carborundum universal limited annual report 2001-2002

CARBORUNDUM UNIVERSAL LIMITEDAnnual Report 2001-2002

Company InformationBOARD OF DIRECTORSM V MURUGAPPAN, ChairmanS N TALWARK N SHENOYP N JAMBUNATHAN, Representative of LICJAMES WHITEHEADSUBODH KUMAR BHARGAVAT L PALANI KUMARM M MURUGAPPAN, Wholetime DirectorRAMESH AGARWAL, President & Wholetime Director MANAGEMENT COMMITTEERAMESH AGARWAL, President & Wholetime DirectorN KISHORE, Vice President - ManufacturingK V RAMESH, Vice President - HueceraP R RAVI, Vice President - FinanceSITHARAM KOKA, Vice President - CeramicsK SRINIVASAN, Vice President - MarketingB SUBRAMANIAM, Vice President - TechnologyM S BALASUBRAMANIAN, General Manager - EMDL PRABHAKAR, Deputy General Manager - HR & TQM SECRETARYS DHANVANTH KUMAR BANKERSSTATE BANK OF INDIABANK OF AMERICASTATE BANK OF TRAVANCORESTANDARD CHARTERED BANKTHE HONGKONG & SHANGHAI BANKING CORPORATION LTD.BANK OF BARODA

Company Information

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IDBI BANK LTD. AUDITORSFRASER & ROSS, CHENNAI REGISTERED OFFICETIAM HOUSE , NO. 72 (OLD NO. 28) RAJAJI SALAI,CHENNAI 600 001

Company Information



Values & BeliefsCUMI, is a member of the Rs.4,200 crore (US$ 840 million) Murugappa Group, agroup with diversified business interests in Abrasives, Bicycles, Ceramics,Confectionery, Engineering, Farm Inputs, Financial Services, Food Processing, ITEnabled Services, Plantations, Refractories, Sanitaryware and Sugar. TheMurugappa Group is the first Asian business group to have been awarded theprestigious “Distinguished Family Business Award - 2001” by IMD, Lausanne, theinternationally renowned business school in Switzerland, for a family promotedbusiness organisation which has demonstrated continuity, value creation, socialcontribution and change management.

Values & BeliefsAdhere to ethical norms in all dealings with shareholders, employees,customers, suppliers, financial institutions and government.

●

Provide value for money to customers through quality products and services.●

Treat our people with respect and concern, provide opportunities to learn,contribute and advance; recognise and reward initiative, innovativeness andcreativity.

●

Maintain:

An organisational climate conducive to trust, open communicationand team spirit.

❍

A style of operations befitting our size, but reflecting moderation andhumility.

❍

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Manage environment effectively for harnessing opportunities.●

Discharge responsibilities to various sections of society and preserveenvironment.

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Grow in an accelerated manner, consistent with values and beliefs, bycontinuous organisation renewal.

●

"The fundamental principle of economic activity is that no manyou transact with will lose; then you shall not."

- Arthasastra

Values & Beliefs

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Board of Directors -A profile S. No. Name, Age & Position in

CompanyBrief profile

1. Mr M V Murugappan

(67 years)Chairman

Mr M V Murugappan is an honoursgraduate in civil engineering. He spentnearly 20 years managing the MurugappaGroup’s building construction businessbefore moving to CUMI in 1979 as itsManaging Director. As ManagingDirector from 1979 to 2000, he wasinstrumental in CUMI’s rapid expansionand diversification, including CUMI’sentry into the power sector. He was aManaging Committee member ofASSOCHAM for several years.

2. Mr S N Talwar

(64 years)Non Executive Director

Mr S N Talwar is a graduate in commerceand law and joined the Board in 1983. Heis a partner of Crawford Bayley & Co., aleading firm of solicitors and advocates.He is the Chairman of several companiesincluding Merck Ltd. and is also on theBoard of companies like Blue Star Ltd.,BPL Communications Ltd., CadburyIndia Ltd., Gillette India Ltd. and MaduraCoats Ltd.

Board of Directors -A profile


3. Mr K N Shenoy(71 years)Non Executive Director

Mr K N Shenoy is a graduate in electricalengineering and post graduate in businessmanagement. He joined the Board in1996. He was the Managing Director ofAsea Brown Boveri Ltd. for over 20 yearsand is currently its Chairman. He is a pastPresident of CII and is currently itsSteering Committee member. He is amember of the Governing Board of IIM,Bangalore and is also on several industryand government committees/panels. He ison the Board of several companiesincluding Volvo India Pvt. Ltd.

4. Mr P N Jambunathan


Mr P N Jambunathan holds a mastersdegree in mathematics and joined theBoard in 1998 as a representative of LifeInsurance Corporation of India. He wasthe Principal of ManagementDevelopment Centre of LIC. He is alsoLIC’s Nominee Director on the Board ofIndustrial Investment Trust Ltd.

5. Mr James Whitehead


Mr James Whitehead holds an honoursdegree in industrial economics and joinedthe Board in 1999. He was formerlyChairman and Chief Executive ofDiamant Boart, SA, Belgium andExecutive Director of Foseco plc., UK.During his tenure at Foseco, he wasChairman and Chief Executive of UnicornIndustries plc., UK, one of the world’slargest manufacturer of abrasives.



6. Mr M M Murugappan(46 years)Wholetime Director

Mr M M Murugappan holds a mastersdegree in chemical engineering. Over thelast 2 decades he has been managing theMurugappa Group’s abrasives,confectionery, electronics and plantationbusinesses at various points of time. AsJoint Managing Director of CUMI from1996 to 1999, he played a pivotal role intransforming CUMI into a processoriented organisation and fostered astrong culture of team work within theorganisation. He is a Director of Mahindra& Mahindra Ltd. and several othercompanies. He is CUMI’s WholetimeDirector since February 2002.

7. Mr Subodh Kumar Bhargava


Mr. Subodh Kumar Bhargava holds adegree in mechanical engineering. Hejoined the Board in October 2000. He wasformerly Chairman and Chief Executiveof Eicher Group and is currently itsAdvisor. He is a past President of CII andis currently its Steering Committeemember. He is on the Governing Board ofIIM, Indore and Indian Institute ofForeign Trade, New Delhi and is also amember of several industry andgovernment committees/panels. He is onthe Board of several companies includingWartsila India Ltd.

8. Mr T L Palani Kumar


Mr T L Palani Kumar is a graduate inchemical engineering and holds a postgraduate diploma in businessmanagement. He joined the Board inOctober 2000. He has been Senior VicePresident of TI Cycles of India andExecutive Director of Escorts TractorsLtd. He is currently Managing Director ofNew Holland Tractors (India) Pvt. Ltd.,the Indian subsidiary of Case NewHolland, world leader inagricultural/construction equipment.



9. Mr Ramesh Agarwal(56 years)President & Wholetime Director

Mr Ramesh Agarwal is an honoursgraduate in engineering. He joined Wendt(India) Ltd. in 1985 as General Managerafter serving various organisations since1967. He took charge as Chief Executiveof Cutfast Abrasive Tools Ltd. in 1996when it was acquired by CUMI. He wasresponsible for streamlining andintegrating the operations of Cutfast withCUMI. He is CUMI’s President &Wholetime Director since January 2000.




Financial Track RecordRs. in crores

31st March

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

REVENUE

Sales 122.86 136.54 151.31 183.37 206.43 239.74 250.36 257.06 285.72 283.37

OtherIncome

7.98 7.09 8.00 11.10 7.77 7.67 11.32 18.00 10.58 9.72

PROFITABILITY

Profitbeforedepreciation

13.96 17.08 20.89 27.89 28.67 35.10 37.65 47.06 47.12 42.59

Profitbefore tax

8.30 12.14 14.14 20.09 20.23 24.17 25.90 34.85 35.75 30.94

Profit aftertax

6.43 10.06 13.85 17.69 16.88 18.41 19.70 25.95 23.20 21.52

Dividend 30% 32% 35% 40% 40% 45% 50% 60% 70% 75%

EPS (Rs.) 7.70 9.09 12.51 15.97 15.04 16.62 16.27 21.44 21.03 23.05

ASSETS EMPLOYED

FixedAssets b

47.34 69.62 82.50 86.07 94.95 107.33 106.61 101.29 97.24 98.88

Investments 17.86 24.68 35.54 45.42 47.45 33.98 34.36 36.35 37.29 55.92

Net CurrentAssets

65.11 42.24 43.15 50.28 68.01 86.34 94.11 89.77 89.18 91.36

TotalAssets

130.31 136.54 161.19 181.77 210.41 227.65 235.08 227.41 223.71 246.16

CAPITAL STRUCTURE

Financial Track Record


Paid upsharecapital

8.35 11.07 11.07 11.07 11.07 11.07 12.10 12.10 9.34 9.34

Reserves c 38.66 58.20 68.56 82.24 91.48 95.89 118.93 137.26 117.90 117.11

Loan funds 83.30 67.27 81.56 88.46 107.86 120.69 104.05 78.05 96.47 101.22

NetDeferredTaxLiability

- - - - - - - - - 18.49

Total funds 130.31 136.54 161.19 181.77 210.41 227.65 235.08 227.41 223.71 246.16

Book Value(Rs.)

56 63 72 84 93 97 108 123 136 135

a Including profit on sale of investments / undertaking

b Excluding revaluation reserve

c Excluding revaluation reserve and net of miscellaneous expenditure not written off andincluding share capital suspense

Financial Track Record



Directors' Report(Pursuant to Section 217 of the Companies Act, 1956)

Your Directors have pleasure in presenting the forty-eighth annual report togetherwith the audited financial statements for the year ended 31st March 2002.

