/GIL_annualreport_2006_07 by Godrej

Fast Forward into the Future

Godrej Industries Limited annual report 2006-2007

Fast Forward into the Future The future, we believe, belongs to the brave. Godrej Industries has grown rapidly over the years, in all its different sectors. The growth is propelled by the Companyâ&#x20AC;&#x2122;s endeavour to excel in each of its businesses, and to deliver value to its consumers and business partners. Our customers appreciate the consistent quality, excellence in service and cost effective products. It is this vision, empowered by an enthusiastic team and a constant aim to innovate that will ensure that we, along with our customers and shareholders move into a future of enduring success and growth.

Annual Report 2006â&#x20AC;&#x201C;2007

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 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

Valia

Wadala

CONTENTS

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

Kolkata

Chennai

SUBSIDIARIES

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

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

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

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

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

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

100

Girikandra Holiday Homes & Resorts Limited ....

108

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

111

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

114

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

117

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

121

Godrej Waterside Properties Private Limited ......

124

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

128

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

134

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

139

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

141

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

145

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

150

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

153

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 & TRANSFER AGENT

Computech Sharecap Ltd. 147, Mahatma Gandhi Road, Opp. Jehangir Art Gallery, Fort, Mumbai 400 023. Phone : 022 - 2263 5000 - 01- 02 Fax : 022 - 2263 5003 E-Mail : helpdesk@computechsharecap.com

Annual Report 2006–2007

GODREJ INDUSTRIES LIMITED – FINANCIAL HIGHLIGHTS (Rs. Lac) 2006-07

2005-06

2004-05

2003-04

2002-03

2919 38143

2919 34216

2919 30618

2919 26197

2919 21511

33093 13677 3980 91811

24911 7803 3818 73667

22075 3557 2502 61671

16814 4235 2972 53137

14815 7432 3466 50143

28704 48567 12937 1602

28594 37135 5719 2219

25100 33577 2868 126

25656 26533 739 209

28130 18646 2944 423

91811

73667

61671

53137

50143

Total Income Expenditure other than Interest and Depreciation Profit before Interest, Depreciation and Tax Interest (net)

78291 64078 14213 3831

80270 69661 10609 2837

82353 70117 12236 2582

73355 64243 9112 580

67780 57737 10043 2024

Profit before Depreciation and Tax Depreciation

10382 2426

7772 2259

9654 2148

8532 2150

8019 2211

Profit before Tax and exceptional items Exceptional items - expense/(income) Provision for Current Tax

7956 (95) 61

5513 (3106) 82

7506 — 401

6382 — 365

5808 — 421

Net Profit after Tax Provision for Deferred Tax

7990 162

8537 1417

7105 (470)

6017 (494)

5387 2119

(2)

(57)

(153)

7806

7113

7577

6568

3421

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

Adjustment in respect of prior years - expense/(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 Expenditure 2006-2007

Total Income 2006-2007 Break-up of Total Income Rs. Lac

Chemicals

57187

Others

569

Vegoils

4991

Estate

2562

Finance & Investment Medical Diagnostics

12145 837 78291

Break-up of Total Expenditure Rs. Lac

Materials

43394

Staff Costs

6266

Depreciation

2426

Interest

3831

Other Operating Expenses

14418

70335

Godrej Industries Limited NOTICE TO SHAREHOLDERS NOTICE is hereby given that the NINETEENTH ANNUAL GENERAL MEETING of the members of GODREJ INDUSTRIES LIMITED will be held on Friday, July 27, 2007 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, 2007 the Balance Sheet as at that date, the Auditors' Report thereon and the Directors' Report along with Management Discussion and Analysis Report and Statement of Corporate Governance. 2. To declare dividend for the financial year ended March 31, 2007. 3. To appoint a Director in place of Mr. A.B. Godrej, who retires by rotation and being eligible offers himself for reappointment. 4. To appoint a Director in place of Mr. S.A. Ahmadullah, who retires by rotation and being eligible offers himself for reappointment. 5. To appoint a Director in place of Mr. V.N. Gogate, who retires by rotation and being eligible offers himself for reappointment. 6. To appoint a Director in place of Mr. Fali P. Sarkari, who retires by rotation and being eligible offers himself for reappointment. 7. To appoint Auditors to hold office from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting and to authorize the Board of Directors of the Company to fix their remuneration. M/s. Kalyaniwalla & Mistry, Chartered Accountants, the retiring Auditors are eligible for re-appointment. SPECIAL BUSINESS : 8. To consider and, if thought fit, to pass with or without modification(s), the following resolution as a SPECIAL RESOLUTION : RESOLVED THAT subject to the provision of Section 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 of and remuneration payable to Mr. N.B. Godrej as Managing Director of the Company for a period of three years from April 1, 2008 to March 31, 2011 on the terms and conditions as contained in the agreement to be entered into between the Company and Mr. N.B. Godrej, a draft of which is placed before the meeting and for the purpose of identification, initialled by the Chairman. By Order of the Board of Directors S.K. BHATT Executive Vice-President (Corporate Services) & Company Secretary Mumbai, May 25, 2007 Registered Office : Pirojshanagar, Eastern Express Highway, Vikhroli (East), Mumbai 400 079. NOTES : 1. The relative Explanatory Statement in respect of business under Item No. 8 as set out in the Notice is annexed hereto. 2. A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO APPOINT A PROXY TO ATTEND AND ON POLL, TO VOTE INSTEAD OF HIMSELF. SUCH A PROXY NEED NOT BE A MEMBER OF THE COMPANY. PROXIES IN ORDER TO BE EFFECTIVE MUST BE RECEIVED BY THE COMPANY NOT LESS THAN 48 HOURS BEFORE THE MEETING. A PROXY SO APPOINTED SHALL NOT HAVE ANY RIGHT TO SPEAK AT THE MEETING. 3. The Register of Members and Share Transfer Books of the Company will be closed from July 20, 2007 to July 27, 2007 (both days inclusive) for ascertaining the names of the shareholders to whom the dividend which if declared at the Annual General Meeting is payable. In respect of shares held in electronic form, the dividend will be payable on the basis of beneficial ownership as per details furnished by National Securities Depository Ltd. and Central Depository Services (India) Ltd., for this purpose. 4

Annual Report 2006-2007

4. Those Members who have so far not encashed their dividend warrants for the below mentioned financial years, may claim or approach the Company for the payment thereof as the same will be transferred to the 'Investor Education and Protection Fund' of the Central Government, pursuant to Section 205C of the Companies Act, 1956 on the respective dates mentioned thereagainst. Please note that as per Section 205C of the Companies Act, 1956, no claim shall lie against the Company or the aforesaid Fund in respect of individual amounts which remain unclaimed or unpaid for a period of seven years from the date the dividend became due for payment and no payment shall be made in respect of such claims. Dividend for the Financial Year ended Due date for transfer 31.03.2000 01.07.2007 31.03.2001 28.07.2008 31.03.2002 14.08.2009 31.03.2003 25.08.2010 31.03.2004 26.07.2011 31.03.2005 26.07.2012 31.03.2006 24.07.2013 5. Members are requested to bring their copy of the Annual Report to the Annual General Meeting. 6. Members are requested to send in their queries at least a week in advance to the Company Secretary at the 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 The tenure of Mr. N.B. Godrej as Managing Director of the Company will expire on March 31, 2008. It is proposed to re-appoint Mr. N.B. Godrej for a further period of three years from April 1, 2008 to March 31, 2011. The proposed remuneration and terms and conditions of appointment of Mr. N.B. Godrej as Managing Director are given below : 1. Mr. N.B. Godrej, shall perform his duties subject to the superintendence, control and direction of the Board of Directors of the Company. 2. Period of appointment : From 1/4/2008 to 31/3/2011. 3. In consideration of the performance of his duties, Mr. N.B. Godrej shall be entitled to receive remuneration as stated hereinbelow :1. Fixed Compensation: Fixed Compensation shall include Basic Salary and the Company's Contribution to Provident Fund and Gratuity Fund. The Basic Salary shall be in the range of Rs. 5,00,000 to Rs. 9,00,000 per month, payable monthly. The Annual Basic Salary and increments will be decided by the Compensation Committee/Board of Directors depending on the performance of the Managing Director, the profitability of the Company and other relevant factors. The Basic Salary approved by the Compensation Committee for the year 2007-08 is Rs. 4,50,000. 2. Performance Linked Variable Remuneration (PLVR) : Performance Linked Variable Remuneration according to the Scheme of the Company for each of the financial years 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 the Managing Director for each year. 3. Flexible Compensation: In addition to the Fixed Compensation and PLVR, Mr. N.B. Godrej will be entitled to the following allowances, perquisites, benefits, facilities and amenities as per rules of the Company and subject to the relevant provisions of the Companies Act, 1956 (collectively called "perquisites and allowances"). These perquisites and allowances may be granted to Mr. N.B. Godrej in the manner as the Board may decide as per the Rules of the Company. 5

Godrej Industries Limited Housing (i.e. unfurnished residential accommodation OR House Rent Allowance at 80% of Basic Salary); Furnishing at residence; ● Supplementary Allowance; ● Leave Travel Assistance; ● Payment/reimbursement of medical expenses for self and family; ● Payment/reimbursement of Food Vouchers, petrol reimbursement; ● Company cars with driver for official use, provision of telephone(s) at residence; ● Payment/reimbursement of telephone expenses; ● Housing Loan, Contingency Loan as per rules of the Company. These loans shall be subject to Central Government approval, if any; ● Earned/privilege leave, on full pay and allowance, not exceeding 30 days in a financial year. Encashment/accumulation of leave will be permissible in accordance with the Rules specified by the Company. Casual/Sick leave as per 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 the Managing Director shall be Rs. 21,00,000. In addition to the above, the Managing Diretor shall be eligible to encashment of leave, club facilities, group insurance cover, group hospitalisation cover, and/or any other allowances, perquisites and 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, dependent children and dependent parents. ii) Perquisites shall be evaluated at actual cost or if the cost is not ascertainable the same shall be valued as per Income Tax Rules. 4. Overall Remuneration : The aggregate of salary and perquisites as specified above or paid additionally in accordance with the rules of the Company in any financial year, which the Board in its absolute discretion pay to the Whole-time Director from time to time, shall not exceed the limits prescribed from time to time under Sections 198, 309 and other applicable provisions of the Companies Act, 1956 read with Schedule XIII to the said Act as may for the time being, be in force. 5. Loans : (a) Granting of loans according to Company's Scheme subject to Central Government's approval, if applicable. (b) Continuation of Loans, if already availed. 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 Managing 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 the Managing Director lower remuneration and revise the same from time to time within the maximum limits stipulated above. IV. In the event of any re-enactment or re-codification of the Companies Act, 1956 or the Income Tax Act, 1961 or amendments thereto, the foregoing shall continue to remain in force and the reference to various provisions of the Companies Act, 1956 or the Income Tax Act, 1961 shall be deemed to be substituted by the corresponding provisions of the new Act or the amendments thereto or the Rules and notifications issued thereunder. V. If at any time the Managing Director ceases to be in the employment of the Company for any cause whatsoever, he shall cease to be the Managing Director of the Company. VI. The Managing Director is appointed by virtue of his employment in the Company and his appointment is subject to the provisions of Section 283(1) of the Companies Act, 1956. The appointment is terminable by giving three months' notice in writing on either side. Draft of the agreement to be entered into with Mr. N.B. Godrej is available for inspection at the Registered Office of the Company from 10.00 A.M. to 12.00 Noon, Monday to Friday (except public holidays) upto the date of the Annual General Meeting. ● ●

Annual Report 2006-2007

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 recommend passing of the resolution as set out at Item no.8 of the Notice. Mr. N.B. Godrej, may be deemed to be interested in the resolution at Item no.8, Mr. A.B. Godrej, being relative of Mr. N.B. Godrej, may be deemed to be interested in the resolution at item no.8. None of the other Directors of the Company are concerned or interested in the resolution. By Order of the Board of Directors S.K. BHATT Executive Vice-President Mumbai, May 25, 2007 (Corporate Services) Registered Office : & Company Secretary 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. A.B. Godrej (65): Mr. A.B. Godrej is B.S., M.S. from Massachusetts Institute of Technology, U.S.A. and is a Director since 1988. Directorship in other Companies: Chairman & Managing Director, Godrej Consumer Products Ltd., Chairman: Godrej Commodities Ltd., Godrej Beverages & Foods Ltd., Godrej Hicare Ltd., Godrej Sara Lee Ltd., Swadeshi Detergents Ltd., Vora Soaps Ltd., Godrej Properties Ltd., Godrej Upstream Ltd., Godrej SCA Hygiene Ltd., Godrej Investments Pvt. Ltd., Godrej Consumer Products (UK) Ltd., Keyline Brands Ltd., Rapidol (Pty) Ltd. Director: Godrej & Boyce Mfg. Co. Ltd., Godrej Agrovet Ltd., Nutrine Confectionery Company Ltd., Godrej International Ltd., Godrej Global Mid East FZE, Member of the Executive Board: Indian School of Business. Committee position held in companies: Chairman : Audit Committee - Godrej Properties Ltd. Chairman : Audit Committee - Godrej Sara Lee Ltd. Chairman : Shareholders' Committee - Godrej Industries Ltd. Member : Shareholders' Committee- Godrej Consumer Products Ltd. Mr. S.A. Ahmadullah (67) : Mr. S.A. Ahmadullah is B. A. (Cantab.). He is a Director of the Company since 1995. Directorship in other Companies : Godrej Industries Ltd. Godrej Global Solutions Ltd., Lawkim Ltd., Globe Theatres Private Ltd., Nadir Company Private Ltd., Motorsports Association of India, Western India Automobile Association. Committee position held in companies: Chairman : Compensation Committee, Godrej Industries Ltd. Member : Audit Committee, Godrej Industries Ltd. Mr. V.N. Gogate (74): Mr. V.N. Gogate is a Chartered Accountant and a qualified Company Secretary by profession. Mr. Gogate was heading the finance function of the former Godrej Soaps Ltd. before retiring in 1994. He is a director of the Company since 1995. Directorship in other Companies : Committee position held in companies : Member : Compensation Committee - Godrej Industries Ltd. Member : Audit Committee - Godrej Industries Ltd. Mr. F.P. Sarkari (75): Mr. F.P. Sarkari is a Practising Chartered Accountant. He was appointed as a Director of the Company from Jan. 30, 2002. Directorship in other Companies : Director : Godrej & Boyce Mfg. Co. Ltd., Tropicana Enterprise Pvt. Ltd., Godrej Global Solutions Ltd., Committee position held in companies : Chairman : Audit Committee - Godrej Industries Ltd., Godrej & Boyce Mfg. Co. Ltd; Chairman : Remuneration Committee - Godrej & Boyce Mfg. Co. Ltd., Member : Remuneration Committee: Godrej Global Solutions Ltd., Member : Audit Committee, Godrej Global Solutions Ltd. Mr. N.B. Godrej (55): Mr. N.B. Godrej has a B.S. degree in Chemical Engineering from the Massachusetts Institute of Technology and a M.S. in Chemical Engineering from Stanford University. He did his M.B.A. at Harvard Business School in 1976. He has a career spanning 29 years in Godrej group as a Board Member/Managing Director of Godrej Soaps Ltd., Gujarat-Godrej Innovative Chemicals Ltd. and Godrej Industries Ltd. He has been very active in developing the chemicals business of the Company. He has demonstrated outstanding leadership skills in diverse business areas. Directorship in other companies: Chairman : Godrej Agrovet Ltd., Goldmohur Foods & Feeds Ltd., Godrej Global Solutions Ltd. Director : Godrej & Boyce Mfg Co. Ltd., Godrej Properties Ltd., Godrej Consumer Products Ltd., Mahindra & Mahindra Ltd., Godrej Beverages & Foods Ltd., Godrej Sara Lee Ltd., KarRox Technologies Ltd., Godrej Upstream Ltd., Godrej Gold Coin Aquafeed Ltd., Nutrine Confectionery Co. Ltd., Avestha Gengraine Technologies Pvt. Ltd., CBay Systems (India) Pvt. Ltd., Godrej International Ltd., Godrej Global Mid East FZE, Compass Connections Ltd., UK, CBay Systems Ltd., USA, ACI Godrej Agrovet Pvt. Ltd., Bangladesh, Keyline Brands Ltd. Committee position held in companies: Chairman : Audit Committee - Godrej Global Solutions Ltd. and Godrej Beverages & Foods Ltd. Chairman : Shareholders' Committee - Godrej Consumer Products Ltd. Member : Audit Committee - Godrej Sara Lee Ltd., Godrej Properties Ltd. and Mahindra & Mahindra Ltd. 7

Godrej Industries Limited DIRECTORS’ REPORT To the Shareholders,

●

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

Discussion on financial performance with respect to operational performance

●

Segment - wise performance

REVIEW OF OPERATIONS

●

Human Resources and Industrial Relations

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

●

Opportunities and Threats

●

Internal Control Systems and their adequacy

●

Risks and Concerns

●

Outlook

(Rs. lac) Year ended March 31, 2007

2006

Sales of products and services Other Income

65477 12814

74548 5733

Total Income

78291

80281

Total Expenditure other than Interest and Depreciation

64078

69660

Profit before Interest, Depreciation and Tax

14213

10621

2426

2260

11787

8361

3831

2848

7956

5513

7895

5431

Depreciation 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

162

1417

7733

4014

3098

7806

7112

–

Surplus brought forward

23710

20082

Profit after Tax available for appropriation

31516

27194

Profit after Current and Deferred Taxation Profit on sale of undertaking, extraordinary item (Net of tax) Net Profit Adjustments in respect of prior years

Appropriation Your Directors recommend appropriation as under: Dividend on Equity Shares

2919

2432

Tax on Distributed Profits

496

341

Transfer to General Reserve

781

711

27320

23710

31516

27194

Surplus Carried Forward Total Appropriation

The total income reduced by 2% from Rs. 80281 lac to Rs. 78291 lac, mainly on account of sale of Foods division. The Net Profit for the year was Rs. 7806 lac as compared to Rs. 7112 lac in the previous year, an increase of 10%. DIVIDEND The Board of Directors of your Company recommends a final dividend of Re. 1/- per equity share of Re. 1/- each, aggregating to Rs. 2919 lac, as against final dividend of Rs. 5/- per equity share of Rs. 6/- each aggregating to Rs. 2432 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

The same is appended as Annexure A to the Directors' Report. SUBSIDIARY AND ASSOCIATE COMPANIES Your Company has interests in several industries including animal feeds, poultry and agro-products, property development, household insecticides, pesticides, tea, fruit and soya drinks and infotech, etc. through its subsidiary/associate companies. Godrej Agrovet Limited (GAVL) : The Company is in the business of animal feeds, agri inputs, poultry, oil palm and rural retailing. The Company recorded a revenue growth of 18% in FY 2006-07, the total income rising from Rs. 60556 lac to Rs. 71285 lac. The Profit after tax however declined from Rs. 683 lac to Rs. 275 lac. The Company launched 8 new rural retail stores under the Aadhaar initiative in the last quarter of the year taking the total store count to 39 outlets and launched 3 new Nature's Basket stores in Mumbai (total 8 such stores), which retail a large range of domestic as well as exotic fruits, vegetables and herbs. The Company also launched the Yummiez range of ready to eat veg and non-veg snacks and extended this range to Delhi, Baroda, Nagpur and Chandigarh in the last quarter. Avian Influenza and high prices of certain key raw materials impacted the performance of the Animal Feed and Poultry businesses. The Company entered into a MoU with IJM Plantations, Berhad a listed Malaysian Company to promote oil palm plantation in India and also entered into a JV (49:51) named Godrej Gold Coin Aqua Feed Limited with Gold Coin Group, Singapore for developing and marketing special feed for shrimp. Goldmohur Foods and Feeds Limited (GFFL) : Operations of this wholly owned subsidiary of GAVL were also impacted during the initial months of the Financial Year under review by the outbreak of Avian Influenza. High prices of certain key raw materials like maize also impacted the performance. The Profit after Tax came down from Rs. 538 lac in the previous year to Rs. 320 lac in the year under review, in spite of the total income rising from Rs. 29588 lac to Rs. 32635 lac. Golden Feed Products Limited (GFPL) : This wholly owned subsidiary of GAVL transferred its Higashimaru brand shrimp feed marketing business to Godrej Gold Coin Aquafeed Limited during the year. The Company reported a loss of Rs. 15.57 lac against a loss of Rs.140 lac for 2005-06. Godrej Properties Limited (GPL) : Recorded an increase in Total Income of 95% from Rs. 7046 lac in the previous year to Rs.13726 lac in the current year. The Profit after Tax increased by 210% from Rs. 1339 lac in the previous year to Rs. 4145 lac. GPL has declared an interim dividend of 419% as compared to 96% in the previous year. "Planet Godrej", the five 50-storeyed towers project located in close proximity to Mahalaxmi race course and Willingdon Club in Mumbai has won the prestigious Pinnacle Award 2006 awarded by Zee Business in the category of 'Best Upcoming Real Estate Project' in India. In addition to the two IT parks over 35 lac sq. ft. in Salt Lake area, Kolkata, the Company has started developing an IT park at Hyderabad

Annual Report 2006-2007

covering an area of approximately 60 lac sq. ft. It has also signed an agreement to develop a residential project on approx. 13 acres of land at Bangalore and 12 acres of land at Pune. The total area under development is over 2 crore sq. ft. at present. The Company has formed three new Private Limited Companies viz., Godrej Real Estate Private Limited, Godrej Developers Private Limited and Godrej Sea View Properties Private Limited to develop the projects at Hyderabad, Kolkata and Goa respectively. Godrej International Limited (GINL) : A worldwide trader of vegetable oils has posted turnover of US$ 61573658 as compared to US$ 50724030 in the previous year a rise of 21%. The net profit increased by 78% from US$ 382566 in the previous year to US$ 658135 in the current year. Godrej Global MidEast FZE (GGME) : A 100% subsidiary of GINL earned Net Profit of AED 356453 as compared to AED 191167 in the previous year registered a rise of 86%. Godrej Hicare Limited (GHL) : The Pest Management Services Company has recorded an excellent growth of 42% in its revenue. Total Income grew from Rs. 2112 lac in the previous year to Rs 2996 lac in the current year. The Company's Profit after Tax of Rs. 182 lac for the year as compared to Rs.104 lac in the previous year shows an impressive growth of 75%. The Company identified training as critical to its success and hence invested substantial resources behind this activity. In its never ending effort to achieve excellence in service delivery it invited eminent foreign consultants to train employees at all levels. The Company launched one of world's leading brands of Flying Insect Killing machines. This was in the last quarter of the current year and the Company expects good revenue in coming years from new customer acquisitions and deepening relationship with current ones. Godrej Global Solutions Ltd. (GGSL) : A back-office transaction Processing Services Company earned a total income of Rs.1405.26 lac as against Rs. 966.30 lac in the previous year, an increase of 45%. GGSL grew its operations at both Chennai and Navi Mumbai facility. During the year under review, GGSL added a number of new clients, ramped up operations for existing clients, achieved higher operational efficiencies there by achieving the revenue growth. During the year, GGSL facilities were awarded the most coveted Information Security Certification ISO 27001 and ISO 9001 certification. GGSL continued to focus on business segments like Healthcare claims processing, medical transcription, medical billing and document management services. Godrej Beverages & Foods Ltd. (GBFL) : GBFL markets juices and fruit drinks under brands Xs and Jumpin; soyamilk based drink under the Sofit brand; edible oil brands like Cooklite, packaged tea under the brand name Godrej Tea and confectionery under the Nutrine portfolio. The Nutrine's portfolio includes strong sub-brands like MahaLacto, Maha MahaLacto, Koko Naka, Milk Eclairs, Honey Fab, Aam Ras, Aasay, SuperStar and Gulkand. W.e.f. May 08, 2006, GBFL ceased to be the subsidiary of the Company. GBFL acquired 100% stake in Nutrine Confectionery Company Ltd. (NCCL) on 01/07/06, a major player in the confectionery business in India. During the year, GBFL earned a Total Income of Rs. 17795 lac as compared to Rs. 779 lac in the previous year recording a loss of Rs. 1879 lac compared to loss of Rs. 1717 lac in the previous year whereas NCCL earned a total income of Rs.10681 lac and profit of Rs. 321 lac for the period July 1, 2006 to March 31, 2007. Further, towards the end of the financial year, Hershey's, the largest North American chocolate manufacturing company signed an agreement to acquire 51% stake in GBFL. The agreement was signed on April 2, 2007, giving GBFL a strategic long term partner with global brands and international technology.

Godrej Sara Lee Limited (GSLL) : The company recorded a topline growth of 17% with strong profit growth of 23% during the year 06-07. The Company paid a total interim dividend of 313%. This year, Good Knight, the lead brand of the company underwent a major transformation in line with changing Indian consumers. Good Knight presented a new vibrant identity to consumers showcased in the form of packaging and advertising. Further, in an endeavour to provide superior solutions for consumers to protect their cherished happy moments everyday from mosquitoes, Good Knight launched a breakthrough innovation: Good Knight Advanced Active + System. Good Knight continued to be voted the most trusted Household care brand by Brand Equity - ET. HIT brand continues to be the fast growing Household Insecticide brand. This was enabled by the launch of a new innovation: HIT Seek n Kill for cockroaches backed by outstanding brand communication. The Company's foray into air care, Ambipur also fortified its pioneering status by expanding franchise into the Home Perfume arena through the launch of Ambipur Aerosols. Godrej Consumer Products Limited (GCPL) : GCPL continued to be a focused FMCG company. On a standalone basis, GCPL earned a Total Income of Rs. 76382 lac as compared to Rs. 66425 lac in the previous year. GCPL's Net Profit increased to Rs.13216 lac as compared to Rs.12120 lac in the previous year. GCPL declared dividends aggregating to 375% in the current year as compared to 350% in the previous year. During this year, the Company commenced commercial production at its new facilities at Katha (HP) and Sikkim. GCPL's 100% subsidiary Keyline Brands Limited (KBL) reported total earnings of Rs.16748 lac and a PBT of Rs.1987 lac for 2006-07. On September 01, 2006, GCPL completed the acquisition of the South African business of Rapidol, U.K. as well as its subsidiary Rapidol International. The Rapidol acquisition gives GCPL ownership of strong ethnic hair colour brands like 'INECTO' and 'SOFLENE' in ten countries. It also gives GCPL an opportunity to enhance its global presence through the Modern Trade Network and the ownership of customer listings of the INECTO and SOFLENE brands. During March 2007, GCPL entered into an agreement with SCA Hygiene Products AB, Sweden to form a 50:50 joint venture company known as Godrej SCA Hygiene Limited. Godrej SCA Hygiene Limited will manufacture and market paper based absorbent hygiene products, especially sanitary napkins and baby diapers in India, Nepal and Bhutan. On a consolidated basis, GCPL earned a total income of Rs. 95588 lac and Net Profit of Rs.14403 lac for the year ended March 31, 2007. GCPL has been ranked 6th in the Best Employers Study conducted by Hewitt Associates along with Economic Times. GCPL is the highest ranked FMCG Company in the survey. GCPL's Malanpur factory was presented by JIPM solutions, Japan with the Award for TPM Excellence, 1st Category for improvement in operational efficiencies with TPM initiatives. The factory also won the Platinum Award in India Manufacturing Excellence Awards (IMEA) by Frost & Sullivan in the Chemicals Category. FINANCIAL POSITION The financial position of your Company continues to be sound. The loan funds as at the end of the year is at Rs. 46770 lac as compared to Rs. 32714 lac as at the end of the previous year. Your Company continues 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 The Chemicals Division of your Company has manufacturing facilities at Vikhroli and Valia.

Godrej Industries Limited Valia : Existing Alpha Olefin Synthesis plant has been revamped to produce Alpha Olefin of higher chain lengths. Additional fractionation column has been installed in existing Fatty Acid Fractionation plant for the production of Lauric Acid as a feed stock for the Fatty Alcohol Synthesis plant making production of Lauryl Alcohol more commercial and economical. Balancing equipment has been installed to help in the manufacture of Fatty Alcohol derivatives. The EOU unit commissioned in March, 2006 has achieved its full operating capacity and contributed to the revenue growth from this division this year. The factory was awarded the "Energy Efficient Unit" award from CII. Vikhroli : Fatty Acid fractionation plant capacity was enhanced by establishing a new fractional distillation plant at Vikhroli factory and the plant was commissioned. Successful trials were conducted for the manufacture of 90% pure Erucic Acid . This plant has been built with heat recovery system to reduce the cost of conversion.

and April 11, 2007, 26,25,000 ESOPs have been granted to 46 employees of the Company and/or its subsidiaries based on their leadership responsibility and potentials. Disclosure in compliance with clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Schee) Guidelines, 1999 are setout in Annexure B to this report. GROUP FOR INTERSE TRANSFER OF SHARES 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. HUMAN RESOURCE DEVELOPMENT AND INDUSTRTIAL RELATIONS Your Company continues to take various initiatives for the development of its human resources. The Company maintained healthy and harmonious industrial relations at all levels. ENVIRONMENT AND SOCIAL CONCERN

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

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

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

Your Company continued "Rain water harvesting" initiatives undertaken during the previous year at its factory at Vikhroli 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. During the year 845 Sq. Metre of roof area has been covered and total roof area covered so far is 8500 Sq. Metre under the rain water harvesting initiative and 22000 M3 of water has been collected at Vikhroli factory and staff quarters. This process has resulted in saving water and consequently, the costs, thereof.

Vegoils Division : Post sale of Foods Division to Godrej Beverages & Foods Ltd. under the Slump Sale Agreement w.e.f. close of working hours on March 31, 2006, the Vegoils Division continued as contract processor of edible oils and vanspati. RESEARCH AND DEVELOPMENT During the year under review, amongst the achievements of R&D of your Company, the notable ones include the development of premium quality fatty acids from economy grade raw materials, a cost and energy saving process for high pressure hydrolysis of specific oils, manufacture of high value fractionated fatty acids for the polymer, oilfield and lubricant industries, manufacture of specialty surfactants for oral care and personal care products and value added derivatives of glycerine so as to enter certain niche markets. R&D efforts of your Company also focused on increasing our intellectual property by filing new patent applications. INFORMATION SYSTEMS GIL continues to leverage IT and implemented SAP across the Chemical business in the year 2006-07. The implementation was done in an aggressive time frame of 5 months across all functions and locations. The SAP implementation is expected to provide the much needed robust architecture required to sustain our e-CRM initiative and ensure faster and accurate information is made available to key decision makers. EMPLOYEE STOCK OPTION PLAN (ESOP) The shareholders at their Extraordinary General Meeting held on December 1, 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. Consequent to the subdivision of each equity share of Rs. 6/- into 6 equity shares of Re.1/- each, the number of options that can be granted stands increased from 15,00,000 to 90,00,000 convertible into 90,00,000 equity shares of Re.1/- each. During the financial year 2006-07 no employee was granted ESOP. However, on April 5, 2007

To prevent pollution to environment, efforts are made to convert waste from the factories into an environment-friendly product and then dispose of 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 factory at Vikhroli. More areas of wasteland have been converted into garden using water from ETP. The process of bio composting has been enhanced to reduce frequency of decomposition with use of enzyme. The Vikhroli factory focused on waste elimination and also continued energy conservation measures. Your Company has put up 5 windmills of 1.25 MW each 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's windmill project has been successfully registered for Clean Development Mechanism (CDM) benefits under the Kyoto Protocol of United Nations Framework on Climate Change Convention (UNFCCC). Your Company is thereby entitled to Certified Emission Reductions (CERs), popularly known as carbon credits, on the basis of units of power generated through windmills. CERs are tradable with countries and companies that have not met their Greenhouse gases reduction targets and thus have a ready market. CERs will continue to accrue on the power generated from the windmill project for a period of 10 years from the date of registration.

Annual Report 2006-2007

FIXED DEPOSITS

consistently, and such judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period.

Your Company has stopped accepting Fixed Deposits from the public. Public Deposits of an aggregate amount of Rs. 17.31 lac which matured, have been repaid during the year. DEPOSITORY SYSTEM

Your Company's equity shares are available for dematerialisation through National Securities Depository Limited & Central Depository Services (India) Limited. As of March 31, 2007, 99.50 % of the equity shares of your Company were held in demat form.

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.

SUB-DIVISION OF EQUITY SHARES In terms of the shareholders' approval in the previous Annual General Meeting the equity share of the Company each equity share of Rs. 6/has been subdivided into 6 Equity Shares of Re.1/- each w.e.f. September 1, 2006. DIRECTORS In accordance with Article 127 of the Articles of Association of the Company, Mr. A. B. Godrej, Mr. S. A. Ahmadullah, Mr. V. N. Gogate and Mr. F. P. Sarkari retire by rotation at the ensuing Annual General Meeting. They are eligible and offer themselves for re-appointment. AUDITORS You are requested to appoint Auditors for the current year and fix their remuneration. The retiring auditors, Kalyaniwalla & Mistry, Chartered Accountants, are eligible for re-appointment. A certificate from the Auditors has been received to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956. Pursuant to directions from the Department of Company Affairs, P.M. Nanabhoy & Co., Cost Accountants, have been appointed as Cost Auditors for the year 2006-07. They are required to submit their report to the Central Government within 180 days from the end of the accounting year. AUDIT COMMITTEE The Audit Committee which was constituted pursuant to the provisions of Section 292A of the Companies Act, 1956 and the listing agreement, has reviewed the Accounts for the year ended March 31, 2007. The members of the Audit Committee are Mr. F.P. Sarkari (Chairman), Mr.V. N. Gogate and Mr. S. A. Ahmadullah. 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 such accounting policies have been selected and applied

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 organisations, 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 25, 2007

Godrej Industries Limited ANNEXURE "A" FORMING PART OF THE DIRECTORSâ&#x20AC;&#x2122; REPORT MANAGEMENT DISCUSSION AND ANALYSIS CHEMICALS DIVISION INDUSTRY STRUCTURE AND DEVELOPMENTS The Indian economy maintained its growth momentum in F.Y. 2006-07 thanks to industrial resurgence, growth in international trade, and the improving physical infrastructure. However, rising inflation rate is an area of concern. The advance estimate of growth in GDP of 9.2% released by CSO for FY 06-07 has surpassed expectations. There has been a noticeable rise in the rate of investment in the economy. The index of industrial production (11.40%) and the steady and sustained growth trend indicates an upswing in the economy in the manufacturing sector. Positive investor sentiment, evidenced by rise in stock market indices will also induce investment inflow into the country and augers well for the economy. The overall performance of your Company has been satisfactory: Except the Chemicals division, most of the businesses improved their performance compared to 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 are as follows: Particulars Sales Total Income Profit Before Taxation Profit After Current Taxation Profit After Current & Deferred Taxation Earnings per Equity Share (Rupees)* Profitability ratios are as follows: PBDIT/Total Income PBT/Total Income PAT/Total Income Return on Capital Employed Return on Net Worth Basic EPS (Rs.)* The Financial risk ratios are as follows: Debt/Equity Interest coverage Segment Performance 1.

Segment Revenue Chemicals Vegoils Estate Finance & Investments Others Total Segment Results (PBIT) Chemicals Vegoils Estate Finance & Investments Others Total Less: Interest (Net) Less: Unallocated expenses (Net) Profit Before Tax Segment Capital Employed Chemicals Vegoils Estate Finance & Investments Others Unallocated Total

2006-07 65477 78291 7956 7895 7733 2.64

Rs. Lac 2005-06 74548 80281 5513 5431 4014 1.37

18.15% 10.16% 9.97% 14.58% 18.82% 2.64

13.22% 6.87% 8.87% 11.76% 12.31% 1.37

1.08 3.08 2006-07

0.94 2.94 (Rs. Lac) 2005-06

57187 4991 2562 12146 1405 78291

51777 21117 2283 3986 1118 80281

643 (417) 1757 12146 478 14606 (3831) (2819) 7956

4760 (341) 1472 4587 (112) 10366 (2849) (2004) 5513

35335 391 226 56258 3015 â&#x20AC;&#x201C; 95225

24448 3277 2331 40239 3413 (41) 73667

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

The Chemicals division operates in the oleo-chemical and surfactant industries. The division has a blend of domestic and international operations and continued its leadership position in the Indian market. The Export Oriented Unit (EOU) commissioned in March 2006 has achieved its full operating capacity and contributed to the revenue from this division. The Chemicals business was recognized as "Exporter of the Year" in the chemicals category of Internationals Trade Awards 200607 awarded by CNBC - TV18 and DHL. The products category-wise review follows: Fatty Alcohol Fatty alcohols accounted for 43% of sales revenue of the Chemicals division. Revenue grew by 11% and volume by 27% over previous year. Industry cyclicality, announcement of fresh capacities and temporary supply-demand mismatch have affected the product pricing and margins adversely. In spite of the aggressive competition there has been an increase in sales volume over previous year. Through effective customer relationship management and supply chain initiatives, the division could maintain its major share with some of the global companies in the international market. With the expansion of customer base, your Company has reached around 60 countries in the world through its exports. With the focused manufacturing and marketing strategies it is expected that revenues from this segment will improve further in the coming year. Fatty Acids The fatty acids portfolio comprising stearic acid, oleic acid, as well as, specialty fatty acids accounted for about 37% of the turnover of the division. Continuous cost reduction and market development initiatives have helped grow this category by about 5% in volume and 16% 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. New fractionation column which is capable of producing premium and specialty fatty acids was commissioned during the year and is expected to achieve full capacity utilisation by the end of 2007-08. Surfactants Surfactants contributed 10 % to the turnover of Chemicals division. Sales declined by 28% in value but increased by 2% in volume. The decline in value was due to higher proportion of processing vis-a-vis outright sales. Your Company is the pioneer, as well as market leader in the production and sales of Alpha Olefin Sulphonate (AOS) in India, a surfactant used in several well known shampoos and detergent brands in the country. Costs have increased due to a steep rise in Alpha Olefin prices, which is the raw material for AOS, affecting margins and off-take. To improve capacity utilisation, the division has started the production of value added sulphonated products. Glycerin Glycerin accounted for 7.5% of the turnover of this division. Revenues increased by 16% over last year, volumes by over 30%. Its competitive price allowed the division to take advantage of the opportunity of substituting other polyols with Glycerin. Other initiatives Your Company got Kosher Ceritification for oleo chemicals, which would allow catering to new market segments, thereby increasing the reach and revenue of the product category and also help in fetching premium pricing. Outlook The outlook for the coming year 2007-08 is mixed at this point in time.

Annual Report 2006-2007

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

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

Most of the new plants are set up to produce mid chain alcohols. GIL has a competitive advantage due to its unique strategy of offering higher chain alcohols in the market. Producers of petroleum based alcohols continue to face relatively high crude oil prices. It is expected that vegetable oil based alcohols will therefore, substitute petro-alcohols in some applications.

HUMAN RESOURCES, INDUSTRIAL RELATIONS Industrial Relations at all locations were cordial. The total number of persons employed in your Company as on March 31, 2007 was 1528. INTERNAL CONTROL SYSTEMS & THEIR ADEQUAECY

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

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 transaction are authorised, recorded and reported correctly.

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

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

VEGOILS DIVISION

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

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

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

Estate Management

INFORMATION SECURITY

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

Your Company recognised that Information being an important asset requires adequate protection.

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. 840 Lac for the year, recording a de-growth of 12% in value terms over the previous year, mainly on account of lower sales to government institutes compared to the previous year. The focus of the division was on reduction in Net Working Capital and sale of the Hematology Cell Counter. The Division extended its sales activities to SAARC countries particularly Nepal and Sri Lanka. FINANCE AND INVESTMENTS Dividend income for the year was significantly higher at Rs. 5781 lac (previous year Rs. 2275 lac) and profit on sale of investment was Rs. 4383 lac (previous year Rs. 2120 lac). During the year, your Company invested Rs. 6240 lac in Godrej Beverages & Foods Limited in its Compulsorily Convertible Preference Shares issue and was also allotted equity shares towards settlement of part consideration of Rs. 3000 lac for sale of Foods business in the last financial year. Your Company invested Rs. 3000 lac in the rights issue of Godrej Agrovet

Therefore "Information Security" has been established as a separate focused Corporate function and attached to Corporate Audit & Assurance Dept. As a part of this initiative, your Company has, with the help of a reputed consultant, formally documented Infosec Policies & Procedures. Chief Information Security Manager has been appointed and entrusted with the implementation of the above policies with a view to safeguard information assets by all concerned. COMPANY WIDE INITIATIVES Your Company has migrated from Mfg/Pro to SAP, a fully integrated and centralised ERP system which will help the Company in achieving better planning and control in terms of purchase, production, product mix, etc. It has robust a management information system, which will help management in taking faster and informed decisions. ICRA Limited (ICRA), one of the leading and reputed credit rating company, has during the year assigned your Company an A1+ rating for its commercial paper programme. This rating is the highest-credit-quality rating assigned by ICRA to short term debt instruments. This rating represents the lowest credit risk in the short term and reflects your Company's relatively stronger credit quality. 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 customised 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

Godrej Industries Limited which are more than 10 years old. The Vegoils division will continue to act as a third party processor in view of good facilities and proximity to the large Mumbai market. Threat could be increased cost of processing in view of rising fuel oil costs and large unutilized refining capacities in the country resulting in uncompetitive pricing. Estate Management business has a potential to increase revenue by giving space on leave and license by optimum re-sizing of the existing operational areas. The factors that can aid further revenue growth include assured power supply, upcoming infrastructural facilities like metro rail and better connectivity that reduces travelling time. RISKS AND CONCERNS Your Company had undertaken a comprehensive review of its risk management process last year 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 arriving at the desired counter measures keeping in mind the risk appetite of the organization. The Risk Committee has periodically reviewed the risks in the various businesses and recommended appropriate risk mitigating actions. The commodity based businesses are likely to be affected by vagaries of the weather, demand for edible oil, oilseed production, etc. The increase in bio-diesel manufacturing capacity is expected to impact vegetable

oil prices. The business is exposed to commodity price risks relating to raw materials which account for the largest portion of the costs of both the Chemicals and Vegoils 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 chemicals 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.

Annual Report 2006-2007

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

Nil

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

Nil

Options lapsed

Nil

Variation of terms of options

Nil

Money realized by exercise of options

Nil

Total number of options in force

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

Employee wise details of options granted to: i)

senior managerial personnel

ii)

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

Nil

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

identified employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant

Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of

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

option calculated in accordance with Accounting Standard (AS) 20

‘Earnings Per Share’. l.

Where the company has calculated the employee compensation cost using the The company has calculated the employee compensation intrinsic value of the stock options, the difference between the employee

cost using the intrinsic value of stock options. Had the fair

compensation cost so computed and the employee compensation cost that shall

value method been used, in respect of stock options granted

have been recognized if it had used the fair value of the options, shall be disclosed.

the employee compensation cost would have been higher

The impact of this difference on profits and on EPS of the company shall

by Rs. 2.04 crore, Profit after tax lower by Rs. 2.04 crore

also be disclosed.

and basic EPS would have been lower by Rs. 0.07

Weighted-average exercise prices and weighted-average fair values of

Exercise price Rs. 65.39 plus interest as mentioned in

options shall be disclosed separately for options whose exercise price either

pricing formula

equals or exceeds or is less than the market price of the stock.

Fair Value Rs. 29.33

A description of the method and significant assumptions used during the year

The fair value of the options granted on 14th Feb 2006 has

to estimate the fair values of options, including the following weighted-average

been calculated using Black–Scholes Options pricing

information:

formula and the significant assumptions made in this regard are as follows:

risk-free interest rate

7.11%

ii)

expected life

4 years

iii)

expected volatility

65%

iv)

expected dividends

1.53%

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

Re. 1 per share Rs. 65.39 (Rs. 392.35 for Rs. 6/- face value)

Godrej Industries Limited 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 & Restrictive Trade Practices Act, 1969) for the purpose of availing exemption from applicability of the provisions of regulation 10 to 12 of Securities & Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulation, 1997 ("the said Regulations"), provided 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 30

Aadhaar Retailing Ltd. Bahar Agrochem and Feeds Pvt. Ltd. Cartini India Ltd. Ensemble Holdings and Finance Ltd. Girikandra Holiday Homes and Resorts Ltd. Godrej (Malaysia) Sdn Bhd Godrej (Singapore) Pte Ltd. Godrej (Vietnam) Co. Ltd. Godrej Agrovet Ltd. Godrej & Boyce Mfg. Company Ltd. Godrej Aquafeed Ltd. Godrej Beverages & Foods Ltd. Godrej Commodities Ltd. Godrej Consumer Products Ltd. Godrej Developers Pvt. Ltd. Godrej Efacec Automation & Robotics Ltd. Godrej Global Mid East FZE Godrej Global Solutions (Cyprus) Ltd. Godrej Global Solutions Ltd. Godrej Global Solutions, Inc. Godrej Hicare Ltd. Godrej Holdings Pvt. Ltd. Godrej Infotech Ltd. Godrej International Ltd. Godrej Investments Pvt. Ltd. Godrej Oil Palm Ltd. Godrej Properties Ltd. Godrej Real Estate Pvt. Ltd. Godrej Realty Private Ltd. Godrej Sea View Properties Pvt. Ltd.

31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60

Godrej Upstream Ltd. Godrej Waterside Properties Pvt. Ltd. Golden Feed Products Ltd. Goldmohur Foods & Feeds Ltd. J T Dragon Pte Ltd. Krithika Agro Farm Chemicals & Engineering Industries Pvt. Ltd. Lawkim Ltd. Mercury Mfg. Co. Ltd. Prashant Metal Forming Industries Pvt. Ltd. Swadeshi Detergents Ltd. Vora Soaps Ltd. Mr. A B Godrej Mrs. Parmeshwar A Godrej Ms. Nisa A Godrej Mr. Pirojsha A Godrej Mrs. Tanya A Dubash Mr. J 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 I. (A) Energy Conservation measures undertaken:

Installation of Variable frequency drives for process pumps in plants.

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

Installation of CFL/PL lamps.

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

Upgradation of instrumentation in FSP and FADP to improve through put and quality of product.

Conversion of Medium Pressure Boilers to run on Natural Gas as feed instead of Liquid fuel.

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

Implementation of Condensate recovery system in tank farm

Installation of two energy efficient motors in high speed machines run on variable frequency drives.

Installation of 6 variable frequency drives in AOS/SLS dryer plant and its tanks.

Installations of suitably designed fatty acid pump to save on power consumed by two smaller pumps.

(B) Proposed energy conservation measures

Regular monitoring of stacks to improve boiler efficiency.

Installation of energy efficient metal halide fittings in street lighting.

Installation of energy efficient motors in plants.

Annual Report 2006-2007

Installation of power factor controller to improve power factor.

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

Installation of more efficient alcohol fractionation column in EOU to save on energy consumption on production.

Saving in energy costs during the period under consideration. 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. Power and Fuel consumption

Purchased

This Year Previous Year 350.92

198.78

1928.02

1037.53

5.49

5.22

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

Own generated through D.G. Sets 1.73

19.83

Cost (Rs. in lac)

32.71

131.65

Rate per unit (Rs.)

18.91

6.64

Units (kWh in lac)

iii) Own generated through Steam Turbine Generator Co-generation 314.06

277.91

1241.21

988.29

3.95

3.56

3191.44

4510.42

501.26

802.68

15.71

17.80

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)

175.30

144.30

Total Amount (Rs. in lac)

1618.00

1194.60

9.23

8.28

677.00

650.09

Rate per unit (Rs. per SM3) Pitches Total Quantity (MT)

85.35

44.67

12607.41

6870.67

Total Cost (Rs. in lac) Rate per unit (Rs. per MT) b)

Consumption per unit of production Natural Gas 3

(NM /MT)

Electricity

Furnace Oil

(kWh/MT)

(Litre/MT)

2006-07

2005-06

2006-07

Fatty Acid

58.73

77.78

Fatty Alcohol

79.21

94.77

Pitches

2005-06

2006-07

2005-06

2006-07 2005-06

105.58

93.41

13.18

10.04

9.34

8.79

530.34

408.29

2.78

6.86

–

1.14

Alpha Olefin Sulphonate

24.96

49.33

116.40

104.61

3.05

8.99

1.03

Fruit Juice/ Pulp

–

149.92

–

36.20

–

Oils/Vanaspati

–

182.74

182.49

56.08

77.52

–

6.64

257.57

458.40

714.33

588.72

58.14

53.01

24.46

25.85

Glycerin

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

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

Technology Absorption, Adaptation and Innovation

a. Oils and Fatty Acids b. Fatty Alcohols c. Surfactants d. Glycerin e. Product Applications f. Fruit Juices and Soy Milk 2. Benefits derived as a result of the above R&D a. Premium quality fatty acids from economy grade raw materials. b. A cost and energy saving process for high pressure hydrolysis of specific oils. c. Manufacture of high value pure cut fatty acids, specifically for the polymer, oilfield and lubricant industries. d. Manufacture of specialty surfactants for oral care and personal care products. e. Value added derivatives of glycerin so as to enter certain niche markets. f. New mixed active surfactant blends for the detergent industry. g. Four new process patent applications filed. 3. Future Plan of Action a. Expand Odour Profiling capabilities by installing our own in-house analytical facilities for the same. b. Working on manufacture of premium quality fatty acids and their derivatives from Jatropha Oil. c. Developing processes to utilize glycerin derived from Jatropha Oil. d. Specialty chemicals used in the personal care formulations - foam boosters, conditioning agents and co-surfactants. No technology has been imported during the year. 4. Expenditure on R&D This Year Previous Year Rs. lac Rs. lac (a) Capital Nil Nil (b) Recurring 139.38 139.39 (c) Total 139.38 139.39 (d) Total R & D expenditure as a percentage of total sales turnover 0.21% 0.19% Foreign Exchange earnings and outgo: The Chemicals Division's exports were Rs. 22043 lac in the current year (including deemed exports of Rs. 3012 lac) as compared to Rs. 17561 lac in the previous year (including deemed exports Rs. 2889 lac). The Company continues to export refined glycerin, fatty alcohol and other chemicals to over 50 countries including U.S.A., U.A.E., Japan, South Africa, Germany, U.K., France, Malaysia, China, Australia, Mexico, Singapore and Sri Lanka. This Year Previous Year Rs. lac Rs. lac Foreign exchange used

28239

25714

Foreign exchange earned

22297

15150

Godrej Industries Limited REPORT ON CORPORATE GOVERNANCE

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

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, if material, Non-compliance of any regulatory, statutory nature or listing requirements as well as shareholder services such as nonpayment of dividend and delays in share transfer. The Board of GIL is presented with all information under the above heads, whenever applicable. These are submitted either as part of the agenda papers well in advance of the Board meetings or are tabled in the course of the Board meetings.

THE COMPANY'S PHILOSOPHY 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. The Company 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. THE GOVERNANCE STRUCTURE 2. BOARD OF DIRECTORS a) Board Structure The Board of Directors of the Company comprises thirteen Directors, which include one Managing Director and four Whole-time Executive Directors. The remaining eight are 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 at least once in a quarter to consider amongst other businesses, quarterly performance of the Company and financial results. To enable the Board to discharge its responsibilities effectively and take informed decisions, necessary information is made available to the Board. During the year four Board meetings were held on May 26, 2006, July 24, 2006, October 30, 2006, and January 30, 2007. The details are given in Table 1. Table 1: Details about GIL’s Board of Directors & meetings attended by the Directors during the year Name of Director

Category Whether Promoter or not

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 ChairmMemanship bership

Promoter Chairman – Non-Executive Promoter Non-Executive N.B. Godrej Promoter Managing Director S.A. Ahmadullah Non-Executive Independent V.M. Crishna Promoter Non-Executive K.K. Dastur Non-Executive Independent V.N. Gogate Non-Executive Independent K.N. Petigara Non-Executive Independent F.P. Sarkari Non-Executive Independent V.F. Banaji Whole-time T.A. Dubash Promoter Whole-time M. Eipe Whole-time M.P. Pusalkar Whole-time A.B. Godrej J.N. Godrej

4 4

4 3

Yes Yes

14(3) 15 (5)

3 2

1 4

Yes

14(3)

Yes

3(1)

Yes

8(2)

–

Yes

–

Yes

1(1)

–

Yes

6(1)

–

4 4

Yes Yes

3(1) 1(1)

3 1

2 1

4 4 4

3 4 4

Yes Yes Yes

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

– – 1

1 1 3

Notes :

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

Information supplied to the Board

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, 2007 Name of Director A. B. Godrej

Relationship with Directors

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

Sitting fees

Commission on profits

Salary Perquisites Provident Fund

Total

170000

Nil

170000

Nil Nil 105000 20000 80000 105000 85000 100000 Nil Nil Nil Nil

Nil Nil Nil 7350000 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil 6096270 Nil 4893000 Nil 5582585 Nil 4223232

Nil 640000 Nil Nil Nil Nil Nil Nil 448752 159657 399620 252592

Nil 576000 Nil Nil Nil Nil Nil Nil 410400 367200 417600 247680

Nil 8566000 105000 20000 80000 105000 85000 100000 6955422 5419857 6399805 4723504

Annual Report 2006-2007

Reviewing with the management, the quarterly financial statements before submission to the board for approval.

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

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

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

Discussion with internal auditors any significant findings and follow up thereon.

Name of Non-Executive Director

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.

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.

COMPENSATION COMMITTEE

Notes : Salary to Mr. N.B. Godrej, Mr. V. F. Banaji, Ms. T.A. Dubash, Mr. M. Eipe and Mr. M.P. Pusalkar includes a performance linked variable remuneration of Rs.150000/-, Rs. 700000/-, Rs.150000/-, Rs.110000 and Rs.360000/- respectively for the year ended March 31, 2007 payable in 2007-08. The service contracts of the Whole-time Directors are for a period of three years with a notice period of three months.

Shares held as on March 31, 2007

A.B. Godrej* J.N. Godrej* F.P. Sarkari S.A. Ahmadullah V.N. Gogate K.K. Dastur

936226 3221472 19590 6000 1878 2106

Dividend paid during the year (Rupees) Nil Nil 16325 5000 1565 1755

* Shares held as second holder.

Committees of the Board 3.

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 i.e. on May 26, 2006, July 24, 2006, October 30, 2006 and January 30, 2007. Table 4 gives the attendance record.

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.

No. of meetings held

Meetings attended

Mr. F.P. Sarkari

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, 2007, the committee met on May 26, 2006. The attendance details are given in Table 5.

Mr. S.A. Ahmadullah

Table 5: Attendance record of Compensation Committee members

Mr. V.N. Gogate

Name of Director

Table 4: Attendance record of audit committee members Name of Director

No. of meetings held

Meetings attended

The Audit Committee of GIL performs the following functions :

Mr. S.A. Ahmadullah

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.

Mr. V.N. Gogate

Mr. K.N. Petigara

Mr. N.B. Godrej

â&#x20AC;&#x201C;

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

Mr. S.K. Mr. S.K. Bhatt, Executive Vice-President (Corporate Services) & Company Secretary acts as the secretary to the Committee.

Reviewing with the management the annual financial statements before submission to the board for approval, with particular reference to

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, 11meetings of the Committee were held. Mr. S.K. Bhatt, Executive Vice-President (Corporate Services) & Company Secretary acts as secretary to the Committee.

Matters required to be included in the Director's Responsibility Statement to be included in the Board's report in terms of clause (2AA) of Section 217 of the Companies Act, 1956. Changes, if any, in accounting policies and practices and reasons for the same. Major accounting entries involving estimates based on the exercise of judgment by management. Significant adjustments made in the financial statements arising out of audit findings. Compliance with listing and other legal requirements relating to financial statements. Disclosure of any related party transactions. Any Qualifications in the draft audit report.

Godrej Industries Limited Name and designation of Compliance Officer

Particulars

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

III. IV. (A) (B) (C)

Number of complaints for the year ended March 31, 2007 Complaints outstanding as on April 1, 2006

Nil

Complaints received during the year ended March 31, 2007

Complaints resolved during the year ended March 31, 2007

Complaints outstanding as on March 31, 2007

Nil

(D) (E) (F) V. VI. VII.

There are no pending share transfers as on March 31, 2007. 6.

MANAGEMENT a)

Management discussion and analysis

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.

Materially significant related party transactions that may have potential conflict of interests of Company at large During the year 2006-07, there were no materially significant related party transactions, i.e. transactions of the Company of material nature, with its promoters, the Directors or the management, their subsidiaries or relatives, etc. that may have potential conflict with the interests of the Company at large.

ii)

Whistle Blower Policy With a view to establish a mechanism for protecting the employees reporting unethical behaviour, frauds, violation of Company's Code of Conduct, the Board of Directors has adopted a Whistle Blower Policy. During the year 2006-07, no personnel has been denied access to the Audit Committee. The Company is committed to creating and maintaining an atmosphere in which employees can work together, without fear of sexual harassment, exploitation or intimidation. Every employee is made aware that the Company is strongly opposed to sexual harassment and that such behaviour is prohibited both by law and by the Godrej group. To redress complaints of sexual harassment, a Complaints Committee has been formed which is headed by Ms. T.A. Dubash, Executive Director & President (Marketing). Members of the Committee include, among others, a representative from an NGO familiar with the issue of sexual harassment. Clause of Listing Agreement

I . Board of Directors 49 I (A) Composition of Board 49 (IA) (B) Non-executive Directorsâ&#x20AC;&#x2122; compensation & disclosures 49 (IB) (C) Other provisions as to Board and Committees 49 (IC) (D) Code of Conduct 49 (ID) II. Audit Committee 49 (II) (A) Qualified & Independent Audit Committee 49 (IIA) (B) Meeting of Audit Committee 49 (IIB) (C) Powers of Audit Committee 49 (IIC) (D) Role of Audit Committee 49 II(D) (E) Review of Information by Audit Committee 49 (IIE)

GENERAL BODY MEETINGS i)

Details of last three AGMs

Year

Venue

Date

2003-04

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

July 26, 2004 4.00 P.M.

2004-05

- do -

July 26, 2005 4.00 P.M.

2005-06

-do-

July 24, 2006 4.30 P.M.

ii)

Yes Yes Yes Yes Yes

Time

Details of Special Resolutions Passed in previous three Annual General Meetings. Number of Special Resolution Passed

Details of Special Resolution Passed

July 26, 2004

1. Approval for the reappointment and remuneration of Mr. N.B. Godrej as a Managing Director of the Company. 2. Approval for the appointment of Mr. Pirojsha A. Godrej as a employee of the Company. 3. Authorised to further invest upto Rs. Fifty Crore only in addition to amount already invested, in securities of Godrej Consumer Products Ltd. 4. Authorised to further invest upto Rs. Two Crore only in addition to amount already invested, in securities of Godrej Agrovet Ltd. 5. Authorised to further invest upto Rs. Two Crore only in addition to amount already invested, in securities of Godrej Properties & Investments Ltd. 6. Authorised to invest upto Rs. Four Core and Fifty Lac only in securities of Avestha Gengraine Technologies Pvt. Ltd. 7. Authorised to invest upto US$ 300,000 only in securities of Ingenero (Mauritius) Ltd.

July 26, 2005

1. Authorised to further invest upto Rs. Twenty crore only in addition to amount already invested, in securities of Godrej Consumer Products Ltd. 2. Authorised to further invest upto Rs. Five Crore only in addition to amount already invested, in securities of Avestha Gengraine Technologies Pvt. Ltd. 3. Authorised to further invest upto Rs. Twenty Crore only in addition to amount already invested, in securities of CBay Systems Limited.

Compliance Status Yes / No Yes Yes Yes Yes

49 (IV E) 49 (IV F) 49 (IV G) 49 (V) 49 (VI) 49 (VII)

Yes Yes Not Applicable at present Yes Yes Yes Yes Yes Yes

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, 2007, is annexed to the Corporate Governance Report.

iv) Details of compliance with mandatory requirement Particulars

Yes

Details of Non-compliance

Date of AGM

iii) Policy to Prevent Sexual Harassment at the Workplace

49 (III) 49 (IV) 49 (IV A) 49 (IV C) 49 (IV D)

vi) Declaration by the Managing Director

DISCLOSURE i)

Compliance Status Yes / No

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.

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

Subsidiary Companies Disclosures Basis of related party transactions Board disclosures Proceeds from public issues, rights issues, preferential issues etc. Remuneration of Directors Management Shareholders CEO/CFO Certification Report on Corporate Governance Compliance

Clause of Listing Agreement

Annual Report 2006-2007 July 24, 2006

iii) 6

1. Approval for the reappointment and remuneration payable to Ms. T.A. Dubash as Whole-time Director of the Company. 2. Approval for the reappointment and remuneration payable to Mr. V. F. Banaji as Whole-time Director of the Company. 3. Approval for the reappointment and remuneration payable to Mr. M. Eipe as Whole-time Director of the Company. 4. Approval for the remuneration payable to Mr. M.P. Pusalkar as Whole-time Director of the Company. 5. Approval for revision in remuneration payable to Mr. Pirojsha A. Godrej. 6. Amendment to the Articles Association of the Company pursuant to increase in Authorised Share Capital. 7. Approval of sub-division of equity shares of the Company.

Details of Special Resolutions Passed in the Extraordinary General Meetings held in the last three years

Date of EGM

Number of Special Resolution Passed

December 1, 2005 5

Details of Special Resolution Passed

1. Approval given for extending Employees Stock Option to Eligible Employees of the Company 2. Approval given for extending Employees Stock Option to Eligible Employees of the Subsidiary Companies 3. Approval given for investment in Godrej Consumer Products Ltd. u/s 372A of the Companies Act, 1956. 4. Approval given for investment in Boston Analytics LLC u/s 372A of the Companies Act, 1956. 5. Approval given for investment in Verseon LLC, USA u/s 372A of the Companies Act, 1956.

iv) Postal Ballot During the year, pursuant to the provisions of Section 192A of the Companies Act, 1956 read with the Companies (Passing of the Resolution by Postal Ballot) Rules 2001, certain resolutions were passed by shareholders by postal ballot. The Notices of postal ballot were mailed to all shareholders alongwith 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. No.

Date of Nature of announcement of resolution results

Item

Total no. of votes polled

March 29, 2007

Special

To invest in securities of and/or place inter corporate 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 and/or investment in Hyca Technologies Pvt. Ltd. under Section 372A of the Companies Act, 1956, upto a sum of Rs. 2 crore.

1473

March 29,2007

Special

To invest in securities of 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 and/or investment in CBay Infotech Ventures Pvt. Ltd. under Section 372A of the Companies Act, 1956, upto a sum of Rs. 2 crore.

October 5, 2006

Special

October 5, 2006

Special

No. of votes in favour

No. of votes against

99.97

0.01

1473

99.97

0.01

0.02

To invest in securities of and/or place inter corporate 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 and/or investment in Godrej Agrovet Ltd., a Subsidiary of the Company, under Section 372A of the Companies Act, 1956, in addition to the existing sanctioned limits, a sum of Rs. 30 crore.

