid

137,500

SCHEDULE 1 : SHARE CAPITAL

This Year Rs. ’000

Previous Year Rs. ’000

– – 330,000 10,090

145,616 48,217 – –

340,090 43,750

193,833 193,833

SCHEDULE 3 : UNSECURED LOANS From Banks Short Term Loans Intercoporate deposits

100,000 50,000

60,000 240,000

150,000

300,000

Amounts due within a year

150,000

300,000

SCHEDULE 2 : SECURED LOANS From a Finance Company From Banks Foreign Currency Term Loan Foreign Currency Working Capital Demand Loan Medium Term Loans Cash Credit Amounts due within a year (other than cash credit) Refer Note 3

Of the above : 97,49,996 shares (Previous year 68,86,496) are held by Godrej Industries Ltd. (GIL) the Holding Company

SCHEDULE 4 : FIXED ASSETS Sr. No.

Particulars

1 2 3 4 5 6 7 8 9 10

Land Building Trade marks Plant & Machinery Office Equipment Furniture Computer Lab Equpiment Electrical Installation Leased Assets Vehicle

Balance as on 1/4/2005

Additions

GROSS BLOCK On acquisition of Foods division

Deductions

Balance as on 31/3/2006

Balance as on 1/4/2005

– – 10 5,622 3,500 4,031 12,079 190 525 –

– – – – 30 58 16 – – –

18,500 103,400 158,470 286,850 – 1,146 2,150 – – 256

– – – – – – 84 – – –

18,500 103,400 158,480 292,472 3,530 5,235 14,161 190 525 256

– – 5 1,064 914 659 4,818 106 42 –

– – 2 630 131 249 1,982 4 8 –

– – – – – – 29 – – –

– – 7 1,695 1,045 908 6,771 110 50 –

18,500 103,400 158,474 290,777 2,485 4,327 7,390 80 475 256

– – 5 4,558 2,586 3,372 7,261 84 483 –

25,957 22,789 –

104 3,498 1,500

570,772 – –

84 329 –

596,749 25,957 1500

7,608 4,436 –

3,006 3,254 –

29 81 –

10,585 7,609 –

586,164 18,390 1,500

18,349 18,353 41

587,664

18,389

TOTAL This Year Previous Year Capital Work-in-progress TOTAL 1. 2.

DEPRECIATION For the On year deductions

Balance as on 31/3/2006

598,249

NET BLOCK Balance Balance as on as on 31/3/2006 1/4/2005

Assets purchased vide slump agreement dated 14th March, 2006 has been taken in books on the basis of a Valuation Report submitted by a professional valuer. Land includes leasehold land of Rs.4,250 thousands which is being amortised over the period of lease. Rs. ’000

This Year Rs. ’000

Previous Year Rs. ’000

SCHEDULE 5 : CURRENT ASSETS, LOANS AND ADVANCES (A) INVENTORIES : Raw materials Work-in-progress Finished goods Packing Material Stores and Spares Promotional Items

Other Debts Considered good Less: Provision for doubtful debts

103,069 29,572 95,775 12,722 2,218 2,696

12,997 19,972 24,417 10,599 – 5,163 73,147

20,313 7,011 27,324

14,854 – 14,854

108,377 135,701 7,011

12,904 27,758 – 27,758

128,690 (Debts amounting to Rs. 296 thousand (Previous Year Rs. 7,091 thousand) are secured against Bank Guarantees / Security Deposits) (C ) CASH AND BANK BALANCES Cash and cheques on hand Balances with scheduled banks : – on current accounts – remittance in transit on deposit accounts (Of this, Rs.1,265 thousand (Previous Year Rs.1,165 thousand) is Pledged with sales tax authorities (D) LOANS AND ADVANCES (Unsecured and considered good) Loans and Advances recoverable in cash or in kind or for value to be received Considered good Considered doubtful Less: Provision for doubtful advances Deposits with Others Advance payment of taxes

This Year Rs. ’000

Previous Year Rs. ’000

95,180 94,829 18,720 699 759 – 210,187

9,111 10,549 2,167 1,620 1,285 1,449 26,181

6,177 6,940

637 282

13,117

919

– – 6,338

57,184 806 8,508

6,338

66,498

435

451

SCHEDULE 6 : CURRENT LIABILITIES

246,053 (B) SUNDRY DEBTORS (Refer Note No. 2) Debts outstanding over six months Considered good Considered doubtful

Rs. ’000 Sundry creditors (Refer Note No. 7) Other liabilities Advances from customers Sundry deposits Sales Tax & Other Taxes Interest accrued but not due SCHEDULE 7 : PROVISIONS Leave Encashment Gratuity SCHEDULE 8 : MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) Deferred revenue expenditure Brand Promotion Expenses Pre operative Expenses ERP Implementation SCHEDULE 9 : OTHER INCOME

774

1,226

15,840 10,326 103,466

6,119 – 23,165 130,406

15,227 13,910 29,137 13,910 15,227 16,588 107

30,510

31,922

4,403 – 4,403 – 4,403 1,104 65 5,572

537,071

136,988

Interest on Bank Deposits (Gross) (Tax at source Rs.42 thousand, Previous year Rs.72 thousand) Miscellaneous income

186

899

621

1,350

SCHEDULE 10 : MATERIALS CONSUMED Raw Materials consumed Stocks at the commencement of the year Add : Purchases On Acquisition Less : Sale of Raw Material Less : Stocks as at the close of the year

12,997 56,131 73,801

105,048 10,664 –

142,929 – 103,069

115,712 29,201 12,997 39,860 6,192

Packing Material Consumed Stores consumed On Acquisition Less : Stocks as at the close of the year

2218 2,218

73,515 11,535 – –

46,052

85,050

Godrej Beverages & Foods Limited (Formerly Godrej Tea Limited) Rs. ’000

This Year Rs. ’000

Previous Year Rs. ’000

19,882 684 70 5,805 1,138 299 876 566 9,269 362 3,609 6,693 4,393 11,261 25,591 679 2,691 300 3,145 228 654 55 605 4,086 58

37,557 1,249 295 8,991 3,099 259 793 786 2,230 430 8,491 4,402 17,748 39,006 17,927 – – – 4,685 565 1,123 120 634 3,055 82

SCHEDULE 11 : EXPENSES Salaries wages and allowances Contribution to provident fund and other funds Employee welfare expenses Rent Rates and Taxes Repairs and maintenance Insurance Electricity Charges Professional Fees Audit Fees Conveyance & Travelling Freight Discount and Commission Advertisement and publicity Sales promotion Bad Debts written off Provision for doubtful debts Provision for doubtful advances Clearing and Forwarding Agent Expenses Consumables Telephone & Telex Charges Recruitment Cost Royalty Other Expenses Loss on disposal of Asset Deferred Revenue Expenses written off Media Amortisation Launch Conference Pre-operative Expenses ERP Implementation

57,184 – 806 2,170

53,009

163,159

206,536

SCHEDULE 12 : INTEREST AND FINANCIAL CHARGES (a) Interest Paid on fixed loans (i) Banks 26,036 (ii) Inter Corporate Deposits 14,663 (b) (c)

Add : Taken over on acquisition Stocks at the close of the year : Finished goods Work-in-progress

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 translated at the year end exchange rates. Forward exchange contracts, remaining unsettled at the year end, backed by underlying assets or liabilities are also translated at year end exchange rates. The premium payable on foreign exchange contracts is amortised over the period of 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. f.

Depreciation is provided on the straight line method at the rates specified in Schedule XIV to the Companies Act, 1956 except for Trademarks which are amortized over a period of five years. The Company has grouped additions and disposals in the appropriate time period of a month for the purpose of charging pro rata depreciation in respect of additions and disposals of its assets keeping in view the materiality of the items involved. h.

Retirement benefits in the form of gratuity and leave encashment are provided for on actuarial valuation basis. i.

Expenditure incurred on implementation of software package is deferred over a period of six years.

ii)

Expenditure incurred prior to commencement of commercial operations is deferred over a period of three years.

Leases of assets under which all the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under operating leases are recognized as an expense on a straight-line basis over the lease term.

Deferred tax assets and liabilities are based on temporary differences between the values of assets and liabilities recorded in the financial statements and those used for the tax purpose. Tax rates applicable to future periods are used to calculate year-end deferred income tax amounts.

47,986

39,292

24,417 19,972

47,681 24,572

The basic earning per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period, except where the results would be anti-dilutive.

44,389 79,301

72,253 –

The Company is engaged in the business of manufactures of tea, which is its only primary business segment. The Company operates in economic environments which are subject to same risks and returns and hence no disclosure is required under AS 17- Accounting Standard on Segment Reporting.

95,775 29,572

24,417 19,972

A valuation allowance is recorded against deferred tax assets resulting from net operating losses and deductible temporary differences when their future realization is not likely.

44,389 27,864 27,864

SIGNIFICANT ACCOUNTING POLICIES Accounting Convention: The financial statements are prepared under the historical cost convention, on accrual basis, in accordance with the generally accepted accounting principles in India, the Accounting Standards issued by the Institute of Chartered Accountants of India and the provisions of the Companies Act, 1956. Fixed Assets:

Fixed Assets are stated at cost, less accumulated depreciation. Cost includes all expenses related to acquisition and installation of the concerned assets. Carrying amount of cash generating units/assets are reviewed at balance sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any is recognized whenever carrying amount exceeds the recoverable amount.

Rs.’000 570,772 155,320 81,415 13,592 10,326 27,520

79,968 66,732 6,683 5,562 700,000 400,000 300,000

CONTINGENT LIABILITIES NOT PROVIDED FOR a) b)

Guarantees given by the Company’s Bankers against counter guarantees given by the Company Rs.1,325 thousands (as on 31-3-2005 Rs.205 thousands). Sales Tax demand pending with Commissionerate / Tribunal and disputed by the Company Rs.207 thousands (as on 31-3-2005 Rs.Nil).

During the current year, the company changed its accounting policy with respect to amortization on promotion of products, publicity & brand from 3 years to 2 years. Had there been no change in the period of amortization, the charge for the year would have been lower by Rs.12,848 thousands. Consequently the losses for the year and accumulated losses are higher by Rs.12,848 thousand.

SECURED LOANS

Inventories: Raw materials and Packing materials are valued at weighted average cost. Promotional items are valued at cost. Finished goods and work-in-progress are valued at lower of cost and net realizable value. These costs include cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

The Company has acquired the Foods division of Godrej Industries Limited (excluding the Wadala Factory) as a going concern on a slump sale basis for net consideration of Rs.700,000 thousands by taking over the following assets and liabilities Particulars Assets: Fixed Assets Stocks Debtors (Net) Cash & Bank Remittance-in-transit Loans & Advances (Net) Total 858,945 Less: Liabilities Creditors Other Liabilities Provision for Gratuity Provision for Leave Encashment Net Consideration Less: Amount paid Consideration to be paid in kind

SCHEDULE 14 : NOTES FORMING PART OF THE ACCOUNTS

Miscellaneous expenditure: i)

1,784 8,239

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

Retirement Benefits:

167 7,120

(1,657)

Depreciation:

29,269

(1,657)

Revenue Recognition: Revenue is recognized when goods are dispatched to external customers. Sales are recorded net of returns, trade discounts, rebates, sales taxes.

18,592 10,677

125,347

Foreign Exchange Transactions:

40,699 Interest paid on other loans Banks Other financial charges

SCHEDULE 13 : INVENTORY CHANGE Stocks at the beginning of the year Finished goods Work-in-progress

48,318 587 1,934 2,170 60,159

Provisions & Contingencies: Provisions are recognized in the accounts in respect of present probable obligations, the amount of which can be reliably estimated.

Foreign currency term loan, foreign currency working capital demand loan and cash credit from a bank is secured by hypothecation by way of a first charge on all tangible and moveable fixed assets, stock and book debts, both present and future.

Annual Report 2005-2006

SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 6.

12.

SUNDRY DEBTORS This Year Rs.’000 Sundry Debtors include amount due from Companies under the same management: Godrej Consumer Products Ltd. Maximum balance during the year Godrej & Boyce Mfg Co. Ltd. Maximum balance during the year Godrej Industries Ltd. Maximum balance during the year Godrej Sara Lee Ltd. Maximum balance during the year

Previous Year Rs. ‘000

RELATED PARTY DISCLOSURES Related Party disclosure as required by AS - 18 “Related Party Disclosures” are given below: 1.

Relationships (i)

Shareholders ( the Godrej Group shareholding) in the company: Godrej Industries Limited hold 70.91% Godrej Industries Limited is a subsidary of Godrej & Boyce (Mfg) Co.Limited, the ultimate holding company.

(ii)

It is the opinion of the management that there are no parties, which can be classified as Small Scale industrial Undertakings to whom the Company owes any sum. The Auditors have accepted the representation of the management in this matter.

Other related parties in the Godrej Group where common control exist. 1. Godrej Consumer Products Limited 2. Godrej Agrovet Limited 3. Godrej Properties Limited 4. Godrej Industries Limited 5. Geometric Software Solutions Company Limited

(iii)

Key Management Personnel: 1. Mr. A.Mahendran

DEFERRED TAX

(iv)

Enterprises over which key management personnel exercise significant influence

108 679 280 307 2,437 11,788 1,280 1,842

76 964 228 228 10,657 10,657 1,633 1,633

The tax effect of significant temporary differences that resulted in deferred tax assets and liabilities are:

Assets Losses carried forward Others Liabilities Depreciation on Fixed Assets Deferred Revenue Expenditure

This Year Rs.’000

Previous Year Rs. ‘000

1,12,350 12,445

1,12,350 300

1,24,795

1,12,650

(23,390) (2,134) 99,272

(2,600) (22,350) 87,700

10.

The amount of exchange difference included in the Profit and Loss Account, under the related heads of expenses, is Rs. 1,018 thousand (Previous year Rs. 3,107 thousand). The amount of exchange difference in respect of forward exchange contracts to be recognized in the profit and loss account of subsequent accounting periods is Rs. Nil (Previous year Rs. 1,018 thousand). LEASE Disclosure relating to Operating Lease as required by AS – 19 “Leases”, is given below : a.

11.

The total of future minimum lease payments under non - cancelable operating leases for each of the following periods: This Year Previous Year Rs.’000 Rs. ‘000 i. Not later than one year 2,938 4,241 ii. Later than one year and not later than five years 2,546 5,648 iii. Later than five years Nil Nil Lease payments recognized in the statement of Profit & Loss for the period : Minimum Lease payments 5,013 7,944

EARNINGS PER SHARE

Number of shares (nominal value Rs.10/- each) (Loss) after tax Basic/Diluted EPS: Weighted Average number of shares Earnings per share in Rs.

(v)

Deferred tax assets on carried forward tax losses have been recognized and carried forward on the ground that there is virtual certainty that sufficient taxable income will arise in future. The Company has considered certain expenditure which is not expected to arise in the future, increase in business income due to formalization of distribution arrangements and the acquisition and amalgamation of highly profitable company as factor on the basis of which it has concluded that it is virtually certain that sufficient taxable income will arise in future against which the deferred tax assets will be realized. 9.

1. 2.

This Year Rs.’000

Previous Year Rs. ‘000

13,750,000 (171,692)

13,750,000 (214,258)

Individuals excercing significant influence 1. Mr. A.B.Godrej 2. Mr. N.B.Godrej 3. Mr. J.N. Godrej 4. Mr. A.Mahendran

The following transactions were carried out with the related parties in the ordinary course of business: (i) Sr No. 1

The details relating to parties referred to in item 1(i) and (ii) above. (Rs.’000)

Godrej Group Shareholders Issue of Share Capital Nil (Nil) 2 Inter corporate deposit taken during the year Nil (Nil) 3 Sale of Fixed Assets Nil (Nil) 4 Sale of goods & Other Income 726 (18,382) 5 Credit note issued for Sales Returns 7,097 (Nil) 6 Purchase of goods 2,073 (1,862) 7 Expenses charged by other Companies 5,713 (9,330) 8 Expenses charged to other Companies 284 (348) 9 Interest on Inter Corporate Deposit Nil (Nil) 10 Sundry Deposit with Other Companies Nil (398) 11 Consideration payable on acquisition 300,000 (Nil) 12 Outstanding (Payables) net of Receivables 2,717 (8,672) Figures in italics are for the previous year. (ii)

Particulars

13,750,000 (15.58)

Note: No effect has been given for Share Application Money pending allotment in the diluted EPS as the results would be anti-dilutive.

Other Related parties in the Godrej Group Nil (Nil) 20,000 (20,000) 58 (Nil) 26 (Nil) Nil (Nil) Nil (Nil) 653 (24) 167 (79) 418 (Nil) Nil (Nil) Nil (Nil) 452 (375)

Details relating to persons referred to in items 1(iii),(iv) and (v) above.

1. 13,750,000 (12.49)

Godrej Sara Lee Limited Godrej Hi Care Limited

2. 3. 4. 5.

Expenses charged by other companies and Reimbursement made to other companies Expenses charged to other companies Sales & Other Income Advances Outstanding (Payables) net of Receivables

This Year Rs.’000

Previous Year Rs. ‘000

1,413 2,532 6 15 1,410

414 2,826 Nil Nil 1,895

Godrej Beverages & Foods Limited (Formerly Godrej Tea Limited) 3.

Significant Related Party Transaction: Rs. ’ 000 Nature of Transaction

Godrej Group Shareholders

1 2

Issue of Share Capital Inter Corporate Deposits taken during the year

– –

3 4

Sale of Fixed Assets Sales of Goods & Other Income

– Godrej & Boyce Limited Godrej Industries Ltd.

5 6

Credit note Issued for Sales Returns Purchase of goods

Godrej Industries Ltd. Godrej Industries Ltd.

Expenses charged by other Companies

Godrej Industries Ltd.

Amount – –

Expenses charged to other Companies

Godrej Industries Ltd. Godrej & Boyce Limited

– 309 415 18,382 7,097 2,073 1,862 5,532 9,113 181 217 284 343 5

Sundry Deposit with Other Companies Interest expense on other inter coporate deposit taken Consideration Payable on acquisition Outstanding (Payable), net of receivables

Godrej Industries Ltd. Godrej & Boyce Limited –

356 42 –

Godrej & Boyce Limited

10 11 12

Godrej Industries Ltd. Godrej Industries Ltd.

300,000 2,437 8,693

Godrej & Boyce Limited (ii) 1 2 3

280

Details relating to person referred to in item 1(iii) , (iv) and (v) above: Issue of Share Capital – Remuneration – Expenses charged by other – Companies & reimbursement made to other Companies Expenses charged to other – Companies

Other Related parties in the Godrej Group

Amount

– Geometric Software Solutions Company Limited

– 20,000 20,000 58 26

Godrej Agrovet Limited Godrej Agrovet Limited

– –

Godrej Agrovet Limited

653

Godrej Consumers Products Ltd.

–

39 49 128 30 –

Geometric Software Solutions Company Limited

418

Godrej Consumers Products Ltd.

108 76 45 299 299

Godrej Agrovet Limited

Godrej Agrovet Limited Godrej Properties Limited

– – –

– – Godrej Sara Lee Limited

–

Godrej Hi Care Limited Godrej Sara Lee Limited

– – 1413 355 59 1075 2564 1457 262 6 15 1280 1633 130 262

Godrej Hi Care Limited 5 6 7

Sales & Other Income Advances Outstanding (Payable), net of receivables

– – –

– –

Godrej Hi Care Limited Godrej Sara Lee Limited Godrej Sara Lee Limited Godrej Hi Care Limited

13.

17.

MANAGERIAL REMUNERATION

Salaries & Allowances Contribution to Provident Fund Estimated monetary value of perquisites Total 14.

This Year Rs.’000 Nil Nil Nil

Previous Year Rs. ‘000 2,61 Nil 14

Nil

2,75

This Year Rs.’000 224 84 20

Previous Year Rs. ‘000 110 33 8

328

151

Total 15. VALUE OF CONSUMPTION OF RAW MATERIAL This Year Rs. ‘000

Manufactured Packet Tea Traded Fruit Drinks/ Trays/Juices Fruits Beverages Puree/Pulp/Juices Refind Oil/Vanaspati Soya & Cereals Trading Oils Soya & Cereals

Imported Items Indigenous Item

Nil 39,860

– 100

Nil 73,515

– 100

Total

39,860

100

73,515

100

This Year Quantity

Packet Tea Blended Tea

18.

MT MT

Previous Year Quantity

Value Rs. ‘000

263

16,421

262

23,752

161

3700

665

KL KL MT MT MT

804 676 512 70 65

30,728 17,678 24,201 2,048 3,084 1,562

Nil Nil Nil Nil Nil Nil

701 Nil

Value Rs. ‘000 77,729 Nil

701

77,729

Previous Year Quantity 1,126 175

Value Rs. ‘000 147,488 9,075

1,256

156,563

Value Rs. ‘000

24,417

RAW MATERIAL CONSUMED Unit

This Year Quantity

Tea 19.

Unit

This Year Quantity

95,775 Previous Year Rs. ‘000

16. SALES

Unit

AUDITOR’S REMUNERATION

Audit Fees Audit under other statutes Out of pocket expenses

INVENTORIES – FINISHED GOODS

855

Value Rs. ‘000 39,860

Previous Year Quantity 905

Value Rs. ‘000 73,515

ACTUAL PRODUCTION Unit Packet Tea

This Year Quantity 702

Previous Year Quantity 830

Note: Actual Production represents production at third party processing locations. 20.

Information required under Schedule VI to the Companies Act, 1956 have been given to the extent applicable.

21.

The previous year’s figures have been regrouped and reclassified wherever necessary to conform to the current year’s presentation.

Annual Report 2005-2006 ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956 i)

ii)

Registration Details Registration No. State Code Balance Sheet Capital raised during the year (Amount in Rs. '000) Public Issue Rights Issue Bonus Issue Private Placement

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006

105714 11 31-Mar-06 Nil Nil Nil Nil

Operating Loss before working capital changes Adjustments for : Inventories Trade & Other receivables Trade & Other payables

iii) Position of mobilisation and deployment of funds (Amount in Rs. '000) Total Liabilities 1,227,590 Total Assets 1,227,590 Source of Funds Paid up Capital Reserve & Surplus / (Accumulated Losses) Secured Loans Unsecured Loans Application of Funds Net Fixed Assets Net Current Assets Deferred Tax Asset Misc. Expenditure iv) Performance of Company (Amount in Rs. '000) Turnover Total Expenditure Loss before Tax Loss after Tax Earning per Share in Rs. Dividend Rate % v)

Generic Names of the three principal products/ services of Company Item Code No. Product Description

Cash Flow from Operating Activities : Loss before tax Adjustments for : Depreciation Loss on Disposal of Asset Expenses incurred during the year deferred Deferred Revenue expenditure written off Interest income Interest expense

Direct Taxes paid

137,500 (520,549) 340,090 150,000 587,664 13,767 99,272 6,338

Net Cash used in operating activities Cash Flow from Investing Activities : Purchase of fixed Assets Sale of fixed assets Interest received Net Cash used in investing activities Cash Flow from Financing Activities : Share Application Money Changes in Cash Credit/Working Capital Demand Loans Term Loans/Inter Corporate Deposits taken Term Loans repaid Interest paid Net Cash from financing activities

78,350 261,134 (182,783) (171,692) (12.49) –

9023000 Packet Tea

Current Year Rs. ‘000

Previous Year Rs. ‘000

(182,783)

(227,158)

3,005 58 – 60,159 (435) 47,986

3,254 82 – 53,009 (451) 39,292

(72,010)

(131,973)

(172,905) (127,239) 497,173

126,842 5,932 (29,138)

197,028 (42)

103,636 126

124,976

(28,212)

(572,376) 38 435

(3,538) 166 451

(571,903)

(2,922)

600,000 (38,127) (150,000) 184,385 (49,435)

– (92,009) 177,000 – (38,687)

546,823

46,304

99,895 30,510

15,171 15,339

130,406

30,510

Net Increase in Cash and Cash Equivalents Add : Cash & Cash equivalents (Opening Balance) Cash & Cash equivalents (Closing Balance) For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants K.M. ELAVIA Partner

A.B. GODREJ Chairman

A. MAHENDRAN Director

Mumbai, May 19, 2006

Godrej Properties Limited BOARD OF DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2006 To The Shareholders Your Directors have pleasure in submitting their Report alongwith the audited Accounts for the year ended 31st March, 2006. 1.

OPERATING RESULTS : Your Company’s performance during the year as compared to the previous period is summarised below:

2005-2006 (Rs. in lacs)

2004-2005 (Rs. in lacs)

Profit before Taxation Provision for Taxation Provision for Fringe Benefit Tax Provision for Deferred Tax

1785.84 (445.32) (4.88) 3.29

879.67 (300.35) — 4.00

Profit after Taxation Add: Surplus brought forward Prior year tax adjustments

1338.93 772.20 (6.87)

583.32 559.20 1.97

AMOUNT AVAILABLE FOR APPROPRIATION

2104.26

1144.49

Appropriations: Your Directors recommend appropriations as under: Interim Dividend Proposed Dividend Dividend Distribution Tax Transfer to General Reserve Surplus carried forward

_ 620.00 86.96 133.90 1263.40

255.00 _ 58.95 58.34 772.20

TOTAL APPROPRIATIONS

2104.26

1144.49

DIVIDEND : Your Directors had announced during the year an Interim Dividend of 96.20 54% for the year ended 31st March, 2006. The same is recommended as the Final Dividend for the year. REVIEW OF OPERATIONS : Your Company has had a good financial year, posting total income of Rs. 7045.78 lacs during the year ended 31st March 2006. Both commercial projects Godrej Eternia C and Godrej Castlemaine at Pune were completely sold out. The office spaces in first phase of the commercial project in Godrej Coliseum, Mumbai have also been sold out and the construction of Phase 2 is in full swing and it should be completed by end of 2006. In the residential segment, our project Godrej Woodsman Estate Bangalore, has been well received by the market. The construction work of Godrej Regency Park Tower B, Thane and Godrej Hill , Kalyan is going on as per schedule. FUTURE PROSPECTS AND OUTLOOK OF THE COMPANY : The Real Estate Industry continues to flourish and your Company is on the threshold of major developments. Your Company has scaled up operations and increased its geographical footprints. The plan is to achieve good geographical and product balance. The company is doing bigger projects like the IT Parks in Kolkata, mixed development at Bavdhan, near Pune and residential development at Bangalore. The Company is also diversifying the portfolio and doing projects like the Retail Mall in Kolkata and exploring new locations like Cochin, Chennai and Hyderabad. SUBSIDIARY COMPANIES : During the year your Company acquired two Private Limited Companies viz., Godrej Waterside Properties Private Limited and Godrej Realty Private Limited. These two companies will be subsidiaries of your Company. The project Godrej Waterside – Kolkata will be developed exclusively by the Godrej Waterside Properties Private Limited and the project at Bavdhan, Pune will be developed exclusively by Godrej Realty Private Limited. Godrej Realty Private Limited allotted 4,90,000 equity shares of Rs.10/- each fully paid-up to HDFC Venture Trustee Company Limited a trustee of HDFC Property Fund, and 5,00,000 equity shares of Rs.10/- each fully paid-up to your Company during the year. As such your Company holds in aggregate 5,10,000 Equity Shares and holds 51% of the paid up share capital of Godrej Realty Private Limited. Further, Godrej Realty Private Limited issued 56,35,000 , 10% Secured Redeemable Optionally Convertible Debentures of Rs.10/- each to HDFC Venture Trustee Company Limited and 58,65,000, 10% Secured

7. 8.

Redeemable Optionally Convertible Debentures of Rs.10/- each to your Company during the year. During the year your Company was allotted 40,000 equity shares of Rs.10/- each fully paid-up in Godrej Waterside Properties Private Limited and holds the entire paid up share capital of that company. The audited Balance Sheet as at 31st March, 2006 and Profit & Loss Account ended on that date together with the Reports of Directors and Auditors thereon of our Subsidiary Companies namely Girikandra Holiday Homes & Resorts Limited, Godrej Realty Pvt. Ltd. and Godrej Waterside Properties Pvt. Ltd. alongwith Statement as required under Section 212 of the Companies Act, 1956, is annexed herewith. LOAN TO SUBSIDIARY : The Company has granted an interest free loan of Rs. 28,267,717/- to Girikandra Holiday Homes & Resorts Limited (GHHRL) the wholly owned subsidiary company. The auditors have mentioned this in their Auditors Report. The said loan was given to GHHRL for promoting the company to carry on the project at Moho near Panvel. FIXED DEPOSITS : The Company has accepted Fixed Deposits to the extent of Rs. 1,740,000/- during the year. ADDITIONAL INFORMATION : (a) The information required to be furnished under the provision of Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 and forming part of Director’s Report is annexed hereto. (b) Information in respect of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo, required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is provided hereunder: (i)

10.

11.

12.

Conservation of Energy : Expenses on account of Energy are negligible. (ii) Technology Absorption: It is an on going process. (iii) Foreign Exchange Earnings & Outgo : During 2005-06, expenditure in foreign currencies amounted to Rs. 755,506/- on account of traveling and expenses incurred for business promotion. The company has not earned any Foreign Exchange during the year. DIRECTORS : In accordance with the provision of the Articles of Association of the Company, Mr. J. N. Godrej, Mr. R.K. Naoroji and Ms. P. A. Godrej retire by rotation and being eligible, offer themselves for re-appointment. Mr. Milind Korde, Managing Director of the Company was appointed as the Managing Director of the Company on 1st April, 2005. His tenure as Managing Director expires on 31st March, 2006, the Company has proposed to re-appoint him w.e.f. 1st April, 2006 for a period of 3 years. DIRECTORS’ RESPONSIBILITY STATEMENT: Your Directors confirm: (i) that in the preparation of the annual accounts, the applicable accounting standards have been followed; (ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended 31st March, 2006 and of the profit of the Company for that year; (iii) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) that the Directors have prepared the annual accounts on a going concern basis. APPOINTMENT OF AUDITORS: M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants retire at the ensuing Annual General Meeting and are eligible for re-appointment for which they have given their consent. ACKNOWLEDGEMENT: Your Directors take this opportunity to thank all the employees and associates for their co-operation. For and on behalf of the Board of Directors A. B. GODREJ Chairman

Mumbai, May 10, 2006

ANNEXURE TO DIRECTORS’ REPORT Information as per Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 and forming part of the Directors’ Report for the year ended March 31, 2006. SR. NO.

NAME

Mr. Milind S. Korde

AGE

QUALIFICATION

DATE OF EMPLOYMENT

DESIGNATION

REMUNERATION (RS.)

B.Sc., L.L.B., A.C.S.

03.12.1990

Managing Director

62,10,465

EXPERIENCE (YEARS) 19

LAST EMPLOYMENT DESIGNATION COMPANY Commercial Officer

Tata Housing Development Co. Ltd.

NOTES : 1.

NATURE OF EMPLOYMENT WHETHER CONTRACTUAL OR OTHERWISE: a) The appointment of the Managing Director from 1st April, 2006 is contractual and terminable by three months notice on either side. b) The appointments of the other employees are non-contractual and are terminable by three months notice on either side.

OTHER TERMS AND CONDITIONS: a) In case of the Managing Director, gross remuneration as shown above includes salary, House Rent Allowance (wherever applicable), Commission (wherever applicable), Company’s contribution to Provident Fund and monetary value of perquisites as per Income Tax Rules which are given in terms of the Agreement entered into with him. b) The Designation represent the nature of duties performed by the Employee. d) The age shown is as of last Birthday and the particulars of previous employment pertain to the immediate past employment.

RELATIVES OF DIRECTORS: The Managing Director is not related to any of the other Directors of the Company.

100

Annual Report 2005-2006

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ PROPERTIES LIMITED 1.

We have audited the attached Balance Sheet of GODREJ PROPERTIES LIMITED, as at 31st March 2006 and also the Profit and Loss Account and the 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 auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 sub-section (4A) of Section 227 of the Companies Act, 1956, we annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order.

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

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

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.

The Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account.

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

Without qualifying our opinion, we draw attention to the fact that as referred to in Note 1(f) of Schedule 19-Notes to Accounts, in respect of projects under long term contracts undertaken and/ or financed by the Company, we have relied upon the management’s estimates of the percentage of completion, costs to completion and on the projections of revenues expected from projects owing to the technical nature of such estimates, on the basis of which profits/losses have been accounted, interest income accrued and realizability of the construction work in progress and project advances determined.

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

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

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.

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

For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants Bahadur S. Dastoor Partner Membership No. 48936 Place : Mumbai Date : May 10, 2006

ANNEXURE TO THE AUDITORS' REPORT Referred to in paragraph (3) of our report of even date. 1.

(a)

According to the information and explanations given to us and on the basis of our examination of books of accounts, during the year, the Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and other statutory dues applicable to it with the appropriate authorities. According to the information and explanations given to us, there are no undisputed dues, payable in respect of above as at 31st March, 2006 for a period of more than six months from the date they became payable.

(b)

According to the information and explanations given to us, there are no dues outstanding of Sales Tax, Income Tax, Customs duty, Wealth Tax, Service tax, Excise Duty or Cess on account of any dispute.

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

(b)

As explained to us, the Company has a program for physical verification of fixed assets at periodicals intervals. In our opinion, the period of verification is reasonable having regard to the size of the Company and the nature of its assets.

(c)

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

(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.

10.

The Company does not have accumulated losses at the end of the financial year and it has not incurred any cash losses in the current and immediately preceding financial year.

(c)

The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

11.

(a)

The Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956.

12.

(b)

Consequently, the question of commenting on the rates of interest and others terms and conditions of the loans granted being prejudicial to the interests of the Company, receipt of regular principal and the interest and reasonable steps taken for recovery of principal and interest does not arise.

13.

(c)

The Company has not taken any loan, secured or unsecured from companies, firms or other parties covered in the Register maintained under Section 301 of the Companies Act, 1956.

(d)

Consequently, the question of commenting on the rates of interest and others terms and conditions of the loans taken being prejudicial to the interests of the Company, payment of regular principal and the interest does not arise.

14.

The Company does not deal in shares, securities, debentures and other investments.

15.

According to the information and explanations given to us, the Company has given guarantee for loans taken by others from banks. The terms and conditions are not prima-facie prejudicial to the interest of the Company.

16.

According to the information and explanations given to us the Company has utilized the term loan for the purpose it was taken.

17.

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 the particular of contracts and arrangement referred to in Section 301 of the Companies Act, 1956 have been entered into the register required to be maintained under that section.

According to the information and explanations given to us and on an overall examination of the Balance Sheet and cash flows of the Company, we report that the Company has not utilized funds raised on shortterm basis for long-term investment.

18.

The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956.

The transactions made in pursuance of such contracts or arrangements, were made at prices which are reasonable having regard to prevailing marketing prices at the relevant time, where comparable market price exist.

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.

(b)

(a)

In our opinion and according to the information and explanations given to us, the Company has complied with 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 our opinion and according to the information and explanations given to us, the internal audit system is commensurate with the size of the Company and nature of its business.

The maintenance of cost records has not been prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956, in respect of the activities carried on by the Company.