KEY FINANCIAL SUMMARY

Rs.in lakhs

31.3.2002 31.3.2001

Sales 28337 28572

Other Income 938 712

Profit from operations 4215 4359

Profit on sale of investments / undertaking 34 346

Profit before tax 3094 3575

Provision for tax 942 1255

Profit after tax 2152 2320

Sales were marginally lowerthan last year due to thesluggish trends in themanufacturing sector of theeconomy. As a result therewas a drop in profit fromoperations and consequentlyprofit before tax and profitafter tax were also lower.

ORGANISATIONRESTRUCTURING

To achieve acustomer-centric approach in

Directors' Report


the businesses, an organisation restructuring was done. The bonded and coatedabrasive businesses were merged to form the Abrasives division and the industrialceramics and refractories businesses were merged to form the Ceramics division.This change would also facilitate pooling of employee skills, which would beleveraged to improve customer focus.

MARKET OVERVIEW

Rs.in lakhs

31.3.2002 31.3.2001

Sales - domestic 25209 26053

Sales - exports 3128 2519

Total 28337 28572

Offtake from major user industries was lower than last year as a result of whichthere was a 3% drop in abrasive sales. However the growth in the ceramics (14%)and electrominerals (13%) divisions helped to partly offset this impact.

EXPORTS

Over the last 5 years, the Company has been making concerted efforts to increaseits presence in the export market. As a result export turnover has been increasingsteadily. During the year, the Company achieved a growth of 24% in exportturnover. Though abrasive sales to the USA suffered a downturn as a result of localrecession, the growth in the ceramics and electrominerals divisions helped toincrease overall export sales. Exports as a percentage of total turnover has alsoincreased from 9% last year to 11%. Entry has been gained into new markets andthe position in existing markets consolidated.

MANUFACTURING

During the year, focussed efforts were taken to lower production costs in alldivisions by better raw material sourcing and improved efficiency in energy andraw material usage.

A state-of-the-art cloth processing plant has been commissioned in March 2002 atMaraimalai Nagar in Tamil Nadu with an investment of Rs.400 lakhs. This wouldimprove the quality of the company's coated abrasive products.

Manufacture of whitealumina was shifted last yearfrom Varvala in Gujarat toEdapally in Kerala in view ofthe increase in power cost inGujarat. Consequently the

Directors' Report


Varvala plant has beenformally closed in November2001 after obtainingnecessary approvals.

The pilot plant set up inconnection with the R & Dproject for ceramic colourshas been completed and the initial testing of products at the users end is inprogress.

DIVISIONAL PERFORMANCE

The performance of the various business segments and the Finance & HumanResource initiatives detailed in the management s discussion and analysis report.

DIVESTMENT

The shareholders had in December 2001 approved by postal ballot the proposal todivest the electrocast refractory unit at Palakkad to S E P R Refractories India Ltd.(part of the Saint-Gobain Group). Consequent to this, the business has been sold on17th April 2002 for a total consideration of Rs.31 crores.

APPROPRIATIONS

The amount available for appropriation and the recommended appropriations aregiven below:

Rs.in lakhs

Available for appropriation

Profit after tax 2152.23

Add : Balance brought forward from previous year 921.08

Total 3073.31

Recommended appropriations

Transfers to general reserve 1200.00

Transfers to debenture redemption reserve 167.00

Dividend proposed (75%) 700.16

Balance carried forward 1006.15

DIVIDEND

As mentioned above, your Directors are pleased to recommend a dividend of 75% (Rs.7.50 per equity share of Rs.10 each) forthe year. A dividend of 70% was declared last year.

SUBSIDIARIES

Directors' Report


CUMI America Inc.

CUMI America continued to promote the company's coated and bonded abrasives in the US markets. The operations wereadversely affected as a result of the recession in U.S.A. Sales were lower at US$ 0.79 million as against US$ 1.34 million lastyear. The profit after tax was US$ 7,327 as against US$ 33,209 last year.

Prodorite Anticorrosives Ltd.

The Company increased its turnover from Rs.1399 lakhs to Rs.1433 lakhs. Export sales increased from Rs.37 lakhs to Rs.120lakhs. Due to difficult market conditions, price realisations were lower and consequently the Company ended the year with amarginal profit before tax of Rs. 8 lakhs.

I T Enabled Services

As a diversification measure into high growth businesses, a controlling interest was acquired in Webword Holdings &Management Private Ltd. ("Webword") and Net Access (India) Private Ltd. ( Net Access ). Webword is engaged in IT enabledservices for the book publishing industry through its two subsidiaries Laserwords Private Ltd. ( Laserwords ) and ApexAbstracting & Editing Services Private Ltd. ( Apex ). During the year Laserwords earned a profit of Rs.777 lakhs and Apex aprofit of Rs.5 lakhs.

Net Access is engaged in providing internet-based business solutions including web-based mail & messaging solutions. Thecompany's customer base is yet to attain a critical mass and as such it has incurred a loss of Rs. 108 lakhs during the year.

The annual reports of the respective subsidiary companies are annexed. In addition a consolidated financial statement(incorporating the operations of the Company and all its subsidiaries) is also annexed.

SOCIAL RESPONSIBILITY

During the year, contributions aggregating toRs. 14.50 lakhs have been made toorganisations devoted to the cause of thehealth and education of the general public andscientific endeavours. The Company isconscious of its responsibility towards theenvironment and is improving its processes toachieve ISO 14000 certification.

DIRECTORS

Mr. M V Murugappan and Mr. K N Shenoyretire by rotation at the forthcoming AnnualGeneral Meeting and being eligible offerthemselves for reappointment.

Mr. M V Murugappan who was ExecutiveChairman of the Company relinquished hisexecutive position effective close of businesson 31st January 2002. He however continuesas a non-executive director and as

Chairman of the Company. The Board of Directors place on record their appreciation for the services rendered by Mr. M VMurugappan during his tenure as Executive Chairman.

Directors' Report


The Board appointed Mr. M M Murugappan as a wholetime director effective 1st February 2002. Since the close of the financialyear, Mr. S P Narayanan (who was a nominee of ICICI) ceased to be a Director of the Company consequent to ICICIwithdrawing his nomination effective 25th April 2002. The Board of Directors place on record their appreciation for the servicesrendered by Mr. S P Narayanan during his tenure as Director of the Company.

AUDITORS

Fraser & Ross, Chartered Accountants retire at the ensuing Annual General Meeting and have confirmed their eligibility andwillingness to accept office, if reappointed.

CORPORATE GOVERNANCE

As required by the listing agreement with stock exchanges, a report on corporate governance and a certificate from the auditorson corporate governance are annexed.

GENERAL

The directors responsibility statement, statement of particulars of employees and the particulars relating to conservation ofenergy, technology absorption and foreign exchange earnings and outgo as required under the Companies Act, 1956 are annexedto and form part of this report. As required by stock exchanges, a cash flow statement is also annexed.

ACKNOWLEDGEMENT

The Board places on record its appreciation for the cooperation and support received from customers, shareholders, employees,dealers, suppliers, government departments, financial institutions, banks and debentureholders.

On behalf of the Board

Chennai15th May 2002

M V MurugappanChairman

Directors' Report



Management's Discussion & Analysis Report

(Pursuant to clause 49 of the Listing Agreement with Stock Exchanges)

Carborundum Universal Ltd. ("CUMI") offers ceramic materials-based solutions forindustrial applications. The major business segments and their product offering areas follows:

Business Segment Product Offering

Abrasives bonded and coated abrasivesCeramics industrial ceramics, bonded and electrocast refractoriesElectrominerals brown fused alumina grains, white fused alumina grains

and silicon carbide grains

CUMI - Business Distribution 2001-02

The industry analysis, CUMI's performance in 2001-02 and the outlook for 2002-03for each business segment are discussed in the following sections.

ABRASIVES



A. Industry Analysis

Abrasives are used in a variety of applications for material removal, polishing andfinishing. They are broadly of three types: bonded, coated and super abrasives.Bonded and super abrasives are, most commonly, in the form of wheels but also inother shapes such as segments, sticks etc. Coated abrasives are flexible abrasivesand are in the form of sheets, belts and discs.

Major end user industries for abrasives are automobile, automobile ancillaries,construction, woodworking and general engineering. There are two majormanufacturers in India. There are also several players specialising in niche products.

Broad characteristics of the industry are:

Diverse industrial applications●

Low threats from substitute products●

Adequate raw material availability●

Application engineering support to users●

The key success factors in this industry are quality, cost and delivery.

B. CUMI in this industry

CUMI manufactures both bondedand coated abrasives. Abrasivemanufacturing facilities arelocated at Tiruvottiyur,Pallikaranai and Hosur (all inTamil Nadu) and GopalpurChandigarh in West Bengal.Except Gopalpur Chandigarh, allother locations are ISO 9002certified. The new clothprocessing facility in MaraimalaiNagar near Chennai supportscoated abrasives manufacture.The 3.825 MW windfarm in Tamil Nadu is a captive source of power for thedivision.

CUMI is the market leader in India in the abrasives industry.

C. CUMI's performance during 2001-02

Key Performance Data Rs. in lakhs

2001-02 2000-01

Segment Revenue 19856 20492Segment Operating Income 2827 3089



Market Scenario

Sales of abrasives registered a marginal drop of 3%.

In the domestic market, demand forabrasives declined mainly on account of theslow down in the major user industries viz.heavy vehicle, auto components andbearings and also because of the lowerspending on infrastructure projects.

Price realisation in lower end products wasunder pressure due to cheaper imports andcompetition from unorganised sector. Anew range of products was introduced tocounter this. A Central warehouse has beenestablished in Hosur in Tamil Nadu, toserve as the main distribution outlet for thecountry. This has helped to enhance productavailability in the market.

Exports also suffered a downturn, especially in the USA. However there was anincrease in coated abrasive exports which helped to mitigate the drop in bondedabrasives exports to a certain extent.