1439

99.96

0.01

0.03

To revise the terms of appointment and remuneration of Ms. Nisa A. Godrej

1439

99.94

0.02

0.04

Procedure adopted for Postal Ballot

No. of invalid votes

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

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

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

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

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

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

(f)

Scrutinizer gives his report to the Chairman.

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

Godrej Industries Limited 9.

SHAREHOLDERS AND MEANS OF COMMUNICATION a)

According to the Articles of Association of GIL, at every annual general meeting of the Company one-third of the Directors are liable to retire by rotation. Thus, Mr. A.B. Godrej, Mr. S.A. Ahmadullah, Mr. V.N. Gogate and Mr. F.P. Sarkari shall retire at this Annual General Meeting of the Company and being eligible, offer themselves for re-election. Information about the Directors who are being appointed/ reappointed is given as an annexure to the Notice of the AGM. b)

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

Disclosures regarding appointment or re-appointment of Directors c)

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. d)

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.

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

Investor grievances

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

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, 2007. N.B. Godrej Mumbai, May 25, 2007

Managing Director

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, 2007, 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 25, 2007

V.R. Mehta Partner Membership No. 32083

Annual Report 2006-2007

SHAREHOLDERS’ INFORMATION i)

Annual General Meeting Date : Time : Venue :

ii)

July 27, 2007 4.30 P.M. Y.B. Chavan Centre, Gen. Jagannathrao Bhonsle Marg, Nariman Point, Mumbai- 400 021.

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

October 30, 2006

Half year

●

January 30, 2007

Third quarter

●

May 25, 2007

Fourth quarter and annual

iii) Record Date/Book Closure A dividend of Re. 1/- per share of Re. 1/- each has been recommended by the Board of Directors of the Company. For payment of dividend, the book closure is from July 20, 2007 to July 27, 2007 (both days inclusive). iv) Listing information The Company's equity shares are listed on The Bombay Stock Exchange Ltd., The National Stock Exchange of India Ltd. Name of the Stock Exchange

Stock code

The Bombay Stock Exchange Ltd. (BSE)

500164

National Stock Exchange of India Ltd. (NSE)

GODREJIND

The ISIN Number of GIL on both NSDL and CDSL is

INE233A01027

Table 2: Monthly high and low prices and trading volumes of equity shares of GIL at NSE for the year ended March 31, 2007 Month April-06 May -06 June -06 July -06 August-06 September - 06 October-06 November-06 December - 06 January - 07 February -07 March-07

High (Rs.)

Low (Rs.)

Volume traded (No. of Shares)

760.95 905.00 643.90 520.95 661.50 103.50 159.00 201.00 193.75 185.55 189.50 171.00

481.05 621.55 352.45 380.00 431.00 87.60 91.00 145.10 155.95 159.50 155.00 140.00

544858 618117 392437 199003 445348 1469532 6392159 9814240 5880801 2026687 3035304 1394667

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 2006-2007 vi) Distribution of shareholding Tables 3 and 4 give the distribution pattern of shareholding of GIL by size class and ownership respectively as on March 31, 2007.

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. v)

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, 2007. 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, 2007 Month

High (Rs.)

Low (Rs.)

Volume traded (No. of Shares)

April 06

757.20

476.60

324773

May 06

908.90

619.80

414127

June 06

642.90

356.10

294811

July 06

520.00

381.70

156807

August 06

591.40

579.60

201884

1 - 500

15985

75.49

2248753

708287

501 - 1000

2615

12.35

1974120

0.68

1001 - 2000

1100

5.20

1605171

0.55

2001 - 3000

446

2.11

1172922

0.40

3001 - 4000

245

1.16

830897

0.28 0.16

September 06

103.00

87.50

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

Number of Shareholders Number of shareholders % shares held

Shareholding % 0.77

October 06

158.85

90.90

3911833

November 06

200.00

145.15

10091299

December 06

193.40

156.00

4898771

4001 - 5000

102

0.48

470454

January 07

185.45

156.00

1604580

5001 - 10000

357

1.69

2428490

0.83

February 07

189.00

150.50

7552537

10001 & above

324

1.53 281120845

96.32

March 07

171.70

138.00

1203887

21174

100.00 291851652

100.00

Total

Note :

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

Godrej Industries Limited Table 4 : Distribution of shareholding by ownership as on March 31, 2007 Category (as being reported to stock exchanges)

Shares held (Nos.)

% of holding

250826144

85.94

–

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

vii) Shares held in physical and dematerialised form As on March 31, 2007, 99.50 per cent of GIL's shares were held in dematerialised form and the remaining 0.50 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 3708

Institutional investors

17466

1451045

290400607

Total Folios

Total Shares

21174

291851652

1427610

0.49

Banks, financial institutions & insurance companies

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

435574

0.15

Foreign institutional investors

8794884

3.01

GIL does not have any outstanding GDRs/ADRs/Warrants/Convertible Instruments.

6566226

2.25

23151751

7.94

Mutual funds & UTI

Others Private corporate bodies Indian public NRI/OCBs Total

649463

0.22

291851652

100.00

ix) Share Transfer Share transfers and related operations for GIL are conducted by Computech Sharecap Limited, which is registered with the SEBI as a Category 1 Registrar. Share transfer is normally effected within the maximum period of 30 days from the date of receipt of all the required documents. x) Investor correspondence should be addressed to: Computech Sharecap Limited 147, M. G. Road, Opp. Jehangir Art Gallery, Mumbai 400001. Tel: 022-22635000-01-02 Email: helpdesk@computechsharecap.com Fax: 022-22635003

GODREJ INDUSTRIES LIMITED

ACCOUNTS 2006-2007

NOTES

Annual Report 2006-2007

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, 2007 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. 2. We conducted our audit in accordance with the Auditing Standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditor's Report) Order, 2003, 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.

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

e) Reference is invited to Note 8 (b) of Schedule 22Notes to Accounts, regarding the recoverability of advances given to certain individuals amounting to Rs. 1033 lac being contingent upon the transfer and/ or disposal of the shares pledged against the loan. The said shares were lodged for transfer which application was rejected and the Company has preferred an appeal to the Company Law Board. The investee Company has in the mean while moved the Bombay High Court and the matter is awaiting hearing. The impact thereof on the profit for the year could not be ascertained. f)

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

in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2007;

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

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

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.

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

b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of such books and proper returns adequate for the 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.

5. On the basis of the written representations received from the directors of the Company as on March 31, 2007 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, 2007 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

c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account and with the audited returns from the branches. d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred

V.R. Mehta Partner M. No.: 32083 Mumbai, May 25, 2007

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 31st March, 2007. 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.

business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit no major weakness has been noticed in the internal controls. 5)

(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 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 have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

(c) In our opinion and according to the information and explanations given to us, a substantial part of the fixed assets has not been disposed of by the Company during the year. 2)

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

In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public during the year and 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 unclaimed deposits.

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 and edible oils 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, 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.

(b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between physical inventories and book records were not material in relation to the operations of the Company and the same have been properly dealt with in the books of account. 3)

(a) The Company had granted unsecured loans to three companies listed in the register maintained under Section 301 of the Companies Act, 1956, of which one loan of Rs. 35 lakhs was outstanding at the year end. The maximum amount of loans granted to the said companies during the year was Rs. 4003 lakhs. (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 loan outstanding at the year end is at call and has not been recalled during the year. The companies are generally regular in payment of interest. (d) There are no overdue amounts exceeding Rs. one lakh. (e) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

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

(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 2006-2007

Name of statute

Rs. in lac.

Period to which amount relates

Forum where dispute is pending

Central Excise

2.90 16.14 45.21 695.04 724.53

2002-03, 2004-05, 2006-07 1996-97, 2003-04, 2004-05 1982-83 and 1999-00 1978-79, 1976-85, 1995-96 1982-95, 1993-97, 2002-03

Assistant Commissioner Commissioner of Excise CESTAT High Court The Supreme Court

Customs Duty

30.05 112.08 25.44 679.98

1978-83, 2003-04 1987-93 1978-79, 1978-84, 2003-04 1978-93, 1991-92

Assistant Commissioner Commissioner CESTAT High Court

1997-98, 1996-00, 2000-02, 1990-92, 2003-04

Sales Tax Officer Assistant Commissioner Commissioner Tribunal High Court

Sales Tax

Others Stamp Duty Municipal Taxes Entry Tax

Total

148.41 78.77 320.39 127.10 1063.29

182.23 909.20 4.26 23.56 1.03

2002-06, 2004-05 2003-05, 2006-07 2002-03 1994-96, 2003-04

2000 1984-2002 1997-99 1997-2003 2000-01

Controlling Revenue Authority High Court Dy. Commissioner Tribunal Supreme Court

5189.62

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.

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 for the shares referred to in note 8(b) which have not been transferred in the name of the Company.

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 any fraud by the Company has been noticed or reported during the year.

13)

14)

15)

16)

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. 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.

have been applied for the purpose for which the loans were obtained.

For and on behalf of Kalyaniwalla & Mistry Chartered Accountants

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

V.R. Mehta Partner M. No.: 32083 Mumbai, May 25, 2007

Godrej Industries Limited BALANCE SHEET AS AT MARCH 31, 2007 Schedule SOURCES OF FUNDS 1. Shareholdersâ&#x20AC;&#x2122; Funds (a) Share capital (b) Reserves & surplus

1 2

Rs. lac

This Year Rs. lac

2918.52 38142.56

2918.52 34216.68 41061.08

2. Loan Funds (a) Secured loans (b) Unsecured loans

3 4

33092.48 13677.13

3. Deferred Tax Liability TOTAL APPLICATION OF FUNDS 4. Fixed Assets (a) Gross block (b) Less : Depreciation/Impairment

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

24910.89 7803.24 46769.61 3980.00

32714.13 3818.00

91810.69

73667.33

54257.93 27302.62

53640.20 25568.23

26955.31 1749.02

28071.97 522.38

6 7 8 9 10

11 12

28704.33

28594.35

48566.78

37134.67

15515.17 9253.24 2536.34 9389.99

11892.38 5806.56 1259.63 7688.73

36694.74

26647.30

18053.18 5704.12

15726.32 5202.03

23757.27

20928.35

Net Current Assets 7. Miscellaneous Expenditure (To the extent not written off or adjusted)

37135.20

(c) Net block (d) Capital work-in-progress 5. Investments 6. Current Assets, Loans and Advances (a) Inventories (b) Sundry debtors (c) Cash and bank balances (d) Loans and advances

Previous Year Rs. lac

12937.47

5718.95

1602.11

2219.36

91810.69

73667.33

TOTAL Significant Accounting Policies

Notes to Accounts

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 25, 2007

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 2006-2007

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

Schedule INCOME Turnover (gross) (refer note 15) 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. 160.45 lac, Previous year Rs. 168.43 lac)

15 16 17 18

This Year Rs. lac

Previous Year Rs. lac

71426.21 5948.61

80054.20 5505.94

65477.60 12813.62

74548.26 5733.04

78291.22

80281.30

46272.06 20683.52 (2877.60) 3830.78 2426.36

50228.83 20627.41 (1196.08) 2848.85 2259.43

70335.12

74768.44

7956.10

5512.86

Profit before Taxation and Extraordinary Items Profit from continuing operations before tax Provision for Income tax – current tax – MAT credit entitlement – fringe benefit tax – deferred tax Profit from continuing operations after tax Loss from discontinuing operations before tax Provision for Income tax – current tax – fringe benefit tax – deferred tax

7956.10

5813.39

(219.00) 219.00 (60.70) (162.00)

— — (67.44) (1479.00) 4266.95 (300.53)

7733.40

— — — —

— (14.24) 62.00 —

(252.77)

7733.40 94.75 (22.07) 7806.08 23709.59

4014.18 3105.80 (7.56) 7112.42 20081.61

31515.67

27194.03

2918.52 496.00 780.61 27320.54 31515.67

2432.10 341.10 711.24 23709.59 27194.03

2.64 2.67

1.37 2.44

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 21 Notes to Accounts 22 The Schedules referred to above form an integral part of the Profit and Loss Account. As per our Report attached

For and on behalf of Kalyaniwalla & Mistry Chartered Accountants

V.R. Mehta Partner Mumbai, May 25, 2007

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, 2007 This Year Rs. lac A.

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 Interest income Interest expense Voluntary retirement compensation paid Deferred expenditure written off Provision for diminution in value of investments written back Provision for doubtful debts and sundry balances written back (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 (used in) / 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 Cash Flow from financing activities : Proceeds from borrowings Repayments of borrowings Bank overdrafts (net) Interest paid Dividend paid Tax on distributed profits Net Cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents (Opening Balance) Less : Cash and cash equivalents transferred to Godrej Beverages and Foods Limited Cash and cash equivalents (Closing Balance)

Notes : 1. Cash and Cash equivalents. Cash on hand and balances with banks Effect of exchange rate changes Cash and cash equivalents

Previous Year Rs. lac

7956.10

5512.86

2426.36 (26.57) (4491.86) (595.31) (5781.12) (429.79) 3901.55 (38.65) 655.90 (300.00)

2259.43 294.21 (2155.37) (309.13) (2212.91) (508.39) 2430.95 (2685.07) 592.01 -

(410.64) 1.71 2867.68

(2.87) (0.42) 3215.30

(3622.79) (1796.22) 2346.98 (204.35) (1145.93) 451.03 (899.25)

(2693.82) 1463.87 23.70 2009.05 (604.30) 124.08 1528.83

(4516.06) 2271.03 (66287.82) 59645.59 (2264.70) 218.70 5781.12

(9503.94) 1339.31 (51582.27) 50167.75 (500.02) 497.56 2275.33

(5152.14) –

(7306.28) 4000.00

(5152.14)

(3306.28)

45416.61 (35435.94) 4091.27 (3972.09) (2430.65) (341.10) 7328.10 1276.71 1259.63

39331.95 (32515.29) (62.36) (2631.58) (1951.09) (272.88) 1898.75 121.30 1377.88

– 2536.34

239.55 1259.63

2536.45 (0.11) 2536.34

1266.79 (7.16) 1259.63

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

Last year the Foods Division (except Wadala Factory) was sold for a consideration of Rs. 7000 Lac. Out of the total consideration Rs. 4000 Lac has been received in cash and the balance by way of allotment of equity shares in Godrej Beverages and 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 25, 2007

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 2006-2007

SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2007 SCHEDULE 1 : SHARE CAPITAL AUTHORISED: 80,00,00,000 Equity shares of Re.1 each (previous year 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: 29,18,51,652 Equity shares of Re.1 each fully paid (previous year 4,86,41,942) Equity shares of Rs. 6 each fully paid) Of the above,

This Year Rs. lac

Previous Year Rs. lac

8000.00

10000.00

18000.00

2918.52

(i) 18,72,02,388 (previous year 3,12,00,398) shares are held by Godrej & Boyce Mfg. Co. Limited, the holding company. (ii) 15,55,47,816 (previous year 2,59,24,636) shares are allotted for consideration other than cash pursuant to schemes of amalgamation/arrangement. (iii) 9,57,05,718 (previous year 1,59,50,953) shares are allotted as fully paid bonus shares by way of capitalisation of Securities premium account. 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

This Year Rs. lac

Previous Year Rs. lac

8.51

25.00

2291.39

3031.76

(465.68)

(740.37) 1825.71

2291.39

3125.00

5837.80

4345.95 711.24 5057.19

27320.54

23709.59

38142.56

34216.68

27482.77 5609.71

23392.45 1518.44

33092.48

24910.89

11677.13

5803.24

Other loans from banks/commercial paper

1000.00

2000.00

Inter corporate borrowing

1000.00

â&#x20AC;&#x201D;

13677.13

7803.24

13677.13

7803.24

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

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

5057.19 780.61

Particulars of securities (refer note 4) SCHEDULE 4 : UNSECURED LOANS Short term loans from banks

Amount repayable within one year

Godrej Industries Limited SCHEDULE 5 : FIXED ASSETS Rs. lac ASSETS

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

GROSS BLOCK

DEPRECIATION/IMPAIRMENT

NET BLOCK

Additions

Deductions/ Adjustments

As on 31.03.2007

Upto 31.03.2006

Deductions/ Adjustments

For the Year

Upto 31.03.2007

As on 31.03.2007

As on 31.03.2006

121.58 147.97 8231.46 40841.44 113.51 1112.83 997.51 609.05

– – 344.84 2671.88 – 163.81 144.27 55.92

– – 1803.75 912.00 – 123.99 27.56 58.89

121.58 147.97 6772.55 42601.32 113.51 1152.65 1114.22 606.08

– 21.24 2285.78 20720.43 46.71 675.64 468.67 310.18

– – 161.12 479.31 – 52.02 13.33 36.70

– 1.54 175.85 2032.21 3.30 60.64 54.14 49.59

– 22.78 2300.51 22273.33 50.01 684.26 509.48 323.07

121.58 125.19 4472.04 20327.99 63.50 468.39 604.74 283.01

121.58 126.73 5945.68 20121.01 66.80 437.19 528.84 298.87

463.00 700.75

– 215.27

– –

463.00 916.02

239.22 623.80

– –

46.30 68.02

285.52 691.82

177.48 224.20

223.78 76.95

301.10 53640.20 49728.83

106.57 3702.56 10738.69

158.64 3084.83 6827.32

249.03 54257.93 53640.20

176.56 25568.23 26192.14

109.94 852.42 3051.77

95.22 2586.81 2427.86

161.84 27302.62 25568.23

87.19 26955.31

124.54 28071.97

As on 01.04.2006

TOTAL 1.

1749.02

522.38

28704.33

28594.35

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. 160.45 lac (Previous Year Rs. 168.43 Lac) being depreciation on revalued component of the fixed assets.

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

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

Capital work-in-progress is net of impairment loss of Rs. 204.10

lac (Previous Year Rs. 204.10 lac) provided on an infructuous asset under construction.

SCHEDULE 6 : INVESTMENTS Investee Company/Institutions

Face Value (Rs.)

Qty. as on 01.04.06

LONG TERM INVESTMENTS : At Cost A. TRADE INVESTMENTS Equity Shares : Fully Paid Bharuch Eco-Aqua Infrastructure Ltd. 10 440000 Preference Shares : Partly PaidGodrej Commodities Ltd. (Formerly Godrej Foods Limited) 10 5000000 (8% Redeemable Cumulative Preference Shares, 2012) B. OTHER INVESTMENTS : Fully Paid unless stated otherwise Equity Shares Quoted : Godrej Consumer Products Ltd. 1 26936108 Unquoted : Avestha Gengraine Technologies Pvt. Ltd. 10 120244 Compass Connections Ltd. £0.25 13692 Gharda Chemicals Ltd. 100 114 Godrej Sara Lee Ltd. 4 5107125 Godrej Beverages & Foods Ltd. 10 9624996 Godrej Upstream Ltd. 10 – Swadeshi Detergents Ltd. 10 209370 Tahir Properties Ltd. (Partly Paid) 100 25 Common Stock/Membership Units : Unquoted : CBay Systems Ltd. (refer note 6) $0.01 4091073 Boston Analytics LLC $1.00 781250 Verseon LLC - Class A Units $1.90 – Preference Shares : Unquoted : Tahir Properties Ltd. (Class - A) (Partly Paid) 100 25 Godrej Beverages & Foods Ltd. 10 – (Zero Coupon Compulsory Convertible Preference Shares) Convertible Debentures : Unquoted : Avestha Gengraine Technologies Pvt. Ltd. (redeemed during the year) 10,000,000

Number Acquired Sold/Adjusted during the during the Year Year

Qty. as on 31.03.07

–

440000

–

5000000

–

3800000

23136108

34500 – – – 6875000 9000000 – –

– – – – – – – –

154744 13692 114 5107125 16499996 9000000 209370 25

– 286504 1315789

– – –

4091073 1067754 1315789

– 7150223

– –

25 7150223

–

Notes

Amount As on As on 31.03.07 31.03.06 Rs. lac Rs. lac

44.00

(b)

450.00

(d)

9216.28

10730.01

743.45 124.55 11.57 4729.79 3963.22 902.25 191.33 0.01

516.76 124.55 11.57 4729.79 963.22 – 191.33 0.01

4062.82 650.48 1142.34

4062.82 258.76 –

(b) (e)

0.02 6240.00

0.02 –

–

300.00

(a)

(b)

Annual Report 2006-2007 Investee Company/Institutions

Face Value (Rs.)

Optionally Convertible Loan Notes : Unquoted : Compass Connections Ltd.

Number Sold during the Year

Qty. as on 31.03.07

Notes

Amount As on As on 31.03.07 31.03.06 Rs. lac Rs. lac

$1,000

–

83.19

–

1,000

–

1,000

0.10

–

0.01

–

10 3,770,160 10 4,112,956 10 47,672,739 £1 2,605,000 10 6,647,100 10 5,264,645

– 3,000,000 – – – –

– – 34,070,479 – – –

3,770,160 7,112,956 13,602,260 2,605,000 6,647,100 5,264,645

1318.14 6377.34 3549.29 1826.94 364.83 4027.61 50019.56 (1452.78) 48566.78

1318.14 3377.34 5589.65 1826.94 364.83 4027.61 38887.45 (1752.78) 37134.67

9216.28 39350.50 48566.78

10730.01 26404.66 37134.67

34021.65

48875.57

Shares in Co-operative Society : Fully Paid Unquoted : The Saraswat Co-op. Bank Ltd. Investment in the capital of Partnership Firm : View Group LP C.

Qty. Acquired the as on during 01.04.05 Year

INVESTMENT IN SUBSIDIARY COMPANIES Equity Shares : Fully Paid unless stated otherwise Unquoted : Ensemble Holdings & Finance Ltd. Godrej Agrovet Ltd. Godrej Global Solutions Ltd. Godrej International Ltd. Godrej Hicare Ltd. Godrej Properties Ltd.

(b), (c) (b)

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

NOTES: (a) The said shares have been refused for registration by the investee company. (b) Uncalled Liability on partly paid shares - Tahir Properties Ltd. - Equity - Rs. 80 per share. - Godrej Commodities Limited - Preference - Re. 1 per share. - Tahir Properties Ltd. - Preference - Rs. 30 per share. - Godrej Global Solutions Ltd - Equity - Rs. 3 per share on 49,71,429 shares. - Godrej Hicare Ltd. - Equity - Rs. 6 per share on 30,40,000 shares. (c) Reduction in number of shares of GGSL represents reduction in equity capital of the company under Sections 101 to 105 of the Companies Act, 1956 as per the order of the High Court of Bombay. (d) Face value of Rs. 4 per share divided into 4 shares of Re. 1 per share each. (e) The compulsory convertible preference shares are convertible into equity shares on 28th June, 2007.

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 doubtful Other debts Considered good Less : Provision for doubtful debts

This Year Rs. lac

Previous Year Rs. lac

1381.64 5820.54 4919.84 3393.15

1156.47 5300.52 1961.02 3474.37

15515.17

11892.38

201.20

233.99

9253.24

5806.56

9454.44

6040.55

201.20

233.99

9253.24

5806.56 33

Godrej Industries Limited

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. 377.07 lac, previous year Rs. 377.07 lac) Consideration Receivable from Godrej Beverages & Foods Ltd. for sale of Foods Division Intercorporate deposits Deposits and balances with – Customs & excise authorities – Others Advance payment of taxes (Net of Provision for tax, Rs. 940 lac) SCHEDULE 11 : CURRENT LIABILITIES (refer note 9) 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

64.29

19.37

464.39 2007.66

386.71 853.55

2536.34

1259.63

2772.28 2784.00

1091.34 556.50

1265.01 –

1663.15 3000.00

35.00

41.80

1319.90 642.42 571.38

849.59 486.35 –

9389.99

7688.73

75.79 15724.93

56.82 13750.58

15800.72 689.40 877.93

13807.40 305.13 555.64

47.74 15.69 – 534.38 87.29

46.29 24.80 0.20 829.03 157.83

18053.15

15726.32

2918.52 496.00 2289.60 –

2432.10 341.10 2388.08 40.75

* There is no amount due and outstanding to be credited to the Investor Education Protection Fund. SCHEDULE 12 : PROVISIONS Proposed dividend Provision for tax on distributed profits Provision for retirement benefits Provision for taxation (Net of Advance Tax, Previous year Rs. 1270.25 lac)

5704.12

5202.03

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

2219.36 38.65

126.30 2685.07

Less : Amortised during the year

(655.90)

(592.01)

1602.11

2219.36

Annual Report 2006-2007

SCHEDULE 14 : OTHER INCOME Interest : – Debentures – Income tax refund – Deposits Dividend – from subsidiary companies – from long term investments Profit on sale of fixed assets (Net) Profit on sale of long term investments (refer note 16) Profit on sale of current investments Provision for diminution investment written back (refer note 16) Bad debt recovered (refer note 16) Miscellaneous income

SCHEDULE 15 : MATERIALS CONSUMED AND PURCHASE OF GOODS Raw materials consumed : Stocks at the commencement of the year Add : Purchases (net) Less : Stocks as at the close of the year Raw materials consumed during the year Purchase of goods for resale SCHEDULE 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 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 Excise duty on inventory change Foreign exchange loss Miscellaneous expenses Less : Expenses recovered under cost sharing agreement for use of common facilities

This Year Rs. lac

Previous Year Rs. lac

32.98 114.78 232.14

9.62 140.56 318.42

3592.11 2189.01 595.31 4382.56

508.20 1704.71 309.13 2120.35

109.30 300.00 650.00 615.43

35.02 – – 587.03

12813.62

5733.04

5300.52 40987.86

5192.87 40385.71

46288.38

45578.58

5820.54

5300.52

40467.84 5804.22

40278.06 9950.77

46272.06

50228.83

5421.36 324.20 520.11 930.87 4963.01 98.50 247.18

5772.39 326.13 636.19 631.87 4164.79 80.85 295.90

496.78

389.57

644.50 614.23 334.47 156.18 2371.50 250.70 453.22 86.91 3.96 822.40 32.38 5.78 (61.38) 243.58 2395.62 (672.54)

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)

20683.52

20627.41 35

Godrej Industries Limited 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

Less : Interest during construction period capitalised Less : Interest received – on loans & deposits – on customer balances, etc. Net Interest Other financial charges Foreign exchange (gain)/loss

SCHEDULE 19 : EXTRAORDINARY ITEMS Profit on sale of Foods division Less : Taxation on above – current tax – deferred tax

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

Previous Year Rs. lac

5435.39 –

3906.05 1126.27 5032.32 (793.01)

(8312.99)

(3474.37) (1961.02) (5435.39)

(2877.60)

(1196.08)

3474.37 1961.02

(3393.15) (4919.84)

(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

2807.07 11.30 610.94

1702.34 114.71 485.72 3429.31 –

40.59 9.30

2302.77 265.47 21.71 18.08

49.89

39.79

3379.42 472.24 (20.88)

1997.51 393.65 457.69

3830.78

2848.85

94.75

3510.80

– –

(506.00) 101.00

94.75

3105.80

(22.07) – –

42.52 62.42 (112.50)

(22.07)

(7.56)

Annual Report 2006-2007

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. Computer software is amortised over a period of six years on the straight line method. 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 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. 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 investee'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 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. 10. 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. 37

Godrej Industries Limited 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. 11. 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. 12. 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. 13. 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. 14. 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. 38

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. 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 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 recognized in the Profit and Loss Account, whereas, the unrealised 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 payback 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 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 recognised 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.

Annual Report 2006-2007

SCHEDULE 22 : NOTES TO ACCOUNTS 1.

Background The Company was incorporated under the Companies Act, 1956 on March 7, 1988 under the name of GujaratGodrej Innovative Chemicals Limited. The business and undertaking of the erstwhile Godrej Soaps Limited was transferred to the Company under a scheme of amalgamation with effect from April 1, 1994 and the Company’s name was changed to Godrej Soaps Ltd. Subsequently, under a scheme of arrangement the Consumer Products division of the Company was demerged with effect from April 1, 2001 into a separate company, Godrej Consumer Products Limited (GCPL) and the vegetable oils and processed foods manufacturing business of Godrej Foods Ltd. was transferred to the Company with effect from June 30, 2001. The Foods division (except Wadala factory) was then sold to GBFL on March 31, 2006, The Company’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.

595.11

518.06

viii) Others

118.76

217.26

647.62

1558.31

3086.00

3085.00

381.57

579.15

This Year Rs. lac

Previous Year Rs. lac

356.81

133.99

Guarantees issued by banks, excluding guarantees issued in respect of matters reported in (a) above.

Guarantees given by the Company in respect of credit / guarantee limits sanctioned by banks to subsidiary and other companies. Uncalled liability on partly paid shares / debentures

3. Capital Commitments

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

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 factories.

Claims against the Company not acknowledged as debts:

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

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

2. Contingent Liabilities This Year Rs. lac a)

vii) Industrial relations matters under appeal

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.

Previous Year Rs. lac

5. 1544.09

1537.41

856.94

844.53

1716.58

207.13

938.05

844.46

182.23

vi) Income Tax demands against which the Company has preferred appeals. 1707.97

1724.64

ii)

Customs Duty demands relating to less charge, differential duty, classification, etc.

iii) Sales Tax demand relating to purchase tax on Branch Transfer / Non availability of C Forms, etc. at various levels. iv) Octroi demand relating to classification issue on import of Palm Stearine and interest thereon. v)

Stamp duties claimed on certain properties which are under appeal by the Company

Investments a)

CBay Systems Limited, USA (CBay USA) carried out an organizational restructuring in October 2005, consequent to which, all businesses of CBay group have been consolidated under CBay Systems Limited, India (CBay India), a wholly owned subsidiary. Under the scheme, the stockholders of CBay USA are entitled to receive one additional share of CBay India for every two stocks in CBay USA. The shares in CBay India were distributed to all stockholders except Indian Shareholders of CBay USA, pending Indian regulatory approvals. The shares of CBay India, pending distribution to Indian shareholders, are held in trust by CBay USA. In the meanwhile, CBay group decided on a further organizational restructuring, wherein CBay Systems Holdings Limited (“CBay BVI”), a company incorporated in the British Virgin Islands, would be the holding company of the CBay group. As per the scheme the Company is now entitled to four shares in CBay BVI for every share it was entitled to in 39

Godrej Industries Limited SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) CBay India. The company has been allotted the shares in CBay BVI on May 15, 2007. b)

against the rejection. Interest on the aforesaid loan 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 loan.

The Company has acquired and sold the following investments during the year: Mutual Funds - Liquid Funds - Growth Plan This Year No. of Amount Units Rs. lac

Previous Year No. of Amount Units Rs. lac

Birla Cash Plus Liquid

83875918

9572.00

39385339

4365.00

Prudential ICICI Liquid

66688100

7117.00

31868947

4912.00

KMMF Liquid

43290891

6200.00

91966703

12598.00

200052

2100.00

–

77393645 10355.00

–

Standard Chartered Liquidity Manager Fund LIC MF Liquid Fund UTI Liquid fund

524962

6272.00

ING Vysya Liquid

27167811

3005.00

52934599

5608.00

SBI Magnum Liquid

49201576

5705.00

130793874

14271.00

Deutsche Insta Cash Plus Fund

15539028

1724.00

4566794

500.00

JMMF Liquid

14278700

1590.00

37497975

4047.00

This Year Rs. lac

Previous Year Rs. lac

Godrej Consumer Products Ltd. 226.49 Godrej Agrovet Ltd. 21.63

Godrej Beverages and Foods Ltd. 29.01 Godrej Global Solutions Ltd. 0.61 Godrej Properties Ltd. 1.76 Godrej Saralee Ltd. 19.88

19.34

175.45

— __ __ __ __

18.50

8. Loans and Advances a) Loans and Advances include Rs. 1.76 lac (Previous year Rs. 2.37 lac) due from a director. Maximum balance during the year Rs. 2.37 lac (Previous year Rs. 3.00 lac). b) Loans and Advances include Rs. 1033 lac (Previous year Rs. 1033 lac) advanced by the Company to certain individuals against pledge by way of deposit of equity 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 40

Maximum balance during the year Rs. lac

This Year Previous Year Rs. lac Rs. lac

Loans and Advances to subsidiary companies i)

Ensemble Holdings & Finance Ltd.

5.00

–

ii)

Godrej Agrovet Ltd. 1200.00

–

35.00

47.80

1033.00

3000.00

Loans and Advances to associate companies Swadeshi Detergents Ltd.

6. Sundry Debtors Sundry Debtors include the following amounts due from companies under the same management:

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

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

47.80

Loans and Advances where there is no repayment schedule or repayment is beyond seven years : D. Kavasmanek and Others 1033.00 (refer (b) above) Consideration receivable for sale of Foods division: Godrej Beverages & Foods Ltd. a subsidiary company.

3000.00

9. 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. b) The names of small scale industrial undertakings to whom an amount is outstanding for more than 30 days are as under: N.R. Packaging Industries Shree Satyanarayan Plastics Shree Diamond Silicate S. P. Fabricators A.R. Engineering

Vraj Packaging Pvt. Ltd. Neo Fab Akshay Inorganics Monarch Corporation Machhar Polymers Pvt. Ltd.

c) 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.

Annual Report 2006-2007

SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) 10. Employee Stock Option Plans In December 2005, the Company had instituted an Employee Stock Option Plan (GIL ESOP) approved by the Board of Directors and the shareholders, which provides for the allotment of 15,00,000 options convertible into 15,00,000 equity shares of Rs. 6 each to eligible employees of participating companies. In view of the sub-division of equity shares into face value of Re. 1 each, the total number of options stands automatically increased to 90,00,000 options convertible into 90,00,000 equity shares of Re. 1 each. The scheme is administered by an independent ESOP Trust which purchases from the market shares equivalent to the number of options granted by the participating companies. The Company decided to extend the benefits of the ESOP scheme to other levels of management as approved by the Compensation Committee. During the year, in preparation to extend the scheme to other levels of management, the participating companies provided finance to the ESOP Trust and the ESOP Trust purchased 26,25,000 additional shares during the year.

Options outstanding at the beginning of the year

No. of Options

Wt. average exercise price

21,00,000

65.39 (plus interest) — — — 65.39 (plus interest)

Options granted — Less : Exercised — Less: Forfeited / expired — Options outstanding at the year end 21,00,000

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 recognised 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 therefore being Nil. Had the fair value method of accounting been used, the employee compensation cost would have been Rs. 204 lac. (Previous year Rs. 204 lac). 11. Incentive Plans There is no positive amount carried forward in notional bank as on March 31, 2007, after distribution of PLVR for the FY 2006-07 (Previous year Rs. Nil lac). 12. Leases:

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

This Year Rs. lac

Previous Year Rs. lac

1784.70

2857.79

892.97

995.81

58.30

115.71

b) Finance Leases: The Company has acquired vehicles under Finance Lease. Liability for minimum lease payment is secured by hypothecation of the vehicles acquired under the lease. The minimum lease payments outstanding as on March 31, 2007, in respect of vehicles acquired under lease are as under: Period

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

Total minimum lease payments outstanding as on March 31, 2007 Rs. lac 63.51

Un-matured Interest

Present value of minimum lease payments

Rs. lac 17.82

Rs. lac 58.48

119.36 182.87

24.79 42.61

92.72 151.20

13. Deferred Tax Major components of deferred tax arising on account of timing differences as at the year end are: Assets

This Year Rs. lac

Previous Year Rs. lac

351

294

204 156 82 793

209 77 210 790

Liabilities Depreciation

4773

4608

Net Deferred Tax Liability

3980

3818

Provision for retirement benefits Provision for doubtful debts / advances VRS Expenses Others

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:

a) 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 12 months to 36 months and are renewable 41

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

Purchase

16. Exceptional Items

Previous Year

Sale Purchase

Sale

Total number of contracts entered during the year

–

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

–

Future contracts not settled as on March 31, 2006

–

Number of units under above contracts

–

b. 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: Details Total number of contracts entered during the year

This Year Previous Year Purchase Sale Purchase Sale 150

110

66.59 –

7.00 9.18

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

19.33 –

2.00 4.12

37.30 13.00 – 0.94

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

15.09

5.54

12.41

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

171

101.25 33.68 – 3.36 54

–

15. Turnover Turnover includes i)

Processing charges

ii) Export Incentives iii) Licence fees and service charges

This Year Rs. lac 1124.99

Previous Year Rs. lac 2003.93

345.20

554.42

2308.97

2194.51

3779.16

4752.86

ii)

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

This Year Rs. lac

Previous Year Rs. lac

4382.56

2119.81

- 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

300.00

650.00

89.00

Provision for diminution in investment written back

iii) Bad debt recovered iv) Payment to Mumbai Port Trust for regularisation of lease included in Rent paid.

17. Profit & Loss Account a) The amount of exchange loss on account of fluctuation of the rupee against foreign currencies and the net charges for forward foreign exchange contracts added to the carrying amount of fixed assets during the year is Rs. 19.57 lac (Previous year Rs. 0.42 lac). The exchange difference included in the Profit and Loss Account is a loss of Rs. 114.50 lac (Previous year profit of Rs. 640.31 lac). The exchange difference in respect of forward exchange contracts to be recognised in subsequent accounting periods is Rs. 27.02 lac (Previous year Rs. 24.68 lac).

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

This Year

Previous Year

Nos. Nos. Nos.

291851652 291851652 291851652

48641942 48641942 48641942

Nos. Rs. lac

291851652 7711.34

291851652 4006.62

Rs. lac

7806.09

7112.42

Rupees

2.64

1.37

Rupees

2.67

2.44

18. Earnings per share: a. 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 Weighted average number of equity shares for the previous year adjusted for the share split into 6 shares of Re. 1 each b. Net profit after tax excluding extraordinary items c. Net profit after tax available for equity shareholders (including extraordinary items) d. Basic and diluted earnings per share of Re.1 each excluding extraordinary items e. Basic and diluted earnings per share of Re.1 each including extraordinary items

Note: There is no impact on basic and diluted earnings per share on account of the ESOP as the scheme does not envisage any fresh issue of share capital. 42

Annual Report 2006-2007

SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) 19. Segment Information Information about primary business segments Chemicals

Rs. lac

Veg oils

Estate

Finance & Investments

Others

Total

This Year

Previous Year This Year

Previous Year

This Year

Previous Year

This Year

Previous Year

57187.42

51777.71 4990.94

21116.55 2561.87

2282.52 12145.53

80281.30

Revenue External Sales Add : Unallocated Income Total Income

–

3986.32

1405.46

1118.20

78291.22

–

78291.22

80281.30

57187.42

51777.71 4990.94

21116.55 2561.87

2282.52 12145.53

3986.32

1405.46

1118.20

642.81

4760.35 (417.08)

(341.38) 1756.72

1471.62 12145.53

4586.33

477.76

(111.58)

Results Segment result 14605.74

10365.34

Unallocated expenses

before interest and tax

(2818.85)

(2003.63)

Interest Expense (net)

(3830.78)

(2848.85)

Profit before tax

7956.11

5512.86

Taxes

(222.70)

(1498.68)

7733.41

4014.18

94.75

3105.80

Profit after taxes and before Extraordinary Items Add: Extraordinary Items (Net of taxes) Add/(Less) : Prior Period Items Net Profit Segment Assets

54217.96

44348.01

730.00

3701.03 1173.00

2768.09 56258.00

40283.49

3189.00

3495.06

Unallocated Assets Total Assets Segment Liabilities

18882.75

19899.83

339.00

423.86

947.00

437.17

0.00

44.86

174.00

81.88

(22.07)

(7.56)

7806.09

7112.42

115567.96

94595.68

115567.96

94595.68

20342.75

20887.60

Unallocated Liabilities

54164.13

36572.88

Total Liabilities

74506.88

57460.48

Total Cost incurred during the year to acquire segment assets

3681.76

7276.38

8.07

297.77

12.72

–

3557.39

–

3151.82

3702.55

14296.08

Segment depreciation

2123.73

1784.09

53.68

239.82

84.02

128.06

–

164.93

107.46

2426.36

2259.43

Information about Secondary Business Segments Revenue by Geographical markets India

55994.08

65131.76

Outside India

22297.14

15149.54

Total

78291.22

80281.30

115567.96

94595.68

Carrying Amount of Segment Assets India Outside India Total

–

115567.96

94595.68

Notes: 1.The Company has disclosed Business Segment as the primary segment. Segments have been identified taking into Account the nature of the products, the different risks and returns, the organisational structure and the internal reporting system. 2.Chemicals segment includes Oleo Chemicals such as Fatty Alcohols, Fatty Acids, Alfa Olefin Sulphonates and Refined Glycerin. Foods segment includes refined vegetable oils and vanaspati, fruit and vegetable puree, pulp juices and fruit beverages. Estate segment comprises the business of giving premises on leave and license basis. Finance and Investments segment comprises of investment in subsidiaries, associate companies and other investments. 3.The geographical segments are as follows: – Sales in India represent sales to customers located in India –

Sales outside India represent sales to customers located outside India.

Godrej Industries Limited 20. Related Party Disclosures a) Names of related parties and description of relationship: Parties where control exists Godrej & Boyce Mfg. Co. Ltd., the holding company Subsidiary companies / Subsidiary of subsidiary company Godrej Agrovet Ltd. Goldmohur Foods & Feeds Ltd. Aadhaar Retailing Ltd. Godrej Aquafeed Ltd. Godrej Oil Palm Ltd. Golden Feed Products Ltd. Krithika Agro Farm Chemicals & Engineering Ind. P. Ltd. Godrej Properties Ltd. Girikandra Holiday Homes & Resorts Ltd. Godrej Developers P. Ltd. Godrej Real Estate P. Ltd. Godrej Realty P. Ltd. Godrej Sea View Properties P. Ltd. Godrej Waterside Properties P. Ltd. Godrej Hicare Ltd. Godrej International Ltd. Godrej Global Solutions Ltd. Godrej Global Mid-East FZE Godrej Global Solutions Inc. Godrej Global Solutions (Cyprus) Ltd Ensemble Holdings & Finance Ltd. Fellow Subsidiaries: Godrej Commodities Ltd. Godrej Infotech Ltd. Godrej Appliances Ltd. Godrej Malaysia Sdn Bhd Godrej Singapore Pvt Ltd. Mercury Mfg. Co. Ltd.

J.T. Dragon Pte Ltd. Godrej (Vietnam) Co. Ltd. Other related parties with whom the Company had transactions during the year. Associate/Joint Venture Companies Godrej SaraLee Ltd. Godrej Beverages & Foods Ltd. Godrej Gold Coin Aquafeed Ltd. Godrej Upstream Ltd. Nutrine Confectionery Company Ltd. Key Management Personnel Mr. A.B. Godrej Chairman Mr. N.B. Godrej Managing Director Ms. T.A. Dubash Executive Director & President (Marketing) Mr. Mathew Eipe Executive Director & President (Chemicals) Mr. V. Banaji Executive Director & President (Group Corporate Affairs) Mr. M.P. Pusalkar Executive Director & President (Corporate Projects) Relatives Key Management Personnel Ms. N.A. Godrej Daugther of Mr. A.B. Godrej Mr. P.A. Godrej Son of Mr. A.B. Godrej Enterprises over which key management personnel exercise significant influence Godrej Consumer Products Ltd. Godrej Investments Pvt. Ltd. Bahar Agrochem & Feeds Pvt. Ltd. Godrej Holdings P. Ltd. Lawkim Ltd. Cartini India Ltd.

Annual Report 2006-2007

SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) b) Transactions with Related Parties Rs. lac

Nature of Transaction

Sale of Goods Previous Year Sale of Fixed Assets Previous Year Sale of undertaking (Foods Division) Previous Year Purchase of goods & equipment Previous Year Processing charges received Previous Year Commission received Previous Year Recovery of establishment & Other Expenses Previous Year Establishment & other expenses paid Previous Year Interest received Previous Year Dividend income Previous Year Dividend paid Previous Year Remuneration Previous Year Purchase of investments Previous Year Inter corporate deposits Advanced / (Accepted) Previous Year Inter corporate deposits repayment received during the year Previous Year Capital reduction under Section 101 to 105 Guarantees & Collaterals given Previous Year Balance Outstanding as on March 31, 2007 Receivables Previous Year Payables Previous Year Guarantees Outstanding Previous Year

Associate/ Key Fellow Joint Venture Management Subsidiaries Companies Personnel

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

Holding Company

Subsidiary Companies

– 17.08 – 0.05 – – 112.76 30.77 – – – –

3.16 1.53 – 1.40 – 7000.00 – 0.14 – – 7.90 30.01

– – – – – – 914.14 695.87 – – 2.50 2.50

19.07 12.50 – 198.46 6.69 193.68 – 73.22 19.78

– – – – – – – – – – – –

5.88 1.43 197.04 228.68 – – – – 1560.02 1248.02 – – – –

274.50 271.58 12.32 19.60 20.45 1.18 3592.11 508.20 – – – – 3128.63 190.68

0.47 12.52 16.39 10.50 – – 33.74 25.28 – – – – – –

354.24 229.64 1.88 14.03 – – 1174.64 536.25 – – – – 10142.25 –

– – – – _ – – – 135.61 47.61 320.65 330.85 – –

– – – – – – – – 869.84 424.41 25.64 4.77 – –

– –

3955.00 1294.46

– –

– (3.30)

– –

(1000.00) (10.00)

2955.00 1281.16

– –

3955.60 103.48

– –

3.55 –

– –

12.80 –

3971.95 103.48

– – –

2042.34 – (2300.00)

– – –

75.73 1.42 38.80 0.01 – –

24.49 3016.15 2.48 113.57 668.00 667.00

617.89 – – – 1000.00 1000.00

48.89 18.54 3.04 42.60 1350.00 1350.00

– – – – – –

982.10 890.83 21.64 264.19 – – 719.88 1033.81 – – 15.98 23.15

Total

1004.33 921.94 21.64 265.64 – 7000.00 1945.24 1767.28 193.68 – 99.60 75.44

936.66 1571.75 815.74 1330.91 87.26 314.89 89.66 362.47 3.91 24.36 4.99 6.17 980.60 5781.09 1007.66 2077.39 – 2565.47 – 1720.04 – 346.29 – 335.62 – 13270.88 – 190.68

– 2042.34 – – – (2300.00)

226.58 222.25 70.97 102.85 – –

993.58 3258.36 115.29 259.03 3018.00 3017.00

Godrej Industries Limited c)

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

Nature of Transaction

This Year Previous Year

Sale of goods - Godrej Consumer Products Ltd. Sale of fixed assets - Godrej Consumer Products Ltd.

981.49

890.83

Rs. lac Nature of Transaction

This Year

Previous Year

Inter corporate deposits repaid during the year - Godrej Agrovet Limited 3950.00

–

Dividend income - Godrej Consumer products Ltd. - Godrej Properties Limited - Godrej Agrovet Limited - Godrej SaraLee Limited

980.60 2712.16 727.99 1174.64

1007.66 – – –

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

1560.02

1248.02

85.66 54.20 64.00 69.55 47.24

82.11 50.57 62.56 77.07 48.93

21.64

264.19

–

7000.00

Purchase of goods & equipment - Godrej Beverages & Foods Ltd. - Godrej Consumer Products Ltd. - Godrej Commodities Ltd.

217.04 719.88 909.67

– 1033.81 692.34

Processing charges received - Godrej Beverages & Foods Ltd.

193.68

–

Commission received - Godrej Consumer Products Ltd. - Godrej Beverages & Foods Ltd. - Godrej Upstream Ltd.

15.98 47.26 25.96

23.15 24.85 19.78

Recovery of establishment & other expenses - Godrej Consumer Products Ltd. - Godrej SaraLee Ltd. - Godrej Agrovet Ltd. - Godrej Beverages & Foods Ltd.

936.66 211.65 191.08 142.59

815.74 229.64 175.10 –

Purchase of Investments - Godrej Agrovet Limited - Godrej Upstream Ltd. - Godrej Beverages & Foods Ltd.

3000.00 902.25 9240.08

– – –

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

197.04 87.14

228.68 89.66

Inter corporate deposits Advanced /(Accepted) - Godrej Agrovet Limited 3950.00 (1000.00) - Godrej Investments Limited

– –

3.91 20.29

4.99 –

Inter corporate deposits - repayment received - Godrej Agrovet Limited 3950.00

–

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

–

Sale of undertaking (Foods Division) - Godrej Beverages & Foods Ltd.

Interest received - Swadeshi Detergents Ltd. - Godrej Agrovet Limited

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

Remuneration to Relatives of Key Management Personnel - Ms. Nisaba A. Godrej 19.92 - Mr. Pirojsha Godrej 5.73

Rs. lac 21. 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)

This Year Rs. lac

Previous Year Rs. Lac

7806.09

7112.42 2259.43 330.85 294.00

2426.36 320.64 222.09

5.78 222.70 3197.57 11003.66

10.87 1903.68 4798.83 11911.25

7679.67 3323.99

2240.45 309.13 2155.37 3510.80 – 8215.75 3695.50

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

332.40

369.55

Managerial remuneration paid / payable

320.64

321.25

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 Provision for diminution in investment written back Net

– 4.77

Profit for the purpose of Directors' Remuneration

2401.80 595.31 4382.56 – 300.00

Annual Report 2006-2007

SCHEDULE 22 : NOTES TO ACCOUNTS (contd.)

This Year Rs. lac

Previous Year Rs. lac

281.44 20.19 19.01

289.12 16.66 15.47

320.64

321.25

26.30 4.00 7.02 11.93 4.40 1.15

30.92 5.50 7.65 9.20 4.30 0.71

54.80

58.28

22. Managerial Remuneration Salaries and allowances Contribution to Provident Fund Estimated Monetary value of perquisites TOTAL 23. Auditors’ Remuneration Audit fees (including Rs. 1.04 lac to branch auditors, previous year Rs. 0.92 lac) Tax audit fees Certification and other services Tax Consultation and representation Consultation and management services Out of pocket expenses TOTAL 24. Turnover (Net) 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

Unit

Quantity

This Year Value Rs. lac

MT MT

58448 11965

20428.32 4066.74

56110 8997

17447.97 3491.25

MT MT MT KL MT

88771 17835 – – –

30931.08 4607.60 – – – 833.23 4410.63

62657 38048 4285 8586 631

28311.15 14461.23 1724.44 2289.06 249.29 958.02 5615.85

Previous Year Quantity Value Rs. lac

65477.60

74548.26

March 31, 2006 Quantity Value

March 31, 2005 Quantity Value

TOTAL 25. 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, 2007 Quantity Value

MT MT

1564 399

Rs. lac 676.07 128.59

2278 638

Rs. lac 817.98 236.59

1665 202

Rs. lac 629.54 90.16

MT MT

5124 3

2434.86 2.04

5710 –

2300.62 –

1649 1075

499.65 509.64

–

5338

1714.67

KL MT

– –

– – 150.55 1.05

– –

– – 119.18 0.00

748 68

165.04 15.45 180.20 101.70

3393.16

3474.37

3906.05

Godrej Industries Limited SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) 26. Raw Materials Consumed Unit Oils & Fats Chemicals and Catalysts Fruit Pulp & Concentrates Packing and other Materials

MT MT KL

This Year Value Rs. lac 161362 32253.73 19289 4910.44 – – 3303.66

Previous Year Quantity Value Rs. lac 126174 31036.70 19942 4550.73 1070 1073.90 3616.73

40467.83

40278.06

Quantity

TOTAL

Raw materials consumption includes consumption for production of captively consumed items. 27. Purchase of Goods

Fatty Acids Oils & Vanaspati Pulp Medical Diagnostic Products Others

Unit

Quantity

MT MT MT

1435 17825 –

This Year Value Rs. lac 612.00 4584.32 – 512.12 95.78

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. / Sweetend Flavoured Milk Instant Tea / Coffee Plant Synthetic Detergents Hydrogen (Captive consumption)

NM3

Oxygen (By-Product)

NM3

MT MT MT MT MT KL MT MT MT KL MT MT

Licensed Capacity

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

134 29063 1011

42.63 8910.68 473.88 461.33 62.25

5804.22

9950.77

Installed Capacity

Actual Production This Previous Year Year

TOTAL 28. Licensed, Installed and Utilised Capacity Item Unit

Previous Year Quantity Value Rs. lac

This Year

Previous Year

55800 8280

32000 8280

59700 11041

46307 9434

65000 26381 1200

35000 26381 1200

82779 7645 –

66933 10338 –

–

30000

–

18467

– 38700 –

5000 38700 250

– 10110 –

3222 10099 4155

– – 11250

1800 3000 11250

– – 13953

1182 879 14699

1224000

687033

518091

612000

343517

259046

N.A

Notes : a. The Licensed capacities are not applicable in view of the exemption from licensing granted under Notification SO 477(E) dated July 25, 1991, issued under the Industries (Development & Regulation) Act, 1951. b. Alpha Olefin and its precursors and derivatives includes Fatty Alcohols and A.O. Sulphonates. c. Installed capacity excludes the installed capacity for manufacture of intermediates which are intended to be used for internal consumption to manufacture A.O and its precursors and derivatives. d. Production of A.O and its precursors and derivatives include 18,324 MT produced under process contracts for third parties.

Annual Report 2006-2007

SCHEDULE 22 : NOTES TO ACCOUNTS (contd.)

This Year Previous Year Rs. lac Rs. lac 29. Value of Imports on CIF Basis (includes only Imports directly made) Raw materials 25313.10 Goods for resale 390.48 Stores & spares 509.60 Capital goods 432.86 TOTAL

26646.04

352.82 83.98 399.93 87.17 20.80 38.07

1593.22

TOTAL

Name

23326.81 382.06 290.72 731.15 24730.74

30. Expenditure in Foreign Currency Interest 587.04 Travelling expenditure 104.07 Other expenditure 740.73 Expenses for Foreign Branch: - Salaries and allowance 126.98 - Rent 15.98 - Others 18.42

982.77

This Year Previous Year Rs. lac Rs. lac 31. Value of Consumption of Raw Materials & Spares

Raw Materials Imported (including duty content) 19366.53 Indigenous 21101.30 40467.83 Spares Imported (including duty content) 620.27 Indigenous 310.60 930.87

48 52 100

26138.87 14139.19 40278.06

65 35 100

68 32 100

240.15 391.72 631.87

38 62 100

This Year Previous Year Rs. lac Rs. lac 32. Dividends Remitted in Foreign Currency (subject to deduction of tax, as applicable) Final Dividend for Financial Year 2005-06 to 6 shareholders on 1110 shares TOTAL

0.05

0.04

0.05

0.04

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

22297.14

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

15149.54

Countries of Principal Incorporation activities

Godrej India SaraLee Ltd. Godrej Beverages & Foods Ltd. India *

Household Insectisides Beverages & Foods

Percentage of Ownership interest as at 31st March, 2007 20%

Percentage Ownership interest as at 31st March, 2006 20%

48%

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

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. (without elimination of the effect of transaction between the company and Joint Venture) related to its interests in these joint ventures are: This Year Previous Year Rs. lac Rs. lac I. ASSETS 1. Fixed Assets 4233.86 2. Investments/Goodwill 10444.32 3. Current Assets, Loans and Advances a) Inventories 2644.75 b) Sundry Debtors 1516.68 c) Cash and Bank Balances 2260.41 d) Other Current Assets 5.16 e) Loans and Advances 1280.09 4. Misc. Expenditure 59.52 II. LIABILITIES 1. Loan Funds a) Secured Loans b) Unsecured Loans 2. Current Liabilities and Provisions a) Liabilities b) Provisions 3. Deferred Tax - Net

967.17 – 898.23 375.64 577.36 0.22 463.50 –

8274.24 410.41

70.98 -

4730.65 327.67 85.86

1251.71 127.05 21.02

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

23924.55 314.69

8911.43 152.84

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

14736.03 7425.11 52.81 401.00 776.17 200.39

4970.02 2724.80 119.20 91.38 12.12 117.79

V. OTHER MATTERS 1. Contingent Liabilities 328.13 207.02 2. Capital Commitments 132.46 2.48 35. Figures for the previous year have been regrouped wherever necessary. 49

Godrej Industries Limited SCHEDULE 22 : NOTES TO ACCOUNTS (contd.) 36. Additional information as required under Part IV of Schedule VI to the Companies Act, 1956 1.

Registration Details Registration No State Code Balance Sheet Date

: : :

97781 11 31/3/2007

Capital raised during the year (Amount in Rs. lac) Public Issue Rights Issue Bonus Issue Private Placement (Preference)

: : : :

Nil Nil Nil Nil

Total Liabilities Total Assets

: :

115567.96 115567.96

Sources of Funds Paid-up Capital Reserves & Surplus Secured Loans Unsecured Loans Deferred Tax Liability

: : : : :

2918.52 41557.09 33092.48 13677.13 3980.00

: : : : :

28704.33 48566.78 16351.99 1602.11 â&#x20AC;&#x201C;

: : : : :

65477.60

: :

2.64 100%

: : : :

38.23 * Fatty Acids/Fatty Alcohols 15.16 * Vanaspati / Refined Oils

3. Position of mobilisation and deployment of funds (Amount in Rs. lac)

Application of Funds Net Fixed Assets Investments Net Current Assets Misc. Expenditure Accumulated Losses 4.

Performance of Company (Amount in Rs. lac) 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

57521.49 7956.11 7733.41

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

GODREJ INDUSTRIES LIMITED

CONSOLIDATED ACCOUNTS 2006-2007

NOTES

Godrej Industries Limited â&#x20AC;&#x201C; 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, 2007, and also the Consolidated Profit and Loss Account and 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. (a)

(b)

(c)

We did not audit the financial statements of certain subsidiaries and joint ventures, whose financial statements reflect the group's share of total assets of Rs. 11,682 lakhs as at March 31, 2007, and the group's share of total revenues of Rs. 172,965 lakhs and net cash outflows amounting to Rs. 1,440 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, the financial statements of a Jointly controlled entity, whose financial statements reflect the Group's share of total assets of Rs. (276) lakhs as at March 31, 2007 and the Group's share of total revenue of Rs. 851 lakhs and net cash outflow amounting to Rs.262 lakhs for the year ended on that date are not audited as of the date of this report and have been included in the consolidated financial statements on the basis of unaudited management accounts. As stated in Note 2 of Schedule 21, the financial statements of certain associates whose financial statements reflect the Group's share of associates' loss upto March 31, 2007 of Rs. 582 lakhs and the share of profit for the year of Rs. 239 lakhs has been included in the consolidated financial statements

on the basis of unaudited management accounts. 4.

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.

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 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 investee company has in the meanwhile moved the Bombay High Court and the matter is awaiting hearing. 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 paragraphs 3 and 5 above, give a true and fair view in conformity with the accounting principles generally accepted in India: a)

in case of the Consolidated Balance Sheet, of the consolidated state of affairs of the Godrej Industries Limited Group as March 31, 2007;

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 25, 2007

V. R. Mehta Partner Membership No.: 32083

Godrej Industries Limited – Consolidated Accounts CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2007 Rs. lac

Schedule SOURCES OF FUNDS 1. Shareholders’ Funds (a) Share capital (b) Share Application Money (c) Reserves & surplus 2. Minority Interest 3. Loan Funds (a) Secured loans (b) Unsecured loans

6. Goodwill (on consolidation) 7. Investments 8. Current Assets, Loans and Advances (a) Inventories (b) Sundry debtors (c) Cash and bank balances (d) Other Current Assets (e) Loans and advances Less : Current Liabilities and Provisions (a) Liabilities (b) Provisions Net Current Assets 9. Miscellaneous Expenditure (To the extent not written off or adjusted) TOTAL Significant Accounting Policies Notes to Accounts

Previous Year Rs. lac

47271.52 3139.53

2918.52 6000.00 33481.40 42399.92 3625.67

91362.88 5117.64 146891.57

29982.41 27140.40 57122.81 3876.13 107024.53

51310.93 27631.09 19372.51

77659.88 32997.46 44662.42 2274.89 46937.31 11275.93 24100.96

2918.52 – 44353.00

1 2

50710.32 40652.56

3 4

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

This Year Rs. lac

5 87729.86 39023.35 48706.51 2604.42

6 7 8 9 10

11 12

46362.41 45640.04 8881.57 9.56 27307.58 128201.16

28500.97 23052.69 9106.59 24.96 17212.33 77897.54

74849.87 6436.45 81286.32 46914.83 1662.20

49278.68 6127.98 55406.67 22490.86 2219.46

146891.57

107024.53

20 21

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 25, 2007 52

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 2006-2007

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007 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. 160.45 lac, Previous year Rs. 168.43 lac) Profit Before Tax Provision for taxation - Current Tax - Deferred Tax - Fringe Benefit Tax Profit for the year after taxation Prior Period adjustments (net)

15 16 17 18

Share of Profit/(Loss) in Associates Profit before Minority Interest Share of Minority Interest Profit after Minority Interest Surplus brought forward Adjustment for opening profit of Subsidiaries (Net) Profit Available For Appropriation APPROPRIATIONS : Dividend on Equity Shares - Interim - Final Tax on distributed profits Transfer to General Reserve Surplus carried forward TOTAL Basic & Diluted Earnings per share (Face Value Re. 1 per share) (refer note 17) Significant Accounting Policies 20 Notes to Accounts 21

This Year Rs. lac

Previous Year Rs. lac

243864.79 5967.69 237897.10 8672.62 246569.71

209816.33 5519.15 204297.18 6319.73 210616.91

177787.43 54980.24 (4581.11) 6500.66 4280.34

150164.44 46763.12 (2220.73) 4528.44 3766.77

238967.56 7602.15

203002.04 7614.87

867.16 204.64 197.38 6332.96 (65.09) 6267.87 24.56 6292.43 (404.37) 5888.06 18220.27 8737.81 32846.14

1197.49 1242.82 114.85 5059.71 (14.38) 5045.33 (78.09) 4967.24 (67.47) 4899.77 17913.78 â&#x20AC;&#x201C; 22813.55

873.69 2918.52 1154.78 1507.89 26391.27 32846.14 2.02

106.15 2552.25 683.27 1251.61 18220.27 22813.55 1.68

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 25, 2007

Signatures to Profit and 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) 53

Godrej Industries Limited â&#x20AC;&#x201C; Consolidated Accounts CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007 A.