For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants Bahadur S. Dastoor Partner Membership No. 48936 Place : Mumbai Date : May 10, 2006

101

Godrej Properties Limited BALANCE SHEET AS AT 31ST MARCH, 2006 Schedule

This Year Rupees

Previous Year Rupees

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

SOURCES OF FUNDS Shareholders’ Funds Share Capital Reserves & Surplus

1 2

64,445,450 413,988,398

64,445,450 351,477,988

Loan Funds Secured Loans Unsecured Loans

3 4

15,553,290 60,859,000

187,255,573 254,473,000

554,846,138

857,652,011

APPLICATION OF FUNDS

55.48

Fixed Assets

85.77

Gross Block Less: Depreciation

36,381,750 14,673,620

27,746,336 14,299,093

21,708,130

13,447,243

Investments

64,264,447

24,036

Current Assets, Loans & Advances Inventories Sundry Debtors Cash & Bank Balances Loans & Advances

7 8 9 10

204,751,391 543,247,709 149,863,239 809,055,939

182,130,830 277,163,500 41,776,280 948,351,137

1,706,918,278

1,449,421,746

1,045,877,540 194,753,178

521,522,751 85,975,263

1,240,630,718

607,498,014

Net Current Assets

466,287,561

841,923,732

Deferred Tax Asset

2,586,000

2,257,000

Less: Current Liabilities & Provisions Current Liabilities Provisions

11 12

Miscellaneous Expenditure (to the extent not written off or adjusted) Deferred Revenue Expenditure (0) 1 NOTES TO ACCOUNTS & ACCOUNTING POLICIES

–

554,846,138

857,652,011

Schedule INCOME Sales - Own Projects - Development Projects Income from Development Projects Operating Income Other Income TOTAL INCOME EXPENDITURE Cost of sales - Own Projects - Development Projects Employee Remuneration & Benefits Administration Expenses Interest & Finance Charges (Net) Depreciation

15 16 17 18

Previous Year Rupees

441,634,459 126,076,106 76,737,391 53,142,859 6,987,239

185,429,148 152,398,186 51,495,835 26,998,677 2,157,094

704,578,054

418,478,940

363,211,528 62,040,000 22,925,238 19,766,499 52,976,531 5,074,007

175,997,648 85,358,564 18,534,877 11,699,691 35,601,852 3,319,210

525,993,804

330,511,841

Profit for the year Provision for Current Taxes for fringe benefit tax for deferred tax

178,584,250 (44,532,000) (487,699) 329,000

87,967,099 (30,034,500) – 400,000

Profit After Tax Prior years tax adjustments Surplus brought forward

133,893,551 (687,642) 77,220,108

58,332,599 196,641 55,919,900

Amount Available for Appropriation Less : Interim Dividend Proposed Dividend Dividend Distribution Tax Transfer to General Reserve

210,426,018

114,449,140

– 62,000,000 8,695,500 13,390,000

25,500,000 – 5,895,032 5,834,000

Surplus carried forward to Balance Sheet

126,340,518

77,220,108

20.67

9.08

Earnings per share (basic/diluted) in Rs. (Refer Note 9) NOTES TO ACCOUNTS & ACCOUNTING POLICIES

13 14

This Year Rupees

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

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

As per our Report of even date.

Signatures to Balance Sheet and Schedules 1 to 12 and 19

For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants B. S. DASTOOR Partner Mumbai, May 10, 2006

A. B. GODREJ M. KORDE

Chairman Managing Director

S. KEMBHAVI Company Secretary

Signatures to Profit and Loss Account and Schedules 10, 13 to 19

For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants B. S. DASTOOR Partner Mumbai, May 10, 2006

Chairman Managing Director

A. B. GODREJ M. KORDE

S. KEMBHAVI Company Secretary

SCHEDULES FORMING PART OF THE ACCOUNTS This Year Rupees

Previous Year Rupees

SCHEDULE 1 : SHARE CAPITAL AUTHORISED 10,000,000 Equity Shares of Rs. 10/- each ISSUED, SUBSCRIBED & PAID UP 6,444,545 Equity Shares of Rs. 10/- each fully paid up. (Out of above 5,264,645 (Previous year 5,073,965) shares are held by Godrej Industries Ltd., the Holding Company)

General Reserve - as per last Balance Sheet Add : Transfer from Profit & Loss Account Profit and Loss Account

102

Previous Year Rupees

15,303,290

165,170,657

250,000

22,084,916

15,553,290

187,255,573

15,553,290

178,751,582

45,000,000

215,000,000

SCHEDULE 3 : SECURED LOANS 100,000,000

100,000,000

64,445,450

Cash Credit / Working Capital Demand Loan (Secured by equitable mortgage of immovable property of the Company’s Project at Juhu- Mumbai & Godrej Hill - Kalyan)

Term Loan from Banks (Secured by way of equitable mortgage of immovable property of the projects undertaken by the Company as Project Manager at Godrej Castlemaine - Pune) Of the above, Repayable within a year

SCHEDULE 2 : RESERVES & SURPLUS Share Premium As per last Balance Sheet

This Year Rupees

245,172,265

29,085,615 13,390,000

23,251,615 5,834,000

42,475,615

29,085,615

126,340,518

77,220,108

413,988,398

351,477,988

SCHEDULE 4 : UNSECURED LOANS Banks Companies Fixed Deposits Of the above, Repayable within a year

–

2,500,000

15,859,000

36,973,000

60,859,000

254,473,000

60,859,000

250,074,000

Annual Report 2005-2006 SCHEDULE 5 : FIXED ASSETS ASSETS

GROSS BLOCK

DEPRECIATION

NET BLOCK

As at 1st April, 2005 Rs.

Additions for the year 2005-2006 Rs.

Deductions for the year 2005-2006 Rs.

As at 31st March, 2006 Rs.

As at 1st April, 2005 Rs.

Additions for the year 2005-2006 Rs.

Deductions for the year 2005-2006 Rs.

As at 31st March, 2006 Rs.

As at 31st March, 2005 Rs.

2,007,976 1,477,796 4,731,182 4,736,275 3,615,082 2,907,329 4,902,371 3,368,325

222,740 11,500 4,027,759 1,210,309 3,773,763 2,331,315 4,127,342 –

2,230,716 1,489,296 604,551 382,501 45,300 202,240 818,505 1,296,205

– – 8,154,390 5,564,083 7,343,545 5,036,404 8,211,208 2,072,120

1,405,578 757,802 951,344 3,153,568 1,256,091 820,468 3,687,980 2,266,262

36,669 6,012 1,424,403 661,195 959,985 546,284 1,288,005 151,454

1,442,247 763,814 235,103 282,417 28,569 143,129 708,040 1,096,161

– – 2,140,644 3,532,346 2,187,507 1,223,623 4,267,945 1,321,555

– – 6,013,746 2,031,737 5,156,038 3,812,781 3,943,263 750,565

602,398 719,994 3,779,838 1,582,707 2,358,991 2,086,861 1,214,391 1,102,063

Total

27,746,336

15,704,728

7,069,314

36,381,750

14,299,093

5,074,007

4,699,480

14,673,620

21,708,130

13,447,243

Previous Year

27,964,734

3,359,562

3,577,959

27,746,336

13,967,328

3,319,210

2,987,444

14,299,093

13,447,243

Land - Leasehold Building Leasehold Improvement Motor Vehicle Furniture & Fixtures Office Equipment Computer Site Equipments

SCHEDULE 6 : INVESTMENTS Long Term (At Cost) Quoted Investments (Note 3) 100 Equity Shares of Rs.10/- each of Alacrity Housing Limited 100 Equity Shares of Rs.10/- each of Alsa Construction & Housing Limited 100 Equity Shares of Rs.10/- each of Ansal Buildwell Limited 100 Equity Shares of Rs.10/- each of Ansal Properties & Construction Limited 100 Equity Shares of Rs.10/- each of Ansal Properties & Industries Limited 100 Equity Shares of Rs.10/- each of Lok Housing & Construction Limited 100 Equity Shares of Rs.10/- each of Mantri Housing & Construction Limited 100 Equity Shares of Rs.10/- each of Premier Hsg. & Industrial Ent. Limited 100 Equity Shares of Rs.10/- each of D.S. Kulkarni Developers 100 Equity Shares of Rs.10/- each of Unitech Limited 100 Equity Shares of Rs.10/- each of The Great Eastern Shipping Company Limited 100 Equity Shares of Rs.10/- each of Radhe Developers Limited 23700 Equity Shares of Rs.10/- each of United Textiles Limited 25000 Equity Shares of Rs.10/- each of Amitabh Bachchan Corporation Limited Less : Provision for Diminution in Value Unquoted Investments 1000 Equity Shares of Rs.10/- each of Saraswat Co-operative Bank Limited Investments In Subsidiary Companies Godrej Realty Pvt. Ltd. 510,000 Equity Shares of Rs.10/- each of 10% Secured redeemable optionally convertible debentures

This Year Rupees

Previous Year Rupees

742

616

1,066

1,366

3,081

1,241

1,641

1,516

891

6,366

3,106

266

2,370

2,500

26,768

22,321

12,732

4,447

14,036

10,000

5,100,000 58,650,000

– –

SCHEDULE 11 : CURRENT LIABILITIES Acceptances Sundry Creditors (Note 7) Investor Education and Protection Fund Advances received against sale of flats / TDRs Deposits Unclaimed Fixed Deposits Other liabilities Interest accrued but not due on Loans SCHEDULE 12 : PROVISIONS Gratuity Leave Encashment Proposed Dividend Tax on Dividend For Taxation SCHEDULE 13 : OPERATING INCOME (GROSS) Project Management fees Other Income from Customers Lease Rent Licence Fees Tax Deducted at source SCHEDULE 14 : OTHER INCOME Dividends Provision for diminution in value of investments written back Profit on sale of Fixed Assets (net) Miscellaneous Income SCHEDULE 15 : COST OF SALES Opening Stock: Add : Expenditure/Transfers from Advances during the year Stock-In-Trade Acquired on Area Sharing Development Rights Construction Infrastructure Architect Fees Advertisement Expenses Overheads / Interest Less : Closing Stock

Godrej Waterside Properties Pvt. Ltd. 50000 Equity Shares of Rs.10/- each of 1. 2.

Cost of Quoted Investments Market Value of Quoted Investments

500,000 64,264,447

– 24,036

26,768 148,408

26,768 61,874

69,281,566 135,469,825 204,751,391

61,584,415 120,546,415 182,130,830

– 543,247,709 543,247,709

– 277,163,500 277,163,500

87,142 10,453,555 139,322,542 149,863,239

6,275 3,640,625 38,129,380 41,776,280

62,307,989 232,218,224 386,020,789 (62,040,000) 323,980,789 75,744,559 114,804,377 809,055,939

32,758,140 249,630,941 553,161,532 (85,358,565) 467,802,967 112,438,437 85,720,650 948,351,136

SCHEDULE 7 : INVENTORIES Stock in trade (Note 4) Construction Work in progress SCHEDULE 8 : SUNDRY DEBTORS (UNSECURED, CONSIDERED GOOD) Exceeding 6 months Others SCHEDULE 9 : CASH & BANK BALANCES Cash & Cheques on Hand Balance with Scheduled Banks - on Current Accounts - on Fixed Deposit Accounts (Refer Note 5) SCHEDULE 10 : LOANS & ADVANCES (UNSECURED, CONSIDERED GOOD) Loans & Advances recoverable in cash or in kind or for value to be received (Note 3) Development Manager Fees Accrued but not due Due on Management Projects (Including Work-in-progress) Less: Transfer to Cost of Sales - Development Projects Deposits Advance Tax & Tax deducted at source

SCHEDULE 16 : EMPLOYEE REMUNERATION & BENEFITS Salaries, Bonus, Gratuity & Allowances Contribution to Provident & other funds Other Employee Benefits SCHEDULE 17 : ADMINISTRATION EXPENSES Cost of Project Management Consultancy Charges Service Charges / Licence Fees Marketing Expenses Compensation Claims Loss on sale of Fixed Assets (Net) Other Operating Expenses Deferred Revenue Expenditure written off Provision for diminution in value of investments SCHEDULE 18 : INTEREST AND FINANCE CHARGES (NET) Interest Paid - Banks - Inter Corporate Deposits - Projects and landlords - Others Total Interest Paid Add : Brokerage & other Financial charges Total Interest/Finance Charges Paid Less: Interest Received (Gross) - Customers - Projects and landlords - Others Less: Interest Received (Gross) NET INTEREST Tax Deducted at source

This Year Rupees

Previous Year Rupees

– 28,029,216 – 764,446,554 24,652,770 4,035,000 224,713,999 – 1,045,877,540

5,679,738 37,298,013 – 295,568,286 23,940,797 3,607,000 155,411,161 17,755 521,522,751

2,755,825 2,634,878 62,000,000 8,695,500 118,666,975 194,753,178

2,223,511 2,435,438 – – 81,316,314 85,975,263

2,564 – 53,128,295 12,000 53,142,859 11,877,497

6,216 1,405,630 25,574,830 12,000 26,998,677 5,488,087

3,330 – 5,376,611 1,607,298 6,987,239

660 4,049 – 2,152,385 2,157,094

182,130,830

230,138,294

– 190,000,000 99,960,010 27,543 9,116,217 11,069,565 75,658,756 385,832,091 (204,751,392) 363,211,528

34,402,940 – 4,083,214 25,036,931 5,670,259 10,909,564 47,887,275 127,990,183 (182,130,830) 175,997,648

19,862,794 2,023,505 1,038,939 22,925,238

15,957,776 1,425,718 1,151,383 18,534,877

168,360 4,372,846 2,328,656 – – – 12,819,182 67,866 9,589 19,766,499

260,345 1,307,704 2,616,469 370,441 791,765 175,569 6,109,533 67,866 – 11,699,691

14,630,446 3,525,045 42,082,239 15,550,516 75,788,246 1,941,802 77,730,048

38,895,784 8,249,217 – 20,373,981 67,518,982 1,978,807 69,497,789

– 22,523,303 2,230,214 24,753,517 52,976,531 5,980,919

3,450 33,576,966 315,522 33,895,938 35,601,852 3,034,602

103

Godrej Properties Limited SCHEDULE 19 : NOTES TO ACCOUNTS & ACCOUNTING POLICIES 1)

ACCOUNTING POLICIES

GENERAL The financial statements are prepared under the historical cost convention in accordance with Generally Accepted Accounting Principles in India, the Accounting Standards issued by The Institute of Chartered Accountants of India and the provisions of the Companies Act, 1956. FIXED ASSETS Fixed assets are stated at cost of acquisition or construction less accumulated depreciation. Cost includes all incidental expenses related to acquisition and installation, other pre-operation expenses and interest in case of construction. Carrying amount of cash generating units /assets are reviewed at balance sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognized whenever carrying amount exceeds the recoverable amount. DEPRECIATION / AMORTIZATION Depreciation has been provided on Written Down Value basis, at the rates specified in Schedule XIV of the Companies Act, 1956. Assets acquired on lease are depreciated over the period of the lease. Leasehold improvements are amortized over a period of five years. INVESTMENTS Investments are classified into long term and current investments. Long-term investments are carried at cost. Provision for diminution, if any, in the value of each long-term investment is made to recognize a decline, other than of a temporary nature. Current investments are carried individually at lower of cost and fair value and the resultant decline, if any, is charged to revenue. INVENTORIES Inventories are valued as under : a) Completed Flats – At lower of Cost or Market value b) Construction Work-in-Progress – At cost Construction Work-in-Progress includes cost of land, premium for development rights, construction costs, allocated interest and expenses incidental to the projects undertaken by the Company. REVENUE RECOGNITION The Company is following the “Percentage of Completion Method” of accounting. As per this method, revenue in Profit & Loss Account at the end of the accounting year is recognized in proportion to the 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. Income from operation of commercial complexes is recognized over the tenure of the lease/service agreement. Interest income is accounted on an accrual basis at contracted rates. Dividend income is recognized when the right to receive the same is established. DEVELOPMENT MANAGER FEES The Company has been entering into Development & Project Management agreements with landlords. Accounting for income from such projects is done on accrual basis on percentage of completion or as per the terms of the agreement. RETIREMENT BENEFITS Retirement benefits to employees comprise payments under defined contribution plans like provident fund and family pension. Payments under defined contribution plans are charged to the profit and loss account. The liability in respect of defined benefit schemes like gratuity and leave encashment benefit on retirement is provided on the basis of actuarial valuation at the end of each year. BORROWING COST Interest and commitment charges incurred in connection with borrowing of funds, which are incurred for the development of long term projects are transferred to Construction Work in Progress / Due on Management Project, as a part of the cost of the projects at weighted average of the borrowing cost / rates as per Agreements respectively. Other borrowing costs are recognized as an expense in the period in which they are incurred. EARNINGS PER SHARE The basic earnings per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period, except where the results would be anti-dilutive. PROVISION FOR TAXATION Tax expense comprises both current and deferred tax. Current tax is measured at the amount expected to be paid to the tax authorities, using the applicable tax rates and tax laws. Deferred tax is recognized on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets, subject to consideration of prudence, are recognized 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 difference at the year-end based on the tax rates and laws enacted or substantially enacted on the balance sheet date. FOREIGN CURRENCY 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 transalated at the year end exchange rates. Forward exchange contracts, remaining unsetteled at the year end, backed by underlying assets or liabilities are also translated at year end exchange rates.The premium payable on foreign exchange contracts is amortised over the period of 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. ALLOCATION OF EXPENSES Corporate Employee Remuneration and Administration expenses are allocated to various projects on a reasonable basis as estimated by the management. PROVISIONS AND CONTINGENT LIABILITIES Provisions are recognized in the accounts in respect of present probable obligations, the amount of which can be reliably estimated. Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.

104

CONTINGENT LIABILITIES: Matters a)

Uncalled amount of Rs. 80/- & Rs. 30/on 70 & 75 partly paid shares respectively of Tahir Properties Limited Consideration payable for acquisition of shares in Girikandra Holiday Homes & Resorts Limited (a subsidiary company) for purchase of land. Claims against the company not acknowledged as debts represents cases filed by parties in the Consumer forum and High Court and disputed by the Company as advised by our advocates. In the opinion of the management the claim is not sustainable. Guarantee given on behalf of project owner (Simplex Mills Company Limited). The Company is entitled to create a corresponding mortgage against project assets as considered necessary.

As at 31st March 2006 Rupees

As at 31st March 2005 Rupees

7,850/-

9,473,750/-

9,427,512/-

5,621,273/-

360,000,000/-

INVENTORIES, CURRENT ASSETS, LOANS AND ADVANCES: a) Construction Work in Progress and Due on Management projects represents materials at site and unbilled cost on the projects. Based on projections and estimates by the Company of the expected revenues and costs to completion. In the opinion of the management, the net realisable value of the construction work in progress will not be lower than the costs so included. b) The company has been entering into Development Agreements with landlords. Development Manager Fees amounting to Rs.232,218,224/- (Previous Year Rs. 249,630,941/-) accrued as per terms of the Agreement are receivable by the Company based upon progress milestones specified in the respective Agreements and have been disclosed as Development Manager Fees accrued but not due in Schedule 10.

INVENTORIES Stock-in-Trade includes shares in the following Companies - at cost or market value (whichever is lower): Current Year Previous Year Rupees Rupees Tahir Properties Limited a) 32,597 Equity shares of Rs. 100/- each, fully paid up 49,993,350 42,296,198 b) 70 Equity shares of Rs. 100/- each, Rs. 20/- paid up 1,400 1,400 c) 75 Redeemable Preference Class A shares of Rs.100/- each, Rs.70/- paid 5,250 5,250 Girikandra Holiday Homes & Resorts Limited (a subsidiary company) 498 Equity shares of Rs.1,000/- each, fully paid up 17,880,000 17,880,000

CASH & BANK BALANCES Balances with scheduled banks on deposit accounts include Rs. 33,829,379/- (Previous year Rs. 33,829,379/-) received from flat buyers and held in trust on their behalf in a corpus fund.

LOANS AND ADVANCES a) Amounts due from companies under the same management. (Amount in Rupees) Particulars Balance as Maximum Balance as Maximum on March Debit on March Debit 31, 2006 Balance 31, 2005 Balance during the during year previous year Godrej Industries Ltd. - Advances 19,736 28,089 64,920 4,027,560 - Deposits 410,000 410,000 385,000 385,000 Girikandra Holiday Homes & Resorts Ltd. - Advances 28,267,717 28,267,717 28,048,667 28,048,667 b)

c) 7)

Amount due from Directors of the Company towards Housing Loan / Consumer Durable Loan / Contingency loan under the Company’s Scheme Rs. NIL (Maximum debit balance during the year Rs.21,189/-) (Previous year Rs. 21,189/- Maximum debit balance Rs. 42,403/-) Due on Management Projects include a sum of Rs.20,056,962/- (Previous Year Rs.19,986,141/-) on account of a project, where the matter is sub-judice with arbitrators.

SUNDRY CREDITORS AND PROVISIONS There are no parties within the definition of Small Scale Industrial Undertakings to whom the Company owes any dues. The auditors have accepted the representation of the management in this matter in the absence of a database identifying the creditors, which are small scale industrial undertakings.

LEASES a) The Company’s significant leasing arrangements are in respect of operating leases for Residential premises. Lease income from operating leases is recognized on a straight-line basis over the period of lease. The particulars of the premises given under operating leases are as under: Current Year Previous Year Rupees Rupees Gross Carrying Amount of Assets NIL 1,477,796 Accumulated Depreciation NIL 757,803 Depreciation for the period NIL 37,894 Stock–in–trade (Refer note below) 50,000,000 42,302,848 Future minimum lease receipts under non-cancelable operating leases 2,006,676 Not later than 1 year 2,976,120 Later than 1 year and not later than 5 years 132,000 132,000 Note : The available-for-sale asset, given on lease, has been classified by the Company under Stock-in-trade.

Annual Report 2005-2006 b)

The Company’s significant leasing arrangements are in respect of operating leases for Commercial premises. Lease expenditure for operating leases is recognized on a straight-line basis over the period of lease. The particulars of the premises taken on operating leases are as under: Current Year Previous Year Rupees Rupees Future minimum lease payments under non-cancelable operating leases Ø Not later than 1 year 6,400,000 4,800,000 Ø Later than 1 year and not later than 5 years 5,775,000 2,200,000 Earnings per share Profit after tax and prior years tax adjustments as per Profit & Loss Account Weighted average no. of equity shares outstanding Basic/Diluted earnings per share Nominal value of shares

133,205,909 6,444,545 20.67 10

58,529,240 6,444,545 9.08 10

10) The amount of exchange difference included in the Profit and Loss Account, under the related heads of expenses is Rs.1,93,933/- (Previous Year Rs.2,052,134/-). The amount of exchange difference in respect of forward exchange contracts to be recognized in the profit and loss account of subsequent periods Rs. NIL (Previous year Rs. 391,673/-). 11) Expenditure in Foreign Currency :Travelling Expenses 286,952 141,244 Other Expenditure 468,554 3,126,049 TOTAL 755,506 3,267,293 12) Computation of Net Profit under Section 349 of the Companies Act, 1956. Profit before Tax as per Profit and Loss Account 178,597,185 87,967,099 Add :Managerial Remuneration 6,210,495 4,265,465 Depreciation 5,074,007 3,319,210 Less :Profit on sale of asset as per accounts 5,376,611 12,397 Depreciation 5,074,007 3,319,210 Net Profit for the purpose of Directors Remuneration 179,431,069 92,220,167 (a) 5% of Net Profits as computed above 8,971,554 4,611,008 (b) Maximum remuneration permissible under the Act (computed on the basis of inadequacy of profits) 3,600,000 3,600,000 (a) or (b) whichever is greater 8,971,554 4,611,008 Managerial Remuneration: A Salaries 3,648,408 2,171,400 B Contribution to Provident Fund 240,000 165,000 C Estimated Monetary Value of Perquisites 265,633 417,004 D Performance Linked Variable Remuneration 2,056,454 1,512,061 6,210,495

4,265,465

Notes : In case of the Managing Director - Performance Linked Variable Remuneration of Rs.2,056,454/- (Previous Year Rs.1,512,061/-) is on the basis of provision made in the accounts. 13) Deferred Tax The tax effect of significant temporary differences that resulted in deferred tax assets are: Depreciation on Fixed Asset 771,000 552,000 Others 1,815,000 1,705,000 Deferred Tax Asset

2,586,000

2,257,000

14) Segment Information : As the company has only one business segment, disclosure under Accounting Standard 17 on “Segment Reporting” issued by the Institute of Chartered Accountants of India is not applicable. 15) Amounts paid to Auditors : a. Audit Fees 1,369,328 1,190,160 b. Audit under Other Statutes 404,064 352,640 c. Certification 35,815 182,990 d. Reimbursement of Expenses 7,368 4,373 16) Revised Accounting Standard 7 – Construction Contracts. The revised Accounting Standard 7 on Construction Contracts is now applicable only to contractors and not to developers. Accordingly the income from projects entered into after 1st April 2003, where the company is a developer will be recognized in consonance with the principles laid down by Accounting Standard 9 for Revenue Recognition. 17) Related Party Disclosures Related party disclosures as required by AS - 18, “ Related Party Disclosures”, are given below: 1. Relationships: (i) Shareholders (the Godrej Group Shareholding ) in the Company Godrej Industries Limited (GIL) holds 81.69% in the Company. GIL is the subsidiary of Godrej & Boyce Mfg. Co. Limited, the Ultimate Holding Company. (ii) Subsidiaries : Girikandra Holiday Homes & Resorts Limited (99%) (GHHRL) Godrej Realty Private Limited (51%) (GRL) Godrej Waterside Properties Private Limited (100%) (GWPL) (iii) Other Related Parties in Godrej Group, where common control exists : Vora Soaps Limited (VSL) Bahar Agrochem & Feeds P. Limited (BAFPL) Ensemble Holdings & Finance Limited (EHFL) Godrej Appliances Limited (GAL) Godrej Agrovet Limited (GAVL) Godrej Consumer Products Limited (GCPL) Godrej Saralee Limited (GSLL) Godrej Hicare Limited (GHCL) (iv) Key Management Personnel : Mr. Milind Surendra Korde (v) Individuals excercising Significant Influence (and their relatives) : Mr. A. B. Godrej Mr. N. B. Godrej

2. (i)

The following transactions were carried out with the related parties in the ordinary course of business. Details relating to parties referred to in items 1 (i), (ii) and (iii) above

Sr. No. Description

1. 2. 3.

Investment in equity share capital Investment in debentures Purchase of fixed assets

4. 5. 6. 7.

Sale of fixed assets Loans & Advances given Deposits Expenses charged to other companies Expenses charged by other companies (net) Interest expense on ICD’s taken

8. 9.

10. ICD’s taken during the year 11. Outstanding receivables, net of (payables) 12. Dividend Paid / Payable (ii)

1. 2. 3.

Godrej & Boyce Mfg. Co. Ltd.

Godrej Industries Ltd.

– – 3,424,267 837,177 – – – 7,709 – 26,475,136 32,227,595 –

– – – – – – 350,000 1,711,896 65,413 2,628,243 1,218,973 – 2,304,793 – 130,000,000 309,739 (3,170,080) 50,648,726 20,076,841

– 830,409 –

Other Related Parties in Godrej Group GAL+VSL+GHCL +GSLL+GRL+GWPL+ GHHRL+BAFPL+EHFL +GCPL+GAVL 5,600,000 58,650,000 635,461 87,180 100,083 219,050 – 15,600,959 117,401 148,111

29,439,825 28,048,667 2,103,531 1,619,651

Details relating to persons referred to in items 1 (iv) & (v) above

Key Management Personnel : Remuneration Interest income on loans given Reimbursement of travel expenses Individuals exercising significant Influence (and their relatives) Dividend paid – Mr. N.B.Godrej

Current Year

Previous Year

6,210,495 516

4,265465 1,610

317,489 1,849,549

21,189 760,701

Figures in italics are for previous year 3.

Significant Related Party Transactions. Nature of Transactions

Other Related Parties in the Godrej Group

Investment in equity share capital Investment in debentures Purchase in fixed assets

Godrej Realty Limited Godrej Realty Limited Godrej Agrovet Limited Godrej Agrovet Limited Godrej Realty Limited Girikandra Holiday Homes & Resorts Ltd Godrej Realty Limited Godrej Agovet Limited Godrej Sara Lee Limited Godrej Hicare India Limited Godrej Infotech Limited Godrej Hicare India Limited Girikandra Holiday Homes & Resorts Limited Girikandra Holiday Homes & Resorts Limited Bahar Agrochem & Feeds Private Limited Ensemble Holdings & Finance Limited Bahar Agrochem & Feeds Private Limited Ensemble Holdings & Finance Limited

Sale of fixed assets Loans & Advances given Expenses charged to other cos. Expenses charged by other cos. (net)

Outstanding receivables, net of (payables)

Dividend Paid / Payable

Amount Rupees 5,100,000 58,650,000 635,461 87,180 100,083 219,050 15,600,959 22,811 13,400 70,300 30,000 96,000 28,267,717

28,048,667 1,331,675 738,184

547,705 1,056,198

Figures in italics are for previous year 18) Information in respect of Joint Ventures. Jointly Controlled Operations - Development of the following Residential / Commercial Projects: Coliseum, Mumbai Woodsman Estate, Bangalore Waterside I T Park, Kolkata Planet Godrej, Mumbai La Vista, Mumbai Waldorf, Mumbai Glenelg, Mumbai Edenwoods, Mumbai Shivajinagar, Pune NLM, Kalyan GVD, Kalyan RSM/HKB, Kalyan Grenville Park, Mumbai Walkeshwar, Mumbai 19) Additional information as required under Part IV of Schedule VI of the Companies Act, 1956 to the extent not applicable has not been given.

105

Godrej Properties Limited 20) STATEMENT PURSUANT TO PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956

Cash Flow Statement for the year ended March 31, 2006

Balance Sheet Abstract for the Year Ended 31st March 2006 And Company’s General Business Profile

Particulars

Cash from Operating Activities Net Profit before tax & extraordinary items Add : Non-cash / non-operating Expenses Depreciation Interest Paid Loss on sale of Fixed Asset Provision for Diminution in value of Investment Deferred Revenue Expenditure

Registration Details Registration No. State Code Balance Sheet Date

: : :

35308 11 31st March, 2006

Capital raised during the year (Amount in Rs. thousands) Public Issue : Rights Issue : Bonus Issue : Private Placement :

Nil Nil Nil Nil

Position of mobilisation and deployment of funds (Amount in Rs. thousands) Total Liabilities : 1,795,477 Total Assets : 1,795,477 Sources of Funds Paid-up Capital Reserves and Surplus Secured Loans Unsecured Loans

: : : :

64,446 413,988 155,532 608,590

Application of Funds Net Fixed Assets Investments Net Current Assets Misc. Expenditure Deferred Tax Asset Accumulated Losses

: : : : : :

21,708 64,264 466,288 Nil 2,586 Nil

: : : :

704,578 525,994 178,584 133,894

: :

20.67 96.2054%

N.A.

Performance of Company (Amount in Rs. thousands) Turnover Total Expenditure (Net of other income) Profit/(loss) before tax Profit/(loss) after tax Earning per Share in Rs. (on an annualized basis) Dividend rate %

Rupees

Less : Non-cash / non-operating Income Provision for Diminution in value of Investment w/back Profit on Sale of Fixed Assets Interest Income Dividend Received Add : Change in Inventory Change in Sundry Debtors Change in Loans & Advances Change in Current Liabilities / Provisions Less : Taxes Paid (Net) Cash from Investing Activities Purchase of Fixed Assets Sale of Fixed Assets Purchase of Investments Interest Received Dividend Received

Name of the Company

: Girikandra Holiday Homes & Resorts Ltd.

Financial Year ending

: 31st March, 2006

Cash from Financing Activities Change in Cash Credit Change in Term Loan Change in Unsecured Loan from Bank Change in Inter Compnay Deposit Change in Fixed Deposits Interest Paid Payment of Dividend Tax on Distrubuted Profits

The Company’s interest in the subsidiary as on above date.

: 500 Equity Shares of Rs. 1,000/- each, fully paidup (representing 100% of the Share Capital)

Cash & Cash Equivalent

Net Profit / (Loss) of the subsidiary company (Not dealt with in the accounts of the Company)

: (Rs. 2,500/-)

Add : Cash & Bank Balance as on 31.3.2005

Generic Name of three principal products/services of Company

STATEMENT REGARDING SUBSIDIARY COMPANY PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956.

S. KEMBHAVI Company Secretary

Cash & Bank Balance as on 31.3.2006

A. B. GODREJ Chairman

MILIND KORDE Managing Director

Mumbai, May 10, 2006 STATEMENT REGARDING SUBSIDIARY COMPANY PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956.

Name of the Company

: Godrej Realty Private Limited

Financial Year ending

: 31st March, 2006

The Company’s interest in the subsidiary as on above date.

: 510,000 Equity Shares of Rs. 10/- each, fully paidup (representing 51% of the Share Capital)

Net Profit / (Loss) of the subsidiary company (Not dealt with in the accounts of the Company)

: Nil

S. KEMBHAVI Company Secretary

A. B. GODREJ Chairman

Mumbai, May 10, 2006 STATEMENT REGARDING SUBSIDIARY COMPANY PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956.

Name of the Company

: Godrej Waterside Properties Private Limited

Financial Year ending

: 31st March, 2006

The Company’s interest in the subsidiary as on above date.

: 50,000 Equity Shares of Rs. 10/- each, fully paidup (representing 100% of the Share Capital)

Net Profit / (Loss) of the subsidiary company (Not dealt with in the accounts of the Company)

: Nil

S. KEMBHAVI Company Secretary Mumbai, May 10, 2006

106

A. B. GODREJ Chairman

MILIND KORDE Managing Director

– 5,376,611 24,753,517 3,330

Previous Year Rupees

178,584,250

87,967,099 3,319,210 69,392,361 175,569

82,881,510

67,866

261,465,760

160,922,105

30,133,458

4,049 – 33,895,938 660

231,332,302

127,021,458

(22,620,561) (266,084,209) 168,311,061 525,086,544

48,007,465 128,408,437 41,954,202 7,489,049

636,025,137 37,440,410

352,880,611 40,308,297

598,584,727

312,572,314

(15,704,728) 7,746,445 (64,250,000) 24,753,517 3,330

(3,359,562) 414,947 – 33,895,938 660

(47,451,436)

30,951,983

(149,867,367) (21,834,916) (170,000,000) (2,500,000) (21,114,000) (77,730,048) – –

(32,023,717) (157,790,886) (25,000,000) (102,500,000) (6,635,000) (69,392,361) (45,500,000) (5,895,032)

(443,046,331)

(444,736,996)

108,086,959

(101,212,699)

41,776,280

142,988,979

149,863,239

41,776,280

Notes : 1. The cash flow statement has been prepared under the ‘Indirect Method’ as set out in the Accounting Standard (AS) 3 on ‘Cash Flow Statement’, and presents cash flows by operating, investing and financing activities. 2. Figures in brackets are outflows / deductions. 3. Figures for the previous year have been regrouped / restated wherever necessary to conform to this year’s classification. For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants B. S. DASTOOR Partner Mumbai, May 10, 2006

MILIND KORDE Managing Director

5,074,007 77,730,048 – 9,589 67,866

Current Year Rupees

S. KEMBHAVI Company Secretary

A. B. GODREJ M. KORDE

Chairman Managing Director

Annual Report 2005-2006

Girikandra Holiday Homes & Resorts Limited BOARD OF DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2006 (iv)

To The Shareholders, Your Directors have pleasure in submitting their Report alongwith the audited Accounts for the year ended 31st March, 2006. 1. FINANCIAL HIGHLIGHTS : The accounting results for the year ended 31st March, 2006 reveal that there is a deficit at the end of the year. 2. REVIEW OF OPERATIONS : The Company has not commenced any activities during the year. 3. DIVIDEND : The Directors regret that no dividend can be recommended. 4. DIRECTORS : In accordance with the provision of the Articles of Association of the Company, Mr. V. Srinivasan retires by rotation and being eligible offers himself for reappointment. 5. DIRECTORS’ RESPONSIBILITY STATEMENT : Your Directors confirm : (i) that in the preparation of the annual accounts, the applicable accounting standards have been followed; (ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended 31st March, 2006 and of the profit of the Company for that year; (iii) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

that the Directors have prepared the annual accounts on a going concern basis.

APPOINTMENT OF AUDITORS : M/s. Kalyaniwalla Mistry and Associates retire at the ensuing Annual General Meeting and are eligible for re-appointment for which they have given their consent.