Manufacturing

During the year, concerted efforts were taken to lower production costs by processimprovements and loss reduction. Procurement costs were also reduced bypurchasing through reverse auctions. The Cellular Autonomous Production System(CAPS) has been completed at Tiruvottiyur which has helped to reduce productioncycle time. The imported automated belt line was fully stabilised and has enhancedthe capability to produce technical coated abrasive products and offer quickerdeliveries.

D. Developments & Outlook

The sluggish trend in the heavy vehicle, auto components and bearing industries,which commenced in the second half of the year 2000, continued during the wholeof 2001. There are signs of recovery in the user industries and demand is estimatedto grow by about 3-5% in 2002-03.

Threats to the domestic industry are in the form of competition from global playersin high-end application specific products and cheap imports in low end products.Price pressure and increasing customer expectation on quality and service levels arecontinuing challenges for this segment. CUMI, with its established position in themarket for quality products, strengths in product development and applicationengineering skills and strong distribution network is prepared to meet these



challenges.

CERAMICS


The ceramics division offers twoproduct lines viz. industrial ceramicsand refractories.

Industrial ceramics are high aluminaceramic products like grinding media,wear resistant liners, lined equipmentand metallised ceramic products.These products are used in industrieslike ceramic tiles, mineral processing,cement, power, defence and coalwasheries.

There are four major players in thedomestic industrial ceramics industry. Imports cater to a significant portion of thedomestic market. Key success factors in the industry are cost and technology.

Refractories are heat resistantproducts used in steel, glass, cement,petrochemicals, fertiliser and ceramicindustries. Steel, cement, insulator,carbon black and glass industries arethe major users of refractories.

The product range is very wide andno single manufacturer caters to theentire range of products. Each playerspecialises in specific products. Thissegment is also served by imports.Technology is the major barrier toenter this market. The key

requirements for success are technology, quality and customer support.


CUMI is one of the key players in the domestic industrial ceramics industry. Theindustrial ceramics plant is located at Hosur in Tamil Nadu and is ISO 9002certified.

In refractories, CUMI is present in the top end of the product line viz. superrefractories and electrocast refractories. In super refractories, CUMI operates in aniche segment. Apart from CUMI there are two other players. Capital investmentand technology are barriers to enter this segment.



Super refractories are manufactured at Ranipet in Tamil Nadu and electrocastrefractories at Palakkad in Kerala. Ranipet plant is ISO 9001 certified and Palakkadplant is ISO 9002 certified. CUMI has exited from electrocast refractories and soldthe Palakkad unit in April 2002.

C. CUMI's performance during 2001-02

Key Performance Data Rs. in lakhs

2001-02 2000-01

Segment Revenue 5235 4599Segment Operating Income 816 657

Market Scenario

During the year, turnover increased by 14%.

In industrial ceramics, significant strides were made in the domestic wear resistanceand engineered ceramics markets. Higher demand from the major user industrieshelped to increase turnover by 32%. In the overseas markets, the Companystrengthened its presence and thereby doubled export turnover.

In refractories, sales increased by about 5% mainly due to increase in exports. Mostof the customers faced a challenging environment in terms of cost pressures,consolidation and international competition. Efforts to introduce new products forthe aluminium and electro-ceramics sectors have made good progress. Pricerealisations were maintained despite competitive pressures.

Manufacturing

Operating margins were increased by optimal raw material selection, reduction inrejection rates and intensive use of SPC/SQC techniques for quality control. Furtherin the industrial ceramics unit, an order update system and advance orderinformation system for resourcing were adopted which has helped to reducelead-time.


There was moderate growth in the domestic market for industrial ceramics in2001-02. With its widened customer base and its marketing alliances for power andcement projects this business is expected to grow next year.

Opportunities in the super refractories industry would come through high value,high performing refractories supported by design and application engineering.Threats are seen from consolidation of global players who have branded products,access to overseas process designers and R & D support. CUMI is focussing onproviding knowledge and service in these product lines.

ELECTROMINERALS




In electrominerals industry,CUMI is engaged in themanufacture of aluminiumoxide and silicon carbide.These are mainly used by theabrasive and refractoryindustries. They are also usedin shot blasting for surfacepreparation and certain otherindustrial applications. Thefortunes of this business arelinked to that of the abrasiveand refractory industries.

In the domestic market there are three major manufacturers for electrominerals. Thedomestic market is also catered to by imports from China.

The key success factors in this industry are cost and quality. Entry barriers are highcapital investment, limited market and technology. Availability of alternatives andproduct differentiation are the main challenges in this segment.


CUMI manufactures three varieties of electrominerals viz. brown fused alumina,white fused alumina and silicon carbide. CUMI is the market leader in the domesticmarket for brown and white fused alumina.

Brown fused alumina and white fused alumina are manufactured at Edapally inKerala and silicon carbide at Koratty in Kerala. Both plants are ISO 9002 certified.The bauxite for brown fused alumina is mined at Bhatia and then calcined at Okha(both in Gujarat). Hydel power generated at Maniyar is a captive source of powerfor this division.

Captive sales to the abrasives and refractory units account for about 40 - 50% of theoutput of this division.

C. CUMI's performance during 2001-02Key Performance Data Rs. in lakhs

2001-02 2000-01

Segment Revenue -External

3494 3086

- Internal 2322 2845 Segment Operating Income 963 716

Market Scenario



Sales registered a 13% increase. This was achieved by finding new applications forthe company's products. Export turnover doubled mainly due to increase in exports

to Europe. Silicon carbide and white microgrits have gained acceptance in Europeanmarble and granite polishing industry. New varieties of silicon carbide microgrits

for razor blade grinding wheels and wafer cutting applications have been introducedin the market.

Manufacturing

The division achieved higher operating profit despite a 25% increase in cost ofpower. This was achieved through improvement in manufacturing processes,

reduction in power consumption and focus on high margin products.

The Maniyar hydel plant generated 373 lakhs units as against 307 lakhs units lastyear. This is the second highest generation since inception. Modifications in the

intake tunnel which were carried out with the help of University of Roorkee,contributed to the improved performance.


During 2001-02, the domestic market has been sluggish across all product lines.The economy is showing signs of recovery and as a result the demand for grains is

likely to grow by about 5% in 2002-03.

Threat from cheap Chinese imports for brown fused alumina exists in the refractorysegment. The reduction in import duties has further accentuated this. Increase incost of calcined alumina and electricity are continuing concerns. The division,

through its culture of continuous improvements in operating efficiencies and energysaving initiatives, is keeping costs under control and is able to compete with

Chinese imports.

RISK MANAGEMENT

Risk is an inherent aspect of a business. The negative fall-outs of risks howeverneed to be managed through effective risk mitigation. An evaluation of CUMI's risk

exposure as perceived by the management is given below:

1. Business portfolio risk

a. User industry concentration

Abrasives are used across a wide variety of industrial segments. The business is notoverly reliant on any single sector and as such cyclicality in one industry does nothave any major adverse impact on CUMI's business. Automobile and automobileancilliaries do contribute to a significant portion of the sales and any downturn in

this sector does have an impact on abrasive sales. However a fair share of businesscomes from general engineering, building construction, woodworking and other

industries.

b. Client concentration



Excessive exposure to a few large clients has the potential to impact profitabilityand tends to increase business risk. The top 5 customers contribute only 1% of the

total revenue. Similarly the top 5 dealers contribute only 7.6% of total revenue.

c. Geographical concentration

Concentration in any one geographical area would make the business dependent onthe political and economic fortunes of that market. CUMI is primarily a nationalplayer. About 88% of the revenue is derived from the Indian market. As such itsbusiness is dependent on the economic climate in India. However within India,

CUMI's customers are spread across all four regions viz. north, south, west and east.In order to mitigate this risk and with an ambition of becoming a more significant

player in the global market, CUMI has been addressing the export marketsaggressively. This effort has been paying off with export revenue increasing steadilyin the last 5 years - from 6% of total sales in 1997-98 to 11% during 2001-02. Even

in the export market, sales are spread across USA, Europe, South East Asia andAustralia.

d. Technology obsolescence

CUMI initially received its technology inputs from its foreign collaborators viz.Carborundum Co. Inc., USA and Unicorn Industries plc., U.K. Even at that time,

CUMI had set up its own R & D centre and by 1992 when the collaboratorsdivested their holding, the R & D centre had acquired a significant degree of

maturity. Over the years, CUMI's technical team has been continuously making itsown developments in the abrasives technology and quite a few of CUMI's productsare best in class. CUMI has also set up pilot plants and product application centres

to facilitate new product development.

Recognising that technology would be one of the main business drivers in the futurebusiness environment, CUMI has restructured and strengthened its technology teamwith doctorates in material sciences. CUMI also works with renowned Universities

and research institutions to supplement its in-house R & D efforts.

2. Financial Risks

a. Currency risk

These risks emerge from the potential upward and downward fluctuations in foreigncurrency.

CUMI's foreign exchange spending currently constitutes only 43% of its total exportearnings. As a net foreign currency earner, CUMI has a natural hedge on all foreign

exchange related payments. Hence the magnitude of this risk is relatively small.

b. Leverage risk

This risk emerges when the proportion of debt in relation to the capital employed ishigh. CUMI's debt constitutes only 41% of the total capital employed and as such



this risk is within limits.

c. Liquidity risk

This represents the ability of the Company to meets its liabilities on time. Theability to pay on time is largely determined by timely collection of receivables.

CUMI has a wide customer base. Consequently its liquidity will not be adverselyaffected by defaults by few customers. Further CUMI's low gearing and the P1+

rating from CRISIL gives it ready access to short term funds.

3. Legal and statutory risks

a. Contractual Liabilities

This refers to risks arising out of contracts that impose onerous responsibilities.CUMI does not have any such contracts and is not tied to any third party

indefinitely with regard to sale or raw material sourcing. All major contracts aresubject to review by the in-house legal team. In addition reputed independent legalcounsel have been retained by the Company and their advice is sought whenevernecessary. Product liability insurance is also taken to cover potential claims from

customers.

b. Statutory compliance

Legal compliance is given due importance in CUMI's internal processes. CUMI hasin place an internal process for ensuring statutory compliance across the Company.