Cash Flow from operating activities : Profit before tax Adjustments for : Depreciation Foreign exchange Profit on sale of investments 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 written back 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 (used in) / from operating activities B. Cash Flow from investing activities : Purchase of fixed assets Proceeds from sale of fixed assets Acquistion 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 financing activities Net increase in cash and cash equivalents Cash and cash equivalents (Opening Balance) Add : Cash and cash equivalents - GBFL (opening balance) Add : Cash and cash equivalents - GUL (opening balance) Adjusted Cash and cash equivalents (opening balance) Cash and cash equivalents (Closing Balance) (including share in jointly controlled entities - Rs. 2176.97 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 25, 2007

This Year Rs. lac 7602.15

Previous Year Rs. lac 7614.87

4190.59 10.16 (4509.98) (570.15) (1018.61) (1415.34) 6668.46 (38.65) 596.46 (300.00) (418.93) 42.72 10838.87

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

(18987.18) (26674.99) 24663.54 (10159.76) (2579.66) 451.03 (12288.39)

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

(9640.47) 2916.07 (71094.70) 61956.37 (2366.49) 1109.78 1018.61 (16100.83)

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

1322.99 171.50 55163.74 (37965.15) 20606.42 (6736.77) (3390.20) (1201.99) 27970.54 (418.68) 9,106.59 159.46 34.20 9,300.25 8881.57

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

This Year Rs. lac

Previous Year Rs. lac

8881.68 (0.11) 8881.57

9113.75 (7.16) 9106.59

1772.01 (14111.51) (12361.45)

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 2006-2007

SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007 This Year Previous Year SCHEDULE 1 : SHARE CAPITAL Authorised 80,00,00,000 Equity shares of Re.1 each (Previous year 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: 29,18,51,652 Equity shares of Re. 1 each fully paid (Previous year 14,86,41,942 Equity shares of Rs. 6 each)

Rs. lac

8000.00 10000.00 18000.00

2918.52

Of the above, 18,72,02,388 (previous year 3,12,00,398) shares are held by Godrej & Boyce Mfg. Co. Limited, the holding company

SCHEDULE 2 : RESERVES AND SURPLUS 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 Total - This Year Total - Previous Year Profit & Loss Account

As at 1.4.2006 1099.18 1099.27 80.39 80.42 2291.39 3031.76 117.39 – 3125.00 3125.00 7561.51 6309.90 35.58 12.29 14193.05 13658.64

Additions

Deductions

1557.84 – – – – – 14.92 117.39 – – 861.13 1251.61 – 23.29 2418.97 1274.90

– 0.10 – 0.03 465.68 740.37 – – – – 22.00 – 6.79 – 494.47 740.50

Share in Jointly Controlled Entities Total Reserves - This Year Total Reserves - 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

As at 31.03.2007 2657.02 1099.17 80.39 80.39 1825.71 2291.39 132.31 117.39 3125.00 3125.00 8400.64 7561.51 28.79 35.58 16117.55 14193.04 26391.27 18220.27 1711.87 950.71 44353.00 33481.41

735.00 30662.20 11038.88 8274.24

565.68 27577.29 1768.46 70.98

50710.32

29982.41

168.98 2443.07 35532.13 1470.04 627.93 410.41

158.59 1828.10 21777.87 2337.17 1038.67

40652.56

27140.40

Godrej Industries Limited – Consolidated Accounts SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.) SCHEDULE 5 : FIXED ASSETS

Rs. lac

ASSETS

GROSS BLOCK

As on 1.04.2006 Tangible Assets Land - Freehold - Leasehold Buildings Plant & Machinery Research Centre Furniture & Fixtures Office & Other Equipments Vehicles Trees Development Cost Intangible Assets Goodwill Trademarks Technical Knowhow Fees Software Assets Acquired Under Finance Lease Plant & Machinery Vehicles Share in jointly controlled entities TOTAL - This Year - Previous Year Capital Work in-Progress

Deductions/ Additions Adjustments

DEPRECIATION/IMPAIRMENT

As on 31.03.2007

Upto Deductions/ 31.03.2006 Adjustments

NET BLOCK

For the Year

Upto 31.03.2007

1137.67 246.38 11436.97 51698.40 150.39 1608.44 1187.65 1348.23 454.69

463.49 8.00 1793.70 3281.58 – 442.57 768.08 168.31 –

– 13.12 1935.64 1760.44 – 184.39 82.65 152.87 –

1601.16 241.26 11295.03 53219.54 150.39 1866.62 1873.08 1363.67 454.69

– 30.81 3051.14 24087.93 64.30 896.45 531.05 655.41 239.55

– – 200.30 888.25 – 67.83 33.41 92.12 –

– 2.92 353.17 2664.53 5.05 68.24 219.77 1.97 30.33

– 33.73 3204.01 25864.21 69.35 896.86 717.41 565.26 269.88

1601.16 207.53 8091.02 27355.33 81.04 969.76 1155.67 798.41 184.81

1137.67 215.57 8385.83 27610.50 86.09 712.01 656.60 692.82 215.14

1116.02 3509.72 200.00 718.89

487.53 (138.73) – 252.96

– 450.10 – –

1603.55 2920.89 200.00 971.85

182.73 1106.50 199.98 625.63

– 41.32 – –

172.86 235.66 – 74.97

355.59 1300.84 199.98 700.60

1247.96 1620.05 0.02 271.25

933.29 2403.22 0.02 93.26

494.42 312.04 2039.98 77659.89 67005.19 –

588.68 106.57 6641.42 14864.16 15946.86 –

0.41 169.58 44.99 4794.19 5292.16 –

1082.69 249.03 8636.41 87729.86 77659.88 –

22.63 176.56 1126.79 32997.46 32523.15 –

0.24 109.94 (3018.50) (1585.09) 3465.45 –

115.48 95.22 400.62 4440.79 3939.76 –

137.87 161.84 4545.92 39023.35 32997.46 – TOTAL

944.82 87.19 4090.49 48706.51 – 2604.42 51310.92

473.43 135.48 912.10 44663.03 – 2274.89 46937.92

1. Buildings Plant & Machinery and Research Centre at Vikhroli Factory were revalued on 30th June 1992 on the basis of a Valuation Report submitted by professional valuers. 2. Depreciation for the year includes Rs.160.45 Lac (Previous Year Rs.168.43 Lac) being depreciation on revalued component of the fixed assets. 3. Accumulated depreciation includes impairment loss of Rs. 707.90 lac on plant & machinery in an earlier year. 4. Capital work-in-progress is net of impairment loss of Rs. 204.10 lac provided on an infructuous asset under construction.

As on As on 31.03.2007 31.03.2006

Annual Report 2006-2007

SCHEDULE 6 : INVESTMENTS Investee Company/Institutions

FACE VALUE (Rs.)

Qty As on 01.04.06

LONG TERM INVESTMENTS - At cost A. TRADE INVESTMENTS Equity Shares : Fully Paid Bharuch Eco-Aqua Infrastructure Ltd. 10 440000 Preference Shares : Partly paid Godrej Commodities Ltd. (Formerly Godrej Foods Limited) 10 5000000 (8% Redeemable Cumulative Preference Shares, 2012) B. OTHER INVESTMENTS : Fully paid unless stated otherwise Equity Shares Quoted : Godrej Consumer Products Ltd. 1 26936108 Others – – Unquoted : Associate Companies Godrej Upstream Ltd. 10 9000000 Swadeshi Detergents Ltd. 10 209370 Creamline Diary Products Ltd 10 2390911 Creamline Nutrients Ltd. 10 351352 Polychem Hygine Laboratories Private Limited 10 455000 Personalitree Academy Ltd. 10 389269 Other Companies Avestha Gengraine Technologies Pvt Ltd. 10 175744 Compass Connections Ltd. £0.25 13692 Gharda Chemicals Ltd. 100 114 Tahir Properties Ltd. (Partly paid) 100 25 KaROX Technologies Ltd. 10 250000 Krithika Agro Farm Chemicals & Engg.Inds.Ltd. 10 7600 Common Stock/Membership Units : Unquoted : CBay Systems Ltd. ( refer note 6) $0.01 4586073 Boston Analytics LLC $1.00 781250 Verseon LLC - Class A Units $1.90 – Newmarket Limited Preference Shares : Unquoted : Tahir Properties Ltd. (Class - A) (partly paid) 100 25 Unquoted : Avestha Gengraine Technologies Pvt. Ltd. (redemed during the year) 10000000 3 Government Securities Unquoted : National Saving Certificate 92000 – Indira Vikas Patra 2000 – Optionally convertible Loan notes : Unquoted : Compass Connections Ltd. $1000 – Shares in Co-operative Society : Fully Paid Unquoted : The Saraswat Co-op Bank Ltd. 10 1000 Sachin Industrial Co-op.Society 500 3 Investment in the capital of Partnership Firm : View Group LP – – CURRENT INVESTMENTS Units of Mutual Fund : Unquoted Templeton India Treasury Fund – – Kotak Liquid Scheme – – Prudential ICICI Liquid Plan – – Grindlays Floating Rate Fund – – Magnum Institutional Income Fund - Savings Growth – – LIC Mutual Fund - Growth plan Less : Provision for diminution in value of Investments Aggregate book value of Investments Quoted Unquoted Market Value of Quoted Investments NOTES:

NUMBER Acquired Sold/Adj. During During Year Year

Qty As on 31.03.07

–

440000

–

5000000

– –

3800000 –

23136108

– – – – – –

– – – _ –

34500 – – – – –

Notes

AMOUNT As on As on 31.03.07 31.03.06 Rs. lac Rs. lac

44.00

(b)

450.00

(d)

9216.28 0.92

10730.01 1.19

9000000 209370 2390911 351352 455000 389269

241.06 55.29 1162.26 120.95 174.91 68.24

457.06 50.28 1014.23 95.96 170.98 68.24

– – – – – 7,600

210,244 13692 114 25 250000 –

883.30 159.17 11.57 0.01 100.50 –

767.13 159.18 11.57 0.01 100.50 0.76

– 286504 1315789

– –

4586073 1067754 1315789

4497.62 650.48 1142.34 883.36

5430.14 258.76 1142.34 –

–

0.02

–

300.00

– –

1.37 0.01

–

83.19

–

– –

– 3

1000 –

0.10 –

0.20 0.02

–

0.01

1368.01

– – – – –

– – – – – 2.73 19948.32 (575.81) 19372.51

160.29 63.53 2.06 1800.00 23.00 25554.21 (569.89) 24100.96

9216.28 10156.22 19372.51 34021.65

10730.01 14254.31 24984.32 48875.57

(a) (b)

(b)

(a) The said shares have been refused for registration by the investee company. (b) Uncalled Liability on partly paid shares - Tahir Properties Ltd. - Equity - Rs. 80 per share. - Godrej Commodities Limited - Preference - Rs. 1 per share. - Tahir Properties Ltd. - Prefernce - Rs. 30 per share. - Godrej Global Solutions Ltd - Equity - Rs. 3 per share on 49,71,429 shares. - Godrej Hicare Ltd - Equity - Rs. 6 per share on 30,40,000 shares. (c) Reduction in number of shares of GGSL represents reduction in equity capital of the company under sections 101to 105 of the Companies Act, 1956 as per the order of the High Court of Bombay. (d) Face value of Rs. 4/- per share divided into 4 shares of Rs. 1/- per share each. (e) The compulsory convertible preference shares are convertible into equity shares on 28th Jun 2007.

Godrej Industries Limited – Consolidated Accounts 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 1533.89 Raw materials 15567.90 Construction work-in-progress 11705.95 Work-in-progress 6893.70 Finished Goods 7444.42 Share in jointly controlled entities 3216.55 46362.41 SCHEDULE 8 : SUNDRY DEBTORS (Unsecured) Debts outstanding over six months Considered good Considered doubtful Other debts Considered good Less: Provision for doubtful debts Share in jointly controlled entities 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

3809.74 559.73 4369.47 40313.62 44683.09 (559.73) 44123.36 1516.68 45640.04

2115.24 522.90 2638.14 20450.21 23088.35 (522.90) 22565.45 487.24 23052.69

Rs. lac SCHEDULE 11 : CURRENT LIABILITIES Acceptances 4755.26 Sundry creditors 32875.55 Advances from customers 22997.39 Sundry deposits 2256.61 Investor Education & Protection Fund Unclaimed Dividend 47.74 Unpaid Matured Deposits 15.69 Interest accrued on above – Other liabilities 6985.54 Interest accrued but not due on loans 185.45 Share in jointly controlled entities 4730.65

Rs. lac 3843.20 27983.12 9174.61 1865.90 46.29 65.15 0.20 4504.59 168.21 1627.41

74849.87

49278.68

2918.52 496.00 2694.26 327.67 6436.45

2658.37 473.16 2869.40 127.05 6127.98

1602.68

2219.46

59.52 1662.20

– 2219.46

SCHEDULE 12 : PROVISIONS Proposed dividend Provision for tax on distributed profits Provision for retirement benefits Share in jointly controlled entities SCHEDULE 13 : MISCELLANEOUS EXPENDITURE

525.58

218.84

3391.39 2704.19 2260.41 8881.57

2917.49 5295.11 675.15 9106.59

SCHEDULE 10: LOANS AND ADVANCES (Unsecured and considered good unless otherwise stated) Loans and Advances (refer note 10) 8572.37 Loan to GIL ESOP Trust 2972.00 Advances recoverable in cash or in kind or for value to be received (net of provision for doubtful advances) 10075.63 Intercorporate deposits Associate companies Others Deposits and balances with Customs & excise authorities Others Advance payment of taxes (Net of provision for tax) Share in jointly controlled entities

1594.27 12829.31 2316.09 3607.67 7134.83 1018.80 28500.97

This Year Previous Year

(To the extent not written off or adjusted) Deferred revenue expenditure -

Voluntary retirement compensation

Share in jointly controlled entities SCHEDULE 14 : OTHER INCOME Interest :

4152.72 742.00 8642.30

35.00 100.00

41.80 –

1637.30 1736.23

850.90 1834.65

893.79 1285.25

153.75 794.21

27307.58

17212.33

Debentures

Income tax refund

Deposits (refer note 15)

Dividend Profit on sale of fixed assets (net)

32.98

9.62

114.78

140.83

367.17

486.54

1018.62

1237.33

570.15

373.81

4509.98

2299.64

–

364.89

Profit on sale of long-term investments (refer note 15) Provision for depletion in value of long term investments written back Bad debts recovered Miscellaneous income (refer note 15) Share in jointly controlled entities

650.00

–

1094.24

1253.00

314.69

154.07

8672.62

6319.73

Annual Report 2006-2007

SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.) This Year Previous Year Rs. lac Rs. lac

SCHEDULE 15 : MATERIALS CONSUMED AND COST OF SALES

Share in jointly controlled entities

Raw materials consumed : Stocks at the commencement of the year 12829.30 Less: Stock adjustment for subsidiaries deleted (1085.55) Add : Purchases (net) 139556.76 151300.51 Less : Stocks as at the close of the year 15601.13 Raw Materials consumed during the year 135699.38 Cost of Sales - Property Development Stocks at the commencement of the year 2316.09 Add : Construction Expenditure during the year 16988.31 19304.40 Less : Stocks as at the close of the year 11720.44 7583.96 Purchase of goods for resale 19775.61 Share in jointly controlled entities 14728.49 177787.44

10306.42 – 125106.17 135412.59 12829.30 122583.29 1928.28 4640.33 6568.61 2316.09 4252.52 18085.57 5243.06 150164.44

SCHEDULE 16 : EXPENSES Salaries, wages and allowances 11586.17 Contribution to provident fund and other funds 704.40 Employee welfare expenses 912.27 Stores and spares consumed 1596.79 Power and fuel 7050.16 Processing charges 4196.49 Rent (refer note 15) 782.75 Rates and taxes 639.38 Repairs and maintenance - Machinery 850.61 - Buildings 654.99 - Other assets 440.79 Insurance 265.29 Freight 4298.57 Commission 2993.68 Discount 497.50 Advertisement and publicity 766.83 Sales promotion 586.61 Selling and distribution expenses 1471.37 Bad debts written off 358.65 Provision for doubtful debts and advances 186.12 Provision for depletion in the value of longterm investments – Excise duty on inventory change (61.38) Foerign Exchange loss 274.60 Miscellaneous expenses 6706.90 Share in jointly controlled entities 7220.70

10318.84

54980.24

46763.12

601.90 981.81 1242.06 5988.09 3795.24 728.76 560.80 1046.90 294.61 519.84 243.23 3535.04 3355.81 467.55 1465.11 303.84 1465.84 620.33 40.78 0.10 284.99 182.62 5654.87 3064.16

SCHEDULE 17 : INVENTORY CHANGE Stocks at the commencement of the year Finished goods Work-in-progress Share in jointly controlled entities Less: Stock adjustment for subsidiaries deleted Less: Stocks at the close of the year : Finished goods Work-in-progress

This Year Previous Year Rs. lac Rs. lac

7134.83 3607.67 638.35 11380.85 340.90

6892.88 1509.69 757.55 9160.12 -

7229.25 6893.70

7134.83 3607.67

(Increase) / Decrease in Inventory

1498.11 15621.06 (4581.11)

638.35 11380.85 (2220.73)

2841.09 1643.42 210.24 1323.44 6018.19

2289.97 441.92 190.10 1093.59 4015.58

–

265.47

25.17 0.01 736.43 138.80 900.41 5117.78 650.27 (20.89) 753.49

39.19 18.08 225.23 26.32 308.82 3441.29 602.05 457.69 27.41

6500.66

4528.44

(65.09) – – (65.09)

35.70 (112.50) 62.42 (14.38)

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 Other financial charges Foreign exchange (gain) / loss Share in jointly controlled entities

SCHEDULE 19 : PRIOR PERIOD ADJUSTMENTS Excess provision for Income tax Provision for pension payments Dividend for previous year

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. b) 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 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 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. c) Intangible Assets The group has evaluated the useful lives of the Intangible Assets – Goodwill, Trade marks, Non compete fees, Acquisition value of contracts, etc. based on the nature of business, growth rates and estimated discounted cash flows. The intangible assets are amortised over the estimated useful lives as follows. Particulars Goodwill

Estimated useful lives 8 – 10 years 59

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

Particulars Estimated useful lives Trade marks 8 – 15 years Non compete fees 7 – 8 years Acquisition costs of contracts 3 years Trees Development cost 15 years Computer Software 6 years d) Asset Impairment The group 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 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. e) Borrowing Costs Borrowing costs that are directly attributable to the acquisition/ construction of the underlying fixed assets are capitalised as a part of the respective asset, upto the date of acquisition/ completion of construction. f) Investments Long-term investments are carried at cost. Provision for diminution, if any, in the value of each long term investment is made to recognise a decline, other than of a temporary nature. The fair value of a long-term investment is ascertained with reference to its market value, the investee’s assets and results and the expected cash flows from the investment. Current investments are carried at lower of cost and fair value. g) 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. Construction work-in-progress is valued at cost. Construction work-in-progress includes cost of land, premium for development rights, construction costs, allocated interest and expenses incidental to the projects undertaken by the Company. h) 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. i) 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 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 60

currency at the rate of exchange prevailing at the time of making the original investment. j) Revenue Recognition 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 recognized on “Percentage of Completion Method” of accounting. As per this method, revenue in Profit and Loss Account at the end of the accounting year is recognised 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. 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. k) 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 in some subsidiary companies, where depreciation has been provided on the written down value method. The impact of the differing method of depreciation has not been ascertained but is not likely to be material. Computer hardware is depreciated over its estimated useful life of 4 years. Depreciation on assets acquired during the year is provided for the full accounting year and no depreciation is charged on the assets sold/discarded during the year, except in case of major additions and deductions exceeding rupees one crore in which case, proportionate depreciation is provided. 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. l) 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. m) Deferred Revenue Expenditure The compensation payable under the Voluntary Retirement Schemes, the benefit of which is expected to accrue in future is deferred over its payback period. The compensation is generally amortised over three to five years depending on the payback period.

Annual Report 2006-2007

SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.)

n) Hedging

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.

Import of crude palm oil by the Group 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.

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.

o) 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 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 unrealised 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.

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. 2.

The financial statements of the subsidiaries, joint ventures and associates used in the consolidation are drawn upto the same reporting date as of the Company i.e. year ended March 31, 2007, except in respect of Personalitree Academy Ltd. an associate company whose accounts for the year ended March 31, 2007 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. The accounts of Al Rahba International Trading Ltd. a joint venture company with Godrej Agrovet Ltd., Creamline Dairy Products Ltd, Creamline Nutrients Ltd. & Polychem Hygiene Laboratories Pvt. Ltd, associate companies have not been audited for the year ended March 31, 2007 as of date and have been consolidated on the basis of the accounts as certified by their respective management.

3. Information on subsidiaries, joint ventures and associates: (a) The subsidiary companies considered in the consolidated financial statements are: Sr. Name of the Company No. 1 2

Country of Percentage of Holding Incorporation This Previous Year Year

Godrej Agrovet Ltd. Goldmohur Foods & Feeds Ltd. (100% subsidiary of Godrej Agrovet Ltd.) Golden Feed Products Ltd. (100% subsidiary of Godrej Agrovet Ltd.) Godrej Acquafeed Ltd. (100% subsidiary of Godrej Agrovet Ltd.) Adhar Retailing limited (100% subsidiary of Godrej Agrovet Ltd.)

India India

70.30 % 70.30 %

57.80% 57.80%

India

70.30 %

57.80%

India

70.30 %

–

India

70.30 %

–

Godrej Industries Limited – Consolidated Accounts SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.) Sr. Name of the Company No. 6 7

13 14 15 16

17 18 19

Country of Percentage of Holding Incorporation This Previous Year Year

Godrej Properties Ltd. India Girikandra Holiday Homes & Resorts Ltd. India (100% subsidiary of Godrej Properties Ltd.) Godrej Realty Pvt. Ltd. India (51% subsidiary of Godrej Properties Ltd.) Godrej Waterside Properties Pvt. Ltd. India (100% subsidiary of Godrej Properties Ltd.) Godrej Developers Pvt. Ltd. India (100% subsidiary of Godrej Properties Ltd.) Godrej Real Estate Private Limited India (100% subsidiary of Godrej Properties Ltd.) Godrej Seaview Private Limited India (100% subsidiary of Godrej Properties Ltd.) Godrej Hicare Ltd. India Ensemble Holdings & Finance Limited India Godrej International Ltd., UK U.K. Godrej Global Mid-East FZE, UAE U.A.E. (100% subsidiary of Godrej International Ltd.) Godrej Beverages and Foods Limited India Godrej Global Solutions Ltd. India Godrej Global Solutions (Cyprus) Limited Greece (100% subsidiary of Godrej Global Solutions Ltd.) Godrej Global Solutions Inc. U.S.A. (100% subsidiary of Godrej Global Solutions Ltd.)

82.88%

i) ii)

42.27%

iii)

82.88%

i) ii)

–

82.88%

–

82.88%

–

85.91%

99.95% 100.00%

100.00%

vi)

vii)

Swadeshi Detergents Ltd. Godrej Upstream Ltd. (held by Godrej Global Solutions Ltd.) Personalitree Academy Ltd. (held by Ensemble Holdings & Finance Ltd.) Creamline Dairy Products Ltd. (held by Godrej Agrovet Ltd.) Creamline Nutrients Ltd. (held by Godrej Agrovet Ltd.) Polychem Hygiene Laboratories Pvt. Ltd. (held by Godrej Agrovet Ltd.) Compass Connections Limited

70.00% 100.00%

100.00%

India India

41.08% 40.43%

India

26.00%

India

26.00%

India

26.00%

India

26.00%

U.K.

–

20.74 %

The break-up of Investment in Associates is as under: Cost of Acquisition

– 100.00%

Country of Percentage of Holding Incorporation This Previous Year Year

4. The accounting policies of certain subsidiaries, joint ventures and associates especially regarding the method of depreciation, amortization 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. 5.

100.00%

Percentage of Ownership interest This Previous Year Year India 20.00% 20.00% 20.00%

20.00%

45.00%

45%

50.00%

49.00%

48.00% 48.00%

Swadeshi Detergents Ltd. (ii) Godrej Upstream Ltd. ( i i i ) Personalitree Academy Ltd. (iv) Creamline Dairy Products Ltd. ( v ) Creamline Nutrients Ltd. (vi) Polychem Hygiene Lab. Pvt. Ltd.

Rs. In Lac Goodwill Share in Provision Carrying included profits/ for cost of in cost of (loss) of diminution Investacquisition associates in the ments post value of acquisition investments

(i)

Country of Incorporation

Godrej SaraLee Ltd. Godrej SaraLee Bangladesh Pvt. Ltd. Bangladesh iii) Godrej SaraLee Sri Lanka Pvt. Ltd. Sri Lanka iv) Al Rahba International Trading Limited U.A.E. (held by Godrej Agrovet Ltd.) v) ACI Godrej Agrovet Pvt. Ltd. Bangladesh (held by Godrej Agrovet Ltd.) vi) Godrej Acquafeed Ltd. India (held by Godrej Agrovet Ltd.) vii) Godrej Beverages & Foods Ltd. India viii) Nutrine Confectionery Ltd India (100% subsidiary of Godrej Beverages and Foods Limited)

iv) v)

82.88%

Investments in Associates:

Sr. Name of the Company No.

82.88%

(b) Interests in Joint Ventures: Sr. Name of the Company No.

(c)

Total

191.34

91.48

(136.04)

55.30

–

902.25

95.27

(661.19)

–

241.06

68.24

Nil

110.28

42.84

(42.04)

950.16

364.53

212.44

87.84

33.89

33.11

162.75

88.99

12.16

2404.62

717.00

(581.56)

– 1162.60 –

120.95

–

174.91

123.54 1699.52

Contingent Liabilities This Year Previous Year 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 1544.09 ii) Customs Duty demands relating to less charge, differential duty, classification, etc. 856.94

Rs. lac

1537.41

844.53

Annual Report 2006-2007

SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.) This Year Previous Year Rs. lac

d) e)

iii) Sales Tax demand relating to purchase tax on Branch Transfer/ Non availability of C Forms, etc. at various levels 2154.74 iv) Octroi demand relating to classification issue on import of Palm Stearine and interest thereon 938.05 v) 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 1777.17 vii) Industrial relations matters under appeal 595.11 viii) Others 886.11 Guarantees issued by banks, excluding guarantees issued in respect of matters reported in (a) above 660.03 Guarantees given by the Company in respect of credit/guarantee limits sanctioned by banks to subsidiary and other companies 14121.10 Uncalled liability on partly paid shares/debentures 381.64 Share in Jointly Controlled Entities 329.11

Rs. lac

This Year Previous Year Rs. lac Rs. lac

512.37

844.46

182.23

1785.83 518.06 704.18

2062.14

15,269.59 673.97 207.02

This Year Previous Year Rs. lac Rs. lac

7. Capital Commitments : Estimated value of contracts remaining to be executed on capital account, to the extent not provided 435.92 Share in Jointly Controlled Entities 53.09

9. Deferred Tax: Major components of Deferred Tax arising on account of timing differences as at March 31, 2007 are:

688.61 2.48

8. Investments : CBay Systems Limited, USA (CBay USA) carried out an organizational restructuring in October 2005, consequent to which, all businesses of CBay group have been consolidated under CBay Systems Limited, India (CBay India), a wholly owned subsidiary. Under the scheme, the stockholders of CBay USA are entitled to receive one additional share of CBay India for every two stocks in CBay USA. The shares in CBay India were distributed to all stockholders except Indian Shareholders of CBay USA, pending Indian regulatory approvals. The shares of CBay India, pending distribution to Indian shareholders, are held in trust by CBay USA. In the meanwhile, CBay group decided on a further organizational restructuring, wherein CBay Systems Holdings Limited (“CBay BVI”), a company incorporated in the British Virgin Islands, would be the holding company of the CBay Group. As per the scheme the company is now entitled to four shares in CBay BVI for every share it was entitled to in CBay India. The company has been allotted the shares in CBay BVI on May 15, 2007.

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

351.00 327.44 306.91 156.00 242.35 1383.70

324.14 295.09 1338.33 77.00 346.20 2380.76

6312.18 – 189.16 6501.34 5117.64

6214.53 21.34 21.02 6256.89 3876.13

Net Deferred Tax Liability 10. Loans & Advances : Loans and Advances include Rs. 1,033 lac (Previous year Rs. 1033 lac) advanced by the Company to certain individuals against pledge, by way of deposit, of equity share of Gharda Chemicals Ltd. The Company 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. Gharda Cheicals Ltd. has in the meanwhile moved the Bombay High Court and the matter is awaiting hearing. Interest on the aforesaid loans and advances amounting to Rs. 315 lac was accrued upto March 31, 2000 and has been fully provided for, no interest is being accrued thereafter. The recoverability of the advance is contingent upon the transfer and/ or disposal of said shares. In the opinion of the management, the value of the said shares is greater than the amount of the loans and advances. 11. Employee Stock Option Plans : In December 2005, the Group had instituted an Employee Stock Option Plan (GIL ESOP) approved by the Board of Directors and the Shareholders, which provides for the allotment of 15,00,000 options convertible into 15,00,000 equity shares of Rs. 6 each to eligible employees of participating companies. In view of the sub-division of equity shares into face value of Re. 1 each, the total number of options stands automatically increased to 90,00,000 options convertible into 90,00,000 equity shares of Re 1 each. The scheme is administered by an independent ESOP Trust which purchases from the market shares equivalent to the number of options granted by the participating companies. The Group decided to extend the benefits of the ESOP scheme to other levels of management as approved by the Compensation Committee. During the year, in preparation to extend the scheme to other levels of management, the participating companies provided finance to the ESOP Trust and the ESOP Trust purchased 26,25,000 additional shares during the year. Options outstanding at the beginning of the year Options granted Less : Exercised Less : Forfeited/expired Options outstanding at the year end

No. of Options

Wt. average exercise price

21,00,000

65.39 (plus interest) – – –

– – – 21,00,000

65.39 (plus interest) 63

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

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 recognised 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 therefore being Nil. Had the fair value method of accounting been used, the employee compensation cost would have been Rs. 204 lac. (Previous year Rs. 204 lac). 12. Leases: a) The Group has entered into leave and licence agreements in respect of its commercial and residential premises. These are not non-cancellable and range between 12 months to 36 months and are renewable by mutual consent on mutually acceptable terms. Leave and licence arrangements being similar in substance to operating leases, the particulars of the premises under leave and licence arrangement are as under:

This Year Previous Year Details Purchase Sale Purchase Sale Total number of contracts entered during the year – – 2 2 Number of units (25 MT per unit) under above contracts – – 60 60 Future contracts not settled as on March 31, 2007 – – – – Number of units under above contracts – – – –

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

This Year Previous Year Rs. lac Rs. lac

Gross carrying amount of premises 1784.70 2857.79 Accumulated depreciation 892.97 995.81 Depreciation for the period 58.30 115.71 The total of future minimum lease payments under noncancellable operating leases for each of the following periods:

Period

Minimum future lease rentals

Jointly controlled entities Rs. Lac 43.97

Rs. Lac Within one year 553.8 Later than one year and not later than five years 1998.70 34.41 Later than five years 2806.32 1.55 Total 5358.82 79.93 Amount recognised during the year 435.06 106.64 c) Finance Leases: The Group 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, 2007, in respect of vehicles acquired under lease are as under: Period

Total minimum lease payments outstanding as on March 31, 2007 Rs. lac

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

13. a.

Unmatured Interest

Present value of minimum lease payments

Rs. lac

63.51

17.82

58.48

119.36 182.87

24.79 42.61

92.72 151.20

Hedging : Reserve Bank of India has permitted the Group to hedge its exposure on Crude Palm Oil on offshore exchanges to the extent of its imports. Accordingly, the Group 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:

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: This Year Previous Year Purchase Sale Purchase Sale 163

113

179

66.90 0.30

7.29 9.18

19.33 –

2.00 4.12

37.30 13.00 – 0.94

15.14 0.35

5.54 1.90

15.10 –

103.30 33.68 – 3.36 54

–

14. Turnover This Year Previous Year Turnover includes: Rs. lac Rs. lac i) Processing charges 1124.99 2003.93 ii) Export Incentives 345.20 554.42 iii) Licence fees and service charges 3910.14 2561.11 iv) Project/Development Management Fees 3121.31 767.40 v) Share in Jointly Controlled Entities 23818.59 9308.70 32320.23 15195.55

15. Exceptional Items This Year Previous Year Rs. lac Rs. lac i)

Included under Other Income - Profit on sale of long-term investments 4382.56 - Reversal of provision for claims payable on culmination of disputes – - Interest received on deposit placed against above claim on execution of decree – - Bad debt recovered 650.00 ii) Payment to Mumbai Port Trust for regularization of lease (included in Rent paid). – iii) Share in Jointly Controlled Entities (86.40)

2,119.81 175.00 307.00 – 89.00 –

16. Profit and Loss Account 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. 75.98 lac (Previous year Rs. 0.42 lac). The exchange difference included in the Profit and Loss Account is a loss of Rs. 253.71 lac (Previous year Loss of Rs. 669.94 lac). The exchange difference in respect of forward exchange contracts to be recognised in subsequent accounting periods is Rs. 27.02 lac (Previous year Rs. 24.88 lac).

Annual Report 2006-2007

SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.)

17. Earnings Per Share This Year a.

b. c.

Calculation of weighted average number of equity shares Number of shares at the beginning of the year Nos. 291851652 Number of equity shares outstanding at the end of the year Nos. 291851652 Weighted average number of equity shares outstanding during the year Nos. 291851652 Weighted average number of equity shares for the previous year adjusted for the share split into 6 shares of Re. 1 each Nos.291851652 Net profit after tax available for equity shareholders Rs. lac 5888.06 Basic and diluted earnings per share of Rs. 6 each Rupees 2.02

Previous Year

48542952

(ii) Other related parties with whom Company had transactions during the year Associate/Joint Venture Companies Godrej SaraLee Ltd. Godrej Beverages & Foods Ltd. Godrej Upstream Ltd Godrej Aquafeed Ltd. Nutrine Confectionery Comopany Limited

48542952

Key Mr. Mr. Ms.

291257712

Mr.

4899.77

Mr.

1.68

18. Related Party Disclosures a) Names of related parties and description of relationship:

Mr.

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

Mr.

Fellow Subsidiaries: Godrej Commodities Ltd. Godrej Infotech Ltd. Godrej Appliances Ltd. Godrej (Malaysia) Sdn Bhd Godrej (Singapore) Pvt. Ltd Mercury Mfg. Co. Ltd. J.T. Dragon Pte Ltd. Godrej (Vietnam) Co. Ltd.

Mr.

Management Personnel A. B. Godrej Chairman N. B. Godrej Managing Director T. A. Dubash Executive Director & President (Marketing) Mathew Eipe Executive Director & President (Chemicals) V. Banaji Executive Director & President (Group Corporate Affairs) M. P. Pusalkar Executive Director & President (Corporate Projects) A. Mahendran Managing Director (Godrej Saralee Ltd.) C. K. Vaidya Managing Director Godrej Agrovet Ltd.

Relatives Key Management Personnel Ms. N. A. Godrej Daughter of Mr. A.B. Godrej Mr. P. A. Godrej Son of Mr. A.B. Godrej Enterprises over which key management personnel excerise significant influence Godrej Consumer Products Ltd. Godrej Investments Pvt. Ltd. Bahar Agrochem & Feeds Pvt. Ltd. Godrej Holdings P. Ltd Lawkim Ltd. Cartini India Ltd.

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

Sale of Goods 110.67 Previous Year 20.17 Sale of Fixed Assets – Previous Year 0.05 Purchase of goods & equipment 153.27 Previous Year 30.77 Processing charges received – Previous Year – Commission received – Previous Year – Recovery of establishment & Other Expenses 20.60 Previous Year 1.48 Establishment & other exps. paid 1030.67 Previous Year 230.49 Interest received – Previous Year – Dividend income – Previous Year – Dividend paid 2485.80 Previous Year 1248.02 Remuneration – Previous Year – Purchase of Investments – Previous Year – Intercorporate Deposits Advanced / (Accepted) 0.01 Previous Year 0.42 Intercorporate Deposits Repayment received during the year – Previous Year – Balance Outstanding as on March 31, 2007 Receivables 78.71 Previous Year 1.42 Payables 94.85 Previous Year 2.81 Guarantees Outstanding – Previous Year – c)

Fellow Subsidiaries

Associate/ Joint Venture Companies

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

Total

– – – – 914.14 695.87 – – 2.50 2.50

22.97 12.50 – – 198.46 6.69 193.68 – 73.22 19.78

– – – – – – – – – –

982.10 976.74 21.64 264.19 719.98 1262.28 – – 15.98 23.15

1115.74 1009.41 21.64 264.24 1985.85 1995.61 193.68 – 91.70 45.43

0.47 12.52 16.39 10.50 – – 33.74 25.28 – – – – – –

360.22 229.64 8.72 14.03 – – 1174.64 536.25 – – – – 10142.25 –

– – – – – – – – 135.61 47.61 427.14 428.16 – –

– – – – – – – – 869.84 424.41 25.64 – – –

937.72 816.13 139.87 89.91 3.91 4.99 980.60 1007.66 – – – – –

1319.00 1059.77 1195.64 344.93 3.91 4.99 2188.98 1569.19 3491.25 1720.04 452.79 428.16 10142.25 –

– –

– (3.30)

– –

(1000.00) (10.00)

(999.99) (12.88)

– –

3.55 –

– –

12.80 –

16.35 –

617.89 – – – 1000.00 1000.00

54.68 18.54 3.04 42.60 1350.00 1350.00

– – – – – –

226.67 222.25 70.97 103.93 – –

977.95 242.21 168.86 149.34 2350.00 2350.00

The significant Related Party transactions are as under: Nature of Transaction This Previous Year Year Rs. Lac Rs. Lac Sale of goods - Godrej Consumer Products Ltd. Sale of fixed assets - Godrej Consumer Products Ltd. Purchase of goods & equipment - Godrej & Boyce Mfg. Co. Ltd. - Godrej Beverages & Foods Ltd. - Godrej Consumer Products Ltd. - Godrej Commodities Ltd. Processing Charges received - Godrej Beverages & Foods Ltd. Commission received - Godrej Consumer Products Ltd. - Godrej Beverages & Foods Ltd. - Godrej Upstream Ltd. Recovery of establishment & other expenses - Godrej Consumer Products Ltd. - Godrej Saralee Ltd. - Godrej Beverages & Foods Ltd.

Rs. lac

982.10

890.83

21.64

264.19

40.51 112.76 720.96 909.67

– – 1262.28 692.34

193.68

–

15.98 47.26 25.96

23.15 – 19.78

936.66 211.65 142.59

815.74 229.64 –

Establishment & other exps paid - Godrej & Boyce Mfg. Co. Ltd. - Godrej Consumer Products Ltd. Interest received - Swadeshi Detergents Ltd. Dividend income - Godrej Consumer Products Ltd. - Godrej Commodities Ltd. - Godrej SaraLee Ltd. Dividend paid - Godrej & Boyce Mfg. Co. Ltd. Remuneration to Key Management Personnel - Mr. N.B. Godrej - Ms. T. A. Dubash - Mr. Mathew Eipe - Mr. V.F. Banaji - Mr. M.P. Pusalkar - Mr. A. Mahendran - Mr. C.K. Vaidya Remuneration to Relatives of Key Management Personnel - Mr. Pirojsha Godrej - Ms. Nisaba A. Godrej Purchase of Investments - Godrej Upstream Ltd. - Godrej Beverages & Foods Ltd. Intercorporate Deposits Advanced/(Accepted) - Goderj Investments Ltd.

This Year Rs. Lac

Previous Year Rs. Lac

1017.21 87.14

228.68 89.66

3.91

4.99

980.60 33.74 1174.64

1007.66 – –

2485.80

1248.02

85.66 54.20 64.00 69.55 47.24 39.36 67.14

82.11 50.57 62.56 77.07 48.93 30.23 67.08

5.73 19.92

4.77 –

902.25 9240.00

– –

(1000.00)

–

170.77 178.82

659.13 401.48

194.53 100.05

950.25 502.00

11118.72

11.98 30.06

7132.86

7725.44

– –

–

39984.58

7078.78

7078.78 5066.75 12145.53 (5066.75) 7078.78

3557.39 0.00

44.86

29363.30

3496.44

3496.29 1078.61 4574.90 (1078.61) 3496.29

6345.57 381.87

34820.42

47616.97

2014.27

95395.84 280.24 95676.08 (280.24) 95395.84

10229.32 915.18

5756.06

28095.60

1385.97

46107.60 4394.19 50501.79 (4394.19) 46107.60

(78.09) 4967.24 (67.47) 4899.77

24.56

(404.37) 5888.07

(14.38) 5045.33

(65.09) 6267.88

6292.44

15071.60 – (2928.29) (4528.44) 7614.87 (2555.16)

210616.91 7750.69 218367.60 (7750.69) 210616.91

(4829.53) (6500.66) 7602.16 (1269.19)

18932.35

246569.71 7503.32 254073.03 (7503.32) 246569.71

Total

11967.63 3755.53

22569.77 3766.77

66148.26 53883.02 120031.28

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 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. Veg oils segment includes the business of refined vegetable oils and vanaspati. Beverages and Foods segment includes fruit and vegetable puree, pulp, juices and fruit beverages. Estate segment comprises the business of developing commercial & residential property and giving premises on leave and licence basis. Household Insecticides segment includes the business of household & environmental pest control solutions. Finance & Investments includes investments in subsidiaries, associates companies and ther investments. Others includes Medical Diagnostics, Agri Inputs, Integrated Poultry, Oil Palm Plantations and energy generation through windmills.

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.

162431.20

228177.87

Total

Notes:

This Year Previous Year 222530.91 158380.95 5646.96 4050.25

210616.91

India Outside India

Carrying Amount of Segment assets

246569.71

116.02 154.06

3436.97

17874.13

(740.24)

782.92 – 782.92 – 782.92

Previous Year

Total

297.77 239.82

5330.28

4553.76

215.49

13564.30 104.18 13668.48 (104.18) 13564.30

This Year

This Year Previous Year 194896.09 186840.48 51673.62 23776.43

8.07 53.68

13355.60

6619.80

1312.34

11176.46 – 11176.46 – 11176.46

Previous Year

(Rs. lac) Total

India Outside India

Information about Secondary Business Segments Revenue by Geographical markets

831.63 518.75

206.83 138.71

7276.38 1784.09

41500.44

20137.20

1751.72

13564.51 1.78 13566.29 (1.78) 13564.51

This Year

Others

162431.20

423.86

46498.30

3613.43

9151.15 177.15 9328.30 (177.15) 9151.15

Previous Year

Finance & Investments This Previous Year Year

228177.87 339.00

701.03

6392.04

15819.47 468.54 16288.01 (468.54) 15819.47

This Year

Beverages & Foods

120928.22 59978.15 180906.37

16100.77

8936.61

19897.28

730.00

(342.91)

21115.02 1.53 21116.55 (1.53) 21115.02

Previous Year

Household Insecticides This Previous Year Year

Segment Liabilities 18882.75 Unallocated Liabilities Total Liabilities Total Cost incurred during the year to acquire segment assets 3681.76 Segment depreciation 2123.73

18497.48

(322.33)

5085.69 – 5085.69 – 5085.69

This Year

Estate & Property Development This Previous Year Year

Total Assets

Segment Assets Unallocated Assets

10413.58

1586.22

67609.76 2099.21 69708.97 (2099.21) 67609.76

Previous Year

Vegoils

153409.94 9021.26

44336.13

54217.96

1261.72

38975.85 1479.68 40455.53 (1479.68) 38975.85

This Year

Animal Feed

223955.32 4222.55

4760.35

540.66

51177.71 0.00 51177.71 – 51177.71

(A) Revenue External Sales 57085.27 Intersegment Sales 102.15 Total Sales 57187.42 Less: Intersegment Sales (102.15) Total Revenue 57085.27

(B) Results Segment result before interest, exceptional items and tax Exceptional items Unallocated expenses Interest Expense (net) Profit before tax Taxes Add/(Less) prior period adjustments Profit after taxes Share of profit 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

SCHEDULES FORMING PART OF THE CONSOLIDATED ACCOUNTS (contd.)

Annual Report 2006-2007

Godrej Industries Limited â&#x20AC;&#x201C; Consolidated Accounts Statement regarding Subsidiary Companies pursuant to Section 212 of the Companies Act, 1956 1. Name of the Company

2. The Company's interest in the subsidiaries as on March 31, 2005 a. Number of Equity Shares Total Number of Shares b. Face Value c. Extent of Holding 3. Net aggregate profit/(Loss) of the subsidiary company so far 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

Godrej Agrovet Limited

Godrej Properties Limited

Ensemble Godrej Godrej Holdings International Global & Finance Limited Solutions Limited

7112956 10118752 10 70.29%

5264645 6444545 10 81.69%

3770160 3774160 10 99.89%

Rs. lac

(1,627.45)

648.71

31.09

72,799.00

2,712.48

4,340.00

2,436.74

1,446.48

(519.34)

2,384.08

1,719.63

Nil

Godrej Hicare Solutions

Golden Feed Products

Godrej Global MidEast FZE

6647100 7900000 ÂŁ1(US$1.52) 10 10 100% 99.94% 84.14%

(See note

6 below)

7 below)

2605000 13602260 2605000 13610606

US$

Rs. lac

27,800 (182.42)

153.44

Nil

2,458,697 (169.25)

N.A

1,134,828

N.A

Nil

Notes: 1 The Financial Year of all subsidiary companies have ended on March 31, 2007. 2 76,795 Equity Shares of Rs.10 each fully paid up in Godrej Properties Ltd. are held by Ensemble Holdings & Finance Ltd., a subsidiary of the Company. 3 4,000 Equity Shares of Rs.10 each in Ensemble Holdings & Finance Ltd., are held by Godrej Agrovet Ltd., a subsidiary of the Company. 4 8,340 equity shares of Rs.10 each in Godrej Global Solutions Ltd. are held by Ensemble Holdings & Finance Ltd., a subsidiary of the Company. 5 4,800 Equity Shares of Rs.10 each in Godrej Hicare Ltd. are held by Ensemble Holdings and Finance Ltd., a subsidiary of the Company. 6 50,000 Equity Shares of Rs. 10 each fully paid up in Golden Feed Products Ltd. (representing 100% of the Share Capital) are held by Godrej Agrovet Ltd., a subsidiary of the Company. 7 5 Ordinary Shares of US$ 2,50,000 each fully paid up in Godrej Global MidEast FZE. (representing 100% of the Share Capital) are held by Godrej International Ltd., a subsidiary of the Company. 8 18,38,170 equity shares of Rs.10 each fully paid up in Goldmohur Foods & Feeds Ltd. (representing 100% of the share capital) are held by Godrej Agrovet Ltd, a subsidiary of the Company. 9 500 equity shares of the face value of Rs.1000 each fully paid up in Girikandra Holiday Homes and Resorts Ltd. ( representing 100% of the share capital)are held by Godrej Properties Ltd., a subsidiary of the Company. 10 510000 equity shares of the face value of Rs.10 each fully paid up in Godrej Realty Pvt. Ltd. are held by Godrej Properties Ltd., a subsidiary of the Company. 11 50000equity shares of the face value of Rs.10 each fully paid up in Godrej Waterside Properties Pvt. Ltd. ( representing 100% of the share capital)are held by Godrej Properties Ltd., a subsidiary of the Company. 12 1000 equity shares of the face value of US 1 cent each fully paid up in Godrej Global Solutions Inc. ( representing 100% of the share capital)are held by Godrej Global Solutions (Cypurs) Ltd., a sub-subsidiary of the Company. 13 26240229 equity shares of the face value of USD 1 each fully paid up in Godrej Global Solutions (Cyprus) Ltd. ( representing 100% of the share capital)are held by Godrej Global Solutions Ltd., a subsidiary of the Company. 68

Annual Report 2006-2007

Goldmohur Girikandra Foods & Holiday Feeds Homes & Limited Resorts Limited

Godrej Realty Pvt. Ltd.

Godrej Waterside Properties Pvt. Ltd

Godrej Global Solutions Inc.

Godrej Global Solutions (Cyprus) Ltd.

Aadhaar Retailing Ltd.

Godrej Aquafeed Ltd.

(see note

Godrej Developers Pvt. Ltd

Godrej Real Estate Pvt. Ltd.

Godrej Sea View Properties Pvt. Ltd.

(see note

(see note (see note

(see note

13 below) 14 below) 15 below)

16 below) 17 below)

18 below)

(see note

8 below)

9 below)

10 below)

11 below) 12 below)

14 50,000 Equity Shares of Rs. 10 each fully paid up in Aadhaar Retailing Ltd. (representing 100% of the Share Capital) are held by Godrej Agrovet Ltd., a subsidiary of the Company. 15 50,000 Equity Shares of Rs. 10 each fully paid up in Godrej Aquafeed Ltd. (representing 100% of the Share Capital) are held by Godrej Agrovet Ltd., a subsidiary of the Company. 16 500 Equity Shares of Rs. 10 each fully paid up in Godrej Developers Pvt Ltd. (representing 100% of the Share Capital) are held by Godrej Properties Ltd., a subsidiary of the Company. 17 500 Equity Shares of Rs. 10 each fully paid up in Godrej Real Estate Pvt Ltd. (representing 100% of the Share Capital) are held by Godrej Properties Ltd., a subsidiary of the Company. 18 500 Equity Shares of Rs. 10 each fully paid up in Godrej Sea View Properties Pvt Ltd. (representing 100% of the Share Capital) are held by Godrej Properties Ltd., a subsidiary of the Company. A.B. Godrej Chairman

N.B. Godrej Managing Director

M. Eipe Executive Director & President (Chemicals)

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

S.K. Bhatt Executive Vice President (Corporate Company Secretary

V. Srinivasan Executive Vice President (Finance & Estate)

Mumbai, May 25, 2007

NOTES

GODREJ INDUSTRIES LIMITED

SUBSIDIARIES' ACCOUNTS 2006-2007

Godrej Agrovet Limited DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2007 To The Shareholders

NATURE'S BASKET:

Your Directors have pleasure in submitting their Report along with the audited Accounts for the financial year ended on March 31, 2007.

Your Company's initiative in retailing of gourmet foods also witnessed good growth with 5 more Nature's Basket stores being opened during the year under review taking the total number to 8. The sales from these stores has doubled from Rs. 6.4 crores to Rs. 12.9 crores. Your Company is repositioning Nature's Basket with new categories like wines, boulangerie, cheese and meat delis, etc. being added.

Financial Results Your Company's performance during the year as compared with that during the previous year is summarised below:For the year

For the year

ended

31/3/2007

31/3/2006

PLANTATIONS:

Rs. lac

71285.18

60555.90

Oil Palm The Oil Palm Division grew revenue by 35% and profit by 45%. The capacity of your Company's Palm Oil Mill at Eluru, Andhra Pradesh has been expanded to 20 MT/hr of FFB, expandable to 30 MT/hr of FFB with marginal additional equipment. An MOU has been signed with Government of Orissa for Oil Palm Development in that State. Additional area of over 3800 HA has been brought under Oil Palm Cultivation. The total area under Oil Palm Cultivation is 12,300 HA.

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

372.66 97.64 275.02 2984.58

761.23 78.70 682.53 2696.74

Jatropha With encouragement and vigorous support from the Government of Mizoram, Jatropha Cultivation has been started in the state of Mizoram. In the very first year, about 5000 HA has been brought under Jatropha cultivation in that state.

Total

3259.60

3379.27

Your Company has ambitious plans for covering larger areas under Oil Palm as well as Jatropha.

975.27 – 136.78 28.5

– 284.75 39.94 70.00

Balance Carried Forward to Balance Sheet

2119.05

2984.58

Total

3259.60

3379.27

Total Income

Appropriations: Interim Dividend Final Dividend Tax on Dividend General Reserve

PLANT BIOTECH BUSINESS:

Review of Operations During the year under review, a Joint Venture was formed with Gold Coin Group of Singapore. Your Company's shrimp feed business has been transferred to this Joint Venture operating in the name and style of Godrej Gold Coin Aquafeed Limited. The JV company has also taken over the shrimp feed business of Golden Feed Products Limited as well as Gold Coin Group in India. The year under review presented many challenges for your Company. Avian Influenza continuing in the initial months of the Financial Year adversely impacted the performance of your Company. Additionally the high raw material prices put severe pressure on the profitability. The foray into retailing, started by your Company witnessed good expansion during the year under review. However, this initiative being in growth mode has impacted the profitability for the year under review. The impact of the above mentioned factors resulted in profitability declining from Rs. 683 lac to Rs. 275 lac. The total income smartly grew from Rs. 60,556 lac to Rs. 71,285 lac. The business-wise performance is reviewed hereunder: ANIMAL FEEDS: Avian Influenza which was detected in some parts of India in February '06 adversely impacted the Animal Feeds Business. The industry witnessed a degrowth during the year under review. While your Company's performance was impacted during the first half of the year under review, your Company did well to regain its volume and market share in the second half of the year under review. Unprecedented price increases in some of the key raw materials such as maize, impacted the margins adversely. Your Company tried to mitigate this pressure on the bottom line by stepping up its R & D efforts and focusing on various cost saving opportunities. Use of various enzymes and additives which helped in saving substantial cost are a result of these efforts. INTEGRATED POULTRY BUSINESS: The Poultry Business too was adversely impacted by the Avian Influenza. However, with no further outbreak reported during the year, consumer confidence has now been restored. The Poultry Processing Plant at Bangalore has been replaced by a modern, higher capacity plant designed to cater to the requirements of the most demanding customers. A range of frozen Ready to Eat and Ready to Cook vegetarian as well as chicken based products has been launched under the brand name "Yummiez". The "Yummiez" range of products has been received well by the consumers. AGRICULTURAL INPUTS: The Agri Inputs Division has reported an excellent performance with 20% growth in profit. Some of our high contribution products have witnessed good volume growth during the year under review despite the Agri Inputs Industry witnessing a degrowth. Your Company's Agri Exports Division too witnessed a good growth with sales growing by 121% over the previous year. The agricultural exports have expanded both in width and depth with newer territories and product categories being added during the year under review. AADHAAR: In the Financial Year 2006-07 Godrej Aadhaar - the agri services cum retail initiative of your Company opened 20 new outlets taking the total count to 39 outlets covering retail area of over 10,000 sq. met. The Aadhaar outlets have been modified to give a refreshing look and an attractive ambience - factors considered very important for retail. For their Visual Merchandise & Retail Design (VM & RD) work for Godrej Aadhaar, the design agencies have won national level awards from independent trade organizations. Your Company also expanded its Strategic Alliances. Some of the alliance partners who have joined hands with Godrej Aadhaar are Apollo Hospitals, ICICI Prudential Life Insurance, Bajaj Allianz Life Insurance, Agri Insurance Company, HDFC Bank, John Deere Tractors, Eicher Motors and Western Union Money Transfer Service. All the partners have already started offering their own products and services to customers of Godrej Aadhaar. Your Company has also tied up with petroleum companies like HPCL and BPCL for petro-format Aadhaar outlets - branded as "Aadhaar Suvidha". Keeping in mind the core objective of serving the farmer community of the country Godrej Aadhaar has launched Crop Improvement Programmes (CIPs). These are aimed at ensuring a much higher crop yield and farm productivity to the members of the CIPs.

The Plant Biotech Division has been expanding its operations of Banana plants in the states of UP and Bihar. Yield improvement program of sugarcane is going on well and is expected to be replicated in newer territories. FINANCE AND INFORMATION SYSTEMS: Your Company was able to procure funds at very competitive pricing in spite of rising interest rate scenario due to efficient treasury operations. Your Company continues to enjoy the apex rating of A1+ from ICRA for it's Commercial Paper Programme of Rs. 15 crore. ICRA had in the previous year put your Company' rating under "rating watch with developing implication". During the year, ICRA removed the rating from "rating watch with developing implication" and confirmed the A1+ rating. During the year, your Company has embarked on implementation of an ERP solution (SAP - IS Retail) for it's retail businesses. IT continues to play a crucial role in the operations of your Company. OTHER INITIATIVES: Your Company's Windmill Power Generation Project at Dhule, Maharashtra has been approved by United Nations Framework Convention on Climate Changes (UNFCCC) under the Clean Development Mechanism (CDM) program, enabling your Company to obtain carbon credits for the units generated by the windmills. DIVIDEND Your Directors have declared an interim dividend for 2006-07 amounting to Rs.13.70 per share of face value of Rs. 10/- each, i.e. 137%. No final dividend is recommended. FIXED DEPOSITS Your Company has not accepted any public deposits during the financial year under review. ADDITIONAL CAPITAL AND HOLDING COMPANY Your Company issued 30,00,000 additional shares to Godrej Industries Limited (GIL) raising GIL's holding to 70.29%. Your Company continues to be a subsidiary of Godrej Industries Limited as defined under Section 4(1)(b) of the Companies Act, 1956. SUBSIDIARY COMPANIES Your Company continues to be the holding Company of Goldmohur Foods and Feeds Ltd. (GFFL), Golden Feed Products Ltd., (GFPL). Your Company has sold its shareholding in Krithika Agro Farm Chemicals and Engineering Industries Private Limited (Krithika) during the year under review. Consequently, Krithika ceases to be a subsidiary of your Company. During the year, your Company has promoted following new wholly owned subsidiary Companies a) b)

Aadhaar Retailing Limited (ARL) Godrej Aquafeed Limited (GAL)

The audited Balance Sheets of GFFL, GFPL, ARL and GAL as at March 31, 2007 together with their audited Profit & Loss Accounts, Directors' Reports and Audtors' Reports are attached to the Balance Sheet and Profit & Loss Account of your Company. JOINT VENTURES Your Company's Joint Ventures in Bangladesh and United Arab Emirates, namely, ACI Godrej Agrovet Pvt. Ltd. and Al Rahba International Trading LLC, have also been impacted by the Avian Influenza. However, the performance of both theses joint ventures has improved considerably in recent months As mentioned elsewhere in this report, your company has formed a joint venture with the Gold Coin group, Singapore to operate in the aqua feed business in India. The aqua feed business of your company alongwith the aqua feed business of Golden Feed Products Limited and Gold Coin group in India has been transferred to the joint venture company, Godrej Gold Coin Aquafeed Limited. The joint venture, Godrej Gold Coin Aquafeed Limited (GGCAL), operated only for a few months in the year under review. 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 Mr. A. B. Godrej, Mr. C. K. Vaidya and Mr. Amit Choudhury, the 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 reappointment.

Annual Report 2006-2007 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.

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;

The following Directors are the Members of the Audit Committee: -

(1) (2) (3)

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.

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

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 and annual financial statements, standard accounting principles, Risk Management policies, etc. The Board of Directors has since accepted the recommendations of the Audit Committee.

HUMAN RESOURCES

REMUNERATION COMMITTEE

PARTICULARS OF EMPLOYEES

Pursuant to the provisions of Schedule XIII to the Companies Act, 1956, your Company has constituted Remuneration Committee of the Board of Directors to approve the payment of remuneration to the Managerial Personnel.

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).

In spite of high churn experienced by most corporates in India, your Company has been able to retain key 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.

The following Directors are the Members of the Audit Committee: (1) (2) (3)

For and on behalf of the Board of Directors

Mr. K. N. Petigara - Chairman Dr. S. L. Anaokar - Member Mr. Amit Choudhury - Member

N. B. Godrej Chairman

Mumbai, May 24, 2007.

RESPONSIBILITY STATEMENT continuously carried out. Some of the key measures undertaken are follows :-

ANNEXURE ‘A’

(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)

II.

The Company's expenditure on R&D is given below: Expenditure on R & D

Conservation of Energy (a) (b) (c) (d)

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)

ENERGY CONSERVATION AND TECHNOLOGY INNOVATION MEASURES UNDERTAKEN DURING 2006-07 AT PALM OIL MILL, CH.POTHEPALLI: Sl. Area No.

Equipment

1. 2. 3. 4.

Decanter water pump Replaced 5 HP motor with 3 HP Sludge day tank pump Replaced 5 HP motor with 2 HP Sludge pit pump Replaced 3 HP motor with 2 HP Tube lights Replaced 40 W tube light with 36 W

CPO Mill CPO Mill CPO Mill Lighting

Conservation measures

Total saving

Use of various enzymes and additives helped in saving substantial costs in particularly broiler feeds.

Savings per annum

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

Rs. 6200/Rs. 9400/Rs. 3100/Rs. 7000/-

– 100.78 100.78 0.15%

– 90.31 90.31 0.15 %

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.

Rs.25700/-

II.

Foreign exchange used

Replacement of 40 W tube light with 36 W fluorescent candle lamps has resulted in power saving.

III.

Foreign exchange earned

During the year, most of the boilers which were using LDO as fuel were replaced by more efficient Furnace oil based/solid fuel based boilers to help in saving energy and costs.

2006-2007 Rs. lac

2005-2006 Rs. lac

1460.28

1582.48

114.93

108.03

For and on behalf of the Board of Directors

N. B. Godrej Chairman

Technology Absorption, Adaptation and Innovation During the year under review, in-house research in quality systems and standards was

2005-2006 Rs. lac.

Foreign Exchange earnings and outgo

2006-2007 Rs. lac

Mumbai, May 24, 2007.

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

profitability of the joint ventures being non-quantifiable at this stage, we are unable to determine the quantum of the possible diminution in the value of these investments /advances.

We have audited the attached Balance Sheet of Godrej Agrovet Limited, as at March 31, 2007 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. 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.

As stated in Note 6 of Schedule 15, during the current year, the Company has changed its accounting policy with respect to depreciation on Staff quarters, Furniture & Fixtures, Office & Other equipments and Vehicles to Straight line method at the rates prescribed in Schedule XIV to the Companies Act, 1956, from Written down method followed earlier. Computer hardware is being depreciated over a period of four years against 16.31% as per Straight line method earlier. Consequently excess depreciation for the earlier years amounting to Rs. 23,287 thousand has been netted off against depreciation for the year. Had there been no change in the method / rate of depreciation, the charge for the year would have been higher by Rs. 3,993 thousand. Consequently the Net Block of Fixed Assets and Reserves and Surplus are higher by Rs. 27,280 thousands

As referred to in Note 7 of Schedule 15, investments in joint ventures aggregating to Rs. 38,368 thousands, exceeds the book value of the shares of those companies. The Company has also advanced Rs. 40,805 thousands to those companies. However, in view of the benefits of future

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, 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 and to the best of our information and according to the explanations given to us, the said financial statements read with the notes thereon, subject to (c) above, give the 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)

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

ii) iii) 5.

in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2007; and in the case of the Profit and Loss Account, of the profit for the year ended on that date, 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, 2007, and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2007 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

Place : Mumbai Dated : May 24, 2007

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants E.K. Irani Partner Membership No. 35646

Godrej Agrovet Limited 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 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.

ANNEXURE TO THE AUDITORSâ&#x20AC;&#x2122; REPORT Referred to in paragraph (3) of our report of even date. 1)

(a) (b)

(a)

(b)

(e)

(f) (g) 4)

The Company has maintained 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. In our opinion, 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. The Company has granted unsecured loans amounting to Rs. 128,436 thousand to three companies covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 128,436 thousand and the year end balance of loan granted to such parties was Rs. 111,982 thousands The Company has not charged interest on unsecured loans amounting to Rs. 88,043 thousands given to two companies which is prima facie prejudicial to the interest of the Company. The rate of interest of other unsecured loans and the other terms and conditions of all the loans is not prima facie prejudicial to the interests of the Company. As informed to us the receipt of principal and interest, to the extent due, has been regular. As informed to us, there are no overdue amounts exceeding rupees one lakh and hence the question of commenting on reasonable steps taken for recovery of principal and interest does not arise. The Company has taken unsecured loans of Rs. 345,000 thousand from a company covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year was Rs. 80,000 thousand and year-end balance of loan taken from such party was Rs. Nil. The rate of interest and the other terms and conditions of the unsecured loan taken is not prima facie prejudicial to the interest of the Company. The payment of principal amounts and interest was also regular.