ADDITIONAL INFORMATION : (a) Since the Company has no employees, the particulars of the employees to be disclosed u/s 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, are not given. (b)

Information in respect of Conservation of Energy, Technology Absorption and Foreign 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 is provided hereunder: (i) (ii) (iii)

Conservation of Energy : Expenses on account of Energy are negligible. Technology Absorption : It is an on going process. Foreign Exchange Earning & Outgo : The Company has not earned any Foreign Exchange nor incurred any Foreign Exchange Expenditure during the year. For and on behalf of the Board of Directors TANYA A. DUBASH

MILIND S. KORDE

Directors Mumbai, May 10, 2006

AUDITORS’ REPORT To the Members of Girikandra Holiday Homes and Resorts Limited 1.

3. 4.

We have audited the attached Balance Sheet of GIRIKANDRA HOLIDAY HOMES AND RESORTS LIMITED, as at 31st March, 2006 and also the Profit and Loss Account and Cash Flow Statement of the Company for the year ended on that date anexed 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 auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to in paragraph (3) above, we report that: a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit. b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of such books. c) The Balance Sheet and Profit and Loss Account & Cash flow Statement dealt with by this report are in agreement with the books of account.

KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants

Mumbai, May 10, 2006

ANNEXURE TO THE AUDITORS’ REPORT Referred to in paragraph (3) of our report of even date. 1. The Company does not have any fixed assets. 2. The Company does not have any inventories. 3. (a) The Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. (b) Consequently, the question of commenting on the rates of interest and conditions of the loans granted being prejudicial to the interests of the Company, receipt of regular principal and interest and reasonable steps taken for recovery of principal and interest does not arise. (c) The Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. (d) Consequently, the question of commenting on the rates of interest and conditions of the loans taken being prejudicial to the interests of the Company and payment of regular principal and interest does not arise. 4. As there are no inventories and assets, nor are there any sales during the year, the question of adequate internal control procedures commensurate with the size of the Company and the nature of its business, for the purchases of inventory, fixed assets and for the sale of goods and services does not arise. During the course of our audit, we have not observed a continuing failure to correct major weaknesses in internal controls. 5. 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 there are no transactions that need to be entered into the register maintained under Section 301 of the Companies Act, 1956. 6. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public and hence the provisions of Sections 58A, 58AA or any other provisions of the Companies Act, 1956 are not applicable. 7. In our opinion and according to the information and explanations given to us, the internal audit system is commensurate with the size of the Company and nature of its business. 8. The maintenance of cost records has not been prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956, for any of the Company's products. 9. (a) According to the information and explanations given to us and on the basis of our examination of the books of accounts, during the year, the Company has no statutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess and other statutory dues incurred during the year. According to the information and explanations given to us, there are no

In our opinion, the Balance Sheet and Profit and Loss Account and the Cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956. e) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: i) in the case of the Balance Sheet, the state of affairs of the Company as at 31st March, 2006; and ii) in the case of the Profit and Loss Account, of the loss of the Company for the year ended on that date. On the basis of the written representations received from the Directors as on 31st March, 2006, and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2005 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

10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21.

BAHADUR S. DASTOOR Partner Membership No. 48936

undisputed dues payable in respect of above as at 31st March, 2005 for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us, there are no dues outstanding of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on account of any dispute. The Company’s accumulated losses at the end of the financial year are more than fifty percent of its net worth. However, it has incurred cash losses in the current and immediately preceding financial year. According to the information and explanations given to us and based on the documents and records produced to us, the Company does not have dues to banks, financial institutions or debenture holders. According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 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. The Company does not deal in shares, securities, debentures and other investments. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial Institutions. The Company did not have any term loans during the year. According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flows of the Company, we report that the Company has not utilized funds raised on short-term basis for long-term investments. 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. The Company did not issue any debentures outstanding during the year. The Company has not raised any money through a public issue during the year. 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 AND ASSOCIATES Chartered Accountants

Mumbai, May 10, 2006

BAHADUR S. DASTOOR Partner Membership No. 48936

107

Girikandra Holiday Homes & Resorts Limited BALANCE SHEET AS AT MARCH 31, 2006 Schedule SOURCES OF FUNDS Shareholders’ Funds Share Capital Reserves & Surplus Loan Funds Unsecured Loans TOTAL APPLICATION OF FUNDS Fixed Assets Investments Current Assets, Loans and Advances Projects in Progress Cash Balance Advance Income tax A Y 2004-2005 Less : Current Liabilities and Provisions Current Liabilities

This Year Rupees

Previous Year Rupees

500,000 –

28,267,717 28,767,717

28,048,667 28,548,667

– –

28,796,852 – 4,239 28,801,091

28,577,310 – 4,239 28,581,549

53,448 53,448

52,956 52,956

28,747,643

28,528,593

10,000 10,074

12,500 7,574

28,767,717

28,548,667

TOTAL

This Year Rupees

Previous Year Rupees

–

219,542

182,071

INCOME

EXPENDITURE Administration Expenses

Preliminary Expenses written off

2,500

222,042

184,571

(219,542)

(182,071)

(2,500)

7,574

5,074

Deficit carried forward to Balance Sheet

10,074

7,574

Earning per share (basic/diluted ) in Rs.

(5.00)

Less : Amount Transferred to Project in Progress (Deficit)/Surplus for the year Deficit brought forward

NOTES TO ACCOUNTS & ACCOUNTING POLICIES 5

NOTES TO ACCOUNTS & ACCOUNTING POLICIES 5 The Schedules referred to above form an integral part of the Balance Sheet.

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

Signatures to the Balance Sheet and Schedules 1 to 3 and 5

For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants B. S. DASTOOR Partner

Schedule Sundry Balances written back (Net)

Net Current Assets Miscellaneous Expenditure (to the extent not written off or adjusted) Preliminary Expenditure Profit and Loss Account

As per our Report of even date.

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

As per our Report of even date.

Signatures to the Profit and Loss Account and Schedules 4 and 5

For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants T. A. DUBASH Directors

M. S. KORDE Directors

Mumbai, Dated : May 10, 2006

B. S. DASTOOR Partner

T. A. DUBASH Directors

M. S. KORDE Directors

Mumbai, Dated : May 10, 2006

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 SCHEDULE 1 : SHARE CAPITAL AUTHORISED 1000 Equity Shares of Rs.1000/- each ISSUED & SUBSCRIBED 500 Equity Shares of Rs.1000/- each PAID UP 500 Equity Shares of Rs.1000/- each fully paid-up [The entire share capital is held by Godrej Properties Limited the Holding Company & its nominees]

This Year Rupees

Previous Year Rupees

1,000,000

500,000

28,577,310 219,542

28,395,239 182,071

28,796,852

28,577,310

53,448 –

52,956 –

53,448

52,956

36,002 28,060 155,480

– 27,550 154,521

219,542

182,071

SCHEDULE 2 : PROJECT IN PROGRESS Project Payments Add : Expenses transferred from Profit & Loss Account

SCHEDULE 3 : CURRENT LIABILITIES Sundry Creditors (Note 1) For Expenses Investors Education & Protection Fund

SCHEDULE 4 : ADMINISTRATION EXPENSES Rent, Rates & Taxes Payment to Auditors - Audit Fees Other Operating Expenses

108

SCHEDULE 5 : NOTES TO ACCOUNTS AND ACCOUNTING POLICIES ACCOUNTING POLICIES 1)

GENERAL The accounts are prepared under the Historical Cost Convention, using the accrual method of accounting.

MISCELLANEOUS EXPENDITURE Miscellaneous expenditure is amortised over a period of 10 years.

NOTES TO ACCOUNTS : 1. There are no parties within the definition of Small Scale Industrial Undertakings to whom the Company owes any sum. 2. Additional information required to be given under Schedule VI, Part II of the Companies Act, 1956 to the extent not applicable is not given. 3. Earnings per share This Year Previous Year Profit after transfer to project in Progress as per Profit & Loss Account Rs. (2500) Rs. (2,500) Weighted average no. of equity shares outstanding 500 500 Basic/Diluted earnings per share Rs. (5) Rs. (5) Nominal value of shares Rs. 1,000 Rs. 1,000 4.

AS 18 – RELATED PARTY DISCLOSURE Related party disclosures as required by AS-18, “Related Party Disclosures”, are given below: 1. Relationships: (i) Shareholders (the Godrej Group Shareholding) in the Company Godrej Properties Limited (GPL) holds 100% in the Company. GPL is the Subsidiary of Godrej Industries Limited (GIL). GIL is subsidiary of Godrej & Boyce Manufacturing Company Limited (G&B), the ultimate holding company. (ii) Key Management Personnel : Mr. Milind Surendra Korde 2. The following transactions were carried out with the related parties in the ordinary course of the business: Sr. No. G&B GIL GPL 1 Expenses charged by other Companies – – 219,050 2 Outstanding net of (payables) – – 28,267,717 28,048,667 Figures in italics are for previous year

Annual Report 2005-2006 5.

STATEMENT PURSUANT TO PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956. BALANCE SHEET ABSTRACT FOR THE YEAR ENDED 31ST MARCH, 2006 AND COMPANY’S GENERAL BUSINESS PROFILE

Cash Flow Statement for the year ended March 31, 2006

Registration Details Registration No. State Code Balance Sheet Date

: : :

11-91582 11 March 31, 2006

Cash from Operating Activities Net Profit Before Tax Add : Non-cash / Non-operating Expenses Deferred Revenue Expenditure

Capital raised during the year (Amount in Rs. Thousands) Public Issue Rights Issue Bonus Issue Private Placement- Capital - Premium

: : : : :

Nil Nil Nil Nil Nil

Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities : Total Assets : Sources of Funds : Paid-up Capital : Reserves & Surplus : Secured Loans : Unsecured Loans : Application of Funds : Net Fixed Assets : Investments : Net Current Assets : Misc. Expenditure : Accumulated Losses :

28,821 28,821 500 – – 28,268 – – – 28,748 10 10

Performance of the Company (Amount in Rs. Thousands) Turnover Total Expenditure Profit/(Loss) before tax Profit/(Loss) after tax Earning per Share in Rs. Dividend Rate %

: : : : : :

– 222 (3) (3) (5) –

Generic Names of Three Principal Products/Services of Company

N.A.

Particulars Rs.

Current Year Rs.

Previous Year Rs.

(2,500)

2,500

Less : Non-cash / Non-operating Income Add : Change in Inventory Change in Loans and Advances Change in Current Liabilities

–

(219,542) – 492

(182,071) (4,239) 1,059

Less : Taxes Paid

(219,050) –

(219,050)

(185,251) – (185,251)

Cash from Investing Activities Cash from Financing Activities Increase in Unsecured Loan

– 219,050

185,251

Cash & Cash Equivalent

219,050

–

Add : Cash & Bank Balance as on 31.3.2005

–

Cash & Bank Balance as on 31.3.2006

–

Notes: 1)

2) 3)

The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting Standard (AS) 3 on “Cash Flow Statements”, and presents cash flows by operating, investing and financing activities. Figures in brackets are outflows/deductions. Figures for the previous year have been regrouped/restated wherever necessary to conform to this year’s classification.

For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants B. S. DASTOOR Partner

T. A. DUBASH Directors

M. S. KORDE Directors

Mumbai, Dated : May 10, 2006

109

Godrej Realty Private Limited (Formerly Casablanca Properties Private Limited) DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006 To The Shareholders Your Directors have pleasure in submitting their Report alongwith the audited Accounts for the year ended 31st March, 2006. 1. FINANCIAL HIGHLIGHTS : The accounting results for the year ended 31st March, 2006 reveal that there is no surplus/deficit at the end of the year. 2. REVIEW OF OPERATIONS : During the year the Company was taken over by Godrej Properties Limited. Further during the year the Company allotted 4,90,000 Nos. of equity shares of Rs.10/- each fully paidup to HDFC Venture Trustee Company Limited a trustee of HDFC Property Fund, and 5,00,000 Nos. of equity shares of Rs.10/- each fully paid-up to Godrej Properties Limited. As such Godrej Properties Ltd. holds in aggregate 5,10,000 Nos. of equity shares of the Company and holds 51% of the paid up share capital of the Company. Further, the Company issued 56,35,000 Nos. of 10% Secured Redeemable Optionally Convertible Debentures of Rs.10/- each fully paid-up to HDFC Venture Trustee Company Limited and 58,65,000 Nos. of 10% Secured Redeemable Optionally Convertible Debentures of Rs.10/- each to Godrej Properties Ltd. 3. DIVIDEND : As there are no profits, the Directors regret that no dividend can be recommended. 4. DIRECTORS : Mr. Pirojsha A. Godrej was appointed as Additional Director of the Company with effect from 30th January, 2006. He holds office till the ensuing Annual General Meeting. Mr. Milind Korde was appointed as Additional Director of the Company with effect from 30th January, 2006. He holds office till the ensuing Annual General Meeting. Mr. Naresh Nadkarni was appointed as Additional Director of the Company with effect from 16th March, 2006. He holds office till the ensuing Annual General Meeting. Mr. Rakesh Desai, Director of the Company resigned on 31st January, 2006. The Board desires to place on record the valuable services rendered by Mr. Rakesh Desai during his tenure as a Director of the Company. Mr. Sanjay Desai, Director of the Company resigned on 31st January, 2006. The Board desires to place on record the valuable services rendered by Mr. Sanjay Desai during his tenure as a Director of the Company 5. CHANGE OF AUTHORISED CAPITAL : The Company has increased its Authorised Capital from Rs.1 Lac to Rs. 1 Crore during the year. 6. CHANGE OF NAME OF THE COMPANY : The name of the Company was changed from Casablanca Properties Private Limited to Godrej Realty Private Limited with effect from 25th January, 2006. The Registrar of Companies has accordingly issued the new Incorporation Certificate.

CHANGE OF REGISTERED OFFICE OF THE COMPANY : The Company changed the address of its Registered Office from 5/40, C.C.I. Colony, Unnat Nagar – 4, M.G. Road, Goregaon (West), Mumbai – 400 062 to Godrej Bhavan, 4th Floor, 4A, Home Street, Fort, Mumbai – 400 001 with effect from 30th January, 2006. 8. APPOINTMENT OF AUDITORS : M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants retire at the ensuing Annual General Meeting and are eligible for re-appointment for which they have given their consent. 9. DIRECTORS’ RESPONSIBILITY STATEMENT: Your Directors confirm: (i) that in the preparation of the annual accounts, the applicable accounting standards have been followed; (ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended 31st March, 2006 and of the profit of the Company for that year; (iii) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) that the Directors have prepared the annual accounts on a going concern basis. 10. ADDITIONAL INFORMATION : (a) Since the company has no employees, the particulars of the employees to be disclosed u/s 217 (2A) of the Companies Act, 1956 read with Companies (particulars of employees) Rules, 1975, are not given. (b) Information in respect of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo, required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is provided hereunder: (i) Conservation of Energy : Expenses on account of Energy are negligible. (ii) Technology Absorption : It is an on going process. (iii) Foreign Exchange Earning & Outgo : The Company has not earned any Foreign Exchange nor incurred any Foreign Exchange Expenditure during the year. For and on behalf of the Board of Directors Pirojsha A. Godrej Milind Korde Director Director Mumbai, May 10, 2006

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ REALTY PRIVATE LIMITED (Formerly Casablanca Properties Private Limited) 1.

3. 4.

We have audited the attached Balance Sheet of GODREJ REALTY PRIVATE LIMITED, as at 31st March, 2006 and also the Profit and Loss Account of the Company for the period ended 27th June 2005 to 31st March, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to in paragraph (3) above, we report that: a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit. b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of such books. c) The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account.

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. In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006; and ii) in the case of the Profit and Loss Account, of the performance Company for the period ended on that date. iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the period ended on that date. 5. On the basis of the written representations received from the directors as on 31st March, 2006, and taken on record by the Board of Directors, we report that, none of the directors is disqualified as on 31st March, 2006 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956. For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants B. S. Dastoor Partner Place : Mumbai Date : May 10, 2006 Membership No. 48936 e)

ANNEXURE TO THE AUDITORS' REPORT Referred to in paragraph (3) of our report of even date. 1) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets. (b) As explained to us, the Company has a program for physical verification of fixed assets at periodical intervals. In our opinion, the period of verification is reasonable having regard to the size of the Company (c) In our opinion, the disposal of fixed assets during the year does not affect the going concern assumption. 2) (a) The management has conducted physical verification of inventory at reasonable intervals. (b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business. (c) The company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification. 3) (a) The Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. (b) Consequently, the question of commenting on the rates of interest and conditions of the loans granted being prejudicial to the interests of the Company, receipt of regular principal and the interest and reasonable steps for recovery of principal and interest does not arise. (c) The Company has not taken any loan, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. (d) Consequently, the question of commenting on the rates of interest and others terms and conditions of the loans taken being prejudicial to the interests of the Company, payment of regular principal and the interest does not arise. 4) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business, for the purchases of inventory, fixed assets and for the sale of goods. There are no sales of service. During the course of our audit, we have not observed a continuing failure to correct major weaknesses in internal controls. 5) (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the particulars of contracts and arrangement referred to in Section 301 of the Companies Act, 1956 have been entered into the register required to be maintained under that section. (b) The transactions made in pursuance of such contracts or arrangements, were made at prices which are reasonable having regard to prevailing marketing prices at the relevant time. 6) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public hence the provisions of Section 58A and 58AA or any other provisions of the Companies Act, 1956, are not applicable. 7) In our opinion and according to the information and explanations given to us, the internal audit system is commensurate with the size of the Company and nature of its business. 8) The maintenance of cost records has not been prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956, for any of the Company’s products.

110

(a)

According to the information and explanations given to us and on the basis of our examination of books of accounts, during the year, the Company has no statutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, Cess and other statutory dues incurred during the year. According to the information and explanations given to us, there are no undisputed dues, payable in respect of above as at 31st March 2006 for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us, there are no dues outstanding of Sales Tax, Income Tax, Wealth Tax, Excise Duty, cess on account of any dispute. 10) The Company does not have accumulated losses at the end of the financial year and it has not incurred any cash losses in the current and immediately preceding financial year. 11) According to the information and explanations given to us and on the based on documents and records produced to us, the Company has not defaulted in dues to debenture holders. There are no dues to banks and financial institutions. 12) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13) In our opinion and according to the information and explanations given to us, the nature of activities of the Company does not attract any special statute applicable to chit fund and nidhi/mutual benefit fund/societies. 14) The Company does not deal in shares, securities, debentures and other investments. 15) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions. 16) The Company did not have any term loans during the year. 17) According to the information and explanations given to us and an overall examination of the Balance Sheet and Cash Flow of the Company, we report that the Company has not utilized funds raised on short term basis for long term investments. 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) According to the information and explanations given to us, during the current perod, the Company had issued 1,15,00,000 debentures of Rs. 10 each. The Company is in process of creating securities for the same. 20) The Company has not raised any money through a public issue during the year. 21) Based on the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the year. For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants B. S. Dastoor Partner Membership No. 48936 Place : Mumbai Date : May 10, 2006.

Annual Report 2005-2006

BALANCE SHEET AS AT MARCH 31, 2006 Schedule

As at 31.03.06 Rupees

SOURCES OF FUNDS Shareholders’ Funds Share Capital

10,000,000

Loan Funds Secured Loans

115,446,417 125,446,417

PROFIT AND LOSS ACCOUNT FOR THE PERIOD JUNE 27TH, 2005 TO MARCH 31, 2006 Schedule

INCOME

For the period ended 31.03.06 –

EXPENDITURE Administration Expenses

13,271,680

Interest & Finance Charges

2,667,104

Depreciation

APPLICATION OF FUNDS Fixed Assets Gross Block Less : Depreciation

Net Block Investments Current Assets, Loans & Advances Projects in Progress Cash Balance Loans & Advances

100,083 2,769 97,314 –

2,769 15,941,552

Less : Amount Transferred to Project in Progress

15,941,552

Earning per share (basic/diluted ) in Rs. (refer note no. 3)

0.00

Notes to Accounts & Accounting Policies 4 5 6

15,941,552 34,689,427 76,248,733 126,879,712

Less : Current Liabilities & Provisions Current Liabilities Provisions

1,530,610 – 1,530,610

Net Current Assets

125,349,102 125,446,417

0.0 Notes to Accounts & Accounting Policies

The Schedules referred to above form an integral part of the Profit and Loss Account As per our Report of even date. Signatures to Profit and Loss Account and Schedules 8 to 10 For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants PIROJSHA GODREJ Director MILIND KORDE Director BAHADUR S. DASTOOR Partner Place : Mumbai Date : May 10, 2006

The Schedules referred to above form an integral part of the Balance Sheet As per our Report of even date. Signatures to Balance Sheet and Schedules 1 to 7 and 10 For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants PIROJSHA GODREJ Director MILIND KORDE Director BAHADUR S. DASTOOR Partner Place : Mumbai Date : May 10, 2006

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 As at 31-03-2006 Rupees SCHEDULE 1 : SHARE CAPITAL Authorised 1000000 Equity Shares of Rs.10 each

10,000,000 10,000,000

Issued, Subscribed and Paid up 1,000,000 Equity Shares of Rs.10 each (out of which 510,000 equity shares are held by the holding company, Godrej Properties Ltd.)

As at 31-03-2006 Rupees SCHEDULE 2 : SECURED LOANS 10% Secured redeemable optionally convertible debentures @Rs. 10/- each Interest Accrued & Due (The Company is in process of creating securities for the same)

115,000,000 446,417 115,446,417

10,000,000

10,000,000 SCHEDULE 3 : FIXED ASSETS

(Rs. ’000) GROSS BLOCK

ASSETS

DEPRECIATION

NET BLOCK

As at 1.4.2005 Rs.

Additions

Deductions

Rs.

As at 31.3.2006 Rs.

As at 1.4.2005 Rs.

For the Year Rs.

As at 31.3.2006 Rs.

Motor Vehicle

–

100,083

–

100,083

–

2,769

97,314

TOTAL

–

100,083

–

100,083

–

2,769

97,314

Previous Year

–

As at 31-03-2006 Rupees SCHEDULE 4 : PROJECT IN PROGRESS Opening Balance Add : Expenses transferred from Profit & Loss Account

– 15,941,552 15,941,552

SCHEDULE 5 : CASH & BANK BALANCE Current account with Scheduled Bank Fixed Deposits

4,624,681 30,064,746 34,689,427

SCHEDULE 6 : LOANS & ADVANCES Advances recoverable in cash or kind or for value to be received

76,248,733 76,248,733

SCHEDULE 7 : CURRENT LIABILITIES Sundry Creditors (Note 2) For Expenses Others

925,485 605,125

As at 31-03-2006 Rupees SCHEDULE 8 : ADMINISTRATION EXPENSES Payment to Auditors - Audit Fees Consultancy Charges Other Operating Expenses

101,016 7,380,371 5,790,293 13,271,680

SCHEDULE 9 : INTEREST AND FINANCE CHARGES (NET) Interest Paid Companies Others Total Interest paid Less : Interest received (Gross) Others Total Interest received NET INTEREST

2,246,473 504,110 2,750,583 83,479 83,479 2,667,104

1,530,610

111

Godrej Realty Private Limited (Formerly Casablanca Properties Private Limited) SCHEDULE 10 : NOTES TO ACCOUNTS AND ACCOUNTING POLICIES 1)

ACCOUNTING POLICIES a) GENERAL The financial statements are prepared under the historical cost convention in accordance with Generally Accepted Accounting Principles in India, the Accounting Standards issued by The Institute of Chartered Accountants of India and the provisions of the Companies Act, 1956. b)

Current tax is measured at the amount expected to be paid to the tax authorities, using the applicable tax rates and tax laws. Deferred tax is recognized on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets, subject to consideration of prudence, are recognized 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 difference at the year-end based on the tax rates and laws enacted or substantially enacted on the balance sheet date.

FIXED ASSETS Fixed assets are stated at cost of acquisition or construction less accumulated depreciation. Cost includes all incidental expenses related to acquisition and installation, other pre-operation expenses and interest in case of construction. Carrying amount of cash generating units / assets are reviewed at balance sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognized whenever carrying amount exceeds the recoverable amount.

DEPRECIATION/AMORTIZATION Depreciation has been provided on Written Down Value basis, at the rates specified in Schedule XIV of the Companies Act, 1956.

INVENTORIES Inventories are valued as under : a) Completed Flats – At lower of Cost or Market value b) Construction Work-in-Progress – At cost Construction Work-in-Progress includes cost of land, premium for development rights, construction costs, allocated interest and expenses incidental to the projects undertaken by the Company.

REVENUE RECOGNITION The Company is following the “Percentage of Completion Method” of accounting. As per this method, revenue in Profit & Loss Account at the end of the accounting year is recognized in proportion to the 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.

There are no parties within the definition of Small Scale Industrial Undertakings to whom the Company owes any sum.

Earnings per share

AS 18 – RELATED PARTY DISCLOSURE 1. Relationships: (i) Shareholders (the Godrej Group Shareholding) in the Company Godrej Properties Limited (GPL) holds 51% in the Company. GPL is the Subsidiary of Godrej Industries Limited (GIL). GIL is subsidiary of Godrej & Boyce Manufacturing Company Limited (G&B), the ultimate holding company. (ii) Key Management Personnel : Mr. Milind Surendra Korde 2.

Balance Sheet Abstract and Company’s General Business Profile 11-154268 11 31/3/2006

Capital raised during the year Public Issue Rights Issue Bonus Issue Private Placement - Capital - Premium

(Rupees ‘000) Nil Nil Nil Nil Nil

Position of mobilisation and deployment of funds Total Liabilities Total Assets Sources of Funds Paid up Capital Reserve & Surplus Secured Loans Unsecured Loans Application of Funds Net Fixed Assets Investments Net Current Assets Misc Expenditure Accumulated Losses

(Rupees ‘000) 126,977 126,977

iv)

Performance of the Company Turnover Total Expenditure Profit/ (Loss) Before Tax Profit/(Loss) After Tax Earnings Per Share in Rs. Dividend Rate

(Rupees ‘000) Nil 15,942 Nil Nil Nil Nil

Generic Names of three Principal products/services of the company

iii)

The following transactions were carried out with the related parties in the ordinary course of the business: Sr. No. 1 2 3 4 5

GIL – – – – –

GPL 5,100,000 58,650,000 100,083 15,600,959 911,655

This being the first year of operations of the Company, the question of previous years figures does not arise.

1,000 Nil 115,446 Nil 97 Nil 125,349 Nil

N.A.

Particulars Cash from Operating Activities Net Profit before Tax Add : Non-cash / non-operating Expenses Depreciation Interest Income Interest Paid Loss on sale of Fixed assets Tax Provision Deferred Revenue Expenditure Less : Non-cash / non-operating Income Add : Change in Inventory Change in Loans & Advances Change in Current Liabilities / Provisions

Rupees

– 2,769 (83,479) 2,750,583 – – – 2,669,873 – 2,669,873 (15,941,552) (76,248,733) 1,530,610 (87,989,803)

Less : Taxes Paid (Net) Cash from Investing Activities Purchase of Fixed Assets Interest Received Cash from Financing Activities Issue of Share Capital Issue of Debentures Interest Paid Cash and Cash Equivalent Cash and Bank Balance as on 31.3.2006

–

(87,989,803)

(100,083) 83,479

(16,604)

10,000,000 115,446,417 (2,750,583)

122,695,835 34,689,427 34,689,427

Notes : 1. The cash flow statement has been prepared under the ‘Indirect Method’ as set out in the Accounting Standard (AS) 3 on ‘Cash Flow Statement’, and presents cash flows by operating, investing and financing activities. 2. Figures in brackets are outflows / deductions. For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants BAHADUR S. DASTOOR Partner Place : Mumbai Date : May 10, 2006

112

G&B – – – – –

Issue of equity share capital Issue of debentures Purchase of Fixed Assets Expenses Charged by other Companies (net) Outstanding net of (payables)

Cash Flow Statement for the period June 27, 2005 to March 31st, 2006.

ADDITIONAL INFORMATION AS REQUIRED PART IV OF THE SCHEDULE VI OF THE COMPANIES ACT, 1956

ii)

101016

SEGMENT INFORMATION As the Company has only one business segment, disclosure under Accounting Standard 17 on “ Segment Reporting” issued by the Institute of Chartered Accountants of India is not applicable.

Other borrowing costs are recognized as an expense in the period in which they are incurred.

Registration Details Registration No State Code Balance Sheet

Current Year (Rs.) 78,568 22,448

Total

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

Amounts paid to Auditors: Audit Fees Audit under other Statutes

BORROWING COST Interest and commitment charges incurred in connection with borrowing of funds, which are incurred for the development of long term projects are transferred to Construction Work-inProgress/Due on Management Project, as a part of the cost of the projects at weighted average of the borrowing cost/rates as per Agreements respectively. EARNINGS PER SHARE The basic earnings per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period, except where the results would be anti-dilutive.

This Year (Rs.) NIL 1000000 NIL 10000000

Profit after transfer to Project in Progress as per Profit & Loss Account Weighted average no. of equity shares outstanding Basic/Diluted earnings per share Nominal value of shares

Interest income is accounted on an accrual basis at contracted rates.

PROVISIONS AND CONTIGENT LIABILITIES Provisions are recognized in the accounts in respect of present probable obligations, the amount of which can be reliably estimated. Contingent liabilities are disclosed in respect of possible obligations that arise from the past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.

Income from operation of commercial complexes is recognized over the tenure of the lease/ service agreement.

PROVISION FOR TAXATION Tax expense comprises both current and deferred tax.

PIROJSHA GODREJ MILIND KORDE

Director Director

Annual Report 2005-2006

Godrej Waterside Properties Private Limited (Formerly Bridgestone Properties Private Limited) DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006 TO THE SHAREHOLDERS Your Directors have pleasure in submitting their Report alongwith the audited Accounts for the year ended 31st March, 2006. 1. FINANCIAL HIGHLIGHTS : The accounting results for the year ended 31st March, 2006 reveal that there is no surplus/deficit at the end of the year. 2. REVIEW OF OPERATIONS : The Company was taken over by Godrej Properties Limited during the financial year. During the year Godrej Properties Limited was allotted 40,000 nos of equity shares of Rs.10/- each fully paid-up of the Company and they hold the entire paid up share capital of the Company. 3. DIVIDEND : As there are no profits, the Directors regret that no dividend can be recommended. 4. DIRECTORS : Mr. Pirojsha A. Godrej was appointed as Additional Director of the Company with effect from 30th January, 2006. He holds office till the ensuing Annual General Meeting. A notice has been received from a shareholder proposing the candidature of Mr. Pirojsha A. Godrej for the office of Director. Mr. Milind Korde was appointed as Additional Director of the Company with effect from 30th January, 2006. He holds office till the ensuing Annual General Meeting. A notice has been received from a shareholder proposing the candidature of Mr. Milind Korde for the office of Director. Mr. Rakesh Desai, Director of the Company has resigned on 31st January, 2006. The Board desires to place on record the valuable services rendered by Mr. Rakesh Desai during his tenure as a Director of the Company. Mr. Sanjay Desai, Director of the Company has resigned on 31st January, 2006. The Board desires to place on record the valuable services rendered by Mr. Sanjay Desai during his tenure as a Director of the Company. 5. CHANGE OF AUTHORISED CAPITAL : During the year the Company has increased its Authorised Capital from Rs.1 Lac to Rs. 5 Lacs. 6. CHANGE OF NAME OF THE COMPANY : The name of the Company was changed from Bridgestone Properties Private Limited to Godrej Waterside Properties Private Limited with effect from 25th January, 2006. The Registrar of Companies has accordingly issued the new Incorporation Certificate. 7. CHANGE OF REGISTERED OFFICE OF THE COMPANY : The Company changed the address of its Registered Office from 5/40, C.C.I. Colony, Unnat Nagar – 4, M.G. Road, Goregaon (West), Mumbai – 400 062 to Godrej Bhavan, 4th Floor, 4A, Home Street, Fort, Mumbai – 400 001 with effect from 30th January, 2006.

APPOINTMENT OF AUDITORS : M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants retire at the ensuing Annual General Meeting and are eligible for re-appointment for which they have given their consent. 9. DIRECTORS’ RESPONSIBILITY STATEMENT: Your Directors confirm: (i) that in the preparation of the annual accounts, the applicable accounting standards have been followed; (ii) that the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended 31st March, 2006 and of the profit of the Company for that year; (iii) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) that the Directors have prepared the annual accounts on a going concern basis. 10. ADDITIONAL INFORMATION : (a) Since the company has no employees, the particulars of the employees to be disclosed u/s 217 (2A) of the Companies Act, 1956 read with Companies (particulars of employees) Rules, 1975, are not given. (b) Information in respect of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo, required under section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is provided hereunder: (i) Conservation of Energy : Expenses on account of Energy are negligible. (ii) Technology Absorption : It is an on going process. (iii) Foreign Exchange Earning & Outgo : The Company has not earned any Foreign Exchange nor incurred any Foreign Exchange Expenditure during the year. For and on behalf of the Board of Directors Pirojsha Godrej Director

Milind Korde Director

Mumbai, May 10, 2006

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ WATERSIDE PROPERTIES PRIVATE LIMITED (Formerly Bridgestone Properties Private Limited) 1.

We have audited the attached Balance Sheet of GODREJ WATERSIDE PROPERTIES PRIVATE LIMITED, as at 31st March 2006 and also the Cash Flow statement of the Company for the period 27th June, 2005 to 31st March, 2006. These financial Statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, the Balance Sheet and the Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006; and

ii)

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

This report does not include a statement on the matters specified in paragraph 4 of the Companies (Auditor’s Report) Order, 2003, issued by the Department of Company Affairs, in terms of Section 227(4A) of the Companies Act, 1956, since in our opinion and according to the information and explanations given to us, the said Order is not applicable to the Company.

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

For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants B.S. Dastoor Partner Membership No. 48936 Place : Mumbai Date : May 10, 2006

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

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.

No Profit and Loss Account has been prepared as the Company is yet to commence operations.

The Balance Sheet and the Cash Flow Statement dealt with by this report are in agreement with the books of account.

113

Godrej Waterside Properties Private Limited (Formerly Bridgestone Properties Private Limited) BALANCE SHEET AS AT MARCH 31, 2006

INFORMATION REQUIRED TO BE FURNISHED UNDER THE PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956

Schedule

SOURCES OF FUNDS Shareholders’ Funds Share Capital Loan Funds

As at 31.03.06 Rupees

500,000 –

Balance Sheet Abstract and Company’s General Business Profile i)

Capital raised during the year Public Issue Rights Issue Bonus Issue Private Placement - Capital - Premium

(Rupees ‘000) Nil Nil Nil Nil Nil

iii)

Position of mobilisation and deployment of funds Total Liabilities Total Assets Source of Funds Paid up Capital Reserve & Surplus Secured Loans Unsecured Loans Application of funds Net Fixed Assets Investments Net Current Assets Misc Expenditure Accumulated Losses

(Rupees ‘000) 500 500

iv)

Performance of the Company Turnover Total Expenditure Profit/ (Loss) Before Tax Profit/(Loss) After Tax Earnings Per Share in Rs. Dividend Rate

(Rupees ‘000) Nil Nil Nil Nil Nil

Generic Names of three Principal products/services of the company

– – –

Investments Current Assets, Loans and Advances Cash Balance

500,000

Less : Current Liabilities and Provisions

500,000 –

Net Current Assets

500,000 500,000

Notes To Accounts and Accounting Policies

The Schedules referred to above form an integral part of the Balance Sheet As per our Report of even date. Signatures to Balance Sheet and Schedules 1, 2, and 3 For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants PIROJSHA GODREJ Director MILIND KORDE Director BAHADUR S. DASTOOR Partner Place : Mumbai Date : May 10, 2006

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 As at 31.03.06 Rupees SCHEDULE 1 : SHARE CAPITAL Authorised 50000 Equity shares of Rs.10/- each

Particulars

Net Profit Before Tax

500,000

Cash from Investing Activities

500,000

500,000 500,000

Cash and Bank Balance as on 31.3.2006

500,000

Figures in brackets are outflows/deductions.