4. Process Maturity Risk

In order to reduce the uncertainties at the operating level, CUMI has put in placeTQM practices so as to ensure the efficacy of processes. All manufacturing

locations are also ISO certified. Enterprise Resource Planning (ERP) software hasbeen implemented to ensure data availability and accuracy.

5. Political Risk

Apart from generic government policies (like taxation, import, labour etc.) whichaffect all industries, there are no specific government policies that impact CUMI'sbusinesses.

As regards the economic policies of the government, the physical trade barriershave already been brought down and the tariff barriers are steadily being reduced.

As a result there is a threat of competition from foreign players. CUMI hasanticipated this and has been taking necessary steps to meet this. With its

established position in the market for quality products, strengths in productdevelopment and application engineering and strong distribution network, CUMI is

prepared to meet these challenges.

FINANCE

Easy liquidity and falling interest rates were the features of the Indian money



market in 2001-02. CUMI raised a sum of Rs.20 crores by issue of long termsecured debentures in the last quarter of the year for the purpose of restructuring

existing debt. The benefits in the form of lower finance charges, would be derivedin 2002-03.

Since commercial paper as a source of finance was cheaper than conventional bankcredit, CUMI was actively engaged in the commercial paper market to finance its

working capital requirements. The Company continued to enjoy CRISIL s P1+rating for its commercial paper programme.

HUMAN RESOURCES

Proactive and collaborative approach towards industrial relations supported by apositive mindset amongst all employees ensured cordial employee relations at all

locations. During this period, mutually beneficial long-term agreements were signedat Edapally - Plant II and Pallikaranai. Effective HR interventions ensured a smooth

closure of Varvala operations.

Employee involvement continued to be a thrust area at all locations focussing onwaste reduction, productivity improvement and process improvement through Small

Group Activities (SGA) and Cross Functional Teams (CFT). Development ofidentified behavioural and functional competencies was initiated through individual

and instructor-led learning.

These initiatives together with the resolve and commitment of all employeesfacilitated performance across all businesses despite a tough market situation.

The total employee strength at the end of the year was 1983.

INTERNAL CONTROL

CUMI has an established framework of internal controls for ensuring optimal use ofresources and safeguarding of assets.

Clear policies have been laid down for the approval and control of expenditure.Investment decisions involving capital expenditure are subject to formal detailed

appraisal and review according to approved levels of authority. Capital and revenueexpenditure is monitored and controlled with reference to approved budgets.

The internal audit department conducts audit to ensure adequacy of internal controlsystem and adherence to policies and procedures. The Audit Committee reviews thefunctioning of the internal audit department.






CAUTIONARY STATEMENT

This communication contains statements relating to future business developmentsand economic performance that constitute forward looking statements . While these

forward looking statements represent the company's judgements and futureexpectations, a number of factors could cause actual developments and results to

differ materially from expectations. The Company undertakes no obligation topublicly revise any forward looking statements to reflect future events or

circumstances.

Further the risks outlined in the risk management section are not exhaustive andthe evaluation of risk exposure is solely based on management s perception.

Investors are requested to exercise their own judgement in assessing various risksassociated with the Company.

CUMI's ASSOCIATES / JOINT VENTURES A performance summary

Wendt India Ltd. ("Wendt India")

Wendt India is a joint venture with Wendt GmbH, Germany. The Companyprimarily supplies super abrasives (Diamond and CBN grinding wheels & tools)and special purpose machines. The association with Wendt India allows CUMI tooffer its customers the full range of abrasive products viz. conventional and superabrasives. Wendt India has achieved a turnover of Rs. 23 crores and a profit after

tax of Rs. 3.6 crores in 2001-02. A dividend of 125% has been recommended for theyear.

Murugappa Morgan Thermal Ceramics Ltd. ("MMTCL")

MMTCL is a joint venture with Morgan Crucible Co. plc., U.K. The Company is inceramic fibre business, which is a refractory material. The Company serves iron andsteel, power, petrochemicals, ceramics and furnace building industries. As CUMI isalso in refractories business there are synergies between MMTCL and CUMI. TheCompany achieved a turnover of Rs. 24 crores during 2001 and profit after tax of

Rs.2.94 crores. A dividend of 45 % has been declared for the year.

Ciria India Ltd. ("Ciria India")

Ciria India is a joint venture with Morgan Crucible Co. plc., U.K. The Company isin the business of design and installation of refractory liners for the petrochemicaland fertiliser industries. During 2001-02, the Company has earned a profit after tax

of Rs. 39 lakhs on a revenue of Rs. 246 lakhs. A dividend of 60% has beenrecommended for the year.

Southern Energy Development Corporation Ltd. ("SEDCO")

SEDCO was set up by CUMI in association with other Murugappa Group



Companies. The Company operates a 5 MW natural gas based power plant in TamilNadu. During 2001-02, the power plant generated 356 lakh units. CUMI and otherMurugappa Group Companies use the power generated by the plant. The estimated

profit after tax for the year is Rs. 2.90 crores.

for Carborundum Universal Ltd.

Chennai26th June 2002





Annexure to the Directors' Report(Pursuant to Section 217 (1)(e) of the Companies Act, 1956)

CONSERVATION OF ENERGY

The major initiatives during the year for conservation of electricity and fuel were:

cycle time reduction in pot furnaces●

optimisation of fusion process in silicon carbide manufacture●

introduction of mixed fuel burner system for the rotary kiln●

modifications to the thermic fluid boiler●

installation of energy efficient pulveriser for manufacture of bonds●

optimising dust collector utilisation●

The steps taken during the year for conservation of electrical energy and fuel involved both process changes andadditional investments to the tune of Rs.56 lakhs. These are expected to yield savings of about Rs.109 lakhs perannum.

Energy conservation measures planned for 2002-03 includes cycle time reduction in certain furnacing operations,feedback control system for pot and tilt furnace, recycling furnace cooling water, optimising dust collector system,modifications to compressed air lines and rationalising power packs in hydraulic presses. These involve an outlayof Rs.61 lakhs and are expected to yield savings of about Rs.54 lakhs per annum.

RESEARCH & DEVELOPMENT

Efforts in brief

Efforts were mainly directed towards development of new products and process changes for quality improvement.

Benefits derived

As a result of the R & D efforts, the abrasives division introduced a new range of grinding wheels usingsemi-friable and sol-gel grains. In electrominerals, R & D efforts resulted in the performance improvement ofbrown fused alumina grains and development of high cubic partially stabilised zirconia which is an importsubstitution product. The pilot plant set up in connection with the R & D project for ceramic colours has beencompleted and the initial testing of products at the users end is in progress.

Future Plans

R & D efforts will continue to be focused on development of new products. Plans are in place to develop newvarieties of grinding wheels and coated abrasives products. Efforts would be made to identify specific areas ofapplication for sol gel coated alumina grains and commercialise the new grains developed during the year. Asregards the ceramic colour R & D project, the plan is to stabilise the pilot plant based on feedback from users andtake the project to commercial scale.

Annexure to the Directors' Report


Expenditure on R & DRs. in lakhs

Capital 329Recurring 280Total 609Total expenditure as a percentage of turnover 2.15%

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

In the electrominerals division, technology improvements have been made in bauxite calcination process and in theprocess for recovery of crude from brown fused alumina pig. New applications for brown and white fused aluminahave also been developed. In the abrasives division, CNC grinding has been adopted for ball wheel finishing and anon-contact cloth pressing line has been commissioned.

IMPORTED TECHNOLOGY

The technology for manufacture of new generation monolithics for steel plants was sold in July 2000 along withthe sale of the Visakhapatnam plant and as such there is no information to be furnished in this respect. Apart fromthis there was no other technology imported during the last 5 years.

FOREIGN EXCHANGE EARNINGS AND OUTGO

Exports continued their robust growth of the past. A growth of 24% was registered during the year. Thoughexports of abrasives took a downturn due to the recession in the USA, it was more than offset by the growth inother segments viz. electrominerals and ceramics. Entry has been gained into new markets. Several products havebecome well-established in European markets. During 2002-03 efforts would be made to enter new markets andconsolidate the position in existing markets

Rs. in lakhs

Foreign Exchange Earnings 3006Foreign Exchange Outgo 1307

ENERGY CONSUMPTION FOR REFRACTORIES

A. Power and fuel consumption

31.3.2002 31.3.2001

a. Electricity i Purchased Units (Kwh) 7059332 6483885 Total amount (Rs. lakhs) 247.30 228.86 Rate per unit (Rs.) 3.50 3.53

ii. Own (Through Diesel Generator) Units (Kwh) 41086 49414 Units per litre of diesel oil 2.40 1.97 Cost per unit (Rs.) 7.61 8.24

b. Fuel *



Quantity (litres) 704190 712796Total cost (Rs. lakhs) 98.86 102.13Rate per unit (Rs.) 14.04 14.33

B. Consumption per tonne of production

Electricity (Kwh) * Fuel (Ltrs)

Product 2001-02 2000-01 2001-02 2000-01

Electrocast Refractories 3506 4016 - -Super Refractories 769 656 622 569

* Fuel includes diesel and kerosene




Annexure to the Directors' Report(Pursuant to Section 217 (2A) of the Companies Act, 1956)

Name and Age Designation /Nature of

duties

GrossRemuneration

Rs

Qualification Experience(Years)

Date ofcommencementof employment

Previousemployment

1 2 3 4 5 6 7

Kailash Agnani (55) Executive ondeputation

14,12,891 M.Sc.(Geology)

33 01.10.1985 Asst. SalesManagerG.K.WilliamsLtd.