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 weakness in internal controls. (a)

(b)

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. 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 reciprocal basis 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.

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

(a)

(b)

Amount (Rs.'000) 28,716 6,920

Forum where dispute is pending Commissioner, Appellate Tribunal and High Court 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)

13)

14)

The Company does not deal in shares, securities, debentures and other investments.

15)

According to the information and explanations given to us, the Company has given a corporate guarantee for loans taken by its subsidiary/joint venture 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 longâ&#x20AC;&#x201C;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.

Place : Mumbai Dated : May 24, 2007

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants E.K. Irani Partner Membership No. 35646

Annual Report 2006-2007

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

BALANCE SHEET AS AT MARCH 31, 2007 Schedule

This Year Rs. ’000

Previous Year Rs. ’000

SOURCES OF FUNDS Shareholders’ Funds Share Capital Reserves & Surplus

1 2

101188 741117

71188 554821 842305

Loan Funds Secured Loans Unsecured Loans

This Year Rs. ’000

10 11

6895038 233479

3 4

494469 1216637

1259 1333526 1711107 49139

1334785 50556

TOTAL

2602551

2011350

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

This Year Rs. ’000

1530802 433802 19890

1194189 418931 19890

1077109 50176

755367 146415

Current Assets, Loans and Advances Inventories Sundry Debtors Cash and Bank Balances Other Current Assets Loans and Advances Less : Current Liabilities and Provisions Liabilities Provisions

1127285

901782

524060

515868

8 9

1179630 587791 92271 92 605799

698849 639825 267412 59 338914

2465584

1945059

1497124 17254

1303021 48339

1514377 Net Current Assets TOTAL

1351360 951207

593699

2602551

2011350

6027586 28004

Materials Expenses Interest and Financial Charges Depreciation (Refer Note 6) Miscellaneous Expenditure written off

12 13 14

PROFIT BEFORE TAXATION Provision for Taxation Current Tax Fringe Benefit Tax MAT Credit entitlement Deferred Prior year Tax adjustment

5173711 1735090 124227 58223 –

4358477 1495255 51885 73626 224 7091251

5979467

37266

76123

– 9000 – (1417) 2181

3409 9100 (3410) (1229) – 9764

7870

PROFIT AFTER TAXATION Surplus brought forward

27502 298458

68253 269674

AMOUNT AVAILABLE FOR APPROPRIATION

325960

337927

APPROPRIATION : Dividend Interim Final (Proposed)

97527 –

Tax on Dividend Transfer to General Reserve Surplus carried forward TOTAL

– 28475 97527 13678 2850 211905

28475 3994 7000 298458

325960

337927

3.61

9.59

Earnings per share (Basic/Diluted) in Rs. (Refer Note 29) NOTES TO ACCOUNTS

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 15

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants V.V. CHAUBAL Company Secretary

Signatures to Profit and Loss Account and Schedules 11 to 15

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants

N.B. GODREJ

Chairman

C.K. VAIDYA

Managing Director

6055590

EXPENDITURE

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

E.K. IRANI Partner Membership No. 35646 Mumbai, May 24, 2007.

Previous Year Rs. ’000

7128517

Net Block Capital Work-in-Progress/advances

Investments

From Operations Other Income

626008

Deferred Tax Liability

NOTES TO ACCOUNTS

Schedule INCOME

E.K. IRANI Partner Membership No. 35646 Mumbai, May 24, 2007.

V.V. CHAUBAL Company Secretary

N.B. GODREJ

Chairman

C.K. VAIDYA

Managing Director

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2007 This Year Rs. ’000

This Year Rs. ’000

Previous Year Rs. ’000

SCHEDULE 1 : SHARE CAPITAL

This Year Rs. ’000

Previous Year Rs. ’000

189290 270000

189290 –

459290

189290

SCHEDULE 2 : RESERVES & SURPLUS

AUTHORISED 1,50,00,000 (Previus year 100,00,000) Equity Shares of Rs. 10 each

150000

100000

ISSUED, SUBSCRIBED AND PAID UP 1,01,18,752 (Previous year 71,18,752) Equity Shares of Rs. 10 each fully paid

101188

71188

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

9602

57470 2850

50470 7000

Of the above Shares (a)

71,12,956 (Previous year 41,12,956) Equity Shares of Rs. 10/- each are held by Godrej Industries Limited, the Holding Company.

(b)

52,47,600 Equity Shares of Rs. 10/- each have been issued as fully paid Bonus Shares by capitalising Securities Premium Account.

GENERAL RESERVE As per last Balance Sheet Add : Transferred from Profit and Loss Account PROFIT AND LOSS ACCOUNT TOTAL

60320 211905

57470 298458

741117

554821

Godrej Agrovet Limited SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2007 This Year Rs.’000

This Year Rs.’000

Previous Year Rs.’000

1169633

1299809

Previous Year Rs.’000

SCHEDULE 3 : SECURED LOANS

SCHEDULE 4 : UNSECURED LOANS

FROM BANKS Term Loans (amount due within a year Rs. 25,000 thousand, Previous year Nil thousand) Cash Credit/Working Capital Demand Loans TOTAL Note : Refer Note (4)

150000

–

344469 494469

1259 1259

FROM BANKS Term Loans (amount due within a year Rs. 1,029,634 thousand, Previous year Rs. 1,216,476 thousand) SALES TAX DEFERMENT FACILITY TOTAL

47004

33717

1216637

1333526

SCHEDULE 5 : FIXED ASSETS

(Rs. ’000) GROSS BLOCK

ASSETS

DEPRECIATION

IMPAIRMENT

NET BLOCK

As at 1.4.2006

Additions

Deductions

As at 31.3.2007

Upto 1.4.2006

For the Year

On Deductions

Upto 31.3.2007

As at 31.3.2007

As at 31.3.2006

93270 9841 233738 518 651806 29382 9409 35783 61285 3688 45469

– 800 119982 – 221786 23047 31046 20648 8189 – –

– 1312 12842 347 66581 381 1181 6636 – –

93270 9329 340878 171 807011 52047 40455 55250 62839 3688 45469

– 957 67047 268 241900 14674 859 18529 28985 1759 23954

– 138 9770 (144) 51648 (1627) 4371 (3010) (6145) 175 3033

– 4580 82 33758 221 – 774 3937 – –

– 1095 72237 42 259790 12826 5231 14745 18902 1935 26987

– – – – 19890 – – – – – –

93270 8234 268641 129 527330 39221 35224 40505 43936 1754 18482

93270 8885 166691 251 390595 14734 8550 16647 3300 1929 21514

– 20000

394 –

– –

394 20000

– 19999

14 –

– –

14 19999

– –

380 1

– 1

TOTAL

1194189

425892

89279

1530802

418931

58223

43352

433802

19,890

1077109

–

Previous Year

1031495

184734

22041

1194189

360256

73626

14951

418931

19,890

–

755367

50176

146415

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

Capital Work-In-Progress/Advances

1127285 This Year Rs. ’000 SCHEDULE 6 : INVESTMENTS LONG TERM NON TRADE UNQUOTED IN GOVERNMENT SECURITIES (All the Securities have been deposited with various Government Authorities) (a ) National Savings Certificates (Face value Rs. 110 thousand; Previous year Rs. 112 thousand) (Rs. 2.5 thousand matured during the year) (b) Indira Vikas Patra (Face value Rs. 1 thousand) TRADE UNQUOTED IN SUBSIDIARY COMPANIES (a) Goldmohur Foods and Feeds Limited 18,38,170 equity shares of Rs. 10 each (b) In Golden Feed Products Limited 50,000 Equity Shares of Rs.10/- each (c) In Godrej Acqua Feed Limited 50,000 Equity Shares of Rs.10/ each (Aquired during the year) (d) In Aadhaar Retailing Limited 50,000 Equity Shares of Rs.10/ each (Aquired during the year) IN COMPANIES (a) 4,000 Fully-paid Equity Shares of Rs.10/each in Ensemble Holdings & Finance Limited (a company under the same management) (b) 5,00,000 (previous year 4,00,000) Fully-paid Equity Shares of Tk.100/- each in ACI Godrej Agrovet Private Limited (Aquired 1,00,000 shares during the year) (c) 675 Fully-Paid Equity share of AED 100/- each in Al Rahba International Trading Limited Liability Co. (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 (g) 49,00,000 Fully-paid Equity shares of Rs. 10/- each in Godrej Goldcoin Aquafeed Limited (Acquired during the year) IN

110

111

1 113

183398

500

–

500

–

37558

30814

810

95016

8784 16275 180528

CO-OPERATIVE SOCIETY 3 Shares of Rs.500/- each in Sachin Industrial Co-operative Society Limited

8784 16275 – 339050

151779

2 524060

2 335792

–

180000

– –

76 180076

524060

This Year Rs. ’000

Previous Year Rs. ’000

112

CURRENT NON-TRADE UNQUOTED Current year Nil, Previous year 1,78,74,343.368 units of Grindlays Floating Rate Fund–Short–term (Plan B) - Daily Dividend (17874343.368 units sold during the year) TRADE UNQUOTED IN SUBSIDIARY COMPANY In Krithika Agro Farm Chemicals and Engineering Industries Private Limited Current year Nil, (Previous year 7,600 Fully-paid Equity share of Rs. 10/- each (7600 shares sold during the year) AGGREGATE COST OF UNQUOTED INVESTMENTS TOTAL

This Year Rs. ’000

515868

SCHEDULE 7 : CURRENT ASSETS, LOANS & ADVANCES (A) INVENTORIES : Raw Materials Finished Products Poultry Stock Stores and Spares Stock under Cultivation (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 Rs12,263 thousand )are secured by equitable mortgage / hypothecation of assets / deposit of title deeds, Rs.10,891 thousand (previous year Rs. 17,366 thousand) against Security Deposits and Rs. 39,100 thousand (Previous year Rs. 25,392 thousands) against 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 (Previous year 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

This Year Rs. ’000

648684 318852 156262 14708 41124

351305 201993 106282 14816 24454 1,179,630

698849

587791

130489 21500 151989 509336 661325 21500 639825

188007 28490 216498 399784 616281 28490

23535

12713

62316 6420

98827 155872 92271 92

508583 7561 516144 7561 508583 4425

267412 59

292449 3361 295810 3361 292449 –

Share application money pending allotment Other Deposits i) Government Authorities 4877 ii) Others 52615 Advance payment of Taxes [including MAT Credit Entitlement Rs. 3410 thousand, Previous year Rs. 3410 thousand (Net of provision for taxation Rs. 93575 thousand; Previous year Rs. 73294 thousand)] 35299 TOTAL

901782 Previous Year Rs. ’000

131 35050

605799 2465582

11284 338914 1945058

Annual Report 2006-2007

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2007 This Year Rs. ’000 SCHEDULE 8 : LIABILITIES Acceptances Sundry Creditors Dues to Small Scale Undertakings (Refer Note 11) Others

SCHEDULE 9 : PROVISIONS Dividend Tax on Dividend Gratuity Leave Encashment TOTAL

Less : Closing Stocks b) c)

PURCHASE FOR RESALE INVENTORY CHANGE Opening Stock Finished Goods Stock under cultivation Poultry Stock Less : Closing Stock Finished Goods Stock under cultivation Poultry Stock

10 11 12 13 14 15 16 17 18 19 20

Insurance Postage, telephone 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 Provision for Doubtful Debts and Advances Loss on sale of Fixed Assets (Net)

724 854398

986130 78441 116677

855122 69212 105638

1497124

1303021

– – – 17254

28475 3994 1439 14431

17254

48339

6823658

5955461

19012

32167 32167

40041

35609

12327 52368 6895038

4349 39958 6027586

This Year Rs. ’000

Previous Year Rs. ’000

Less: Shared Expenses recovered

74431 1761490 (26400)

65114 1521655 (26400)

TOTAL

1735090

1495255

112107

38005 – 38005 1500 36505

3701 8419

3012 2157 5169 10212

124227

51885

General Expenses

SCHEDULE 14 : INTEREST AND FINANCIAL CHARGES (a)

Interest paid on fixed loans i) Banks ii ) Inter corporate Deposits Less: Interest capitalised

(b)

(c)

113119 5361 118480 6373

Interest paid on other loans i) Banks ii ) Others

2096 1605

Other Financial Charges

230475 – – 3004 233479

– 1273 2175 24556 28004

4270914 1086306

316868 3910803 4227671 – 54881 4172789 351305 3821484 648921

SCHEDULE 15 : NOTES TO ACCOUNTS

351305 4648244 4999549 27177 52774 4919598 648684

201993 24454 106282 332729

108490 18370 93941 220801

318852 41124 156262 516238

201993 24454 106282 332729 (111928) 4358477

(183509) 5173711

TOTAL SCHEDULE 13 : 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. ’000

TOTAL

SCHEDULE 11 : OTHER INCOME Profit on transfer of aqua feed business (Refer Note 10) Profit on sale of Fixed Assets (Net) Provision for Doubtful Debts and Advances no longer required Miscellaneous Income TOTAL

Less: Transferred to Godrej Aquafeed Limited Less : Sales during the year

273048

19012

TOTAL

SCHEDULE 12 : MATERIALS a) RAW MATERIALS CONSUMED Opening Stock Add : Purchases during the year

315875 3591 982539

TOTAL

Financial Operations Dividend on Investments (Gross) Interest (Gross) (Tax at Source Rs.414 thousand; Previous year Rs. 114 thousand)

Previous Year Rs. ’000 SCHEDULE 13 : EXPENSES (contd.)

Advances from Customers Sundry Deposits

SCHEDULE 10 : INCOME FROM OPERATIONS Net Sales Other Business Operations Claims and Compensation

This Year Rs. ’000

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

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 : (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)

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

Amortizations Asset type

Period

(i)

Leasehold Land

Primary lease period

(ii)

Leasehold improvements and equipments

Primary lease period or 16 years whichever is less

(iii)

Trees Development cost

15 years

(iv)

Nursery/Greenhouse building

10 years

(v)

Poultry Equipments/Signages

3 years

(vi)

Technical Know-how of a capital nature

(vii) Computer software 341576

274449

18909 34813 313159 66439 165740 49809 8405

15852 28220 266225 55783 141032 25870 9596

19056 8016 35153 2130 50111 120892 268925 52016 99653 18731 11190 2336

2815 10014 5086 17914 8330 27314 1929 59136 83620 301345 42940 80390 16594 – –

3873 11495 3688

6 years 6.17 years

Grants/Subsidies : (i)

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.

(ii)

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.

(iii)

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 actuarial valuation at the end of each year. The liability for retirement gratuity is funded through a trust created for the purpose.

Godrej Agrovet Limited SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2007 i)

Miscellaneous expenditure : i)

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

ii)

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

Revenue is recognized 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".

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 recognized as an expense in the period in which they are incurred.

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.

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 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.

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.

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

Legal formalities relating to the transfer of title of immovable assets situated at Chennai (acquired as a part of the takeover 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. 6.

Previous Year Rs.’000

6920

7228

(b)

43816

45066

The Income Tax Department has filed an appeal against the order of CIT (A), for A.Y. 2000-2001 and has also raised a demand for A.Y.2002-03 & 2004-05 Sales Tax Matters 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 (Previous year 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 (Previous year Rs. 14,300 thousand).

(c)

Guarantee issued to Banks on behalf of the subsidiary companies

(d)

Guarantee issued to Banks on behalf of the Joint venture companies

(a)

(e)

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

(f)

Case/Claim filed by Processors for claiming various expenses

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

123459

54635

47815

39468

37328

4702

55462

SECURED LOANS/UNSECURED LOANS a)

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). Sales Tax Deferment includes Rs. 1,328 thousand (Previous year 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.

735000

88875

Country of Incorporation

Percentage Holding This Year Previous Year

ACI Godrej Agrovet Private Limited Bangladesh 50% 50% ACI Godrej Agrovet Private Limited has its operations in the fields of Animal Feed, Poultry businesses etc. Interest in Assets, Liabilities, Income and Expense with respect of jointly controlled entity Assets 2135 78899 Liabilities 2135 78899 Income 81500 15612 Expense 107830 19758

(b)

9. (a)

600000

INFORMATION IN RESPECT OF JOINT VENTURE (JOINTLY CONTROLLED ENTITY) Name

CONTINGENT LIABILITY Income Tax Matters

INVESTMENTS IN JOINT VENTURES The Company has equity investment of Rs. 37,558 thousand (Previous year Rs. 30,814 thousands) in ACI Godrej Agrovet Private Limited and Rs. 810 thousand (Previous year Rs. 810 thousand) in Al Rahba International Trading LLC. The Company’s investments in Joint ventures are carried at costs, which are higher than their respective book values. The diminution in the value of these investments is considered to be of a temporary nature, in view of the Company’s long–term financial involvement in, and the future profitability projected by the two companies. No provision for diminution in the value of investments is therefore considered necessary in the accounts. Accordingly no provision for Debtors/Loans and advance of Rs. 3,381 thousand (Previous year Rs. 13 thousands) in ACI Godrej Agrovet Private Limited and Rs. 37,424 thousand (previous year Rs. 33,075 thousand) in Al Rahba International Trading LLC is also considered necessary in the accounts.

In respect of : (a)

DEPRECIATION ON ASSETS During the current year, the Company has changed its accounting policy with repect to depreciation on Staff Quarters, Furniture & Fixtures, Office & Other equipments and Vehicles to straight line method at the rates prescribed in Schedule XIV to the Companies Act, 1956 from Written down method followed earlier. Computer hardware is being depreciated over a period of four years against 16.31% as per Straight line method earlier. Consequently excess depreciation for the earlier years amounting to Rs. 23,287 thousand has been netted off against depreciation for the year. Had there been no change in the rate of depreciation, the charge for the year would have been higher by Rs. 3,993 thousand Consequently the Net Block of Fixed Assets and Reserves and Surpluses are higher by Rs. 27,280 thousand.

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. This Year Rs.’000

FIXED ASSETS

(b)

Al Rahaba Trading International LLC Abu Dhabi 70% 70% The company has a 45% share in the Equity capital of Al Rahaba International LLC but a 70% share in the profits and in future investments. Al Rahaba Trading International LLC is in the Poultry business Interest in Assets, Liablities, Income and Expense with respect of jointly controlled entity Assets 33134 40227 Liablities 33134 40227 Income 121585 24114 Expense 139187 39883 (c) Godrej Gold Coin Aquafeed Limited India 49% – The Company is in the the aqua feed business. Interest in Assets, Liablities, Income and Expense with respect of jointly controlled entity Assets 210712 – Liablities 210712 – Income 40958 – Expense 54894 – This Year Previous Year Rs.’000 Rs.’000 CURRENT ASSETS, LOANS AND ADVANCES Sundry Debtors include due from Companies under the same management (i) Godrej & Boyce Mfg Co. Ltd. 96 (ii) Godrej Industries Limited 659 (iii) Goldmohur Foods and Feeds Limited 9100 18219 (iv) ACI Godrej Agrovet Private Limited 3381 13 (v) Al Rahba International Trading LLC 947 – (vi) Godrej Gold Coin Aqua feed Limited 40332 – Loans and Advances include due from Companies under the same management (i) Golden Feed Products Limited 23939 40393 Maximum balance during the year 40393 45000 (ii) Krithika Agro Farm Chemicals and Engineering Industries Private Limited 4909 4205 Maximum balance during the year 4909 4205 (iii) Al Rahba International Trading Limited Liability Company 36477 33075 Maximum balance during the year 36477 33075 (iv) Aadhaar Retailing Limited 83134 – Maximum balance during the year 83134 –

10. Transfer of Aqua Business Effective 30th September, 2006, the Company has transferred its aqua feed business to Godrej Aquafeed Limited for a total consideration of Rs. 342,223 thousand. Pursuant to the same the following assets were transferred to Godrej Aquafeed Limited. Rs. '000 Fixed Assets 39576 Inventories : (a) Raw material 27177 (b) Finished goods 5854 33031 Sundry Debtors 39141 Total 111748

Annual Report 2006-2007

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2007 11. Current Liabilities: (a)

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 Sai Annapurna Pkg.

Rs.’000 2274

Sriram Chemicals

(b)

843

Name of the party

Rs.’000

18. DISCLOSURE 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 periodic basis by mutual consent on mutually acceptable terms. a.

Sainath Fisheries Nandi Enterprises

M/s. Healthcare Pvt. Ltd.

Malchand Dinadayal & Co.

S R Enterprises

Sesha Sai Mining

Finplast (Surat) Pvt. Ltd.

This Year

Previous Year

Rs.'000

53328

1115

334

Dues to subsidiary company - Godrej Aquafeed Limited Rs. 16,891 thousand ( previous year NIL thousand).

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

Depreciation on Fixed Assets

The total of future minimum lease payments under non-cancellable operating leases for each of the following periods :

This Year Rs.’000

Previous Year Rs.’000

(104837)

(82407)

Not later than one year

ii.

Later than one year and not later than five years

196165

2230

iii.

Later than five years

280632

–

41728

1115

Lease payments recognized in the statement of Profit & Loss for the period : Minimum lease payments

19. LICENSED & INSTALLED CAPACITY AND ACTUAL PRODUCTION Item

For the year Ended

Capacity Per Annum Registered Installed MT MT

Actual Production MT

Third Party Production MT

7310

Provision for Doubtful Debts

10585

8368

Animal Feeds (Non-Scheduled)

31.3.2007 31.3.2006

Not Applicable Not Applicable

294600 306645

154777 185938

362157 338577

Carry Forward unabsorbed depreciation

29130

8946

8674

7227

Processed Chicken (Non-Scheduled)

31.3.2007 31.3.2006

Not Applicable Not Applicable

17536 15566

12694 12298

– –

(49139)

(50556)

Palm Oil (Non-Scheduled)

31.3.2007 31.3.2006

Not Applicable Not Applicable Million Plants

14850 11490 Million Plants

8806 7112 Million Plants

– –

Tissue Culture Plants (Non-Scheduled)

31.3.2007 31.3.2006

4.25 4.25

5.00 5.00

4.63 4.21

– –

Agri Inputs (Non-Scheduled) (i) Plant Growth Promoter Liquids

31.3.2007 31.3.2006

500 KL –

465KL –

– –

31.3.2007 31.3.2006

5000 MT –

2729MT –

– –

Provision for Impairment of Fixed Assets

Others Deferred Tax Liability

13. Grants/subsidies from Government Grants/Subsidies amounting to Rs. 50,297 thousand (Previous year Rs. Nil thousand) related to revenue are credited to the profit and loss statement or are deducted in reporting the related expense. This Year Unit

Quantity

Value Rs.‘000

Previous Year Quantity

Value Rs.‘000

(ii) Plant Growh Regulator Granules

14. SALES TURNOVER Animal Feeds Agro Inputs Integrated Poultry Business Oil Palm Plantation Retail Segment Others

452873 – – – – –

3897585 630282 1169952 462256 485306 178277

467343 – – – – –

6823658

TOTAL

3689176 641747 884002 323862 282461 134213

20. (a)

Profit after tax as per Profit and Loss Account

5955461

Add : Depreciation as per accounts Managerial Remuneration

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

Provision for Doubtful Debts/Advances

15. FINISHED GOODS INVENTORIES Animal Feeds

Profit on transfer of aqua feed unit MT

Agro Inputs Synthetic pesticides

Natural pesticides

8291 (7258)

68170 (62699)

7,258 (4,978)

62699 (44451)

Provision for Tax (including Deffered tax)

184 (168) 3 (4)

24178 (35848) 458 (480) 18707 (40360) 158998 NA 48341 (62606) 318852

168 (151) 4 (22)

35848 (19153) 480 (3477) 40360 (8612) NA NA 62606 (32797) 201993

Processed Chicken Retail Segment Others TOTAL

(201993)

3256

70290

467 5376 1114

37183 80994 129848 614753 153238 1086306

285 5,713 1,298

21407 65185 143591 240092 108659 648921

MT MT

135,397 243,991

842107 1469241 1959566 4270914

122403 262515

697964 1276327 1847193 3821484

73626

6714

6708

18751

(2175)

(230475)

1273 7870 87302

Less : Depreciation as per Section 350 of the Companies Act, 1956

79582

73626

(Loss)/Profit on sale of Fixed Assets (net)

(2336)

1273

77246

74899

(186768)

80656

– 7244

4,033 6708

Salaries

6144

4941

Contribution to Provident Fund

356

341

Estimated monetary value of perquisites

214

Performance Linked Variable Remuneration

–

1398

6714

6708

Directors' Sitting Fees

69987

KL MT KL

58223

(b) MANAGERIAL REMUNERATION

(108490)

5,220

Previous Year Rs.’000 68253

(137024)

5% thereof Amount approved by Central Government

Note : Figures in bracket pertain to the Previous Year. MT

This Year Rs.’000 27502

9764

Net (Loss)/Profit for the purpose of Directors remuneration

16. PURCHASES FOR RESALE Animal Feeds Agro Inputs Plant Growth Promoter Spray Granules Synthetic pesticides Retail Segment Others TOTAL 17. RAW MATERIALS CONSUMED Cakes & Brans Extractions Others TOTAL

Computation of Profit for the purpose of manegerial remuneration

Note: (a) (b) (c)

144

6858

6780

All the above items have been included under respective heads under "Expenses" in Schedule 14. Performance linked variable remuneration is on the basis of provision made in the books of accounts. The remuneration paid to the Managing Director is in excess of the remuneration prescribed under Section 198 read with Schedule XIII to the Companies Act, 1956 by Rs. 6714 thousand (Previous year Rs. 2,675 thousand). The Company has got the necessary approval from the Central Government for the remuneration in excess of the prescribed limits.

21. COMMON EXPENSES SHARED BY THE COMPANIES : a)

Expenses (Schedule 14) include Rs. 21006 thousand (Previous year Rs. 16470 thousand) charged by Godrej Industries Limited, the Holding Company.

During the year, the Company shared the services of some of it’s employees and facilities with its subsidiary 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 thousand (Previous year Rs. 26,400 thousand).

Godrej Agrovet Limited SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2007 This Year

Previous Year

Rs.'000

(iii)

Godrej Consumer Products Limited Godrej Infotech Limited Godrej Beverages & Foods Limited (upto 08.05.2006) Godrej Properties Limited Godrej Hicare Limited Ensemble Holdings & Finance Limited

22. AUDITORS’ REMUNERATION 1122

1122

Audit under Other Statutes

337

Tax representation before Authorities

411

196

Audit fees

Management Consultancy

Certification

172

Reimbursement of Expenses TOTAL

2130

1929

This Year

Previous Year

Rs.'000

86002

103040

(iv)

(v)

Capital Goods

2802

1129

33759

29990

122563

134159

(vii) Key management personnel : Mr. C. K. Vaidya (viii) Individuals exercising control or significant influence (and their relatives)

Travelling Expenses Others

5887

2523

17578

21567

23465

24089

11493

10803

Mr. A. B. Godrej Mr. N. B. Godrej 2.

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

2374

1837

13867

12641

This Year Rs.'000 % 75080

Previous Year Rs.'000 %

43946

Investment in share capital Advances given during the year

Intercorporate deposits taken during the year

Sale of materials / finished goods

3821484

100

SPARES & TOOLS : 741

750

65698

55033

99 100

28. The amount of exchange difference included in the Profit and Loss Account, under the related heads of expenses/income, is Rs. 1,735 thousand (Previous year expense Rs. 1,742 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 Rs. Nil (previous year Rs. Nil thousand) 29. EARNINGS PER SHARE Profit after tax and prior period expenses (Rs.'000) Weighted average number of equity shares outstanding Basic earnings per share (Rs.) Diluted earnings per share (Rs.) Nominal value of shares (Rs.)

Previous Year

27502

68253

7618752

7118752

3.61

9.59

–

– –

–

3925 –

1582

5696

–

3594

–

797

–

39576 47

–

– 5667

– –

– 886

– –

6743 –

– –

–

83134 79230

– –

4240 34511

–

705 –

– –

238144 216412

– –

19697 5667

– –

345000

– –

213889 122745

– 1107

– –

12843 10553

134432 122374

– –

26412 26592

– –

701 1287

– –

21159 16470

2224 1307

2366 3403

7798 –

– –

–

1846 1787

– –

–

Expenses charged to other companies Expenses charged by other companies

Interest income on loan given

Interest expense on intercorporate deposits taken Dividend Income Dividend paid

Sundry Income

Outstanding receivables, net of (payables)

Holding Companies :

(ii)

1778 –

Subsidiary companies

(v)

– 82

9.59

Goldmohur Foods and Feeds Limited Golden Feed Products Limited Krithika Agro Farm Chemicals and Engineering Industries Private Limited (upto 30.03.2007) Godrej Aquafeed Limited Aadhaar Retailing Limited

–

Sundry deposits placed

10.00

Godrej Industries Limited (GIL) holds 70.29% (Previous year 57.69%)in the Company. GIL is the subsidiary of Godrej & Boyce Mfg. Co. Limited, the ultimate Holding Company. (ii)

– –

Purchase of materials / finished goods

3.61

Relationships : (i)

300000 –

10.00

Related party disclosures as required by AS - 18, "Related Party Disclosures", are given below .

Associates

30. RELATED PARTY DISCLOSURES 1.

Subsidiaries (ii)

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

Rs.’000 Other Related Parties (vi)

Holding Companies (i)

27. Research & Development Expenditure of revenue nature charged to the Profit and Loss Account amounts to Rs. 10,078 thousand (Previous year Rs. 9031 thousand).

This Year

Purchase/Transfer of fixed assets

3777538

100

55783

4270914

100

Share application money

Sales/Transfer of fixed assets

4195834

66439

TOTAL

Issue of share capital (incl. Premium)

Indigenous

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

26. VALUE OF CONSUMPTION OF RAW MATERIALS, SPARES & TOOLS (INCLUDING CANALIZED ITEMS)

Imported items

Other related parties where persons mentioned in (vii) below exercise significant influence Bahar Agrochem & Feeds Private Limited Avestha Gengraine Technologies Pvt. Ltd. Krithika Agro Farm Chemicals and Engineering Industries Private Limited (from 31.03.2007)

24. EXPENDITURE IN FOREIGN CURRENCY

RAW MATERIALS : Imported items (including duty content)

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

(vi)

Spares

Joint Ventures. ACI Godrej Agrovet Private Limited Al Rahba Trading International LLC Godrej Gold Coin Aquafeed Limited

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

Fellow Subsidiaries :

2029 –

– –

–

– –

34006 31000

3 33

– –

6031 4576

– –

72799 13573

– –

230475 –

– –

755 8

(7790) 35552

– –

43714 (13)

527 (1173)

4909 (1373)

Guarantees issued in favour of

– –

– 145000

– –

– 123459

– –

Gurantees Outstanding

– –

600000 735000

– –

88875 123459

– –

Details relating to persons referred to in items 1 (vii) & (viii) above Current Previous Year Year 1 2 3

Remuneration Dividend paid Sale of investments

6714 10381 76

6708 1935 –

Annual Report 2006-2007 3.

Significant Related Party Transactions :

(Rs.'000)

Nature of Transactions

Holding Companies (i)

Amount

Godrej Industries Ltd.

300000 –

Issue of share capital (incl. Premium)

Share application money

Purchase/Transfer of fixed assets

Subsidiaries (ii)

Aadhaar Retailing Limited Godrej Industries Ltd.

– 3594 – 654 –

Godrej & Boyce Mfg. Co. Ltd. 4

Investment in share capital

–

Advances given during the year

Godrej Industries Ltd.

– –

Goldmohur Foods & Feeds Ltd. Godrej Aquafeed Limited Krithika Agro Farm Chemical & Engineering Industries Pvt. Limited Krithika Agro Farm Chemical & Engineering Industries Pvt. Limited

1166 Golden Feeds Products Limited Aadhaar Retailing Ltd. 6

Intercorporate deposits taken during the year

Godrej Industries Ltd.

345000

Sale of materials/finished goods / debtors

Godrej Industries Ltd.

– –

– – Goldmohur Foods & Feeds Ltd. Godrej Aquafeed Limited

Amount

Fellow subsidiaries (iii)

Amount

3925 – 5696 – 39576 – – 76 705 4205 – 40393 83134 – – – 162653 215661 72934

– Krithika Agro Farm Chemical & Engineering Industries Pvt. Limited 8

Purchase of materials/finished goods

Godrej & Boyce Mfg. Co. Ltd.

–

– – – 59 – 12 21006 16470 –

–

Godrej Industries Ltd. 9

Expenses charged to other companies

Godrej & Boyce Mfg. Co. Ltd.

Expenses charged by other companies

Godrej Industries Ltd.

Goldmohur Foods & Feeds Ltd.

Goldmohur Foods & Feeds Ltd. Goldmohur Foods & Feeds Ltd.

Aadhaar Retailing Ltd. 11

Interest income on loan given

Interest expense on intercorporate deposits taken

–

Golden Feeds Products Limited

– – –

– – Goldmohur Foods & Feeds Ltd.

72799 13573 659 – 96 –

– – Goldmohur Foods & Feeds Ltd.

Godrej Industries Ltd.

Dividend Income

–

Dividend paid

Godrej Industries Ltd.

Outstanding receivables, net of (payables)

Godrej Industries Ltd. Godrej & Boyce Mfg. Co. Ltd.

Kritika Agro Farm Chemical & Engineering Industries Pvt. Limited

Golden Feeds Products Limited Godrej Aquafeed Limited

– 458 202245 111120

26400 26400 – 1307

Godrej Consumer Products Ltd.

1225 495

1800 – – 230 1846 1557 –

1557

34006 31000

9100 18219 – 23939 40393 (16891)

– Krithika Agro Farm Chemical & Engineering Industries Pvt. Limited Aadhaar Retailing Limited 16

Sundry Income

Guarantees issued in favour of

Godrej Aquafeed Limited –

–

Goldmohur Foods & Feeds Ltd. Golden Feed Products Limited

Guarantees Outstanding

Investment in share capital

Al Rahba Trading International LLC

Goldmohur Foods & Feeds Ltd.

Sales/Transfer of fixed assets

ACI Godrej Agrovet Pvt. Ltd.

Advances given during the year

Al Rahba Trading International LLC

4 5

Sale of materials/finished goods Purchase of materials / finished goods

4240 33075 Godrej Gold Coin Aquafeed Ltd. 19697 –

Expenses charged to other companies

Al Rahaba Trading International LLC 701

Expenses charged by other companies

Godrej Gold Coin Aquafeed Ltd. 6725

ACI Godrej Agrovet Pvt. Ltd.

– 810 6743 – – 5667 –

– 4205 83134 – 230475 – – 70000 – 75000 600000 660000

–

– – – – Polchem Hygiene Laboratories Pvt. Ltd. 12843 – –

Bahar Agrochem & Feeds Private Ltd.

134432 122374

– ACI Godrej Agrovet Pvt. Ltd.

1,073 –

Godrej Agrovet Limited 3.

Significant Related Party Transactions (contd.) : Joint Nature of Transactions

Ventures (iv)

Dividend Income

–

Amount

Associates

Amount

(v) –

Creamline Dairy Products Limited

Polchem Hygiene Laboratories Pvt. Ltd. Outstanding receivables, net of payables

3381

ACI Godrej Agrovet Private Ltd.

Al Rahaba Trading International LLC Godrej Goldcoin Aqufeed Ltd. 10

Guarantees issued in favour of

Al Rahaba Trading International LLC

Guarantees Outstanding

Al Rahaba Trading International LLC

ACI Godrej Agrovet Private Limited

Amount

Parties (vi)

Creamline Nutrients Limited

Other Related

Polchem Hygiene Laboratories Pvt. Ltd.

13 37424 33075 40332 – – 60683 – 62776 59582 60683 29294 62776

4782 3776 703 527 546 – 527

– Kritika Agro Farm Chemical & Engineering Industries Pvt. Limited

4909 –

–

31. SEGMENT INFORMATION FOR THE YEAR ENDED MARCH 31, 2007 (i)

Information about Primary Business Segments For the year ended 31st March, 2007 Animal Feeds

Revenue

Agri

637267

Retail

485306

Integrated Poultry Business 1184197

Rs. ’000 Oil Palm Plantations 463996

Other Business

Unallocated

179341

Total

For the year ended 31st March, 2006

Animal Feeds

Agri

Retail

282461

Integrated Poultry Business

Oil Palm Plantations

Other Business

Rs. ’000 Unallocated

Total

Total Sales

4045553

–

6995660

3991907

654364

887978

357620

33759

–

6208090

Less : Inter-segment

(147968)

(6985)

–

(14246)

(1740)

(1063)

–

(172002)

(209921)

(16335)

(12003)

(14369)

–

(252628)

External Sales

3897585

630282

485306

1169952

462256

178278

–

6823658

3781986

638029

282461

875975

343251

33759

–

5955462

126172

111698

(207198)

(88837)

126717

11216

79768

105267

93121

(27570)

(46806)

87613

(1539)

(201118)

(122034)

(124227)

(51887)

12327

4349

Result Segment Result

210086

Unallocated expenditure net of unallocated income Profit on transfer of Aqua feed business

230475

Interest expenses Interest Income Dividend Income and Profit on sale of Investments Profit before taxation and exceptional items

356647

111698

(207198)

(88837)

126717

11216

40041

(272977)

37266

9764

9764 27502

Provision for taxation

105267

93121

(27570)

(46806)

87613

(1539)

35609

(133963)

76123

7870

7870 68253

Profit after taxation and before exceptional items

356647

Exceptional Items

–

Prior years adjustments

–

Net profit

111698

(207198)

(88837)

–

126717

11216

(282741)

105267

93121

(27570)

(46806)

87613

(1539)

(141833)

356647

111698

(207198)

(88837)

126717

11216

(282741)

27502

105267

93121

(27570)

(46806)

87613

(1539)

(141833)

68253

1041358

374885

321226

924150

256265

27086

1305430

4250400

956282

310358

78857

628642

194537

29646

1164386

3362709

893661

56049

14480

254561

43955

5258

2140131

3408095

847930

50921

15309

171650

27983

602

1580794

2695188

20683

29330

101622

96442

49616

859

31101

329654

32056

1359

22743

138396

3429

415

124793

323191

13871

(10)

9356

21256

9986

1531

2233

58223

27030

861

1341

20121

10731

1413

12128

73626

Total

India

Outside India

Other Information Segment assets Segment liabilities Capital expenditure Depreciation Non-cash expenses other than depreciation

(ii)

Information about Secondary Business Segments Rs. ’000 Revenue by Geographical segments

Rs. ’000

India

Outside India

Total Sales

6981794

13866

6995660

6195449

12641

6208090

Less : Inter-segment

(172002)

–

(172002)

(252628)

–

(252628)

External Sales

6809792

13866

6823658

5942821

12641

5955462

Carrying amount of segment assets

4250400

–

4250400

3362709

–

3362709

329654

–

329654

323191

–

323191

Additions to fixed assets

Total

Information required under Schedule VI to the Companies Act, 1956 have been given to the extent applicable. Notes : (iii) (i) The Company is organized into four main business segments, namely (a) Animal Feeds - comprising of compound feed for cattle, poultry, aqua etc. (b) Agri-business - comprising of plant growth promoters, pesticides, vegetables etc. (c) Retail - comprises of Aadhaar and Nature's Basket. (d) Integrated Poultry business. (e) Oil Palm Plantation business. Segments have been identified and reported taking into account, the nature of products and services, the differing risks and returns, the organisation structure, and the internal financing reporting systems. (ii)

The Segment revenue in each of the above business segments consists of sales (net of returns, sales tax, rebates etc.)

(iii)

The Segment revenue in the geographical segments considered for disclosure are as follows : (a) Revenue within India includes sales to customers located within India. (b) Revenue outside India includes sales to customers located outside India. Segment Revenue, results, Assets and Liabilities include the respective amounts identifiable to each of the segments and amounts allocated on a reasonable basis.

(iv)

32. Figures of the previous year have been regrouped and re-classified wherever necessary to conform to the current year's classification.

Annual Report 2006-2007 33. INFORMATION REQUIRED TO BE FURNISHED UNDER PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956 BALANCE SHEET ABSTRACT & COMPANY'S GENERAL BUSINESS PROFILE i)

Registration Details Registration No. State Code Balance Sheet Date Capital raised during the year Public Issue Rights Issue Bonus Issue Private Placement

(Rupees '000) Nil Nil Nil 300000

iii)

Position of mobilisation and deployment of funds Total Liabilities Total Assets

(Rupees '000) 4116928 4116928

iv)

16655 11 31/3/2007

ii)

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

Adjustments for: Inventories Debtors and Other Receivables Creditors and Other Payables

101188 741117 494469 1216637

Golden Feed Products Ltd.

N.B. GODREJ Chairman

76123

(98058)

73626 (1273) – (35609) (4349) 51885 224 84504

(60792)

160627

(548303) (609095) (35196) (644291)

(149113) (361105) 87117 (423101) (262472) (33489) (295963)

(513811) (229977) 195486

(329653) 4015 342223 (188269) 180076 12294 40041

(323191) 8363 – (180904) – 4361 35609 60728 60728

(455762)

408422

– (115598) 1153283 (22741) (51885) (23492) (3295) 936273

(175142)

184548

Net Cash used in Investing Activities C.

Aadhaar Retailing Ltd.

Godrej Aquafeed Limited

2. Date on which it became a Subsidiary Jan. 1, 2001 July 14, 2003 Aug. 16, 2006Oct. 23, 2006 3. Financial Year ending Mar. 31, 2004 Mar. 31, 2004 Mar. 31, 2007Mar. 31, 2007 4. The Company's interest in the Subsidiary as on 31.3.2007 a ) Number of fully paid Equity Shares held 2158170 50000 50000 50000 b) Face Value Rs. 10 Rs. 10 Rs. 10 Rs. 10 c ) Extent of holding 100% 100% 5. Net aggregate Profit/(Loss) of the subsidiary Company (Rs.'000) (Rs.'000) so far as it concerns the members of the Company :A ) For the Financial Year ended on March 31, 2004 : i) Not dealt with in the Books of Account of the Company 18519 – – – ii) Dealt with in the Books of Account of the Company 47500 – – – 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 40590 N.A. – – Company ii) Dealt with in the Books of Account of the 81801 N.A. – – Company

V.V. CHAUBAL Company Secretary

37266

Cash Flow from Investing Activities : Acquisition of Fixed Assets Proceeds from sale of Fixed Assets Proceeds from transfer of aqua feed business Purchase of Investments Proceeds from sale/maturity of Investments Interest Received Dividend Received

23099010 Animal Feeds

C.K. VAIDYA Managing Director

Previous Year Rs. ’000

58223 2336 (230475) (40041) (12327) 124227 –

Cash Generated from Operations Direct Taxes paid (net of refund received) Net Cash Flow from Operating Activities

1127285 524060 951207 0 Nil (Rupees '000) 6,823658 7091251 37266 27502 3.61 137%

Goldmohur Foods and Feeds Ltd.

Cash Flow from Operating Activities : Net Profit Before Taxes Adjustments for: Depreciation Loss/(Profit) on sale of Fixed Assets Profit on transfer of aqua feed business Dividend Income Interest Income Interest Expenses Miscellaneous expenditure written off

Operating Profit Before Working Capital Changes

STATEMENT REGARDING SUBSIDIARY COMPANIES PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 1. Name of the Subsidiary

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007 Current Year Rs. ’000 Rs. ’000

Cash Flow from Financing Activities : Proceeds from Issue of Capital Repayment of Borrowings Proceeds from Borrowings Increase/(Decrease) in Cash Credit/WCDL Interest Paid Dividend Paid Dividend Tax Paid Net Cash used in Financing Activities

300000 (116889) 150000 343210 (124227) (126002) (17672)

Net increase in Cash and Cash equivalents Cash and Cash equivalents (Opening balance)

267412

82864

92271

267412

Cash and Cash equivalents (Closing balance)

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 Chartered Accountants E.K. IRANI Partner Membership No. 35646 Mumbai, May 24, 2007

V.V. CHAUBAL Company Secretary

N.B. GODREJ

Chairman

C.K. VAIDYA

Managing Director

Mumbai, May 24, 2007

Aadhaar Retailing Limited BOARD OF DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2007 To The Shareholders, Your Directors have pleasure in submitting their Report along with the audited Accounts for the financial year ended on 31st March, 2007. PRINCIPAL ACTIVITY The principal activity of the Company is to carry on the business of retailing, selling, buying and providing services in all types of goods and equipments, including consumer, household lifestyle and fast moving consumer durable and non-durable goods. FINANCIAL RESULTS As the company's activities are in the nascent stage, no income was earned in the year under review. The revenue expenditure (loss) incurred in the year was Rs.1,29,335/-. INCORPORATION AND SHARE CAPITAL DETAILS Your Company was incorporated on March 10, 2006 with an Authorised Capital of Rs. 5,00,000. The Company obtained the Certificate of Commencement of Business from the Registrar of Companies on April 10, 2006. The Authorised Capital was then increased to Rs. 10,00,00,000 by an Ordinary Resolution passed at the Extraordinary General Meeting of the Company held on November 21, 2006. Presently, the entire paid-up share capital of Rs. 5,00,000 is held by Godrej Agrovet Limited (GAVL) and its nominees. DIVIDEND The Directors do not recommend any dividend for the year 2006-07. FIXED DEPOSITS The Company has not accepted any public deposits during the financial year under review. HOLDING COMPANY The Company is a subsidiary of Godrej Agrovet Limited as defined under Section 4(1)(b) of the Companies Act, 1956. SUBSIDIARY COMPANIES The Company has no subsidiary companies during the year under review. DIRECTORS Mr. C. K. Vaidya, Mr. R. S. Vijan and Mr. Subbarao A. R. are the First Directors of the Company who were named under Article 21 of the Articles of Association of the Company and hence are not liable to retire by rotation at the First Annual General Meeting of the Company. 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. 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 The Company doesnot have any any employee, hence 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. 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 Not Applicable since the Company does not have any manufacturing facility. Technology absorption, adaptation and innovation Not Applicable since the Company does not have any manufacturing.. Foreign Exchange earnings and outgo C. Your Company had no foreign exchange earning as well as outgo. For and on behalf of the Board of Directors R.S. VIJAN C.K. Vaidya Mumbai, May 23, 2007 Director Director B.

AUDITORS’ REPORT 1.

3. 4.

We have audited the attached Balance Sheet of Aadhaar Retailing Limited, as at 31st March, 2007 and also the Profit and Loss Account and the Cash Flow Statement of the Company for the period 10th March, 2006 to 31st March, 2007 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 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 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

KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants

Mumbai, May 23, 2007

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 and the nature of its assets. (c) There are no disposal of fixed assets during the year. 2) The Company does not have any inventories. 3) (a) The Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. (b) Consequently, the question of commenting on the rates of interest and conditions of the loans granted being prejudicial to the interests of the Company, receipt of regular principal and the interest and reasonable steps for recovery of principal and interest does not arise. (c) The Company has taken unsecured loan amounting to Rs. 83134043 from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. (d) The rates of interest and conditions of the loans taken are not prejudicial to the interests of the Company and payment of principal and the interest is regular. (e) The payment of the principal amount and interest are regular. 4) As there are no inventories and sales during the year, the question of adequate internal control procedures commensurate with the size of the Company and the nature of its business, for the purchases of inventory and for the sale of goods and services does not arise. As regards fixed assets the internal control procedures are commensurate with the size of the Company and the nature of its business. 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 a reciprocal basis and hence the prices are not comparable. 6) In our opinion and according to the information and explanations given to us, the Company has 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. 9) (a) According to the information and explanations given to us and on the basis of our examination

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, 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, 2007; and ii) in the case of the Profit and Loss Account, of the loss for the period ended on that date. iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the period ended on that date. On the basis of the written representations received from the directors as on 31st March, 2007, and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2007, from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956. For and on behalf of e)

10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20) 21)

BAHADUR S. DASTOOR Partner Membership No. 48936

of books of accounts, during the period, the Company has no statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, Sales Tax, Value Added Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, cess and other statutory dues incurred during the period covered. According to the information and explanations given to us, there are no undisputed dues, payable in respect of above as at 31st March, 2007 for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us, there are no dues outstanding of Sales Tax, Income Tax, Wealth Tax, Excise Duty, cess on account of any dispute. As the Company has been registered for a period less than five years the question of commenting on its accumulated losses being less than fifty percent of its net worth does not arise. The Company has not incurred cash loss during the financial year. According to the information and explanations given to us and based on documents and records produced to us, the Company has not defaulted in payment of 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. According to the information and explanations provided to us, the term loans have been applied for the purposes which they were obtained. According to the information and explanations given to us and an overall examination of the Balance Sheet and Cash Flows of the Company, we report that the Company has not utilized funds raised on 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 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 23, 2007

BAHADUR S. DASTOOR Partner Membership No. 48936

Annual Report 2006-2007

BALANCE SHEET AS AT MARCH 31, 2007 This Period Rupees

Schedule SOURCES OF FUNDS Shareholders’ Funds Share Capital Share application money pending allotment of Shares

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

500000 3925000

Schedule

83134043 15700000 103259043

2 3

– 98403080 777593 97625487 4598143

EXPENDITURE Interest and Financial Charges Auditor's Remuneration Depreciation Preliminary Expenses written off

489087 23072 777593 639583

(Loss) Before Taxation

(129335)

Current Tax Fringe Benefit Tax Deffered Tax

6 170611 170611

– – –

Profit after Taxation

Net Current Assets Profit and Loss Account

906078 129335 103259043

NOTES TO ACCOUNTS

(129335)

Balance Brought Forward Balance Carried Forward Earning per share (Basic/Diluted) in Rs. (Refer Note 3) NOTES TO ACCOUNTS

– (129335) (2.59) 7

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 AND ASSOCIATES Chartered Accountants

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants C.K. VAIDYA Director

Signature to Profit & Loss Account and Schedule 7

As per our Report attached

Signatures to the Balance Sheet and Schedules 1 to 7

B.S. DASTOOR Partner Membership No. 48936

1800000 –

Provision for Taxation

533703 542986 1076689

Less : Current Liabilities and Provision Liabilities

–

1929335 102223630

Current Assets, Loans and Advances Cash and Bank Balances Loans and Advances

This Period Rupees

INCOME Rental Income `

Loan Funds Unsecured Loans Secured loans Total APPLICATION OF FUNDS Fixed Assets Gross Blocks Less Depreciation Net Block Capital Work-in-progress/advances

Rupees

B. S. DASTOOR Partner Membership No. 48936

R.S. VIJAN Director

C.K. VAIDYA Director

R.S. VIJAN Director

Mumbai, May 23, 2007

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE PERIOD ENDED MARCH 31, 2007 SCHEDULE 1 : SHARE CAPITAL

Rupees

AUTHORISED 10000000 Equity Shares of Rs.10/- each

This Period Rupees 100000000

Issued, Ssubscribed And Paid–up 50,000 Equity Shares of Rs.10/- each

SCHEDULE 5 : CURRENT ASSETS, LOANS & ADVANCES A)

B) 500000

The entire share capital is held by Godrej Agrovet Limited the holding Company (and its nominees)

CASH AND BANK BALANCES Cash in Hand Balance with scheduled banks in current account LOANS AND ADVANCES Advance payment of taxes Deposits with Government authorities

533703 407880 135106

542986 1076689

500000

TOTAL

533703

SCHEDULE 6 : LIABILITIES

SCHEDULE 2 : SECURED LOANS From Banks

15700000

Other Liabilties

170611

TOTAL

15700000

Total

170611

SCHEDULE 3 : UNSECURED LOANS From holding Company

83134043

TOTAL

83134043

SCHEDULE 4 : FIXED ASSETS

(Rs. ’000) GROSS BLOCK

ASSETS

DEPRECIATION

NET BLOCK

As at 10.03.2006

Additions

Deductions

As at 31.3.2007

Upto 10.03.2006

For the Period

On Deductions

Upto 31.3.2007

As at 31.3.2007

– – – –

46469547 49274510 2144338 514685

– – – –

46469547 49274510 2144338 514685

– – – –

673929 – 67868 35796

– – – –

673929 – 67868 35796

45795618 49274510 2076470 478889

TOTAL

–

98403080

–

98403080

–

777593

–

777593

97625487

Previous Year

–

Building Land Furniture & Fixtures Office Equipment

Capital-Work-in-Progress/Advances

4598143 102223630

Aadhaar Retailing Limited SCHEDULE 7 : NOTES TO ACCOUNTS

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

SIGNIFICANT ACCOUNTING POLICIES

Particulars

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

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

Audit fees 3.

22472

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

This Year (129335) 50000 (2.59) (2.59) 10.00

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

Relationships : (i)

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 ultimated holding company. 2.

The following transactions were carried out with the related parties in the ordinary course of business : Rs. Nature of Transactions

Holding Company (i)

Loan taken

83134043

Outstanding payables, net of (receivables)

83134043

Share Application Money

3925000

Rent received

1800000

The Current year figures for a period of 12 months and 21 days. Previous year figures have not been disclosed has the Company was incorportated on March 10, 2006.

764970 – 764970

Cash Flow from Investing Activities Acquisition of Fixed Assets

(103001223) (103001223) (103001223)

Cash Flow from Financing Activities Proceeds from issuance of share capital Share Application money received Proceeds from Borrowings Interest Paid Net Cash used in Financing Activities

500000 3925000 98834043 (489087) 102769956

Net increase in Cash and Cash equivalents Cash and Cash equivalents (Opening balance) Cash and Cash equivalents (Closing balance)

533703 – 533703

NOTES: 1 The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting Standard (AS) 3 on “Cash Flow Statements”, and presents cash flows by operating, investing 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 AND ASSOCIATES Chartered Accountants B.S. DASTOOR Partner

For and on behalf of the Board C.K. VAIDYA Directors

R.S. VIJAN Directors

Mumbai, May 23, 2007

STATEMENT PURSUANT TO PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956. BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE 1 Registration Details Registration No. 160440 State Code 11 Balance Sheet Date 31.03.2007 Capital raised during the year Public Issue Rights Issue Bonus Issue Private Placement500000

(Rupees) Nil Nil Nil

iii) Position of mobilisation and deployment of funds (Rupees) Total Liabilities 103259043 Total Assets 103259043 Source of Funds Paid up Capital 500000 Reserve & Surplus – Secured Loans 15700000 Unsecured Loans 83134043 Application of funds Net Fixed Assets 102223630 Investments – Net Current Assets 906078 Misc. Expenses – 129335 Accumulated Losses (iv) Performance of the Company Turnover Total Expenditure 1929335 Profit Before Tax -129335 Profit After Tax -129335 Earnings Per Share in Rs. Dividend Rate – (v)

(Rupees) –

-2.59

Generic Names of three Principal products services of the Company Item Code No. – Product Description –

Mumbai, May 23, 2007

(542986) 170611

Net Cash used in Investing Activities

ii)

Holding Companies :

1137345

(372375)

AUDITORS' REMUNERATION

777593 489087

Cash Generated from Operations Direct Taxes paid (net of refund received) Net Cash Flow from Operating Activities

Primary lease period or 16 years whichever is less

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 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.

(129335)

1266680

Cash Flow from Operating Activities Net Profit Before Taxes Adjustment for: Depreciation Interest expenses Operating Profit Before Working Capital Changes Adjustments for: Debtors and Other Receivables Creditors and Other Payables

Current Year Rs.

Rs.

C.K. VAIDYA Director

R.S. VIJAN Director

Annual Report 2006-2007

Godrej Aquafeed Limited DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2007 To The Shareholders, Your Directors have pleasure in submitting their Report along with the audited Accounts for the financial year ended on 31st March, 2007. PRINCIPAL ACTIVITY The principal activity of the Company is to carry on the business of manufacturing, producing, processing, formulating, buying, selling and distributing of all types of feeds and foods including Aquaculture feeds, but excluding hatchery feed and sinking fish feed, for consumption of animals, birds, insects, fish, plants and other living organisms. FINANCIAL RESULTS As your Company's business of shrimp feed marketing business was transferred to a Joint Venture formed between Godrej Agrovet Limited and Gold Coin Group, Singapore no previous year figures have been given: (Rupees) For the period ended 31/3/2007 Total Income 27750365 Loss before Taxation 1522914 Add: Provision for Taxation 34226 Loss after Taxation 1557140 Balance Brought Forward from previous year – Balance Carried Forward to Balance Sheet 1557140 INCORPORATION AND SHARE CAPITAL Your Company was incorporated on August 18, 2006 with an Authorised Capital of Rs. 500000. The Company obtained the Certificate of Commencement of Business on September 13, 2006. Presently, the entire paid-up share capital of Rs. 500000 is held by Godrej Agrovet Limited (GAVL) and its nominees. DIVIDEND The Directors do not recommend any dividend for the year 2006-07. FIXED DEPOSITS The Company has not accepted any public deposits during the financial year under review. HOLDING COMPANY The Company is a subsidiary of Godrej Agrovet Limited as defined under Section 4(1)(b) of the Companies Act, 1956. SUBSIDIARY COMPANIES The Company has no subsidiary companies during the year under review. DIRECTORS Mr. C. K. Vaidya, Mr. Subbarao A. R. and Mr. N. B. Godrej were the First Directors of the Company named under Article 111 of the Articles of Association of the Company. During the year Mr. R. S. Vijan was appointed as an 'Additional Director' of the Company pursuant to provisions of Section 260 of the Companies Act, 1956 on February 8, 2007. Mr. N. B. Godrej has resigned as the Director w.e.f. February 8, 2007. Since this is the first year of operation of the Company, Mr. C. K. Vaidya and Mr. Subbarao A. R. are not liable to retire by rotation. Mr. R. S. Vijan being an Additional Director holds office up to the date of the ensuing Annual General Meeting. He is eligible for appointment as a 'Director' of the Company. The notice in this respect under Section 257 of the Companies Act, 1956 has been received from one of the Members along with a deposit of Rs.500/- (Rupees Five hundred only) signifying the intention to propose his candidature for the office of Director of the Company. 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.

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 Your Company aims to focus on development of Human Resources. The industrial relations are cordial and the Board would like to place on record its sincere appreciation for the unstinted support from all the employees. ANNEXURE `A' ANNEXURE FORMING PART OF THE DIRECTORS' 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 : Conservation of Energy A. The Company has not established any manufacturing facility this year. Technology absorption, adaptation and innovation B. Not Applicable since the Company does not have any manufacturing facility at present. Foreign Exchange earnings and outgo C. Your Company had no foreign exchange earning as well as outgo. For and on behalf of the Board of Directors

Mumbai, May 23, 2007

C.K. Vaidya Director

A.R. Subbarao Director

REPORT OF THE AUDITORS’ REPORT 1.

3. 4.

We have audited the attached Balance Sheet of Godrej Aquafeed Limited, as at 31st March, 2007 and also the Profit and Loss Account for the period 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 dealt with by this report are in agreement with the books of account. d) In our opinion, the Balance Sheet, the Profit and Loss Account dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956.

ANNEXURE TO THE AUDITORS’ REPORT

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants

Mumbai, May 23, 2007

Referred to in paragraph (3) of our report of even date. 1)

6) 7) 8)

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 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 loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. (b) Consequently, the question of commenting on the rates of interest and the other terms and conditions of the loans granted being prejudicial to the interest of the Company, receipt of 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.

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, 2007; and ii) in the case of the Profit and Loss Account, of the loss for the period ended on that date. On the basis of the written representations received from the Directors as on 31st March, 2007, and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2007 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

(a)

10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20) 21)

ERMIN K. IRANI Partner Membership No. 35646

(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, 2007 for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us, there are no dues outstanding of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Service Tax, Excise Duty or cess on account of any dispute. The Company has accumulated losses at the end of the financial year and has incurred cash losses in the period under review. This being the first year of operations there were no operations in the immediately preceding 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 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 not utilized funds raised on short-term 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

Mumbai, May 23, 2007

ERMIN K. IRANI Partner Membership No. 35646

Godrej Aquafeed Limited BALANCE SHEET AS AT MARCH 31, 2007 This Year Rupees

Schedule SOURCES OF FUNDS Shareholders' Funds Share Capital Reserves & Surplus

500000 –

Loan Funds Secured Loans

– 500000

APPLICATION OF FUNDS Current Assets, Loans & Advances Inventories Sundry Debtors Cash & Bank Balances Loans and Advances

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

INCOME Sales

27750365

TOTAL INCOME

27750365

EXPENDITURE Materials Expenses Depreciation

32647506 118496

5 6

32766002 Net Current Assets

(1057140)

Balance In (Profit) & LOSS

Profit/(Loss) for the year

(1522914)

Provision Current Tax Deferred Tax Fringe benefit tax

– – 34226

Profit/(Loss) After Tax

(1557140)

Balance Brought Forward

– (1557140)

Balance Carried Forward to Balance Sheet

1557140 500000

NOTES TO ACCOUNTS

23626853 5203771 442655

29273279 28590993 3115369 2500

2 3 4

31708862 LESS: Current Liabilities & Provisions Current Liabilities Provisions

This Year Rupees

Schedule

Earnings Per Share (Basic / Diluted) in Rs. NOTES TO ACCOUNTS

(31.14) 8

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.

As per our Report of even date.

Signatures to the Balance Sheet and Schedules 1 to 6 & 8

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants E.K. IRANI Partner Membership No. 35646

C.K. VAIDYA Director

A.R. SUBBARAO Director

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants E.K. IRANI Partner Membership No. 35646

Signatures to the Profit and Loss Account Schedules 1 to 8

C.K. VAIDYA Director

A.R. SUBBARAO Director

Mumbai, May 23, 2007

SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2007 SCHEDULE 1 : SHARE CAPITAL Authorised 10000000 Equity Shares of Rs. 10/- each

This Year Rupees

SCHEDULE 2 : SUNDRY DEBTORS Unsecured And Considered Good) Over six months Others TOTAL Less : Provision For Doubtful Debts

703081 30400

Buildings

ii)

Plant

Insurance

750 6800 120374 75882

Legal and Professional charges

609241

Carriage and freight

171115

Travelling and motor car expenses

810107

Miscellaneous Expenses

201779

Auditors' Remuneration

(32425890) (221616) – (32647506)

7500

Repairs and maintenance

Postage, telephone and stationery

SCHEDULE 5 : CURRENT LIABILITIES Sundry Creditors Security Deposits Other Liabilities

153231

Power, light, fuel and water

– 28590993

2500 – 2500

57239

Consumption of Stores and Spare Parts

28590993

SCHEDULE 4 : LOANS AND ADVANCES

49714 606868

Rates and Taxes

– 3115369

1515420

Processing Charges

– 28590993

3115,369 (Unsecured and considered good unless otherwise stated) i) Government Authorities ii) Others

Provident and other Funds

Rent

SCHEDULE 3 : CASH & BANK BALANCES Cash and Cheques on Hand Balance with Scheduled Banks - on Current Accounts

(118496)

Workmen and Staff Welfare expenses 500000

(34226) (84270

SCHEDULE 7 : EXPENSES Salaries & Wages

500000

(All the above shares are held by Godrej Agrovet Ltd., Holding Company Total

Fringe Benefit Tax Auditors' Remuneration

100000000 100000000

Issued & Subscribed And Paid–Up 50000 Equity Shares of Rs. 10/- each

SCHEDULE 6 : PROVISIONS

84270 5203771

Annual Report 2006-2007 SCHEDULE 8 : NOTES TO ACCOUNTS 1.