AS 18 – RELATED PARTY DISCLOSURE Related party disclosures as required by AS-18, “Related Party Disclosures’, are given below: 1. Relationships: (i) Shareholders (the Godrej Group Shareholding) in the Company Godrej Properties Limited (GPL) holds 100% in the Company. GPL is the Subsidiary of Godrej Industries Limited (GIL). GIL is subsidiary of Godrej & Boyce Manufacturing Company Limited (G&B), the ultimate holding company. (ii) Key Management Personnel : Mr. Milind Surendra Korde 2. The following transactions were carried out with the related parties in the ordinary course of the business: GIL –

–

500,000

NOTES TO ACCOUNTS a) As there are no operations, no Profit & Loss Account has been prepared. b) Additional information required to be given under Schedule VI, Part II of the Companies Act, 1956 to the extent not applicable is not given.

G&B –

–

Notes:

GENERAL The accounts are prepared under the Historical Cost Convention, using the accrual method of accounting.

GPL 500,000

This being the first year of operations of the Company, the question of previous years figures does not arise.

114

Rs.

500,000

ACCOUNTING POLICIES

Rs.

Cash and Cash Equivalent

SCHEDULE 3 - NOTES TO ACCOUNTS AND ACCOUNTING POLICIES

Issue of equity share capital

N.A.

Cash from Financing Activities Increase in Share Capital

SCHEDULE 2 : CASH & BANK BALANCE Current account with Scheduled Bank

Sr. No 1

Nil Nil 500 Nil Nil

Cash Flow Statement for the period June 27, 2005 to March 31, 2006

500,000

500 Nil Nil Nil

Cash from Operating Activities

Issued and Subscribed and Paid Up 50000 Equity Shares of Rs.10/- each (50000 equity shares are held by the holding company, Godrej Properties Ltd)

11-154255 11 31/3/2006

ii)

500,000 Application Of Funds Fixed Assets

Registration Details Registration No State Code Balance Sheet

For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants BAHADUR S. DASTOOR Partner Place : Mumbai Date : May 10, 2006

PIROJSHA GODREJ MILIND KORDE

Director Director

Annual Report 2005-2006

Godrej Hicare Limited DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2006 To The Members of GODREJ HICARE LIMITED Your Directors submit their Report along with the Audited Accounts of your Company for the year ended March 31, 2006. Operating Results Your Company’s performance during the year as compared with the previous year is summarized below: March 31, 2006 March 31, 2005 (Rs. Lac) (Rs.Lac) Total Income 2112.19 1205.84 Profit/(Loss) for the year 104.34 (113.04) Before Extraordinary Items (After tax) Profit/(Loss) After Extraordinary Items 104.34 (113.04) Add: Balance brought Forward (1444.94) (1331.90) Deficit Carried Forward (1340.60) (1444.94) Operations Review Your Company has recorded impressive growth of 75%. Total Income grew from Rs. 1206 lac in the previous year to Rs. 2112 lac in the current year. The Company has been delivering profits for last 14 months in a row and recorded a Profit after Tax of Rs. 103 lac as compared to loss of Rs.113 lac in the previous year. During the year the Company acquired reticulation technology (for pre-construction anti-termite treatment) from Termguard, Australia and Thermal imaging camera for termite detection from FLIR, Sweden. Your Company also undertook a major quality initiative called “SMILE” to improve internal processes and to enhance service delivery to customers. Your Company has planned aggressive geographical expansion in next year while continuing to grow in current markets by increasing service centers. Dividend: In view of the accumulated losses, your Directors do not recommend any dividend for the year. Directors: There are no changes in the Directorship in the Company. In accordance with Article 150 of the Articles of Association of your Company, one of the Directors of the Company, Mr. A.B.Godrej by rotation in the ensuing Annual General Meeting and being eligible, offers himself for reappointment. Auditors: You are requested to appoint Auditors for the current year and fix their remuneration. The retiring Auditors, M/s. Kalyaniwalla Mistry & Associates (KMA), Chartered Accountants, are eligible for re-appointment. Audit Committee: The Audit Committee which was appointed pursuant to the provision of Sec 292A of the Companies Act, 1956 has reviewed the accounts for the year ended March 31st 2006. Note on Auditors Report: Erosion of Networth (Note 4(i) of Auditors report and note 10 of Annexure to Auditors report) Though the accumulated losses of the Company exceeds its paid up capital, the shareholders are very supportive of the Pest management business and are committed to infuse funds as and when required to for working capital and other requirements. Change in Amortisation policy for Software (Note 4(iii) of Auditors report) The change in the amortization policy for computer software from 3 years to 6 years has been done to reflect more appropriate value of the asset in the Balance Sheet of the Company considering the useful life of the computer softwares. Fixed Assets Register (Note 1 (a) and (b) of Annexure to Auditors report) Your Company is in process of updating the same. Physical verifications will be carried out after the records and updated.

Repayment of Loans from Group Companies (Note 3(e) of Annexure to Auditors report) Due to the accumulated losses, the repayment of the loans of the group companies are not being made. Your Company is regular in repayment of loans taken from other corporates in form of Inter Corporate Deposits. 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 they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period. c) that they have taken proper and sufficient care for the maintenance of adequate accounting 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 they have prepared the annual accounts on a going concern basis. Conservation of Energy, Technology Absorption: The information in respect of Conservation of Energy, Technology Absorption and Foreign Exchange earnings and outgo, required under Section 217(1)(e) of the Companies Act,1956, read with the Company’s ( Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 has not been given, since such requirement is not applicable to the Company. Particulars of Employees: None of the employees fall under the provisions of Sec 217(2A) of the Companies Act, 1956. Hence, the particulars required under Section 217(2A) of the Companies Act, 1956 read with the Company’s (Particulars of Employees) Rules, 1975 are not given. Foreign Exchange earnings and Outgo: Expenditure in Foreign Currency Current Year Previous Year March 31, 2006 March 31, 2005 (Rs. Lacs) (Rs. Lacs) License Fees 8.75 Nil Training Expenses 2.28 Nil Travelling Expenses 0.53 0.26 Additional Information The additional information as required to be given under the Companies Act, 1956 has been laid out in the schedules attached to and forming part of the Balance Sheet and Profit and Loss Account , including the Notes to Accounts which are self explanatory Acknowledgement Your Board wishes to thank all its Members, Bankers, Franchisees, Employees, Suppliers and Customers for their continued support and help for the growth of the Company. For and on behalf of the Board of Directors Mumbai , May 8, 2006

A. B. Godrej Chairman

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ HICARE LIMITED 1.

We have audited the attached Balance Sheet of GODREJ HICARE LIMITED as at 31 March, 2006 and also the Profit and Loss Account 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 auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on 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 the 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 annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to in para (3) above, we report that: i) The accumulated losses of the Company as at March 31, 2006 exceed its paid up capital resulting in the erosion of its net worth. The accounts for the year have been prepared on the ‘Going Concern’ basis on the understanding that finance will continue to be available to the Company for working capital requirements from the promoters. ii) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit. iii) In current year the Company has changed the amortization policy of software development from 3 years to 6 years. Had there been no change in the rate of depreciation, the charge for current year would have been higher by Rs. 115,786. Consequently accumulated losses and written down value of asset as at year end are lower by Rs. 183,415.

iv)

In our opinion, proper books of account, as required by law, have been kept by the Company so far as appears from our examination of such books. The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account. vi) In our opinion, the Balance Sheet and the Profit and Loss Account dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956. vii) In our opinion and to the best of our information and according to the explanations given to us, subject to paragraph (i) above, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view: i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31 , 2006; ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and iii) in the case of the Cash Flow Statement, of the cash flows of the company for the year ended on that date. 5. On the basis of the written representations received from the Directors as on March 31, 2006, and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on March 31, 2006 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants B. S. Dastoor Partner Membership No. 48936 Mumbai, May 8, 2006 v)

ANNEXURE TO THE AUDITORS’ REPORT Referred to in paragraph (3) of our report of even date. 1.

(a) (b)

(c)

As per the information and explanations given to us, the Company is in the process of updating its records showing full particulars, including quantitative details and situation of fixed assets. The Company has not conducted a physical verification of fixed assets during the year, in view of which we are unable to comment on discrepancies, if any. The disposal of fixed assets during the year does not affect the going concern assumption. The Management has conducted physical verification of inventory at reasonable intervals. 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. The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

(a) (b)

The Company has not granted any loans, secured or unsecured to Companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. Consequently, the question of commenting on the rates of interest and the other terms and conditions of the loans granted being prejudicial to the interests of the Company, receipt of regular principal and interest and reasonable steps taken for recovery of principal and interest due does not arise The Company has taken unsecured loans of Rs. 104,310,000/- from six Companies listed in the Register maintained under Section 301 of the Companies Act, 1956. In case of these loans, Interest has been waived by the respective companies. In our opinion, the rate of interest and other terms and conditions of these loans are not prima facie prejudicial to the interests of the Company. The payment of principal for above amounts has not been regular. The payment of interest has been regular wherever the same has not been waived.

115

Godrej Hicare Limited ANNEXURE TO THE AUDITORS’ REPORT (Contd.) 4.

7. 8. 9.

10.

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 purchases of inventory, 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 the particulars of contracts and arrangements referred to in Section 301 of the Companies Act, 1956 have been entered into the register required to be maintained under that section. (b) These transactions made in pursuance of such contracts or arrangements, were made at prices which are reasonable having regard to the prevailing market prices at the relevant time. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from public and the provisions of Section 58A, 58AA or any other provision of the Companies Act, 1956, read with the rules framed there under are not applicable. In our opinion and according to the information and explanations given to us, the internal audit system is commensurate with the size of the Company and nature of its business. The maintenance of cost records has not been prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956, in respect of the Company’s products. (a) According to the information and explanations given to us and on the basis of our examination of the books of account, during the year, the Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Service Tax, Cess and other statutory dues applicable to it with the appropriate authorities. According to the information and explanations given to us, there are no undisputed dues payable in respect of above as at March 31, 2006 for a period of more than six months from the date they became payable (b) According to the information and explanations given to us, there are no dues outstanding of Sales Tax, Income Tax, Customs Duty, Service tax, Wealth Tax, Excise Duty or Cess on account of any dispute. The Company’s accumulated losses at the end of the financial year are in excess of fifty percent of its net worth. Though it has incurred cash losses in the immediately preceding financial year, there are no cash losses in the current financial year.

This Year Rupees

Schedule

Net Block INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES Inventory Sundry Debtors Cash and Bank Balances Loans and Advances LESS : CURRENT LIABILITIES AND PROVISIONS Current liabilities Provisions

14. 15. 16. 17.

18.

19. 20. 21.

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants B. S. Dastoor Partner Membership No. 48936 Mumbai, May 8, 2006

Previous Year Rupees

56,200,000

36,000,000

– 139,310,000

– 127,358,000

401,000

–

195,911,000

163,358,000

This Year Rupees

Previous Year Rupees

44,484,712 1,321,380

32,467,955 –

43,163,332 163,155,659 4,899,732

32,467,955 86,735,748 1,380,239

17,353,167 6,011,084

14,223,379 4,694,077

211,218,723

120,583,942

11,342,083 68,905

9,529,302 68,905

53,190,753 7,404,457 (1,900,192) 136,573,253 2,317,918 1,324,008

17,451,768 22,990,205 (2,198,413) 90,656,366 1,784,373 1,203,817

5 6 7 8

22,276,952 45,098,800 17,917,076 31,802,401

20,111,010 44,523,041 2,253,597 4,236,709

198,910,197

131,888,116

12,308,526 668,980 805,000 401,000

(11,304,174) – – –

Profit/(Loss) for the Year after Tax Add : Balance Brought Forward

10,433,546 (144,493,959)

(11,304,174) (133,189,785)

Deficit Carried Forward

(134,060,413)

(144,493,959)

2.29

(3.29)

INCOME : Gross Sales Less : Excise Duty Net Sales Service Income Other Income

9 10

NET CURRENT ASSETS PROFIT & LOSS ACCOUNT

NOTES TO ACCOUNTS

13.

According to the information and explanations given to us and based on the documents and records produced to us, there are no dues to banks, financial institutions or debenture holders. According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 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. The Company does not deal in shares, securities, debentures and other investments. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks and financial institutions. The Company did not have any term loans during the year. According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flows of the Company, we report that the Company has not utilized funds raised on short-term basis for long-term investment. The Company has made preferential allotment of shares during the year to parties covered in the register maintained under Section 301 of the Companies Act, 1956. In our opinion and based on the information and explanations given to us, the price at which the shares are issued is not prima-facie prejudicial to the interest of the Company. The Company did not issue any debentures during the year. The Company has not raised any money through a public issue during the year. 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.

Schedule

DEFERRED TAX LIABILITY APPLICATION OF FUNDS : FIXED ASSETS Gross Block Less : Depreciation

12.

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON MARCH 31, 2005

BALANCE SHEET AS AT MARCH 31, 2006

SOURCES OF FUNDS : SHAREHOLDERS’ FUNDS Share Capital LOAN FUNDS Secured Loans Unsecured Loans

11.

117,095,229

67,124,357

64,451,387 2,204,243

57,040,119 818,404

66,655,630

57,858,523

50,439,599 134,060,413

9,265,834 144,493,959

195,911,000

163,358,000

EXPENDITURE: Raw Materials Consumed Purchase of Traded Goods Inventory Change Expenses Interest and Finance Expense Depreciation

Profit/(Loss) for the Year Less : Fringe Benefit Tax Current Tax Deferred Tax

Basic/Diluted Earnings per Share (Refer Note 9)

NOTES TO ACCOUNTS

12 13 14 15 3

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

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

As per our Report of even date

As per our Report attached

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants D.U. MENON BAHADUR S. DASTOOR Company Secretary Partner Mumbai, May 8, 2006

116

Signatures to Balance Sheet and Schedules 1 to 10 and 16 A.B. GODREJ

Chairman

A. MAHENDRAN

Managing Director

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants D.U. MENON BAHADUR S. DASTOOR Company Secretary Partner Mumbai, May 8, 2006

Signatures to Profit and Loss Account and Schedules 11 to 16 A.B. GODREJ

Chairman

A. MAHENDRAN

Managing Director

Annual Report 2005-2006

SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2006 SCHEDULE 1 : SHARE CAPITAL Authorised: 8,000,000 Equity Shares of Rs.10/- each (Previous year 7,500,000 Equity Shares of Rs.10 each) Issued & Subscribed 7,900,000 (Previous year 3,600,000) Equity Shares of Rs 10/- each Paid-up 4,100,000 (Previous year 3,600,000) Equity Shares of Rs 10/- each fully paid 3,800,000 (Previous year Nil) Equity Shares of Rs 10/- each, Rs 4/- paid. Of the above: 6,647,100 (Previous year 3,107,100) shares are held by Godrej Industries Ltd. (GIL), the Holding Company SCHEDULE 2 UNSECURED LOANS Intercorporate deposits (due within a year, or at call)

This Year Rupees

Previous Year Rupees

80,000,000

75,000,000

79,000,000

36,000,000

41,000,000 15,200,000 56,200,000

36,000,000 – 36,000,000

139,310,000 139,310,000

127,358,000 127,358,000

SCHEDULE 3 : FIXED ASSETS

(Amount in Rs.) GROSS BLOCK

ASSETS Intangibles Trademarks Computer Software Total (A) Tangibles Factory Building Plant & Machinery Office Equipment Furniture & Fixture Spray and Service Kit Vehicles Computer Hardware Total (B)

DEPRECIATION

NET BLOCK

As at 01/04/2005

Additions

Deductions

As at 31/03/2006

Up to 01/04/2005

For the year

Deductions

Up to 31/03/2006

As at 31/03/2006

As at 31/03/2005

9,000,000 540,000 9,540,000

– 1,274,392 1,274,392

– – –

9,000,000 1,814,392 10,814,392

1,070,137 135,110 1,205,247

900,000 48,306 948,306

– – –

1,970,137 183,416 2,153,553

7,029,863 1,630,976 8,660,839

7,929,863 404,890 8,334,753

82,400 4,407,529 46,863 48,638 59,000 38,949 –

– 1,211,234 26,052 – – – 692,785

– 74,675 –

82,400 5,544,088 72,915 48,638 59,000 38,949 692,785

8,281 3,381,774 13,182 11,567 35,077 38,949 –

7,412 200,196 11,485 6,710 23,923 – 125,976

– 7,001 – – – – –

15,693 3,574,969 24,667 18,277 59,000 38,949 125,976

66,707 1,969,119 48,248 30,361 – – 566,809

74,119 1,025,755 33,681 37,071 23,923 – –

– –

4,683,379

1,930,071

74,675

6,538,775

3,488,830

375,702

7,001

3,857,531

2,681,244

1,194,549

TOTAL(A+B)

14,223,379

3,204,463

74,675

17,353,167

4,694,077

1,324,008

7,001

6,011,084

11,342,083

9,529,302

Previous Year Total

12,979,858

1,243,521

–

14,223,379

3,490,260

1,203,817

–

4,694,077

9,529,302

This Year Rupees SCHEDULE 4 : INVESTMENTS : LONG TERM In Mutual Funds, Quoted Templeton India Treasury Management Account Regular Plan - Growth No. of units 43.19 (Previous year 43.19) Market Value SCHEDULE 5 : INVENTORY Raw material Packing Material Finished Goods Service Stock Photographic equipment SCHEDULE 6 : SUNDRY DEBTORS (Unsecured and considered good unless otherwise stated) Due for more than six months Considered good Considered doubtful Other debts Considered good Considered doubtful Less : Provision for doubtful debts SCHEDULE 7 : CASH AND BANK BALANCES Cash on hand Balances with scheduled banks in current accounts in fixed deposit account in margin deposit account SCHEDULE 8 : LOANS AND ADVANCES (Unsecured and considered good unless otherwise stated) Loans and advances recoverable in cash or in kind or for value to be received : Advance to Suppliers Deposits Advance Tax and Tax Deducted at Source

Previous Year Rupees

68,905

75,728

68,905

SCHEDULE 9 : CURRENT LIABILITIES Current Liabilities: Sundry Creditors (Refer Note 4) Security Deposits Advance from Customers Other Liabilities Interest accrued but not due

This Year Rupees

Previous Year Rupees

12,057,968 8,620,334 24,870,848 17,945,805 956,432

15,631,800 7,899,449 14,083,253 19,416,028 9,589

64,451,387

57,040,119

1,399,243 805,000

818,404 –

2,204,243

818,404

3,922,887 930,122 4,356,905 12,252,981 814,057

3,635,957 785,956 2,429,913 12,418,328 840,856

SCHEDULE 10 : PROVISIONS Leave Encashment Taxation

22,276,952

20,111,010

SCHEDULES FORMING PART OF THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006

8,409,492 379,601

12,247,885 379,601

8,789,093

12,627,486

36,689,308 – 45,478,401 379,601

28,275,156 – 40,902,642 379,601

45,098,800

40,523,041

47,281

1,034

9,303,535 7,323,200 1,243,060

1,622,216 – 630,347

17,917,076

2,253,597

SCHEDULE 11 : OTHER INCOME Miscellaneous income Sundry Credit balances written back SCHEDULE 12 : MATERIALS a) Raw Material and Packing Material Consumed Opening stock Add : Purchases during the year Less : Closing stocks b)

1,232,534 147,705

4,899,732

1,380,239

4,421,913 24,028,993

69,856 4,975,000

28,450,906 4,853,009

5,044,856 4,421,913

Service Stock Consumed

SCHEDULE 13 : INVENTORY CHANGE Opening stock Photographic equipments Finished goods

4,123,113 776,619

23,597,897 29,592,856

622,943 16,828,825

53,190,753

17,451,768

840,857 2,429,913

840,857 231,500 3,270,770

22,453,920 4,938,556 2,715,931 1,693,994

941,023 728,090 2,564,536 3,060

31,802,401

4,236,709

Less: Closing Stock Photographic equipments Finished goods

814,057 4,356,905

1,072,357 840,857 2,429,913

5,170,962

3,270,770

(1,900,192)

(2,198,413)

117

Godrej Hicare Limited SCHEDULES FORMING PART OF THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006 SCHEDULE 14 : EXPENSES Salaries, Bonus & Allowances Contribution to Provident Fund and Other Funds Staff Welfare Expenses Processing Charges Electricity Expenses Rent Rates & Taxes Repairs & Maintenance : Machinery & Equipment Others Insurance Freight & Transportation Expenses Service Center Expenses Advertising, Publicity & Sales Promotion Expenses Discount Travelling & Conveyance Legal & Professional Charges Bad debts and advances written off IT Expenses General Expenses

This Year Rupees

Previous Year Rupees

16,448,123 770,279 759,757 1,677,141 359,073 2,261,717 2,586,662

12,936,622 1,338,763 237,237 1,090,572 287,683 1,512,787 43,073

7,802 274,713

8,494 46,778

282,515 104,398 2,709,778 35,717,165 52,907,561 1,062,414 4,333,627 3,836,943 5,111,522 587,943 5,056,635

55,272 171,020 648,439 19,657,815 40,361,448 – 3,351,709 4,213,557 120,175 1,223,142 3,407,052

136,573,253

90,656,366

SCHEDULE 15 : INTEREST AND FINANCE EXPENSES Interest on intercorporate deposits Other Interest & financial charges

919,610 1,799,886

658,203 1,126,170

Less : Interest Income

2,719,496 401,578

1,784,373 –

2,317,918

1,784,373

SCHEDULE 16 : NOTES TO ACCOUNTS 1.

SIGNIFICANT ACCOUNTING POLICIES a)

Spray and service kits and Vehicles: On Straight Line Method basis at the rates prescribed by Schedule XIV to the Companies Act, 1956.

Computer Hardware and Other Assets: On Written Down Value basis at the rates prescribed by Schedule XIV to the Companies Act, 1956.

Following assets are Amortized as follow:

Bank Guarantee given by the company amounting to Rs.1,243,060 (Previous year Rs. 630,347)

Capital Commitments

SSI CREDITORS

The Company has not provided for interest for the year on certain Inter Corporate Deposits received, as the same has been waived by the concerned companies in view of the financial position of the Company.

During the current year, the Company changed its accounting policy with respect to amortization of Computer Software from 3 years to 6 years. Had there been no change in the rate of depreciation, the charge for current year would have been higher by Rs. 115,786. Consequently accumulated losses and written down value of asset as at year end are lower by Rs.183,415.

Expenditure in Foreign Currency License Fees Training Expenses Travelling Expenses

(a)

Trademarks

(b)

Computer Software

This Year

875,400 227,978 53,389

Nil Nil 26,720

ACCOUNTING FOR LEASES The lease rentals in respect of office and factory space charged during the period and maximum obligations on non-cancellable operating leases payable as per the rentals stated in the lease agreement are given in accordance with the Accounting Standard (AS-19) on “Leases” issued by the Institute of Chartered Accountants of India. (Amounts in Rupees)

Period

Lease Rentals paid during the year

10 years

Future Lease Obligations

This Year

1,136,209

318,000

–

Due within one year of the Balance Sheet date

1,204,132

318,000

Impairment :

–

Due between one year and five years

2,255,473

631,000

Carrying amount of cash generating units / assets are reviewed at balance sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognized whenever carrying amount exceeds the recoverable amount.

–

Due after five years

–

6 years

Inventories :

Current Year Item 9.

Research & Development : Revenue expenditure on Research and Development is charged to Profit and Loss Account of the year in which it is incurred. Capital expenditure incurred during the year on Research and Development is shown as addition to Fixed Assets. Revenue Recognition : Revenue from Pest Management services is recognized as and when the services are rendered. Sales are net of returns, rebates, sales tax, etc.

Previous Year

Units

Quantity

Value (Rs.)

Quantity

Value (Rs.)

INVENTORIES OF FINISHED GOODS Traded goods Print Leader Nos Imager Nos

3 5

352,286 461,771

3 6

352,286 488,571

1,767

814,057 306,864

2215

840,857 515,041

Insecticides

Ltrs

1,120,921

Retirement Benefits : Retirement benefits to employees comprise payments under defined contribution plans like provident fund and family pension. Payments under defined contribution plans are charged to the profit and loss account. The liability in respect of defined benefit schemes like gratuity and leave encashment benefit on retirement is provided on the basis of actuarial valuation at the end of each year. The liability for retirement gratuity is funded through a trust created for the purpose.

118

Stores and spares are valued at weighted average cost.

Claims against company not acknowledged as debts amounts to Rs. 14,500,000 (Previous year Rs. 13,718,000)

In the absence of a database identifying creditors as Small Scale Industrial Undertakings, it is the opinion of the management that there are no parties, which can be classified as Small Scale Industrial Undertakings to whom the company owes any sum. The auditors have accepted the representations of the management in this matter.

Finished goods are valued at lower of cost and net realisable value.These costs include cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

CONTINGENT LIABILITIES : 1)

The estimated value of contracts remaining to be executed on capital account to the extent not provided for is Rs. Nil (Previous Year Rs. Nil.)

Raw materials and Service Stock are valued at weighted average cost.

Earnings per Share : The basic earning per share is computed using the weighted average number of common shares outstanding during the period. Diluted earning per share is computed using the weighted average number of the common and dilutive common equivalent shares outstanding during the period except where the results would be anti dilutive.

Depreciation/Amortization :

Asset Type

Fixed Assets : Fixed assets have been stated at cost and include incidental and / or installation/development expenses incurred in putting the asset to use and interest on borrowing incurred during construction period. Pre-operative expenses for major projects are also capitalized, where appropriate.

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 translated at the year end exchange rates. Forward exchange contracts, remaining unsettled at the year end, backed by underlying assets or liabilities are also translated at year end exchange rates.The premium payable on foreign exchange contracts is amortised over the period of 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.

Accounting Conventions : The accounts have been prepared on historical cost convention. The Company follows mercantile system of accounting and recognizes income and expenditure on accrual basis

Manufactured goods Insecticides

Ltrs

9,352

Total 10.

SALES (NET OF EXCISE DUTY) Item Traded goods Spares & Consumables Insecticides Manufactured goods Insecticides Total

4,050,041

1,355,898 7101

1,914,872

4,050,041

1,914,872

5,170,962

3,270,770

Units

Quantity

Value (Rs.)

Ltrs.

– 29,920

– 11,672,717

32,825

Ltrs.

82,932

31,490,615

28,846

43,163,332

Quantity

Value (Rs.) 92,596 21,513,196 11,877,036 33,482,828

Annual Report 2005-2006 2.

SCHEDULE 16 : NOTES TO ACCOUNTS (Contd..) Current Year Item 11.

Units

Quantity

PURCHASES FOR RESALE Insecticides Spares & Consumables

29,472 –

Total 12.

RAW MATERIAL CONSUMED Basic Chemicals Service Stock Others

Kgs

127,522 –

Quantity

7,404,457 –

35,240 –

CIF VALUE OF IMPORTS Item

Issue of Share Capital

Sale of Fixed Assets

Purchase of Fixed Asset

Sales & Other Income

Purchases (net of returns) Expenses charged by other Companies Expenses charged to other Companies

42,305,906 10,884,847

100 –

17,451,768 –

Interest on Inter Corporate Deposit

17,451,768

Sundry Deposit with Other Companies

10.

Sundry Deposits refunded

11.

Outstanding Receivables (net) of Payables

(ii)

Details relating to person referred to in item1(iii) above

Production Current Year

Previous Year

51,215 33,968

35,484 –

240,000

51,215

35,484

Quantity

Value (Rs.)

Quantity

Value (Rs.)

12,016,607

2,500

1 Issue of share capital Sale of Fixed Assets Purchase of Fixed Assets

2,540,309

Sales & Other Income

Previous Year

Purchases(net of returns)

(11,304,174) 3,435,616 (3.29)

Expenses charged by other Companies

RELATED PARTY DISCLOSURE AS REQUIRED BY AS - 18 “RELATED PARTY DISCLOSURES” ARE GIVEN BELOW:

Expenses charged to other Companies Outstanding Receivables, net of Payables

12,016,607

2,540,309

EARNING PER SHARE Current Year Profit/ (Loss) after Tax as per profit & loss account Weighted average number of equity shares of Rs. 10 each Basic/Diluted Earnings Per Share

Rs. 10,433,546 4,557,425 Rs. 2.29

Relationships (i)

(ii)

Shareholders (the Godrej Group shareholding) in the company: Godrej Industries Limited hold 84.1% GIL is a subsidiary of Godrej & Boyce (Mfg.) Co. Limited, the ultimate holding co. Other related parties in the Godrej Group where common control exists. 1. 2. 3. 4.

(iii)

18.

Current year 3,040,000

Previous year 2,400,000

Significant Related Party Transactions 1.

58,660

(ii) Nil (Nil) 74,675 (Nil) Nil (74,675) 4,066,038 (1,014,862) (454,918) (14,312,784) 2,065,638 (3,203,865) 1,733,582 (Nil) Nil (Nil) Nil (Nil) Nil (Nil) 3,004,913 (49,008)

240,000 –

Kgs.

(i) 17,160,000 (2,400,000) Nil (Nil) Nil (Nil) Nil (Nil) Nil (17,000) 1,475,254 (1,301,911) 5,650 (Nil) 88,457 (111,000) Nil (350,000) Nil (Nil) (357,800) (-21,286)

3. Units

(i) Nil (Nil) Nil (Nil) Nil (Nil) Nil (Nil) Nil (Nil) Nil (2,975) Nil (Nil) Nil (Nil) 351,450 (Nil) 350,000 (Nil) Nil (Nil)

Value (Rs.)

Insecticide

17.

622,943 16,828,825 –

240,000 –

Total 16.

22,983,950 6,255

Godrej Group Other Related Shareholders parties in the Godrej Ultimate Holding Co. Group Holding Co.

INSTALLED CAPACITY AND ACTUAL PRODUCTION Units Installed Capacity

Ltrs.

Sr. Particulars No.

17,451,768

53,190,753

Insecticides Processed Outside

Details relating to parties referred to in item 1(i) and (ii) above:

Value (Rs.)

Current Year Previous Year

15.

5,523 –

53,190,753

VALUE OF CONSUMPTION OF RAW MATERIALS, SPARES AND CONSUMABLES Item % Raw Materials Indigenous 80 Imported (including custom duty) 20

The following transactions were carried out with the related parties in the ordinary course of business:

22,990,205

22,862,147 29,592,856 735,750

Total 14.

Value (Rs.)

7,404,457

Total 13.

Previous Year

Godrej Sara Lee Limited – – Godrej Sara Lee Limited Godrej Sara Lee Limited Godrej Properties Limited Godrej Sara Lee Limited Godrej Sara Lee Limited Godrej Sara Lee Limited Godrej Tea Limited Godrej Sara Lee Limited Godrej Tea Limited Godrej Sara Lee Limited Godrej Sara Lee Limited – Godrej Tea Limited Godrej Sara Lee Limited Godrej Tea Limited Godrej Sara Lee Limited

74,675 (Nil) Nil (74,675) 3,044,295 991,250 (1,014,862) (454,918) (14,312,784) 1,337,917 727,720 (1,016,303) (2,187,562) 1,724,082 (Nil) 2,018,551 991,250 (-262,147) (311,155)

Deferred Tax The Tax effects of significant temporary differences that resulted in deferred tax assets and liabilities are : Current Year Previous Year Rs. Rs.

Godrej Tea Limited Godrej Agrovet Limited Godrej Properties Limited Godrej Sara Lee Limited

Depreciation on Fixed Assets Others

Key Management Personnel

Deferred Tax Liability

Mr. A. Mahendran (Managing Director) 19.

(1,163,000) 762,000

– –

(401,000)

–

Auditors Remuneration Statutory Audit Audit under other Statutes

134,688 33,672

82,650 27,550

Total

168,360

110,200

20.

The amount of exchange difference included in the Profit and Loss Account, under the related heads of expenses / income, is Rs.9,856 (Previous year expense Rs.).

21.

The Company is engaged in the business of rendering pest management services, which is its only primary business segment. The Company operates in economic environments which are subject to same risks and returns and hence no disclosure is required under AS 17- Accounting Standard on Segment Reporting.

22.

Information required under Schedule VI to the Companies Act ,1956, have been given to the extent applicable.

119

Godrej Hicare Limited BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE 1. Registration details Registration No. : 72222 State Code : 11 Balance Sheet Date : March 31, 2006 2. Capital raised during the year Public Issue : – Rights Issue : 20,200,000 Bonus Issue : – Private Placement : – 3. Position of mobilisation and deployment of funds Total Liabilities : 262,566,630 Total Assets : 262,566,630 Sources of funds Paid up Capital : 56,200,000 Reserves & Surplus : – Secured Loans : – Unsecured Loans : – Deferred Tax Liability : 401,000 Application of funds Net Fixed Assets : 11,342,083 Investments : 68,905 Net Current Assets : 50,439,599 Miscellaneous Expenditure : – Accumulated Losses : 134,060,413 4. Performance of Company Turnover (Total Income) : 211,218,723 Total Expenditure : 198,910,197 Profit / (Loss) before tax : 12,308,526 Profit / (Loss) after tax : 10,433,546 Earnings per share in Rs. : 2.29 Dividend rate (%) : – 5 Generic names of three principal products / services of the Company Item Code No. Nil Product Description Pest Control Services Item Code No. 3808.1* Product Description Insecticides Item Code No. 90.10 * Product Description Photographic Equipment & Spares

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006

Cash Flow from Operating Activities : Profit/(Loss) before tax Adjustments for : Depreciation Interest expense Operating Loss before working capital changes Adjustments for : Inventories Trade & Other receivables Trade & Other payables

Direct taxes paid Fringe Benefit tax Paid Cash Flow from Investing Activities : Purchase of Assets Investments

Previous Year Rs. ‘000

12,308,526

(11,304,174)

1,324,008 2,317,918

1,203,817 1,784,373

15,950,452

(8,315,984)

(2,165,942) (30,447,457) 7,035,675

(17,862,984) (45,733,188) 49,045,856

(9,627,272) (1,693,994) (668,980)

(22,866,300) (3,060) –

(3,136,789) –

(1,083,521) (68,905)

Net Cash used in investing activities Cash Flow from Financing Activities : Term Loans/Inter Corporate Deposits taken Issue of Share Capital Interest paid

(3,136,789)

(1,152,426)

11,952,000 20,200,000 (1,361,486)

19,500,000 4,800,000 (1,774,786)

Net Cash from financing activities

30,790,514

22,525,214

Net Increase in Cash and Cash Equivalents

15,663,479

(1,496,572)

2,253,597

3,750,169

17,917,076

2,253,597

Add : Cash & Cash equivalents (Opening Balance) Cash & Cash equivalents (Closing Balance)

Notes 1. Cash flow statement has been prepared under the Indirect method as set out in the accounting standards AS-3 on Cash Flow Statement as present cash flows by operating, investing and financing activities 2. Figures in brackets are outflows/deductions. 3. Previous year figures are regrouped/restated whereever necessary to confirm to this year’s classification. For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants D.U. MENON BAHADUR S. DASTOOR Company Secretary Partner Mumbai, May 8, 2006

120

Current Year Rs. ‘000

A.B. GODREJ

Chairman

A. MAHENDRAN

Managing Director

Annual Report 2005-2006

Ensemble Holdings & Finance Limited DIRECTORS’ REPORT FOR THE YEAR ENDED ON MARCH 31, 2006 To The Shareholders, Your Directors submit their Report along with the audited Accounts for the year ended on March 31, 2006. Review of operations Your Company’s performance during the year as compared with that during the previous year is summarised below :This Year Previous Year (Rs.’000) (Rs.’000) 57,332

3,039

Profit/(Loss) for the year Provision for Taxation Adjustment in respect of prior years Loss brought forward

Gross Revenue earned

57,185 520 5 (80,575)

2,053 – – (82,628)

Loss carried forward

(80,521)

(80,575)

Dividend The Board of Directors have declared and paid two interim dividends for year 2005-06 aggregating to Rs.8.13 per share. The Directors recommend a final dividend of Rs.0.97 per share. Taken together these work out to Rs.9.11 per share (previous year Rs. Nil). Compliance with guidelines issued by the Reserve Bank of India Your Company has been granted a Certificate of Registration by Reserve Bank of India to carry on the business as Non-Banking Financial Institution. Your Company has not accepted any public deposits during the year under review, nor does it propose to accept the same. As such, pursuant to Non-Banking Financial Companies (Reserve Bank) Directions, 1998, issued by Reserve Bank of India vide notification No.DFC.114/DG (SPT) dated January 2, 1998, your Company is not required to obtain rating from a rating agency in this regard. Hence, rating for Fixed Deposit obtained from CRISIL in 1996-97 has not been renewed. In view of the above, there are no overdue or unclaimed deposits. Directors In accordance with Article 124 of the Articles of Association of your Company, Ms. T. A. Dubash retires by rotation and being eligible offers herself for re-appointment. Mr. Hoshedar K. Press was appointed as Executive Director with effect from November 16, 2005. Notice under Section 257 of the Companies Act, 1956 has been received from a member signifying intention to propose his appointment as Director in the forthcoming Annual General Meeting.