Kishore N (49) Vice President-Manufacturing

15,03,907 M.Tech.(Indl.Engineering)

24 16.06.1995 Dy. GeneralManagerEID Parry(India) Ltd.

Partho S Datta (53) Executive ondeputation

48,97,443 B.Com.(Hons)C.A.

29 19.08.1998 Director &CFOIndianAluminiumCompany



Ramesh Agarwal (56) President &WholetimeDirector

31,13,974 B.Sc.(Engineering)

35 27.01.2000 VicePresidentWendt IndiaLtd.

Ramesh K V (44) Vice President- Huecera

14,58,708 B.Sc.,B.E.,MBA

20 09.05.1996 PrincipalConsultant,TexasInstruments,Dallas, USA

Ravi P R (50) Vice President- Finance

14,90,682 B.Sc.,AICWA,MBA

28 07.02.1990 Dy. FinanceManagerMadrasFertilisersLtd.

Sitharam Koka (50) Executive ondeputation

15,08,711 B.Sc.,P.G.Dip.inBusinessMgmt.

28 01.10.1985 RegionalSalesManagerBakeliteHylam Ltd.

Subramaniam B (50) Vice President-Technology

12,94,240 B.E.(Metallurgy)

25 06.08.1976 EngineerComincoLtd.

Sukumaran P P (48) Vice President-H R & TQM

19,97,630 B.Sc., M.S.W. 24 22.06.1995 Asst. Gen.Manager -H.RTVSElectronicsLtd.

Part of the year

Murugappan M V (67) ExecutiveChairman

21,56,531 B.Sc.(Hons.) 45 14.06.2000 Chairman &ManagingDirectorCarborundumUniversalLtd.

Murugappan M M (47) WholetimeDirector

5,18,287 B.Tech.,M.Sc.(ChemicalEngg.)

24 01.02.2002 WholetimeDirectorParry AgroIndustriesLtd.



Srinivasan K (44) Vice President-Marketing

2,07,712 B. Tech.(Mech.)

22 30.01.2002 VicePresidentWendt(India) Ltd.

Note:

1. Remuneration has been calculated in accordance with clarification given by the Department of CompanyAffairs in their circular No.23/76 (No.8/27) (217A/75-CLV) dated 6th August 1976. Accordingly, perquisiteshave been valued in terms of actual expenditure incurred by the company in providing benefit to the employeesexcept in cases where the actual amount of expenditure cannot be ascertained with reasonable accuracy and insuch cases a notional amount as per Income Tax Rules has been added.

2. The above mentioned employees are not relatives (in terms of the Companies Act, 1956) of any director of theCompany.

3. No employee of the Company is covered by the provisions of Sec.217(2A)(a)(iii) of the Companies Act, 1956.

4. a) Mr. M V Murugappan was appointed by the resolution of shareholders for the period 14.6.2000 to31.5.2005. Mr. M V Murugappan relinquished his executive position with effect from the close of businesson 31.1.2002. He however continues as non-executive Chairman.

b) Mr. M M Murugappan was appointed as Wholetime Director of the Company by Board resolution dated1.2.2002 for a period of 5 years commencing from 1.2.2002. Approval of the shareholders is being soughtfor his appointment and remuneration at the forthcoming Annual General Meeting.

c) Mr. Ramesh Agarwal was appointed by resolution of shareholders for a period of 5 years commencing from27.1.2000. As an employee of the Company, he is also governed by the service conditions as applicable toall other employees.

d) In respect of all other employees their nature of employment is contractual. Other terms and conditions areas per company's rules.







Corporate Governance ComplianceReport

To the members of Carborundum Universal Ltd.

We have examined the compliance of conditions of Corporate Governance byCarborundum Universal Ltd., for the year ended on 31st March 2002, as stipulatedin Clause 49 of the Listing Agreement of the said company with stock exchanges.

The compliance of conditions of corporate governance is the responsibility of themanagement. Our examination was limited to procedures and implementationthereof, adopted by the company for ensuring the compliance of the conditions ofCorporate Governance. It is neither an audit nor an expression of opinion on thefinancial statements of the company.

In our opinion and to the best of our information and according to the explanationsgiven to us, we certify that the company has complied with the conditions ofCorporate Governance as stipulated in the above mentioned Listing Agreement.

We state that no investor grievance in pending for a period exceeding one monthagainst the Company as per the records maintained by the Investors GrievanceCommittee.

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

For FRASER & ROSSChartered Accountants


K.N. RAMASUBRAMANIANPartner

Corporate Governance Report(Pursuant to clause 49 of the Listing Agreement)

The Directors have pleasure in presenting the Corporate Governance Report for theyear ended 31st March 2002.

Corporate Governance Compliance Report


1. CORPORATE GOVERNANCE PHILOSOPHY

Carborundum Universal Limited ("CUMI"), as a constituent of the MurugappaGroup, is committed to the highest standards of corporate governance in all its

activities and processes. CUMI looks at corporate governance as the cornerstone forsustained superior financial performance, for serving all the stakeholders and for

instilling pride of association. Apart from drawing from the various legalprovisions, the group practices are continuously benchmarked in terms of the CII

code and international studies. The entire process begins with the functioning of theBoard of Directors, with leading professionals and experts serving as independentDirectors and represented in the various Board Committees. Systematic attempt ismade to eliminate informational asymmetry between executive and non-executive

directors.

Key elements in corporate governance are transparency, internal controls, riskmanagement, internal/ external communications and high standards of safety andhealth. The Board has empowered responsible persons to its broad policies and

guidelines and has set up adequate review processes.

2. BOARD OF DIRECTORS

a) Composition

The Board comprises of 10 members who bring in a pool of collective knowledgefrom various disciplines like engineering, finance, law and business management.

The Board has been constituted in a manner, which will result in an appropriate mixof executive and independent directors. This has been done to preserve the

independence of the Board and to separate the Board functions of governance andmanagement.

b) Board Meetings

The Board has a formal schedule of matters reserved for its consideration anddecision. These include setting performance targets, reviewing performance,

approving investments, ensuring adequate availability of financial resources andreporting to the shareholders. Eight Board Meetings were held during the year i.e.

on 1st June 2001, 20th July 2001, 31st August 2001, 31st October 2001, 31stJanuary 2002, 1st February 2002, 4th March 2002 and 27th March 2002.

Name Category No. ofDirectorships /Chairmanships(excludingCUMI)

No. of otherCommitteememberships(excludingCUMI)

No. ofBoard

meetingsattended

Attendanceat lastAGM



Mr. M VMurugappanChairman

Promoter &Non-ExecutiveDirector

7 (of which 4as Chairman)

Nil 7 Yes

Mr. S NTalwar

Non-Executive& IndependentDirector

57 (of which14 asChairman) b

10 (of which4 asChairman)

6 Yes

Mr. K NShenoy




6 Yes

Mr. JamesWhitehead


Nil Nil 3 Yes

Mr. S PNarayanan (Nominee ofICICI asdebenturetrustees) c


7 Nil 7 Yes

Mr. P NJambunathan(RepresentsLIC of Indiaas equityinvestor)


1 Nil 7 Yes

Mr. SubodhKumarBhargava




7 Yes

Mr. T LPalaniKumar


2 Nil 6 Yes

Mr. M MMurugappanWholetimeDirector

Promoter &ExecutiveDirector



8 Yes



Mr. RameshAgarwalPresident &WholetimeDirector

Non-Promoter& ExecutiveDirector

6 Nil 8 Yes

Includes only membership in Audit, Remuneration and Investors GrievanceCommittee.

.

This includes 26 directorships in private limited companies and 17 alternatedirectorships.

b.

Consequent to ICICI stepping down as debenture trustees, ICICI havewithdrawn their nominee Mr. S P Narayanan from the company's Board,effective 25th April 2002Mr. R J Shahaney retired from the Board at the last Annual General Meetingheld on 20th July 2001. He attended one board meeting during the financialyear.

c.

The Company has paid a sum of Rs.68,696 to Crawford Bayley & Co., Advocates& Solicitors (of which Mr. S N Talwar is a partner) for legal services renderedduring the year ended 31st March 2002.

The resume, nature of expertise and directorships and committee memberships ofthe directors proposed for reappointment at the forthcoming Annual GeneralMeeting is given in the Notice of the meeting.

3. BOARD COMMITTEES

The Board has set up the following committees as per the requirements of the codeof corporate governance:

a. Audit Committee

This committee has been formed to monitor and provide effective supervision of thefinancial control and reporting process. The terms of reference of the committee is

to review the financial reporting process, internal audit process, adequacy ofinternal control systems, management audit and risk management policies and also

to recommend the appointment of the statutory auditors and their remuneration.

The committee met on 5 occasions during the year. The chairman of the Board, thestatutory auditor, internal auditor and members of the senior management are

permanent invitees to the committee meetings. The names and attendance of thecommittee members are given below:

Name of member Meetings attended



Mr. K N Shenoy (Chairman) 4Mr. P N Jambunathan 5Mr. S P Narayanan 2

b. Investors Grievance Committee

The terms of reference of this committee encompasses formulation of investorsservicing policies, looking into redressal of investors complaints like delay in

transfer of shares, non receipt of balance sheet and non receipt of dividend warrants.The committee is also empowered to decide on any other matter as may be required

in connection with the investors servicing or redressal of their grievances.

The committee has laid down norms for investor services. The committee alsomonitors investor servicing on a continuous basis by receiving monthly reports from

the Company Secretary. In addition the Committee met on 2 occasions during theyear.

The names and attendance of the committee members are given below:


Mr. S P Narayanan (Chairman) 2Mr. M M Murugappan 2Mr. Ramesh Agarwal 2

Mr. R J Shahaney was the Chairman of the Committee until his retirement on20.7.2001. Mr. Ramesh Agarwal was inducted in his place.