AUDITORS REMUNERATION

SIGNIFICANT ACCOUNTING POLICIES a) b)

For the year 31.3.07 Statutory Audit

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

Audit under other statutes

Depreciation/Amortisation has been provided for as under:

Total

(i)

(ii)

1) Building, plant & Machinery: On Straight Line Method basis at the rates prescribed by Schedule XIV of the Companies Act, 1956. 2) Computers are amortized over the period of 4 years. 3) Other assets: On Written down Value basis at the rate prescribed by Schedule XIV to the Companies Act, 1956. 4] Purchased Goodwill is amortised over a period of ten years.

Raw materials are valued at weighted average cost. Finished goods are valued at lower of cost and net realizable value. These Costs include cost of conversion and other costs incurred to in bringing the inventories to their present location and condition. Stores and Spares are valued at cost using the First-in-First-Out Method.

Revenue is recognised when goods are dispatched to external customers. Sales are inclusive of realized exchange fluctuations on export receivables but net of returns, sales tax, rebates 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 unsettled at the year end, backed by underlying assets & 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.

Provisions are recognized in the accounts 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. UNIT

For the year 31.3.07 % Value Rs.000 Raw Materials Imported Items (Incl. Duty Content)

–

Indigenous

100

23626

Total

100

23626

RELATED PARTY DISCLOUSERE Related party disclosure as required by AS-18 "Related Party Disclosure" are given below 1.

Qty.

Value Rs 000

1071

26470

–

1280

TOTAL

1071

27750

Raw Materials consumed 272

7512

Others

123

16114

TOTAL

395

23626

LICENSED & INSTALLED CAPACITY AND ACTUAL PRODUCTION ITEM

Aqua Feed

For the Year Capacity Per Annum

31.3.07

Relationships: (A) 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.

(B) Fellow Subsidiary: Godrej Agrovet Limited (GAVL) holds 100% stake in GoldMohur Foods & Feeds Limited (GFFL), Aadhaar Retailing Limited (ARL) and Golden Feed Products Limited (GFPL), which are100% subsidiary companies. 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.'000's Sr. No. 1 2

Nature of transactions

Holding Co. Fellow Subsidiary (GAVL) (GFFL)

Sales of Raw Material & Finished Goods – Purchases of Raw Material & Finished goods – Expenses charged by other companies 37.70 –

Fellow Subsidiary (GFPL)

Total

28.67

–

28.67

–

2.45

– –

37.70 –

Significant Related Party Transactions All the transactions with holding company mentioned above are with Godrej Agrovet Limited and transactions with Fellow subsidiaries are with GoldMohur Foods & Feeds Limited and Golden Feed Products Limited. EARNINGS PER SHARE: For the Year 31.3.07

Profit after tax and prior period items (Rs.'000) Weighted average number of equity shares outstanding Basic & Diluted earnings per share Nominal value of shares

Sales Turnover

Animal Proteins

VALUE OF CONSUMPTION OF RAW MATERIALS:

For the Year 31.3.07

Others

The basic earnings per share are 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 common and dilutive common equivalent shares outstanding during the period, excepts where the results would be anti-dilutive.

Aqua Feed

Taxation Representation Before Authorities

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 on prudence, are recognised and carried forward 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 in the balance sheet date.

ITEM

Certification

Retirement benefits to employees comprise of Payments made under defined contribution plans like provident fund and family pension. Payments under defined contribution plans are charged to profit and loss account. The Liability for 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.

Rs. '000

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

Registered MT

Installed MT

Not Applicable

800

Act. Production MT

778

Capacity P.A. Regd., MT

Not Applicable

(1557) 50000 (31.14) 10.00

Information required under Schedule VI to the Companies Act, 1956 has been given to the extent applicable. 10. This is the first year of operation for the Company, hence no previous financial year data available. 11. Transfer of Aqua Business Effective 16th November, 2006, the company has transferred its aqua feed business to Godrej Goldcoin Aquafeed Limited for a total consideration of Rs. 403853 thousand. Pursuant to the same the following assets were transferred to Godrej Goldcoin Aquafeed Limited. Rs. '000 Fixed Assets 39173 Inventories : (a) Raw material 35622 (b) Finished goods 6641 (c) Spares 3719 45982 Sundry Debtors 56701 Sundry Creditors (Security deposit) (9353) Total 132503

Godrej Aquafeed Limited 12. Information required to be furnished under the Part IV of the Companies Act 1956 Balance Sheet Abstract and Company's General Business Profile: i)

ii)

Registration Details Registration No State Code Balance Sheet

163857 11 31 Mar. 07

Capital raised during the period (Rs. 000) Public Issue Rights Issue Bonus Issue Private Placement

500 Nil Nil Nil

iii) Position of mobilization and deployment of funds (Rs. 000) Total Liabilities 33181 Total Assets 33181 Source of Funds Paid up Capital 500 Reserve & Surplus – Secured Loans – Unsecured Loans – Deferred Tax Liability – Application of funds Net Fixed Assets – Investments – Net Current Assets 973 Misc. Expenses – iv)

Performance of the Company (Rs. 000) Turnover Total Expenditure Profit / (Loss) Before Tax Profit / (Loss) After Tax Earnings Per Share in Rs. Dividend Rate

27750 29273 (1523) (1557) (31.14) Nil

Generic Names of three Principal products services of the company Item Code No. Product Description

23099010 Aqua Feeds

Cash Flow Statement for the year ended March 31, 2007 Particulars A.

Current Year Rs.

Cash Flow from Operating Activities: Loss before Tax and Operational Items Adjustment for: Depreciation

(1472870) 442655

Operating Profit before Working Capital Changes Adjustments for : Debtors and Other Receivables Creditors and Other Payables

442655 (1030215) (28593493) 32681732 4088239 3058024 – 3058024

Cash Generated from Operations Direct taxes Paid Net Cash Generated from Operating Activities B.

Cash from Investing Activities: Acquisition of Fixed Assets Proceeds from sales of Fixed Assets Net Cash used in Investing Activities

(39576482) 39133827 (442655)

Cash from Financing Activities: Increase in Share Capital/Share Premium Net Cash used in Financing Activities

500000 500000

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

Previous Year Rs.

3115369 – 3115369

For and on behalf of Board

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants E.K. IRANI Partner Membership No. 35646 Mumbai, May 23, 2007.

C.K. VAIDYA Director

A.R. SUBBARAO Director

Annual Report 2006-2007

Golden Feed Products Limited DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2007 To The Shareholders Your Directors have pleasure in submitting their Report along with the audited Accounts for the financial year ended on 31st March, 2007. FINANCIAL RESULTS Your Company's performance during the year as compared with that during the previous year is summarised below: Rs. Lac For the year ended For the year ended 31/3/2007 31/3/2006 Total Income 940.83 345.00 Loss before Taxation 14.12 140.07 Add: Provision for Taxation 01.45 Nil Loss after Taxation 15.57 140.07 Balance Brought Forward from previous year 140.07 Nil Balance Carried Forward to Balance Sheet 155.64 140.07 REVIEW OF OPERATIONS During the year under review, your Company transferred the shrimp feed marketing business to Godrej Aquafeed Limited effective 30th September, 2006. Consequently, the results reflected the operations for the six months period from April '06 to September '06. DIVIDEND Your Directors do not recommend any dividend for the year 2006-07. FIXED DEPOSITS Your Company has not accepted any public deposits during the financial year under review. HOLDING COMPANY Your Company continues to be a subsidiary of Godrej Agrovet Limited as defined under Section 4(1)(b) of the Companies Act, 1956. SUBSIDIARY COMPANIES The Company has no subsidiary companies during the year under review. DIRECTORS Mr. C. K. Vaidya and Dr. S. L. Anaokar, Directors, retire by rotation at the ensuing Annual General Meeting in accordance with the provisions of the Companies Act, 1956 and being eligible, offer themselves for re-appointment. AUDITORS You are requested to appoint Auditors for the current year and fix their remuneration. The retiring Auditors M/s. Kalyaniwalla & Mistry, Chartered Accountants, Mumbai are eligible for re-appointment and a 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 31,2007 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 For and on behalf of the Board of Directors the employees of your Company.

C.K. Vaidya Director

Dr. P.N. Narkhede Director

Mumbai, May 23, 2007.

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 Company has not established any manufacturing facility this year. B. Technology absorption, adaptation and innovation Not Applicable since the Company does not have any manufacturing facility at present.

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 C.K. Vaidya Director

Dr. P.N. Narkhede Director

Mumbai, May 23, 2007.

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 2007 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: The accumulated losses of the Company as at March 31, 2007 exceeds its paid up capital a) 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. f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements read with the notes thereon, subject to para (a) above, give 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, 2007; 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, 2007, and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2007 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956. For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants

Mumbai, May 23, 2007

ERMIN K. IRANI Partner Membership No. 35646

Golden Feed Products Limited ANNEXURE TO THE AUDITORSâ&#x20AC;&#x2122; REPORT Referred to in paragraph (3) of our report of even date. 1)

(a)

(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.

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.

10)

The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

As the Company has been registered for a period less than five years the question of commenting on its accumulated losses being less than fifty percent of its net worth does not arise. The Company has not incurred cash loss during the financial year.

11)

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. 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.

(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 of Rs.40,393,120, from a company covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year was Rs.40,393,120 and the year end balance & loan taken from such party was Rs.23,938,744.

13)

14)

The Company does not deal in shares, securities, debentures and other investments.

(d)

The rate of interest and the other terms and conditions of the loan taken is not prejudicial to the interests of the Company.

15)

According to the information and explanations given to us, the Company has not given any guarantee.

16)

According to the information and explanations given to us, the Company has not applied for any term loans.

17)

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.

(b)

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. 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.

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.

(b)

(e) The payment of principal and interest was also regular. 4)

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.

The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(a)

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants

Mumbai, May 23, 2007

ERMIN K. IRANI Partner Membership No. 35646

Annual Report 2006-2007

BALANCE SHEET AS AT MARCH 31, 2007 Schedule SOURCES OF FUNDS SHAREHOLDERS’ FUNDS Share Capital LOAN FUNDS Unsecured Loans

This Year Rs.

LESS : CURRENT LIABILITIES AND PROVISIONS Liabilities Provisions

Previous Year Rs.

This Year Rs.

Previous Year Rs.

500000

23938744 24438744

70393120 70393120 70893120

35225 25000

45046967 1875000 43171967 – 43171967 25000

23938744

INCOME 92301242

From Operations

34550891

1782044

Other income

48940 94083287

34599831

EXPENDITURE 46967 11742 35225 –

Materials

64580667

22980279

Expenses

26363023

21606761

Interest and financial charges

2290274

2080190

2261742

1875000

Depreciation

Miscellaneous Expenditure written off

64508

5 – 19658516 248099 42996 18200

27832117 30671000 2604347 166999 _

19967812

61274462

11153355 –

47335216 250000

Deficit carried forward

47585216 13689246 14006907

Earnings per share (Basic/Diluted) in Rs.

LOSS BEFORE TAXATION Provision for Taxation

11153355 8814456 15564062 24438744

70893120

95495706

48606738

(1412419)

(14006907)

–

144736

Fringe Benefit Tax LOSS AFTER TAXATION

144736

–

(1557155)

(14006907)

Surplus/Deficit Brought Forward 6 7

NET CURRENT ASSETS PROFIT & LOSS ACCOUNT TOTAL NOTES TO ACCOUNTS

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

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 Loans and Advances

This Year Rs.

TOTAL (Refer Note 12) NOTES TO ACCOUNTS

(15564062)

(14006907)

(31)

(280)

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 7 and 11 For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants C.K. VAIDYA Director DR. P.N. NARKHEDE Director E. K. IRANI Partner Membership No. 35646

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 8 to 11 For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants C.K. VAIDYA Director DR. P.N. NARKHEDE Director E.K. IRANI Partner Membership No. 35646

Mumbai, May, 23, 2007

Mumbai, May 23, 2007

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2007 SCHEDULE 1 : SHARE CAPITAL Authorised 1,00,000 Equity Shares of Rs.10 each *(Previous year 1,00,000) Issued, Subscribed and Paid up 50,000 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. Nil, Previous year 30,000,000) From Godrej Agrovet Ltd.(including interest accured Rs. 18,458,77, Previous year Rs. 15,57,118) TOTAL

This Year Rs.

Previous Year Rs.

1000000

500000

–

30000000

23938744

40393120

23938744

70393120

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) TOTAL SCHEDULE 5 : CURRENT ASSETS, LOANS & ADVANCES (A) INVENTORIES : Raw Materials Finished Products (B) SUNDRY DEBTORS Debts outstanding for a period exceeding six months Considered Good Considered Doubtful

This Year Rs.

Previous Year Rs.

25000 25000

–

25444477 2387638 27832115

– –

Other Debts

4526306 538508 5064814 15132212

9825161 _ 9825161 20845839

TOTAL Less: Provision for doubtful debts

20197026 538508

30671000 – 30671000 (Rs.)

19658518 SCHEDULE 3 : FIXED ASSETS ASSETS

As at 1.4.2006

GROSS BLOCK Additions Deductions

As at 31.3.2007

Upto 1.4.2006

–

1875000

DEPRECIATION For the On Year Deductions

Prior Period Adjustments

Upto 31.3.2006

4125000

–

NET BLOCK As at As at 31.3.2007 31.3.2006

Intellectual property, Technical Know-how etc. *(Refer note 2) Plant & Machinery TOTAL Previous Year

45000000

–

45000000

2250000

–

43125000

46967

–

46967

–

11742

–

11742

35225

46967

45046967 –

– 45046967

45000000 –

46967 45046967

1875000 –

2261742 1875000

4125000 –

– –

11745 1875000

35225 43171962

43171967 –

Golden Feed Products Limited SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2007 This Year Rs. SCHEDULE 5 : CURRENT ASSET LOANS & ADVANCES (C) CASH AND BANK BALANCES : Cash and Cheques on hand – Balances with Scheduled Banks in current account 248099

This Year Rs.

53072

248099 42996

(D) OTHER CURRENT ASSETS :

SCHEDULE 6 : LIABILITIES Sundry Creditors Other Liabilities

SCHEDULE 7 : PROVISIONS Gratuity Leave Encashment TOTAL SCHEDULE 8 : MATERIALS a) RAW MATERIALS CONSUMED Opening stock Add : Purchases during the year Less : Transferred to Godrej Aquafeed Limited Less : Sales during the year Less : Closing Stocks b) c)

PURCHASE FOR RESALE INVENTORY CHANGE Opening Stock Finished Goods Finished Goods taken over Less : Closing Stock Finished Goods

SCHEDULE 9 : 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 10 11 12 13 11 12 13 14 15 16

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 Provision for Dobtful Debts and Advances General Expenses

37637147 – 9698069

11153355

47335216

– –

200000 50000

–

250000

60872187 1320842

– 41177837 41177837 – 89.554 41088283 25444477 15643805 8049679

2387638 – 2387638

TOTAL

– 61274460

8330590 2822766

25444477 44256407 69700884 7972627 856069 60872187 –

– –

Other Financial Charges TOTAL

– – –

5462400 2868190

TOTAL

(b)

18200 19967814

Advances from Customers

2551275 2604347 166999

SCHEDULE 10 : INTEREST AND FINANCIAL CHARGES (a) Interest paid on fixed loans From:i) Banks 203959 ii ) Others 1869931 2073,890 216384

4,808 1954936 1959744 120446

2290274

2080190

SCHEDULE 11 : NOTES TO ACCOUNTS

(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 18200 Considered Doubtful 18200 Less: Provision for doubtful advances – 18200 Advance payment of Taxes (Net of provision for taxation Rs.81,925 thousand; Previous Year Rs. 81,925 thousand) TOTAL

Previous Year Rs.

– 1674434 1674434

– 2387638 64580667

2387638 2387638 (713204) 22980280

3153401

2365840

343159 468973 10572608 – 11107 56000 9143

191663 61477 12058653 – 252 40,700 19142

20922 117631 153252 115360 356893 3353218 5372542 _ 1632774 538508 87532

1933 – 2329 4260 22575 116827 112240 2765733 1153010 1556745 64979 1062483 – 10182

26363023

21606762

6223 – 14700

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) 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) 1) Depreciation is provided on the straight line method at the rates specified in Schedule IV to the Companies Act, 1956, except for computer hardware which is depreciated over its estimated useful life of four years. 2 ) Amortizations Asset type Period (i) Leasehold Land Primary lease period (ii) Leasehold improvements and equipments Primary lease period or 16 years whichever is less (ii) Signages 3 years (iv) Technical knowhow, technical knowhow fees of a capital nature 10 years (v) Computer software 6.17 years e) Raw materials are valued at weighted average cost. Finished goods and work-in-progress are valued at lower of cost and net realisable value. These costs include cost of conversion and other costs incurred in bringing the inventories to their present location and condition. f) 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 . g) Revenue is recognised when goods are despatched to external customers. h) Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal 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. i) 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. j) Provisions are recognized in the accounts in respect of present probable obligations, the amount of which can be reliably estimated. TRANSFER OF SHRIMP FEED BUSINESS Effective 30th September, 2006, the Company has transferred its aqua feed business to Godrej Aquafeed Limited for a total consideration of Rs. 6,46,68,396. Pursuant to the same the following assets were transferred to Godrej Aquafeed Limited. Rs. ‘000 Fixed Assets Inventories : (a) Raw material (b) Finished goods

40875000 7971627 1207980 9179607 24407181 74461788 9793392 64668,396

Sundry Debtors Less: Current liabilities Total This Year

SALES TURNOVER Aqua Feed

Previous Year

Unit

Quantity

Value Rs.

Quantity

Value Rs.

2903

92301242

1228

34550,891

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

Annual Report 2006-2007

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2007 4. 5. 6.

FINISHED GOODS INVENTORIES Aqua Feeds PURCHASES FOR RESALE Aqua Feed RAW MATERIALS CONSUMED Animal Proteins Others

–

1320842

365

8049679

601

15759,194 45112993

445

10217648 5426156 15643804

LICENSED & INSTALLED CAPACITY AND ACTUAL PRODUCTION

Aqua Feeds

For the year Ended

Registered Production MT

Installed Production MT

Actual Production MT

Third Party Production MT

31.03.2007 31.03.2006

– –

2918.4 1189.5

This Year Rs.

2387638

60872187

Item

TOTAL

–

AUDITORS’ REMUNERATION Audit fees Audit under Other Statutes TOTAL

This Year Rs.

Previous Year Rs.

86520 28840 115360

84180 28060 112240

VALUE OF CONSUMPTION OF RAW MATERIALS, SPARES & TOOLS This Year Previous Year Rs. % Rs. % RAW MATERIALS : Indigenous 60872187 100 15643804 100 TOTAL

60872187

100

15643804

100

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.

12.

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. (ii) Fellow subsidiaries: GAVL also holds 100% stake in GoldMohur Foods & Feeds Limited (GFFL), Godrej Aquafeed Limited (GAL) and Aadhaar Retailing Limted (ARL). 2. The following transactions were carried out with the related parties in the ordinary course of business : Rs. Rs. Holding Fellow Nature of Transactions Company * Subsidiary** (i) (ii) 1 Sale of materials/finished goods/ Debtors 4524000 33586788 1072000 – 2 Purchase of Fixed Assets – – – 46987 3 Sale of Fixed Assets – 40875000 – – 4 Purchase of materials/finished goods 2558000 – 293000 – 5 Loan taken – – 40393120 5 Loan repaid 16454376 – – – 6 Interest expense on loan taken 1846000 – 1557118 – 7 Expenses charged to other companies 257816 – – – 8 Transfer of current liabilities – 9793392 – – 9 Outstanding payables, net of (receivables) 23938744 – 40393120 – 10 Guarantees issued by – – 75000000 – 11 Gurantees outstanding – – 75000000 – * All transaction are with Godrej Agrovet Limited ** All transactions are with Godrej Aquafeed Limited EARNINGS PER SHARE This Year Previous Year Rs. Rs. 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

(1557155) 50000 (31) (31) 10.00

(14006907) 50000 (280) (280) 10.00

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. 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 Accumulated Loses 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

140599 11 31/3/2007 (Rupees) Nil Nil Nil Nil (Rupees) 35592099 35592099 500000 – – 23938744 35225 25000 8814456 – Nil (Rupees) 94083287 95495706 -1412419 -1557155 -31.14

23099010 Animal Feeds

C.K.Vaidya Director

Mumbai, May 23, 2007

DR. P.N. NARKHEDE Director

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007 Current Year Rs.

Previous Year Rs.

(1412419)

(14006907)

4552016 3139597

1875000 2080190 64508 4019698 (9987209)

Rs. A.

Cash Flow from Operating Activities : Net Profit Before Taxes Adjustment for: Depreciation Interest expenses Miscellaneous expenditure written off

2261742 2290274 –

Operating Profit Before Working Capital Changes Adjustments for: Inventories 27832117 Debtors and Other Receivables 11118288 Creditors and Other Payables (36431861)

2518544 5658141 (144736) 5513405

Cash Generated from Operations Direct Taxes paid (net of refund received) Net Cash Flow from Operating Activities Cash Flow from Investing Activities : Acquisition of fixed assets Proceeds from sale of fixed assets Purchase of Investments Net Cash used in Investing Activities Cash Flow from Financing Activites : Proceeds from Borrowings Repayment of Borrowings Interest Paid

– 40875000 –

– (46454376) (2290274)

Net increase in Cash and Cash equivalents Cash and Cash equivalents (Opening balance)

(25000) (45071967) (45071967) 70393120 – (2080,190)

(48744650)

68312930

(2356247)

2117160

2604,347

487187

248099

2,604347

Cash and Cash equivalents (Closing balance) Notes:

(21123801) (45046967)

40875000 40875000

Net Cash used in Financing Activities

(27832115) (30837998) 47533521 (11136592) (21123801)

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 Chartered Accountants C.K. VAIDYA Director DR. P.N. NARKHEDE Director E.K. IRANI Partner Membership No. 35646 Mumbai, May 23, 2007

Goldmohur Foods & Feeds Limited DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON MARCH 31, 2007 To The Shareholders

Your Directors have pleasure in submitting their Report along with the audited Accounts for the financial year ended on 31st March, 2007. Financial Results

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

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

For the year ended 31.3.2007

Rs. Lac For the year ended 31.3.2006

32635.13 443.40 123.00 320.40 226.82 547.22

29587.69 618.00 80.00 538.00 96.10 634.10

340.06 – 47.69 32.04 127.44 547.22

310.00 43.48 53.80 226.82 634.10

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 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 ;

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

HUMAN RESOURCES In a competitive business environment, a competent and motivated team of employees is a key ingredient for the success of an organization. We are pleased to report that during the year under review industrial relations at all units continued to be cordial. The Management thanks all the employees and workers for their continued contribution and efforts towards the Company's progress.

REVIEW OF OPERATIONS The year under review presented many challenges for your Company. Avian influenza which was detected in certain pockets of the country last year continued to adversely impact the performance of your Company. Additionally unprecedented increase in certain key raw materials like maize put severe pressure on the margins. Though the industry witnessed a degrowth during the year under review, your Company did well to grow by 10 %.

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

Mumbai, May 23, 2007

DIVIDEND Your Directors have paid an interim dividend of Rs.18.50 per (on 18,38,170 shares) share for the year 200607 (previous year Rs.16.86 per share on 18,38,170 shares). Your directors do not recommend any final dividend. FIXED DEPOSITS Your Company has not accepted any public deposits during the financial year under review.

ANNEXURE ‘A’ ANNEXURE FORMING PART OF THE DIRECTORS’ REPORT ANNEXURE FORMING PART OF THE DIRECTORS' REPORT

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

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 :

SUBSIDIARY COMPANIES

HOLDING COMPANY

Your Company is constantly endeavoring to conserve and optimize the use of energy through new and improved methods.

The Company has no subsidiary companies during the year under review. DIRECTORS Mr. N. B. Godrej and Dr. S. L. Anaokar, Directors, retire by rotation at the ensuing Annual General Meeting in accordance with 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 and a certificate as required u/s 224 (1-B) of the Companies Act, 1956 has been received from them. 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, adaptation and innovation I.

Your Company has also been making constant efforts for up-gradation 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)

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.1615.91 lac (Previous year Rs. 2267.76 lac).

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.

For and on behalf of the Board of Directors Mumbai, May 23, 2007

N.B. Godrej Chairman

Annual Report 2006-2007

REPORT OF THE AUDITORS TO THE MEMBERS OF GOLDMOHUR FOODS & FEEDS LIMITED 1.

We have audited the attached Balance Sheet of Goldmohur Foods and Feeds Limited, as at 31st March, 2007 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 Standards 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, 2007; and ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date. iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. On the basis of the written representations received from the Directors as on 31st March, 2007, and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2007 from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants ERMIN K. IRANI Partner Membership No. 35646

of the loans granted being prejudicial to the interest of the Company, receipt of regular principal and interest and reasonable steps taken for recovery of principal and interest does not arise.

(a)

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

(b)

(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 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

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)

(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 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)

(b)

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)

12)

13)

Mumbai, May 23, 2007

ANNEXURE TO THE AUDITORS’ REPORT Referred to in paragraph (3) of our report of even date

(c)

14)

The Company does not deal in shares, securities, debentures and other investments.

15)

According to the information and explanations given to us, the Company has not given guarantee for loans taken by others from banks and financial institutions.

16)

The Company has not taken any term loan during the year.

17)

According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flows of the Company, we report that no funds raised on short-term basis have been used 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 ERMIN K. IRANI Partner Membership No. 35646

Mumbai, May 23, 2007

Goldmohur Foods & Feeds Limited BALANCE SHEET AS AT MARCH 31, 2007 Schedule

As at March 31, 2007 Rs. '000

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

As at March 31, 2007 Rs. '000

As at March 31, 2006 Rs. '000

SOURCES OF FUNDS Shareholders’ Funds Share Capital Reserves and Surplus

For the year ended 31/03/2007 Rs. '000

1 2

18382 182447

18382 189180

3 4

90000

TOTAL

3233489

Sales Other Income

90000 52400

108440 54900

343229

370903

Net Block Capital work-in-progress Fixed Assets Held for Disposal at Net Realisable Value

459402 153062

460282 123968

306340 10108

336314 -

7 316455

Materials

2791578

2484063

Expenses

391066

377453

Interest and Financial Charges

5728

7155

30802

28298

Depreciation/Amortisation

LESS :Current Liabilities and Provisions Liabilities Provisions

323619 191830 8410 46910

749038

570769

7 705130 17134

529525 6662

722264

536187

Net Current Assets TOTAL Notes to Accounts

Current Minimum Alternate Tax

26774

34582

343229

370903

Fringe Benefit

5300

(5300)

1300

2100

E.K. IRANI Partner Membership No. 35646 Mumbai, May 23, 2007.

5900 12300

8000

32040

53800

Profit Brought Forward

22682

9610

AMOUNT AVAILABLE FOR APPROPRIATION

54722

63410

34006

31000

APPROPRIATION Interim Dividend Tax on Dividend

4769

4348

Transfer to General Reserve

3204

5380

Surplus Carried Forward TOTAL

Earnings per share (Basic/Diluted ) in Rs. ( Refer Note 21 )

12743

22682

54722

63410

17.43

29.27

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

61800

(2500)

Deferred

Notes to Accounts

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

2896969

44340 13500

PROFIT AFTER TAXATION 378835 238502 42862 88839

3219173

Provision for Taxation

336321

2958769

EXPENDITURE

PROFIT BEFORE TAXATION

14330 3263514

APPLICATION OF FUNDS

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

For the year ended 31/03/2006 Rs. '000 2944439

30025

207563 8440 100000

Deferred Tax Liability

Fixed Assets Gross Block Less : Depreciation

For the year ended 31/03/2007 Rs. '000

INCOME

200829 Loan Funds Secured Loans Unsecured Loans

Schedule

N.B. Godrej

Chairman

C.K. Vaidya

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 E.K. IRANI Partner Membership No. 35646 Mumbai, May 23, 2007.

N.B. Godrej

Chairman

C.K. Vaidya

Director

SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2007 As at March 31, 2007 Rs. '000 SCHEDULE 1 : SHARE CAPITAL Authorised 5,000,000 Equity Shares of Rs 10 each Issued, Subscribed and Paid up 1,838,170 Equity Shares of Rs.10 each fully paid 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 GENERAL RESERVE ACCOUNT As per last Balance Sheet Add: Transfer from Profit & Loss Account PROFIT AND LOSS ACCOUNT TOTAL

As at March 31, 2007 Rs. '000

As at March 31, 2006 Rs. '000

50000

18382

As at March 31, 2007 Rs. '000 SCHEDULE 3 : SECURED LOANS FROM BANKS Cash Credit TOTAL

As at March 31, 2007 Rs. '000

As at March 31, 2006 Rs. '000

– –

8440 8440

90000 90000

100000 100000

Security : Refer Note (3) SCHEDULE 4 : UNSECURED LOANS Short Term Loans from Banks TOTAL 136233 30266 3204

136233 24886 5380

33470 12744

30266 22682

182447

189180

Repayable at call or within a year Rs. 90,000 thosusands (Previous Year 1,00,000)

Annual Report 2006-2007

SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2007 SCHEDULE 5 : FIXED ASSETS

(Rs. '000)

ASSETS

GROSS BLOCK

NET BLOCK

As at April 1, 2006

Additions

Deductions

As at March 31, 2007

Up to April 1, 2006

For the year

On Deductions

Up to March 31, 2007

As at March 31, 2007

As at March 31, 2006

5191 2563 6105 64148 123168 4710 11016 6592 236789

– – – 865 323 32 542 507 –

– – – 106 – 1570 308 1164 –

5191 2563 6105 64907 123491 3172 11249 5935 236789

– 1721 1423 21013 5450 2088 7545 1852 82876

– 70 162 5638 6537 219 1798 592 15786

– – – 26 – 998 278 406 –

– 1791 1585 26625 11987 1309 9065 2038 98662

5191 772 4520 38283 111504 1863 2185 3897 138127

5191 842 4682 43136 117718 2622 3471 4740 153913

460281

2269

3148

459402

123968

30802

1708

153062

306340

336314

391938 –

68703 –

359 –

460282 –

95864 –

28298 –

194 –

123968 –

336314 10108

– –

Land-Freehold Leasehold improvements Buildings Plant & Machinery Power Generating Wind Mill Furniture, Fittings & Fixtures Computers Motor Vehicles Trade Marks TOTAL

DEPRECIATION

Previous Year Capital Work-in-Progress/Advances Assets Held for Disposal at Net Realisable Value

77 316455

As at March 31, As at March 31, 2007 2007 Rs. '000 Rs. '000 SCHEDULE 6 : CURRENT ASSETS , LOANS AND ADVANCES (A) INVENTORIES : Raw Materials and Packing Material Stores & Spares Finished Goods Raw Material in Transit

281859 517 58632 37827

247215 527 65076 10801 378835

(B) SUNDRY DEBTORS : Debts outstanding for a period exceeding six months Considered Good Considered Doubtful

As at March 31, 2006 Rs. '000

323619

30362 4105

15982 –

Other Debts

34467 208140

15982 175848

TOTAL

242607

191830

4105

–

Less: Provisions for doubtful debts

238500

35350

2804 8410

(D) LOANS & 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

56435 1070

38706 715

Less: Provision for Doubtful Advances

57504 1070

39421 715

Deposits

56435 32404

38706 8204

TOTAL

88839

46910

749038

570769

SCHEDULE 7 : CURRENT LIABILITIES AND PROVISIONS A) CURRENT LIABILITIES Acceptances 159651 Sundry Creditors (Note 5) 539862 Deposits 5617 Interest accrued but not due on loans –

111272 416080 2091 82 705130

PROVISIONS For Taxation (Net of Advance Tax Rs.55,285 thousand; Previous Year Rs. 50,708 thousand) For Gratuity For Leave Encashment

529525

5828

(2291)

8884 2422

7192 1761 11306

TOTAL

For the year ended March 31, 2006 Rs. '000

97 18545 87

52 8222 2

11295

6054

30024

14330

Less: Sales during the year Less: Closing stocks

247215 2840213

166336 2440295

3087428

2606631

257081

27946

2830347

2578685

281859

6662

17134

6662

722264

536187

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 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

247215 2548488 236646

65076 58632

5606

42862

SCHEDULE 9 : MATERIALS Raw Materials Consumed Opening Stock Add: Purchases during the year

Purchase For Resale Inventory Change Opening Stock of Finished Goods Less: Closing Stock of Finished Goods 7512

For the year ended March 31, 2007 Rs. '000

SCHEDULE 8 : OTHER INCOME Interest Income Income from wind mill Insurance Claim Received Miscellaneous Income (Tax Deducted at source Rs. 4 thousand; Previous Year Rs. 30 thousand)

191830

[Debts amounting to Rs.1,37,851 thousands (Previous Year Rs.1,19,752 thousands) are secured against Bank Guarantees. Debtors Rs.15,012 thousands (Previous Year Rs.15,657 thousands) are secured against Collateral Land and shares (C) CASH AND BANK BALANCES : Cash and cheques on hand Balances with Scheduled Banks In Current Accounts

For the year ended March 31, 2007 Rs. '000

336321

68564 65076 6444

3488

2791578

2484063

95662 3369 2751 79117 34717 11447 1790

78124 2962 6927 88889 35283 12994 3,799 279 5627 1771

196 8863 191

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 Doubtful Debts & Advances/(Written back) Bad Debts Written Off Loss on Sale of Fixed Assets (Net) Miscellaneous Expenses

SCHEDULE 11 : INTEREST AND FINANCIAL CHARGES (a) Interest paid on fixed loans i) Banks ( b) Other Financial Charges

2331470 149105

9250 1442 7169 1447 8070 64064 1460 23223

1417 8488 1447 1478 58074 3422 25494

4505 10422 254 30907

– 22500 41 18437

391066

377453

3549 2179

5149 2006

5728

7155

Goldmohur Foods & Feeds Limited SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2007 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 pro-rata 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 certainity 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 Liablities 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 Rs.nil (Previous Year Rs. 36,800/- thousands) 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 technological obsolecence. The management is of the opinion that th 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 31/03/07 Unit 6.

SALES TURNOVER Aqua Feed Cattle Feed Poultry Feed Lab Feeds Contract Broiler Farming Others

Value Rs. ‘000

Quantity

Value Rs. ‘000

8948 37006 229209 222 – 1596

244317 232624 2457835 2617 – 296097

11217 35579 228196 474 – –

320624 216282 2396162 3815 – 7556

276981

3233490

275466

2944439

FINISHED GOODS INVENTORIESMT Aqua Feed Cattle Feed Poultry Feed Lab Feeds Others

759 567 2954 4 29

22794 3686 30991 30 1131

1007 1024 3088 46 –

32236 5785 25834 377 844

TOTAL

4313

58632

5165

65076

188 14315 14664 – 168

1074 90999 143183 – 1389

86 19874 3054 – –

1314 113731 28958 – 5101

TOTAL

29335

236646

23014

149104

RAW MATERIALS CONSUMED MT DLM Maize Rice Bran Extraction Rice Bran Soya Others

333 84945 25311 7377 64022 –

58,896 714376 105089 55009 666352 948766

421 92126 22189 10361 64700 –

64937 605050 71032 61019 619358 910074

181988

2548488

189797

2331470

PURCHASE FOR RESALE Aqua Feed Cattle Feed Poultry Feed Lab Feeds Others

TOTAL 10.

Quantity

TOTAL 7.

For the Year 31/03/06

LICENSED AND INSTALLED CAPACITY AND ACTUAL PRODUCTION Item

For the Year

Capacity Per Annum Registered MT

Aqua, Cattle 31.03.07 Not and Poultry Feed Applicable Aqua, Cattle and Poultry Feed

31.03.06

Not Applicable

Actual

Capacity Per Annum

Installed MT

Production* MT

Registered MT

232000

246794

Not Applicable

232000

252710

Not Applicable

* Actual production includes production at third party processing locations. 11.

COMMON EXPENSES ALLOCATED BY THE HOLDING COMPANY : For the Year 31/03/07 Rs. ‘000s Expenses (Schedule 12) include amounts charged by Godrej Agrovet Limited, the Holding Company 26400

12. AUDITORS’ REMUNERATION Statutory Audit Audit under other statutes Certification Taxation Representation Before Authorities TOTAL

For the Year 31/03/06 Rs. ‘000s 26400

898 393 44 112

1447

13. Revenue expenditure on scientific research debited to respective expense heads Rs. 2,657 thousands (Previous Year Rs.2,594 thousands ) 14.

VALUES OF IMPORTS ON CIF BASIS Raw Materials

152837

246138

TOTAL

152837

246138

312 2367

618 1017

2679

1635

15. EXPENDITURE IN FOREIGN CURRENCY Travelling Expenses Bank Charges TOTAL 16. VALUE OF CONSUMPTION OF RAW MATERIALS

Raw Materials : Imported Items (Including Duty Content) Indigeneous TOTAL

For the Year 31/03/07 % Value Rs. ‘000

For the Year 31/03/06 % Value Rs. ‘000

6 94

158912 2389576

10 90

225141 2106329

100

2548488

100

2331470

17. The profit/loss on forward foreign exchange contracts cancelled during the year included in the Profit and Loss Account amounts to Rs. 482 thousands (net expense) (Previous Year Rs. 740 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.140 thousands (Previous Year - Rs. 12 thousands ).

Annual Report 2006-2007

SCHEDULES TO THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2007 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 deffered tax liabilities/assets. The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities are : For the Year For the Year 31/03/07 31/03/06 Rs. ‘ 000 Rs. ‘ 000 Depreciation on Fixed Assets Carried forward loss Provision for Doubtful Debts Provision for Doubtful Advances Others

(57986) – 1395 364 3843

(61732) 3619

(52384)

(54900)

241 2972

20. RELATED PARTY DISCLOUSERE 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 subsidairy of Godrej & Boyce Mfg. Co. Limited, the ultimate Holding Company. Associate Company Godrej Gold Coin Aqua Feed Private Limited.GAVL holds 49% in the Company. GVAL has aquired 49% stake in GGCAFPL during the year. 2. The following transactions were carried out with the related parties in the ordinary course of business : (i) Details relating to parties referred to in 1 above Rs. ‘000s Rs. ‘000s Holding Associate Company Company 1 Sale of Materials/Finished Goods 132548 595 11120 – 2 Sale of Services 180 – – 3 Purchase of Materials/Finished Goods 198469 2820 215661 – 4 Expenses charged to other companies 8400 – 1307 – 5 Expenses charged by other companies 39152 – 26592 – 6 Dividend paid 34006 – 31000 – 7 Outstanding receivables, net of payables 5497 (2225) 18219 – 8 Guarantees taken 5900 – 70000 – Note : Figures in italics pertains to the previous year 3. Significant Related Party Transactions All the transactions with holding company mentioned above are with Godrej Agrovet Limited. All the transactions with associate company mentioned above are with Godrej Gold Coin Feed Private Limited. 21.

23. 24.

For the Year 31/03/07 32040 1838200 17.43 17.43 10.00

For the Year 31/03/06 53800 1838200 29.27 29.27 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 For the Year Particulars 31/03/07 31/03/06 Rs. ‘ 000 Rs. ‘ 000 Lease rental paid during the year 10640 11012 Future Lease Obligations Due within one year of balance sheet date 6061 6077 Due after one year and with in five years of balance sheet date 8832 9301 Due after five years of balance sheet date – – Information required under Schedule VI to the Companies Act, 1956 has been given to the extent applicable. Figures for the previous financial year have been regrouped wherever necessary.

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 31-Mar-2007 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 343229 Total Assets 343229 Source of Funds Paid up Capital 18382 Reserve & Surplus 182447 Secured Loans – Unsecured Loans 90000 Deferred Tax Liability 52400 Application of funds Net Fixed Assets 316455 Investments – Net Current Assets 26774 Misc. Expenditure – iv) Performance of the Company (Rupees ‘000) Turnover 3263514 Total Expenditure 3219174 Profit Before Tax 44340 Profit After Tax 32040 Earnings Per Share in Rs. 17.43 Dividend Rate 185% v) Generic Names of three Principal Products Services of the Company Item Code No 23099001 Product Description Animal Feeds N.B. Godrej Chairman

C.K. Vaidya Director

Mumbai, May 23, 2007 CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007 For the Year Ended 31-03-2007 Rs. '000 Rs. '000 A. Cash Flow from Operating Activities : Profit before Tax and Operational Items 44340 Adjustment for: Depreciation 30802 Loss/(Profit) on sale of Fixed Assets 254 Exchange Difference 3956 Interest Income (97) Interest Expense 3549 38463 Operating Profit before Working Capital Changes Adjustments For : Inventories (55215) Debtors and Other receivables (88599) Creditors and Other payables 174084

EARNINGS PER SHARE

Profit after tax as per Profit & Loss Account ( Rs. ‘000) Weighted average number of equity shares outstanding Basic earnings per share Diluted earnings per share Nominal value of shares 22.

25.

61800 28298 41 (8876) (52) 7155 26566 88366 (72417) 42472 (53183)

30270

(83128)

Cash Generated from Operations Direct taxes Paid

113073 (6681)

5237 (5930)

Net Cash Generated from Operating Activities

106392

(693)

Cash from Investing Activities: Acquisition of Fixed Assets Proceeds from sales of Fixed Assets Interest Income

(12377) 1200 97

Net Cash used in Investing Activities C.

82803

For the Year Ended 31-03-2006 Rs. '000

Cash from Financing Activities: Proceeds from Borrowings Repayment of Borrowings (Decrease)/Increase in Cash Credit/ WCDL from Banks (net) Interest Paid Dividend Paid Tax on distributed profits Other Financial Charges

(68703) 124 52 (11080)

(68527)

– (10000)

100000 –

(8453) (3631) (34006) (4769) –

8440 (5067) (31000) (4348) (2006)

Net Cash used in Financing Activities

(60858)

66019

Net Increase/(Decrease) in Cash and Cash Equivalents Cash and Cash equivalents (Opening Balance)

34454 8410

(3201) 11611

Cash and Cash equivalents (Closing Balance)

42864

8410

N.B. Godrej

Chairman

C.K. Vaidya

Director

As per our Report attached For and on behalf of KALYANIWALLA & MISTRY Chartered Accountants E.K. IRANI Partner Membership No. 35646 Mumbai, May 23, 2007

Godrej Properties Limited BOARD OF DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2007 To The Shareholders Your Directors have pleasure in submitting their Report alongwith the Audited Accounts for the year ended 31st March, 2007. 1. OPERATING RESULTS: Your Company’s performance during the year as compared to the previous period is summarised below: 2006-2007 2005-2006 (Rs. in lacs) (Rs. in lacs) Profit before Taxation 4609.76 1785.84 Provision for Taxation (517.42) (445.32) Provision for Fringe Benefit Tax (7.67) (4.88) Provision for Deferred Tax 14.71 3.29 Provision for MAT credit entitlement 45.84 – Profit after Taxation 4145.22 1338.93 Add: Surplus brought forward 1263.41 772.20 Prior year tax adjustments AMOUNT AVAILABLE FOR APPROPRIATION Appropriations: Your Directors recommend appropriations as under: Interim Dividend Dividend Distribution Tax Transfer to General Reserve Surplus carried forward TOTAL APPROPRIATIONS

(0.52)

(6.87)

5408.11

2104.26

2700.00 378.67 414.53 1914.91 5408.11

620.00 86.96 133.90 1263.40 2104.26

FIXED DEPOSITS: The Company has accepted Fixed Deposits to the extent of Rs. 4140000/- 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 Directors' 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)

Conservation of Energy : Expenses on account of Energy are negligible.

(ii)

Technology Absorption:

(iii)

Foreign Exchange Earnings & Outgo :

It is an on going process.

DIVIDEND: Your Directors during the year had announced two interim dividends @ 186.2039% & @ 232.7549%. The said two interim dividends are recommended as the Final Dividend for the year. REVIEW OF OPERATIONS: Your Company has had a good financial year, posting total income of Rs. 13726.17 lacs during the year ended 31st March, 2007. The highlights of the year have been the residential projects Godrej Woodsman Estate in Bangalore and Planet Godrej at Mahalaxmi. Both these projects recorded excellent sales and the launch of the 5th Tower Celesta in Planet Godrej has been very successful. FUTURE PROSPECTS AND OUTLOOK OF THE COMPANY: The Industry continues to surge ahead as demand outstripped supply in all major markets across various business verticals. The growth story is expected to continue for the next five years in the back of strong IT/ITES demand, expansion of modern retails and housing demand for the growing young urban population in India. To capitalise on this tremendous opportunity your Company has entered into a large development opportunity in Hyderabad for building an IT Park of six million sq. ft. The Company is also in the process of finalizing several residential and commercial projects in Bangalore, Pune, Chennai and Goa. The Company is also exploring the possibility of raising capital through an Initial Public Offer subject to SEBI approval during the current financial year. SUBSIDIARY COMPANIES : During the year your Company formed three new Private Limited Companies viz., Godrej Real Estate Private Limited, Godrej Developers Private Limited and Godrej Sea View Properties Private Limited. These three companies will be subsidiaries of your Company. The project at Hyderabad will be developed exclusively by the Godrej Real Estate Private Limited, one of the project with Simoco at Kolkata will be developed by Godrej Developers Private Limited and the new project at Goa will be developed exclusively by Godrej Sea View Properties Private Limited. During the year, Godrej Realty Private Limited issued 1715000 10% Secured Redeemable Optionally Convertible Debentures of Rs.10/- each to HDFC Venture Trustee Company Limited and 1785000 10% Secured Redeemable Optionally Convertible Debentures of Rs. 10/- each to your Company.

The audited Balance Sheet as at 31st March, 2007 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 Private Limited, Godrej Waterside Properties Private Limited, Godrej Real Estate Private Limited, Godrej Developers Private Limited and Godrej Sea View Properties Private Limited alongwith Statement as required under Section 212 of the Companies Act, 1956, is annexed herewith.

During 2006-07, expenditure in foreign currencies amounted to Rs. 39,497,612 /- on account of travelling and expenses incurred for business promotion. The Company has not earned any Foreign Exchange during the year. 8.

DIRECTORS : In accordance with the provision of the Articles of Association of the Company, Ms. Pheroza Jamshyd Godrej, Mr. Nadir B. Godrej and Ms. Smita Vijay Crishna retire by rotation and being eligible, offer themselves for re-appointment.

DIRECTORS’ RESPONSIBILITY STATEMENT: Your Directors confirm:

10.

(i)

that in the preparation of the annual accounts, the applicable accounting standards have been followed;

(ii)

(iii)

(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.

11.

ACKNOWLEDGEMENT: Your Directors take this opportunity to thank all the employees and associates for their cooperation. For and on behalf of the Board of Directors A.B. GODREJ Chairman

Mumbai, May 23, 2007

ANNEXURE TO DIRECTORS’ REPORT Information as per Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 and forming part of the Directors’ Report for the year ended 31st March, 2007. SR. NO.

NAME

Mr. Milind S. Korde

Mr. K. T. Jithendran

AGE

QUALIFICATION

DATE OF EMPLOYMENT

DESIGNATION

REMUNERATION (RS.)

EXPERIENCE (YEARS)

LAST EMPLOYMENT DESIGNATION COMPANY

B.Sc., L.L.B., A.C.S.

03.12.1990

Managing Director

7916230

Commercial Officer

Tata Housing Development Co. Ltd.

B.Tech., P.G.D.M.

01.06.1994

Executive Vice President

3479680

Design Engineer

Metallurgical Engineering Consultants India Ltd.

NOTES : 1. NATURE OF EMPLOYMENT WHETHER CONTRACTUAL OR OTHERWISE: a) The appointment of the Managing Director from 1st April, 2006 is contractual and terminable by three months notice on either side. b) The appointments of the other employees are non-contractual and are terminable by three months notice on either side. 2. OTHER TERMS AND CONDITIONS: a) Remuneration for the purpose of this statement as shown above includes Salary, House Rent Allowance, Performance Linked Variable Remuneration (PLVR), Company’s contribution to Provident Fund and monetary value of perquisites as per Income Tax Rules. b) The Designation represents the nature of duties performed by the Employee. c) The age shown is as of last Birthday and the particulars of previous employment pertain to the immediate past employment. 3. RELATIVES OF DIRECTORS: The Managing Director is not related to any of the other Directors of the Company. 4. Information about qualification and last employment is based on particulars furnished by the concerned employee.

100

Annual Report 2006-2007

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, 2007 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:

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. f)

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, 2007;

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, 2007, and taken on record by the Board of Directors, we report that, none of the directors is disqualified as on 31st March, 2007 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

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.

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants

Bahadur S. Dastoor Partner Membership No. 48936

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

Mumbai, May 23, 2007

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 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.

(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 loan, 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 other terms and conditions of the loans granted being prejudicial to the interests of the Company, receipt of regular principal and interest and overdue amounts exceeding rupees one lakh 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 other 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.

(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, Value Added 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, 2007 for a period of more than six months from the date they became payable.

(b)

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)

12)

13)

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 primafacie prejudicial to the interest of the Company.

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.

16)

According to the information and explanations given to us the Company has utilized the term loan for the purpose it was taken.

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 short-term 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 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.

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 marketing prices at the relevant time, where comparable market price exist.

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 complied with directives issued by the Reserve Bank of India and the provisions of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under, with regard to deposits accepted from the public. There have been no proceedings before the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other Tribunal in respect of the aforesaid deposits.

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 AND ASSOCIATES Chartered Accountants Bahadur S. Dastoor Partner Membership No. 48936 Mumbai, May 23, 2007

101

Godrej Properties Limited BALANCE SHEET AS AT 31ST MARCH, 2007 Schedule

As at 31.03.2007 Rupees

As at 31.03.2006 Rupees

1 2

64445450 520592130

64445450 413988398

3 4

173899130 1137065294 1896002004

15553290 60859000 554846138

44391084 20339609 24,051475 2141192 26192667

36381750 14673620 21708130 – 21708130

83614447

64264447

4057000

2586000

SOURCES OF FUNDS Shareholders’ Funds Share Capital Reserves & Surplus Loan Funds Secured Loans Unsecured Loans APPLICATION OF FUNDS Fixed Assets Gross Block Less: Depreciation Net Block Capital Work-in-progress Investments

Deferred Tax Asset Current Assets, Loans & Advances Inventories Sundry Debtors Cash & Bank Balances Loans & Advances

7 8 9 10

787897598 2197881753 133678881 1070145412 4189603646

204751391 828107552 149863239 704608934 1887331115

Less: Current Liabilities & Provisions Current Liabilities Provisions

11 12

2401583011 5882745 2407465756 1782137890 1896002004

1341094752 79948801 1421043553 466287563 554846138

Net Current Assets 0

(0)

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

Schedule

INCOME Sales Operating Income Other Income

13 14

TOTAL INCOME EXPENDITURE Cost of sales Employee Remumeration & Benefits Administration Expenses Interest & Finance Charges (Net) Depreciation

15 16 17 18

1172466094 199775722 375370

567710565 129880250 6987239

1372617186

704578054

758398853 69482325 35359665 41519933 6879606

425251528 22925238 19766499 52976531 5074007 525993804

460976804 (51742000) (767000) 4584000 1471000

178584250 (44532000) (487699) – 329000

Profit After Tax Prior years tax adjustments Surplus brought forward

414522804 (51572) 126340517

133,893,551 (687642) 77220108

Amount Available for Appropriation

540811750

210426017

Less : Interim Dividend

270000000

62000000

Dividend Distribution Tax

37867500

8695500

Transfer to General Reserve

41453000

13390000

191491250

126340517

64.31

20.67

NOTES TO ACCOUNTS & ACCOUNTING POLICIES Signatures to Balance Sheet and Schedules 1 to 12 and 19

For the year ended 31.03.2006 Rupees

911640382

Earnings per share (basic/diluted) in Rs. (Refer Note 9)

For the Period ended 31.03.2007 Rupees

Profit for the year Provision for Current Taxes for fringe benefit tax for MAT credit entitlement for deferred tax

Surplus carried forward to Balance Sheet

NOTES TO ACCOUNTS & ACCOUNTING POLICIES

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

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

Signatures to Profit and Loss Account and Schedules 13 to 19

As per our Report of even date.

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants A.B. GODREJ Chairman MILIND S. KORDE Managing Director BAHADUR S. DASTOOR SHODHAN KEMBHAVI Company Secretary Partner Mumbai, May 23, 2007

BAHADOOR S. DASTOOR Partner Mumbai, May 23, 2007

A.B. GODREJ MILIND S. KORDE SHODHAN KEMBHAVI

Chairman Managing Director Company Secretary

SCHEDULES FORMING PART OF THE ACCOUNTS As at 31.03.2007 Rupees

As at 31.03.2007 Rupees

SCHEDULE 1 : SHARE CAPITAL AUTHORISED 10,000,000 Equity Shares of Rs. 10/- each

ISSUED, SUBSCRIBED & PAID UP 6444545 Equity Shares of Rs. 10/- each fully paid- up. (Out of above 5264645 shares are held by Godrej Industries Limited, the Holding Company)

As at 31.03.2006 Rupees

173899130

15303290

–

250000

173899130

15553290

–

250000

1110167294

45000000

SCHEDULE 3 : SECURED LOANS 100000000

100000000

64445450

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 (other than cash credit accounts)

SCHEDULE 2 : RESERVES & SURPLUS Share Premium as per last Balance Sheet

As at 31.03.2007 Rupees

245172265

245172265 SCHEDULE 4 : UNSECURED LOANS

245172265

General Reserve - as per last Balance Sheet

42475615

29085615

Banks

Add : Transfer from Profit and Loss Account

41453000

13390000

Companies

10000000

–

Fixed Deposits

16898000

15859000

1137065294

60859000

1137065294

60859000

Profit and Loss Account

102

83928615

42475615

191491250

126340518

520592130

413988398

Of the above, Repayable within a year

Annual Report 2006-2007 SCHEDULE 5 : FIXED ASSETS ASSETS

Leasehold Improvement Motor Vehicle Furniture & Fixtures Office Equipment Computer Site Equipments Intangible Assets Licenses & Software Total Previous Year Capital Work-In-Progress

GROSS BLOCK

DEPRECIATION

NET BLOCK

As at 1st April, 2006 Rs.

Additions for the year 2006-2007 Rs.

Deductions for the year 2006-2007 Rs.

As at 31st March, 2007 Rs.

As at 1st April, 2006 Rs.

Additions for the year 2006-2007 Rs.

Deductions for the year 2006-2007 Rs.

As at 31st March, 2007 Rs.

As at 31st March, 2006 Rs.

8154390 5564083 7343544 5036403 8211208 2072120

935139 383231 1681741 778611 2554637 –

– 1222922 – 34000 195550 –

9089529 4724392 9,025285 5781014 10570295 2072120

2140645 3532346 187507 1223625 4267947 1321555

1800,115 607252 1312181 583671 2123766 104404

– 1,043,966 – 5,114 164,536 –

3940760 3095633 3499688 1802182 6227176 1425959

5148769 1628759 5525597 3978832 4343118 646161

6013746 2031737 5156038 3812781 3943263 750565

– 36381748 27746336

3128449 9461808 15704728

– 1452472 7069314

3128449 44391084 36381750

– 14673626 14299093

348217 6879606 5074007

– 1213616 4699480

348217 20339615 14673620

2780232 24051469

– 21708130

2141192 26192661

– 21708130

TOTAL SCHEDULE 6 : INVESTMENTS Long Term Quoted Investments 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 300 Equity Shares of Rs. 5/- each of Ansal Properties & Industries Limited (150 shares received on stock split during the year) (Previous Year 150 Equity Shares of Rs. 10/- each) 100 Equity Shares of Rs.10/- each of 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 6500 Equity Shares of Rs. 2/- each of Unitech Limited (400 shares received on stock split & 6000 bonus shares received during the year) (Previous Year 100 Equity Shares of Rs. 10/- each) 72 Equity Shares of Rs.10/- each of The Great Eastern Shipping Company Limited (72 shares of resulting company received in lieu of 90 shares of demerged company during the year) (Previous Year 90 Equity Shares of Rs. 10/- each) 18 Equity Shares of Rs.10/- each of The Great Offshore Limited (18 shares received on demerger during the year) (Previous Year NIL) 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. 510000 Equity Shares of Rs.10/- each 10% Secured redeemable optionally convertible debentures Godrej Waterside Properties Pvt. Ltd. 50000 Equity Shares of Rs.10/- each Godrej Sea View Properties Pvt. Ltd. 50000 Equity Shares of Rs.10/- each (Purchased during the year) Godrej Real Estate Pvt. Ltd. 50000 Equity Shares of Rs.10/- each (Purchased during the year) Godrej Developers Pvt. Ltd. 50000 Equity Shares of Rs.10/- each (Purchased during the year) 1. Cost of Quoted Investments 2. Market Value of Quoted Investments

As at 31.03.2007 Rupees

As at 31.03.2006 Rupees

742

616

1066

1366

3081

1241

1641

1516

891

6366

2485

3,106

621

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-in-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 Development Manager Fees Accrued but not due (Note 3 b) Due on Management Projects Less: Transfer to Cost of Sales - Development Projects Interest Accrued Deposits Advance Tax & Tax deducted at source (Including MAT credit entitlement of Rs. 45,84,000/- & Net of Provision for Tax of Rs. 153155245/-)

–

266

2370

2500

26768

22321 4447

10000

5100000 76500000

5100000 58650000

500000

–

500000

–

500000

–

83614447

64264447

26768 2677624

26768 148408

SCHEDULE 11 : CURRENT LIABILITIES Sundry Creditors (Note 7) Investor Education and Protection Fund Advances received against sale of flats Deposits Unclaimed Fixed Deposits Other liabilities Due to Management Projects SCHEDULE 12 : PROVISIONS Gratuity Leave Encashment Interim Dividend Tax on Dividend For Taxation (Net of Advance Tax & Tax deducted at source of Rs. 114804377/-)

SCHEDULE 13 OPERATING INCOME (GROSS) Income From Development Projects Compensation Received Project Management fees Other Income from Customers Lease Rent Licence Fees Tax Deducted at source

As at 31.03.2007 Rupees

As at 31.03.2006 Rupees

19328216 768569382

69281566 135469825

787897598

204751391

14209863 2183671891

15945862 812161690

2197881753

828107552

10826454 82797016 40055411

87142 10453555 139322542

133678881

149863239

450741887 205299063 448079279 (88368864) 359710415 9492175 31740447

63017736 232218224 395173841 (62040000) 333133841 494573 75744559

13161426

–

1070145412

704608934

57487977 – 1880540792 410590 1689000 307135995 154318657

28029216 – 764705864 24652770 4035000 225918319 293753583

2401583011

1341094752

3076578 2806167 – – –

2755825 2634878 62000000 8695500 3862598

5882745

79948801

For the Period ended 31.03.2007 Rupees

For the year ended 31.03.2006 Rupees

71065851 120000000 12769 3512026 5173076 12000

76737391 – 2564 – 53128295 12000

199775722

129880250

995854

11877497

103

Godrej Properties Limited For the Period ended 31.03.2007 Rupees

For the year ended 31.03.2006 Rupees

4529 43908 326933 375370

3330 5376611 1607298 6987239

SCHEDULE 14 : OTHER INCOME Dividends Profit on sale of Fixed Assets Miscellaneous Income SCHEDULE 15 : COST OF SALES Own Projects Opening Stock: Add : Expenditure/Transfers from Advances during the year Development Rights Land Construction Infrastructure Architect Fees Advertisement Expenses Overheads Interest Less : Closing Stock: Development Projects

204751392

182130830

6612000 570000000 532541579 3501892 12378669 16461721 68852936 42827398 1253176195 (787897597) 670029990 88368864 758398854

190000000 99960010 27543 9116217 11069565 63272454 12386302 385832001 (204751392) 363211439 62040000 425251439

65887735 2951360 643230 69482325

19862794 2023505 1038939 22925238

530087 11163268 111734 1052240 9421234 841480 23100 474780 – – 11741742 35359665

168360 4372846 235688 151345 2092969 272307 467763 479451 67866 9589 11448316 19766499

48569967 15813507 53165598 590762 118139834 6414436 124554270

14630446 3525045 48613207 9019548 75788246 1941802 77730048

1480 73643136 9389720 83034336

22523303 2230214 24753517

41519933

52,976,531

6943577

5980919

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 Power & Fuel Rent Insurance Rates & Taxes Repairs & Maintenance Deferred Revenue Expenditure written off Provision for diminution in value of investments Other Operating Expenses 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 Total Interest Received NET INTEREST Tax Deducted at source

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. e)

Inventories are valued as under :

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 preoperation 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. Intangible Assets are amortized over a period of six years.

104

INVESTMENTS Investments are classified into long-term and current investments.

Completed Flats

Construction Work-in-Progress - At Cost

- At lower of Cost or Market Value

REVENUE RECOGNITION The Company is following the “Percentage of Completion Method” of accounting. As per this method, revenue in Profit and 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 finance 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, deferred and fringe benefit tax. Current and fringe benefit 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.

ACCOUNTING POLICIES a)

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.

SCHEDULE 19 : NOTES TO ACCOUNTS & ACCOUNTING POLICIES 1)

INVENTORIES

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 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 recognized 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.