REPORT OF THE AUDITORS To The Members of ENSEMBLE HOLDINGS & FINANCE LIMITED 1. We have audited the attached Balance Sheet of Ensemble Holdings and Finance Limited as at March 31, 2006 and also the Profit and Loss Account and Cash Flow Statement 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. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. 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 annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. Further to our comments in the Annexure referred to above, we report that: a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of such books; c) The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account; d) In our opinion, the Profit and Loss Account and Balance Sheet dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; e) In our opinion and to the best of our information and according to the explanations given to us, the said accounts, read with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the 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, 2006, (ii) in the case of the Profit and Loss Account, of the Profit of the Company for the year ended on that date; (iii) in the case of Cash Flow Statement, of the cash flow for the year ended on that date. 5. On the basis of the written representations received from the Directors as on March 31, 2006, and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2006, from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956. For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants V. M. PADWAL Partner Mumbai, May 26, 2006 Membership No.: 49639 ANNEXURE TO THE AUDITORS’ REPORT Referred to in Paragraph 3 of our report of even date on the accounts of Ensemble Holdings & Finance Limited for the year ended March 31, 2006: 1. a) The Company has granted unsecured loans to two companies covered in the register maintained under Section 301 of the Companies Act, 1956 and the amount involved in the said transactions was Rs. Nil. The outstanding amount receivable towards loans from such companies amount to Rs. 2,31,81,117/-. b) In our opinion and according to information and explanations given to us, the rate of interest and other terms and conditions of unsecured loans given by the Company, are prima facie not prejudicial to the interest of the Company except for unsecured loan given to Godrej Hicare Limited which has been adequately provided for.

Auditors You are requested to appoint Auditors for the current year and fix their remuneration. The retiring auditors, M/ s Kalyaniwalla Mistry & Associates, Chartered Accountants are eligible for reappointment 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 they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the loss of the Company for that period; c) that they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguard of the assets of the Company and for preventing and detecting fraud and other irregularities; d) that they have prepared the annual accounts on a going concern basis. Additional Information The additional information required to be given under the Companies Act, 1956, has been laid out in the Accounts to the extent applicable. The notes to the Accounts referred to in the Auditors’ Report are selfexplanatory and therefore do not call for any further explanation. The 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 has not been given, since such requirement is not applicable to the Company. The particulars, required under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, have not been given, since the Company did not employ any person during the year under review. For and on behalf of the Board of Directors M. EIPE Director

C.K. VAIDYA Director

Mumbai, May 26, 2006 c)

All parties except for Godrej Hicare Limited have repaid the principal amounts as stipulated and have been regular in the payment of interest. d) In our opinion, the Company has taken reasonable steps for the recovery of principal and interest in respect of overdue balance of Rs. 23,110,000/- due from Godrej Hicare Limited. e) The Company had taken unsecured loans from a company covered in the register maintained under Section 301 of the Companies Act, 1956. The amount involved during the year was Rs. 58,00,000/-. f) According to information and explanations given to us, we are of the opinion that the rate of interest and other terms and conditions on which loans have been taken from the company covered in the register maintained under Section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the Company. g) The Company is regular in repaying the principal amounts as stipulated and has been regular in the payment of interest. 2. a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that all transactions that need to be entered into the register in pursuance of Section 301 of the Companies Act, 1956, have been so entered. b) These transactions have been made at reasonable prices having regard to the prevailing market prices at the relevant time. 3. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956, and the rules framed thereunder. 4. The Company has an internal audit system, which in our opinion, is commensurate with the size and nature of its business. 5. a) According to the records examined by us, the Company is generally regular in depositing undisputed statutory dues including income tax with appropriate authorities. b) According to the information and explanation given to us there are no dues of sales tax, income tax, wealth tax, service tax, excise duty or cess, which have not been deposited on account of any dispute. 6. The accumulated losses of the Company as at end of the financial year are more than fifty percent of its net worth. The company has not incurred cash losses during the current financial year and in the immediately preceding financial year. 7. According to the information and explanations given to us and the records examined by us, we observed that the Company has not borrowed any money from financial institutions or banks or debenture holders. 8. According to the information and explanations given to us the Company has not granted loans and advances on the basis of security by way of pledge of shares and other securities. 9. In our opinion and according to the information and explanation given to us, the nature of the activities of the Company does not attract any special statute applicable to chit fund and nidhi/mutual benefit fund/ societies. 10. In our opinion, the Company has maintained proper records of the transactions and contracts of the investments dealt in by the Company and timely entries have been made therein. The investments made by the Company are held in its own name. 11. According to the information and explanations given to us and the records examined by us, the Company has not given any guarantees for loans taken by others from banks or financial institutions. 12. According to the information and explanations given to us and the records examined by us we observed that the Company has not taken any term loan. 13. On the basis of an overall examination of the balance sheet and cash flows of the Company and the information and explanation given to us, we report that the Company has not utilised any funds raised on short-term basis for long-term investments. 14. The Company has not made any preferential allotment of shares to parties or companies covered under Section 301 of the Companies Act, 1956. 15. The Company did not issue any debentures during the financial year. 16. The Company has not raised any money through a public issue during the year. 17. Based upon the audit procedures performed and the information and explanation given by the management, we report that no fraud on or by the Company has been noticed or reported during the year. 18. In our opinion, clauses (i), (ii), (iv) and (viii) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003 are not applicable. For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants V. M. PADWAL Partner Mumbai, May 26,2006 Membership No.: 49639

121

Ensemble Holdings & Finance Limited BALANCE SHEET AS AT MARCH 31, 2006

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

Schedule

Previous Year Rupees

SOURCE OF FUNDS 1

Shareholders’ Funds (a)

Share Capital

37,741,600

(b)

Reserves & Surplus

102,357,370

84,945,040

140,098,970

122,686,640

–

1,100,000

140,098,970

123,786,640

44,027,576

35,578,755

453,350

–

Loan Funds Unsecured Loans

Total APPLICATION OF FUNDS 1

Investments

Current Assets, Loans and Advances (a)

Sundry Debtors

(b)

Cash & Bank Balances

504,958

7,207,669

(c)

Other Current Assets

804

8,600

(d)

Loans and Advances

18,893,472

502,273

19,852,584

7,718,542

Less : Current Liabilities and Provisions Current Liabilities Provisions

8 103,199 4,199,084

85,762 –

4,302,283

85,762

Net Current Assets

15,550,301

7,632,780

Profit and Loss Account

80,521,093

80,575,105

140,098,970

123,786,640

Total NOTES TO ACCOUNTS

This Year Rupees

Previous Year Rupees

457,070 397,935 19,750,323

842,572 2,181,632 34

36,488,750 237,935

– 14,595

57,332,013

3,038,833

127,137 19,554

54,329 931,130

Schedule INCOME Interest Income Dividend Profit on sale of investments (Net) Provision for diminution in value of Long term investments written back Profit on sale of Mutual Funds EXPENDITURE Expenses Interest

10 11

146,691

985,459

PROFIT / (LOSS) BEFORE TAX Provision for Taxation

57,185,322 520,000

2,053,374 –

PROFIT / (LOSS) AFTER TAX Adjustments for Income tax of prior years

56,665,322 5,779

2,053,374 –

PROFIT AVAILABLE FOR APPROPRIATION

56,671,101

2,053,374

34,382,599

–

4,822,160 11,745,220 5,667,110

– – –

Balance available for set off against b/f deficit in P&L A/c Loss brought forward

56,617,089 54,012 (80,575,105)

– – (82,628,479)

Loss Carried Forward

(80,521,093)

(80,575,105)

15.02

0.54

APPROPRIATION Dividend Interim Final (Proposed)

30,700,000 3,682,599

Dividend Distribution Tax Transfer to Special Reserve Fund u/s 45IC of RBI Act, 1934 Transfer to General Reserves

Earnings Per Share

12 (6)

NOTES TO ACCOUNTS

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

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

As per our Report of even date attached.

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants V.M. PADWAL Partner

Signatures to Balance Sheet and Schedules 1 to 8 and 12

Director Director

M. EIPE C.K. VAIDYA

S. SRINIVASAN Company Secretary

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants V.M. PADWAL Partner

Mumbai, May 26, 2006

Signatures to Profit & Loss Account and Schedules 9 to 12

Director Director

M. EIPE C.K. VAIDYA

S. SRINIVASAN Company Secretary

Mumbai, May 26, 2006

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 This Year Rupees

Previous Year Rupees

SCHEDULE 1 : SHARE CAPITAL

(Out of the above, 3,770,160 shares are held by Godrej Industries Ltd., the Holding Company)

84,945,040

SHARE PREMIUM 50,000,000

50,000,000

As per last Balance Sheet

37,741,600

Special Reserves u/s 45IC of RBI Act, 1934 Opening Balance Add : Transfer during the year for FY 2004-05 Add : Transfer during the year for FY 2005-06

ISSUED, SUBSCRIBED AND PAID UP 3,774,160 Equity Shares of Rs. 10/- each fully paid up.

Previous Year Rupees

SCHEDULE 2 : RESERVES & SURPLUS

AUTHORISED 5,000,000 Equity Shares of Rs. 10/- each

This Year Rupees

– 411,000 11,334,220

– – – 11,745,220

General Reserve Opening Balance Transfer during the year for FY 2005-06

– 5,667,110 5,667,110

–

102,357,370

84,945,040

–

1,100,000

–

1,100,000

SCHEDULE 3 : UNSECURED LOANS Inter Corporate Borrowings

(Inter Corporate Borrowings are from the Holding Company; and are due for repayment within on call.)

122

Annual Report 2005-2006

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 SCHEDULE 4 : INVESTMENTS Quantity Investee Company / Institution Long Term Investments (At Cost) Equity shares - Quoted Companies under same management Godrej Industries Ltd. Godrej Foods Ltd. Other Companies Agro Tech Foods Ltd. Colgate Palmolive India Ltd. Dabur India Ltd. (Bonus received during the year) Henkel Spic India Ltd. Hindustan Lever Ltd. Gillette India Ltd. Marico Industries Ltd. Nirma Ltd. Procter & Gamble Hygiene & Health Care Ltd. Venkys India Ltd. Unquoted Companies under the Same Management : Godrej Properties Ltd. Godrej Agrovet Ltd. Godrej Remote Services Ltd. Godrej Hicare Ltd. Godrej Global Solutions Ltd. (Reduction of Share Capital during the year under a scheme of arrangement) Other Companies : karROX Technologies Ltd. Personalitree Academy Ltd. Reckitt Benckiser (India) Ltd. Avestha Gengraine Technologies Pvt. Ltd. Current Investments Mutual Funds - Unquoted Magnum Institutional Income fund– Savings Growth

Face Value

Acquired during the year

Sold during the year

Quantity as on 31.03.06

As on 31.03.06 Rupees

As on 31.03.05 Rupees

6 1

98,990 1,484,864

– –

98,990 1,484,864

– –

40,992,795 1,363,885

10 10 1

1 1 1

– – 1

– – –

1 1 2

53 151 59

10 1 10 10 10 10 10

1 751 1 4 1 1 1

– – – – – – –

1 751 1 4 1 1 1

31 90,589 400 271 255 490 37

10 10 10 10 10

267,410 – 10,883 4,800 49,940

65 2,000 – – –

190,680 – 10,883 – 8,689

76,795 2,000 – 4,800 41,251

5,488,590 560,000 – 48,000 499,400

18,957,460 – 109,384 48,000 499,400

10 10 10 10

250,000 389,269 10 –

– – – 55,500

– – 10 –

250,000 389,269 – 55,500

10,050,000 11,027,991 – 25,037,438

10,050,000 11,027,991 2,433 –

2,300,000 55,103,755 11,076,179 44,027,576

– 83,143,684 47,564,929 35,578,755

92,336 43,935,240 44,027,576 210,151

5,960,076 29,618,677 35,578,753 24,993,109

Less : Provision for diminution in value of Investments Aggregate Book Value of Investments : Quoted Investments Unquoted Investments Market Value of quoted investments

SCHEDULE 5 : CASH AND BANK BALANCES Cash on hand Balances with Scheduled Banks in Current Accounts in Fixed Deposits with Bank SCHEDULE 6 : OTHER CURRENT ASSETS Accrued Interest SCHEDULE 7 : LOANS AND ADVANCES (Unsecured, considered good, unless stated otherwise) Loans ESOP Loans Share Application Money (considered doubful) Intercorporate Deposits (considered doubtful) Less : Provision for Doubtful Loans and Advances Advance Payment of Taxes (Net of provision for tax Rs.5,20,000, previous year Nil) SCHEDULE 8 : CURRENT LIABILITIES & PROVISIONS Current Liabilities Sundry Creditors Provisions : Proposed Dividend Tax on Distributed Profits SCHEDULE 9 : INTEREST INCOME (Gross) On Loans (TDS Rs. 85,400/-, previous year Rs. Nil) On Intercorporate Deposits (TDS Rs. Nil, previous year Rs. 1,68,443/-) On Income tax Refund On Fixed Deposits with Bank (TDS Rs. 5,505, previous year Rs. Nil) SCHEDULE 10 : EXPENSES Salary Profession Tax Directors’ sitting fees Auditors’ Remuneration Professional Charges Miscellaneous Expenses Total SCHEDULE 11 : INTEREST On Inter Corporate Borrowings Total

Amount

Quantity as on 01.04.05

This Year Rupees

Previous Year Rupees

1,736

1,792

503,222 – 504,958

1,205,877 6,000,000 7,207,669

804 804

8,600 8,600

71,117 18,550,000 300,000 23,110,000

139,440 – 300,000 23,110,000

23,410,000 (23,410,000) – 272,355

23,410,000 (23,410,000) – 362,833

18,893,472

502,273

103,199

85,762

3,682,599 516,485 4,199,084

– – 85,762

405,846 –

35,848 805,562

26,690 24,534 457,070

52 1,110 842,572

22,500 2,500 4,000 44,896 25,510 27,731 127,137

– 2,500 2,000 27,550 20,000 2,279 54,329

19,554 19,554

931,130 931,130

SCHEDULE 12 : NOTES TO ACCOUNTS 1. Significant Accounting Policies a. Accounting Convention The financial statements are prepared under the historical cost convention, on accrual basis in accordance with the generally accepted accounting principles in India, the Accounting Standards issued by the Institute of Chartered Accountants of India and the provisions of the Companies Act,1956. b. Income recognition (i) Dividend income is recognised when the right to receive the same is established. (ii) Interest income is recognised on time proportion basis. (iii) Profit/loss on sale of investments is accounted on the trade dates. c. Investments Long term investments are carried at cost. Provision for diminution, if any, in the value of each long term investment is made to recognise decline, other than that 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 investments. d. 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 based on the tax rate and laws enacted or substantially enacted on the Balance Sheet date. 2. Investments The Company has acquired and sold the following investments during the year : This year Previous year No. of units/ Purchase No. of units/ Purchase Share (Rs.) Cost (Rs.) Share (Rs.) Cost (Rs.) JM Mutual Fund – – 1,895,393 20,000,000 Avestha Gengraine Technology Pvt. Ltd. – – 50,000 20,000,000 SBI-Magnum Inst. Income Fund 4,967,729 54,503,966 Nil Nil SBI- Insta Cash Fund 120,882 1,850,000 Nil Nil Kotak -Liquid Inst Premium Fund 1,379,441 18,700,000 Nil Nil 3. Loans given by the Company to the ex-employees of Godrej Industries Limited and Lawkim Limited are covered by an undertaking from the respective companies to repay the instalments on due dates from the voluntary retirement compensation falling due to the said ex-employees. 4. Amount due from a Company under the same management This year Previous Year Rupees Rupees Godrej Industries Ltd. 71,921 140,971 Godrej Hicare Ltd. 23,110,000 23,110,000 Godrej Remote Services Ltd. – 7,534 23,181,921 23,258,505 5. Auditors’ Remuneration : (includes service tax wherever applicable) Audit Fees 28,060 27,550 Tax Audit Fees 16,836 – 44,896 27,550 6. Earnings per share a. Net Profit/(Loss) after Tax available for shareholders 56,671,101 2,053,373 b. Weighted Average Number of Equity Shares 3,774,160 3,774,160 c. Basic and Diluted Earnings per Share of Rs.10 each 15.02 0.54

123

Ensemble Holdings & Finance Limited SCHEDULES ANNEXED TO AND FORMING PART OF ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2006 7.

Related Party Disclosures

b) Sr. No.

Related Parties with whom transactions have taken place during the year, with the name and description of relationship. Parties where control exists. Godrej Industries Limited, the Holding Company Godrej & Boyce Mfg. Co. Ltd., the ultimate Holding Company Related Parties with whom transactions have taken place during the year Holding Company Godrej Industries Limited Fellow Subsidiaries Godrej Properties Limited Godrej Remote Services Limited Individual exercising significant influence over the enterprise Ms. T. A. Dubash Mr. M. Eipe Mr. C. K. Vaidya Mr. H. K. Press

Transactions with Related Parties

Nature of Transaction

Acceptance of ICB Previous Year Refund of ICB Previous Year iii) Interest paid on ICB Previous Year iv) Intercorporate Deposits placed Previous Year v ) ICD Refund received Previous Year vi) Interest Received on ICD Previous Year vii) Dividend Received Previous Year viii) Refund of VRS Loan Previous Year ix) Interest Received on VRS Loan Previous Year x ) Sale of Investments Previous Year xi) Dividend Paid Previous Year xii) Remuneration Previous Year xiii) Balance Outstanding as on 31.3.06 Payable Previous Year Receivable Previous Year ii)

Subsidiary Company

Fellow Subsidiary

Associate/ Joint Venture

57.00 25.00 68.00 258.50 0.19 9.31

– – – – – –

57.00 25.00 68.00 258.50 0.19 9.31

– – – –

– 105.00 – 105.00

– – – –

– 105.00 – 105.00

– – 3.96 2.97 0.68 0.58

– – – – – –

– 8.06 – 18.84 – –

– – – – – –

– 8.06 3.96 21.81 0.68 0.58

0.26 0.36 190.68 200.00 306.67 – – –

– – – – – – – –

– – – – 0.32 – – –

– – – – – – – –

– – – – – – 0.23 –

– – – – – – – –

0.26 0.36 190.68 200.00 307.00 – 0.23 –

–

11.00 0.72 1.41

– – –

– – 0.08

– – –

11.00 0.72 1.49

Key Mang. Relatives of Personnel Key Mang. Personnel

Total

ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956 BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE Registration details Registration No. : 11-65457 State Code : 11 Balance Sheet Date : 31.03.2006

Capital raised during the year Public Issue Rights Issue Bonus Issue Private Placement

(Amount in Rs. Thousands) : – : – : – : –

Position of mobilisation and deployment of funds Total Liabilities Total Assets Sources of funds Paid up Capital Reserves & Surplus Secured Loans Unsecured Loans

(Amount in Rs .Thousands) : 140,099 : 140,099 : : 37,742 : 102,357 : – : –

Application of funds Net Fixed Assets Investments Net Current Assets Miscellaneous Expenditure Accumulated Losses Performance of Company (Amount in Rs. Thousands) Turnover (Total Income) Total Expenditure Profit before tax Profit after tax Earnings per share in Rs. Dividend rate (%) Generic names of three principal products/services of the Company

: : : : : :

(Rs. in lac) Amount

Acceptance of ICB Godrej Industries Limited

57.00

Refund of ICB Godrej Industries Limited

68.00

Interest paid on ICB Godrej Industries Limited

: : : : : : :

– 44,028 15,550 – 80,521 57,332 147 57,185 56,665 Rs. 15.02 91.10% The Company is a Loan and Investment Company

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006

The significant Related Party Transactions are as under Nature of Transaction

(Rs. in lac)

Holding Company

10.

Cash flow from Operating Activities Profit before tax Adjustments for : Profit on sale of long term investments Profit on sale of Mutual Fund Provision for Dimunition in value of long term Investments Interest Expense - GIL

This Year Rupees

Previous Year Rupees

57,185,322

2,053,374

(19,750,323) (237,936) (36,488,750) 19,554

(34) (14,595) – 931,130

0.19

Operating Profit before working capital changes

727,867

2,969,875

Dividend Received Godrej Industries Limited

3.96

Refund of VRS Loan Godrej Industries Limited

0.68

Adjustments for : Accrued Interest Sundry Debtors Trade Payables

7,796 (453,350) 17,437

(6,453) 28,635,000 641

Interest Received on VRS Loan Godrej Industries Limited

0.26

Cash generated from operations Direct Taxes paid Direct Taxes refund received Net Cash from operating activities

299,750 (590,905) 167,161 (123,994)

31,599,063 (168,443) 1,274 31,431,894

151,018,592 (102,990,404) (18,481,677)

14,629 (138,364) 57,862

Sale of Investments Godrej Industries Limited

190.68

Dividend Paid Godrej Industries Limited Godrej Agrovet Limited

306.67 0.32

Remuneration Mr. H. K. Press

0.23

Balance Receivable Outstanding Godrej Industries Limited

0.72

Cash flow from Investing Activities Proceeds from sale of investments New investments made Loans Net cash generated/(used) from investing activities

Additional information required under Schedule VI, Part II of the Companies Act, 1956 to the extent not applicable has not been given. Previous year’s figures have been regrouped/reclassified wherever necessary.

29,546,511

(65,873)

Cash flow from Financing Activities Intercorporate Borrowings (Net) Interest Paid on Borrowings Dividend Paid Tax on Distributed Profits

(1,100,000) (19,554) (30,700,000) (4,305,675)

(23,350,000) (931,130) – –

Net cash generated/(used) from financing activities

(36,125,229)

(24,281,130)

(6,702,712)

7,084,891

Net increase/(decrease) in cash and cash equivalents Cash in and cash equivalents (opening balance)

7,207,669

122,778

504,957

7,207,669

Cash in and cash equivalents (closing balance) As per our Report attached.

Signatures to Cash Flow Statement

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants V.M. PADWAL Partner Mumbai, May 26, 2006

124

S. SRINIVASAN Company Secretary

M. EIPE C.K. VAIDYA

Director Director

Annual Report 2005-2006 SCHEDULE TO BALANCE SHEET OF A NON-BANKING FINANCIAL COMPANY (as required in terms of Paragraph 9BB of Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 (Rs. in lakhs) Particulars LIABILITIES SIDE : 1.

Loans and advances availed by the NBFCs inclusive of interest accrued thereon but not paid: (a) Debentures : Secured : Unsecured (other than falling within the meaning of public deposits*) (b) Deferred Credits (c) Term Loans (d) Inter-corporate loans and borrowing (e) Commercial Paper (f) Public Deposits* (g) Other Loans (specify nature)

Amount outstanding Nil Nil

Amount overdue Nil Nil

Nil Nil Nil Nil Nil Nil

Nil Nil

Nil

* Please see Note 1 below 2.

Break-up of (1)(f) above (Outstanding public deposits inclusive of interest accrued thereon but not paid) : (a) In the form of Unsecured debentures (b) In the form of partly secured debentures i.e. debentures where there is a shortfall in the value of security (c) Other public deposits * Please see Note 1 below

ASSETS SIDE : 3.

Break-up of Loans and Advances including bills receivables [other than those included in (4) below] : (a) Secured (b) Unsecured i) Loans/Advances ii) Intercorporate Deposit iii) Advance Payment of Taxes Break up of Leased Assets and stock on hire and hypothecation loans counting towards EL/HP activities (i) Lease assets including lease rentals under sundry debtors : (a) Financial lease (b) Operating lease (ii) Stock on hire including hire charges under sundry debtors : (a) Assets on hire (b) Repossessed Assets (iii) Hypothecation loans counting towards EL/HP activities (a) Loans where assets have been repossessed (b) Loans other than (a) above Break-up of Investments : Current Investments : 1. Quoted : (i) Shares : (a) Equity (b) Preference (ii) Debentures and Bonds (iii) Units of mutual funds (iv) Government Securities (v) Others (please specify) 2. Unquoted : (i) Shares : (a) Equity (b) Preference (ii) Debentures and Bonds (iii) Units of mutual funds (iv) Government Securities (v) Others (Please specify)

Amount outstanding Nil 189.21 231.10 2.72

Nil Nil Nil Nil Nil Nil

Nil Nil Nil Nil Nil Nil Nil Nil Nil 23 Nil Nil

Long Term investments : 1. Quoted : (i) Share : (a) Equity 0.92 (b) Preference — (ii) Debentures and Bonds Nil (iii) Units of mutual funds Nil (iv) Government Securities Nil (v) Others (Please specify) Nil 2. Unquoted : (i) Shares : (a) Equity 527.11 (b) Preference — (ii) Debentures and Bonds Nil (iii) Units of mutual funds Nil (iv) Government Securities Nil (v) Others (Please specify) Nil Borrower group-wise classification of all leased assets, stock-on-hire and loans and advances : Please see Note 2 below Category Amount net of provisions Secured Unsecured Total 1. Related Parties ** (a) Subsidiaries Nil Nil Nil (b) Companies in the same group : Loans Godrej Industries Ltd. Nil 0.71 0.71 (c) Other related parties Inter Corporate Deposits Godrej Photo-Me Ltd. Nil — — 2. Other than related parties 2.72 2.72 a) Advance Tax Payment Nil Total 3.43 Investor group-wise classification of all investments (current and long term) in shares and securities (both quoted and unquoted): Please see note 3 below Category Market Value / Break up or fair value or NAV 1. Related Parties ** (a) Subsidiaries Nil (b) Companies in the same group : Quoted Nil Unquoted 329.26 (c) Other related parties NIL 2.

3.43

Book Value (Net of Provisions) Nil Nil 65.48 NIL

Other than related parties Quoted : Unquoted :

2.10 0.92 519.03 373.88 Total 850.39 440.28 ** As per Accounting Standard of ICAI (Please see Note 3) # Start up Company hence fair value considered at face value. 8. Other information Particulars Amount (i) Gross Non-Performing Assets (a) Related parties Nil (b) Other than related parties Nil (ii) Net Non-Performing Assets (a) Related parties Nil (b) Other than related parties Nil (iii) Assets acquired in satisfaction of debt Nil Notes : 1. As defined in Paragraph 2(1)(xii) of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998. 2. Provisioning norms shall be applicable as prescribed in the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998. 3. All Accounting Standards and Guidance Notes issued by ICAI are applicable including for valuation of investments and other assets as also assets acquired in satisfaction of debt. However, market value in respect of quoted investments and break up/fair value/NAV in respect of unquoted investments should be disclosed irrespective of whether they are classified as long term or current in column (5) above.

125

Godrej International Limited DIRECTORS’ REPORT The Directors present their report and accounts for the year ended 31st March, 2006

Political and charitable donations

Principal activities and review of the business

The company made no political or charitable contributions during the year.

The company's principal activity during the year continued to be trading in vegetable oils. The company's working capital was augmented during the year by means of a Rights Issue of 1,100,000 shares of £1 each, taken up entirely by the parent company. Prices of vegetable oil remained flat for most of the year and made trading conditions difficult. The Company managed to increase it's turnover by 30 percent as a result of better availability of workinag capital. However, margins were under severe pressure due to those flat market conditions for most of the year. The strength in energy prices and the prospect of usage of vegetable oils in bio-diesel are expected to lead to greater market volatility and more trading opportunity in the coming year.

Directors’ responsibilities

Results and dividends Profit for the year declined slightly to USD382,566. The directors recommend a dividend for the year at 6 cents for each £ 1 share on the entire increased share capital, amounting to USD156,300 in total. Directors The directors who served during the year and their interests in the share capital of the Company were as follows: £1 Ordinary shares Adi B Godrej (Indian) Nadir B Godrej (Indian) Aspi K Bardy (Indian) Dorab E Mistry (British) Sharon Lancaster (British) (resigned 13 October 2005) Philip Collins (British) (Appointed 13 October 2005, Resigned 11 May 2006) Marion Hodgson (British) (Appointed 11 May 2006)

2006

2005

1 – – – – – –

Company law requires the directors to prepare accounts for each financial year which give a true and fair view of the state of affairs of the company and of the profit or loss for that period. In preparing those accounts, the directors are required to: - select suitable accounting policies and then apply them consistently; - make judgements and estimates that are reasonable and prudent; and - prepare the accounts on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for maintaining proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the accounts comply with the Companies Acts 1931 to 2004. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Auditors A resolution to reappoint Graham Moore as auditors will be put the members at the Annual General Meeting. This report was approved by the board on 12 May 2006. Homeric Limited Secretary

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF GODREJ INTERNATIONAL LIMITED We have audited the accounts of Godrej International Limited for the year ended 31 March 2006. These accounts have been prepared under the historical cost convention and the accounting policies set out therein. RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS As described in the Statement of Directors’ Responsibilities the company’s directors are responsible for the preparation of the accounts in accordance with applicable law. In the absence of comparable accounting standards in the Isle of Man, the Directors have chosen to apply United Kingdom Accounting Standards where they do not conflict with Isle of Man Statute. Our responsibility is to audit the accounts in accordance with relevant legal and regulatory requirements together with our own professional ethical guidance.

BASIS OF AUDIT OPINION We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the accounts. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the accounts, and of whether the accounting policies are appropriate to the company’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the accounts are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the accounts.

We report to you our opinion as to whether the accounts give a true and fair view and are properly prepared in accordance with the Companies Acts 1931 to 2004. We also report to you if, in our opinion, the Directors’ Report is not consistent with the accounts, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and transactions with the company is not disclosed.

OPINION

We read the Directors’ Report and consider the implications for our report if we become aware of any apparent misstatements within it.

14 Douglas Street Peel Isle of Man May 12, 2006

BALANCE SHEET AS AT MARCH 31, 2006

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2006

Notes Fixed assets Investments Current assets Debtors Cash at bank and in hand Creditors: amounts falling due within one year

Capital and reserves Called up share capital Profit and loss account Shareholders’ funds:

2005 $ Rs. Lac

Rs. Lac

4,312,060

1,924

4,312,060

1,888

2,389,343 1,193,349

1,066 532

1,718,086 386,598

752 169

3,582,692

1,598

2,104,684

922

(177,876)

(79)

(844,314)

(370)

3,404,816

1,519

1,260,370

552

7,716,876

3,443

5,572,430

2,440

(1,169,000)

(521)

(1,169,000)

(512)

6,547,876

2,922

4,403,430

1,928

4,209,327 2,338,549

1,878 1,044

2,291,147 2,112,283

1,003 925

Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year

2006

9 10

Graham Moore Chartered Accountants

Notes

2006 $

Rs. Lac

2005 Rs. Lac

50,724,030 (50,239,122)

22,633 (22,417)

39,031,709 (38,491,244)

17,092 (16,855)

Gross profit Administrative expenses Other operating income

484,908 (72,417) –

216 (32) –

540,465 (131,660) 12,000

237 (58) 5

Operating profit Interest receivable Interest payable

412,491 22,158 (52,083)

184 10 (23)

420,805 7,206 (28,749)

184 3 (13)

382,566 – 382,566

171 – 171

399,262 – 399,262

175 – 175

(156,300)

(70)

(150,500)

(66)

226,266

101

248,762

109

Turnover Cost of sales

6,547,876

2,922

4,403,430

1,928

6,547,876

2,922

4,403,430

1,928

Note: The Rupee equivalents of US $ have been given at the closing exchange rates has on March 31, 2006 (US $1.00 = Rs. 44.62) and March 31, 2005 (US $ 1.00 = Rs. 43.79) M Hodgson Director Approved by the board on 12 May 2006

D E Mistry Director

Profit on ordinary activities before taxation Tax on profit on ordinary activities Profit for the financial year Dividends: ordinary dividend on equity shares Retained profit for the financial year

Equity

126

In our opinion the accounts give a true and fair view of the state of the company’s affairs as at 31 March 2006 and of its profit for the year then ended and have been properly prepared in accordance with the Companies Acts 1931 to 2004.

Continuing operations None of the Company's activities were acquired or discontinued during the above two financial years. Note: The Rupee equivalents of US $ have been given at the closing exchange rates has on March 31, 2006 (US $1.00 = Rs. 44.62) and March 31, 2005 (US $ 1.00 = Rs. 43.79)

Annual Report 2005-2006 8.

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 MARCH 2006 Notes

2006 $ Rs. Lac

2005 $ Rs. Lac

Profit for the financial year

382,566

171

399,262

175

Total recognised gains and losses related to the year

382,566

171

399,262

175

Accounting policies Accounting convention The accounts have been prepared under the historical cost convention and in accordance with applicable accounting standards.

10.

Foreign currencies Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. All differences are taken to the profit and loss account.

11.

Turnover Turnover represents the invoiced value of goods supplied by the Company, net of value added tax and trade discounts. Turnover is attributable to one continuing activity, the trading of vegetable oils.

Interest payable Bank loans and overdrafts Other loans

4. 5.

Equity dividends Equity dividends on ordinary shares - final proposed

2006 $ 37,633 14,450

2006 Rs. Lac 17 6

2005 $ – 28,749

2005 Rs. Lac – 13

52,083

28,749

156,300

150,500

Investments in Other investments subsidiary undertakings $ Rs. Lac $ Rs. Lac 1,257,060 1,257,060

550 561

3,055,000 3,055,000

1,338 1,363

Total

Unlisted investments

Rs. Lac

4,312,060 4,312,060

1,888 1,924

1,363

3,055,000

1,338

On 4 April 2001, the Company invested US$1million in 495,000 C Bay Systems Ltd. (C Bay) 8% Series E Cumulative Convertible Redeemable Preferred Stock of US$ 0.1 per share at a price of US$ 0.2 per share. This represents approximately 6% of the issued share capital of C Bay. CB ay is incorporated in Delaware, USA. On 8 March 2004, the Company invested US$2,055,000 in equity shares of Newmarket Limited, a Company incorporated in the lisle of Man. This represents approximately 18% of the issued share capital of Newmarket Limited. Debtors 2006 2006 2005 2005 $ Rs. Lac $ Rs. Lac Trade debtors Amounts owned by group undertakings and undertakings in which the company has a participating interest Other debtors Prepayments and accrued income

3,055,000

Creditors: amounts falling due within one year Amounts owed to group undertakings and undertakings in which the Company has a participating interest Other creditors Accruals and deferred income Proposed dividend

2006 Rs. Lac

2005 Rs. Lac

Bank loans

1,169,000

521

1,169,000

512

Share capital Authorised: Ordinary shares of £1 each

4,000,000

1,785

2,000,000

876

2006 No.

2005 No.

2005 $

2006 Rs. Lac

2005 $

2005 Rs. Lac

2,605,000

1,505,000

4,209,327

1,878

2,291,147

1,003

Profit and loss account At 1 April Retained profit

2,112,283 226,266

943 101

1,863,521 2,112,283

816 109

At 31 March

577,578

258

315,072

138

113,764

1,689,614 8,387

754 3

1,283,837 5,412

562 2

2,389,343

1,066

1,718,086

752

2,338,549

1,044

2,112,281

925

Reconciliation of movement in shareholders’ funds At 1 April 4,403,430 Retained Profit 382,566 Dividends (156,300) Shares issued 1,918,180

1,965 171 (70) 856

4,154,668 399,262 (150,500) –

1819 175 (66) –

At 31 March

6,547,876

2,922

4,403,430

1,928

22,158 (52,083)

10 (23)

7,206 (28,749)

3 (13)

(29,925)

(13)

(21,543)

(9)

–

767,014

336

1,918,180

856

–

Gross cash flows Returns on investments and servicing of finance Interest received Interest paid Capital expenditure Receipts from sales of tangible fixed assets Financing Issue of share capital

13.