The Board has appointed Mr. S Dhanvanth Kumar, Company Secretary as theCompliance Officer for the purpose of compliance with the requirements of theListing Agreement.

33 complaints have been received from shareholders during the year. All of themhave been resolved to the satisfaction of the shareholders. There were no sharetransfers pending as on 31.3.2002.

c. Remuneration and Nomination Committee

This committee has been formed to recommend to the Board theappointment/reappointment of the executive and non-executive directors, theinduction of Board members into various committees and the remuneration packageof the executive director(s). The committee has also been empowered to determinethe periodic increments in salary and annual incentive of the executive directors.This committee comprises entirely of independent directors. The committee met on3 occasions during the year. The names and attendance of committee members aregiven below:




Mr. K N Shenoy (Chairman) 3Mr. Subodh Kumar Bhargava 3Mr. T L Palani Kumar 3

Mr. R J Shahaney was a member of the Committee until his retirement on20.7.2001. He attended one meeting during the year.

d. Share Transfer and Finance Committee

This committee approves transfer, transmission, transposition, splitting,consolidation of shares and debentures, issue of duplicate certificates, demat/rematrequests, allotment of debentures and creating security for the same. The committee

met on 24 occasions during the year. The names and attendance of committeemembers are given below:


Mr. M V Murugappan (Chairman) 24Mr. M M Murugappan 20Mr. Ramesh Agarwal 14

Mr. R J Shahaney was also a member of the committee until his retirement on20.7.2001. He attended 5 meetings during the year.

4. DIRECTORS REMUNERATION

a. Policy

The compensation of the executive directors comprises of a fixed component and aperformance incentive by way of commission. The compensation is determined

based on levels of responsibility and scales prevailing in the industry. Thecommission is determined based on certain pre-agreed performance parameters. The

executive directors are not paid sitting fees for any Board / Committee meetingsattended by them.

The compensation of the non-executive directors takes the form of commission onprofits. Though the shareholders have approved payment of commission upto 1% of

net profits of the Company for each year calculated as per the provisions of theCompanies Act, 1956, the actual commission paid to the directors is restricted to a

fixed sum. This sum is reviewed periodically taking into consideration variousfactors such as performance of the Company, time spent by the directors for

attending to the affairs and business of the company and extent of responsibilitiescast on directors under general law and other relevant factors. Further the aggregatecommission paid to all non-executive directors is well within the limit of 1% of the

net profits as approved by the shareholders. The non-executive directors are alsopaid sitting fees as permitted by government regulations for every Board /

Committee meeting attended by them.



b. Remuneration paid during 2001-02

i. Non-Executive Directors (Rs. in 000's)

Name Sitting fees Commission

Mr. M V Murugappan 40 24(from 1.2.2002 to 31.3.2002) Mr. S. N. Talwar 30 1,50Mr. R J Shahaney (retired on 20.7.2001) 35 46Mr. K N Shenoy 75 1,50Mr. M M Murugappan (from 1.4.2001 to 31.1.2002) 1,20 1,26Mr. S. P Narayanan (paid to ICICI) 55 1,50Mr. P N Jambunathan (commission paid to LIC) 60 1,50Mr. James Whitehead 15Mr. Subodh Kumar Bhargava 50 1,50Mr. T L Palani Kumar 55 1,50

ii. Executive Directors (Rs. in 000's)

Name Fixed ComponentVariable

Component(d)

Salary &

AllowancesRetirement

benefitsOther

benefitsCommission /

Incentive

Mr. M V Murugappan(a) 13,24 18 8,14

Mr. M M Murugappan(b) 4,30 86 2

Mr. Ramesh Agarwal(c) 18,60 3,40 2,81 6,34

Notes

Mr. M V Murugappan was appointed by shareholders as wholetime directorfor the period 14.6.2000 to 31.5.2005. He resigned as wholetime director

effective 31.1.2002. He however continues as a non-wholetime director andas Chairman of the Board. His commission is based on the net profits of the

Company (i.e. 1% of the net profits subject to a ceiling of annual salary).

.

Mr. M M Murugappan was appointed by the Board as wholetime director fora period of 5 years commencing from 1st February 2002. As provided underthe Companies Act, the approval of the shareholders is being sought for his

b.



appointment at the forthcoming Annual General Meeting.

Mr. Ramesh Agarwal was appointed by the shareholders as wholetimedirector for a period of 5 years commencing from 27.1.2000. As an employeeof the Company, he is governed by the service conditions as applicable to all

other employees. His annual incentive is based on a balanced scorecardwhich comprises of financial, operational and human resource performance

parameters.

c.

Represents commission / incentive paid in 2001-02 in respect of the financialyear 2000-01.

d.

The Company does not have any stock option scheme and as such no stock optionshave been issued to directors.

5. GENERAL BODY MEETINGS

a. Last 3 Annual General Meetings

Year Date Time Venue

1998-1999 28.07.1999 4.00 PM T T K Auditorium, MusicAcademy,168 (Old No. 306) T T KRoad,Royapettah, Chennai 600014

1999-2000 26.07.2000 3.30 PM - do -2000-2001 20.07.2001 3.30 PM - do -

b. Resolutions passed by Postal Ballot

In December 2001, a resolution under Section 293(1)(a) for sale of the electrocastrefractories undertaking at Palakkad in Kerala was passed by postal ballot. Thepostal ballot was conducted by Mr. R Sridharan who is a practising CompanySecretary and a council member of the Southern India Regional Council of the

Institute of Company Secretaries of India. The postal ballot was conducted as perthe procedure laid down in the Section 192A of the Companies Act, 1956 read withthe Companies (Passing of Resolutions by Postal Ballot) Rules, 2001. 1265 ballots

representing 46,47,664 shares were "For" the resolution. 39 ballots representing5,546 shares were Against the resolution. 52 ballots representing 6,305 shares were

"Invalid".

6. DISCLOSURES

There were no materially significant related party transactions during the yearhaving conflict with the interests of the Company.

.

There have been no non-compliance by the Company or penalty or strictureb.



imposed on the Company by the Stock Exchange or SEBI or any statutoryauthority, on any matter related to capital markets, during the last 3 years.

7. MEANS OF COMMUNICATION

The quarterly/half yearly unaudited financial results and the annual audited financialresults are published in Business Standard and Dinamani. Press releases are given to

all important dailies. The financial results and the press releases are posted on thecompany's website i.e. www.cumi.co.in. The Company has mailed the half yearly

report alongwith the unaudited financial results for the six months ended 30thSeptember 2001 to all shareholders.

8. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A management discussion and analysis report is annexed to the Directors Report.

9. NON MANDATORY REQUIREMENTS

The Board has constituted a Remuneration and Nomination Committee. Theterms of reference of this Committee is given in para 3 (c) above.

i.

The Company has complied with the requirements of postal ballot in respectof the sale of the Palakkad Unit.

ii.

Half yearly financial results were sent to individual household ofshareholders.

iii.

10. GENERAL SHAREHOLDER INFORMATION

This is annexed to this Report.







General Shareholder Information(Pursuant to clause 49 of the Listing Agreement)

1. Registered Office of the Company

'TIAM House', 72 (Old No. 28), Rajaji Salai, Chennai 600 001

2. Forthcoming Annual General Meeting

Wednesday, the 31st July 2002 at 3.30 pm at T T K Auditorium, MusicAcademy,

168 (Old No. 306), T T K Road, Royapettah, Chennai 600 014

Last date for receipt of proxy forms 29th July 2002

3. Financial Calendar (tentative and subject to change)

Annual General Meeting 31st July 2002Financial reporting for the first quarter ending June 30, 2002 31st July 2002Financial reporting for the second quarter ending September30,2002

25th October 2002

Financial reporting for the third quarter ending December 31,2002

2nd fortnight of January 2003

Financial reporting for the year ending March 31, 2003 May 2003

4. Book Closure Dates

Friday, the 19th July 2002 to Wednesday, the 31st July 2002 (both days inclusive)

5. Share Capital

The paid up capital of the Company was Rs.9,33,53,600 comprising 93,35,360 equity shares ofRs.10/- each. 40 equity shares relating to the amalgamation scheme are pending allotment.

6. Dividend

The Board of Directors have recommended a dividend of 75% (Rs.7.50 per equity share ofRs.10 each) and the same will be paid after declaration at the Annual General Meeting to those

General Shareholder Information


members whose names appear in the Register of Members on the date of Annual GeneralMeeting and in case of shares in dematerialised form, as per the details furnished byNSDL/CDSL. The warrants will be posted by 16th August 2002.

Instructions to shareholders

(a) Shareholders holding shares in physical form

Please notify the change in your address, if any, immediately and not later than19th July 2002 to enable the Company to forward the dividend warrants to yourpresent address. Members are also advised to intimate to the Company the detailsof their bank account to enable the same to be incorporated in the dividendwarrants. This would help to prevent any fraudulent encashment of the dividendwarrants.

(b) Shareholders holding shares in demat form

In respect of shareholders residing in Ahmedabad, Bangalore, Chennai, Hyderabad,Kolkata, Mumbai and New Delhi, the dividend would be remitted by ECS to yourbank account. The Company would advice you after completion of remittance ofdividend.

In respect of shareholders residing in other centres, the bank account detailsfurnished by your Depository Participants (DPs) would be incorporated in thedividend warrants and these would be mailed to your residence. If there is anychange in the bank account details kindly advice your DPs immediately about thechange.

Further, if there is any change in your address kindly advice to your DPsimmediately about the change.

(c) Furnishing Permanent Account Number (PAN)

As per provisions of the Income Tax Act, the PAN is required to be incorporated inthe TDS certificate. Shareholders who hold more than 133 shares and not eligible tofurnish form 15G are requested to furnish their PAN to the company as theirdividend would exceed Rs.1,000 and tax would be deducted at source.