Annual Report 2006-2007 2)

CONTINGENT LIABILITIES: Matters a)

8) As at As at 31st March, 2007 31st March 2006 Rupees Rupees 7850 7850

Uncalled amount of Rs. 80/- & Rs. 30/- on 70 & 75 partly paid shares respectively of Tahir Properties Limited b) Consideration payable for acquisition of 9473750 9473750 shares in Girikandra Holiday Homes & Resorts Limited (a subsidiary company) for purchase of land. c) Claims against the Company not acknowledged 9476293 9427512 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 claims are not sustainable. d) Guarantee given on behalf of project owner 360000000 360000000 (The Simplex Mills Company Limited). The Company is entitled to create a corresponding mortgage against project assets as considered necessary. 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 realizable 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. 205299063/- (Previous Year Rs. 232218224/-) 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. c) Construction Work in Progress includes the land situated at Patancheru, village Sangareddy, Medak District, Andhra Pradesh, for which legal formalities relating to the transfer of the title are being complied with. Stamp duty payable thereon is not presently determinable. 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) 400 (Previous year 32,597) Equity shares 40000 49993350 of Rs. 100/- each, fully paid-up b) 70 Equity shares of Rs. 100/- each, 1400 1400 Rs. 20/- paid up c) 75 Redeemable Preference Class A shares of 5250 5250 Rs.100/- each, Rs. 70/- paid Girikandra Holiday Homes & Resorts Limited (a subsidiary company) 500 Equity shares of Rs.1,000/- each, fully paid-up 17880000 17880000 CASH & BANK BALANCES Balances with scheduled banks on deposit accounts include Rs. 36617677/- (Previous year Rs. 33829379/- ) 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

Godrej Industries Ltd. Advances Deposits Girikandra Holiday Homes & Resorts Ltd. Advances

Balance as on March 31, 2007

19736 1350000

Maximum Balance as Debit on March Balance 31, 2006 during the year

Advances

493706 1350000

19736 410000

28089 410000

28511433 28511433

28267717

Advances

4824156 16639964

1111058

278077328

342031262

NIL

18420

NIL

18420

NIL

18420

NIL

Godrej Sea View Properties Pvt Ltd -

Advances

Godrej Real Estate Pvt Ltd. -

Advances

b) 7)

Advances

12)

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:

Godrej Developers Pvt Ltd. -

11)

13)

Godrej Waterside Properties Pvt Ltd. -

10)

Maximum Debit Balance during previous year

Godrej Reality Pvt Ltd.

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 NIL Accumulated Depreciation NIL NIL Depreciation for the period NIL NIL Stock – in – trade (Refer note below) NIL 50000000 Future minimum lease receipts under noncancelable operating leases ● Not later than 1 year 26400 2976120 ● Later than 1 year and not later than 5 years 132000 132000 Note : The available-for-sale asset, given on lease, has been classified by the Company under Stock-in-trade. 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 straightline 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 noncancelable operating leases ● Not later than 1 year 4621234 4200000 ● Later than 1 year and not later than 5 years 7191878 9975000 Earnings per share Profit after tax and prior years tax adjustments as per Profit and Loss Account 414471232 133205909 Weighted average no. of equity shares outstanding 6444545 6444545 Basic/Diluted earnings per share Rs. 64.31 Rs. 20.67 Nominal value of shares Rs. 10 Rs. 10 The amount of exchange difference included in the Profit and Loss Account, under the related heads of expenses is Rs. Nil (Previous Year Rs.193,933/-). Expenditure in Foreign Currency : Current Year Previous Year Rupees Rupees Travelling Expenses 681041 286952 Other Expenditure 38816571 8819964 TOTAL 39497612 9106916 Computation of Net Profit under Section 349 of the Companies Act, 1956. Profit before Tax as per Profit and Loss Account 460976804 178584250 Add :Managerial Remuneration 13657985 6210495 Depreciation 6879606 5074007 Less :-Profit on sale of asset as per accounts 43908 5376611 Depreciation 6879606 5074007 Net Profit for the purpose of Directors Remuneration 474590881 179418134 (a) 5% of Net Profit as computed above 23729544 8970907 (b) Maximum remuneration permissible under the Act (computed on the basis of inadequacy of profits) 3600000 3600000 (a) or (b) whichever is greater 23729544 8970907 Managerial Remuneration: A Salaries 4910678 3648408 B Contribution to Provident Fund 353280 240000 C Estimated Monetary Value of Perquisites 432856 265633 D Performance Linked Variable Remuneration 7961171 2056454 13657985 6210495 Notes : In case of the Managing Director - Performance Linked Variable Remuneration of Rs.7961171/(Previous year Rs. 2056454/-) is on the basis of provision made in the accounts. Deferred Tax The tax effect of significant temporary differences that resulted in deferred tax assets are: Current Year Previous Year Rupees Rupees Depreciation on Fixed Assets 2058000 771000 Others 1999000 1815000 Deferred Tax Asset 4057000 2586000

Due on Management Projects include a sum of Rs. 20309477/- (Previous year Rs. 20056962/-) 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.

Audit Fees Audit & Other Statutes Certification Consultancy Charges Reimbursement of Expenses

Current Year Rupees

Previous Year Rupees

1487180 589260 30866 516304 601

1369328 404064 35815 – 7368

105

Godrej Properties Limited 16) Related Party Disclosures

Nature of Transactions

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 (100%) Godrej Realty Private Limited (51%) Godrej Waterside Properties Private Limited (100%) Godrej Real Estate Private Limited (100%) Godrej Developers Private Limited (100%) Godrej Sea View Properties Private Limited (100%) (iii) Other Related Parties in Godrej Group, where common control exists : Vora Soaps Limited Bahar Agrochem & Feeds Private Limited Ensemble Holdings & Finance Limited Godrej Appliances Limited Godrej Agrovet Limited Godrej Consumer Products Limited Godrej Saralee Limited Godrej Hicare Limited Godrej Infotech Limited Godrej Beverages & Foods Limited (iv) Key Management Personnel : Mr. Milind Surendra Korde (v) Individuals excercising Significant Influence : Mr. A. B. Godrej Mr. N. B. Godrej 2. The following transactions were carried out with the related parties in the ordinary course of business. (i) Details relating to parties referred to in items 1 (i), (ii) and (iii) above (Amt in Rupees) Sr. Description No.

Godrej & Boyce Mfg. Co. Ltd. (i)

Godrej Industries Ltd. (i)

Subsidiaries Other Related Parties in Godrej Group (ii) (iii)

– –

5100000 17850000 58650000

– –

2892016 3424267

– –

84000 635461 – –

Investment in equity share capital Investment in debentures

Purchase of fixed assets

Sale of fixed assets

– –

5. 6.

Loans & Advances given Deposits

– – –

– 1000000 350000

Construction & other expenses incurred on behalf of other companies Expenses charged by other companies (net)

1471819 7709

502278 1711896

– 100083 4200000 – – 358970202 15820009

82017012 26475136

2035464 2628243

2656006 –

759799 117401

Outstanding receivables, net of (payables)

(5605348) 830409

1353565 309736

387968178 88028775

(48965) (31608)

10.

Dividend Paid

– –

220567029 50648726

– –

9160538 2103531

– – – – –

Godrej Waterside Properties Private Limited Expenses charged by other cos. (net)

Current Year

Previous Year

13657985

6210495

–

516

194400

317489

8054487

1849549

2. Interest income on loans given 3. Reimbursement of travel expenses 4. Individuals exercising significant Influence Dividend paid – Mr. N. B.Godrej 3.

Nature of Transactions

Subsidiaries & Other Related Parties in the Godrej Group Amount (Rs.)

Investment in equity share capital Investment in debentures

Godrej Realty Private Limited

Purchase of fixed assets

Godrej Appliances Limited

Sale of fixed assets

Godrej Realty Private Limited

Loans & Advances given

Girikandra Holiday Homes & Resorts Ltd . Godrej Realty Private Limited

106

22811 13400

Girikandra Holiday Homes & Resorts Limited

70300 28511433

28267717 Godrej Waterside Properties Private Limited Godrej Realty Private Limited

Dividend Paid

Bahar Agrochem & Feeds Private Limited Ensemble Holdings & Finance Limited

278077329 – 81324156

59761058 5799230 1331675 3217396 738184

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 Simoco, Kolkata Planet Godrej, Mumbai La Vista, Mumbai Waldorf, Mumbai Glenelg, Mumbai Edenwoods, Mumbai Shivajinagar, Pune NLM, Kalyan GVD, 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. 20) STATEMENT PURSUANT TO PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956 Balance Sheet Abstract for the Year Ended 31st March, 2007 And Company’s General Business Profile a)

Significant Related Party Transactions.

Godrej Realty Private Limited

342031262 –

Godrej Agrovet Limited

(payables)

Amount (Rs.)

1. Remuneration

16639964

Godrej Sara Lee Limited Godrej Hicare Limited Outstanding receivables, net of

Amount (Rs.)

15820009

incurred on behalf of other companies

Details relating to persons referred to in items 1 (iv) & (v) above Key Management Personnel:

Godrej Realty Private Limited

RSM/HKB, Kalyan

Figures in italics are for previous year (ii)

Construction & other expenses

Subsidiaries & Other Related Parties in the Godrej Group

– 5100000 17850000 58650000 84000 635461 – 100083 231391 219050 4200000 –

Registration Details Registration No. : U74120MH1985PLC35308 State Code : 11 Balance Sheet Date : 31st March, 2007 Capital raised during the year (Amount in Rs. thousands) Public Issue : Nil Rights Issue : Nil Bonus Issue : Nil Private Placement : Nil Position of mobilisation and deployment of funds (Amount in Rs. thousands) Total Liabilities : 4303468 Total Assets : 4303468 Sources of Funds Paid-up Capital : 64446 Reserves & Surplus : 520592 Secured Loans : 173899 Unsecured Loans : 1137065 Application of Funds Net Fixed Assets : 26193 Investments : 83614 Net Current Assets : 1782138 Misc. Expenditure : Nil Deferred Tax Asset : 4057 Accumulated Losses : Nil Performance of Company (Amount in Rs. thousands) Turnover : 1372617 Total Expenditure (Net of other income) : 911640 Profit/(loss) before tax : 460977 Profit/(loss) after tax : 414523 Earning per Share in Rs. (on an annualized basis) : 64.31 Dividend rate % : 418.9589% Generic Name of three principal products/services of Company : N.A

Annual Report 2006-2007 STATEMENT REGARDING SUBSIDIARY COMPANY PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 1.

Name of the Company

Girikandra Holiday Homes & Resorts Ltd.

Financial Year ending

31st March, 2007

The Company’s interest in the subsidiary as on above date.

500 Equity Shares of Rs. 1000/- 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)

(Rs. 2500/-)

A.B. GODREJ Chairman

MILIND S. KORDE Managing Director

SHODHAN KEMBHAVI Company Secretary

Mumbai, May 23, 2007 STATEMENT REGARDING SUBSIDIARY COMPANY PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 1.

Name of the Company

Godrej Realty Private Limited

Financial Year ending

31st March, 2007

The Company’s interest in the subsidiary as on above date.

Net Profit/(Loss) of the subsidiary company (Not dealt with in the accounts of the Company)

510,000 Equity Shares of Rs. 10/- each, fully paid-up (representing 51% of the Share Capital) (Rs.1142533/-)

A.B. GODREJ Chairman

MILIND S. KORDE Managing Director

SHODHAN KEMBHAVI Company Secretary

Mumbai, May 23, 2007 STATEMENT REGARDING SUBSIDIARY COMPANY PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 1.

Name of the Company

Godrej Waterside Properties Private Limited

Financial Year ending

31st March, 2007

The Company’s interest in the subsidiary as on above date.

Net Profit/(Loss) of the subsidiary company (Not dealt with in the accounts of the Company)

50000 Equity Shares of Rs. 10/- each, fully paid-Up (representing 100% of the Share Capital) (Rs.1851808/-)

A.B. GODREJ Chairman

MILIND S. KORDE Managing Director

SHODHAN KEMBHAVI Company Secretary

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2007 Particulars

Current Year Rupees Rupees

Cash Flow form Operating Activities Net Profit before tax & extraordinary items Add : Non-cash / Non-operating Expenses 1. Depreciation 6879606 2. Interest Paid 124554270 3. Provision for Diminution in value of Investment – 4. Deferred Revenue Expenditure – Less : Non-cash / Non-operating Income 1. Profit on Sale of Fixed Assets 2. Interest Income 3. Dividend Received Add : 1. Change in Inventory 2. Change in Sundry Debtors 3. Change in Loans & Advances 4. Change in Current Liabilities / Provisions Less : Taxes Paid (Net) Cash Flow from Investing Activities 1. Purchase of Fixed Assets 2. Sale of Fixed Assets 3. Purchase of Investments 4. Interest Received 5. Dividend Received Cash Flow from Financing Activities 1. Change in Cash Credit 2. Change in Term Loan 3. Change in Unsecured Loan from Bank 4. Change in Inter Company Deposit 5. Change in Fixed Deposits 6. Interest Paid 7. Payment of Dividend 8. Tax on Distributed Profits

43908 83034336 4529

Previous Year Rupees

460976804

178584250

131433876 592410679

5074007 77730048 9589 67866 261465760

83082773

5376611 24753517 3330

509327907

231332302

(583146207) (1369774201) (343377450) 1060980303

(22620561) (266084209) 168311061 525086544

(725989649) 65000599

636025137 37440410

(790990248)

598584727

(11603000) 282764 (19350000) 74036734 4529

(15704728) 7746445 (64250000) 24753517 3330

43371026

(47451436)

158595840 (250000) 1065167294 10000000 1039000 (124554270) (332000000) (46563000)

(149867367) (21834916) (170000000) (2500000) (21114000) 77730048 – –

731434864

(443046331)

Mumbai,: May 23, 2007

Net (Decrease)/Increase in Cash & Cash Equivalents

(16184359)

108086961

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

Add : Cash & Bank Balance as on 31.3.2006

149863239

41776279

Cash & Bank Balance as on 31.3.2007

133678881

149863239

Name of the Company

Godrej Real Estate Private Limited

Financial Year ending

31st March, 2007

The Company’s interest in the subsidiary as on above date.

Net Profit / (Loss) of the subsidiary company (Not dealt with in the accounts of the Company)

50000 Equity Shares of Rs. 10/- each, fully paid-Up (representing 100% of the share Capital) (Rs.25931/-)

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.

A.B. GODREJ Chairman

MILIND S. KORDE Managing Director

SHODHAN KEMBHAVI Company Secretary

Mumbai, May 23, 2007 STATEMENT REGARDING SUBSIDIARY COMPANY PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 1.

Name of the Company

Godrej Developers Private Limited

Financial Year ending

31st March, 2007

The Company’s interest in the subsidiary as on above date.

Net Profit / (Loss) of the subsidiary company (Not dealt with in the accounts of the Company)

50000 Equity Shares of Rs. 10/- each, fully paid-Up (representing 100% of the share Capital) (Rs.25931/-)

A.B. GODREJ Chairman

MILIND S. KORDE Managing Director

For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants BAHADUR S. DASTOOR Partner

A.B. GODREJ Chairman MILIND S. KORDE Managing Director SHODHAN KEMBHAVI Company Secretary

Mumbai, May 23, 2007

SHODHAN KEMBHAVI Company Secretary

Mumbai, May 23, 2007 STATEMENT REGARDING SUBSIDIARY COMPANY PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 1.

Name of the Company

Godrej Sea View Properties Private Limited

Financial Year ending

31st March, 2007

The Company’s interest in the subsidiary as on above date.

Net Profit / (Loss) of the subsidiary company (Not dealt with in the accounts of the Company)

50,000 Equity Shares of Rs. 10/- each, fully paid-up (representing 100% of the share Capital) (Rs.26081/-)

A.B. GODREJ Chairman

MILIND S. KORDE Managing Director

SHODHAN KEMBHAVI Company Secretary

Mumbai, May 23, 2007

107

Girikandra Holiday Homes & Resorts Limited BOARD OF DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2007 (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. 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

To The Shareholders, Your Directors have pleasure in submitting their Report along with the Audited Accounts for the year ended 31st March, 2007. 1. FINANCIAL HIGHLIGHTS : The accounting results for the year ended 31st March, 2007 reveal that there is deficit at the end of the year. 2. REVIEW OF OPERATIONS : The Company has not commenced any activities during the year. 3. DIVIDEND : As there are no profits, the Directors regret that no dividend can be recommended. 4. DIRECTORS : In accordance with the provision of the Articles of Association of the Company, Mr. Milind S. Korde retires by rotation and being eligible, offers himself for re-appointment. 5. APPOINTMENT OF AUDITORS : M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants retire at the ensuing Annual General Meeting and are eligible for re-appointment. 6. DIRECTORS' RESPONSIBILITY STATEMENT : Your Directors confirm: (i) that in the preparation of the annual accounts, the applicable accounting standards have been followed; (ii) that the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended 31st March, 2007 and of the loss of the Company for that year;

MILIND S. KORDE Director Mumbai, May 23, 2007

AUDITORS’ REPORT d)

To the Members of Girikandra Holiday Homes and Resorts Limited 1.

3. 4.

We have audited the attached Balance Sheet of GIRIKANDRA HOLIDAY HOMES & RESORTS LIMITED, as at 31st March, 2007 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 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, Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account.

KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants

Mumbai, May 23, 2007 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 the interest and reasonable steps for recovery of principal and interest does not arise. (c) The Company has not taken any loans, secured or unsecured from companies, firms or 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) 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 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. 9) (a) According to the information and explanations given to us and on the basis of our examination of books of account, during the year, the Company has no statutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Value Added 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, 2007 for a period of more than six months from the date they became payable.

108

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. 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, 2007; ii) in the case of the Profit and Loss Account, the loss of the Company for the year ended on that date; and iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. On the basis of the written representations received from the Directors as on 31st March, 2007, and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2007 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956. For and on behalf of

BAHADUR S. DASTOOR Partner Membership No. 48936

(b)

10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20) 21)

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. The Company’s accumulated losses at the end of the financial year are less than fifty percent of its net worth. However, it has incurred cash losses in the current and immediately preceding financial year. According to the information and explanations given to us and on the based on 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 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 23, 2007

BAHADUR S. DASTOOR Partner Membership No. 48936

Annual Report 2006-2007

BALANCE SHEET AS AT 31ST MARCH, 2007 As at 31.03.2007 Rupees

Schedule SOURCES OF FUNDS Shareholders’ Funds Share Capital Reserves & Surplus Loan Funds Unsecured Loans

As at 31.03.2006 Rupees

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

APPLICATION OF FUNDS Fixed Assets Investments Current Assets, Loans and Advances Projects in Progress

Advance Income tax Less : Current Liabilities and Provisions Current Liabilities

500000 –

28511433

28267717

EXPENDITURE

29011433

28767717

Administration Expenses

– –

29028243

28796852

4239 29032482

4239 28801091

41123 41123

53448 53448

28991359

28747643

7500

10000

Net Current Assets Miscellaneous Expenditure (to the extent not written off or adjusted) Preliminary Expenditure Profit and Loss Account

12574

10074

29011433

28767717

As on 31.03.2006 Rupees

–

231391

219542

INCOME

500000 –

– –

As on 31.03.2007 Rupees

2500

233891

222042

(231391)

(219542)

2500

Preliminary Expenses written off Less : Amount Transferred to Project in Progress Loss for the year Loss brought forward

10074

7574

Loss carried forward to Balance Sheet

12574

10074

Earning per share (basic/diluted ) in Rs.

(5.00)

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.

Signatures to the Balance Sheet and Schedules 1 to 3 and 5

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

As per our Report of even date.

For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants

BAHADUR S. DASTOOR Partner

TANYA A. DUBASH Director

MILIND S. KORDE Director

Mumbai, May 23, 2007 May 10, 2006

BAHADUR S. DASTOOR Partner

Signatures to the Profit and Loss Account and Schedules 4 and 5

TANYA A. DUBASH Director

MILIND S. KORDE Director

Mumbai, May 23, 2007 May 10, 2006

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31ST MARCH, 2007 As at 31.03.2007 Rupees

As at 31.03.2006 Rupees

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]

1000000

500000

28796852 231391

28577310 219542

29028243

28796852

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.

41123

53448 53448

46000 28060 157331

36002 28060 155480

231391

219542

SCHEDULE 4 : ADMINISTRATION EXPENSES Rent, Rates & Taxes Audit Fees Other Operating Expenses

41123

SCHEDULE 3 : CURRENT LIABILITIES Sundry Creditors (Note 1) For Expenses

ACCOUNTING POLICIES

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 Current Year Previous Year Profit after transfer to project in Progress as per Profit & Loss Account Rs. 2500 Rs. 2500 Weighted average no. of equity shares outstanding 500 500 Basic/Diluted earnings per share Rs. (5) Rs. (5) Nominal value of shares Rs. 1000 Rs. 1000

SCHEDULE 2 : PROJECT IN PROGRESS Project Payments Add : Expenses transferred from Profit & Loss Account

SCHEDULE 5 : NOTES TO ACCOUNTS AND ACCOUNTING POLICIES

AS 18 – RELATED PARTY DISCLOSURE Related party disclosures as required by AS-18, “Related Party Disclosures”, are given below: 1. Relationships: Shareholders (the Godrej Group Shareholding) in the Company Godrej Properties Limited (GPL) holds 100% of the Share Capital of the Company. 2. The following transactions were carried out with the related parties in the ordinary course of the business: Sr. No. Rs. 1 Expenses charged by other Companies 243716 219050 2

Outstanding net of (payables)

28511433 28267717

Figures in italics are for previous year

109

Girikandra Holiday Homes & Resorts Limited 5.

STATEMENT PURSUANT TO PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956. BALANCE SHEET ABSTRACT FOR THE YEAR ENDED 31ST MARCH, 2007 AND COMPANY’S GENERAL BUSINESS PROFILE

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

Registration Details Registration No. State Code Balance Sheet Date

Cash Flow from Operating Activities Net (Loss) Before Tax Add : Non-cash / Non-operating Expenses 1 Deferred Revenue Expenditure

: : :

U55101MH1995PLC091582 11 31st March, 2007

Capital raised during the year (Amount in Rs. thousands) Public Issue : Nil Rights Issue : Nil Bonus Issue : Nil Private Placement - Capital : Nil - Premium : Nil Position of mobilisation and deployment of funds (Amount in Rs. thousands) Total Liabilities : 29053 Total Assets : 29053 Sources of Funds Paid-up capital : 500 Reserves & Surplus: Secured Loans : Unsecured Loans : 28511 Application of Funds Net Fixed Assets : Investments : Net Current Assets : 28991 Misc. Expenditure : 7 Accumulated Losses : 13 Performance of Company (Amount in Rs. thousands) Turnover : Total Expenditure : Profit / (Loss) before tax : Profit / (Loss) after tax : Earning per Share in Rs. : Dividend Rate % : Generic Names of Three Principal products / services of Company

110

234 3 3 (5) N.A.

Particulars

Working Capital Changes Inventory Current Liabilities

Current Year Rs. Rs. (2500)

(2500)

2500 –

(231391) (12325) (243716) (243716)

(219542) 492 (219050) –

–

Less : Taxes Paid Cash Flow from Investing Activities Cash Flow from Financing Activities Increase in Unsecured Loan

Previous Year Rs.

243716

219050

Net (Decrease)/Increase in Cash & Cash Equivalents

–

Add : Cash & Bank Balance as on 31.3.2006

–

Cash & Bank Balance as on 31.3.2007

–

NOTES: 1)

The Cash Flow Statement has been prepared under the "Indirect Method" as set out in the 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 BAHADUR S. DASTOOR Partner Mumbai, May 23, 2007

TANYA A. DUBASH Directors

MILIND S. KORDE Directors

Annual Report 2006-2007

Godrej Developers Private Limited BOARD OF DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2007

(ii)

(iii)

(iv)

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

To The Shareholders Your Directors have pleasure in submitting their Report together with the Audited Accounts for the period ended 31st March, 2007. 1.

FINANCIAL HIGHLIGHTS : The accounting results for the period ended 31st March, 2007 reveal that there is deficit at the end of the period.

REVIEW OF OPERATIONS :

The Company has not commenced any activities during the year.

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)

DIVIDEND :

SHARE CAPITAL : The share capital is held by Godrej Properties Limited.

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:

DIRECTORS :

(i)

As there are no profits, the Directors regret that no dividend can be recommended.

Mr. Milind S. Korde and Mr. K. T. Jithendran who were named as the first Directors of the Company in the Articles of Association of the Company, constituted the Board of Directors.

Expenses on account of Energy are negligible. (ii)

Mr. Milind S. Korde and Mr. K. T. Jithendran retire by rotation at the ensuing Annual General Meeting and are eligible for re-appointment. 6.

Technology Absorption : It is an on going process.

(iii)

APPOINTMENT OF AUDITORS :

Foreign Exchange Earning & Outgo :

The Company has not earned any Foreign Exchange nor incurred any Foreign Exchange Expenditure during the year.

M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants were appointed as Statutory Auditors of the Company who will hold office from until the conclusion of first Annual General Meeting of the Company. 7.

Conservation of Energy :

For and on behalf of the Board of Directors

DIRECTORS’ RESPONSIBILITY STATEMENT : MILIND S. KORDE Director

Your Directors confirm: (i)

that in the preparation of the annual accounts, the applicable accounting standards have been followed;

Mumbai, May 23, 2007

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ DEVELOPERS PRIVATE LIMITED 1.

We have audited the attached Balance Sheet of GODREJ DEVELOPERS PRIVATE LIMITED, as at 31st March 2007 and also the Profit and loss account and the Cash Flow Statement of the Company for the period 15th March 2007 to 31st March 2007. 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.

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.

in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2007;

ii)

in the case of the Profit and Loss Account, of the loss of the Company for the period ended on that date and,

iii)

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

On the basis of the written representations received from the Directors as on 31st March, 2007, and taken on record by the Board of Directors, we report that, none of the directors is disqualified as on 31st March, 2007 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

Further 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 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.

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants Bahadur S. Dastoor Partner Membership No. 48936 Mumbai, May 23, 2007

111

Godrej Developers Private Limited BALANCE SHEET AS AT 31ST MARCH, 2007

PROFIT AND LOSS ACCOUNT FOR THE PERIOD 15TH MARCH, 2007 TO 31ST MARCH, 2007

Schedule

As At 31.03.07 Rupees

500000 – 500000

SOURCES OF FUNDS Shareholders’ Funds Share Capital Loan Funds

Schedule

For the period ended 31.03.07 Rupees –

INCOME

APPLICATION OF FUNDS Fixed Assets

–

EXPENDITURE Administration Expenses

24089

Preliminary Expenses written off

1842 25931

Investments Current Assets, Loans & Advances Cheques-in-hand

– 2

Less : Current Liabilities & Provisions Current Liabilities

Net Current Assets

42509 42509

Loss for the period

25931

Earning per share (basic/diluted) in Rs.

(0.52)

Notes to Accounts & Accounting Policies

16578 25931 42509 500000

Notes to Accounts & Accounting Policies

5 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

As per our Report of even date.

For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants

BAHADUR S. DASTOOR Partner

457491 457491

Miscellaneous Expenditure (To the Extent Not Written Off or Adjusted) Preliminary Expenditure Profit & Loss Account

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

500000 500000

MILIND S. KORDE K.T. JITHENDRAN

Director Director

Mumbai, May 23, 2007

Signatures to Profit & Loss Account and Schedules 4 and 5

BAHADUR S. DASTOOR Partner

Director Director

MILIND S. KORDE K.T. JITHENDRAN

Mumbai, May 23, 2007

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON 31ST MARCH, 2007 As at 31.03.07 Rupees SCHEDULE 1 : SHARE CAPITAL Authorised 50,000 Equity shares of Rs. 10/- each Issued & Subscribed & Paid Up 50,000 Equity shares of Rs. 10/- each ( 50,000 equity shares are held by the Holding Company, Godrej Properties Limited and its nominee)

500000 500000

There are no parties within the definition of Small Scale Industrial Undertakings to whom the Company owes any sum.

Additional information required to be given under Schedule VI, Part II of the Companies Act, 1956 to the extent not applicable is not given.

Earnings per share

500000

Current Year

500000 SCHEDULE 2 : CASH & BANK BALANCE Cheques-in-hand SCHEDULE 3 : CURRENT LIABILITIES Sundry Creditors (Refer note 1 ) Other Liabilities SCHEDULE 4 : ADMINISTRATION EXPENSES Audit fees Professional Fees

Loss for the period as per Profit & Loss Account

500000 500000 4)

Relationships: Shareholders : Godrej Properties Limited (GPL) holds 100% of the Share Capital of the Company.

6734 17355 24089

The accounts are prepared under the Historical Cost Convention, using the accrual method of accounting.

The following transactions were carried out with the related party in the ordinary course of the business: Sr. No.

MISCELLANEOUS EXPENDITURE

112

Rs. 10

AS 18 – RELATED PARTY DISCLOSURE Related party disclosures as required by AS-18, “Related Party Disclosures”, are given below:

GENERAL

Miscellaneous expenditure is amortised over a period of 10 years.

Rs. (0.52)

Nominal value of shares 17355 25154 42509

ACCOUNTING POLICIES

50000

Basic/Diluted earnings per share

SCHEDULE 5 : NOTES TO ACCOUNTS AND ACCOUNTING POLICIES 1)

Rs. 25931

Weighted average no. of equity shares outstanding

Reimbursement of expenses to holding company

18420

Outstanding payables

18420

Amounts paid to Auditors: Audit Fees

Rs.

Current Year (Rs.) 6734

This being the first year of operations of the Company, the question of previous years figures does not arise.

Annual Report 2006-2007 ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF THE SCHEDULE VI TO THE COMPANIES ACT, 1956 Balance Sheet Abstract for the period ended 31st March, 2007 and Company’s General Business Profile. 1. Registration Details Registration No. : U45200MH2007PTC168783 State Code : 11 Balance Sheet Date : 31st March, 2007 2. Capital raised during the year (Amount in Rs. thousands) Public Issue : Nil Rights Issue : Nil Bonus Issue : Nil Private Placement - Capital : Nil - Premium : Nil 3. Position of mobilisation and deployment of funds (Amount in Rs. thousands) Total Liabilities : 543 Total Assets : 543 Sources of Funds Paid-up capital : 500 Reserves & Surplus : – Secured Loans : – Unsecured Loans : – Application of Funds Net Fixed Assets : – Investments : – Net Current Assets : 457 Misc. Expenditure : 17 Accumulated Losses : 26 4. Performance of Company (Amount in Rs. thousands) Turnover : – Total Expenditure : 26 Profit / (Loss) before Tax : (26) Profit / (Loss) after Tax : (26) Earning per Share in Rs. : (0.52) Dividend Rate % : – 5. Generic Names of three principal products / services of Company : N.A.

CASH FLOW STATEMENT FOR THE PERIOD ENDED 31ST MARCH, 2007 Particulars

Current Year Rs.

Rs.

Cash Flow from Operating Activities Net (Loss) Before Tax

(25931)

Add : Non-cash / non-operating Expenses Preliminary Expenditure

1842 (24089)

Working Capital changes Current Liabilities

42509

Preliminary Expenditure

(18420) –

Cash Flow from Investing Activities

–

Cash Flow from Financing Activities Issue of Share Capital

500000

Net (Decrease)/Increase in Cash & Cash Equivalents

500000 500000

Add : Cash & Bank Balance as on 15.3.2007

–

Cash & Bank Balance as on 31.3.2007

500000

NOTES: 1)

Figures in brackets are outflows/deductions.

For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants BAHADUR S. DASTOOR Partner

MILIND S. KORDE K. T. JITHENDRAN

Director Director

Mumbai, May 23, 2007

113

Godrej Real Estate Private Limited BOARD OF DIRECTORSâ&#x20AC;&#x2122; REPORT FOR THE PERIOD ENDED ON 31ST MARCH, 2007 To The Shareholders

(ii)

(iii)

(iv)

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

Your Directors have pleasure in submitting their Report together with the Audited Accounts for the period ended 31st March, 2007. 1.

FINANCIAL HIGHLIGHTS : The accounting results for the period ended 31st March, 2007 reveal that there is deficit at the end of the period.

REVIEW OF OPERATIONS : The Company has not commenced any activities during the year.

DIVIDEND :

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)

As there are no profits, the Directors regret that no dividend can be recommended. 4.

SHARE CAPITAL: The share capital is held by Godrej Properties Limited.

DIRECTORS : Mr. Milind S. Korde and Mr. K. T. Jithendran who were named as the first directors of the Company in the Articles of Association of the Company, constituted the Board of Directors.

(i)

Mr. Milind S. Korde and Mr. K. T. Jithendran retire by rotation at the ensuing Annual General Meeting and are eligible for reappointment. 6.

Conservation of Energy : Expenses on account of Energy are negligible.

(ii)

APPOINTMENT OF AUDITORS :

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.

7. DIRECTORS' RESPONSIBILITY STATEMENT

For and on behalf of the Board of Directors

Your Directors confirm: (i)

that in the preparation of the annual accounts, the applicable accounting standards have been followed;

Mumbai, May 23, 2007

MILIND S. KORDE Director

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ REAL ESTATE PRIVATE LIMITED 1.

We have audited the attached Balance Sheet of GODREJ REAL ESTATE PRIVATE LIMITED, as at 31st March, 2007 and also the Profit and Loss Account and the Cash Flow Statement of the Company for the period 15th March, 2007 to 31st March 2007. 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.

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)

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.

114

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 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, 2007;

ii)

in the case of the Profit and Loss Account, of the loss of the Company for the period ended on that date and

iii)

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

Mumbai, May 23, 2007

BAHADUR S. DASTOOR Partner Membership No. 48936

Annual Report 2006-2007

BALANCE SHEET AS AT 31ST MARCH, 2007 Schedule

SOURCES OF FUNDS Shareholders’ Funds Share Capital

As at 31.03.07 Rupees

500000

Loan Funds

– 500000

APPLICATION OF FUNDS

PROFIT AND LOSS ACCOUNT FOR THE PERIOD MARCH 15, 2007 TO 31ST MARCH, 2007 Schedule

For the period ended 31.03.07 Rupees

INCOME

–

EXPENDITURE Administration Expenses

24089

1842

Preliminary Expenses written off

Fixed Assets

–

Investments

–

Current Assets, Loans & Advances Cheques-in-hand

500000

25931 Loss for the period

25931

Earning per share (Basic/Diluted) in Rs.

(0.52)

NOTES TO ACCOUNTS AND ACCOUNTING POLICIES

500000 Less : Current Liabilities & Provisions Current Liabilities

42509

Net Current Assets

457491

MISCELLANEOUS EXPENDITURE (to the extent not written off or adjusted) Preliminary Expenditure PROFIT AND LOSS ACCOUNT

16578 25931 42509 500000

Notes to Accounts & Accounting Policies The Schedules referred to above form an integral part of the Balance Sheet As per our Report of even date. For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants

The Schedules referred to above form an integral part of the Profit and Loss Account As per our Report of even date. For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants

Signatures to Profit and Loss Account and Schedules 4 and 5

MILIND S. KORDE K.T. JITHENDRAN

Director Director

BAHADUR S. DASTOOR Partner Mumbai, May 23, 2007

Signatures to the Balance Sheet and Schedules 1 to 3 and 5

MILIND S. KORDE K.T. JITHENDRAN

Director Director

BAHADUR S. DASTOOR Partner Mumbai, May 23, 2007

SCHEDULES FORMING PART OF THE ACCOUNTS As at 31-03-2007 Rupees SCHEDULE 1 : SHARE CAPITAL Authorised 50000 Equity shares of Rs.10 each

500000 500000

Issued, Subscribed and Paid up 50000 Equity shares of Rs.10 each (50000 Equity shares are held by the holding company, Godrej Properties Limited and its nominee)

500000

number of common and dilutive common equivalent shares outstanding during the period, except where the results would be anti-dilutive. NOTES TO ACCOUNTS 1)

There are no parties within the definition of Small Scale Industrial Undertakings to whom the Company owes any sum.

Additional information required to be given under Schedule VI, Part II of the Companies Act, 1956 to the extent not applicable is not given.

Earnings per share Current Year

500000

Loss for the period as per Profit and Loss Account

Rs. 25931

Weighted average no. of equity shares outstanding As at 31-03-2007 Rupees SCHEDULE 2 : CASH AND BANK BALANCE Cheques-in-hand

500000

Basic/Diluted earnings per share Nominal value of shares 4)

Relationships: Shareholders :Godrej Properties Limited (GPL) holds 100% of the share capital of the Company.

17355 25154

42509 SCHEDULE 4 : ADMINISTRATION EXPENSES Audit Fees Professional Fees

Rs. 10

AS 18 - RELATED PARTY DISCLOSURE Related party disclosures as required by AS-18, "Related Party Disclosures", are given below:

500000 SCHEDULE 3 : CURRENT LIABILITIES Sundry Creditors (Refer Note 1) Other Liabilities

50000 Rs. (0.52)

The following transactions were carried out with the related party in the ordinary course of the business: Sr. No.

6734 17355

Rs.

Reimbursement of expenses to Holding Company

18420

Outstanding payables

18420

24089 SCHEDULE 5 : NOTES TO ACCOUNTS AND ACCOUNTING POLICIES 1)

ACCOUNTING POLICIES GENERAL

Amounts paid to Auditors: Audit Fees

Current Year (Rs.) 6734

This being the first year of operations of the Company, the question of previous years figures does not arise.

The accounts are prepared under the Historical Cost Convention, using the accrual method of accounting. 2)

MISCELLANEOUS EXPENDITURE Miscellaneous expenditure is amortized over a period of 10 years.

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

115

Godrej Real Estate Private Limited ADDITIONAL INFORMATION AS REQUIRED PART IV OF THE SCHEDULE VI OF THE COMPANIES ACT, 1956 BALANCE SHEET ABSTRACT FOR THE PERIOD ENDED 31ST MARCH, 2007 AND COMPANY’S GENERAL BUSINESS PROFILE

CASH FLOW STATEMENT FOR THE PERIOD ENDED 31ST MARCH, 2007 Particulars

Current Year Rupees Rupees

Cash Flow from Operating Activities i)

ii)

Registration Details Registration No. State Code Balance Sheet

Net (Loss) Before Tax U45200MH2007PTC168818 11 31st March, 2007

Capital raised during the year (Amount in Rs. thousands) Public Issue Rights Issue Bonus Issue Private Placement- Capital - Premium

iii) Position of mobilisation and deployment of funds (Amount in Rs. thousands) 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 iv)

Performance of the Company (Amount in Rs. thousands) Turnover Total Expenditure Profit/ (Loss) Before Tax Profit/(Loss) After Tax Earnings Per Share in Rs. Dividend Rate% Generic Names of three Principal products/services of the Company

116

Preliminary Expenditure Working Capital Changes

543 543

Cash Flow from Financing Activities

– – 457 17 26

1842 (24089)

Nil Nil Nil Nil Nil

500 – – –

(25931)

Add : Non-cash/non-operating Expenses

Current Liabilities Preliminary Expenditure

42509 (18420) –

Cash Flow from Investing Activities

Issue of Share Capital

–

500000

Net (decrease)/Increase in Cash & Cash Equivalents

500000 500000

Add: Cash & Bank Balance as on 15.3.2007

–

Cash & Bank Balance as on 31.3.2007

500000

Notes : 1.

The Cash Flow Statement has been prepared under the ‘Indirect Method’ as set out in 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.

For and on behalf of – 26 (26) (26) (0.52) – N.A.

KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants

BAHADUR S. DASTOOR Partner Mumbai, May 23, 2007

MILIND S. KORDE

Director

K.T. JITHENDRAN

Director

Annual Report 2006-2007

Godrej Realty Private Limited BOARD OF DIRECTORS’ REPORT FOR THE FINANCIAL YEAR ENDED ON 31ST MARCH, 2007 To The Shareholders Your Directors have pleasure in submitting their Report alongwith the Audited Accounts for the year ended 31st March, 2007. 1. FINANCIAL HIGHLIGHTS : The accounting results for the year ended 31st March, 2007 reveal that there is deficit at the end of the year. 2. REVIEW OF OPERATIONS : The Company has conceptualised the project and finalised the design & are awaiting further approvals. 3. DIVIDEND : As there are no profits, the Directors regret that no dividend can be recommended. 4. ISSUE OF DEBENTURE : During the year the Company issued 1715000 10% Secured Redeemable Optionally Convertible Debentures of Rs.10/- each to HDFC Venture Trustee Company Limited and 17,85,000 10% Secured Redeemable Optionally Convertible Debentures of Rs.10/- each to Godrej Properties Limited. 5. DIRECTORS : In accordance with the provisions of the Article of Associations, Mr. Naresh Nadkarni, retire by rotation and being eligible, offer himself for re-appointment. 6. APPOINTMENT OF AUDITORS : M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants retire at the ensuing Annual General Meeting and are eligible for re-appointment. 7. 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, 2007 and of the loss 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. 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

Mumbai, May 23, 2007

MILIND S. KORDE Director

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ REALTY PRIVATE LIMITED 1.

3. 4.

We have audited the attached Balance Sheet of GODREJ REALTY PRIVATE LIMITED, as at 31st March, 2007 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 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, Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account. d) In our opinion, the Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt

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, 2007; ii) in the case of the Profit and Loss Account, of the loss of the Company for the year ended on that date and, iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. On the basis of the written representations received from the Directors as on 31st March, 2007, and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2007 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956. For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants BAHADUR S. DASTOOR Partner Membership No. 48936 e)

Mumbai, May 23, 2007

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 periodicals 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 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 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 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 marketing prices at the relevant time, where comparable market price exist. 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.

10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20) 21)

(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, Value Added Tax, Sales Tax, Wealth Tax, Service Tax, Custom 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 2007 for a period of more than six months from the date they became payable. (b) According to the information and explanations given to us, there are no dues outstanding of Sales Tax, Value Added Tax, Income Tax, Wealth Tax, Excise Duty, cess on account of any dispute. The Company’s accumulated losses at the end of the financial year are less than fifty percent of its net worth. However, it has incurred cash losses in the current financial year. According to the information and explanations given to us and 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. 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 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. According to the information and explanations given to us, securities have been created in respect of debenture issued by the Company as required by the Debenture Trust Deed. 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 BAHADUR S. DASTOOR Partner Membership No. 48936

Mumbai, May 23, 2007

117

Godrej Realty Private Limited BALANCE SHEET AS AT 31ST MARCH, 2007 Schedule

SOURCES OF FUNDS Shareholders’ Funds Share Capital Loan Funds Secured Loans

As at 31.03.07 Rupees

As at 31.03.06 Rupees

10000000

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

For the period ended 31.03.07 Rupees

For the year ended 31.03.06 Rupees

1026852

83479

Administration Expenses

9098167

913953

Interest & Finance Charges

–

36985

2769

In Progress

6376767

9051243

Loss for the year

1731533

–

589000

–

1142533

–

(1.14)

–

INCOME 1

150000000 160000000

APPLICATION OF FUNDS Fixed Assets Gross Block Less : Depreciation Net Block Investments Deferred Tax Assets Current Assets, Loans & Advances Inventory Cash & Bank Balances Loans & Advances

347608 39754 307854 – 589000

100083 2769 97314 – –

61819484 20571060 88235917 170626462

4 5 6

Less : Current Liabilities & Provisions Current Liabilities

115000000 125000000

15941553 34689427 76248733 126879713

Interest Income EXPENDITURE

Depreciation Less : Amount Transferred to Project

Provision for Deferred Tax Net Loss After Tax (Amount Transferred to Balance Sheet) Earning Per Share (Basic/ Diluted ) In Rs. (Refer Note No 5) Notes to Accounts & Accounting Policies

12665849 12665849 157960613 1142533 160000000

Net Current Assets Profit And Loss Account Notes To Accounts & Accounting Policies

1977027 1977027 124902686 – 125000000

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

Signatures to the Balance Sheet and Schedules 1 to 7 and 11

MILIND S. KORDE NARESH NADKARNI

Signatures to the Profit and Loss Account Schedules 8 to 11

As per our Report of even date.

As per our Report of even date. For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants BAHADUR S. DASTOOR Partner Mumbai, May 23, 2007

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants BAHADUR S. DASTOOR Partner

Director Director

MILIND S. KORDE Director NARESH NADKARNI Director

Mumbai, May 23, 2007

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS AS AT 31ST MARCH, 2007

SCHEDULE 1 : SHARE CAPITAL Authorised 1000000 Equity Shares of Rs.10 each 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.)

SCHEDULE 2 : SECURED LOANS 10% Secured redeemable optionally convertible debentures @ Rs. 10/- each (Refer Note -2)

As at 31.03.07 Rupees

As at 31.03.06 Rupees

10000000

150000000

115000000

150000000

115000000

SCHEDULE 3 : FIXED ASSETS Gross Block As at 1st April 2006 Rs. Land (Refer Note 1b) Motor Vehicle Computers Total Previous Year

Depreciation

Additions

Deductions

Rs.

As at 31st March 2007 Rs.

As at 1st April 2006 Rs.

For the year

As at 31st March 2007 Rs.

222175

– 222175

–

100083

–

– 100083

2769

25195

27964

72119

97314

–

25350

–

11790

13560

–

100083

247525

– 347608

2769

36985

39754 307854

–

100083

– 100083

–

2769

–

– 222175

As at 31st March 2006 Rs.

–

SCHEDULE 4 : INVENTORY Construction work in progress As per last Balance Sheet Add : Expenditure/Transfers from advances during the year Construction Advertisement Expenses Overheads

118

Rs.

Net Block

As at 31st March 2007 Rs.

2769

97314

–

As at 31.03.07 Rupees

As at 31.03.06 Rupees

15941553

–

17960338 281427 9220785

32,825 – 4,105,133

As at 31.03.07 Rupees

As at 31.03.06 Rupees

12038615 55442717 6376767 61819484

2752352 6890310 9051243 15941553

2657347 413713 17500000 20571060

– 4624681 30064746 34689427

11753493 76230000 13386 239038 88235917

– 76230000 – 18733 76248733

392530 9514561 2758758 12665849

925485 446417 605125 1977027

1026852 1026852

83479 83479

232461

18733

6707047 2391121 9098167

7380371 1751582 9131953

SCHEDULE 4 : INVENTORY (contd.) Interest Add : Transferred from Profit & Loss Account SCHEDULE 5 : CASH & BANK BALANCE Cash & Cheques in Hand Balance with Scheduled Bank - on Current Account - on Fixed Deposit Account SCHEDULE 6 : LOANS & ADVANCES (Unsecured & considered good unless otherwise stated) Advances recoverable in cash or kind or for value to be received Secured (Secured against Bank Guarantee) Others Interest Accrued Advance Tax and Tax Deducted at Source SCHEDULE 7 : CURRENT LIABILITIES Sundry Creditors (Note 3) Interest Accrued but not due Other Liabilities SCHEDULE 8 : NCOME Interest received Tax deducted at Source SCHEDULE 9 : ADMINISTRATION EXPENSES Consultancy Charges Other Operating Expenses

Annual Report 2006-2007

SCHEDULES ATTACHED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON 31ST MARCH, 2007

SCHEDULE 10 : INTEREST AND FINANCE CHARGES (NET) Interest Paid Others Total Interest paid Add : Brokerage & Other Financial Charges Total Interest / Finance Charges Paid Less : Transferred to project in Progress NET INTEREST

As at 31.03.07 Rupees

As at 31.03.06 Rupees

12038466 12038466 149 12038615 12038615 –

2750583 2750583 1769 2752352 2752352 –

SCHEDULE 11 NOTES TO ACCOUNTS & 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) 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. c) DEPRECIATION / AMORTIZATION Depreciation has been provided on Written Down Value basis, at the rates specified in Schedule XIV of the Companies Act, 1956. d) INVENTORIES Inventories are valued as under : a) Completed Flats - At lower of Cost or Market value b) Construction Work-in-Progress - At cost Construction Work in Progress includes cost of land, premium for development rights, construction costs, allocated interest and expenses incidental to the projects undertaken by the Company. e) 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. f) BORROWING COST Interest and finance 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. g) 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. h) PROVISION FOR TAXATION Tax expense comprises both current and deferred tax. Current tax is measured at the amount expected to be paid to the tax authorities, using 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. i) 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.

3) 4)

Secured Loans The 10% secured optionally convertible debentures are redeemable at the end of the 7 years from the deed date of allotment and are secured to the extent of specific immovable assets of the Company disclosed under the head “Fixed Assets”. The Company shall create a Debenture Redemption Reserve as required under section 117 ( C ) of the Companies Act, 1956 from the year in which profits are available for creation. There are no parties within the definition of Small Scale Industrial Undertakings to whom the Company owes any sum. Deferred Tax The Tax effect of significant temporary difference that resulted in deferred tax assets and liabilities are : Current Year (Rs.) Previous Year (Rs.) Loss Carried forward 586319 Depreciation on Fixed Assets 2681 Deferred Tax Asset 589000 Deferred Tax assets on carried forward tax losses have been recognized and carried forward on the ground that there is virtual certainty that sufficient taxable income will arise in future. The Company has considered the profitability of the project in progress as the 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. Earnings per share Current Year Previous Year Loss after transfer to Project in Progress as per Profit & Loss Account Rs. 1142533 – Weighted average no. of equity shares outstanding 1000000 1000000 Basic/Diluted earnings per share (Rs. 1.14) – Nominal value of shares Rs. 10 Rs. 10 Amounts paid to Auditors: Current Year (Rs.) Previous Year (Rs.) Audit Fees 89792 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. AS-18 Related Party Disclosures. Related party disclosures as required by AS - 18, “ Related Party Disclosures”, are given below: 1. Relationships: (i) Shareholders (the Godrej Group Shareholding ) in the Company Godrej Properties Limited (GPL) holds 51% in the Company. GPL is the subsidiary of Godrej Industries Limited (GIL).GIL is a subsidiary of Godrej & Boyce Manufacturing Company Limited (G&B), the Ultimate Holding Company. (ii) Investing party in respect of which the reporting enterprise is an associate :HDFC India Real Estate Fund. 2. The following transactions were carried out with the related parties in the ordinary course of business. (Amount in Rupees))

SR.NO.

DESCRIPTION

1 2

Issue of equity share capital Issue of debentures

3 4 5

Expenses Charged to other companies Purchase of Fixed Assets Expenses charged by other companies

6 7

Loans/Advances taken Outstanding receivables, Net of (payables)

G&B

GPL

2351113 703

5100000 17850000 58650000 2656006 100083 16639964 15820009 4200000 (81324156) (59761058)

HDFC India Real Estate Fund

4900000 17150000 56350000 (78190405) (56597014)

Figures in italics are for previous year 9) Previous year figures have been rearranged/regrouped wherever necessary to confirm to current year’s classification.

119

Godrej Realty Private Limited ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF THE SCHEDULE VI TO THE COMPANIES ACT, 1956 Balance Sheet Abstract for the year ended 31st March, 2007 and Company’s General Business Profile. 1. Registration Details Registration No. U70100MH2005PTC154268 State Code: 11 Balance Sheet Date 31st March, 2007 2.

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 172666 Total Assets 172666 Sources of Funds Paid-up capital 10000 Reserves & Surplus Nil Secured Loans 150000 Unsecured Loans – Application of Funds Net Fixed Assets 308 Investments – Net Current Assets 157961 Deferred Tax Assets 589 Misc. Expenditure – Accumulated Losses 1142 Performance of Company (Amount in Rs. thousands) Turnover – Total Expenditure Profit / (Loss) before Tax Profit / (Loss) after Tax Earning per Share in Rs. Dividend Rate % Generic Names of three principal products / services of Company

9135 1732 1143 (1.14) – N.A.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2007 Particulars Current Year Previous Year Rs. Rs. Rs. Cash Flow from Operating Activities Net Loss before Tax (1731533) – Add : Non-cash / Non-operating Expenses 1 Depreciation 36985 2769 2 Interest Paid 12038615 12075600 2752352 10344066 Less : Non-Cash / Non - operating Income Interest Income

1026852

83479

9317214

2,671642

Add : 1 2 3

Change in Inventory Change in Loans & Advances Change in Current Liabilities / Provisions

(45877932) (11734760) 1620678

(15941553) (76230000) 1977027 (55992014)

Less : Taxes Paid (Net)

239038

Cash Flow from Investing Activities 1 Purchase of Fixed Assets 2 Interest Received

(247525) 1013466

(46674800) 239038

(87522884) 18733

(46913838)

(87541617)

765941

(100,083) 83479 (16604)

Cash Flow from Financing Activities 1 Issue of Share Capital 2 Issue of Debentures 3 Interest Paid

– 35000000 (2970471)

Net (Decrease)/Increase in Cash & Cash Equivalents Add : Cash & Cash Equivalents as on 01.04.2006

32029529

10000000 115000000 (2752352)

(14118367) 34689427

122247648 34689427 –

Cash & Bank Balance as on 31.3.2007 20571060 34689427 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 AND ASSOCIATES Chartered Accountants BAHADUR S. DASTOOR Partner Mumbai, May 23, 2007

120

2755121

MILIND S. KORDE Director NARESH NADKARNI Director

Annual Report 2006-2007

Godrej Sea View Properties Private Limited BOARD OF DIRECTORS’ REPORT FOR THE PERIOD ENDED 31ST MARCH, 2007 To The Shareholders

view of the state of affairs of the Company at the end of the financial year ended 31st March, 2007 and of the loss of the Company for that year;

Your Directors have pleasure in submitting their Report together with the Audited Accounts for the period ended 31st March, 2007. 1.

The accounting results for the period ended 31st March, 2007 reveal that there is deficit at the end of the period. 2.

REVIEW OF OPERATIONS : The Company has not commenced any activities during the year.

(iii)

(iv)

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

FINANCIAL HIGHLIGHTS :

DIVIDEND :

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)

As there are no profits, the Directors regret that no dividend can be recommended. 4.

SHARE CAPITAL: The share capital is held by Godrej Properties Limited.

DIRECTORS : Mr. Milind S. Korde and Mr. K. T. Jithendran who were named as the first directors of the Company in the Articles of Association of the Company, constituted the Board of Directors.

(i)

Expenses on account of Energy are negligible.

Mr. Milind S. Korde and Mr. K. T. Jithendran retire by rotation at the ensuing Annual General Meeting and are eligible for reappointment. 6.

(ii)

Technology Absorption : It is an on going process.

APPOINTMENT OF AUDITORS :

(iii)

Conservation of Energy :

Foreign Exchange Earning & Outgo :

The Company has not earned any Foreign Exchange nor incurred any Foreign Exchange Expenditure during the year.

DIRECTORS’ RESPONSIBILITY STATEMENT : For and on behalf of the Board Of Directors

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

MILIND S. KORDE Director Mumbai, May 23, 2007

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ SEA VIEW PROPERTIES PRIVATE LIMITED 1.

comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

We have audited the attached Balance Sheet of GODREJ SEA VIEW PROPERTIES PRIVATE LIMITED, as at 31st March 2007 and also the Profit and Loss Account and the Cash Flow Statement of the Company for the period 14th March, 2007 to 31st March, 2007. 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)

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 and the Cash Flow Statement dealt with by this report

in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2007;

ii)

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

iii)

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

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants BAHADUR S. DASTOOR Partner Membership No. 48936 Mumbai, May 23, 2007

121

Godrej Sea View Properties Private Limited BALANCE SHEET AS AT 31ST MARCH, 2007

PROFIT AND LOSS ACCOUNT FOR THE PERIOD 14TH MARCH, 2007 TO 31ST MARCH, 2007 Schedule

SOURCES OF FUNDS Shareholders’ Funds Share Capital Loan Funds

As At 31.03.07 Rupees

500000 – 500000

EXPENDITURE Administration Expenses

24239

Preliminary Expenses written off

1842 26081

–

Investments Current Assets, Loans & Advances Cheques-in-hand

500000 500000

Less : Current Liabilities & Provisions Current Liabilities

42659 42659

–

Net Current Assets

Loss for the period

26081

Earning per share (basic/diluted) in Rs.

(0.52)

NOTES TO ACCOUNTS AND ACCOUNTING POLICIES

457341 457341

Miscellaneous Expenditure (to the extent not written off or adjusted) Preliminary Expenditure Profit and Loss Account

16578 26081 42659 500000

Notes to Accounts and Accounting Policies

5 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

As per our Report of even date.

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants

BAHADUR S. DASTOOR Partner

For the period ended 31.03.07 Rupees –

INCOME

APPLICATION OF FUNDS Fixed Assets

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

Schedule

MILIND S. KORDE K.T. JITHENDRAN

Director Director

Mumbai, May 23, 2007

Signatures to Profit & Loss Account and Schedules 4 & 5

BAHADUR S. DASTOOR Partner

MILIND S. KORDE K.T. JITHENDRAN

Director Director

Mumbai, May 23, 2007

SCHEDULES FORMING PART OF THE ACCOUNTS As at 31.03.07 Rupees SCHEDULE 1 : SHARE CAPITAL AUTHORISED 50000 Equity shares of Rs. 10/- each Issued and Subscribed and Paid up 50000 Equity shares of Rs. 10/- each ( 50000 equity shares are held by the Holding Company, Godrej Properties Limited and its nominee)

500000 50000

There are no parties within the definition of Small Scale Industrial Undertakings to whom the Company owes any sum.

Additional information required to be given under Schedule VI, Part II of the Companies Act, 1956 to the extent not applicable is not given.

Earnings per share

500000

Current Year

500000 SCHEDULE 2 : CASH & BANK BALANCE Cheques-in-hand SCHEDULE 3 : CURRENT LIABILITIES Sundry Creditors (Refer Note 1 ) Other Liabilities SCHEDULE 4 : ADMINISTRATION EXPENSES Audit Fees Professional Fees

Loss for the period as per Profit and Loss Account Weighted average no. of equity shares outstanding

500000 500000

Basic/Diluted earnings per share Nominal value of shares

17505 25154 42659

5) 6)

Rs.

Reimbursement of expenses to holding company

Outstanding payables

Amounts paid to Auditors: Audit Fees

MISCELLANEOUS EXPENDITURE

122

The following transactions were carried out with the related party in the ordinary course of the business: Sr. No.

GENERAL

Miscellaneous expenditure is amortized over a period of 10 years.

Relationships: Shareholders : Godrej Properties Limited (GPL) holds 100% of the Share Capital of the Company.

ACCOUNTING POLICIES

Rs. 10

AS 18 – RELATED PARTY DISCLOSURES 1.

6734 17505 24239

The accounts are prepared under the historical cost convention, using the accrual method of accounting.

50000 Rs. (0.52)

Related party disclosures as required by AS-18, “Related Party Disclosures”, are given below:

SCHEDULE 5 : NOTES TO ACCOUNTS AND ACCOUNTING POLICIES 1)

Rs. 26081

18420 18420 Current Year (Rs.) 6734

This being the first year of operations of the Company, the question of previous years figures does not arise.

Annual Report 2006-2007 ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF THE SCHEDULE VI TO THE COMPANIES ACT, 1956 Balance Sheet Abstract for the period ended 31st March, 2007 and Company’s General Business Profile. 1 Registration Details Registration No. : U45200MH2007PTC168730 State Code : 11 Balance Sheet Date : 31st March, 2007 2 Capital raised during the year (Amount in Rs. thousands) Public Issue : Nil Rights Issue : Nil Bonus Issue : Nil Private Placement - Capital : Nil - Premium : Nil 3 Position of mobilisation and deployment of funds (Amount in Rs. thousands) Total Liabilities : 543 Total Assets : 543 Sources of Funds Paid-up capital : 500 Reserves & Surplus : Secured Loans : Unsecured Loans : Application of Funds Net Fixed Assets : Investments : Net Current Assets : 457 Misc. Expenditure : 17 Accumulated Losses : 26 4 Performance of Company (Amount in Rs. thousands) Turnover : Total Expenditure : 26 Profit / (Loss) before Tax : (26) Profit / (Loss) after Tax : (26) Earning per Share in Rs. : (0.52) Dividend Rate % : 5 Generic Names of three principal products / services of Company : N.A.

CASH FLOW STATEMENT FOR THE PERIOD ENDED 31ST MARCH, 2007 Particulars

Current Year Rupees

Rupees

Cash Flow from Operating Activities Net (Loss) Before Tax

(26081)

Add : Non-cash/Non-operating Expenses Preliminary Expenditure

1842 (24239)

Working Capital changes Current Liabilities

42659

Preliminary Expenditure

(18420) –

Cash Flow from Investing Activities

–

Cash Flow from Financing Activities Issue of Share Capital

500000

Net (Decrease)/Increase in Cash & Cash equivalents Add : Cash & Bank Balance as on 14.3.2007

500000 500000 –

Cash & Bank Balance as on 31.3.2007

500000

NOTES: 1)

The Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting Standard (AS) 3 on “Cash Flow Statement”, and presents cash flows by operating, investing and financing activities.

Figures in brackets are outflows/deductions.

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants BAHADUR S. DASTOOR Partner

MILIND S. KORDE Director K.T. JITHENDRAN Director

Mumbai, May 23, 2007

123

Godrej Waterside Properties Private Limited BOARD OF DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2007 TO THE SHAREHOLDERS Your Directors have pleasure in submitting their Report alongwith the audited Accounts for the year ended 31st March, 2007. 1. FINANCIAL HIGHLIGHTS : The accounting results for the year ended 31st March, 2007 reveal that there is deficit at the end of the year. 2. REVIEW OF OPERATIONS : During the year the Company has entered into agreement for developing the property at Salt Lake Kolkata. The project has been conceived as a landmark IT project in the heart of IT city, Salt Lake Kolkata. The needs of ITES space requirement have been specifically considered by providing large floor plates of approximately 17.87 lacs sq. ft. which will be the largest floor plates available in the city after its completion. The construction of the project has already commenced. 3. DIVIDEND : As there are no profits, the Directors regret that no dividend can be recommended. 4. FUTURE PROSPECTS AND OUTLOOK OF THE COMPANY : The project is expected to develop into a major IT destination on its completion. We also expect to enter into agreement for leasing the units/premises in the building with international IT/ ITES companies of repute in the coming years. 5. DIRECTORS : In accordance with the provisions of the Article of Associations, Mr. Milind S. Korde, retire by rotation and being eligible, offer himself for reappointment. Mr. K.T. Jithendran was appointed as an Additional Director of the Company with effect from May 1, 2007. He holds office till the ensuing Annual General Meeting. A notice has been received from a shareholder proposing the candidature of Mr. K.T. Jithendran. 6. APPOINTMENT OF AUDITORS : M/s. Kalyaniwalla Mistry and Associates, Chartered Accountants retire at the ensuing Annual General Meeting and are eligible for reappointment. 7. DIRECTORS’ RESPONSIBILITY STATEMENT: Your Directors confirm: (i) that in the preparation of the annual accounts, the applicable accounting standards have been followed;

(ii)

(iii)

(iv)

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

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)

Conservation of Energy : Expenses on account of Energy are negligible.

(ii)

Technology Absorption : It is an on going process.

(iii)

Foreign Exchange Earning and 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 MILIND S. KORDE Director

Mumbai, May 23, 2007

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ WATERSIDE PROPERTIES PRIVATE LIMITED 1.

We have audited the attached Balance Sheet of GODREJ WATERSIDE PROPERTIES PRIVATE LIMITED, as at 31st March, 2007 and also the Profit and Loss Account and the Cash Flow 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.