On 11 December 1997 the Company acquired the entire issued share capital (US$507060) of Godrej Global ME, a Company incorporated in the United Arab Emirates on 1 November 1997. On 10 March 2003 the Company invested a further sum of US$750,000 in the equity share capital of GGME. Other investments 2006 2006 2005 2005 $ Rs. Lac $ Rs. Lac

12.

Investments

Cost At 1 April 2005 At 31 March 2006

Allotted, called up and fully paid: Ordinary shares of £1 each

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 1.

Creditors: amounts falling due after one year

Analysis of changes in net debt At 1 Apr 2005 Cash flows Non-cash changes $ Rs. Lac $ Rs. Lac $ Rs. Lac Cash at bank and in hand 386,598 169 806,751 360 – – Debt due after 1 year (1,169,000) (512) – – – – Total

14.

(782,402)

(343)

806,751

360

–

At 31 Mar 2006 $ Rs. Lac 1,193,349

532

(1,169,000)

(521)

24,349

Ultimate Parent Company In April 2001 Godrej Soaps Limited, the owner of all the company's share capital, was demerged into two separate entities: Godrej Consumer Products Limited and Godrej Industries Limited. The assets and liabilities of Godrej Soaps Limited were divided between the two new companies. The entire share capital of Godrej International Limited is now held by Godfej Industries Limited. Godrej Industries Limited is currently listed on the Mumbai Stock Exchange. The financial statements of Godrej Industries Limited are available from : The Secretary, Godrej Industries Limited, Eastern Express Highway, Vikroli, Mumbai 400 079, India.

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

2005 $

2005 Rs. Lac

412,491 (671,257) (672,238)

184 420,805 (299) (1,050,190) (300) (186,772)

184 (460) (82)

Net cash outflow from operating activities

(931,004)

(415)

(816,157)

(357)

Net cash outflow from operating activities Returns on investments and servicing of finance Capital expenditure

(931,004)

(415)

(816,157)

(357)

(29,925) –

(13) –

(21,543) 767,014

(9) 336

Reconciliation of operating profit to net cash inflow from operating activities Operating profit Increase in debtors Decrease in creditors

– 235 21,341 156,300

– – 9 70

650,000 235 43,579 150,500

285 – 19 66

Equity dividends paid

177,876

844,314

370

Increase/(decrease) in cash

Financing

12 12

Reconciliation of net cash flow to movement in net debt Increase/(decrease) in cash in the period Change in net debt Net debt at 1 April Net funds/(net debt) at 31 March

2006 $

2006 Rs. Lac

(960,929)

(429)

(70,686)

(31)

(150,500)

(67)

(135,450)

(59)

(1,111,429)

(496)

(206,136)

(90)

1,918,180

856

–

806,751

360

(206,136)

(90)

806,751

360

(206,136)

(90)

806,751 (782,402)

360 (349)

(206,136) (576,266)

(90) (252)

24,349

(782,402)

(343)

Note: The Rupee equivalents of US $ have been given at the closing exchange rates has on March 31, 2006 (US $1.00 = Rs. 44.62) and March 31, 2005 (US $ 1.00 = Rs. 43.79)

127

Godrej Global Mid East FZE DIRECTORS’ REPORT Your Company’s performance for the year under review is summarized below: 2005-06 AED Mio.

2004-05 AED Mio.

7.56 5.23

6.21 4.25

2.33 2.14 –

1.96 1.83 0.06

Profit Before Tax Tax

0.19 –

Profit after Tax

0.19

Sales Cost of Sales Gross Profit Expenses Other Income

REVIEW OF OPERATIONS Your Company has achieved breakthrough in exports to Sudan, Yemen. Your Company hopes to open up the Pakistan market through initial launch of Powder Haircolour sachets and later consolidate their position through launch of other range. Since the net assets of your Company are below 75 percent of the share capital, the Auditors have qualified in their report. Remedial measure of providing sufficient funds will have to be taken by the parent company in due course in accordance with the implementation procedures of Sharjah Airport Free Zone.

FUTURE OUTLOOK Your Company is planning to launch Cinthol soaps in Syria. Cinthol soaps manufactured in the UAE has duty rebates in the Arab league countries. Your Company is working towards launch of newly acquired Cuticura and Erasmic brands in the GCC. Bottom line improvement is envisaged through lower cost raw material suppliers which includes GIL for supply of soap noodles. AUDITORS You are required to appoint Auditors for the current year. The Auditors, M/s. Pannell Kerr Forster, Chartered Accountants Co. being eligible, offer themselves for reappointment. PARTNERS IN PROGRESS Your company wishes to thank the Sharjah Airport International Free Zone, HSBC Bank Middle East, Alseer Trading Agencies , Khimji Ramdas, A. Latiff Al Aujan Food International, Gulf Trading Corporation, Zahem & Malhotra, Nasser Bin Khalid Trading Company, Godrej Consumer Products Ltd. and Godrej Industries Limited, who through their continued support and co-operation, have been partners in your Company’s progress. On behalf of the Board of directors A.B.GODREJ Director Date : May 15, 2006

AUDITORS’ REPORT TO THE SHAREHOLDERS OF GODREJ GLOBAL MIDEAST FZE We have audited the accompanying financial statements of GODREJ GLOBAL MIDEAST FZE for the year ended 31 March 2006 set out on pages 2 to 15. Respective responsibilities of the management and the auditors These financial statements are the responsibility of the establishment’s management. Our responsibility is to express an opinion on these financial statements based on our audit. Basis of opinion We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

BALANCE SHEET AS AT MARCH 31, 2006 Notes AED NON-CURRENT ASSETS Property, plant and equipment Intangible assets CURRENT ASSETS Inventories Trade and other receivables Amounts due from related parties Cash and cash equivalents

3 4

21,863 — 21,863

5 6 7 8

719,232 2,220,868 2,755 191,120 3,133,975 3,155,838

2006 Rs. 265,636 — 2,65,636 8,738,669 26,983,546 33,473 2,322,108 38,077,796 38,343,432

AED 35,861 10,344 46,205 845,697 1,691,775 1,755 286,881 2,826,108 2,872,313

427,463 123,300 550,764 10,080,708 20,165,958 20,920 3,419,621 33,687,207 34,237,971

714,674 1,840,403 418,030 2,973,107

8,683,289 22,360,896 5,079,065 36,123,250

1,151,394 1,332,953 418,030 2,902,377

13,724,616 15,888,800 4,982,918 34,596,334

NON-CURRENT LIABILITY Staff end-of-service gratuity

92,300

1,121,445

70,672

842,410

TOTAL EQUITY AND LIABILITIES

4,586,250 (4,495,819) 90,431 3,155,838

55,722,938 (54,624,201) 10,98,737 38,343,432

As required by the Sharjah Airport Free Zone Authority pursuant to Law No. 2 of 1995, we further confirm that we have obtained all the information and explanations necessary for our audit, proper books of account and other records have been maintained in accordance with the said regulation.

Sharjah United Arab Emirates 15 May 2006

2005 Rs.

9 10 11

In our opinion, the financial statements give a true and fair view of the financial position of GODREJ GLOBAL MIDEAST FZE as of 31 March 2006 and of the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with Implementation Procedures issued by the Sharjah Airport Free Zone Authority pursuant to Law No. 2 of 1995.

Pannell Kerr Forster

INCOME STATEMENT FOR THE YEAR ENDED MARCH 31, 2006

TOTAL ASSETS CURRENT LIABILITIES Bank borrowings Trade and other payables Loan from the parent company

SHAREHOLDER’S FUNDS Share capital Accumulated losses

Opinion

4,586,250 (4,686,986) (100,736) 2,872,313

54,668,100 (55,868,873) (1,200,773) 34,237,971

Notes

2006 AED

Rs.

2005 AED

Rs.

7,562,467

9,1883,974

6,213,663

74,066,863

(5,233,800)

(63,590,670)

(4,253,630)

(50,703,270)

2,328,667

28,293,304

1,960,033

23,363,593

2,074

25,199

60,783

724,533

(479,832)

(5,829,959)

(429,688)

(5,121,881)

Depreciation

(18,196)

(221,081)

(18,402)

(219,352)

Amortisation

(10,344)

(125,680)

(10,344)

(123,300)

Other operating expenses

(1,438,059)

(17,472,417)

(1,235,313)

(14,724,931)

384,310

4,669,366

327,069

3,898,662

2,310

28,067

762

9,083

(195,453)

2,374,754

(137,452)

(1,638,428)

191,167

2,322,679

190,379

2,269,318

REVENUE Cost of sales

GROSS PROFIT Other operating income Staff costs

PROFIT FROM OPERATING ACTIVITIES Interest income on bank call deposits Finance costs

PROFIT FOR THE YEAR

The Rupee equivalents of AED have been given at the closing exchange rates as on March 31, 2006. (1 AED = Rs. 12.15) and as on March 31, 2005 (1 AED = Rs.11.92)

The accompanying notes form an integral part of these financial statements.

The accompanying notes form an integral part of these financial statements. The report of the auditor is set forth as given above

The report of the auditor is set forth as given above We confirm that we are responsible for these financial statements, including selecting the accounting policies and making the judgements underlying them. We confirm that we have made available all relevant accounting records and information for their compilation. Approved by the directors on 15 May 2006.

Approved by the directors on 15 May 2006. For GODREJ GLOBAL MIDEAST FZE A.B.GODREJ Director

128

We confirm that we are responsible for these financial statements, including selecting the accounting policies and making the judgements underlying them. We confirm that we have made available all relevant accounting records and information for their compilation.

For GODREJ GLOBAL MIDEAST FZE A.B.GODREJ Director

Annual Report 2005-2006

STATEMENT OF CHANGES IN EQUITY YEAR ENDED MARCH 31, 2006 Share capital AED Rs. As at 31.03.2004

Notes AED

2006 Rs.

AED

2005 Rs.

REVENUE

Total AED

Rs.

4,586,250

54,438,788

(4,877,365)

(57,894,323)

(291,115)

(3,455,535)

—

190,379

2,269,318

190,379

2,269,318

4,586,250

54,668,100

(4,686,986)

(55,868,873)

(100,736)

(1,200,773)

Profit for the year As at 31.03.2005

Accumulated losses AED Rs.

CASH FLOW STATEMENT YEAR ENDED MARCH 31, 2006

Cash flows from operating activities Cash generated from/(used in) operations

Interest paid Net cash from/(used in) operating activities

512,572

6,227,750

(144,279)

(1,719,806)

(169,725)

(2,062,159)

(137,452)

(1,638,428)

342,847

4,165,591

(281,731)

(3,358,234)

(4,198)

(51,006)

(1,600)

(19,072)

2,310

28,067

762

9,083

(1,888)

(22,939)

(838)

(9,989)

—

25,725

306,642

(401,267)

(4,875,394)

365,052

4,351,420

(35,453)

(430,754)

(206,135)

(2,457,129)

(436,720)

(5,306,148)

184,642

2,200,933

(95,761)

(1,163,496)

(97,927)

(1,167,290)

286,881

3,485,604

384,808

4,586,911

191,120

2,322,108

286,881

3,419,622

(A)

Cash flows from investing activities

Profit for the year

—

191,167

2,322,679

191,167

2,322,679

Purchase of property, plant and equipment

As at 31.03.2006

4,586,250

55,722,938

(4,495,819)

(54,624,201)

90,431

1,098,737

Interest received Net cash used in investing activities

(B)

Cash flows from financing activities Receipt of loan from the parent company (Payment of)/proceeds from clean import loans Payment of bank overdraft (net) Net cash (used in)/from financing activities

(C)

Net decrease in cash and cash equivalents (A+B+C) Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

The Rupee equivalents of AED have been given at the closing exchange rates as on March 31, 2006. (1 AED = Rs. 12.15) and as on March 31, 2005 (1 AED = Rs.11.92)

The accompanying notes form an integral part of these financial statements. The report of the auditor is set forth as given above

Approved by the directors on 15 May 2006.

Approved by the directors on 15 May 2006. For GODREJ GLOBAL MIDEAST FZE A.B.GODREJ Director

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2006 1.

Gains or losses resulting from foreign currency transactions are taken to the income statement. g)

GODREJ GLOBAL MIDEAST FZE was incorporated on 1 November 1997 in the Sharjah Airport Free Zone, Sharjah, UAE as a Free Zone Establishment pursuant to Law No. 2 of 1995 of H.H. Sheikh Sultan Bin Mohammed Al Qassimi, The Ruler of Sharjah. The registered office is P. O. Box 7966, Sharjah, United Arab Emirates.

The establishment’s principal activity consists of trading in soaps and toiletries in the United Arab Emirates and other AGCC countries.

The establishment is a wholly owned subsidiary of Godrej International Limited, a company incorporated in the Isle of Man. Godrej International Limited is a wholly owned subsidiary of Godrej Industries Limited, a company incorporated in India and which is a subsidiary of the ultimate parent company Godrej & Boyce Mfg. Co. Ltd., India.

Financial assets are de-recognised when, and only when, the contractual rights to receive cash flows expire or when substantially all the risks and rewards of ownership have been transferred. Financial liabilities are de-recognised when, and only when, they are extinguished, cancelled or expired. Current financial assets that have fixed or determinable payments and for which there is no active market, which comprise trade and other receivables and related party receivables, are classified as receivables and stated at cost or, if the impact is material, at amortised cost using the effective interest method, less any write down for impairment losses plus reversals of impairment losses. Impairment losses and reversals thereof are recognised in the income statement.

The financial statements are prepared under the historical cost convention and in accordance with International Financial Reporting Standards issued or adopted by the International Accounting Standards Board (IASB) and which are effective for accounting periods beginning on or after 1 January 2005, and the laws of Sharjah Airport Free Zone Authority. The significant accounting policies adopted, and that have been consistently applied, are as follows: Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost less estimated residual value, where material, is depreciated using the straight-line method over the estimated useful lives of five years.

Financial instruments Financial assets and financial liabilities are recognised when, and only when, the establishment becomes a party to the contractual provisions of the instrument.

SIGNIFICANT ACCOUNTING POLICIES, JUDGEMENTS AND KEY ASSUMPTIONS

Cash and cash equivalents Cash and cash equivalents comprise cash, bank current accounts, bank deposits free of encumbrance with a maturity date of three months or less from the date of deposit and highly liquid investments with a maturity date of three months or less from the date of investment.

LEGAL STATUS AND BUSINESS ACTIVITY a)

For GODREJ GLOBAL MIDEAST FZE A.B.GODREJ Director

Current financial liabilities, which comprise current bank borrowings, trade and other payables, related party payables are measured at cost or, if the impact is material, at amortised cost using the effective interest method. i)

Significant judgments and key assumptions

Impairment

An assessment of residual values is undertaken at each balance sheet date and, where material, if there is a change in estimate, an appropriate adjustment is made to the depreciation charge. b)

At each balance sheet date, management conducts an assessment of property, plant, equipment and all financial assets to determine whether there are any indications that they may be impaired. In the absence of such indications, no further action is taken. If such indications do exist, an analysis of each asset is undertaken to determine its net recoverable amount and, if this is below its carrying amount, a provision is made.

Intangible assets Intangible assets are stated at cost less accumulated amortisation and impairment losses. Product development expenses are amortised over their estimated useful life of five years.

Inventories Inventories are stated at the lower of cost and net realizable value. Cost is arrived at using the FirstIn First-Out (FIFO) method and comprises invoice value plus applicable landing charges. Net realizable value is based on estimated selling price less any estimated cost of disposal.

e) f)

Staff end-of-service gratuity

The significant judgments made in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are as follows:

Key assumptions made concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are as follows:

Carrying values of property, plant and equipment

Provision is made for end-of-service gratuity payable to the staff at the balance sheet date in accordance with the local labour laws.

Residual values are assumed to be zero unless a reliable estimate of the current value can be obtained for similar assets of ages and conditions that are reasonably expected to exist at the end of the assets’ estimated useful lives.

Revenue

Inventory provisions

Revenue represents the net amount invoiced for goods delivered during the year.

Management regularly undertakes a review of the establishment’s inventory, stated at AED 590,000 (previous year AED 876,690) in order to assess the likely realisation proceeds, taking into account purchase and replacement prices, technological changes, age, likely obsolescence, the rate at which goods are being sold and the physical damage. Based on the assessment assumptions are made as to the level of provisioning required.

Foreign currency transactions Transactions in foreign currencies are translated into UAE Dirhams at the rate of exchange ruling on the date of the transactions. Monetary assets and liabilities expressed in foreign currencies are translated into UAE Dirhams at the rate of exchange ruling at the balance sheet date.

Doubtful debt provisions Management regularly undertakes a review of the amounts of loans and receivables owed to the establishment either from third parties, (see note 6) or from related parties (see note

129

Godrej Global Mid East FZE NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2006 7) and assesses the likelihood of non-recovery. Such assessment is based upon the age of the debts, historic recovery rates and assessed creditworthiness of the debtor. Based on the assessment assumptions are made as to the level of provisioning required.

The establishment enters into transactions with entities that fall within the definition of a related party as contained in International Accounting Standard 24. The directors consider such transactions to be in the normal course of business.

Impairment Assessments of net recoverable amounts of property, plant, equipment and all financial assets other than loans and receivables (see above) are based on assumptions regarding future cash flows expected to be received from the related assets.

Related parties comprise the parent companies, companies under common ownership and/or common management control.

Staff end-of-service gratuity

At the balance sheet date significant balances with related parties were as follows:

The establishment computes the provision for the liability to staff end-of-service gratuity stated at AED 92,300 (previous year AED 70,672), assuming that all employees were to leave as of the balance sheet date. The management is of the opinion that no significant difference would have arisen had the liability been calculated on an actuarial basis as salary inflation and discount rates are likely to have approximately equal and opposite affects. j)

Trade and other payables to other related parties

Adoption of revised and new International Financial Reporting Standards The adoption of revised International Financial Reporting Standards effective for accounting periods beginning on or after 1 January 2005 has impacted only on presentation and disclosures.

1,755

20920

Loan from the parent company

418,030

5,079,065

418,030

4982918

1,400,000

17,010,000

1,400,000

16,688,000

Purchases Interest expenses

2,123,202 (1,695,739) 427,463

Cost Accumulated depreciation Net book value

182,319 (160,456) 21,863

2,215,176 (1,949,540) 265,636

As at 1.4.2004 Additions Depreciation for the year

52,663 1,600 (18,402)

625,110 19,072 (219,352)

As at 31.03.2005 Additions Depreciation for the year

35,861 4,198 (18,196)

427,463 51,006 (221,081)

21,863

265,636

INTANGIBLE ASSETS

8,164,962 27,228,141

39,724

482,647

39,730

473,582

5,625

68,344

1,459

17,391

2,253,764

285,422

3,402,231

191,120

2,322,108

286,881

3,419,622

Overdraft

124,914

1,517,705

160,367

1,911,574

Clean import loans

589,760

7,165,584

991,027

11,813,042

714,674

8,683,289

1,151,394

13,724,616

714,674

8,683,289

1,151,394

13,724,616

BANK BORROWINGS

HSBC Bank Middle East Limited

Bank borrowings are secured by assignment of insurance policies covering inventories and assets, corporate guarantee from a parent company, letter of awareness and comfort from the parent companies and assignment of dues from one of the customers. The bank borrowings are subject to certain financial covenants including non withdrawal of profits. 10.

TRADE AND OTHER PAYABLES Trade payables Accruals

11.

Product development expenses

684,980 2,284,240

An analysis by bank of amounts outstanding is as follows:

Reconciliation of net book values

As at 31.03.2006

8,655,150 23,018,382

185,495

Rs. 9.

712,358 1,894,517

CASH AND CASH EQUIVALENTS

Furniture, fixtures, computers and equipment

As at 31.03.2006

190,333

33,473

Bank call deposits accounts

178,121 (142,260) 35,861

2275921

7,164,029

Cash on hand

Cost Accumulated depreciation Net book value

2005 Rs.

2,755

PROPERTY, PLANT AND EQUIPMENT AED

AED

589,632

Sales

Net book values As at 31.03.2005

2006 Rs.

All balances other than loan from a parent company are unsecured and are expected to be settled in cash. Other terms are set out in note 11 and 19. Significant transactions with related parties during the year were as follows:

Amendment to IAS39: Cash Flow Accounting of Forecast Intragroup Transactions (1 January 2006) Amendment to IAS1: Capital Disclosures (1 January, 2007)

AED

Due from other related parties Guarantee received

The following International Financial Reporting Standards, amendments thereto and Interpretations that are assessed by management as likely to have an impact on the financial statements, have been issued by the IASB prior to 31 March 2006 but have not been applied in these financial statements as their effective dates of adoption are for future accounting periods, as referred to below. It is anticipated that their adoption in the relevant accounting periods will have an impact only on disclosures within the financial statements:

RELATED PARTIES

1,385,735

16,836,680

961,013

454,668

5,524,216

371,940

11,455,275 4,433,525

1,840,403

22,360,896

1,332,953

15,888,800

LOAN FROM THE PARENT COMPANY This represents a short term loan, secured by a first floating charge on property, plant and equipment, inventories and book debts. Interest is paid @ 7% (previous year 7% per annum).

Net book values As at 31.03.2005 Cost Accumulated amortisation Net book value

51,720 (41,376) 10,344

616,502 (493,202) 123,300

51,720 (51,720) —

628,398 (628,398) —

As at 1.4.2004 Amortisation for the year As at 31.03.2005

20,688 (10,344) 10,344

251,360 (125,680) 125,680

Amortisation for the year

(10,344)

(125,680)

—

AED 12

As at 31.03.2006 Cost Accumulated amortisation Net book value

As at 31.03.2006

2005 Rs. 734,605

Opening balance

70,672

858,665

61,628

Provision for the year

21,628

262,780

20,802

247,960

–

(11,758)

(140,155)

92,300

1,121,445

70,672

842,410

4,586,250

55,722,938

4,586,250

54,668,100

Closing balance 13.

AED

PROVISION FOR STAFF END-OF-SERVICE GRATUITY

Paid during the year

Reconciliation of net book values

2006 Rs.

SHARE CAPITAL Authorised, issued and paid-up: 5 ordinary shares of US$ 250,000 each [2 shares converted @ 1 US$ = AED 3.66] [3 shares converted @ 1 US$ = AED 3.675]

2006 Rs.

AED

2005 Rs.

590,000

7,168,500

876,690

10,450,145

14.

Less: Provision for slow moving inventories Goods in transit

—

(66,690)

(794,945)

590,000

7,168,500

810,000

9,655,200

129,232

1,570,169

35,697

425,508

719,232

8,738,669

845,697

10,080,708

TRADE AND OTHER RECEIVABLES Trade receivables

15.

876,690

10,651,784

673,846

8,032,244

Add: Purchases (including direct expenses)

4,947,110

60,107,386

4,456,474

53,121,170

Less: Inventory, end of the year

(590,000)

(7,168,500)

(876,690) (10,450,145)

5,233,800

63,590,670

4,253,630

50,703,270

458,204

5,567,179

408,886

4,873,921

21,628

262,780

20,802

247,960

479,832

5,829,959

429,688

5,121,881

STAFF COSTS Staff salaries and benefits Staff end-of-service gratuity

2,182,058

26,512,005

Prepayments

10,510

127,697

9,741

116,113

Deposits

28,300

343,845

31,800

379,056

2,220,868

26,983,547

1,691,775

20,165,958

130

COST OF SALES Inventory, beginning of the year

INVENTORIES Goods held for sale

AED

1,650,234

19,670,789

Annual Report 2005-2006

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2006

16.

Advertisement and promotion expenses Bad debts written off Other expenses

18.

2006 Rs.

AED

2005 Rs.

80,000

972,000

80,002

953,624

991,625

12,048,244

901,321

10,743,746

5,839

70,944

—

OTHER OPERATING EXPENSES Rent

17.

AED

The establishment buys and sells goods and services in foreign currencies. Exposure is minimised where possible by denominating such transactions in US dollars to which the UAE Dirham is pegged. Management continuously monitors its cash flows to determine its cash requirements and makes comparison with its funded and un-funded facilities with banks in order to manage exposure to liquidity risk. Borrowing facilities are regularly reviewed to ensure that the establishment obtains the best available pricing, terms and conditions on it borrowings.

360,595

4,381,229

253,990

3,027,561

1,438,059

17,472,417

1,235,313

14,724,931

On other bank short term loans and overdraft 106,106

1,289,188

72,947

869,528

Financial assets that potentially expose the establishment to concentrations of credit risk comprise principally bank accounts, trade and other receivables and amounts due from related parties.

FINANCE COSTS

Exposures to the aforementioned risks are detailed below: Credit risk

On loan from the parent company

25,728

312,595

25,725

306,642

The establishment’s bank accounts are placed with high credit quality financial institutions.

On related party guarantees

13,996

170,051

14,005

166,940

On supplier’s delayed payments

49,623

602,920

24,775

295,318

Amounts due from related parties, trade and other receivables are stated net of the allowance for doubtful recoveries. The establishment’s trade receivables mainly comprise of duly appointed distributors in the UAE and other Middle East countries.

195,453

2,374,754

137,452

1,638,428

At the balance sheet date, the establishment’s maximum exposure to credit risk from trade receivables situated outside the UAE amounts to AED 1,484,223 due from distributors/customers in other Middle East countries (Previous year AED 933,586).

191,167

2,322,679

190,379

2,269,318

At the balance sheet date 61% of trade receivables was due from two distributors (Previous year 69 % due from three distributors).

Depreciation of property, plant and equipment

18,196

221,081

18,402

219,352

Amortisation

10,344

125,680

10,344

123,300

There are no significant concentrations of credit risk outside the industry in which the establishment operates.

Finance costs

195,453

2,374,754

137,452

1,638,428

Interest income

(2,310)

(28,067)

(762)

(9,083)

operating assets and liabilities

412,850

5,016,128

355,815

4,241,315

Decrease/(increase) in inventories

126,465

1,536,550

(164,217)

(1,957,467)

(529,093)

(6,428,480)

(521,739)

(6,219,129)

481,722

5,852,922

176,534

2,104,285

21,628

262,780

9,044

107,804

CASH GENERATED FROM/(USED IN) OPERATIONS Profit for the year Adjustments for:

Operating profit before changes in

Interest rate risk Call and fixed deposit accounts, amounts due to related parties and suppliers are subject to fixed interest rates at levels generally obtained in the UAE and are therefore exposed to fair value interest rate risk. All other bank borrowings are subject to floating interest rates at levels generally obtained in the UAE and are therefore exposed to cash flow interest rate risk. Exchange rate risk

Increase in trade and other receivables Increase in trade and other payables Increase in staff gratuity provision (Increase)/decrease in amounts due from related parties 19.

(1,000)

(12,150)

284

3,385

512,572

6,227,750

(144,279)

(1,719,806)

There are no significant exchange rate risks as substantially all financial assets and financial liabilities are denominated in UAE Dirhams or US Dollars to which the Dirham is fixed. Fair values The fair value of a financial instrument is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. The fair values of the establishment’s financial assets and financial liabilities which are required to be stated at cost or at amortised cost, approximate to their carrying values.

FINANCIAL INSTRUMENTS The management conducts and operates the business in a prudent manner, taking into account the significant risks to which the business is or could be exposed. The primary risks to which the business is exposed comprise credit, currency, liquidity and cash flow interest rate risks.

For GODREJ GLOBAL MIDEAST FZE A.B.GODREJ Director

Credit risk is managed by assessing the creditworthiness of potential distributors/customers and the potential for exposure to the market in which they operate, combined with regular monitoring and follow-up.

131

Godrej Global Solutions Limited DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2006. To, The Members of GODREJ GLOBAL SOLUTIONS LIMITED Your Directors present their Forth Annual Report together with the Audited Accounts of the Company for the year ended 31st March, 2006. FINANCIAL RESULTS Particulars

Income from Services Other Income Total Income Less: Total Expenditure Profit / [Loss] Before Tax Less: Fringe Benefit Tax Income Tax - Deferred Profit [Loss] After Tax Profit /(Loss) brought forward Loss written off in Capital Reorganisation Profit/(Loss) carried forward

Year ended 31.3.06 (Rupees)

Period ended 31.3.05 (Rupees)

82,265,686 14,364,895 96,630,581 97,286,753 (656,172) (250,381) 288,313 (618,240) (14,244,299) 14,244,299 (618,240)

1,667,018 27,390,126 29,057,144 28,023,912 1,033,233 — — 1,033,233 (15,277,532) — (14,244,299)

DIVIDEND In view of the loss sustained by the Company, your Directors do not recommend any dividend for the year under review. OPERATIONS & FUTURE OUTLOOK Your Company is focused on providing transaction processing services. During the year under review your Company acquired, through its US subsidiary, Godrej Global Solutions Inc., the business of Outsource Offshore Inc., a US based healthcare forms processing service provider. Your Company successfully completed the acquisition of the Data Conversion Business of Softpage Data Conversion Services Private Ltd., Navi Mumbai during the year. Your Company also successfully set up state-of-art service delivery capabilities at Chennai and Navi Mumbai which can support customers in areas of healthcare such as medical transcription, medical billing, claims processing and document management services. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATE COMPANIES To enable your Company to facilitate business development and manage the customer relationships, your company set-up an US subsidiary, Godrej Global Solutions, Inc. The US entity is held through a holding company in Cyprus, viz. Godrej Global Solutions (Cyprus) Limited. Your Company has investments in The View Group LP, an US based private equity group and Godrej Upstream Limited, a travel focused customer care and service company. During the year your company also made investments in Verseon LLC, a Delaware based Limited Liability company engaged in the business of development and exploitation of technology relating to pharmaceutical research and development. To enable your company to focus on its core BPO business, your Company proposes to divest these investments in the coming year. Your company has already initiated necessary action in this regard. CAPITAL RESTRUCTURING Pursuant to demerger of Data Conversion business of Softpage Data Conversion Services Private Limited (Softpage) into the Company during the year, the Equity Share Capital of the Company was restructured which presently stands at Rs.46,22,26,090 divided into 4,27,42,609 Equity Shares of Rs.10/-each fully paid-up and 49,71,429 Equity Shares of Rs.10/- each, Rs.7/- each paid-up respectively. During the year the Company issued and allotted 18,000 Redeemable Preference Shares of Rs.10/- each at par to shareholders of Softpage. DIRECTORS In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Mr. Sanjay S. Tipnis and Mr. K. N. Petigara will retire by rotation at the ensuing Annual General Meeting. However, being eligible, they have offered themselves for re-appointment. Your Directors recommend their re-appointment for your approval. STATUTORY INFORMATION a. Conservation of Energy, Foreign Exchange Earnings & Outgo and Technology Absorption: As required under Section 217[1][e] of the Companies Act, 1956, the necessary details are given hereunder: The activities of the Company being service oriented, the particulars required to be furnished in respect of conservation of energy are not applicable. However, all efforts are being made by the Company to conserve energy at all the stages of its activities.

During the year under review, the Company has earned Rs. 8,22,65,686/- in foreign currency. However, it has spent Rs. 13,75,844/- in foreign currency, the details of which are available in points 3 and 4 of the Notes to the Accounts (Schedule 18) for the year. Further, the Company has not imported any foreign technology and hence the requisite particulars in this regard are not applicable. b.

Particulars of Employees: The particulars required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules 1975 : Name

Designation Gross remuneration (Rs.)

* Sanjay Wholetime Tipnis Director

Qualification Experie- Date of Age nce (yrs.) commencement of employment 43,44,492 B.Com., ACA 22 1-09-2004 41

Particulars of previous employment Godrej Remote Services Ltd.

Audit Committee : As required under Section 292A of the Companies Act, 1956, the Audit Committee of Directors of the Company consisted of Mr. N.B. Godrej, Mr. F.P. Sarkari and Mr. K.N. Petigara. The said Committee met Four times during the year and has performed the functions as prescribed under the said Section and its terms of reference.

Fixed Deposits : The Company has not accepted any deposits from the public during the year under review.

Directors’ Responsibility Statement : In accordance with the requirement under Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm : 1.

that in the preparation of the accounts for the financial year ended 31st March, 2006, the applicable accounting standards have been followed along with proper explanation relating to material departures;

that the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that were 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 under review and also of the loss of the Company for that period;

that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

that the Directors have prepared the accounts for the financial year ended 31st March, 2006 on a going concern basis.

INSURANCE All the assets of the Company are adequately insured. AUDITORS The present Auditors of the Company, M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants, Mumbai, holds their office until the conclusion of the ensuing Annual General Meeting. The Company has received an eligibility Certificate from them pursuant to Section 224(IB) of the Companies Act, 1956. Your Directors recommend their re-appointment at the ensuing Annual General Meeting for your approval. ACKNOWLEDGEMENTS Your Directors place on record their sincere thanks to all the Government Departments concerned with the operations of the Company, the Bankers and employees of the Company, and to Godrej Industries Limited, for their continued support and co-operation.

For and on behalf of the Board S.S. Tipnis Director

C.K. Vaidya Director

Mumbai, May 5, 2006

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS LIMITED 1.

We have audited the attached Balance Sheet of Godrej Global Solutions Limited as at March 31, 2006 and the Profit and Loss Account for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 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 annex hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to above, we report that: a. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; b. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of such books; c. The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account;

132

In our opinion, the Profit and Loss Account and Balance Sheet dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; e. In our opinion and to the best of our information and according to the explanations given to us, the said accounts, read with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the 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, 2006; and (ii) in the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date. (iii) in the case of cash flow statement, of the cash flow for the year ended on that date. 5. On the basis of the written representations received from the Directors as on March 31, 2006, and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2006, from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956. For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants V. M. PADWAL Partner Membership No.: 49639 Mumbai, May 5, 2006.