7. Listing on stock exchanges and stock code

Stock Exchange Stock Code

National Stock Exchange CARBORUNIV -EQThe Stock Exchange, Mumbai 13375Madras Stock Exchange CRB

8. Market price data

Month Mumbai Stock Exchange National Stock Exchange



High Low High LowApril 2001 77.75 69.50 79.00 72.00May 2001 85.05 72.00 85.00 72.10June 2001 90.45 78.00 94.50 80.10July 2001 86.45 70.10 86.80 68.00August 2001 80.00 71.15 81.00 68.05September 2001 81.80 68.00 82.00 70.00October 2001 82.90 72.25 87.25 70.00November 2001 91.00 80.00 89.00 78.25December 2001 88.00 74.65 87.90 80.00January 2002 85.25 75.25 88.00 78.10February 2002 85.00 78.25 87.50 81.00March 2002 91.00 81.00 91.00 81.05

9. Performance in comparison with broad indices

CUMI PRICE vs. NIFTY(for the period April 01 to March 02)

CUMI PRICE vs. BSE Senex(for the period April 01 to March 02)



10. Share Transfer Process

The Company has an in-house Shares Department which processes all transfer and otherrequests. The Board has delegated the power to approve the transfers to the Share Transfer &Finance Committee and also to the Chairman and other members of the Committee individually.The transfers are approved atleast twice a month.

11. Shareholding Pattern/ Distribution

a. Shareholding Pattern as on 31.3.2002

Category % to total capital

Promoter Group 45.08Financial Institutions 27.63Non-resident (NRI s/OCBs/FIIs) 0.32Banks 0.02Mutual Funds 0.01Others 26.94

Total 100.00

b. Distribution of Shareholding as on 31.3.2002

Category No. of Holders % to total No. of Shares % to total

1-100 9,279 65.08 4,04,435 4.33101-200 3,207 22.49 5,52,997 5.92201-500 1,147 8.05 3,89,074 4.17501-1,000 290 2.03 2,11,593 2.271001-5,000 247 1.74 5,02,536 5.385001-10,000 24 0.17 1,71,469 1.84



Above 10,000 63 0.44 71,03,256 76.09

Total 14,257 100.00 93,35,360 100.00

12. Dematerialisation of shares

The Company has signed agreements with both National Securities Depository Limited (NSDL)and with Central Depository Services (India) Ltd., (CDSL) to provide the facility of holding andtrading of its equity shares in dematerialised form.

As per SEBI s instructions, the company's shares can be sold through stock exchanges only indematerialised form. Though there is a limited physical segment available the same is not veryactive and sales through this segment also suffers a discount to the normal market price.

As on date, 80,55,208 equity shares constituting 86% of the total paid-up capital of the companyhave been dematerialised.

13. Outstanding GDRs / ADRs etc.

The Company has not issued any GDR, ADR or any convertible instruments pending conversionor any other instrument likely to impact the equity share capital of the Company.

14. Address for correspondence

Compliance Officer Shares Department

S. Dhanvanth KumarCompany SecretaryCarborundum Universal Ltd.P.B. No.2272, Tiruvottiyur, Chennai 600 019Tel : (044) 5730566 Fax : (044) 5733280e-mail : [email protected]

Carborundum Universal Ltd.72 (Old No. 28), Rajaji Salai,Chennai 600 001Tel : (044) 5211652Fax : (044) 5230706e-mail: [email protected]

15. Plant Locations

Given in the back inside cover.



M V Murugappan

Chairman




Annexure to the Directors' Report(Pursuant to Section 217(2AA) of the Companies Act, 1956)

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors to the bestof their knowledge and belief confirm that:

in the preparation of the Profit & Loss Account for the financial year ended31st March 2002 and the Balance Sheet as at that date ( financial statements )applicable accounting standards have been followed;

●

appropriate accounting policies have been selected and applied consistentlyand such judgements and estimates that are reasonable and prudent have beenmade so as to give a true and fair view of the state of affairs of the companyas at the end of the financial year and of the profit of the company for thatperiod;

●

proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act,1956 for safeguarding the assets of the company and for preventing anddetecting fraud and other irregularities. (To ensure this, the company hasestablished internal control systems, consistent with its size and nature ofoperations. In weighing the assurance provided by any such system ofinternal controls its inherent limitations should be recognized. These systemsare reviewed and updated on an ongoing basis. Periodic internal audits areconducted to provide reasonable assurance of compliance with these systems.The Audit Committee meets at regular intervals to review the internal auditfunction);

●

the financial statements have been prepared on a going concern basis.●



M V Murugappan

Chairman




Auditors' Report(Pursuant to Section 227 of the Companies Act, 1956)

To the members of Carborundum Universal Ltd.

We have audited the attached Balance Sheet of Carborundum Universal Limited, asat 31st March, 2002 and also the Profit and Loss Account for the year ended on thatdate annexed thereto. These financial statements are the responsibility of thecompany's management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted inIndia. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. Webelieve that our audit provides a reasonable basis for our opinion.

As required by the Manufacturing and Other Companies (Auditor s Report) Order,1988 issued by the Central Government of India in terms of sub-section (4A) ofsection 227 of the Companies Act, 1956, we enclose in the Annexure a statement onthe matters specified in paragraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to above, we report that:

We have obtained all the information and explanations, which tothe best of our knowledge and belief were necessary for thepurposes of our audit;

i.

In our opinion, proper books of account as required by law havebeen kept by the company so far as appears from ourexamination of those books;

ii.

The Balance Sheet and Profit and Loss Account dealt with bythis report are in agreement with the books of account;

iii.

In our opinion, the Balance Sheet and Profit and Loss Accountdealt with by this report comply with the accounting standards

iv.

Auditors' Report


referred to in sub-section (3C) of section 211 of the CompaniesAct, 1956;

On the basis of written representation received from thedirectors, as on 31st March, 2002, and taken on record by theBoard of Directors, we report that none of the directors isdisqualified as on 31st March 2002 from being appointed as adirector in terms of clause (g) of sub-section (1) of section 274of the Companies Act, 1956.

v.

In our opinion and to the best of our information and accordingto the explanations given to us, the said accounts give theinformation required by the Companies Act, 1956, in the mannerso required and give a true and fair view in conformity with theaccounting principles generally accepted in India:

in the case of the Balance Sheet, of the state of affairs ofthe Company as at 31st March, 2002; and

.

in the case of the Profit and Loss Account, of the profit forthe year ended on that date.

b.

vi.



K.N. Ramasubramanian

Partner

Annexure to the Auditors' Report

The Company has maintained records showing the cost and quantitativeparticulars and situation of fixed assets at divisions which are being updatedto include additions/deletions during the year. Physical verification of theseassets is conducted in a phased manner by the Management, which in ouropinion is reasonable, taking into account the nature of the assets and theresults of such verification have been properly dealt with in the books.

1.

The fixed assets of the Company have not been revalued during the year.2.

The stocks of finished goods, raw materials and stores and spares at alllocations have been verified by the Management at reasonable intervalsduring the year.

3.

The procedures of verification of stocks followed by the management, in ouropinion, are reasonable and adequate in relation to the size of the Companyand the nature of its business. The discrepancies between the physical stocksand book balances were not material in relation to the operations of the

4.

Auditors' Report


Company and have been properly dealt with in the books of account.

On the basis of our examination of stock records, we are of the opinion thatthe valuation is fair and proper and in accordance with the normally acceptedaccounting principles and is on the same basis as in the preceding year.

5.

The Company has not taken or granted any loans secured or unsecured , fromor to companies, firms and other parties listed in the register maintainedunder Section 301 of the Companies Act, 1956. We are informed that thereare no companies under the same management as defined under sub section(1B) of Section 370 of the Companies Act,1956.

6.

The parties to whom loans or advances in the nature of loans have been givenby the Company have been repaying principal amounts as stipulated and arealso regular in the payment of interest wherever applicable. Loans andadvances in the nature of loans given to employees are repaying the principalamounts as stipulated and are regular in payment of interest whereverapplicable.

7.

In our opinion and according to the information and explanations given to usduring the course of audit, there are adequate internal control procedurescommensurate with the size of the Company and the nature of its business forthe purchase of raw materials, stores, components, equipments, plant andmachinery, other assets and for the sale of goods.

8.

In our opinion and according to the information and explanations given to us,there are no transactions for sale of goods and materials made in pursuance ofcontracts or arrangements entered in the register maintained under Section301 of the Companies Act, 1956. The Company has purchased goods duringthe year exceeding Rs.50,000 or more in value from a Company in which theDirectors are interested and the prices paid for the goods are reasonableaccording to prevailing market conditions.

9.

As explained to us, the Company has a regular procedure for thedetermination of unserviceable or damaged stores, raw materials, finishedgoods and trading stocks at the end of the year and adequate provision hasbeen made in the accounts for the loss arising on the items so determined.

10.

In our opinion and according to the information and explanations given to us,the Company has complied with the provisions of Section 58 A of theCompanies Act, 1956 and the rules framed thereunder with regard to depositsaccepted from the public.

11.

In our opinion, reasonable records have been maintained for the sale anddisposal of realisable scrap. The Company has no by-products.

12.

In our opinion the internal audit carried out in-house and also supplementedby outside firm of Chartered Accountants is commensurate with the size andnature of its business.

13.

Auditors' Report


The Central Government has not prescribed maintenance of cost recordsunder Section 209(1)(d) of the Companies Act, 1956 for any of thecompany's products.

14.

According to the records of the Company, provident fund and employeesstate insurance dues have been regularly deposited with appropriateauthorities.

15.

According to the information and explanations given to us and the books andrecords examined by us, no undisputed amounts payable in respect of incometax, customs duty, excise duty and sales tax were outstanding as at 31stMarch 2002 for a period of more than six months from the date they becamepayable.

16.