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, 2007;

ii)

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

iii)

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

On the basis of the written representations received from the directors as on 31st March, 2007 and taken on record by the Board of Directors, we report that, none of the directors is disqualified as on 31st March, 2007 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

Further we report that:

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants

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.

BAHADUR S. DASTOOR Partner Membership No. 48936

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.

Mumbai, May 23, 2007

124

Annual Report 2006-2007

BALANCE SHEET AS AT 31ST MARCH, 2007 Schedule

SOURCES OF FUNDS Shareholders’ Funds Share Capital Loan Funds

As at 31.03.07 Rupees

As at 31.03.06 Rupees

500000 – 500000

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON 31ST MARCH, 2007 Schedule For the period ended 31.03.07 Rupees INCOME

For the year ended 31.03.06 Rupees

394262

–

Administration Expenses

18702113

–

Interest and Finance Charges

389262

–

88,408

–

EXPENDITURE

Application of Funds Fixed Assets Gross Block Less : Depreciation Net Block Investments Deferred Tax Assets Current Assets, Loans and Advances Inventory Cash & Bank Balances Loans & Advances

3 4 5

311178675 5346124 105286436 421811235

– 500000 – 500000

Less : Current Liabilities and Provisions Current Liabilities

424649894 424649894 (2838659) 1851808 500000

– – 500000 – 500000

622259 88408 533851 – 953000

– – – – –

Depreciation

15980713

–

Loss for the year

2804808

–

Provision for Deferred Tax

(953000)

–

Net Loss After Tax

1851808

–

(37)

–

Less : Amount Transferred to Construction Work in Progess

(Amount Transferred to Balance Sheet)

Net Current Assets/(Liabilities) Profit and Loss Account Notes to Accounts and Accounting Policies

Earning per share (basic/diluted) in Rs. (Refer Note No. 4) Notes to Accounts and Accounting Policies

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

Signatures to the Balance Sheet and Schedules 1 to 6 and 10

As per our Report of even date. For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants BAHADUR S. DASTOOR Partner

Director Director

MILIND S. KORDE K.T. JITHENDRAN

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

Signatures to the Profit & Loss Account and Schedules 7 to 10

As per our Report of even date. For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants BAHADUR S. DASTOOR Partner

MILIND S. KORDE K.T. JITHENDRAN

Director Director

Mumbai, May 23, 2007

SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON 31st MARCH, 2007 As at 31.03.07 Rupees SCHEDULE 1 : SHARE CAPITAL Authorised 50000 Equity shares of Rs. 10/- each Issued & Subscribed and Paid Up 50000 Equity shares of Rs. 10/- each (50000 equity shares are held by the Holding Company, Godrej Properties Limited and its nominee)

As at 31.03.06 Rupees

500000 500000

500000

SCHEDULE 2 : FIXED ASSETS Particulars

Particulars

Gross Block As at 1st April, 2006 Rs.

Additions Rs.

Furniture & Fixtures Office Equipments Computers

– – –

80591 59331 482337

Total

–

PreviousYear

–

Depreciation

As at As at Deduc31st 1st tions March, April, 2007 2006 Rs. Rs. Rs. – – –

80591 59331 482337

622259

–

Net Block

As at As at For the 31st 31st year March, March, 2007 2007 Rs. Rs. Rs.

– – –

65526 701 22181

65526 15065 701 58630 22181 460156

622259

–

88408

88408 533851

–

As at 31.03.07 Rupees SCHEDULE 3 : INVENTORY Construction Work-in-progress As per last Balance Sheet – Add : Expenditure/Transfers from Advances/taken over during the year Construction 235956947 Architect Fees 7631073 Advertisment Expenses 3774807 Overheads 28587371 Interest 19247765 295197963 Add: Transferred from Profit and Loss Account 15980713 311178675

–

As at 31st March, 2006 Rs. – – – –

As at 31.03.06 Rupees

– – – – – – – – –

As at 31.03.07 Rupees

As at 31.03.06 Rupees

16530 5329594 5346124

– 500000 500000

35273927 69616764 305789 89956 105286436

– – – – –

1609144 94892000 328148750 424649894

– – – –

394262 394262 88473

– –

14979176 3722937 18702113

– – –

SCHEDULE 9 : INTEREST AND FINANCIAL CHARGES Interest Paid Other Loans Total Interest Paid Add: Brokerage and other Financial Charges Total Interest/Finance Charges Paid

16126997 16126997 82781 16209778

– – – –

Less: Allocated to Construction Work-in-progress

15820516

–

389262

–

SCHEDULE 4 : CASH AND BANK BALANCE Cash and Cheques-in-Hand Balances with Scheduled Bank - On current Account SCHEDULE 5 : LOANS AND ADVANCES (Unsecured and considered good unless otherwise stated) Advances recoverable in cash or kind or for value to be received Secured (Secured against Bank/Corporate Guarantee) Others Interest accrued Advance Tax and Tax Deducted at Source SCHEDULE 6 : CURRENT LIABILITIES Sundry Creditors (Note 2) Sundry Creditors Advances received against Sale of Commercial premises Other Liabilities SCHEDULE 7 : INCOME Interest received Tax deducted at source SCHEDULE 8 : ADMINISTRATION EXPENSES Consultancy Charges Other Administrative Expenses

Net Interest

125

Godrej Waterside Properties Private Limited SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON 31st MARCH, 2007 SCHEDULE 10 NOTES TO ACCOUNTS AND ACCOUNTING POLICIES 1)

ACCOUNTING POLICIES a)

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.

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.

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

There are no parties within the definition of Small Scale Industrial Undertakings to whom the Company owes any sum. Deferred Tax The Tax effect of significant temporary differences that resulted in the deferred tax assets and liabilities are :

Assets

DEPRECIATION/AMORTIZATION

Losses carried forward

Depreciation has been provided on Written Down Value basis, at the rates specified in Schedule XIV of the Companies Act, 1956.

Liabilities Depreciation on Fixed Assets

INVENTORIES

Deferred Tax Assets

Inventories are valued as under : a)

Completed Flats

At lower of Cost or Market Value

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.

Current Year

Previous Year

(Rs.)

975016

–

22016

–

953000

–

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 the profitability of the project in progress as the 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. 4)

Earnings per share Current Year

Previous Year

REVENUE RECOGNITION Loss after transfer to Project in Progress as per The Company is following the “Percentage of Completion Method” of accounting. As per this method, revenue in Profit and 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.

Profit and Loss Account Weighted average no. of Equity shares outstanding Basic/Diluted earnings per share Nominal value of shares 5)

Income from operation of commercial complexes is recognized over the tenure of the lease/ service agreement. Interest income is accounted on an accrual basis at contracted rates.

Dividend income is recognized when the right to receive the same is established. f)

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.

126

Rs. 10

Current Year (Rs.) 89792 89792

SEGMENT INFORMATION

AS 18 – RELATED PARTY DISCLOSURE Relationships:

The following transactions were carried out with the related party in the ordinary course of the business: Sr. No

PROVISION FOR TAXATION

Current tax is measured at the amount expected to be paid to the tax authorities, using the applicable tax rates and tax laws.

–

Rs. 10

Total

EARNINGS PER SHARE

Tax expense comprises both current and deferred tax.

Rs. (37)

Shareholders in the Company : Godrej Properties Limited (GPL) holds 100% of the share capital of the Company.

50000

Audit Fees

Other borrowing costs are recognized as an expense in the period in which they are incurred. g)

–

50000

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.

BORROWING COST Interest and Finance 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.

Amounts paid to Auditors :

Rs. 1851808

Rs.

Expenses incurred by holding company towards Construction work-in-progress and Revenue expenditure

342031262

Outstanding net of (payables)

278077329

Figures in italics are for previous year 8)

Previous year figures have been regrouped/rearranged whereever necessary to confirm to current year’s classification.

Annual Report 2006-2007 CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2007 Particulars

Current Year Rupees

Cash Flow from Operating Activities Net Loss before Tax Add : Non- Cash/Non-operating Expenses 1. Depreciation 2. Interest paid

(2804808)

–

16298186

–

13493378

–

394262 13099116

– –

INFORMATION REQUIRED TO BE FURNISHED UNDER THE PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956 Balance Sheet Abstract for the year ended 31st March, 2007 and Company’s General Business Profile 1

394262

(311178675) (104890691)

Change in Current Liabilities/Provisions

424649894 89956

less: Taxes paid (Net)

88473 – (16209778)

Cash & bank Balance as on 31.03.2007

Public Issue

Nil

Rights Issue

Nil

Bonus Issue Private Placement 3

(622259)

Interest Received

Cash Flow from Financing Activities 1. Issue of Share Capital 2. Interest paid Net (decrease)/Increase in Cash & Cash Equivalents Add: Cash & Cash Equivalents as on 01.04.2006

31st March, 2007

Capital raised during the year (Amount in Rs. thousands)

– –

Balance Sheet Date

– – 8580528 21679644 89956

U70100MH2005PTC154255

State Code

21589688 Cash Flow from Investing Activities 1. Purchase of Fixed Assets 2.

Registration Details Registration No.

88408 16209778

Less : Non-Cash/Non operating Income Interest Income Add: 1. Change in Inventory 2. Change in Loans and Advances

Rupees

Previous Year Rupees

Nil -

Capital

Nil

Premium

Nil

Position of mobilisation and deployment of funds (Amount in Rs. thousands) Total Liabilities

425150

Total Assets

425150

Sources of Funds (533786) 21055902

– –

Paid-up capital Reserves & Surplus

–

Secured Loans

–

(16209778)

500000 –

Unsecured Loans

–

4846124

500000

–

5346124

500000

Application of Funds Net Fixed Assets Investments Net Current Assets

Notes:

Deferrred Tax Assets

Misc. Expenditure

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.

Figures in brackets are outflows / deductions.

Figures for the previous year have been regrouped/restated wherever necessary to confirm to this year's classification.

For and on behalf of KALYANIWALLA MISTRY & ASSOCIATES Chartered Accountants BAHADUR S. DASTOOR Partner Mumbai, May 23, 2007

Accumulated Losses 4

Director Director

Turnover

– (2839) 953 – 1852 –

Total Expenditure

19180

Profit/(Loss) before Tax

(2805)

Profit/(Loss) after Tax

(1852)

Dividend Rate % 5

534

Performance of the Company (Amount in Rs. thousands)

Earning per Share in Rs. MILIND S. KORDE K.T. JITHENDRAN

500

(37) –

Generic Names of three Principal products /services of Company

N.A.

127

Godrej Hicare Limited DIRECTORS’ REPORT FOR THE YEAR ENDED ON MARCH 31, 2007 To the Members GODREJ HICARE LIMITED Your Directors submit their Report along with the Audited Accounts of your Company for the year ended March 31, 2007. Operating Results Your Company’s performance during the year as compared with the previous year is summarized below: March 31, 2007 March 31, 2006 (Rs Lacs) (Rs Lacs) Total Income 2995.53 2112.19 Profit/ (Loss) for the year 182.35 104.34 before extraordinary items (After tax) Profit / (Loss) After Extraordinary Items 182.35 104.34 Add: Balance brought Forward (1340.60) (1444.94) Deficit Carried Forward (1158.26) (1340.60) Operations Review Your Company has recorded an excellent growth of 42% in its revenue. Total Income grew from Rs. 2112 lac in the previous year to Rs 2996 lac in the current year. The Company’s Profit after Tax of Rs. 182 lac for the year as compared to Rs.104 lac in the previous year shows an impressive growth of 75%. The Company identified training as critical to its success and hence invested substantial resources behind this activity. In its never ending effort to achieve excellence in service delivery it invited eminent foreign consultants to train employees at all levels. The Company launched one of world’s leading brands of Flying Insect Killing machines. This was in the last quarter of the current year and the Company expects good revenue in coming years from new customer acquisitions and deepening relationship with current ones. Dividend: In view of the accumulated losses, your Directors do not recommend any dividend for the year. Directors: There are no changes in the Directorship in the Company. In accordance with Article 150 of the Articles of Association of your company, one of the Directors of the Company, Mr. A.B. Godrej by rotation in the ensuing Annual General Meeting and being eligible, offers himself for reappointment. Auditors: The retiring Auditors of the Company, Messrs. Kalyaniwalla Mistry and Associates, Chartered Accountants, have indicated their inability to accept appointment as Auditor of the Company. As required under Section 225(1) of the Companies Act, 1956, a Special Notice in terms of Section 190 of the Act has been received from a Member, proposing the appointment of Messrs. Kalyaniwalla & Mistry (K & M ), Chartered Accountants, as the Auditors of the Company, in place of the retiring Auditors. The retiring Auditors have informed the Company that they have no representation to make to the Members of the Company relating to the Special Notice. Messrs Kalyaniwalla & Mistry ( K & M ) is a reputed firm of Chartered Accountants and the Board, therefore, proposes the appointment of Messrs Kalyaniwalla & Mistry ( K & M ) as the Auditors of the Company. 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 Mar 31st 2007. Note on Auditors Report: Erosion of Net worth (Note 4(i) of Auditors report and note 10 of Annexure to Auditors report) Though the accumulated losses of the Company exceed its paid up capital, the shareholders are very supportive of the Pest management business and are committed to infuse funds as and when required to for working capital and other requirements. Fixed Assets Register (Note 1 (a) and (b) of Annexure to Auditors report) Your Company is in process of updating the same. Physical verifications will be carried out after 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;

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: Statement under Section 217(2A) of the Companies Act, 1956 read with the Company’s (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

Gross Qualifi Remun- -cation eration (Rs.‘000)

Years of Experience inGHCL

Date of Age Commen- (Years) cement of employment

Particulars of previous Employment

Previous Experience (Years)

Vikas Hajela

4048

PGDMM

18.01.05

GSLL

S. Anand

Chief Operating Officer Exe. Vice President

3111

CA, ICWAI

21.01.04

GSLL

Foreign Exchange earnings and Outgo: Expenditure in Foreign Currency Current Year Mar-2007 (Rs Lacs) Nil Nil Nil 16.35

PreviousYear Mar-2006 (Rs Lacs) 8.75 2.28 0.53 Nil

License Fees Training Expenses Travelling Expenses Consultancy Charges 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 A.B. Godrej Chairman Mumbai, May 7, 2007

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

We have audited the attached Balance Sheet of GODREJ HICARE LIMITED, as at 31st March, 2007 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 para (3) above, we report that: i) The accumulated losses of the Company as at March 31, 2007 exceed its paid up capital resulting in the erosion of its net worth. The accounts for the year have been prepared on the 'Going Concern' basis on the understanding that finance will continue to be available to 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 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.

128

iv)

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. vi) In our opinion and to the best of our information and according to the explanations given to us, subject to paragraph (i) above, give the information required by the Companies Act, 1956, 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 31st March 2007; 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. On the basis of the written representations received from the Directors as on 31st March, 2007, and taken on record by the Board of Directors, we report that, none of the Directors is disqualified as on 31st March, 2007 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. v)

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Charetered Accountant BAHADUR S. DASTOOR Partner Membership No. 48936 Mumbai, May 7, 2007

Annual Report 2006-2007

ANNEXURE TO THE AUDITORS’ REPORT (Contd.) Referred to in paragraph (3) of our report of even date. 1) (a) As per the information and explanations given to us, the Company is in the process of updating its records showing full particulars, including quantitative details and situation of fixed assets. (b) The Company has not conducted a physical verification of fixed assets during the year, in view of which we are unable to comment on discrepancies, if any. (c) The disposal of fixed assets during the year does not affect the going concern assumption. 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 listed in the register maintained under Section 301 of the Companies Act, 1956. (b) Consequently, the question of commenting on the rates of interest and the other terms 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 (c) 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. (d) In case of these loans, interest has been waived by the respective companies. In our opinion, the rate of interest and other terms and conditions of these loans are not prima facie prejudicial to the interests of the Company. (e) The payment of principal for above amounts has not been regular. The payment of interest has been waived. 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. During the course of our audit, no major weakness has been noticed in the internal controls. 5) (a) Based on the audit procedures applied by us and according to the information and 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. 6) 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. 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, in respect of the Company's products. 9) (a) According to the information and explanations given to us and on the basis of our examination

Schedule

Current Year Rupees

Net Block INVESTMENTS DEFERRED TAX ASSET CURRENT ASSETS, LOANS AND ADVANCES Inventory Sundry Debtors Cash and Bank Balances Loans and Advances LESS : CURRENT LIABILITIES AND PROVISIONS Current liabilities Provisions

13) 14) 15) 16) 17) 18)

19) 20) 21)

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants BAHADUR S. DASTOOR Partner Membership No. 48936 Mumbai, May 7, 2007

Previous Year Rupees

56200000

2 3

19114088 134310000

– 139310000

Current Year Rupees

Previous Year Rupees

50485610 1908583

44484712 1321380

–

401000

209624088

195,911,000

48577027 237733236 13242305

43163332 152706621 15289388

20453140 8230125

17353167 6011084

299552568

211218723

12223015 68905

11342083 68905

61163839 9862569 (954916) 205971039 2257479 2219041

53190753 7404457 (1900192) 136573253 2317918 1324008

1535000

–

26864719 77064818 11654782 81565959

22276952 45098800 17917076 31802401

280519050

198910197

19033518 675000 2060000 (1936000)

197150278

117095229

12308526 668980 805000 401000

115403281 1775725

64451387 2204243

Profit/(Loss) for the Year after Tax Add : Balance Brought Forward

18234518 (134060413)

10433546 (144493959)

117179006

66655630

79971272 115825895

50439599 134060413

Deficit Carried Forward

(115825895)

(134060413)

3.24

209624088

195911000

2.29

INCOME : Gross Sales Less : Excise Duty Net Sales Service Income Other Income

6 7 8 9

10 11

NET CURRENT ASSETS PROFIT & LOSS ACCOUNT

NOTES TO ACCOUNTS

12)

Schedule

DEFERRED TAX LIABILITY APPLICATION OF FUNDS : FIXED ASSETS Gross Block Less : Depreciation

11)

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

BALANCE SHEET AS AT MARCH 31, 2007

SOURCES OF FUNDS : SHAREHOLDERS’ FUNDS Share Capital LOAN FUNDS Secured Loans Unsecured Loans

10)

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 31st March 2007 for a period of more than six months from the date they became payable (b) According to the information and explanations given to us, there are no dues outstanding of 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. There are no 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, 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 a 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.

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 15) NOTES TO ACCOUNTS

13 14 15 16

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

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

As per our Report of even date

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants

Signatures to Balance Sheet and Schedules 1 to 11 and 17

Chairman A.B. GODREJ A. MAHENDRAN Managing Director RAMESH IYER Company Secretary

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants

BAHADUR S. DASTOOR Partner

Mumbai, May 7, 2007

Signatures to Profit and Loss Account and Schedules 12 to 17 A.B. GODREJ A. MAHENDRAN RAMESH IYER

Chairman Managing Director Company Secretary

129

Godrej Hicare Limited SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2007 Current Year Rupees

SCHEDULE 1 : SHARE CAPITAL Authorised: 8000000 Equity Shares of Rs.10/- each Issued & Subscribed 7900000 Equity Shares of Rs 10/- each Paid-up 4100000 Equity Shares of Rs 10/- each fully paid 3800,000 Equity Shares of Rs 10/- each, Rs 4/- paid.

Previous Year Rupees

80000000

79000000

41000000 15200000 56200000

SCHEDULE 2 : SECURED LOANS Cash Credit (Secured against hypothecation of stock & book debts) SCHEDULE 3 : UNSECURED LOANS Intercorporate deposits (due within a year, or at call)

Current Year Rupees

Previous Year Rupees

19114088

–

19114088

–

134310000

139310000

134310000

139310000

Of the above: 6647100 shares are held by Godrej Industries Ltd. (GIL), the Holding Company SCHEDULE 4 : FIXED ASSETS

(Amount in Rs.) GROSS BLOCK

ASSETS Intangibles Trade Marks Computer Software Total (A) Tangibles Factory Building Plant & Machinery Office Equipment Furniture & Fixture Spray and Service Kit Vehicles Computers Total (B) TOTAL (A+B) Previous Year Total

DEPRECIATION

As at 01/04/2006

Additions

Deductions

As at 31/03/2007

Up to 01/04/2006

For the year

Deductions

Up to 31/03/2007

As at 31/03/2007

As at 31/03/2006

9000000 1814392 10814392

– 246668 246668

– – –

9000000 2061060 11061060

1970137 183416 2153553

900000 333122 1233122

– – –

2870137 516538 3386675

6129863 1544522 7674385

7029863 1630976 8660839

82400 5544088 72915 48638 59000 38949 692785 6538775 17353167 14223379

– 412218 153953 561615 – 456745 1268774 2853305 3099973 3204463

– – – – – – – – – 74675

82400 5956306 226868 610253 59000 495694 1961559 9392080 20453140 17353167

15693 3574970 24666 18277 59000 38949 125976 3857531 6011084 4694077

6671 293809 26623 72844 – 1477 584495 985919 2219041 1324008

– – – – – – – – – 7001

22364 3868779 51289 91121 59000 40426 710471 4843450 8230125 6011084

60036 2087527 175579 519132 – 455268 1251088 4548630 12223015 11342083

66707 1969118 48249 30361 – – 566809 2681244 11342083

Current Year Rupees SCHEDULE 5 : INVESTMENTS : LONG TERM In Mutual Funds, Unquoted 43.19 units of Templeton India Treasury Management Account Regular Plan - Growth

Net Asset Value SCHEDULE 6 : INVENTORY Raw material Packing Material Finished Goods Service Stock Photographic equipment Less : Provision for Stock obsolesence SCHEDULE 7 : 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 8 : CASH AND BANK BALANCES Cash on hand Balances with scheduled banks in current accounts in fixed deposit account in margin deposit account SCHEDULE 9 : 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 (Net of Provision for Taxation Rs. 3540000/- Prvious Year Rs. 805000/-)

130

NET BLOCK

814057 (407028)

Previous Year Rupees

68905

80438

75728

385444 284863 5718849 20068533

3922887 930122 4356905 12252981

407029

814057

26864719

22276952

31400811 2718884

8409492 379601

34119695

8789093

45664007 – 79783702 2718884

36689308 – 45478401 379601

77064818

45098800

1610

47281

6148343 4263620 1241209

9303535 7323200 1243060

11654782

17917076

SCHEDULE 10 : CURRENT LIABILITIES Current Liabilities: Sundry Creditors (Refer Note 4) Security Deposits Advance from Customers Other Liabilities Interest accrued but not due SCHEDULE 11 : PROVISIONS Leave Encashment Taxation

Current Year Rupees

Previous Year Rupees

26965355 13474661 40630979 34029889 302397

12057968 8620334 24870848 17945805 956432

115403281

64451387

1775725 –

1399243 –

1775725

1399243

SCHEDULES FORMING PART OF THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007 SCHEDULE 12 : OTHER INCOME Publicity & Information Support Miscellaneous Income Sundry Credit balance written back

10988057 1700185 554063

10449038 4063731 776619

13242305

15289388

SCHEDULE 13 : MATERIALS a) Raw Material and Packing Material Consumed Opening stock 4853009 Add : Purchases during the year 17605232

4421913 24028993

22458241 670308

28450906 4853009

Less : Closing stocks b)

Service Stock Consumed

SCHEDULE 14 : INVENTORY CHANGE Opening stock Photographic equipments Finished goods

814057 4356905

Less: Closing Stock Photographic equipments Finished goods

407029 5718849

21787933 39375906

23597897 29592856

61163839

53190753

840857 2429913 5170962

71711757 3480385 4610669 1763148

22431883 4938556 2737968 888994

81565959

30997401

3270770 814057 4356905

6125878

5170962

(954916)

(1900192)

Annual Report 2006-2007

SCHEDULES FORMING PART OF THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2007 SCHEDULE 15 : 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 Auditors Remuneration Travelling & Conveyance Legal & Professional Charges Provision for Doubtful debts Bad debts and advances written off IT expenses General Expenses

SCHEDULE 16 : INTEREST AND FINANCE EXPENSES Interest on intercorporate deposits Other Interest & financial charges Less : Interest Income (Tax deducted at source Rs. 449,499/Previous year Rs. 84,908/-)

Current Year Rupees

Previous Year Rupees

37198224 2178292 477423 2318094 481151 4049016

16448123 770279 759757 1677141 359073 4848379

33470 170671 204141 601890 4226884 68244802 58264824 4427575 169360 6384052 6453210 2339283 1210153 1752748 4989917 205971039

7802 274713 282515 104398 2709778 35717165 52907561 1062414 169360 4333627 3836943 – 5111522 587943 4887275 136573253

1878888 2528339

919610 1799886

4407227 2149748

2719496 460960

2257479

2317918

SCHEDULE 17 : NOTES TO ACCOUNTS 1)

Significant Accounting Policies a)

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 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. Depreciation/Amortization: 1) Spray and service kits and Vehicles: On Straight Line Method basis at the rates prescribed by Schedule XIV to the Companies Act, 1956. 2) Computer Hardware and Other Assets: On Written Down Value basis at the rates prescribed by Schedule XIV to the Companies Act, 1956. 3) Following assets are Amortized as follow: Asset Type Period (a) Trademarks 10 years (b) Computer Software 6 years Impairment: 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. Inventories: Raw materials and Service Stock are valued at weighted average cost. Finished goods are valued at lower of cost and net realisable value.These costs include cost of conversion and other costs incurred in bringing the inventories to their present location and condition. Stores and spares are valued at weighted average cost. 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. 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. 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. j) 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. CONTINGENT LIABILITIES: 1) Claims against company not acknowledged as debts amounts to Rs. 18318000/- (Previous year Rs. 14500000/-) 2) Bank Guarantee given by the Company amounting to Rs.1241209/- (Previous year Rs. 1243060/-) CAPITAL COMMITMENTS The estimated value of contracts remaining to be executed on capital account to the extent not provided for is Rs. 3208634 (Advance paid Rs. 3208634) (Previous Year Rs. Nil/-) SSI CREDITORS 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. 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. EXPENDITURE IN FOREIGN CURRENCY Current Year PreviousYear License Fees Nil 875400 Training Expenses Nil 227978 Travelling Expenses Nil 53389 Consultancy Charges 1635556 Nil 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) Current Year Previous Year 1. Lease Rentals paid during the year 1777514 1136209 2. Future Lease Obligations Due within one year of the Balance Sheet date 2051984 1204132 Due between one year and five years 3704898 2255473 Due after five years – – Current year Previous year Item Units Quantity Value Quantity Value (Rs.) (Rs.) INVENTORIES OF FINISHED GOODS Traded goods Print Leader Nos 3 176143 3 352,286 Imager Nos 5 230886 5 461771 407029 814057 Insecticides Ltrs 367 216038 1367 251369 Nos 100 32011 100 32011 Fly Catcher Nos 814 3872400 – – 4527479 1097437 Manufactured goods Insecticides Ltrs 2759 1185064 9352 4050041 Kgs 24142 413335 300 23484 1598399 4073525 Total 6125878 5170962 SALES (NET OF EXCISE DUTY) Item Units Quantity Value Quantity Value (Rs.) (Rs.) Traded goods Fly Catcher Nos 316 2258240 – – Insecticides Kgs 1774 527028 6074 9792033 Insecticides Ltrs. 13058 5852907 23846 1880684 Manufactured goods Insecticides Ltrs. 83078 38581541 82932 31490615 Kgs 130408 1357310 – –

Total 10) PURCHASES FOR RESALE Item Insecticides

48577027 Units

Quantity

Ltrs. Kgs Nos

12058 1524 1130

Fly Catcher Total 11) RAW MATERIAL CONSUMED Item Units Basic Chemicals Service Stock Others Total

Kgs

43163332

Value (Rs.) 4366993 109696 5385880 9862569

Quantity

Value (Rs.) 140167 20276018 39375906 1511916 61163839

Quantity

29472 – –

127522

Value (Rs.) 7404457 – – 7404457 Value (Rs.) 22862147 29592856 735750 53190753

131

Godrej Hicare Limited Value (Rs.)

Item %

12) VALUE OF CONSUMPTION OF RAW MATERIALS, SPARES AND CONSUMABLES Raw Materials Indigenous 73 44682320 Imported (including custom duty) 27 16481519 Total 61163839

240000 –

14) CIF VALUE OF IMPORTS Item Units

Details relating to person referred to in item1(iii) above

80 20

42305906 10884847 53190753

Current year Nil

Issue of share capital

–

Nil

74675

Godrej Sara Lee Limited 2 Purchase of Fixed Assets 3

Sales & Other Income

–

Nil

–

Nil

Godrej Agrovet Limited

457173

Godrej Agrovet Limited

Production Previous Year

240000 –

43950 32535

51215 33968

240000

43950

51215

4 Purchases (net of returns)

Nil

Godrej Sara Lee Limited

487347

Godrej Sara Lee Limited

3044295

Godrej Properties Limited

1455822

Godrej Properties Limited

991250

–

Nil

Godrej Sara Lee Limited Quantity

Value (Rs.)

Quantity

Value (Rs.)

Previous year 3040000

Significant Related Party Transactions 1 Sale of Fixed Assets

Current Year Previous Year Current Year Ltrs.

(ii)

13) INSTALLED CAPACITY AND ACTUAL PRODUCTION Units Installed Capacity

Insecticides Processed Outside

Value (Rs.)

5 Expenses charged by other Companies

(454918)

Godrej Beverages & Foods Limited

1227467

Godrej Beverages & Foods Limited

(1337917)

Insecticide

Kgs.

57300

15375964

58660

12016607

Godrej Sara Lee Limited

56867

Insect-O-Cutor (PMS)

Nos

1130

5385880

–

Godrej Sara Lee Limited

(727720)

Total

20761844

12016607

6 Expenses charged to other Companies

15) EARNING PER SHARE: Current Year 18234518 5620000 3.24

Profit/(Loss) after Tax as per Profit & Loss account Weighted average number of equity shares of Rs 10 each Basic / Diluted Earnings Per Share

Previous Year 10433546 4557425 2.29

Godrej Beverages & Foods Limited Godrej Sara Lee Limited 7 Outstanding Receivables, net of Payables

16) 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:

1724082

Godrej Properties Limited

1441559

Godrej Properties Limited

991250

Godrej Sara Lee Limited

723827

Godrej Sara Lee Limited

(2018551)

Godrej Beverage & Foods Limited

Godrej Agrovet Limited

Provision for Stock

137000

Godrej Properties Limited

Provision for Doubtful debts

787000

–

Godrej Sara Lee Limited

Others

611000

762000

1535000

(401000)

Current Year

Previous Year

134688

Deferred Tax Asset / (Liability)

Key Management Personnel 1.

The following transactions were carried out with the related parties in the ordinary course of business:

Sr. Particulars No.

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

Interest on Inter Corporate Deposit

Sundry Deposit with Other Companies

10. Sundry Deposits refunded 11. Outstanding Receivables (net) of Payables

Statutory Audit Audit under other Statutes

Godrej Group Shareholders Ultimate Holding Holding Co. Co. (i)

–

18) Auditors Remuneration

Mr. A. Mahendran (Managing Director)

Details relating to parties referred to in item 1(i) and (ii) above:

132

Godrej Sara Lee Limited

The Tax effects of significant temporary differences that resulted in deferred tax assets and liabilities are :Current Year Previous Year Depreciation on Fixed Assets – (1163,000)

Other related parties in the Godrej Group where common control exists. 1.

Nil 40800

Note :- Figures in Italics represents previous year figures.

GIL is a subsidiary of Godrej & Boyce (Mfg) Co. Limited, the ultimate holding co.

(iii)

8686

17) Deferred Tax

Godrej Industries Limited hold 84.1% (ii)

Godrej Beverages & Foods Limited

(i)

Other Related parties in the Godrej Group (ii)

Nil

(Nil) Nil (Nil) 403600 (Nil) 266568 (Nil) Nil (Nil) 228 (Nil) Nil (Nil) Nil (Nil) 1450 351450 Nil (350000)

(17160000) Nil (Nil) Nil (Nil) 774438 (Nil) Nil (Nil) 1699574 (1475254) Nil (5,650) Nil (88457) 355500 ((Nil) Nil (Nil)

(Nil) NIL (74675) Nil (Nil) 2400342 (4066038) Nil (454918) 1284333 (2065638) 49486 (1733582) Nil (Nil) 6000 (Nil) Nil (Nil)

183020 (Nil)

423926 (357800)

2314375 (3004913)

Total

33672

168360

19) The amount of exchange difference included in the Profit and Loss Account, under the related heads of expenses / income, is Rs. 57,419 (Previous year expense Rs.9,856). 20) The Company is engaged in the business of rendering pest management services & sale of related insecticides 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. 21) Information required under Schedule VI to the Companies Act 1956, have been given to the extent applicable.

Annual Report 2006-2007 CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2007

BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE 1.

Registration details Registration No. State Code Balance Sheet Date

: : :

U29294MH1993PTCO72222 11 March 31, 2007

Current Year Rs.

Previous Year Rs.

19033518

12308526

Depreciation

2219041

1324008

Interest expense

2257479

2317918

23510037

15950452

Cash Flow from Operating Activities : Profit/(Loss) before tax Adjustments for :

Capital raised during the year Public Issue Rights Issue Bonus Issue Private Placement

: : : :

Position of mobilisation and deployment of funds 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 : Deferred Tax Assets : Net Current Assets : Miscellaneous Expenditure : Accumulated Losses : Performance of Company Turnover (Total Income) Total Expenditure Profit / (Loss) before tax Profit / (Loss) after tax Earnings per share in Rs. Dividend rate (%)

: : : : : :

– – – –

Adjustments for : Inventories Trade & Other receivables Trade & Other payables

326803094 325268094

Direct & Fringe Benefit Taxes paid 56200000 – 19114088 134310000 –

Fringe Benefit tax Paid B.

12223015 68905 1535000 79971272 – 115825895

299552568 280519050 19033518 18234518 3.24 –

(4587767)

(2165942)

(78120422)

(30447457)

47485979

7035675

(11712173)

(9627272)

(2972117)

(1693994)

(637037)

(668980)

(3099973)

(3136789)

Cash Flow from Investing Activities : Purchase of Assets Investments Net Cash used in investing activities

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

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

Operating Profit/(Loss) before working capital changes

–

(3099973)

(3136789)

14114088

11952000

–

20200000

Cash Flow from Financing Activities : Term Loans/Inter Corporate Deposits taken Issue of Share Capital Interest paid

(1955082)

(1361486)

Net Cash from financing activities

12159006

30790514

Net Increase in Cash and Cash Equivalents

(6262294)

15663479

Add : Cash & Cash equivalents (Opening Balance)

17917076

2253597

Cash & Cash equivalents (Closing Balance)

11654782

17917076

Notes 1.

Cash flow statement has been prepared under the Indirect method as set out in the acounting standsrds AS-3 on Cash Flow Statement as present cash flows by operating, investing and financing activities

Figures in brackets are outflows/deductions.

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

A.B. GODREJ A. MAHENDRAN RAMESH IYER

Chairman Managing Director Company Secretary

BAHADUR S. DASTOOR Partner Mumbai, May 7, 2007

133

Ensemble Holdings & Finance Limited DIRECTORS’ REPORT FOR THE YEAR ENDED ON MARCH 31, 2007 To The Shareholders, Your Directors submit their Report along with the Audited Accounts for the year ended on March 31, 2007. 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) Gross Revenue earned

8062

57332

Profit / (Loss) for the year Provision for Taxation Adjustment in respect of prior years Loss brought forward

7896 438 – (80521)

57185 520 5 (80575)

Loss carried forward

(80250)

(80521)

Dividend The Board of Directors have declared and paid two interim dividends for year 2006-07 aggregating to Rs.1.15 per share. The same is recommended as the final dividend for the year. Compliance with guidelines issued by the Reserve Bank of India Your Company has been granted a Certificate of Registration by Reserve Bank of India to carry on the 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, Mr. C. K. Vaidya retires by rotation and being eligible offers himself for re-appointment.

Auditors You are requested to appoint Auditors for the current year and fix their remuneration. The retiring auditors, M/s Kalyaniwalla Mistry and Associates, Chartered Accountants are eligible for re-appointment. Directors' Responsibility Statement Pursuant to the provisions contained in Section 217 (2AA) of the Companies Act, 1956, the Directors of 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 25, 2007 c.

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, 2007 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. 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, as amended by the Companies (Auditors' Report) (Amendment) Order 2004, 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;

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants V. M. PADWAL Partner Membership No.: 49639

Mumbai, May 25, 2007

payable in respect of statutory dues were outstanding, at the year end for a period of more than six months from the date they became payable. 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. 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 immediate preceding financial year. 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. 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. 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. 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. 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. 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. 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. The Company has not made any preferential allotment of shares to parties or companies covered under section 301 of the Companies Act, 1956. The Company did not issue any debentures during the financial year. The Company has not raised any money through a public issue during the year. 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. In our opinion, clauses (i), (ii), (iv) and (viii) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003 are not applicable. b)

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, 2007: 1. a) The Company, during the current year, has not granted any loans, secured or unsecured, to any companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956 and the outstanding from one company covered in the register maintained under section 301 of the Companies Act, 1956 is Rs. 23,110,000/b) In our opinion and according to information and explanations given to us, the rate of interest and 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. 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. 500,000/- and the same was repaid during the year. 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 with appropriate authorities undisputed statutory dues including Income Tax and other statutory dues as applicable to it. According to the information and explanation given to us, no undisputed amounts

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 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, 2007, (ii) in the case of the Profit and Loss Account, of the Profit of the Company for the year ended on that date (iii) in the case of Cash Flow Statement, of the cash flow for the year ended on that date. On the basis of the written representations received from the Directors as on March 31, 2007, and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2007, from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. d.

6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18.

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants V.M. PADWAL Partner Membership No.: 49639 Mumbai, May 25,2007

134

Annual Report 2006-2007

BALANCE SHEET AS AT MARCH 31, 2007

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

This Year Rupees

Schedule

Previous Year Rupees

SOURCE OF FUNDS 1

SHAREHOLDERS' FUNDS (a)

Share Capital

37741600

(b)

Reserves & Surplus

104594668

102357370

142336268

140098970

31202440

44027576

APPLICATION OF FUNDS 1

Investments

Current Assets, Loans and Advances (a)

Sundry Debtors

(b)

Cash & Bank Balances

–

453350

1461530

504958

Other Current Assets

440110

804

(d)

Loans and Advances

29114660

18893472

31016300

19852584

7 132215

103199

–

4199084

132215

4302283

NET CURRENT ASSETS

30884085

15550301

80249743

80521093

142336268

140098970

Current Liabilities Provisions

Profit And Loss Account

Total NOTES TO ACCOUNTS

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 Misc. Income EXPENDITURE Expenses Interest

(c)

LESS: Current Liabilities and Provisions

Schedule 8

9 10

Previous Year Rupees

2114248 3992965 1809937

457070 397935 19750323

– 135160 9558

36488750 237935 –

8061868

57332013

150302 15904

127137 19554

166206

146691

PROFIT / (LOSS) BEFORE TAX Provision for Taxation

7895662 438000

57185322 520000

PROFIT / (LOSS) AFTER TAX Adjustments for Income tax of prior years

7457662 –

56665322 5779

PROFIT AVAILABLE FOR APPROPRIATION

7457662

56671101

Dividend 1st Interim 1132248 2nd Interim 3208036 Dividend Distribution Tax Transfer to Special Reserve Fund u/s 45IC of RBI Act, 1934 Transfer to General Reserves

4340284 608730 1491532 745766

34382599 4822160 11745220 5667110

7186312 271350 (80521093) (80249743)

56617089 54012 (80575105) (80521093)

1.98

15.02

Balance available for set off against b/f deficit in P&L A/c Loss brought forward Loss Carried Forward Earnings Per Share

This Year Rupees

NOTES TO ACCOUNTS

11 (6) 11

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 attached.

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants V.M. PADWAL Partner

Signatures to Balance Sheet and Schedules 1 to 7 and 11

M. EIPE C.K. VAIDYA S. SRINIVASAN

Director Director Company Secretary

Mumbai, May 25, 2007

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants V.M. PADWAL Partner

Signatures to Profit and Loss Account and Schedules 8 to 11

M. EIPE C.K. VAIDYA S. SRINIVASAN

Director Director Company Secretary

Mumbai, May 25, 2007

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2007 This Year Rupees

Previous Year Rupees

SCHEDULE 1 : SHARE CAPITAL

(Out of the above, 3770160 shares are held by Godrej Industries Ltd., the Holding Company)

84945040

SHARE PREMIUM 50000000

50000000

As per last Balance Sheet

37741600

Special Reserves u/s 45IC of RBI Act, 1934 Opening Balance Add Transferred from Profit and Loss A/c

37741600

ISSUED, SUBSCRIBED AND PAID UP 3774160 Equity Shares of Rs. 10/- each fully paid up

Previous Year Rupees

SCHEDULE 2 : RESERVES & SURPLUS

AUTHORISED 5000000 Equity Shares of Rs. 10/- each

This Year Rupees

117453220 1491532

– 13236752

General Reserve Opening Balance Add: Transferred from Profit and Loss A/c Transfer during the year for FY 2005-06

11745220

5667110 745766 6412876

5667110

104594668

102357370

135

Ensemble Holdings & Finance Limited SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2007 SCHEDULE 3 : INVESTMENTS Quantity Investee Company / Institution Long Term Investments (At Cost) Equity shares - Quoted Other Companies Agro Tech Foods Ltd. Colgate Palmolive India Ltd. Dabur India Ltd. (Bonus received during the year) Henkel India Ltd. Hindustan Lever Ltd. Gillette India Ltd. Marico Industries Ltd. (Change in FV to Re.1) Nirma Ltd. (Change in FV to Rs.5) Procter & Gamble Hygiene & Health Care Ltd. Venkys India Ltd. Unquoted Companies under the Same Management : Godrej Properties Ltd. Godrej Agrovet Ltd. Godrej Hicare Ltd. Godrej Global Solutions Ltd. (Reduction of Share Capital during the year approved by Hon HC) Other Companies : karROX Technologies Ltd. Personalitree Academy Ltd. Avestha Gengraine Technologies Pvt. Ltd.

Amount

Quantity as on 01.04.06

Acquired during the year

Sold during the year

Quantity as on 31.03.07

As on 31.03.07 Rupees

As on 31.03.06 Rupees

10 10 1

1 1 2

– – 1

– – –

1 1 3

53 151 59

10 1 10 1 5 10 10

1 751 1 40 2 1 1

– – – – – – –

1 751 1 40 2 1 1

31 90589 400 271 255 490 37

10 10 10 10

76795 2000 4800 41251

– 4500 – –

– – – 32911

76795 6500 4800 8340

5488688 1011402 48000 302290

5488590 560000 48000 499400

10 10 10

250000 389269 55500

– – –

– – 24500

250000 389269 31,000

10050000 11027991 13984875

10,050,000 11027991 25037438

Face Value

Current Investments Mutual Funds - Unquoted LIC Mutual Fund - Growth Plan Less : Provision for diminution in value of Investments Aggregate Book Value of Investments : Quoted Investments Unquoted Investments Market Value of quoted investments

SCHEDULE 4 : CASH AND BANK BALANCES Cash on hand Balances with Scheduled Banks in Current Accounts SCHEDULE 5 : OTHER CURRENT ASSETS Accrued Interest SCHEDULE 6 : LOANS AND ADVANCES (Unsecured, considered good, unless stated otherwise) Loans ESOP Loans Share Application Money (considered doubful) Intercorporate Deposits (considered good) Intercorporate Deposits (considered doubtful) Less : Provision for Doubtful Loans and Advances Advance Payment of Taxes (Net of provision for tax Rs. 438000, previous year 520000) SCHEDULE 7 : CURRENT LIABILITIES & PROVISIONS Current Liabilities Sundry Creditors Provisions : Proposed Dividend Tax on Distributed Profits SCHEDULE 8 : INTEREST INCOME (Gross) On Loans (TDS Rs. 344292, previous year Rs. 85400) On Intercorporate Deposits (TDS Rs. 127013 previous year Rs. Nil) On Income tax Refund On Fixed Deposits with Bank (TDS Rs. NIl previous year Rs. 5505) Total SCHEDULE 9 : EXPENSES Salary Profession Tax Directors' sitting fees Auditors' Remuneration Professional Charges Miscellaneous Expenses Total SCHEDULE 10 : INTEREST On Inter Corporate Borrowings Total

136

This Year Rupees

Previous Year Rupees

2852

1736

1458678 1461530

503222 504958

440110 440110

804 804

– 18800000 300000 10000000 23110000 33410000 (23410000) 10000000 314660

71117 18550000 300000 – 23110000 23410000 (23410000) – 272355

29114660

18893472

273037

2300000

42278619 11076179

55,03755 11076179

31202440

44027576

92336

31110104 31202440 159342

43935240 44,027576 210151

SCHEDULE 11 : 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.)

132215

103199

– – –

3682599 516485 4199084

1547125 567123

405846 –

– – 2114248

26690 24534 457070

60000 2500 1500 44944 30000 11358 150302

22500 2500 4000 44896 25510 27731 127137

15904 15904

19554 19554

LIC Mutual Fund SBI-Magnum Inst Income Fund SBI- Insta Cash Fund Kotak -Liquid Inst Premium Fund

1169380 – – –

15426963 – – –

– 4967729 120882 1379441

– 54503966 1850,000 18700000

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. Amount due from a Company under the same management This year Previous Year Rupees Rupees Godrej Industries Ltd. – 71921 Godrej Hicare Ltd. 23110000 23110000 23,110,000 23,181921 Auditors' Remuneration: (includes service tax wherever applicable) This year Previous Year Rupees Rupees Audit Fees 28090 28060 Tax Audit Fees 16854 16836 44944 44896

Annual Report 2006-2007

SCHEDULES ANNEXED TO AND FORMING PART OF ACCOUNTS FOR THE YEAR ENDED ON MARCH 31, 2007 6.

Earnings per share

Related Party Disclosures

ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956 BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE 1. Registration details Registration No : 11-65457 State Code : 11 Balance Sheet Date : 31.03.2007

Capital raised during the year Public Issue Rights Issue : Bonus Issue Private Placement

Position of mobilisation and deployment of funds 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 : Miscellaneous Expenditure : Accumulated Losses :

– 31202 30884 – 80250

Performance of Company (Amount in Rs Thousand) Turnover (Total Income) : Total Expenditure : Profit before tax : Profit after tax : Earnings per share in Rs : Dividend rate (%) :

8062 166 7896 7458 Rs.1.98 11.50%

Generic names of three principal products / services of the Company

The Company is a Loan and Investment Company

a. b. c. 7.

This year 7457662 3774160 1.98

Net Profit/(Loss) after Tax available for shareholders Weighted Average Number of Equity Shares Basic and Diluted Earnings per Share of Rs.10 each

Previous year 56671101 3774160 15.02

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

10.

Holding Company Godrej Industries Limited Fellow Subsidiaries Godrej Properties Limited Godrej Agrovet Limited Individual exercising significant influence over the enterprise Ms. T. A. Dubash Mr. M. Eipe b)

Mr. C. K. Vaidya Mr. H. K. Press

Transactions with Related Parties

Sr. No.

Nature of Transaction

Acceptance of ICB Previous Year Refund of ICB

5.00 57.00 5.00

Previous Year

ii)

(Rs. in lac)

Holding Subsidiary Company Company

Fellow Subsidiary

Associate/ Joint Venture

Key Mang. Relatives of Personnel Key Mang. Personnel

Total

– – –

5.00 57.00 5.00

68.00

–

68.00

iii)

Interest paid on ICB Previous Year

0.16 0.19

– –

0.16 0.19

iv)

Dividend Received Previous Year

– 3.96

– –

39.91 –

– –

39.91 3.96

Refund of VRS Loan Previous Year

0.81 0.68

– –

0.81 0.68

vi)

Interest Received on VRS Loan Previous Year

0.14 0.26

– –

0.14 0.26

vii)

Sale of Investments Previous Year

128.63 190.68

– –

128.63 190.68

80.14 306.67

– –

0.09 0.32

– –

80.23 307.00

– –

0.60 0.23

– –

0.60 0.23

viii) Dividend Paid Previous Year ix)

Remuneration Previous Year

Balance Outstanding as on 31.3.07 Payable Previous Year Receivable Previous Year

–

– – 0.72

–

0.72

The significant Related Party Transactions are as under Nature of Transaction

(Rs. in lac) Amount

Acceptance of ICB Godrej Industries Limited

5.00

Refund of ICB Godrej Industries Limited

5.00

Interest paid on ICB Godrej Industries Limited

0.16

Dividend Received Godrej Properties Limited

39.91

Refund of VRS Loan Godrej Industries Limited

0.81

Interest Received on VRS Loan Godrej Industries Limited

0.14

Sale of Investments Godrej Industries Limited Dividend Paid Godrej Industries Limited Godrej Agrovet Limited Remuneration Mr. H. K. Press

0.60

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.

37742 104595 – –

This Year Rupees 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 Operating Profit before working capital changes Adjustments for : Accrued Interest Sundry Debtors Trade Payables Cash generated from operations Direct Taxes paid Direct Taxes refund received Net Cash from operating activities Cash flow from Investing Activities Proceeds from sale of investments New investments made Loans

Previous Year Rupees

7894162

57185322

(1809937) (135160) – 15904

(19750323) (237936) (36488750) 19554

5964969

727867

(439306) 453350 (4170068)

7796 (453350) 17437

1808945 (480305) 1328640

299750 (590905) 167161 (123994)

30921733 (16150000) (10178883)

151018592 (102990404) (18481677)

4592850

29546511

Cash flow from Financing Activities Intercorporate Borrowings (Net) Interest Paid on Borrowings Dividend Paid Tax on Distributed Profits

– (15904) (4340284) (608730)

(1100000) (19554) (30700000) (4305675)

Net cash generated/(used) from financing activities

(4964918)

(36125229)

(956572)

(6702712)

504958

7207669

1461530

504957

Net increase/(decrease) in cash and cash equivalents Cash in and cash equivalents (opening balance)

80.14 0.09

(Amount in Rs. Thousands) 142336 142336

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006

Net cash generated/(used) from investing activities

128.63

(Amount in Rs Thousands) : – : – : – : –

Cash in and cash equivalents (closing balance) As per our Report attached. For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants V.M. PADWAL Partner

Signatures to Cash Flow Statement

M. EIPE C.K. VAIDYA S. SRINIVASAN

Director Director Company Secretary

Mumbai, May 25, 2007

137

Ensemble Holdings & Finance Limited 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 :

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) * Please see Note 1 below 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 : Break-up of Loans and Advances including bills receivables [other than those included in (4) below] : (a) Secured (b) Un-secured 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)

138

Amount outstanding Nil Nil

Amount overdue Nil Nil

Nil Nil Nil Nil Nil Nil

Nil Nil

Nil

Long Term investments : 1. Quoted : (i) Share : (a) Equity 0.92 (b) Preference â&#x20AC;&#x201D; (ii) Debentures and Bonds Nil (iii) Units of mutual funds Nil (iv) Government Securities Nil (v) Others (Please specify) Nil 2. Unquoted : (i) Shares : (a) Equity 419.13 (b) Preference â&#x20AC;&#x201D; (ii) Debentures and Bonds Nil (iii) Units of mutual funds Nil (iv) Government Securities Nil (v) Others (Please specify) Nil 6. Borrower group-wise classification of all leased assets, stock-on-hire and loans 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 Nil Nil Nil (c) Other related parties Inter Corporate Deposits Nil Nil Nil

Amount outstanding

Nil 188.00 331.10 3.15

Nil Nil Nil Nil Nil Nil

Nil Nil Nil Nil Nil Nil Nil Nil Nil 2.73 Nil Nil

Other than related parties a) Advance Tax Payment b) Loans Total

Nil Nil Nil

3.15 100.00 103.15

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 Book Value (Net or fair value or NAV of Provisions) 1. Related Parties ** (a) Subsidiaries Nil Nil (b) Companies in the same group : Quoted Nil Nil Unquoted 2446.85 68.02 (c) Other related parties NIL NIL 2. Other than related parties Quoted : 1.59 0.92 Unquoted : 671.00 243.08 Total 3119.44 312.02 ** As per Accounting Standard of ICAI (Please see Note 3) # Start up Company hence fair value considered at face value. 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.

Annual Report 2006-2007

Godrej International Limited DIRECTORS’ REPORT The Directors present their report and accounts for the year ended 31st March, 2007

Political and charitable donations

Principal activities and review of the business

The company made no political or charitable contributions during the year.

The company trades worldwide in vegetable oils. The year under review was a record for the company. Vegtable oilmarkets were bouyant throughout the year as the worldwide commodity boom continued . The company's assessment of market behaviour proved to be quite accurate and this resulted in record turnover and profits. Turnover for the year increased 21% at $61,573,658 while profits increased 72% to $ 658135.

Directors’ responsibilities

Results and dividends The Company does not propsoe to distribute a dividend this year. In due course depending on further progress in the business, a buyback of shares from the parent company may be contemplated. The outlook for the year 2007-08 continues to be encouraging. Directors The directors who served during the year and their interests in the share capital of the Company were as follows: £1 Ordinary shares Adi B Godrej (Indian) Nadir B Godrej (Indian) Aspi K Bardy (Indian) Dorab E Mistry (British) Marion Hodgson (British) (Appointed 11 May 2006 retired 28 February 2007) Andrew B Byers (British) (Appointed 28 February 2007) Lynsey Elliott (British) (Appointed 28 February 2007) –

2007

2006

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 27 April, 2007. L. ELLIOTT ACCA 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 2007 which comprise pages 5 to 18. 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. 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. We read the Directors' Report and consider the implications for our report if we become aware of any apparent misstatements within it.

BALANCE SHEET AS AT 31 MARCH, 2007 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:

2006 $ Rs. Lac

4312060

1875

4312060

1924

3269025 1179505

1421 513

2389344 1193349

1066 532

4448530

1934

3582692

1599

(1554594)

(676)

(177879)

(79)

2893936

1258

3404814

1519

7205996

3133

7716874

3443

Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year

2007 $ Rs. Lac

9 10

Equity 11

–

(1169000)

(522)

7206009

3133

6547874

2922

4209327 2996682

1830 1303

4209327 2338547

1878 1043

7206009

3133

6547876

2922

7206009

3133

6547874

2922

Note: The Rupees equivalents of US $ have been given at the closing exchange rates as on March 31, 2007 (US $ 1 = Rs. 43.48) and March 31, 2006 (US $ 1 = Rs. 44.62) A.B. Byers ACA D E Mistry Director Director Approved by the board on 27 April, 2007

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. OPINION In our opinion the accounts give a true and fair view of the state of the company's affairs as at 31 March 2007and of its profit for the year then ended and have been properly prepared in accordance with the Companies Acts 1931 to 2004. Graham Moore Chartered Accountants 14 Douglas Street Peel Isle of Man 27 April, 2007

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

Rs. Lac

2006 Rs. Lac

61573658 (60741539)

26772 (26410)

50724030 (50239122)

22633 (22417)

832119 (114624)

362 (50)

484908 (72417)

216 (32)

717495 15807 (75167)

312 7 (33)

412491 22158 (52083)

184 10 (23)

658135 –

286 –

382566 –

171

658135

373

382566

171

–

(156300)

(70)

658135

286

226266

101

Notes Turnover Cost of sales

Gross profit Administrative expenses Operating profit Interest receivable Interest payable 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 Continuing operations

–

None of the Company's activities were acquired or discontinued during the above two financial years. Note: The Rupees equivalents of US $ have been given at the closing exchange rates as on March 31, 2007 (US $ 1 = Rs. 43.48) and March 31, 2006 (US $ 1 = Rs. 44.62)

139

Godrej International Limited 8.

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 MARCH 2007 $ Profit for the financial year

658135

286

382566

171

Total recognised gains and lossess related to the year

658135

286

382566

171

2006 Rs. Lac

Accounting policies Accounting convention The accounts have been prepared under the historical cost convention and in accordance with applicable accounting standards. 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.

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

2007 $ 75167 –

2007 Rs. Lac 33 –

2006 $ 37633 14450

2006 Rs. Lac 17 6

75167

52083

2007 $

2007 Rs. Lac

2006 $

2006 Rs. Lac

–

156300

Investments Investments in subsidiary undertakings $ Rs. Lac Cost At 1 April 2006 At 31 March 2007

1257060 1257060

547 547

Other Investment $ Rs. Lac 3055000 3055000

1328 1328

Total $

Rs. Lac

4312060 4312060

1875 1875

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 2007 2007 2006 2006 $ Rs. Lac $ Rs. Lac Unlisted investments

1328

3055000

1363

On 4 April 2001, the Company invested US$1million in 495,000 CBay Systems Ltd. (CBay) 8% Series E Cumulative Convertible Redeemable Preferred Stock of US$ 0.1 per share at a price of US$ 0.2 per share. This represents approximately 6% of the issued share capital of CBay. CBay is incorporated in Delaware, USA. On 8 March 2004, the Company invested US$2,055,000 in equity shares of Newmarket Limited, a Company incorporated in the lisle of Man. This represents approximately 18% of the issued share capital of Newmarket Limited. Debtors 2007 2007 2006 2006 $ 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

3055000

416927

181

577578

258

100014

113765

2739672 12412

1191 5

1689614 8387

754 4

3269025

1421

2389344

1066

532 1 130

– – –

– 13 – 676

235 21344 156300 177879

– 10 70 79

Creditors: amounts falling due within one year Bank loans & overdraftes 1223757 Trade Creditors 1825 Amount owed to group undertaking 300000 and undertaking in which the company has participating interest Other Creditors 235 Accruals and deferred income 28777 Proposed dividend – 1554594

Share capital Authorised: Ordinary shares of £1 each

2007 Rs. Lac

(13)

–

1169000

522

4000000

1739

4000000

1785

2006 $ Rs. Lac

2007 No.

2006 No.

2007 $

2007 Rs. Lac

2006 $

2006 Rs. Lac

2605000

4209327

1830

4209327

1878

2007 Rs. Lac

Movement in share capital At 1 April Share Issued At 31 March

4209327 – 4209327

1830 – 1830

2291147 1918180 4209327

1022 856 1878

10. Profit and loss account At 1 April Retained profit

2338547 658135

1017 286

2112281 226266

942 101

Allotted, called up and fully paid: Ordinary shares of £1 each

NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 MARCH, 2007 1.

$ Bank loans

2007 Rs. Lac

Creditors: amounts falling due after one year

2006 $ Rs. Lac

2996682

1303

2338547

1043

11. Reconciliation of movement in shareholders’ funds At 1 April 6547874 Profit for the financial year 658135 Dividends – Shares issued –

2847 286 – –

4403428 382566 (156300) 1918180

1965 171 (70) 856

7206009

3133

6547874

2922

15807 (75167)

7 (33)

22158 (52083)

10 (23)

(59360)

(26)

(29925)

(13)

– 54744

– 24

1918180 –

856 –

At 31 March

At 31 March 12. Gross cash flows Returns on investments and servicing of finance Interest received Interest paid Financing Issue of share capital Loan advance 13. Analysis of changes in net debt

At 1 Apr 2006 Cash flows Non-cash changes $ Rs. Lac $ Rs. Lac $ Rs. Lac Cash at bank and 1193349 519 (13844) (6) – – in hand Debt due within – – (1223757) (532) – – 1 year Debt due after 1 year

At 31 Mar 2007 $ Rs. Lac 1179505 513 (1223757)

(532)

(1169000)

(508)

1169013 (54744)

508 (24)

– –

13 –

– –

24349

(68588)

(30)

–

(44239)

(19)

Total

14. 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, Vikhroli, Mumbai 400 079, India. CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2007 Notes Reconciliation of operating profit to net cash inflow from operating activities Operating profit Increase in debtors Increase/(decrease) in creditors Net cash inflow/(outflow) from operating activities CASH FLOW STATEMENT Net cash inflow/(outflow) from operating activities Returns on investments and servicing of finance 12 Equity dividends paid Financing 12 (Decrease)/Increase in cash Reconciliation of net cash flow to movement in net debt (decrease)/Increase in cash in the period Increase in debt and lease financing Change in net debt 13 Net fund/(Net debt) at 1 April (Net debt)/Net funds at 31 March

2007 $

2007 Rs. Lac

2006 $

2006 Rs. Lac

717495 (879681) 309257

312 (382) 134

412491 (671257) (672238)

184 (300) (300)

147071

(931004)

(415)

147071 (59360) 87711 (156300) (68589) 54744 (13845)

64 (26) 38 (68) (30) 24 (6)

(931004) (29925) (960929) (150500) (1111429) 1918180 806751

(415) (13) (429) (67) (496) 856 360

(13845) (54743) (68588) 24349 (44239)

(6) (24) (30) 11 (19)

806751 – 806751 (782402) 24349

360 – 360 (349) 11

Note: The Rupees equivalents of US $ have been given at the closing exchange rates as on March 31, 2007 (US $ 1 = Rs. 43.48) and March 31, 2006 (US $ 1 = Rs. 44.62)

140

Annual Report 2006-2007

Godrej Global Mid East FZE DIRECTORS’ REPORT OPERATING RESULTS Your Company’s performance for the year under review is summarized below: 2006-07 AED Mio. 8.34 5.63

2005-06 AED Mio. 7.56 5.23

Gross Profit Expenses Other Income

2.71 2.47 0.12

2.33 2.14 0.00

Profit Before Tax Tax

0.36 –

0.19 –

Profit after Tax

0.36

0.19

Sales Cost of Sales

REVIEW OF OPERATIONS Sudan market opened up during the last financial year continuing to grow. However Pakistan market, which your company opened up during the same period did not grow beyond the trial orders. New channels are being looked into for servicing this market. Since the net assets of your company are below 75 percent of the share capital, the Auditors have qualified in their report in accordance with the implementation procedures of Sharjah Airport Free Zone. FUTURE OUTLOOK Your company is planning to launch Cinthol DeoSpray in new designs and fragrances for the GCC markets.