Annual Report 2005-2006

ANNEXURE TO THE AUDITORS’ REPORT Referred to in Paragraph 3 of our report of even date on the accounts of Godrej Global Solutions Limited for the period ended March 31, 2006: 1. a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets. b) The Company has a program for physical verification of fixed assets at periodic intervals. In our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its assets. The discrepancies reported on such verification were not material and have been properly dealt with in the books of account. 2. a) The Company has granted unsecured loans to a company listed in the register maintained under Section 301 of the Companies Act, 1956 and the said loan has been repaid during the year. The total amount of loan granted during the year was Rs. 100 lac and the total amount of loan repaid during the year was Rs. 2192 lac. b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions of loan given are prima facie not prejudicial to the interest of the company. c) In our opinion and according to the information and explanation given to us the company is generally regular in repayment of principal amount and interest. d) There are no overdue amount of principal and interest. e) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956. 3. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of fixed assets and sale of services. During the course of our audit no major weakness have been observed in the internal controls. 4. a) Based on the audit procedures applied by us and according to the information and explanation provided by the management, the particulars of contracts or arrangements referred to in Section 301 of the Act have been entered in the register required to be maintained under that section. b) In our opinion and according to the information and explanations given to us, having regard to 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 in respect of any party during the period have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time. 5. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public within the meaning of Section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under. 6. The Company has an internal audit system, which in our opinion, is commensurate with the size and nature of its business. 7. a) According to the records examined by us the Company is generally regular in depositing the undisputed statutory dues including Provident Fund, Employees State Insurance, Income tax, Cess and other statutory dues with the appropriate authorities and there is no arrears of outstanding dues

as at the last date of the financial year concerned for a period of more than six months from the date they became payable. b) According to the information and explanations given to us and the records examined by us, there are no dues of Income tax or Cess outstanding on account of any dispute. 8. The Company’s accumulated losses at the end of the financial year do not exceed fifty percent of its net worth and it has not incurred any cash losses in the immediately preceding financial year. 9. According to the information and explanations given to us and records examined by us, we observed that the Company has not has not defaulted in repayment of dues to a financial institution or bank or debenture holders. 10. According to the information and explanations given to us the Company has not granted loans and advances on the basis of security by way of pledge of shares and other securities. 11. In our opinion and according to the information and explanations given to us, the nature of the activities of the Company does not attract any special statute applicable to chit fund and nidhi/mutual benefit fund /societies. 12. In our opinion, the Company has maintained proper records of the transactions and contracts in respect of the investments purchased and sold during the year and timely entries have been made therein. The investments made by the Company have been held in its own name. 13. According to information and explanations given to us and records examined by us, on overall basis, the term loans were applied for the purpose for which they were obtained. 14. According to the information and explanations given to us and the records examined by us, the Company has not given any guarantees for loans taken by others from banks or financial institutions, the terms and conditions whereof are prima facie prejudicial to the interest of the Company. 15. On the basis of an overall examination of the balance sheet of the Company and the information and explanations given to us, we report that the Company has not utilised any funds raised on short-term basis for long-term investments. 16. The Company has not made any preferential allotment of shares to parties or companies covered under Section 301 of the Act. 17. According to the information and explanations given to us and the records examined by us, no debentures have been issued by the Company. 18. The Company has not raised any money through a public issue during the period. 19. Based upon the audit procedures performed and the information and explanation given by the management, we report that no fraud on or by the Company has been noticed or reported during the year. 20. In our opinion, clauses (ii) and (viii) of paragraph 4 of the companies (Auditors Report) Order, 2003 are not applicable. For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants V. M. PADWAL Partner Membership No.: 49639 Mumbai, May 5, 2006.

BALANCE SHEET AS AT MARCH 31, 2006

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

Schedule SOURCE OF FUNDS 1 SHAREHOLDERS’ FUNDS (a) Share Capital (b) Reserves & Surplus 2

BORROWED FUNDS (a) Secured Loans (b) Unsecured Loan

APPLICATION OF FUNDS 1 FIXED ASSETS (a) Gross Block (b) Less : Accumulated Depreciation (c) 2 3 4

March 31, 2005 (Amount Rs.)

462,406,093 51,374,134

538,465,000 –

513,780,227

538,465,000

17,300,244 22,654,141

– –

39,954,385

–

553,734,612

538,465,000

37,589,595 11,900,449

7,813,568 3,691,261

Schedule 1 2

3 4

Net Block

INVESTMENTS DEFERRED TAX ASSET CURRENT ASSETS, LOANS AND ADVANCES (a) Cash & Bank Balances (b) Debtors (c) Loans and Advances LESS : CURRENT LIABILITIES AND PROVISIONS Current Liabilities Provisions

March 31, 2006 (Amount Rs.)

NET CURRENT ASSETS MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) PROFIT AND LOSS ACCOUNT

NOTES TO ACCOUNTS

25,689,146

4,122,307

455,394,643 288,313

193,332,114 –

7 8 9

32,800,201 26,950,942 22,626,693

105,830,447 150,132 221,759,874

82,377,836

327,740,453

10 11

9,818,433 815,132

2,756,895 468,066

10,633,565 71,744,271 –

3,224,961 324,515,492 2,250,789

618,240

14,244,299

553,734,612

538,465,000

INCOME Income from Services Other Income EXPENDITURE Staff Expenses Establishment Expenses Other Operating Expenses Interest & Finance Charges Amortizations Depreciation

Year Ended March 31, 2006 (Amount Rs.)

Year Ended March 31, 2005 (Amount Rs.)

82,265,686 14,364,895

1,667,018 27,390,126

96,630,581

29,057,144

38,846,547 27,369,723 19,945,861 2,864,457 – 8,260,166

4,655,619 6,510,716 13,692,634 – 556,671 2,608,271

97,286,753

28,023,911

(656,172) (250,381) – 288,313

1,033,233 – – –

14 15 16 17

PROFIT / (LOSS) FOR THE YEAR -Before Tax Fringe Benefit Tax Income Tax - Current Income Tax - Deferred PROFIT / (LOSS) FOR THE YEAR -After Tax Profit / (Loss) brought forward Loss written off in Capital Regorganisation (Refer Note number 3 in Schedule 18)

(618,240)

1,033,233

(14,244,299) 14,244,299

(15,277,532) –

(618,240) (0.01)

(14,244,299) 0.02

Profit / (Loss) carried forward Basic Earning Per Share (Face value of Rs 10 per share)

NOTES TO ACCOUNTS

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

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

As per our Report attached.

For and on behalf of the Board

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants

V. M. Padwal Partner Mumbai, May 5, 2006

For and on behaof of the

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants S. S. Tipnis C. K. Vaidya A.K. Singla

Whole time Director Director Company Secretary

V. M. Padwal Partner

S. S. Tipnis C. K. Vaidya A.K. Singla

Whole time Director Director Company Secretary

Mumbai, May 5, 2005

133

Godrej Global Solutions Limited SCHEDULES ANNEXED TO AND FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2006 March 31, 2006 (Amount Rs.)

March 31, 2005 (Amount Rs.)

599,000,000

600,000,000

1,000,000

–

600,000,000

477,140,380

577,465,000

SCHEDULE 1 : SHARE CAPITAL AUTHORISED 59,900,000 (Previous Year 60,000,000) Equity Shares of Rs.10/- each 100,000 (Previous Year Nil) Preference Shares of Rs.10/- each ISSUED AND SUBSCRIBED 47,714,038 (Previous Year 57,746,500) Equity Shares of Rs.10/- each. 18,000 (Previous Year NIL) Preference Shares of Rs.10/- each. PAID UP 42,742,609 (Previous Year 51,746,500) Equity Shares of Rs.10/- each fully paid up 4,971,429 (Previous Year 6,000,000) Equity Shares of of Rs.10/each Rs. 7.00 each paid up (P.Y. Rs 3.50) 18,000 (Previous Year NIL ) Preference Shares of Rs.10/- each.

180,000

–

477,320,380

577,465,000

427,426,090

517,465,000

34,800,003 180,000

21,000,000 –

462,406,093

538,465,000

SCHEDULE 2 : RESERVES & SURPLUS Capital Reserve Opening Balance Add : Additions during the year (Refer note 3, Schedule 18) Securities Premium Account Opening Balance Add : Additions during the year

March 31, 2006 (Amount Rs.)

March 31, 2005 (Amount Rs.)

– 1,554,134

1,554,134

–

– 49,820,000

49,820,000

–

51,374,134

–

17,300,244

–

17,300,244

–

22,654,141

–

22,654,141

–

SCHEDULE 3 : SECURED LOANS Term Loan from bank

SCHEDULE 4 : UNSECURED LOANS Demand Loan from bank (Repayable within one year)

Of the above 4,76,72,739 (Previous Year 5,22,96,500) equity shares are held by Godrej Industries Limited, the Holding Company. 18,000 Preference shares of Rs. 10/- each were issued for consideration other than cash. Refer Note Number 3 in Schedule 18. SCHEDULE 5 : FIXED ASSETS ASSETS

GROSS BLOCK

DEPRECIATION

NET BLOCK

As on 01.04.2005

Additions

Deletions

As on 31.03.2006

As on 01.04.2005

For the Year

Reductions

As on 31.03.2006

As on 31.03.2005

Leasehold Improvements Computers Office Equipments Furniture & Fixtures Vehicle Total

3,457,993 3,176,990 169,825 633,400 375,360 7,813,568

2,957,260 21,494,567 5,006,757 507,508 – 29,966,092

– – 190,065 – – 190,065

6,415,253 24,671,557 4,986,517 1,140,908 375,360 37,589,595

1,440,299 1,878,452 73,638 223,800 75,072 3,691,261

1,625,317 5,889,972 535,254 134,551 75,072 8,260,166

– – 50,978 – – 50,978

3,065,616 7,768,424 557,914 358,351 150,144 11,900,449

3,349,637 16,903,133 4,428,603 782,557 225,216 25,689,146

2,017,694 1,298,538 96,187 409,600 300,288 4,122,307

Previous Year

6,142,511

1,671,057

–

7,813,568

1,082,990

2,608,271

–

3,691,261

4,122,307

5,059,521

SCHEDULE 6 : INVESTMENTS Investee Company/Institutions

Face Value

LONG TERM INVESTMENTS Unquoted Equity Shares-Fully Paid Godrej Upstream Limited Verseon LLC - Class A preferred units (US$)** Investment in Subsidiary Company Equity Shares in Godrej Global Solutions (Cyprus) Ltd face value of US$ 1.00 each Preference Shares in Godrej Global Solutions (Cyprus) Ltd face value of US$ 1.00 each Investment in the capital of Partnership firm View Group LP CURRENT INVESTMENTS Unquoted Units of Mutual Fund Templeton India Treasury Management Prudential ICICI Liquid Plan Institutional Plus Kotak Liquid Scheme TOTAL

March 31, 2006 (Amount Rs.) SCHEDULE 7 : CASH AND BANK BALANCES Cash on hand Balances with Scheduled Bank In Current Account In Fixed Deposit SCHEDULE 8 : DEBTORS Unsecured and Considered Good Outstanding for more than six months Outstanding for less than six months SCHEDULE 9 : LOANS AND ADVANCES Advances recoverable in cash or in kind or for value to be received Intercorporate deposits Security Deposits Accrued Interest Staff Loan Advance Payment of Taxes

134

(Rs.)

Quantity As on 1/04/05

Acquired during Year

Sold during Year

Quantity As on 31/3/2006

Amount (Rs.) As on 31/3/2006

Amount (Rs.) As on 31/3/2005

10 1.90**

9,000,000 –

– 1,315,789

–

9,000,000 1,315,789

90,000,000 114,233,750

90,000,000 –

26,240,229

–

26,240,229

–

65,600,571

–

65,600,571

–

136,801,078

80,243,788

1,000 10 10

13,264 – 303,094

50,195 4,236,307 10,109,650

52,904 4,218,875 9,787,072

10,555 17,432 625,672

15,959,680 206,590 6,352,745 455,394,643

20,055,234 – 3,033,092 193,332,114

March 31, 2005 (Amount Rs.)

97,371

34,804

32,536,330 166,500 32,800,201

5,726,644 100,069,000 105,830,447

1,293,710 25,657,232 26,950,942

– 150,132 150,132

723,721 – 13,357,804 – 78,500 8,466,668

398,820 214,868,647 1,720,272 331,644 21,000 4,419,491

22,626,693

221,759,874

SCHEDULE 10 : CURRENT LIABILITIES Sundry creditors (Due to SSI Undertakings Rs: Nil / Prev. Year Rs : Nil ) Other Liabilities Advance from Customers SCHEDULE 11 : PROVISIONS Provision for employee retirement benefit SCHEDULE 12 : MISCELLANEOUS EXPENDITURE [To the extent not written off or adjusted] Preliminary Expenses Less : Adjusted during the year Less : written off during the year Pre-operative Expenses Less : Adjusted during the year Less : written off during the year

March 31, 2006 (Amount Rs.)

March 31, 2005 (Amount Rs.)

3,076,823

1,451,295

6,741,610 – 9,818,433

– 1,305,600 2,756,895

815,132 815,132

468,067 468,067

929,240 (929,240) – – 1,321,549 (1,321,549) – –

1,045,395 – (116,155) 929,240 1,762,065 – (440,516) 1,321,549

–

2,250,789

Annual Report 2004-2005

SCHEDULES ANNEXED TO AND FORMING PART OF THE PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006

SCHEDULE 13 : OTHER INCOME Interest (Gross) – Bank - (TDS : C.Y : Rs. 7,687/-, P.Y: Rs. 354,340/-) – Companies - (TDS : C.Y : Rs. 2,781,773/- P.Y. : Rs. 4,054,506/-) Dividend Miscellaneous Income SCHEDULE 14 : STAFF EXPENSES Salary, bonus, exgratia Contribution to Providend Fund and other funds Staff Welfare SCHEDULE 15 : ESTABLISHMENT EXPENSES Rent Office Maintenance Electricity Communication expenses Repairs and Maintenance - Plant and Machinery SCHEDULE 16 : OTHER OPERATING EXPENSES Legal & Professional Expenses Insurance Conveyance and Travelling Recruitment & Training Outsourcing expenses Loss on Sale of Assets Exchange Difference – Loss General Expenses SCHEDULE 17 : INTEREST & FINANCE CHARGES Interest on Bank Loan Finance Commission

March 31, 2006 (Amount Rs.)

March 31, 2005 (Amount Rs.)

52,363 12,396,488 1,910,349 5,696

2,042,707 25,132,315 116,391 98,713

14,364,895

27,390,126

34,990,456 2,617,899 1,238,192

4,097,232 61,820 496,567

38,846,547

4,655,619

11,251,006 5,785,814 5,409,147 4,406,888 516,868

1,170,071 3,510,296 993,315 837,034 –

27,369,723

6,510,716

9,532,816 183,094 2,916,553 1,415,302 2,690,130 82,837 287,282 2,837,848

7,611,612 71,970 2,774,267 1,508,896 – – – 1,725,889

19,945,861

13,692,634

2,392,882 471,575

– –

2,864,457

–

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 SCHEDULE 18 : NOTES TO ACCOUNTS 1. Background Godrej Global Solutions Limited (“the Company”) was incorporated on February 28, 2003 as a limited liability company. The main business of the company is to carry out IT enabled services and back office support functions. 2. Significant Accounting Policies a) Accounting Convention The financial statements are prepared under the historical cost convention, on accrual basis in accordance with the generally accepted accounting principles in India, the Accounting Standards issued by the Institute of Chartered Accountants of India and the provisions of the Companies Act, 1956. b) Fixed Asset Fixed Assets are stated at cost less accumulated depreciation. Cost includes all expenses related to acquisition and installation of the concerned asset. c) Asset Impairment The Company reviews the carrying values of tangible and intangible assets for any possible impairment at each balance sheet date. An Impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. In assessing the recoverable amount, the estimated future cash flows are discounted to their present value at appropriate discount rate. 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 recognize a decline, other than that of a temporary nature. The fair value of a long-term investment is ascertained with reference to its market value, the investee’s assets and results and the expected cash flows from the investments. Current investments are carried at lower of cost and fair value. e) Provisions and Contingent Liabilities Provisions are recognized in the accounts in respect of present probable obligations, the amount of which can be reliably estimated. Contingent Liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company. f) Revenue Recognition Income from services is recognized on completion of service as per terms of the contract. Interest income is recognized on a time proportion basis. Dividend income is recognised when the right to receive the same is established. g) Depreciation Leasehold Improvements are amortized equally over the lease period. Depreciation is provided pro-rata to the period of use on the Straight Line Method over the estimated useful life of assets which is as under: Computers 3 Years Office Equipment 5 Years Furniture & Fixture 5 Years Motor Vehicle 5 Years h) Retirement Benefits Retirement Benefits to employees comprises payment 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.

Taxes on Income Provision for current tax is ascertained on the basis of the taxable income for the year determined in accordance with the provision of Income Tax Act, 1961. Deferred tax is recognised on timing differences; being the difference between the taxable incomes and accounting income that originate in one period and are capable of reversal in one or more accounting periods. Deferred tax assets subject to the consideration of prudence are recognised and carried forward only to the extent that there is reasonable certainly that sufficient future taxable income will be realised. The tax effect is calculated on the accumulated timing difference at the year-end and based on the tax rate and laws enacted on substantially enacted on the balance sheet date. j) Foreign Currency Transactions Transactions in foreign currency are recorded at the exchange rates prevailing on the date of the transaction. Monetary assets and Liabilities denominated in foreign currency are translated at the period end exchange rates. Exchange gain/losses are recognised in the profit and loss account except for exchange differences related to fixed assets, which are adjusted in the cost of the assets. Non Monetary foreign currency items like investments in foreign subsidiaries are carried at cost and expressed in Indian currency at the rate of exchange prevailing at the time of making the original investment. Scheme of Arrangement The scheme of arrangement under Sections 391 and 394 of the Companies Act, 1956 between the Company, Softpage Data Conversion Services Private Limited and their respective Shareholders for vesting the Data Conversion business of the Company was approved by the Honorable High Court of Mumbai on November 9, 2005. Accordingly all the Assets and Liabilities pertaining to the Data Conversion Business of Softpage Data Conversion Services Private Limited were transferred to and vested in the company with retrospective effect from April 1, 2005, the appointed date. The scheme has accordingly been given effect to in these accounts. Pursuant to the scheme, all the assets and liabilities of data Conversion Business of Softpage Data Conversion Services Private Limited as at April 1, 2005 have been taken over at their book value and accounted for under the “Pooling of Interest Method”. The assets and liabilities taken over consist of fixed assets Rs. 5.98 lac, current assets Rs. 3.87 lac, bank loan Rs. 1.69 lac. Pursuant to the scheme, consideration for vesting of the Data Conversion Business of Softpage Data Conversion Services Private limited was discharged by payment of Rs. 300 lac in cash and issue of 18,000 redeemable preference shares of the face value of Rs. 10/- each issued at a premium of Rs. 498.20 lac to be redeemed as under: a. 4,000 preference shares of Rs. 10/- each on January 31, 2006 b. 10,000 preference shares of Rs .10 each on May 31, 2006 c. 4,000 preference shares of Rs. 10 each on May 31, 2007 The maximum premium payable on redemption of these shares is Rs. 498.20 lac subject to achievement of predetermined performance on the date of redemption. Pursuant to the scheme, equity share capital of the company is reduced by Rs. 972.39 lac and the said amount is credited to capital reorganization account. The difference of aggregate of value of Redeemable Preference Shares (i.e. face value and the maximum premium payable) allotted and cash over the value of net assets of Data cConversion Business of Softpage Data Conversion Services Private Limited amounting to Rs. 791.83 lac is debited to capital reorganization account. The debit balance in profit and loss account of Rs. 142 lac and the balance in miscellaneous expenditure account of Rs. 23 lac as on April 1, 2005 is also debited to capital reorganization account. The balance lying in capital reorganization account after the above adjustment is transferred to capital reserve account. As per the scheme of arrangement, the company has taken over all the employees of the Data Conversion Business of Softpage Data Conversion Services Private Limited. Redemption of Preference Shares The Company has not redeemed 4,000 preference shares of Rs 10/- each at par on January 31, 2006 due to inadequacy of divisible profits. Secured Loan Term loan from bank are secured by Charge by way of hypothecation of assets on movable fixed assets of the Company Hypothecation of the entire current assets of the Company. Irrevocable and unconditional Corporate Guarantee from Godrej Industries Limited. Investments The Company is in the process of disposing off the investment made in the equity shares of Godrej Upstream Limited and in the capital of view Group LP, a partnership firm formed under the laws of the state of Delaware, USA and does not expect to incur any loss on such sale. Operating Lease The Company’s significant leasing agreements are in respect of operating lease for office premises. These leasing agreements are cancelable and renewable by mutual consent on mutually acceptable terms. The aggregate lease rentals payable by the company are charged to profit and loss account as a rent amounting to Rs. 101.34 Lacs. (Previous year. Rs. 11.70 Lacs). The future minimum lease payments under non-cancelable operating leases due within a period of one year are estimated at Rs. 103.92 Lacs (Previous year. Rs. 11.23 Lacs) and due within a period of one year but less than five years are estimated at Rs. 126.58 Lacs. (Previous year. Rs. 6.55 Lacs) Related Party Disclosures a) Related Parties with whom transactions have taken place during the year, with the name and description of relationship. Parties with whom control exists : Godrej Industries Limited (GIL); the Holding company. Godrej & Boyce Manufacturing Co. Ltd (GBMCL); the Ultimate Holding Company Associate Companies : Godrej Upstream Limited (GUL) Fellow Subsidiaries : Godrej Remote Services Limited (GRSL) Wholly Owned Subsidiaries : Godrej Global Solutions Inc. (GGSI) Godrej Global Solutions (Cyprus) Ltd. (GGSCL) Key Management Personnel Mr. N.B. Godrej (NBG) Mr. Sanjay Tipnis (SST)

135

Godrej Global Solutions Limited SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2006 b)

Transactions with Related Parties – Parent and Fellow Subsidiaries Nature of Transaction

Ultimate Holding Co. (GBMCL)

Holding Company (GIL)

– – – – – – – – – – 12,240 –

1,123,440 1,011,700 2,808,000 2,529,250 571,604 153,799 – 288,465,000 21,000,000 – – –

–

17,447

Leave & Licence Previous Year Service Charges Previous Year Other Expenses Previous Year Issue of Equity Shares Previous Year Call Money Received Previous Year Purchase of Fixed Assets Previous Year Balance Outstanding as of 31-3-2005 Payables c)

(Amount Rs.) Fellow Subsidiaries (GRSL)

Total

Disclosure as required vide Part IV of Schedule VI of the Companies Act, 1956. Balance Sheet Abstract and Company’s General Business Profile I.

– 1,123,440 – 1,011,700 – 2,808,000 – 2,529,250 – 571,604 – 153,799 – – – 288,465,000 – 21,000,000 – – – 12,240 375,360 375,360 –

II.

III.

–

Transactions with Related Parties – Subsidiaries and Others (Amount Rs) Nature of Transaction

Wholly Owned Subsidiary Company (GGSI)

Investment in Preference Shares – Previous Year – Investment in Equity Shares – Previous Year – Export of Services 54,733,608 Previous Year – Interest Income – Previous Year – Inter Corporate Deposit Given– – Previous Year – Inter Corporate Deposit Repaid – Previous Year – Managerial Remuneration – Previous Year –

Wholly Owned Subsidiary Company (GGSCL)

Associate Company

Key Management Personnel

(GUL)

(SST)

65,600,571 – 26,240,229 – – – – –

– – – – – – 12,396,488 25,132,315

Profit for the year as per Profit and Loss Account Add : Depreciation as per Accounts Managerial Remuneration Less : Depreciation u/s 350

11.

13.

– 10,000,000 – 335,000,000

– 219,200,000 – 135,000,000 – – – –

– 219,200,000 – 135,000,000 4,344,492 4,344,492 1,605,206 1,605,206

Current Year

Previous Year

(618,240)

1,033,233

8,260,166 4,344,492 11,986,418

2,608,271 1,645,206 4,253,447

(4,922,868)

(1,733,139)

Net Profit / (Loss)

7,063,550

2,520,338

Management Remuneration Salaries and allowances Contribution to Provident Fund and other fund Sitting Fees

4,118,460 226,032 –

1,501,720 103,486 40,000

Total

4,344,492

1,645,206

9,00,000 1,00,000

75,000 25,000

10,00,000

1,00,000

82,265,686

1,667,018

3,209 106,389 18,849 Nil Nil 1,176,955 26,581

86,250 875,538 Nil 36,171 788,357 1,093,500 Nil

43,861

Nil

(618,240)

1,033,233

57,746,500 47,714,038 52,952,098

25,000,000 57,746,500 46,038,992

(0.01)

0.02

Auditors Remuneration included in General Expenses (Excluding service tax) Audit Fees Tax Audit Fees Total

12.

Earning in Foreign Currency Income from services Expenditure in Foreign Currency Marketing Expenses Travelling Expenses Books & Periodicals Technical Services Professional Fees Training Liability Insurance Software Development & Maintenance

14.

65,600,571 – 26,240,229 – 54,733,608 – 12,396,488 25,132,315

Computation of Profits under Section 349 of Companies Act, 1956 Particulars

10.

– – – – – – – –

Total

Earning Per Share Net profit / (loss) after tax available to shareholders Number of Equity Shares: As at commencement of the year As at the end of the year Weighted Average Number of Equity Shares Basic Earning per Share of Rs. 10/- each

15.

Additional information required under Schedule VI Part II of the Companies Act, 1956, to the extent not applicable has not been given.

16.

Figures of the previous year have been regrouped wherever necessary.

136

IV.

Amount in Rs. Thousands Registration Details Registration No. 11-139431 State Code 11 Balance Sheet date March 31, 2006 Capital raised during the year Public Issue – Rights Issue – Bonus Issue – Private Placement Position of mobilisation and deployment of funds Total Liabilities 553,734 Total Assets 553,734 Sources of Funds Paid-up Capital 462,406 Reserves and surplus 51,374 Secured Loans 17,300 Unsecured Loans 22,654 Application of Funds Net Fixed Assets 25,689 Investments 455,395 Deferred Tax Asset 288 Net Current Assets 71,744 Miscellaneous Expenditure – Accumulated Losses 618 Performance of the Company Total Income 96,631 Total Expenditure 97,287 Profit / (loss) before Tax (656) Profit / (loss) after Tax (618) Earning per share (in Rs.) 0.01 Dividend Rate % – Generic names of principle products / services of company (as per monetary terms) Item Code N.A. Product Description IT Service

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 Particulars March 31, 2006 March 31, 2005 (Amount Rs) (Amount Rs) Cash Flow from Operating Activities Net Loss Before Tax (656,172) 1,033,233 Adjustment for: Depreciation 8,260,166 2,608,271 Interest Paid 2,864,457 – Deferred Revenue Expenditure written off – 556,671 (Profit)/Loss on Fixed Assets Scrapped / Sold 84,122 – (Profit)/Loss on Investments Sold (5,696) – Dividend Income (1,910,349) (116,391) Interest Income (12,448,851) (27,175,022) Operating Profit before Working Capital Changes (3,812,322) (23,093,238) Adjustment for: Trade and Other Receivables (38,101,714) (155,192,413) Trade Payables 7,408,603 2,656,405 Cash Generated from Operations (34,505,433) (175,629,246) Direct Taxes Paid -FBT (250,381) – Direct Taxes Paid (4,047,177) – Total Cash Generated from Operating Activites (38,802,991) (175,629,246) Net Cash from/(used) in Operating Activities (38,802,991) (175,629,246) Cash Flow from Investing Activities Purchase of Fixed Assets (29,375,208) (1,671,057) Sale of Fixed Assets 56,250 – Acquisitions of Data Conversion Business (80,000,000) – Purchase of Long Term Investments (262,631,840) (11,094,000) Purchase of Current Investments (277,318,150) (43,147,045) Sale of Current Investments 277,893,157 20,058,719 Recovery of Inter Corporate Deposits 214,868,647 – Interest Income 12,448,851 27,175,022 Dividend Income 1,910,349 116,391 Net Cash from/(used) in Investing Activities (142,147,944) (8,561,970) Cash Flow from Financing Activities Proceeds from Issue of Share Capital 71,000,000 288,465,000 Proceeds from Long Term Borrowings 48,190,146 – Repayment of Long Term Borrowing (8,405,000) – Interest Paid (2,864,457) – Net Cash from Financing Activities 107,920,689 288,465,000 Net Increase in Cash and Cash Equivalents (73,030,246) 104,273,785 Cash and Cash Equivalents as at beginning of the year 105,830,447 1,556,662 Cash and Cash Equivalents as at end of the year 32,800,201 105,830,447 Note: To finance working capital requirements, the Company’s Bankers have sanctione a total fund based limit of Rs 450 lac. Of this, limits utilized as on March 31, 2006 is Rs Nil. As per our Report attached. For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES CHARTERED ACCOUNTANTS V M Padwal Partner Mumbai, May 5, 2006

For and on behalf of the board

S. S. Tipnis Whole Time Director A.K.Singla Company Secretary

C. K. Vaidya Director

Annual Report 2005-2006

Godrej Global Solutions (Cyprus) Limited DIRECTORS’ REPORT For the period from January 19, 2005 to December 31, 2005 The Directors have pleasure in enclosing the Company’s first set of financial statements for the period from January 19, 2005 to December 31, 2005. Principal activities The Company’s principal activity during the period under review was that of holding of investments and financing. Directors The Directors of the Company during the period were the following : Stelios Savvides Eva Agathangelou Rohinton Homi Khajotia Dorab Erach Mistry Sanjay Tipnis

Company’s results 19.01.2005- 31.12.2005 US$ 32.962 32.962

Profit for the period Balance carried forward

Dividends The Directors recommend no dividend to be paid for the period ended December 31, 2005. Auditors A resolution will be put forward to the Annual General Meeting to reappoint PKF Savvides & Co Limited as auditors for the next year. By order of the Board For Godrej Global Solution (Cyprus) Limited Secretary Limassol : April 13, 2006

AUDITORS’ REPORT TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS (CYPRUS) LIMITED 1.

We have audited the financial statements of Godrej Global Solutions (Cyprus) Limited which comprise the balance sheet as at December 31, 2005 and the income statement, statement of changes in equity and cash flow statement for the period from January 19, 2005 to December 31, 2005 and the related notes. These financial statements are the responsibility of the Company’s Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audit. This report is made solely to the Company’s members, as a body, in accordance with Section 156 of the Companies Law, Cap. 113. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Board of Directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements give a true and fair view of the financial position of Godrej Global

BALANCE SHEET AS AT DECEMBER 31, 2005 Note Assets Non-current Assets Investments

Solutions (Cyprus) Limited for the period from January 19, 2005 to December 31, 2005 and of its financial performance and its cash flows for the period then ended in accordance with International Financial Reporting Standards and the requirements of Cyprus Companies Law, Cap. 113. Report on other legal requirements Pursuant to the requirements of the Companies Law, Cap. 113, we report the following : We have obtained all the information and explanations we considered necessary for the purposes of our audit. In our opinion, proper books of account have been kept by the Company. The Company’s financial statements are in agreement with the books of account. In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Companies Law, Cap. 113, in the manner so required. In our opinion, the information given in the report of the Board of Directors on page 1 is consistent with the financial statements. Certified Public Accountants Limassol: April 13, 2006

INCOME STATEMENT For the year ended from January 19, 2005 to December 31, 2005 US$

Rs. Lac

1,000,000

450.70

1,055,000

475.49

49,844 35,428

22.46 15.97

Note

Loan receivable Current Assets Interest receivabe Cash at Bank

85,272

38.43

2,140,272

964.62

2,245 2,097,755 32,962

1.01 945.46 14.86 961.33

2,132,962 – 7,310

Total Assets Equity and Liabilities Capital and reserves Share capital Equity to be issued Reserves

Current liabilities Creditors and accruals Total equity and liabilities

2,140,272

Particulars Interest receivable Administration expenses (Loss)/profit from operations Financial (expenses)/income-net Incorporation expenses writen off (Loss)/profit for the period before taxation Taxation (Loss)/profit for the period after taxation

US$ 49,844 (9,850) 39,994 (1,449) (5,583) 32,962 – 32,962

3 4

Rs. Lac 22.46 (4.44) 18.03 (0.65) (2.52) 14.86 – 14.86

Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, 2005 (US$ 1.00 = Rs. 45.07).

By order of the Board For Godrej Global Solution (Cyprus) Limited

3.29 – 964.62

Secretary

Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, 2005 (US$ 1.00 = Rs. 45.07). By order of the Board For Godrej Global Solution (Cyprus) Limited Limassol: April 13, 2006 Secretary

Limassol: April 13, 2006

STATEMENT OF CHANGES IN EQUITY For the Period from January 19, 2005 to December 31, 2005

Issue of share capital Funds received Profit for the period At December 31, 2005

Share capital US$

Share capital Rs. Lac

2,245

1.01

–

Equity to be issued US$

Equity to be issued Rs. Lac

Profit & Loss Reserve US$

Profit & Loss Reserve Rs. Lac

–

2,245

1.01

2,097,755

945.46

–

2,097,755

945.46

Total US$

Total Rs. Lac

–

32,962

14.86

32,962

14.86

2,245

1.01

2,097,755

945.46

32,962

14.86

2,132,962

961.33

Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, 2005 (US$ 1.00 = Rs. 45.07).

137

Godrej Global Solutions (Cyprus) Limited NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2005 1.

Introduction The Company was incorporated in Cyprus on January 19, 2005 as a private limited liability company in accordance with the provisions of the Cyprus Companies Law Cap. 113. The Company’s principal activity during the period was that of holding of in investments and financing. Principal accounting policies The following is a summary of the most important accounting policies used by the Company : a) Basis of accounting The financial statements have been prepared under the historical cost convention and in accordance with the International Financial Reporting Standards and the Companies Law. b) Foreign exchange The financial statements are expressed in US Dollars. Current assets and liabilities of the Company other than in US Dollars are translated at the rate of exchange ruling at the balance sheet date. Transactions during the period other than in US Dollars are converted at the rate of exchange ruling on the dates when they occur. Differences on exchange are included in the income statement. c) Taxation Tax is calculated as follows : The current and deferred taxation are recognised as income or expense for the period. The provision for income tax and defence contribution for the period is calculated in accordance with the Income Tax Laws. Deferred taxation is calculated on the basis of the rates ruling at the balance sheet date. The debit balances of the deferred taxation arriving from deductible temporary differences are recognised to the extent of the anticipated taxable profits. d) Investments Investments in subsidiaries are stated at cost unless there is an impairment of value. Any such impairment is recognised in the income statement. Investments held for trading are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in the income statement. When the Company has the positive intent and ability to hold bonds to maturity, these are stated at amortised cost less impairment losses. Other investments held by the Company are classified as being available-for-sale and are stated at fair value, with any resultant gain or loss recognised directly to equity. When an investment is sold collected or otherwise disposed of or when the carrying amount of the investment is impaired, the cumulative gain or loss recognised in equity is transferred to the income statement. The fair value of investments held for trading and investments available-for-sale is their quoted price, excluding disposal costs, at the balance sheet date. Where a quoted price is not available and other methods of determining fair value are inappropriate, the investment is stated at cost. Any sale of investment is recognised when the actual transfer of shares from the registrar takes place. e) Provisions Provisions are recognised when the Company has a present obligation as a result of a past event, which it is probable will result in an outflow of economic benefits that can be reasonably estimated. f) Contingent liabilities Contingent liabilities are disclosed as expenditure and liability if the confirmation of the expense or loss is considered possible from future events. g) Post balance sheet events Current assets and liabilities of the Company are adjusted to reflect any post balance sheet events and include additional information for amounts calculated on the basis ruling at the balance sheet date. Profit from operations Profit from operations is arrived at after charging the following : 19.1.2005-31.12.2005 US$ Auditors’ remuneration 5,066 Financial expenses 19.01.2005-31.12.2005 US$ Bank charges 1,449 Taxation The Company is liable to income tax at the rate of 10% on its taxable profits. Defence contribution is charged on interest receivable at the rate of 10% per annum. Investments Country of Class of Incorporation/ shares Holding 2005 Registration held % US$ Godrej Global Solutions Inc. USA Ordinary 100 1,000,000

138

Loan receivable 2005 US$ Godrej Global Solutions Inc. (Subsidiary company registered in USA)

9. 10.

11. 12. 13.

1,055,000

The above loan carries interest at the rate of 7% per annum on the outstanding amount and it is receivable by the end of March 31, 2010. The interest receivable is accounted for on an accruals basis. The interest expense for the period ended December 31, 2005 was US$ 49.844. Share capital 2005 £C US$ Authorised, issued and fully paid 1.000 ordinary shares of £C1 each 1,000 2,245 Reserves As at 31 December, 2005 the reserves available for distribution amounted to US$32.962. Creditors and accruals 2005 US$ Accruals 7,310 The above amounts are payable within one year. Capital commitments At the balance sheet date there were no capital commitments. Contingent liabilities At the balance sheet date there were no contingent liabilities. Fair value of assets and liabilities The fair value of an asset or liability represents the replacement cost or an obligation to be settled at an arms length transaction. The fair value of all the assets and liabilities of the Company approaches their accounting value as stated in the financial statements.