Your company is also in the final stages of developing a new Cinthol Handwash range in contemporary designs and fragrance for the GCC markets. In soaps your company will be launching the newly launched hygiene soap Vigil and Cinthol Deo complexion soap after adapting the packs to GCC requirements. The Cuticura range would be launched soon after Keyline Brands -U.K, finalise their distribution partner in the UAE. Gross contribution affected due to increased costs of raw material would be addressed partially through price increase across GCC in a phased manner and partially through smart Below the Line activities. Your company hopes to double the business in the state of Bahrain having appointed a new distributor M/s Al Jazira Cold Stores in last financial year. AUDITORS You are required to appoint Auditors for the current year. The Auditors, M/s Pannell Kerr Forster, Chartered Accountants Co. being eligible offers self for reappointment. PARTNERS IN PROGRESS Your company wishes to thank the Sharjah Airport International Free Zone, HSBC Bank Middle East, Fine Fair Trading (A division of Al Seer group) in the UAE , Khimji Ramdas of Sultanate of Oman, Al Jazira Cold Stores of Bahrain, Gulf Trading Corporation of the Kingdom of Saudi Arabia, Zahem & Malhotra of Kuwait, Nasser Bin Khalid Trading Company of the state of Qatar, Godrej Consumer Products Ltd , Godrej Industries Limited, Gulf Centre for soaps and chemicals Industries LLC and European Perfume Works LLC who through 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 : 1 May,, 2007

AUDITORS’ REPORT TO THE SHAREHOLDERS OF GODREJ GLOBAL MIDEAST FZE Report on the Financial Statements We have audited the accompanying financial statements of GODREJ GLOBAL MIDEAST FZE which comprise the balance sheet as at 31 March 2007, and the income statement, statement of changes in equity and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with international Financial Reporting Standards. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances. Auditor' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with international Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement including the assessment of the risks of material misstatement of the financial statements. Whether due to fraud or error in making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation

of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion 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 2007, and of its financial performance and its cash flows for the year then ended in accordance with international Financial Reporting Standards. Report on Other Legal and Regulatory Requirements Except as stated in Note 20, that the net assets of the establishment are below 75% of its share capital, we confirm that the financial statements comply with implementation Procedures issued by the Sharjah Airport Free Zone Authority pursuant to Law No.2 of 1995, we have obtained all the information and explanations necessary for our audit and proper books of account and other records have been maintained in accordance with the said regulation.

BALANCE SHEET AS AT 31 MARCH, 2007

INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH, 2007

Notes

2007 AED

NON-CURRENT ASSETS Property, plant and equipment CURRENT ASSETS Inventories Trade and other receivables Amounts due from related parties Cash and cash equivalents TOTAL ASSETS CURRENT LIABILITIES Bank borrowings Trade and other payables Loan from the parent company Amount due to a related party NON-CURRENT LIABILITY Staff end-of-service gratuity SHAREHOLDER'S FUNDS Share capital Accumulated losses Equity funds TOTAL EQUITY AND LIABILITIES

Notes

2006 Rs.

AED

Pannell Kerr Forster

Sharjah United Arab Emirates 8 May,, 2007

Rs.

9892

116132

21863

265635

5 6 7 8

485311 2154636 -246133 2886080 2895972

5697551 25295427 – 2889601 33882579 33998711

719232 2220868 2755 191120 3133975 3155838

8738669 23983546 33473 2322108 38077796 38343431

9 10 11 7

349358 1576337 393228 1000 2319923

4101463 18506196 4616497 11740 27235896

714674 1840403 418030 – 2973107

8683289 22360896 5079065 – 36123250

129165

1516397

92300

1121445

4586250 (4139366) 446884

53842575 (48596157) 5246418

4586,250 (4495,819) 90,431

55722,938 (54624201) 1098737

2895972

33998711

3155838

38343431

The Rupee equivalents of AED have been given at the closing exchange rates as on March 31, 2007. 1 AED = Rs.11.74) and as on March 31, 2006 (1 AED = Rs.12.15). The accompanying notes form an integral part of these financial statements. The report of the independent 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 1 May 2007. For GODREJ GLOBAL MIDEAST FZE A.B.GODREJ Director

REVENUE Cost of sales

GROSS PROFIT

2007

2006

AED

Rs.

AED

Rs.

8341626

97930689

7562467

91883974

(5633262)

(66134496)

(5233800)

(63590670)

2708364

31796193

2328667

28293304

Other operating income

120100

1409974

2074

25199

Staff costs

(470911)

(5528495)

(479832)

(5829959)

Depreciation

(15459)

(181489)

(18196)

(221081)

Amortisation

–

(10344)

(125680)

Other operating expenses

(1834164)

(21533085)

(1438059)

(17472417)

507930

5963098

384310

4669367

8446

99156

2310

28067

(159923)

(1877496)

(195453)

(2374754)

356453

4184758

191167

2322679

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, 2007. (1 AED =Rs.11.74 and as on March 31, 2006 (1 AED = Rs.12.15). The accompanying notes form an integral part of these financial statements. The report of the independent 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 1 May 2007. For GODREJ GLOBAL MIDEAST FZE A.B. GODREJ Director

141

Godrej Global MidEast FZE STATEMENT OF CHANGES IN EQUITY YEAR ENDED 31 MARCH, 2007 Share capital AED Rs. As at 31.03.2005

Notes

2007 AED

2006 Rs.

AED

Rs.

REVENUE

Total

Cash flows from operating activities

AED

Rs.

4586250

54668100

(4686986)

(55868873)

(100736)

(1200773)

–

191167

2322679

191167

2322679

4586250

55722938

(4495819)

(54624201)

90431

1098737

Cash flows from investing activities

Profit for the year As at 31.03.2006

Accumulated losses AED Rs.

CASH FLOW STATEMENT YEAR ENDED 31 MARCH, 2007

Cash generated from operations

600096

7045127

512572

6227750

(159923)

(1877496)

(169725)

(2062159)

440173

5167631

342847

4165591 (51006)

Interest paid Net cash from operating activities (A)

Profit for the year

–

356453

4184758

356453

4184758

Purchase of property, plant and equipment

(3488)

(40949)

(4198)

As at 31.03.2007

4586250

53842575

(4139366)

(48596157)

446884

5246418

Interest received

8446

99156

2310

28067

Net cash from/(used in) investing activities (B)

4958

58207

(1888)

(22939)

GODREJ GLOBAL MID EAST FZE

Cash flows from financing activities (24802)

(291175)

(345130)

(4051826)

(401267)

(4875394)

Repayment of loan from the parent company Payment of clean import loans

(20186)

(236984)

(35453)

(430754)

(390118)

(4579985)

(436720)

(5306148)

Payment of bank overdraft (net) Net cash (used in)/from financing activities (C) Net Increase/(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

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.

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.

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.

Staff end-of-service gratuity Provision is made for end-of-service gratuity payable to the staff at the balance sheet date in accordance with the local labour laws.

e) f)

191120

2322108

Cash and cash equivalents

Financial instruments

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. 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 ●

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:

Impairment 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. ●

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 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.

Inventory provisions

Revenue

Management regularly undertakes a review of the establishment's inventory stated at

Revenue represents the net amount invoiced for goods delivered during the year.

AED 625311 (previous year AED 590000) 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. Gains or losses resulting from foreign currency transactions are taken to the income statement.

142

2889601

Financial liabilities are de-recognised when and only when they are extinguished cancelled or expired.

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.

3485604

246133

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.

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)

(1163496)

286881

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 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:

(95761)

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)

645853 2243749

The Rupee equivalents of AED have been given at the closing exchange rates as on March 31, 2007. (1 AED = Rs. 11.74) and as on March 31, 2006 (1 AED = Rs.12.15). The accompanying notes form an integral part of these financial statements. The report of the independent 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 1 May 2007. For GODREJ GLOBAL MIDEAST FZE A.B. GODREJ Director

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH, 2007 1.

55013 191120

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 7) and assesses the likelihood of non-recovery. Such assessment is based upon the age of the debts historic recovery

Annual Report 2006-2007

NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH, 2007 rates and assessed creditworthiness of the debtor. Based on the assessment assumptions are made as to the level of provisioning required.

At the balance sheet date significant balances with related parties were as follows: 2007

Impairment

Parent Companies AED Trade and other payables

–

506496

Due from other related parties

–

2755

Due to a related party

–

1000

11740

–

393228

–

393228

4616497

418030

5079065

1400000

–

1400000

16436000

1400000

17010000

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.

Staff end-of-service gratuity The establishment computes the provision for the liability to staff end-of-service gratuity stated at AED 129165 (previous year AED 92300) 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)

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 2007 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:

Loan from the parent company Guarantee received

Adoption of new International Financial Reporting Standards

Amendment to IAS1: Capital Disclosures (1 January 2007)

IFRS7: Financial Instruments Disclosures (1 January 2007)

Parent Companies

Other Related Parties AED

Net book value

21863

265635

Cost Accumulated depreciation Net book value

185807 (175915)

2181374 (2065242)

9892

116132

803079

–

2125620

39728

–

39728

9428147

AED

Rs.

712358

8655150

24954779 1894517 23018382 466407

39724

482647 2006

Rs.

AED

Rs.

1585

18608

5625

68344

244548

2870994

185495

2253764

246133

2889602

191120

2322108

Overdraft

104728

1229507

124914

1517705

Clean import loans

244630

2871956

589760

18440117

349358

4101463

714674

8683289

349358

4101463

714674

8683289

Bank call deposits accounts BANK BORROWINGS

35861 4198 (18196)

421008 49285 (213621)

An analysis by bank of amounts outstanding is as follows:

As at 31.03.2006 Additions Depreciation for the year As at 31.03.2007

21863 3488 (15459) 9892

256672 40949 (181489) 116132

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.

HSBC Bank Middle East Limited

The bank borrowings are subject to certain financial covenants including non withdrawal of profits.

INTANGIBLE ASSETS Product development expenses Net book values

2007

51720 (51720) –

628398 (628398) –

51720 (51720) –

607193 (607193) –

10344 (10344) – – –

121439 (121439) – – –

2007 INVENTORIES Goods held for sale Less: Provision for slow moving inventories Goods in transit TRADE AND OTHER RECEIVABLES Trade receivables Advance to Suppliers Prepayments Deposits

2006

AED

Rs.

1171901

13758118

1385735

16836680

404436

4748079

454668

5524216

1576337

18506196

1840403

22360896

10. TRADE AND OTHER PAYABLES

As at 01.04.2005 Amortisation for the year As at 31.03.2006 Amortisation for the year As at 31.03.2007

2006 Rs.

CASH AND CASH EQUIVALENTS Cash on hand

Trade payables Accruals

11. 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).

Reconciliation of net book values

2007 AED

Reconciliation of net book values As at 31.03.2005 Additions Depreciation for the year

As at 31.03.2006 Cost Accumulated amortisation Net book value As at 31.03.2007 Cost Accumulated amortisation Net book value

33473

2007

As at 31.03.2007

Rs. 7164029

AED 8.

2215176 (1949540)

AED 589632

–

Rs.

182319 (160456)

Rs. 5946263

Purchases Interest expenses

Cost Accumulated depreciation

AED 506496

Sales

Furniture fixtures computers and equipment

As at 31.03.2006

Total

Significant transactions with related parties during the year were as follows:

PROPERTY PLANT AND EQUIPMENT

Net book values

Total

All balances other than loan from a parent company are unsecured and are expected to be settled in cash. Other terms are set out in note 11 and 21.

AED

2006

Other Related Parties AED

2006

AED 625311 (140000) 485311 – 485311

Rs. 7341151 (1643600) 5697551 – 5697551

AED 590000 – 590000 129232 719232

Rs. 7168500 – 7168500 1570169 8738669

1986399 112158 26055 30024 2154636

23320324 1316735 305886 352482 25295427

2182058 – 10510 28300 2220868

26512005 – 127697 343845 26983547

RELATED PARTIES 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. Related parties comprise the parent companies companies under common ownership and/or common management control.

2007 12

2006

AED

Rs.

AED

Rs.

Opening balance

92300

1083602

70672

858665

Provision for the year

36865

432795

21628

262780

129165

1516397

92300

1121445

4586250

53842575

4586250

55722938

PROVISION FOR STAFF END-OFSERVICE GRATUITY

Closing balance 13. SHARE CAPITAL Authorised issued and paid-up: 5 ordinary shares of US$ 250000 each [2 shares converted @ 1 US$ = AED 3.66] [3 shares converted @ 1 US$ = AED 3.675] 14. COST OF SALES Inventory beginning of the year

590000

6926600

876690

10651784

Add: Purchases (including direct expenses)

5668573

66549047

4947110

60107387

Less: Inventory end of the year

(625311)

(7341151)

(590000)

7168500

5633262

66134496

5233800

63590670

143

Godrej Global MidEast FZE NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH, 2007 2007 15

20. SHARJAH AIRPORT FREE ZONE AUTHORITY REGULATIONS

2006

AED

Rs.

Provisions written back

120000

1408800

–

Miscellaneous income

100

1174

2074

25199

120100

1409974

2074

25199

434046

5095700

458204

5567179

36865

432795

21628

262780

470911

5528495

479832

5829959

AED

Rs.

OTHER OPERATING INCOME

16. STAFF COSTS Staff salaries and benefits Staff end-of-service gratuity 17. OTHER OPERATING EXPENSES Rent Advertisement and promotion expenses

80000

939200

80000

972000

1270754

14918652

991625

12048244

–

5839

70944

140000

1643600

–

Bad debts written off Inventory provision Other expenses

21. 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. 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 followup. 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.

343410

4031633

360595

4381229

1834164

21533085

1438059

17472417

On other bank short term loans and overdraft

75065

881263

106106

1289187

On loan from the parent company

25728

302047

25728

312595

On related party guarantees

14000

164360

13996

170051

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. The establishment's bank accounts are placed with high credit quality financial institutions.

18. FINANCE COSTS

45130

529826

49623

602919

159923

1877496

195453

2374754

CASH GENERATED FROM OPERATIONS 2007 Profit for the year

2006

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. At the balance sheet date the establishment's maximum exposure to credit risk from trade receivables situated outside the UAE amounts to AED 1228364 due from distributors/customers in other Middle East countries (previous year AED 1484223).

AED

356453

4184758

191167

2322679

At the balance sheet date 77% of trade receivables was due from three distributors (previous year 61 % due from three distributors). There are no significant concentrations of credit risk outside the industry in which the establishment operates.

15459

181489

18196

221081

Amortisation

–

10344

125680

Finance costs

159923

1877496

195453

2374754

(8446)

(99156)

(2310)

28067

assets and liabilities

523389

6144587

412850

5016128

Decreasein inventories

233921

2746233

126465

1536550

66232

777564

(529093)

6428480

(264066)

(3100135)

481722

5852922

36865

432795

21628

262780

1000

11740

–

Interest income

Credit risk

AED Adjustments for: Depreciation of property plant and equipment

Borrowing facilities are regularly reviewed to ensure that the establishment obtains the best available pricing terms and conditions on it borrowings. Exposures to the aforementioned risks are detailed below:

On supplier's delayed payments

As the net assets of the establishment area below 75 percent of its share capital in accordance with the implementation Procedures issued by the Sharjah Airport Free Zone Authority pursuant to Law No.2 of 1995 the Directors have intimated the matter to the Sharjah Airport Free Zone Authority and have taken steps to remedy the situation.

Operating profit before changes in operating

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

(Decrease)/ Increase in trade and other receivables (Decrease)/Increase in trade and other payables Increase in staff gratuity provision (Increase in amount due to a related party Decrease/(increase) in amounts due from related Parties

144

2755

32344

(1000)

12150

600096

7045127

512572

6227750

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.

For GODREJ GLOBAL MIDEAST FZE A.B.GODREJ Director

Annual Report 2005-2006

Godrej Global Solutions Limited DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2007. To, The Members of GODREJ GLOBAL SOLUTIONS LIMITED Your Directors present their Fifth Annual Report together with the Audited Accounts of the Company for the year ended 31st March 2007. FINANCIAL RESULTS Particulars Year ended Period ended 31.3.07 31.3.06 [Rupees] [Rupees] Income from Services 140031074 82265686 Other Income 494690 14364895 Total Income 140525764 96630581 Less: Total Expenditure 160038116 97286753 Profit / [Loss] Before Tax (19512352) (656172) Less: Fringe Benefit Tax (851931) (250381) Income Tax - Deferred – 288313 Profit [Loss] After Tax (20364283) (618240) Profit /(Loss) brought forward (618240) (14244299) Loss written off in Capital Reorganisation – 14244299 Profit/(Loss) carried forward (20982523) (618240) 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 GGSL has shown growth in its operations at both Chennai and Navi Mumbai facility. During the year under review, GGSL added new clients, ramped up operations for existing clients, achieved higher operational efficiencies thereby achieving the revenue growth. During the year, GGSL facilities were awarded the Information Security Certification ISO 27001 . GGSL continued to focus on business segments like Healthcare claims processing, medical transcription, medical billing and document management services. The Company would explore organic and inorganic opportunities for future growth. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATE COMPANIES To enable your Company to focus on its core BPO business, your Company has sold its investments in The View Group LP, Godrej Upstream Limited and Verseon LLC to its holding Company Godrej Industries Ltd. at Book value during the year. CAPITAL RESTRUCTURING Consequent to the decision of the Board for sale of Investments and reduction of Capital, the Company has filed on 19th January, 2007 a Petition under Sections 100 to 105 of the Companies Act, 1956 for reduction of fully paid up Equity Share Capital of the Company from Rs. 427,426,090 representing 42,742,609 Equity Shares of Rs.10 each fully paid up to Rs. 86,391,770 representing 8,639,177 Equity Shares of Rs. 10 each fully paid up. The petition was admitted by Bombay High Court on 2nd February, 2007. Accordingly vide order dated 2nd March, 2007 Hon’ble High Court of Bombay has confirmed the reduction of Issued/Subscribed and Paid up Capital to Rs. 121,191,773/- divided into 8,639,177 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. A copy of the said order was filed and registered with Registrar of Companies Maharashtra Mumbai on 26th March, 2007. DIRECTORS In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Mr. F.P. Sarkari and Mr. V. Srinivasan Directors of the Company, will retire by rotation at the ensuing Annual General Meeting. However, being eligible, they have offered themselves for reappointment. 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. 14,00,31,074/- in foreign currency. However, it has spent Rs. 48,15,864/- in foreign currency, the details of which are available in points 11 and 12 of the Notes to the Accounts (Schedule 17) for the year. Further, the Company has not imported any foreign technology and hence the requisite particulars in this regard are not applicable. Particulars of Employees : The particulars required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Riles 1975: Name Designation Gross Qualification Experie- Date of Age Particulars remunce (yrs.) commenof previous neration cement employment (Rs.) of employment *Sanjay Wholetime 5538912 B.Com., ACA 23 1-09-2004 42 Godrej Tipnis Director 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. d. Fixed Deposits : The Company has not accepted any deposits from the public during the year under review. e. Directors’ Responsibility Statement : In accordance with the requirement under Section 217[2AA] of the Companies Act, 1956, the Directors hereby confirm : 1. that in the preparation of the accounts for the financial year ended 31st March, 2007, the applicable accounting standards have been followed along with proper explanation relating to material departures; 2. 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; 3. 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; 4. that the Directors have prepared the accounts for the financial year ended 31st March, 2007 on a going concern basis. INSURANCE All the assets of the Company are adequately insured. AUDITORS REPORT The present Auditors of the Company, M/s. Kalyaniwalla Mistry & Associates, Chartered Accountants, Mumbai, has expressed their inability to seek reappointment as Auditors of the Company. You are requested to appoint Auditors and fix their remuneration. One of the members has recommeneded appoint of M/s Kalyaniwala & Mistry, Chartered Accountants, Mumbai as Auditors of the Company in place of M/s. Kalyaniwalla Mistry & Associates, Chartered Accountants, retiring auditors. The Directors recommend the appointment of M/s Kalyaniwala & Mistry, Chartered Accountants, Mumbai as auditors of the Company in the vacancy caused by M/s Kalyaniwala Mistry and Associates, Chartered Accountants, Mumbai. 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 N. B. Godrej Chairman Mumbai, May 24, 2007

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, 2007 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. 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, as amended by the Companies (Auditors' Report) (Amendment) Order 2004, 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;

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, 2007, (ii) in the case of the Profit and Loss Account, of the loss of the Company for the year ended on that date (iii) in the case of Cash Flow Statement, of the cash flow for the year ended on that date. 5. On the basis of the written representations received from the Directors as on March 31, 2007, and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2007, from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants V. M. PADWAL Partner Membership No.: 49639 Mumbai, May 24, 2007

145

Godrej Global Solutions Limited 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 year ended March 31, 2007: 1. a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets. b) The Company has a program for physical verification of fixed assets at periodic intervals. In our opinion, the frequency of verification is reasonable having regards to the size of the Company and nature of its assets. The discrepancies reported on such verification were not material and have been properly dealt with in the books of accounts. c) In our opinion, the disposal of fixed assets during the year does not affect the going concern assumption. 2. 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) 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 3. In our opinion and according to the information and the explanation 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 has been observed in the internal controls. 4. a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956, 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 regards to the explanation that many of the items are of special nature and their prices cannot be compared with alternative quotations, the transactions made in the pursuance of contracts or arrangement entered in the register maintained under 301 of the Companies Act, 1956 in respect of any party during the period have been made at the prices which are reasonable having regards to 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 Sections 58A and 58AA or any other relevant provisions of the Companies Act, 1956, and the rules framed thereunder. 6. The Company has an internal audit system, which in our opinion, is commensurate with the size and nature of its business. 7. a) According to the records examined by us, the Company is generally regular in depositing with appropriate authorities undisputed statutory dues including Provident Fund, Employees' State Insurance, Income Tax, Cess and other statutory dues as applicable to it. According to the information and explanation given to us, no undisputed amounts payable in respect of statutory dues were outstanding, at the year end for a period of more than six months from the date they became payable. b) According to the information and explanation given to us and the records examined by us there

Year ended March 31, 2007 Schedule (Amount Rs.)

BORROWED FUNDS (a) Secured Loans (b) Unsecured Loan

APPLICATION OF FUNDS 1 FIXED ASSETS (a) Gross Block (b) Less : Accumulated Depreciation (c) Net Block 2 INVESTMENTS 3 DEFERRED TAX ASSET 4 CURRENT ASSETS, LOANS AND ADVANCES (a) Cash & Bank Balances (b) Debtors (c) Loans and Advances LESS : CURRENT LIABILITIES AND PROVISIONS Current Liabilities Provisions

10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants V. M. PADWAL Partner Membership No.: 49639 Mumbai, May 24, 2007

Year ended March 31, 2006 (Amount Rs.)

Schedule

Year Ended March 31, 2007 (Amount Rs.)

Year Ended March 31, 2006 (Amount Rs.)

INCOME 1 2

3 4

121371773 51374134

462406093 51374134

172745907

513780227

42034821 –

17300244 22654141

42034821

39954385

214780728

553734612

7 8 9

57533801 29113787 28420014 91840800 288313

8747767 56313073 24474861 89535701

37589594 11900449 25689145 455394643 288313

32800201 26950942 22626693 82377836

Income from Services Other Income

140031074

82265686

494690

14364895

140525764

96630581

EXPENDITURE Staff Expenses

71290277

38846547

Establishment Expenses

39383921

27369723 19753641

Other Operating Expenses

28043151

Interest & Finance Charges

3889350

3056677

Depreciation

17431417

8260166

PROFIT / (LOSS) FOR THE YEAR -Before Tax

160038116

97286753

(19512352)

(656172)

(851931)

(250381)

Fringe Benefit Tax Income Tax - Current

–

Income Tax - Deferred

–

288313

PROFIT / (LOSS) FOR THE YEAR -After Tax

(20364283)

(618240)

(14244299)

–

14244299

(20982523)

(618240)

(0.47)

(0.01)

Profit / (Loss) brought forward Loss written off in Capital Regorganisation Profit/Loss carried forward

10 11

NET CURRENT ASSETS PROFIT AND LOSS ACCOUNT

NOTES TO ACCOUNTS

are no dues of income tax or cess outstanding on account of any dispute. The accumulated losses of the Company as at end of the financial year do not exceed fifty percent of its net worth. The company has incurred cash losses during the current financial year and has not incurred cash losses in the immediate preceding financial year. According to the information and explanations given to us and the records examined by us, we observed that the company has not defaulted in repayment of dues to financial institutions or banks or debenture holders. 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. 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. 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. 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. According to the information and explanations given to us and the records examined by us on an overall basis, the term loans were applied for the purpose for which they were obtained. On the basis of an overall examination of the balance sheet 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. The Company has not made any preferential allotment of shares to parties or companies covered under section 301 of the Companies Act, 1956. According to the information and explanation given to us and the records examined by us, the Company did not issue any debentures during the financial year. The Company has not raised any money through a public issue during the year. 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. In our opinion, clauses (ii) and (viii) of paragraph 4 of the Companies (Auditor's Report) Order, 2003 are not applicable.

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

BALANCE SHEET AS AT MARCH 31, 2007

SOURCE OF FUNDS 1 SHAREHOLDERS’ FUNDS (a) Share Capital (b) Reserves & Surplus

14429874 1856749

9818433 815132

16286623 73249078 20982523 214780728

10633565 71744271 618240 553734612

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 Profit & Loss Account.

The Schedules referred to above form an integral part of the Balance Sheet. 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 24, 2007

146

As per our Report attached.

For and on behaof of the Board

For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants N. B. Godrej S. S. Tipnis C. K. Vaidya A. K. Singla

Chairman Whole time Director Director Company Secretary

V. M. Padwal Partner Mumbai, May 24, 2007

N. B. Godrej S. S. Tipnis C. K. Vaidya A. K. Singla

Chairman Whole time Director Director Company Secretary

Annual Report 2006-2007

SCHEDULES ANNEXED TO AND FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2007 March 31, 2007 (Amount Rs.)

March 31, 2006 (Amount Rs.)

599000000

1000000

600000000

477140380

SCHEDULE 1 : SHARE CAPITAL AUTHORISED 59,900,000 (Previous Year 59,900,000) Equity Shares of Rs.10/- each 100,000 (Previous Year 100,000) Preference Shares of Rs.10/- each ISSUED AND SUBSCRIBED 13,610,606 (Previous Year 47,714,038) Equity Shares of Rs.10/- each. 18,000 (Previous Year 18,000) Preference Shares of Rs.10/- each. PAID UP Fully paid up equity shares Opening balance 42,742,609 (Previous Year 51,746,500) Equity Shares of Rs.10/- each fully paid up Less : Reduced during the year (Refer note number 3 Schedule 17) 34,103,432 (Previous Year 9,003,891) Equity Shares of of Rs.10/each fully paid up Closing balance 8,639,177 (Previous Year 42,742,609) Equity Shares of of Rs.10/each fully paid up Partly paid up Equity Shares Opening Balance 4,971,429 (Previous Year6,000,000 ) Equity Shares of Rs 10/- each Rs 7.00 paid up (Previous Year Rs. 3.50 Paid Up) Add: Call money received during the year Nil (P.Y. 6,000,000 Equity Shares @ Rs. 3.50 per share Less: Reduced during the year Nil (Previous Year 1,028,571) Equity Shares of Rs. 10/- each Rs. 7.00 paid up Closing balance 4,971,429 (Previous year 4,971,429) Equity Shares of of Rs.10/each Rs. 7.00 each paid up (Previous Year Rs 7.00)

180000

477320380

427426090

517465000

341034320

90038910

86391770

427426090

34800003

21000000

–

21000000

–

7199997

34800003

March 31, 2007 (Amount Rs.)

March 31, 2006 (Amount Rs.)

180,000 121371773

180000 462406093

Fully paid up Preference Shares 18,000 (Previous Year 18,000) Preference Shares of Rs.10/- each.

Of the above 13,602,260 (Previous Year 47,672,739) 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 4 in Schedule 17) SCHEDULE 2 : RESERVES & SURPLUS Capital Reserve Opening Balance Additions during the year Securities Premium Account Opening Balance Add: Additions during the year

SCHEDULE 3 : SECURED LOANS Term Loan from Bank Repayable within one year Rs. 11,112,000 (Previous Year Rs. 3,620,000)

1554134 – 1554134

– 1554134 1554134

49820000 – 49820000 51374134

– 49820000 49820000 51374134

42034821

17300244

42034821

17300244

–

22654141

–

22654141

SCHEDULE 4 : UNSECURED LOANS Demand Loan from Bank (Repayable within one year)

34800003

SCHEDULE 5 : FIXED ASSETS ASSETS

Leasehold Improvements Computers Office Equipments Furniture & Fixtures Vehicle Total Previous Year

GROSS BLOCK

DEPRECIATION

NET BLOCK

As on 01.04.2006

Additions

Deletions

As on 31.03.2007

As on 01.04.2006

For the Year

Reductions

As on 31.03.2007

As on 31.04.2006

6415253 24671555 4986517 1140908 375360 37589594 7813568

21600 16985253 1401562 295003 1664148 20367566 29966092

–

6436853 41656808 6340081 1435911 1664148 57533801 37589595

3065616 7768425 557914 358351 150144 11900449 3691261

1766364 13966088 1260378 280834 157752 17431416 8260166

– – 23917 – 194161 218078 50978

4831978 21734514 1794375 639185 113735 29113787 11900449

1604875 19922295 4545706 796726 1550413 28420015 25689146

3349638 16903131 4428603 782557 225216 25689145 4122307

(Rs.)

Quantity As on 01/04/06

Acquired during Year

Sold during Year

Quantity As on 31/03/2007

Amount (Rs.) As on 31/03/2007

Amount (Rs.) As on 31/04/2006

10 87

9000000 1315789

– –

9000000 1315789

– –

90000000 114233750 26240229

47998 – 375360 423358 190065

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$ 1.90) 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 (Refer Note Number 3 in Schedule 17) CURRENT INVESTMENTS Unquoted Units of Mutual Fund Templeton India Treasury Management Prudential ICICI Liquid Plan Institutional Plus Kotak Liquid Scheme TOTAL

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

600000

–

600000

26240229

1500000

–

1500000

65600571

–

136801078

1000 10 10

10555 17432 634824

6841 423 5406

17396 17855 640230

– – –

– – – 91840800

15959680 206590 6352745 455394643

March 31 2007 (Amount Rs.)

March 31 2006 (Amount Rs.)

59257

97371

8515760 172750

32536330 166500

8747767

32800201

1282425 55030648

1293710 25657232

56313073

26950942

March 31 2007 (Amount Rs.) SCHEDULE 9 : LOANS AND ADVANCES Advances recoverable in cash or in kind or for value to be received Inter corporate Deposits Security Deposits Accrued Interest Staff Loan Advance Payment of Taxes SCHEDULE 10 : CURRENT LIABILITIES Sundry creditors – Due to SSI Undertakings Rs: Nil/Previous Year Rs : Nil ) – Other Liabilities

March 31 2006 (Amount Rs.)

1016189 13608084 180542 10509 1190811 8468726

723721 13357804 – – 78500 8466668

24474861

22626693

– 14429874 14429874

– 9818433 9818433

147

Godrej Global Solutions Limited SCHEDULES ANNEXED TO AND FORMING PART OF THE PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2007 SCHEDULE 11 : PROVISIONS Provision for employee retirement benefit

SCHEDULE 14 : ESTABLISHMENT EXPENSES Rent Office Maintenance Electricity Communication expenses Repairs and Maintenance - Plant and Machinery SCHEDULE 15 : OTHER OPERATING EXPENSES Legal & Professional Expenses Insurance Conveyance and Travelling Recruitment & Training Processing Cost Loss on Sale of Fixed Assets Exchange Difference – Loss (Net) General Expenses

11697 – 53159 418483 2437 6801 2113 494690

52363 12396488 – 1910349 5696 – – 14364895

60477186 7502485 3310606

34273675 3334680 1238192

71290277

38846547

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.

17652556 7713353 7423059 6381913 213039

11251006 5785814 5409147 4406888 516868

39383921

27369723

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 or substantially enacted on the balance sheet date.

10030360 212744 4795494 3997393 3648042 – 1462636 3896483

9532816 209675 2916553 1415302 2690130 82837 287282 2619047

28043151

19753641

3226056 663294

2392882 663795

3889350

3056677

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 Office Equipment Furniture & Fixture Motor Vehicle h)

Fully paid up equity share capital of Rs. 427426090 representing 42742609 equity shares of Rs. 10 each fully paid up were reduced to Rs 86391770 representing 8639177 equity shares of Rs. 10 each fully paid up. By way of repayment of Rs. 10/- per equity share to the shareholders holding 20423375 equity shares of Rs. 10/- each fully paid up aggregating to Rs. 204233750 in proportion to there existing shareholdings.

To utilize an amount of Rs.136800570 from equity share capital held by the equity shareholders in proportion of their existing shareholding for the downward revision in the carrying value of investments in the capital of View Group LP as at 1st April 2006.

Background

During the year the Company has sold the investment in the equity shares of Godrej Upstream Limited Verseon LLC and in the capital of View Group LP to Godrej Industries Limited at their carrying value as at March 31 2007. The aggregate sale proceed thereof was Rs. 204234258. The said sales proceeds were adjusted against the dues payable by the company to Godrej Industries Limited on account of reduction of equity share capital.

Significant Accounting Policies Accounting Convention

Asset Impairment

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.

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.

148

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.

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. 217.66 Lacs. (Previous year. Rs. 101.34 Lacs). The future minimum lease payments under non-cancelable operating leases due within a period of one year are estimated at Rs. 216.16 Lacs (Previous Year. Rs. 103.92 Lacs) and due within a period of one year but less than five years are estimated at Rs. 392.24 Lacs.(Previous Year. Rs. 126.58 Lacs)

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.

Secured loan Term loan from bank are secured by

Fixed Asset

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.

Redemption of Preference Shares Due to inadequacy of divisible profits the Company has not redeemed 18000 preference shares of Rs 10/- each at par due for redemption on May 31 2006.

Fixed Assets are stated at cost less accumulated depreciation. Cost includes all expenses related to acquisition and installation of the concerned asset. c)

Foreign Currency Transactions

Reduction of Equity Capital

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.

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.

Taxes on Income

The Company has made an application for reduction of equity share capital under Section 101 to 105 of the Companies Act 1956 which was approved by Hon’ble High Court Bombay vide its order dated March 2nd 2007 and accordingly:

SCHEDULE 17 : NOTES TO ACCOUNTS

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. 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.

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31 2006

3 Years 5 Years 5 Years 5 Years

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.

SCHEDULE 16 : INTEREST & FINANCE CHARGES Interest on Bank Loan Other Bank/Finance Commission

Depreciation

815132 815132

SCHEDULE 12 : OTHER INCOME Interest (Gross) – Bank - (TDS : C.Y : Rs. 2058/- P.Y: Rs. 7687/-) – Companies - (TDS : C.Y : Rs. Nil P.Y. : Rs. 2781773/-) – Staff loan Dividend Profit on sale of investment Profit on sale of fixed assets Miscellaneous Income SCHEDULE 13 : STAFF EXPENSES Salary, bonus, exgratia Contribution to Providend Fund and other funds Staff Welfare

1856749 1856749

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; the Holding company. Godrej & Boyce Manufacturing Co Ltd.; the Ultimate Holding Company Associate Companies : Godrej Upstream Limited upto 23-03-2007 Wholly Owned Subsidiaries : Godrej Global Solutions Inc. Godrej Global Solutions (Cyprus) Ltd. Key Management Personnel : Mr. N. B. Godrej Mr. Sanjay Tipnis

Annual Report 2006-2007

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2007 b)

Transactions with Related Parties – Parent and Fellow Subsidiaries (Amount Rs.) Nature of Transaction

Holding Company

Leave & License Previous Year Service Charges Previous Year Other Expenses Previous Year Call Money Received Previous Year Repayment of Equity Shares Previous Year Sale of Investments Previous Year Balance Outstanding as of 31-3-2006 Receivable c)

Transactions with Related Parties – Subsidiaries and Others Nature of Transaction

Wholly Owned Subsidiary Company

Investment in Pref Shares Previous Year Investment in Equity Shares Previous Year Export of Services Previous Year Interest Income Previous Year Inter Corporate Deposit Given Previous Year Inter Corporate Deposit Repaid Previous Year Managerial Remuneration Previous Year 8.

1123440 1123440 3516282 2808000 373549 571604 – 21000000 204036400 – 204234258 – – 197858

65600571 – 26240229 96196640 54733608 – – – – – – – – – –

– – – – – – – 12396488 – – 10000000 – – 219200000 – –

Salaries and allowances paid Sitting Fees Total

65600571 – 26240229 96196640 54733608 – 12396488 – – 10000000 – – 219200000 5538912 4474492

5268613

4118460

270299

226032

115000

130000

5653912

4474492

900000

Auditors Remuneration included in General Expenses (Excluding service tax)

Total

100000

1000000

140031074

82265686

10. Earning in Foreign Currency Income from services 11.

Expenditure in Foreign Currency Nil

3209

855602

106389

19692

18849

9406

Nil

3860970

1176955

Marketing Expenses Traveling Expenses Books & Periodicals Professional Fees Training Liability Insurance

25765

26581

Software Development & Maintenance

44429

43861

(20364283)

(618240)

47714038

57746500

12. 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

13610606

47714038

Weighted Average Number of Equity Shares

43517624

52952098

(0.47)

(0.01)

Basic Earning per Share of Rs 10/- each

13. Additional information required under Schedule VI Part II of the Companies Act 1956 to the extent not applicable has not been given. 14.

III.

IV. – – – – – – – – – – – – – 5538912 4474492

Current Year

Contribution to Provident Fund

Tax Audit Fees

II.

Total

Managerial Remuneration

Audit Fees

(Amount Rs.)

Associate Key Company Management Personnel

Particulars Previous Year

Disclosure as required vide Part IV of Schedule VI of the Companies Act 1956. Balance Sheet Abstract and Company’s General Business Profile

Figures of the previous year have been regrouped wherever necessary.

Amount in Rs. Thousands Registration Details Registration No. 11-139431 State Code 11 Balance Sheet date March 31 2007 Capital raised during the year Public Issue – Rights Issue – Bonus Issue – Private Placement Position of mobilisation and deployment of funds Total Liabilities 214780 Total Assets 553734 Sources of Funds Paid-up Capital 121780 Reserves and surplus 51374 Secured Loans 42034 Unsecured Loans Application of Funds Net Fixed Assets 28420 Investments 91841 Deferred Tax Asset 288 Net Current Assets 73249 Miscellaneous Expenditure – Accumulated Losses 618 Performance of the Company Total Income 140526 Total Expenditure 160038 Profit / (loss) before Tax (19512) Profit / (loss) after Tax (20364) Earning per share (in Rs.) (0.47) 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 2007 Particulars March 31 2007 (Amount Rs.) Cash Flow from Operating Activities Net loss before tax (19512352) Adjustment for: Depreciation 17431417 Interest Paid 3889350 Deferred revenue expenditure written off (Profit)/loss on fixed assets scrapped / sold (6801) (Profit)/loss on investments sold (2437) Dividend income (418483) Interest income (64856) Operating Profit before Working Capital Changes 1315838 Adjustment for: Trade and Other Receivables (31208241) Trade Payables 5653057 Cash Generated from Operations Direct Taxes Paid -FBT (851931) Direct Taxes Paid (2058) Total Cash Generated from Operating Activites (25093335) Net Cash from/(used) in Operating Activities (25093335) Cash Flow from Investing Activities Purchase of Fixed Assets (20367566) Sale of Fixed Assets 212081 Acquisitions of Data Conversion Business – Purchase of Long Term Investments – Sale of Long Term Investments 204234258 Downward Revision of Investments 136800570 Purchase of Current Investments (10420921) Sale of Current Investments 32942373 Recovery of Inter Corporate Deposits – Interest Income 64856 Dividend Income 418483 Net Cash from/(used) in Investing Activities 343884135 Cash Flow from Financing Activities Proceeds from Issue of Share Capital – Repayment of Equity Share Capital (204233750) Reduction in Equity Share Capital (136800570) Proceeds from Long Term Borrowings 32072639 Repayment of Long Term Borrowing (29992203) Interest Paid (3889350) Net Cash from Financing Activities (342843234) Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents as at beginning of the year Cash and Cash Equivalents as at end of the year

(24052434) 32800201 8747767

March 31 2006 (Amount Rs.) (656172) 8260166 2864457 84122 (5696) (1910349) (12448851) (3812322) (38101714) 7408603 (34505433) (250381) (4047177) (38802991) (38802991) (29375208) 56250 (80000000) (262631840) – – (277318150) 277893157 214868647 12448851 1910349 (142147944) 71000000 – – 48190146 (8405000) (2864457) 107920689 (73030246) 105830447 32800201

(Note: To finance working capital requirements the Company’s Bankers have sanctioned a total fund based limit of Rs. 450 lac. Of this limits utilized as on March 31 2007 is Rs. Nil.) For and on behalf of KALYANIWALLA MISTRY AND ASSOCIATES Chartered Accountants

V. M. Padwal Partner Mumbai May 24 2007

For and on the behalf of the Board N.B. Godrej Chairman S.S. Tipnis Whole time Director C.K. Vaidya Director A.K. Singla Company Secretary

149

Godrej Global Solutions (Cyprus) Limited DIRECTORS’ REPORT FOR THE YEAR ENDED MARCH 31, 2007 Company’s results 31-03-2007 31-03-2007 US $ Rs. in Lac

The Directors have pleasure in enclosing the Company’s set of financial statements for the year ended March 31, 2007. Balance Brought Forward Profit / Loss for the period Balance Carried Forward

Principal activities The company’s principal activity during the period under review was that of holding of investments and financing.

25702 48481 74183

11.47 20.87 31.94

Directors

Dividends

The Directors of the Company during the period were the following:

The directors recommend no dividend to be paid for the year ended 31 March, 2007.

Stelios Savvides Eva Agathangelou Rohinton Homi Khajotia Dorab Erach Mistry Sanjay Tipnis

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 Solutions (Cyprus) Limited HIVE MANAGEMENT SERVICES LTD Secretary Limassol : May 4, 2007

INDEPENDENT AUDITORS’ REPORT

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS (CYPRUS) LIMITED

Opinion

We have audited the financial statements of Godrej Global Solutions (Cyprus) Limited on pages 4 to 11, which comprise the Balance Sheet as at March 31, 2007 and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

In our opinion, the financial statements give a true and fair view of the financial position of Godrej Global Solutions (Cyprus) Limited as on March 31, 2007, and of its financial performance and its cash flows for the period then ended in accordance with International Financial Reporting Standards as adopted by the EU and the International Financial Reporting Standards as issued by the IASB and the requirements of Cyprus Companies Law, Cap. 113. Report on other legal requirements

Board of Directors’ Responsibility for the Financial Statements The Company’s Board of Directors is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (EU) and International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB) and the requirements of the Cyprus Companies Law, Cap 113. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies: and making accounting estimates that are reasonable in the circumstances.

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.

Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedure selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of these financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the financial statements.

BALANCE SHEET AS AT MARCH 31, 2007

Note

3/31/2007 3/31/2007 US $ Rs. in Lacs

3/31/2006 US $

430.50

1000000

446.10

Loan Receivable

1055000

454.18

1055000

470.64

Current Assets Interest Receivable Cash at Bank

Total Assets

66465 62960

28.61 27.10

68054 27718

30.36 12.36

129425

55.72

95772

42.72

2184425

940.39

2150772

959.46

2100000 74183

904.05 31.94

2100000 25702

936.81 11.47

2174183

935.99

2125702

948.28

5567 4675

2.40 2.01

25070 –

11.18 –

EQUITY AND LIABILITIES 8 9

10 11

10242

4.41

25070

11.18

2184425

940.39

2150772

959.46

Note : The Rupee equivalent of US $ have been given at the closing exchange rates as on March 31, 2007. (US $ 1.00 = Rs. 43.05)

150

Certified Public Accountants Limassol : May 4, 2007

Note 1000000

Total Equity and Liabilities

PKF SAVVIVES & CO. LTD.

3/31/2006 Rs. in Lacs

Current Liabilities Creditors and accruals Income Tax

This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with Section 156 of Companies Law, Cap.113 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to.

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

ASSETS Non-Current Assets Investments

Capital and Reserve Share Capital Reserves

Other Matter

01/04/06 31/03/07 US $

01/04/06 31/03/07 Rs in Lac

01/01/06 31/03/06 US $

01/01/06 31/03/06 Rs in Lac

Interest Receivable

73850

31.79

18210

8.12

Administration Expenses

(5971)

(2.57)

(25363)

(11.31)

67879

29.22

(7153)

(3.19)

Financial (Expenses)/Income Net 4

(532)

(0.23)

(107)

(0.05) (3.24)

Profit /(Loss) from Operations (Profit)/Loss for the period before Taxation Profit/(Loss) for the year after taxation

67347

28.99

(7260)

(18866)

(8.12)

–

48481

20.87

(7,260)

(3.24)

Note : The Rupee equivalent of US $ have been given at the closing exchange rates as on March 31, 2007. (US $ 1.00 = Rs. 43.05)

Annual Report 2006-2007

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007 1.

Introduction

Taxation

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. 2.

Principal accounting policies The following is a summary of the most important accounting policies used by the Company: a)

Basis of accounting The financial statements have been prepared under the historical cost convention and in accordance with the International Financial Reporting Standards and the Companies Law.

Foreign exchange

The financial statements are expressed in US Dollars.

01/04/06 31/03/07 US $

01/04/06 31/03/07 Rs in Lac

01/01/06 31/03/06 US $

01/01/06 31/03/06 Rs. in Lac

Income Tax For the year Prior year

3000 1675

1.29 0.72

– _

Defence Contribution For the year Prior year

7385 6806

3.18 2.93

– _

Investments Country of Class of Holding Incorporation Shares held % Registration

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. 7.

Differences on exchange are included in the income statement. c)

Godrej Global Solutions, INC

USA

The current and deferred taxation are recognized as income or expense for the period.

The provision for income tax and defence contribution for the period is calculated in accordance with the Income Tax Laws. Deferred taxation is calculated on the basis of the rates ruling at the balance sheet date.

Godrej Global Solutions Inc.

600000 ordinary shares of US$1 each 1500100 perference shares of US$1 each 9.

600000

258.30

600000

267.66

1500000

645.75

1500,000

669.15

2100000

904.05

2100000

936.81

Reserves

10. Creditors and accruals 03/03/07 US $

03/31/07 Rs. in Lac

03/31/06 US $

31/03/06 Rs. in Lac

5567

2.40

32.380

14.44

Accruals The above amounts are payable within one year. 11. Taxation Income tax due

US $ 4675

Rs in Lacs 2.013

12. Capital commitments 13. Contingent liabilities At the balance sheet date there were no contingent liabilities. 14. Fair value of assets and liabilities The fair value of an asset or liability represents the replacement cost or an obligation to be 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.

(Loss)/profit from operations is arrived at after charging the following:

31/03/06 Rs. in Lac

At the balance sheet date there were no capital commitments.

(Loss)/profit from operations

4/1/2006 3/31/2007 US $

4/1/2006 3/31/2007 Rs in Lac

1/1/2006 3/31/2006 US $

1/1/2006 3/31/2006 Rs in Lac

5567

2.40

1826

0.81

5567

2.40

1826

0.81

4/1/2006 3/31/2007 US $

4/1/2006 3/31/2007 Rs in Lac

1/1/2006 3/31/2006 US $

1/1/2006 3/31/2006 Rs in Lac

Bank Charge

343

0.15

146

0.07

Exchange Differences - Loss/(gain)

189

0.08

(39)

(0.02)

532

0.23

107

0.05

Auditor's Remmuneration

31/03/06 US $

As at March 31, 2007 the reserves available for distribution amounted to US$74.183 (31-03-2006 : US$ 25.702)

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.

31/03/07 Rs. in Lac

Authorised, issued and fully paid

Contingent liabilities Contingent liabilities are disclosed as expenditure and liability if the confirmation of the expense or loss is considered possible from future events.

1055000

Share capital 31/03/07 US $

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.

1055000

The above loan carries interest at the rate of 7% per annum on the outstanding amount and it is receivable by the end of 31 March, 2010. The interest receivable is accounted for on an accruals basis. The interest expense was US$ 73.850 for the period ended 31 March, 2007.

Any sale of investment is recognised when the actual transfer of shares from the registrar takes place.

1000000

Loan receivable

( Subsidiary company registered in USA)

Investments

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.

1000000

100

31/03/2007 31/03/2007 US $ US $

The debit balances of the deferred taxation arriving from deductible temporary differences are recognised to the extent of the anticipated taxable profits.

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.

31/03/2006 US $

Taxation Tax is calculated as follows:

Ordinary

31/03/2007 US $

15.

Related party transactions The Company, in the normal course of business, trades with other businesses that fall within the definition of related party contained in International Accounting Standard 24. The amount receivable from related party is shown in note 7.

Financial (expenses)/income - net

151

Godrej Global Solutions (Cyprus) Limited STATEMENT OF CHANGES IN EQUITY AS AT MARCH 31, 2007 Share Capital US $ At December 31, 2005 Issue of Share Capital

Equity to be issued Rs in Lac

P& L reserve US $

P& L reserve Rs in Lac

31-03-2007 Total US $

31-03-2007 Total Rs in Lac 961.33

2245

1.01

2097755

945.46

32962

14.86

2132962

935.81

(2097755)

(935.81)

(7260)

(3.27)

(7260)

(3.27)

2100000

936.81

25702

11.47

2125702

948.28

48481

20.87

48481

20.87

2100000

904.05

74183

31.94

2174183

935.99

Profit for the period At March 31, 2007

Equity to be issued US $

2097755

Loss for the period At March 31, 2006

Share Capital Rs in Lac

From the tax year commencing 1 January, 2003 onwards companies, which do not distribute 70% of their profits after tax, as defined by the Special Contribution for Defence Law 117 (1) 2002, within two years after the end of the relevant tax year, will be deemed to have distributed as dividends 70% of these profits. Special contribution for defence at 15% will be payable on such deemed dividends to the extent that the shareholders are Cyprus tax residents. The amount of deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year during the following two years. This special contribution for defence is payable for the account of the shareholders.

Financial Statements for the year ended 31st March 2007 01/04/06 01/04/06 Schedule 31/03/07 31/03/07 US $ Rs in Lacs Administration Expenses Issuing costs of additional equity Overprovision made in previous period Professional fees Audit Fees Consulancy Fees

01/01/06 31/03/06 US $

01/01/06 31/03/06 Rs in Lacs

Schedule

1 Financial expenses / (income) - net Bank Charges Exchange Difference - loss / (gain)

(3147) 2899 5567 652 5971

(1.35) 1.25 2.40 0.28 2.57

18000 2537 1826 3000 25363

8.03 1.13 0.81 1.34 11.31

01/04/06 31/03/07 US $

Interest Receivable Administration Expenses

Profit /(Loss) from Operations Fianancial (expenses)/income-net

Profit/(Loss) for the period before

343 189 532

0.15 0.08 0.23

146 (39) 107

0.07 (0.02) 0.05

Computation of Defence Contribution for the year ended 31st March 2007 Schedule 1

US $ 73850

Rs in Lacs 31.79

73850

31.79

£C 43.05

32036 £C cents 3203.60

Defence contribution at the rate of 10% Tax suffered in USA (US$7385 Equivalent to £C3203.60

01/01/06 31/03/06 US $

01/01/06 31/03/06 Rs in Lac

73850

31.79

18210

8.12

(5971)

(2.57)

(25363)

(11.31)

67879

29.22

(7153)

(3.19)

(532)

(0.23)

(107)

(0.05)

67347

28.99

(7260)

(3.24)

Defence Contribution (7385)

(3.18)

–

Prior Year

(6806)

(2.93)

–

Profit/(Loss) for the year before taxation

53156

22.88

(7260)

(3.24)

Current Year

(3000)

(1.29)

–

Prior Year

(1675)

(0.72)

–

Profit/(Loss) for the year after taxation

48481

20.87

(7260)

(3.24)

Current Year

Income tax

CASH FLOW STATEMENT FOR THE PERIOD ENDED MARCH 31, 2007 (3203.60)

1/04/07 01/04/07 31/03/07 31/03/07 US $ Rs. in Lacs

Computation of Chargeable Incom e for the year ended 31st March 2007 Schedule Profit for the period as per profit and loss account Interest received exempt at 50% Issuing cost for additional equity Adjusted profit for the year Translated into £C at the rate of £C1 : US $ 2.3052 Income tax on above amount at 10% Additional tax 10% Income tax charge for the year payable

01/04/06 31/03/07 Rs in Lac

defence Contribution

Interest received Total Income subject to defence contribution Translated into £C1 = US $2.3052

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

US $

Rs in Lacs

67347 (36925) (3147) 27275

28.99 (15.90) (1.35) 11.74

£C

2727.51 272.75 3000.26

1.17 0.12 1.29

01/01/06 31/03/06 Rs. in Lacs

(7260)

(3.24)

Cash Flows from operating activities profit/ (Loss) for the period before taxation

1 1 2

01/01/06 31/03/06 US $

67347

28.99

Operating profit/ (loss) before working capital changes

11832 1183.20 118.32 1301.52

67347

28.99

(7260)

(3.24)

Increase in creditors and accruals

(19503)

(8.40)

17760

7.92

Cash flows from operations

47844

20.60

10500

4.68

Tax paid on interest received

(6806)

(2.93)

Net Cash from operating activities

41038

17.67

10500

4.68

Interest receivable

(5796)

(2.50)

(18210)

(8.12)

Net cash used in investing activities

(5796)

(2.50)

(18210)

(8.12)

Cash flows from investing activities

Cash flows from financing activities Issuance of share capital

2097755

935.81

Equity to be issued

(2097755)

(935.81)

Net cash generated from financing activities

Increase/(Decrease) in cash and cash equivalents 35242

15.17

(7710)

(3.44)

Cash and cash equivalents at beginning of year

27718

11.93

35428

15.80

Cash and cash equivalents at end of year

62960

27.10

27718

12.36

62960

27.10

27718

12.36

Cash and cash equivalents are as follows Cash at Bank

Note : The Rupee equivalent of US $ have been given at the closing exchange rates as on March 31, 2007. (US $ 1.00 = Rs. 43.05)

152

Annual Report 2006-2007

Godrej Global Solutions, Inc. DIRECTORS’ REPORT We are pleased to submit the report for the period from April 1, 2006 to March 31, 2007.

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.

Political or Charitable Contributions The Company made no political or charitable contributions during the year.

Companys’ Results Net income for the period

$ 160944

Retained earnings as of March 31, 2006

$ 16875

For Godrej Global Solutions, Inc. Sanjay Tipnis Director

Dividends No dividend is recommended to be paid for the period ended March 31, 2007.

April 17, 2007

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GODREJ GLOBAL SOLUTIONS, INC. whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in 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.

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, 2007, and the related statements of operations and retained earnings and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Godrej Global Solutions, Inc. as of March 31, 2007, and the result of its operations and its cash flows for the year 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

BRAVER PC Accountants & Advisors April 17, 2007

BALANCE SHEET AS AT MARCH 31, 2007

STATEMENT OF OPERATIONS AND RETAINED EARNINGS FOR THE YEAR ENDED MARCH 31, 2007

Assets Current Assets

US $

Rs. Lac

873908

376.22

399599

172.03

10959

4.72

1284466

552.96

227680

98.02

Goodwill, net of accumulated amortization of $13,608

3010596

Total Non-Current Assets Total Assets

Cash and cash equivalents Accounts receivable - trade, net of allowance for doubtful accounts of $0 Prepaid and other assets Total Current Assets Intangible assets, net of accumulated amortization of $423,155

Particulars

US $

Rs. Lac

Sales

3078647

1325.36

Cost of goods sold

2139335

920.98

Gross Profit

939312

404.37

1296.06

Operating expenses

399177

171.85

3238276

1394.08

Operating Income

540135

232.53

4522742

1947.04

Other Income (expenses)

Liabilities and stockholder’s equity

Interest Income

Current Liabilities

Impairmnent of Goodwill

Note Payable

1132483

487.53

Amortization of Intangible Assets

Account Payable

1117198

480.95

Interest expenses

23242

10.01

2272923

978.49

Accrued expenses Total Current Liabilities Long Term Liabilities Note Payable Deffered Tax Liability Total Long Term Liabilities

1055000

454.18

17000

7.32

1072000

461.50

–

999990

430.50

16482

7.10

(13608)

(5.86)

(198191)

(85.32)

(73850)

(31.79)

(269167)

(115.88)

Net Income before provision for Income Taxes

270968

116.65

Provision for Income Taxes

110024

47.37

Net Income

160944

69.29

Retained Earnings - April 1, 2006 Retained Earnings - March 31, 2007

16875

7.26

177819

76.55

Stockhoder’s equity

The accompanying notes are an integral part of these financial statements

Common Stock, 0.01 par value, 1,000 shares authorized, issued and outstanding Additional paid in capital Retained earnings

177819

76.55

Total Stockhoder’s equity

1177819

507.05

Total Liabilities and Stockholder’s equity

4522742

1947.04

Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31, 2007 (US$ 1.00 = 43.05).

The accompanying notes are an integral part of these financial statements Note : The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31, 2007 (US$ 1.00 = 43.05)

April 17, 2007

For Godrej Global Solutions, Inc.

Sanjay Tipnis Director

Sanjay Tipnis Director April 17, 2007

153

Godrej Global Solutions, Inc. NOTES TO THE FINANCIAL STATEMENTS For the Year Ended March 31, 2007 Note 1 – Nature of the Business Godrej Global Solutions, Inc. (the “Company” or “GGSI”) was incorporated on January 21, 2005, 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. 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 disclosure 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 investments 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, 2007, cash equivalents consist of bank deposits and short-term investments of $873908. Accounts Receivable Accounts receivable are stated at the amount the Company expects to collect from outstanding balances. An allowance for doubtful accounts is provided for that portion of accounts receivable considered to 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 for the year ended March 31, 2007. Bad debts are written off against the allowance when identified. Management has determined that any uncollectible amounts at March 31, 2007, are not material. Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment whenever an event or change in circumstances indicates 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 the 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. Revenue Recognition Revenues generated from providing services to customers 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 a change in tax rates or laws is 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 deductible temporary differences and tax credit carry forwards. 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 customers’ financial condition are performed, although collateral generally is not required. The Company maintains its cash in bank deposit accounts in several institutions which, at times, may exceed the federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100000. At March 31, 2007, the Company has approximately $769000 in excess of the FDIC insured limits. The Company has not experienced any losses in such accounts. During the year ended March 31, 2007 the Company provided services to four customers that constituted approximately 92% of sales. 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 as of March 31, 2007 is $3675039 of which $650835 has been allocated to intangible assets as the value of the contracts. The remaining amount of $3024204 has been identified as Goodwill. During the year ended March 31, 2007 the Company identified an impairment related to Goodwill as one customer on the customer list did not renew their contract. The amount of impairment reported at March 31, 2007 in other expenses on the statement of operations is $13608. Goodwill is comprised of the following at March 31, 2007: Goodwill Original Goodwill Impairment March 31, 2007 Expertise of employees $ 302420 $– $ 302420 Customer list 907261 (13608) 893653 Entry into U.S. markets 1814523 – 1814523 Total Goodwill $ 3024204 $ (13608) $ 3010596 Note 4 – Stockholder’s Equity Common Shares In April 2005, the Company issued 1000 Common Shares of $0.01 par for $1,000,000 to Godrej Global Solutions (Cyprus) Limited (“GGSC”). 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.

154

Note 5 – Note Payable (Current) As part of the Company’s acquisition of Outsource Offshore Inc. (“OOI”) 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 two year period ending March 31, 2007. The last payment is due May 31, 2007. The amount of the note payable as an earn-out payment as of March 31, 2007, is approximately $1132483. Note 6 – Note Payable (Non-current) In April 2005, the Company issued an unsecured note in favor of Godrej Global Solutions(Cyprus Ltd.) (GGSC). Its stockholder, in exchange for installments totaling $1055000. The note bears interest at the rate of 7% per annum. The entire amount of principal is payable at maturity on March 31, interest expense inclusive of withholding taxes paid was $73,850 for the year ended March 31, 2007. Note 7 – Income Taxes As of March 31, 2007, the Company’s deferred tax liability is as follows. Amortization of goodwill and intangible assets $ 17000 The Company’s provision for income taxes for the year ended March 31, 2007 was as follows : Current $ 93024 Deffered $ 17000 $ 110024 Note 8 – Employee Benefit Plans The Company sponsors a defined contribution plan (individual retirement account) covering substantially all its employees. Company contributions are at the discretion of the Board of Directors. Defined contribution pension expense for the Company was $50000 for the year ended March 31, 2007. Note 9 – Acquisitions The Company acquired the assets, liabilities and the business of Outsource Offshore Inc. (OOI), a 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 earnout payment to be $423974 as of March 31, 2006. The Company has also paid to a former vendor of data entry services consideration of approximately $439000 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 U.S. clients. As of March 31, 2007, the total acquisition cost is approximately $3675039. Note 10 – Related Party Transactions The Company’s data entry and related services are provided by Godrej Global Solutions Limited, an affiliate, for servicing the Company’s clients. During the period ended March 31, 2007, the Company’s expenses include $2139335 paid to Godrej Global Solution Limited for these services. As of March 31, 2007, the amount in accounts payable due to Godrej Global Solutions Limited is $1117198. Note 11 – Commitment and Contingencies In connection with the Company’s purchase of assets of OOI, the Company is obligated to pay earn out payments on May 31, 2006 and 2007 (See Note 5.) The Company has entered into a lease for office space which began on November 1,2006 and expires on April 30, 2007. The lease requires an initial deposit of $2.200 and base rental payments are $1,100 which does not include taxes. Internet and phone fees. Rent expense for the year ended March 31, 2007 is $7.349. This lease has been renewed for the period from May 1, through October of 2007, with base rental payments increasing to $1400 a month, beginning May 1, 2007. Future minimum lease payments for 2007 amounts to $9500. Note 12 – Intangible Assets In connection with acquisition of Outsource Offshore Inc., the assets acquired included $650835 of intangible assets other than goodwill. All of the $650835 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, 2007, to extend over a period of up to two years. Amortization in the amount of $198191 was recorded in the fiscal year ended March 31, 2007. Amortization expense for the next three fiscal years would be as follows: 2008 $ 161757 2009 $ 65923 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 2007 Particulars US$ Cash Flows from operating activities Net income 160944 Adjustments to reconcile net income to net cash provided by operating activities Amortization of intangible assets 198191 Impairment of Goodwill 13608 Provision for deferred income tax 17000 Changes in operating assets and liabilities Increase Accounts receivable (20737) Increase in prepaid and other assets (10959) Increase accounts payable 629061 Increase in Income taxes payable (27249) Decrease in accrued expenses (4258) Net cash provided by Operating activities 955601 Cash Flows from investing activities Purchase of goodwill (423974) Net increase in cash and cash equivalents 531627 Cash and Cash equivalents- April 1, 2006 342281 Cash and Cash equivalents- March 31, 2007 873908 Supplemental disclosure of non-cash investing and financing activities Increase in note payable (current) 708509 Supplemental disclosure of cash flow information Cash paid during the year for interest 73850 Cash paid for income taxes during the year 118418

Rs. Lac 69.29

85.32 5.86 7.32 (8.93) (4.72) 270.81 (11.73) (1.83) 411.39 (182.52) 228.87 147.35 376.22 305.01 31.79 50.98

The accompanying notes are an integral part of these financial statements BNote: The Rupee equivalents of US$ have been given at the closing exchange rates as on March 31, 2007 (US$ 1.00 = 43.05). For Godrej Global Solutions, Inc. Sanjay Tipnis Director April 17, 2007

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