Cash Flow Statement for the Period from January 19, 2005 to December 31, 2005 Particulars Cash flows from operating activities (Loss)/profit for the period before taxation Operating (loss)/profit before working capital changes Increase in creditors and accruals Net cash from operating activities Cash flows from investing actinities Purchase of investments Interest receivable Net cash used in investing activities Cash flows from financing activities Issuance of share capital Equity to be issued Loan receivable Net cash generated from financing activities (Decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Cash and cash equivalents are as follows : Cash at bank

US$

Rs. Lac

32,962

14.86

32,962 7,310

14.86 3.29

40,272

18.15

(1,000,000) (49,844)

(450.70) (22.46)

(1,049,844)

(473.16)

2,245 2,097,755 (1,055,000)

1.01 945.46 (475.49)

1,045,000

470.98

35,428 – 35,428

15.97 – 15.97

35,428

15.97

Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, 2005 (US$ 1.00 = Rs. 45.07).

By order of the Board For Godrej Global Solution (Cyprus) Limited Secretary Limassol: April 13, 2006

Annual Report 2005-2006

DIRECTORS’ REPORT Company’s results

For the period from January 1, 2006 to March 31, 2006 The Directors have pleasure in enclosing the Company’s set of financial statements for the period from 1 January, 2006 to March 31, 2006.

1.1.2006–31.3.2006 US$ Balance brought forward 32,962 Loss for the period (7,260) Balance carried forward 25,702 Dividends The Directors recommend no dividend to be paid for the period ended March 31, 2006. Auditors A resolution will be put forward to the Annual General Meeting to reappoint PKF Savvides & Co. Limited as auditors for the next year. By order of the Board For Godrej Global Solution (Cyprus) Limited

Principal activities The Company’s principal activity during the period under review was that of holding of investments and financing. Directors The Directors of the Company during the period were the following : Stelios Savvides Eva Agathangelou Rohinton Homi Khajotia Dorab Erach Mistry Sanjay Tipnis

Secretary Limassol : April 13, 2006

AUDITORS’ REPORT TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS (CYPRUS) LIMITED 1.

In our opinion, the financial statements give a true and fair view of the financial position of Godrej Global Solutions (Cyprus) Limited for the period from January 1, 2006 to March 31, 2006 and of its financial performance and its cash flows for the period then ended in accordance with International Financial Reporting Standards and the requirements of Cyprus Companies Law, Cap. 113. Report on other legal requirements Pursuant to the requirements of the Companies Law, Cap. 113, we report the following : We have obtained all the information and explanations we considered necessary for the purposes of our audit. In our opinion, proper books of account have been kept by the Company. The Company’s financial statements are in agreement with the books of account. In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Companies Law, Cap. 113, in the manner so required. In our opinion, the information given in the report of the Board of Directors on page 1 is consistent with the financial statements. Certified Public Accountants Limassol : April 13, 2006

We have audited the financial statements of Godrej Global Solutions (Cyprus) Limited on which comprise the balance sheet as at March 31, 2006 and the income statement, statement of changes in equity and cash flow statement for the period from January 1, 2006 to March 31, 2006 and the related notes. These financial statements are the responsibility of the Company’s Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audit. This report is made solely to the Company’s members, as a body, in accordance with Section 156 of the Companies Law, Cap. 113. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Board of Directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

BALANCE SHEET AS AT MARCH 31, 2006 Note Assets Non-current Assets Investments Loan receivable Current Assets Interest receivabe Cash at bank

Current Liabilities Creditors and accruals

31.12.2005 US$ Rs. Lac

US$

Rs. Lac

1,000,000

446.10

1,000,000

450.70

1,055,000

470.64

1,055,000

475.49

68,054 27,718

30.36 12.36

49,844 35,428

22.46 15.97

1.1.2006 to 31.3.2006 US$ Rs. Lac

Note Particulars

Total Assets Equity and Liabilities Capital and reserves Share capital Equity to be issued Reserves

31.3.2006

INCOME STATEMENT FOR THE YEAR ENDED January 1, 2006 to March 31, 2006

8 9

Total equity and liabilities

95,772

42.72

85,272

38.43

2,150,772

959.46

2,140,272

964.62

2,100,000 – 25,702

936.81 – 11.47

2,245 2,097,755 32,962

1.01 945.46 14.86

2,125,702

948.28

2,132,962

961.33

25,070

11.18

7,310

3.29

2,150,772

959.46

2,140,272

964.62

Interest receivable Administration expenses (Loss)/profit from operations Financial (expenses)/income-net Incorporation expenses writen off (Loss)/profit for the period before taxation Taxation

3 4

(Loss)/profit for the period after taxation

18,210 (25,363)

8.12 (11.31)

49,844 (9,850)

22.46 (4.44)

(7,153) (107) –

(3.19) (0.05) –

39,994 (1,449) (5,583)

18.03 (0.65) (2.52)

(7,260) –

(3.24) –

32,962 –

14.86 –

(7,260)

(3.24)

32,962

14.86

Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31, 2006 (US$ 1.00 = Rs. 44.61).

Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31, 2006 (US$ 1.00 = Rs. 44.61). By order of the Board For Godrej Global Solution (Cyprus) Limited

By order of the Board For Godrej Global Solution (Cyprus) Limited Secretary

Secretary Limassol : 13 April, 2006

19.1.2005 to 31.12.2005 US$ Rs. Lac

Limassol : April 13, 2006

STATEMENT OF CHANGES IN EQUITY For the Period from January 1, 2006 to March 31, 2006

Issue of share capital Funds received Profit for the period At December 31, 2005 Issue of share capital

Share capital US$

Share capital Rs. Lac

Equity tobe issued US$

Equity to be issued Rs. Lac

Profit & Loss Reserve US$

Profit & Loss Reserve Rs. Lac

2,245

1.01

–

2,245

1.01

–

2,097,755

945.46

–

2,097,755

945.46

Total US$

Total Rs. Lac

–

32,962

14.86

32,962

14.86

2,245

1.01

2,097,755

945.46

32,962

14.86

2,132,962

961.33

2,097,755

935.81

(2,097,755)

(935.81)

–

Loss for the period

–

(7,260)

(3.24)

(7,260)

(3.24)

At March 31, 2006

2,100,000

936.81

–

25,702

11.47

2,125,702

948.28

Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, 2005 (US$ 1.00 = Rs. 45.07).

139

Godrej Global Solutions (Cyprus) Limited NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 2006 1.

5. 6.

Introduction The Company was incorporated in Cyprus on January 19, 2005 as a private limited liability company in accordance with the provisions of the Cyprus Companies Law Cap. 113. The Company’s principal activity during the period was that of holding of in investments and financing. Principal accounting policies The following is a summary of the most important accounting policies used by the Company : a) Basis of accounting The financial statements have been prepared under the historical cost convention and in accordance with the International Financial Reporting Standards and the Companies Law. b) Foreign exchange The financial statements are expressed in US Dollars. Current assets and liabilities of the Company other than in US Dollars are translated at the rate of exchange ruling at the balance sheet date. Transactions during the period other than in US Dollars are converted at the rate of exchange ruling on the dates when they occur. Differences on exchange are included in the income statement. c) Taxation Tax is calculated as follows: The current and deferred taxation are recognised as income or expense for the period. The provision for income tax and defence contribution for the period is calculated in accordance with the Income Tax Laws. Deferred taxation is calculated on the basis of the rates ruling at the balance sheet date. The debit balances of the deferred taxation arriving from deductible temporary differences are recognised to the extent of the anticipated taxable profits. d) Investments Investments in subsidiaries are stated at cost unless there is an impairment of value. Any such impairment is recognised in the income statement. Investments held for trading are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in the income statement. When the Company has the positive intent and ability to hold bonds to maturity, these are stated at amortised cost less impairment losses. Other investments held by the Company are classified as being available-for-sale and are stated at fair value, with any resultant gain or loss recognised directly to equity. When an investment is sold collected or otherwise disposed of or when the carrying amount of the investment is impaired, the cumulative gain or loss recognised in equity is transferred to the income statement. The fair value of investments held for trading and investments available-for-sale is their quoted price, excluding disposal costs, at the balance sheet date. Where a quoted price is not available and other methods of determining fair value are inappropriate, the investment is stated at cost. Any sale of investment is recognised when the actual transfer of shares from the registrar takes place. e) Provisions Provisions are recognised when the Company has a present obligation as a result of a past event, which it is probable will result in an outflow of economic benefits that can be reasonably estimated. f) Contingent liabilities Contingent liabilities are disclosed as expenditure and liability if the confirmation of the expense or loss is considered possible from future events. g) Post balance sheet events Current assets and liabilities of the Company are adjusted to reflect any post balance sheet events and include additional information for amounts calculated on the basis ruling at the balance sheet date. (Loss)/profit from operations (Loss)/profit from operations is arrived at after charging the following: 1.1.200619.01.200531.3.2006 31.12.2005 US$ US$ Auditors’ remuneration 1.826 5.066 Financial (expenses)/income - net 1.1.200619.01.200531.3.2006 31.12.2005 US$ US$ Bank charges (146) (1.449) Exchange differences – gain 39 – (107) (1.449) Taxation The Company is liable to income tax at the rate of 10% on its taxable profits. Defence contribution is charged on interest receivable at the rate of 10% per annum. Investments Country of Class of Incorporation/ shares Holding 31.3.2006 31.12.2005

Godrej Global Solutions Inc.

140

Registration

held

US$

USA

Ordinary

100

1.000.000

Loan receivable Godrej Global Solutions Inc. (Subsidiary company registered in USA)

10.

11. 12. 13.

31.12.2005 US$

1,055,000

31.3.2006 US$

1,000

2,245

600,000 1,500,000

2,100,000 Reserves As at March 31, 2006 the reserves available for distribution amounted to US$ 25,702. Creditors and accruals 31.3.2006 31.12.2005 US$ US$ Accruals 25,070 7,310 The above amounts are payable within one year. Capital commitments At the balance sheet date there were no capital commitments. Contingent liabilities At the balance sheet date there were no contingent liabilities. Fair value of assets and liabilities The fair value of an asset or liability represents the replacement cost or an obligation to be settled at an arms length transaction. The fair value of all the assets and liabilities of the Company approaches their accounting value as stated in the financial statements.

Cash Flow Statement for the period from January 1, 2006 to March 31, 2006 1.1.200631.3.2006 US$

Particulars Cash flows from operating activities (Loss)/profit for the period before taxation (7,260) Operating (loss)/profit before working capital changes (7,260) Increase in creditors and accruals 17,760 Net cash from operating activities 10,500 Cash flows from investing actinities Purchase of investments – Interest receivable (18,210) Net cash used in investing activities (18,210) Cash flows from financing activities Issuance of share capital 2,097,755 Equity to be issued (2,097,755) Loan receivable – Net cash generated from financing activities – (Decrease)/increase in cash and cash equivalents (7,710) Cash and cash equivalents at beginning of period 35,428 Cash and cash equivalents at end of period 27,718 Cash and cash equivalents are as follows : Cash at bank 27,718

1.1.200631.3.2006 Rs. Lac

19.1.200531.12.2005 US$

19.1.200531.12.2005 Rs. Lac

(3.24)

32,962

14.70

(3.24) 7.92 4.68

32,962 7,310 40,272

14.70 3.26 17.97

– (8.12) (8.12)

(1,000,000) (49,844) (1,049,844)

(446.10) (22.24) (468.34)

935.81 (935.81) – – (3.44) 15.80 12.36

2,245 2,097,755 (1,055,000) 1,045,000 35,428 – 35,428

1.00 935.81 (470.64) 466.17 15.80 – 15.80

12.36

35,428

15.80

Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31, 2006 (US$ 1.00 = Rs. 44.61). By order of the Board For Godrej Global Solution (Cyprus) Limited Limassol : April 13, 2006

Secretary

Annual Report 2005-2006

Godrej Global Solutions, Inc. DIRECTORS’ REPORT We are pleased to submit the report for the period from April 8, 2005 to December 31, 2005.

Events Since Balance Sheet Date

Principal activities

There have been no events since the balance sheet date which affect the company’s results or performance.

The Company’s principal activity during the period under review was that of providing Healthcare - related Business Process Outsourcing Services. The company acquired the business of Outsource Offshore Inc, during this period.

Political or Charitable Contributions The company made no political or charitable contributions during the year.

Company’s results Net loss for the period

$ 10,970

Retained deficit as of December 31, 2005

$ 10,970

For Godrej Global Solutions, Inc. Sanjay Tipnis Director

Dividends March 6, 2006

No dividend is recommended to be paid for the period ended December 31, 2005

AUDITORS’ REPORT TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS, INC. 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.

In our opinion, the financial statement referred to above present fairly, in all material respects, the financial position of Godrej Global solutions, Inc. as of December 31, 2005, and the results of its operations and its cash flow for the period then ended in conformity with accounting principles generally accepted in the United States of America.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test

Accountants & Advisors

BALANCE SHEET AS AT DECEMER 31, 2005 Assets Current Assets Cash and cash equivalents Accounts receivable - trade, net of allowance for doubtful accounts of $0 Deferred tax asset Total current assets

US$

Rs. Lac

553,414

249.42

345,253 8,275

155.61 3.73

906,942

408.76

Intangible assets, net of accumulated amortization of $168,723 Goodwill

482,112 1,580,093

217.29 712.15

Total non-current assets

2,062,205

929.44

Total assets

2,969,147

1,338.19

741,927 112,346 70,844

334.39 50.63 31.93

Liabilities and stockholder’s equity Current liabilities Accounts payable Note payable Accrued expenses Total current liabilities Note payable Stockholder’s equity Common stock, .01 par value, 1,000 shares authorized, issued and outstanding Additional paid in capital Retained earnings (deficit) Total stockholder’s equity Total liabilities and stockholder’s equity

925,117

416.95

1,055,000

475.49

10 999,990 (10,970)

0 451 (5)

989,030

446

2,969,147

1,338

Braver PC March 6, 2006

STATEMENT OF OPERATIONS AND RETAINED EARNINGS (ACCUMULATED DEFICIT) For the period April 8, 2005 (Inception of Operations) to December 31, 2005 Particulars Sales Cost of goods sold

US$ 1,534,150 1,077,669

Rs. Lac 691.44 485.71

Gross Profit Operating expenses

456,481 259,651

205.71 117.02

Operating income

196,830

88.71

2,492 (168,723) (49,844)

1.12 (76.04) (22.46)

Other income (expense) Interest income Amortization Interest expense

(216,075)

(97.39)

Net loss before income tax benefit Income tax benefit

(19,245) 8,275

(8.67) 3.73

Net loss Retained earnings, (deficit) April 8, 2005 Retained earnings, (deficit) December 31, 2005

(10,970) – (10,970)

(4.94) – (4.94)

The accompanying notes are an integral part of these financial statements Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, 2005 (US$ 1.00 = Rs. 45.07).

March 6, 2006

For Godrej Global Solutions, Inc.

Sanjay Tipnis Director

Sanjay Tipnis Director March 6, 2006

141

Godrej Global Solutions, Inc NOTES TO THE FINANCIAL STATEMENTS For the Period April 8, 2005 (Inception of Operations) to December 31, 2005 Note 1 – Nature of the Business Godrej Global Solutions, Inc. (the “Company” or “GGSI”) was incorporated on January 21, 2005 under the laws of the state of Delaware; however, the Company did not begin its operations until April 8, 2005 when it acquired the assets of another company (Note 9). The Company’s principal activity is to provide information technology services consisting of business process outsourcing services. Presently, the principal areas of industry it services are claims processing for insurance companies and healthcare third party administrators. Note 2 – Summary of Significant Accounting Policies Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments, which include accounts receivable, accounts payable and other accrued expenses approximate their fair values due to their short maturities. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investment with maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates fair value. At December 31, 2005, cash equivalents consist of bank deposits of $553,414. Accounts Receivable Accounts receivable are stated at the amount the Company expects to collect from outstanding balances. An allowance for doubtful accounts is provided for that potion of accounts receivable considered to be uncollectible, based upon historical experience and management’s evaluation of outstanding accounts receivable at the end of the year. Bad debts expense was $0 as of December 31, 2005. Bad debts are written off against the allowance when identified. Management has determined that any uncollectible amounts at December 31, 2005 are not material. Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment whenever an event or change in circumstances indicate that the carrying amount of such assets may not be recoverable. The carrying values of long-lived assets are assessed for recoverability by reference to the estimated future undiscounted cash flows associated with them. Where this assessment indicates a deficit, the assets are written down to market value. For assets which do not have a readily determinable market value, the assets are written down to their estimated market value calculated by reference to the estimated future discounted cash flows. Assets to be disposed are reported at the lower of the written down value or the fair value, less the cost to sell. Goodwill The Company evaluates the carrying value of goodwill each year. When evaluating whether goodwill is impaired, the Company compares the fair value of the reporting unit to which the goodwill is assigned to reporting unit’s carrying amount, including goodwill. If the carrying amount exceeds its fair value, then the amount of the impairment loss is measured and recorded. At December 31, 2005, the Company has not identified any impairment related goodwill. Revenue Recognition Revenues generated from providing services to customer are recognized at the time the services are being provided. Revenue earned from fixed-price engagements is recognized on a monthly basis during the period when services are being provided. Income Taxes Deferred tax assets and liabilities are determined based on the future effect on the temporary differences between the carrying amounts for financial statement purposes and the income tax basis of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The future effect on deferred taxes of change in tax rates or laws are adjusted for on the date of the enactment. Deferred tax assets are recognized, net of any valuation allowance, for the estimated future tax effects of the deductible temporary differences and tax credit carryforwards. A valuation allowance against deferred tax assets is recorded when and if, based upon available evidence, it is more likely than not that some or all deferred tax assets will not be realized. Concentration of Credit Risk Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of accounts receivable. To minimize customer credit risk, ongoing credit evaluations of customer’ financial condition are performed, although collateral generally is not required. The Company maintains its cash in bank deposit accounts which, at times, may exceed the federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. At December 31, 2005. The Company has approximately $447,939 in excesss of the FDIC insured limites. The Company has not experienced any losses in such accounts. During 2005, the Company provided services to three customers that constituted approximately 83% of sales for the period ending December 31, 2005. The Company anticipates the growth of the business will overcome any loss of future revenue from these customers. The Company currently uses only one vendor, an affiliate, for the outsourcing of date processing. Management believes the vendor can be replaced with other outsourcing vendors, if necessary. Note 3 – Goodwill The total amount the Company paid for the acquisition (see Note 9) as of December 31, 2005 is $2,230,928 of which $650,835 has been allocated to intangible assets as the value of the contracts. The remaining amount of $1,580,093 has been identified as goodwill. Goodwill is comprised of the following at December 31, 2005 : Expertise of employees $ 158,009 Customer list 474,028 Entry into U.S. markets 948,056 Total Goodwill $ 1,580,093 Note 4 – Stockholder’s Equity Common Shares In April 2005, the Company issued 1,000 Common Shares of $0.01 par for $1,000,000 to Godrej Global Solutions (Cyprus) Limited. Each share of common stock is entitled to one vote. The holders of common stock are entitled to receive dividends whenever funds are legally available and when declared by the Board of Directors. Note 5 – Note Payable (Current) As part of the Company’s acquisition (see Note 9) the Company must pay earn out payments to the stockholders of the acquired company. These earn-out payments are calculated based on a percentage of revenues and net income for the previous year April 1st to March 31st. There is one payment due on May 31, 2006 calculated on the 2005 year’s operations and another payment due May 31, 2007 calculated on the 2006 operations. The amount of the note payable as an earn out payment as of December 31, 2005 is $112,346. Note 6 – Note Payable (Non-current) In April 2005, the Company issued an unsecured Note, in favor of Godrej Global Solutions (Cyprus) Limited, (GGSC), its stockholder, in exchange for installments totaling $1,055,000. The note bears interest at the rate of 7% per annum. The entire amount of principal is payable at maturity on March 31, 2010, while interest is payable every March 31st. Interest expense was $49,844 for the period ended December 31, 2005.

142

Note 7 – Income Taxes Deferred tax assets consist of the following at December 31, 2005 : Federal net operating loss State net operating loss Management determined a valuation allowance was not applicable. For the period ended December 31, 2005, the income tax benefit consisted of the following : Deferred taxes

6,543 1,732

8,275

(8,275)

At December 31, 2005, the Company has net tax operating loss carryforwards of approximately $1,000 available to reduce future taxable income which begin to expire in December 31, 2006 through 2025. Note 8 – Employee Benefit Plans The Company sponsors a defined contributions plan (individual retirement account) covering substantially all its employees. Company contributions are at the discretion of the board of directors. Defined contribution pension expenses for the Company was $37,500 for the period ended December 31, 2005. Note 9 – Acquisitions During the current year, the Company acquired the assets, liabilities and the business of Outsource Offshore Inc. (OOI), a Minnesota Corporation, for an initial cash consideration of $1.68 million. The rights and obligations as agreed between OOI and its customers have been assumed by the Company. The stockholders of OOI are also to receive two earn-out payments (see Note 5) on May 31, 2006 and 2007. The Company has calculated the earn-out payment to be $112,346 as of December 31, 2005. The Company has also paid to a former vendor of date-entry services, consideration of approximately $439,000 as set up and termination fees. Data entry and related services were thereafter provided by an affiliate company, Godrej Global Solutions Limited for servicing its US Clients. As of December 31, 2005 the total acquisition cost is approximately, $2,231,000. Note 10 – Related Party Transactions The Company’s data entry and related services are provided by Godrej Global Solutions Limited, an affiliate, for servicing the Company’s clients. During the period ended December 31, 2005, the Company's expenses include $741,165 to Godrej Global Solution Limited for these services. As of December 31, 2005 the amount in accounts payable due to Godrej Global Solutions Limited is $741,165. Note 11 – Commitment and Contingencies Certain conditions may exist as of the date of the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings or unasserted claims as well as perceived merits of the amount of relief sought or expected be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, than the estimated liability would be accrued in the Company’s financial statements. If assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but can not be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determined material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. In connection with the Company’s purchase of assets of OOI, the Company must pay earn out payments on May 31, 2006 and 2007. These earn out payments are calculated based on a percentage of revenues and net income for the previous fiscal year. Amounts paid for earn out payments will increase the Company’s purchase price. Note 12 – Intangible Assets In connection with acquisition of Outsource Offshore Inc., (see Note 9) the assets acquired included $650,835 of intangible assets other than goodwill. All of the $650,835 of intangible assets is attributable to value of the contracts purchased from Outsource Offshore Inc. The Company estimates the useful lives of the contracts remaining at December 31, 2005 to extend over a period of up to three years. Amortization in amount of $168,723 was recorded in 2005. Amortization expense for the next three years would be as follows : 2006 213,569 2007 162,265 2008 106,278 Note 13 – Subsequent Events Following the period ended December 31, 2005, the Company has changed its fiscal year end to March 31st. Statement of cash flows For the period april 8, 2005 (inception of operations) to december 31, 2005 Particulars Cash flows from operating activities Net loss Adjustments to reconcile net loss to net cash provided by operating activities Amortization Changes in operating assets and liabilities Accounts receivable Deferred tax asset Accounts payable Accrued expenses Net cash provided by operating activities Cash flows from investing activities Purchase of intangible asset Purchase of goodwill Net cash used in investing activities Cash flows from financing activities Proceeds from note payable Proceeds from stock issuance Net cash provided by financing activities Net increase in cash and cash equivalents Cash and cash equivalents April 8, 2005 Cash and cash equivalents at December 31, 2005 Supplemental disclosure of non-cash investing and finansing activities : Investment in Goodwill financed by a note payable Supplemental disclosure of cash flow information Cash paid during the period for interest The accompanying notes are an integral part of these financial statements

US$

Rs. Lac

(10,970)

(4.94)

168,723

76.04

(345,253) (8,275) 741,927 70,844 616,996

(155.61) (3.73) 334.39 31.93 278.08

(650,835) (1,467,747) (2,118,582)

(293.33) (661.51) (954.84)

1,055,000 1,000,000 2,055,000 553,414 – 553,414

475.49 450.70 926.19 249.42 – 249.42

112,346

50.63

–

Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on December 31, 2005 (US$ 1.00 = Rs. 45.07). For Godrej Global Solutions, Inc. Sanjay Tipnis Director March 6, 2006

Annual Report 2005-2006

DIRECTORS’ REPORT We are pleased to submit the report for the period January 1, 2006 to March 31, 2006 Principal activities The Company’s principal activity during the period under review was that of providing Healthcare related Business Process Outsourcing Services. Companys’ Results Net income for the period Retained deficit as of March 31, 2006

: :

Political Or Charitable Contributions The Company made no political or charitable contributions during the year.

For Godrej Global Solutions, Inc.

$ 27,845 $ 16,875

Sanjay Tipnis Director

Dividends No dividend is recommended to be paid for the period ended March 31, 2006 Events Since Balance Sheet Date There have been no events since the balance sheet date which affect the company’s results or performance.

April 14, 2006

AUDITORS’ REPORT TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS, INC. 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.

To the Board of Directors' and Stockholder Godrej Global Solutions, Inc. Boston, Massachusetts We have audited the accompanying balance sheet of Godrej Global Solutions, Inc. ( a Delaware corporation) as of March 31, 2006, and the related statements of operations and retained earnings (accumulated deficit) and cash flow for the three months then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes

BALANCE SHEET AS AT MARCH 31, 2006 US$

Rs. Lac

Assets Current Assets Cash and cash equivalents Accounts receivable - trade, net of allowance for doubtful accounts of $0

342,281

152.69

378,862

169.01

Total current assets

In our opinion, the financial statement referred to above present fairly, in all material respects, the financial position of Godrej Global solutions, Inc. as of March 31, 2006, and the results of its operations and its cash flow for the three month then ended in conformity with accounting principles generally accepted in the United States of America. Braver PC Accountants & Advisors April 14, 2006

STATEMENT OF OPERATIONS AND RETAINED EARNINGS (ACCUMULATED DEFICIT) For the period January 1, 2006 to March 31, 2006

721,143

321.70

Particulars Sales Cost of goods sold

Intangible assets, net of accumulated amortization of $224,964 Goodwill

425,871 1,891,721

189.98 843.90

Gross Profit Operating expenses

218,858 84,490

218,858.00 37.69

Total non-current assets

2,317,592

1,033.88

59.94

3,038,735

1,355.58

Operating income Other income (expense) Interest income Amortization of intangible assets Interest expense

134,368

Total assets

3,452 (56,241) (18,210)

1.54 (25.09) (8.12)

423,974 488,137 27,249 27,500

189.13 217.76 12.16 12.27

(70,999)

(31.67)

63,369 35,524

28.27 15.85

966,860

431.32

1,055,000

470.64

27,845 (10,970)

12.42 (4.89)

16,875

7.53

Liabilities and stockholder’s equity Current liabilities Note payable Accounts payable Income taxes payable Accrued expenses Total current liabilities Note payable Stockholder’s equity Common stock, .01 par value, 1,000 shares authorized, issued and outstanding Additional paid in capital Retained earnings

Net income before provision for income taxes Provision for income taxes Net income Accumulated deficit - January 1, 2006 Retained earnings - March 31, 2006

10 999,990 16,875

– 446.10 7.53

Total stockholder’s equity

1,016,875

453.63

Total liabilities and stockholder’s equity

3,038,735

1,355.58

US$ 706,995 488,137

Rs. Lac 315 .39 217.76

The accompanying notes are an integral part of these financial statements Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31, 2006 (US$ 1.00 = Rs. 44.61).

April 14, 2006

For Godrej Global Solutions, Inc.

For Godrej Global Solutions, Inc

Sanjay Tipnis Director

Sanjay Tipnis Director April 14, 2006

143

Godrej Global Solutions, Inc NOTES TO THE FINANCIAL STATEMENTS For the Period January 1, 2006 to March 31, 2006 Note 1 – Nature of the Business Godrej Global Solutions, Inc. (the “Company” or “GGSI”) was incorporated on January 21, 2005 under the laws of the state of Delaware; however, the Company did not begin its operations until April 8, 2005 when it acquired the assets of another company (Note 9). The Company’s principal activity is to provide information technology services consisting of business process outsourcing services. Presently, the principal areas of industry it services are claims processing for insurance companies and healthcare third party administrators. Note 2 – Summary of Significant Accounting Policies Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments, which include accounts receivable, accounts payable and other accrued expenses approximate their fair values due to their short maturities. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investment with maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates fair value. At March 31, 2006, cash equivalents consist of bank deposits of $342,281. Accounts Receivable Accounts receivable are stated at the amount the Company expects to collect from outstanding balances. An allowance for doubtful accounts is provided for that potion of accounts receivable considered to be uncollectible, based upon historical experience and management’s evaluation of outstanding accounts receivable at the end of the year. The allowance is $0 as of March 31, 2006. Bad debts are written off against the allowance when identified. Management has determined that any uncollectible amounts at March 31, 2006 are not material. Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment whenever an event or change in circumstances indicate that the carrying amount of such assets may not be recoverable. The carrying values of long-lived assets are assessed for recoverability by reference to the estimated future undiscounted cash flows associated with them. Where this assessment indicates a deficit, the assets are written down to market value. For assets which do not have a readily determinable market value, the assets are written down to their estimated market value calculated by reference to the estimated future discounted cash flows. Assets to be disposed are reported at the lower of the written down value or the fair value, less the cost to sell. Goodwill The Company evaluates the carrying value of goodwill each year. When evaluating whether goodwill is impaired, the Company compares the fair value of the reporting unit to which the goodwill is assigned to reporting unit’s carrying amount, including goodwill. If the carrying amount exceeds its fair value, then the amount of the impairment loss is measured and recorded. At March 31, 2006, the Company has not identified any impairment related goodwill. Revenue Recognition Revenues generated from providing services to customer are recognized at the time the services are being provided. Revenue earned from fixed-price engagements is recognized on a monthly basis during the period when services are being provided. Income Taxes Deferred tax assets and liabilities are determined based on the future effect on the temporary differences between the carrying amounts for financial statement purposes and the income tax basis of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The future effect on deferred taxes of change in tax rates or laws are adjusted for on the date of the enactment. Deferred tax assets are recognized, net of nay valuation allowance, for the estimated future tax effects of the deductible temporary differences and tax credit carryforwards. A valuation allowance against deferred tax assets is recorded when and if, based upon available evidence, it is more likely than not that some or all deferred tax assets will not be realized. Concentration of Credit Risk Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of accounts receivable. To minimize customer credit risk, ongoing credit evaluations of customer’ financial condition are performed, although collateral generally is not required. The Company maintains its cash in bank deposit accounts which, at times, may exceed the federally insured limits. The balances are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. At March 31, 2006, the Company has approximately $131,000 in excess of the FDIC insured limits. The Company has not experienced any losses in such accounts. During the period January to March 2006, the Company provided services to three customers that constituted approximately 93% of sales for the period ending March 31, 2006. The Company anticipates the growth of the business will overcome any loss of future revenue from these customers. The Company currently uses only one vendor, an affiliate, for the outsourcing of data processing. Management believes the vendor can be replaced with other outsourcing vendors, if necessary. Note 3 – Goodwill The total amount the Company paid for the acquisition (see Note 9) as of March 31, 2006 is $2,542,556; of which $650,835 has been allocated to intangible assets as the value of the contracts. The remaining amount of $1,891,721 has been identified as goodwill. Goodwill is comprised of the following at March 31, 2006 : Expertise of employees $ 189,172 Customer list 567,516 Entry into U.S. markets 1,135,033 Total Goodwill

Statement of Cash Flows for the period January 1, 2006 To March 31,2006 Particulars Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities Amortization of intangible assets Changes in operating assets and liabilities Accounts receivable Deferred tax asset Accounts payable Income taxes payable Accrued expenses Net cash used in operating activities Cash and cash equivalents - January 1, 2006 Cash and cash equivalents - March 31, 2006 Supplemental disclosure of non-cash investing and finansing activities Increse in note payable (current) Supplemental disclosure of cash flow information Cash paid during the period for interest

US$

Rs. Lac

27,845

12.42

56,241

25.09

(33,609) 8,275 (253,790) 27,249 (43,344) (211,133) 553,414 342,281

(14.99) 3.69 (113.22) 12.16 (19.34) (94.19) 246.88 152.69

311,628

139.02

68,054

30.36

$ 1,891,721

Note 4 – Stockholder’s Equity Common Shares In April 2005, the Company issued 1,000 Common Shares of $0.01 par for $1,000,000 to Godrej Global Solutions (Cyprus) Limited. Each share of common stock is entitled to one vote. The holders of common stock are entitled to receive dividends whenever funds are legally available and when declared by the Board of Directors.

144

Note 5 – Note payable (Current) As part of the Company’s acquisition (see Note 9) the Company must pay earn out payment to the stockholders of the acquired company. These earn-out payments are calculated based on a percentage of revenues and net income for the previous fiscal year ended March 31st. There is one payment due on May 31, 2006 calculated on the 2005 year’s operations and another payment due May 31, 2007 calculated on the 2006 operations. The amount of the note payable as an earn-out payment as of March 31, 2006 is approximately $424,000. Note 6 – Note Payable (Non-current) In April 2005, the Company issued an unsecured Note, in favor of Godrej Global Solutions (Cyprus) Limited, (GGSC), its stockholder, in exchange for installments totaling $1,055,000. The note bears interest at the rate of 7% per annum. The entire amount of principal is payable at maturity on March 31, 2010, while interest is payable every March 31st. Interest expense was $18,210 for the period ended March 31, 2006. Note 7 – Income Taxes Provision for income taxes for the three months ended March 31, 2006, is $35,524. A net operating loss was available in the amount of $8,275. The balance of $27,249 is in income tax payable. Note 8 – Employee Benefit Plans The Company sponsors a defined contributions plan (individual retirement account) covering substantially all its employees. Company contributions are at the discretion of the board of directors. Defined contribution pension expenses for the Company was $12,500 for the period ended March 31, 2006. Note 9 – Acquisitions The Company acquired the assets, liabilities and the business of Outsource Offshore Inc. (OOI), a Minnesota Corporation, for an initial cash consideration of $1.68 million. The rights and obligations as agreed between OOI and its customers have been assumed by the Company. The stockholders of OOI are also to receive two earn-out payments (see Note 5) on May 31, 2006 and 2007. The Company has calculated the first earn-out payment to be $423,974 as of March 31, 2006. The Company has also paid to a former vendor of date-entry services, consideration of approximately $439,000 as set up and termination fees. Data entry and related services were thereafter provided by an affiliate company, Godrej Global Solutions Limited for servicing its US Clients. As of March 31, 2006 the total acquisition cost is approximately, $2,542,556. Note 10 – Related Party Transactions The Company’s data entry and related services are provided by Godrej Global Solutions Limited, an affiliate, for servicing the Company’s clients. During the period ended March 31, 2006, the Company's expenses include $488,137 to Godrej Global Solution Limited for these services. As of March 31, 2006 the amount in accounts payable due to Godrej Global Solutions Limited is $488,137. Note 11 – Commitment and Contingencies In connection with the Company’s purchase of assets of OOI, the Company must pay earn-out payments on May 31, 2006 and 2007. These earn-out payments are calculated based on a percentage of revenues and net income for the previous fiscal year. Amounts paid for earn out payments will increase the Company’s purchase price. Note 12 – Intangible Assets In connection with acquisition of Outsource Offshore Inc., (see Note 9) the assets acquired included $650,835 of intangible assets other than goodwill. All of the $650,835 of intangible assets is attributable to value of the contracts purchased from Outsource Offshore Inc. The Company estimates the useful lives of the contracts remaining at March 31, 2006 to extend over a period of up to three years. Amortization in amount of $56,241 was recorded in the period January 1, 2006 to March 31, 2006. Amortization expense for the next three fiscal years ending March 31would be as follows: 2007 $ 198,191 2008 161,757 2009 65,923

Sanjay Tipnis Director April 14, 2006