According to the information and explanations given to us, no personalexpenses of employees or Directors have been charged to revenue accountother than those payable under contractual obligations or in accordance withgenerally accepted business practice.

17.

The Company is not a sick industrial Company within the meaning of clause(o) of sub-section (1) of Section 3 of the Sick Industrial Companies (SpecialProvisions) Act, 1985.

18.

In respect of service activities, the Company has, commensurate with the sizeand nature of its business, a reasonable system of:

recording receipts, issues and consumption of materials and stores andallocating stores and labour to relative jobs.

.

authorisation at proper levels and an adequate system of internalcontrol on issue of stores and allocation of stores and labour to jobs.

b.

19.



K.N. Ramasubramanian

Partner

Auditors' Report



Balance SheetAs at 31st March 2002

(Rs. in 000's)

Schedule Previous

Year 31.3.2001

SOURCES OF FUNDS SHAREHOLDERS FUNDS Capital 1 9,33,54 9,33,54

Reserves and Surplus 2 127,45,05 130,39,89

136,78,59 139,73,43

LOAN FUNDS Secured Loans 3 52,20,05 47,18,23

Unsecured Loans 4 49,01,84 49,28,38

101,21,89 96,46,61

Total 238,00,48 236,20,04

APPLICATION OF FUNDS FIXED ASSETS Gross block 223,66,15 210,00,29

Less: Depreciation 123,94,88 113,58,06

Net Block 5 99,71,27 96,42,23

Capital work-in-progress at cost 2,60,70 4,31,61

102,31,97 100,73,84INVESTMENTS 6 55,92,44 37,28,90CURRENT ASSETS, LOANS &ADVANCES

7

Inventories 38,31,10 43,81,10 Sundry Debtors 58,67,23 59,23,94 Cash & Bank Balances 10,35,64 5,96,82

Loans & Advances 19,57,86 19,08,26

Balance Sheet


http://www.cumi.co.in/che/cul/index.html

http://www.cumi.co.in/che/cul/2002/a0/000.html

126,91,83 128,10,12

Less : CURRENT LIABILITIES &PROVISIONS

8

Current Liabilities 28,55,53 31,72,15

Provisions 7,00,16 7,20,13

35,55,69 38,92,28

NET CURRENT ASSETS 91,36,14 89,17,84

Deferred tax asset 1,88,47 -

Deferred tax liability (20,37,15) -NET DEFERRED TAX LIABILITY (18,48,68) -MISCELLANEOUS EXPENDITURE

(Deferred revenue expenditure to the

extent not written off) 9 6,88,61 8,99,46

Total 238,00,48 236,20,04

SIGNIFICANT ACCOUNTING POLICIES 15 NOTES ON ACCOUNTS 16

Per our Report of even date

For Fraser & Ross M V Murugappan Ramesh AgarwalChartered Accountants Chairman President & Wholetime Director

K N Ramasubramanian S Dhanvanth Kumar M M MurugappanPartner Secretary Wholetime DirectorChennai 15th May 2002

Balance Sheet



Profit and Loss AccountFor the year ended 31st March 2002

(Rs. in 000's)

Schedule Previous Year 31.3.2001

INCOME Sales 283,37,42 285,71,54Other income 10 9,38,00 7,12,40Profit on sale of investments 33,73 -

Profit on sale of undertaking - 3,45,77

293,09,15 296,29,71

EXPENDITURE Raw materials consumed 68,74,70 74,92,89Employee cost 11 39,06,85 38,74,37

Other costs 12 91,43,96 89,80,75

Excise duty 35,03,17 36,82,58

Depreciation 11,70,06 11,44,80Less: Transfer from fixed assets revaluationreserve

5,32 7,51

11,64,74 11,37,29Interest and finance charges 11,54,68 11,30,40

(Accretion)/Decretion to stock 13 4,66,73 (2,44,01)

262,14,83 260,54,27

PROFIT BEFORE TAX 30,94,32 35,75,44Less: Provision for income tax Current tax 8,35,00 12,55,00

Deferred tax 1,07,09 -

PROFIT AFTER TAX 21,52,23 23,20,44

Profit and Loss Account




Add:Unappropriated profits from previousyear

9,21,08 9,20,77

Profit available for appropriation 30,73,31 32,41,21

APPROPRIATIONS Transfers to: General Reserve 12,00,00 7,00,00Investment Fluctuation Reserve - 4,00,00

Debenture Redemption Reserve 1,67,00 5,00,00

13,67,00 16,00,00

Proposed Dividend @ 75% (70%) 7,00,16 6,53,48

Dividend tax thereon - 66,65

7,00,16 7,20,13

Balance carried over to Balance Sheet 2 10,06,15 9,21,08

30,73,31 32,41,21

Earnings per share - Basic and Diluted (Rs.) -Face value Rs.10

23.05 21.03

SIGNIFICANT ACCOUNTING POLICIES 15

NOTES ON ACCOUNTS 14 & 16




Profit and Loss Account



SchedulesShare CapitalReserves And SurplusSecured LoansUnsecured Loans @Fixed AssetsInvestmentsCurrent Assets, Loans And AdvancesCurrent Liabilities And ProvisionsMiscellaneous ExpenditureOther IncomeEmployee CostOther CostsAccretion To StockQuantitative ParticularsAccounting PoliciesNotes on Accounts

Schedules

http://www.cumi.co.in/che/cul/2002/a0/012.html [1/14/2003 3:45:45 PM]






Cash Flow StatementFor the year ended March 31, 2002

(Rs. in 000's)

Previous year 31.03.2001

A. Cash flow from operatingactivities

Net profit before tax andextraordinary items

30,94,32 35,75,44

Depreciation 11,64,74 11,37,29 Interest and finance charges 11,54,68 11,30,40 (Profit)/Loss on sale of fixed assets(net)

26,14 11,76

Provision for doubtful debts andadvances

1,95,14 99,43

(Profit)/Loss on sale ofinvestments (net)

(33,08) 20,59

Profit on sale of undertaking - (3,45,77) Interest and dividend received (4,09,71) (1,98,80) Excess provision for expenses of earlier years released (43,37) (35,79) Excess provision of incentive towholetime

director in previous year (3,26) - Deferred revenue expenditure 2,51,49 3,24,99 Profit on exchange fluctuation (22,84) (28,43) Diminution in value of investments 25,67 23,05,60 66 21,16,33Operating profit before working capital changes 53,99,92 56,91,77Adjustments for: Trade and other receivables (2,28,69) (6,55,55) Trade payables (2,41,95) 2,51,96

Cash Flow Statement




Inventories 5,50,01 79,37 (77,17) (4,80,76)

Cash generated from operations 54,79,29 52,11,01Direct taxes paid (9,26,75) (11,02,48) Deferred revenue expenditure - Voluntary retirement scheme (40,64) (9,67,39) (9,85,89) (20,88,37)

Net cash flow from operatingactivities

45,11,90 31,22,64

B. Cash flow from investingactivities

Purchase of fixed assets (13,80,22) (11,87,21) ( including capital work inprogress)

Sale of fixed assets 25,89 21,72 Sale of undertaking - 7,69,98 Purchase of investments (19,44,73) (16,19,23) Sale of investments 88,59 15,03,89 Loans given to third parties (2,01,00) (34,95,00) Receipt of loans given to thirdparties

3,52,00 33,05,00

Dividend received 3,67,74 3,64,31

Interest received 46,22 62,62

Net cash used in investingactivities

(26,45,51) (2,73,92)

C. Cash flow from financingactivities

Buyback of shares (31,82,97)Borrowings 31,24,59 39,69,63Repayments on borrowings (26,49,31) (20,56,18)Interest paid (11,86,47) (11,93,06)Dividend paid (inclusive ofdividend tax)

(7,16,38) (8,15,78)

Net cash used in financingactivities

(14,27,57) (32,78,36)

Net increase/(decrease) in cash and cashequivalents 4,38,82 (4,29,64)

Cash and cash equivalents openingbalance:

Cash Flow Statement


Cash and bank balances 5,96,82 10,26,46Cash and cash equivalents closingbalance:

Cash and bank balances 10,35,64 5,96,82

4,38,82 (4,29,64)

M V Murugappan Ramesh Agarwal Chairman President & Wholetime Director

Chennai S Dhanvanth Kumar M M Murugappan15th May 2002 Secretary Wholetime Director

To

The Board of DirectorsCarborundum Universal LimitedChennai 600 001.

We have examined the above cash flow statement of Carborundum UniversalLimited, for the year ended 31st March 2002. The statement has been prepared bythe Company in accordance with the requirements of Clause 32 of the Listingagreement with Stock Exchanges and is based on and in agreement with thecorresponding Profit & Loss Account and Balance Sheet of the Company coveredby our report of 15th May 2002 to the members of the Company.


Chennai K N RAMASUBRAMANIAN15th May 2002 Partner

Cash Flow Statement



Schedule (1 to 2) SCHEDULE 1 SHARE CAPITAL

(Rs. in 000's)

Previous

Year 31.03.2001

AUTHORISED 1,60,00,000 equity shares of Rs.10 each 16,00,00 16,00,00

ISSUED AND SUBSCRIBED 1,21,03,160 (Previous year - 1,21,03,160) equity shares of Rs.10 each fully paid (Includes 1,78,713 (Previous year - 1,78,713) shares allotted as fully paid up for consideration other than cash pursuantto

contracts, 4,67,859 (Previous year - 4,67,859) shares allotted to shareholders of amalgamating companies and 72,29,624 (Previous year - 72,29,624) shares allotted as fully paid up bonus shares by capitalisation of share premium and general reserve) 12,10,32 Less Shares bought back 27,67,800 shares of Rs.10 each have been bought back at a price of Rs.115 per share from the share holders pursuant to the offer for buy-back of shares made during the year 2,76,78 93,35,360 equity shares of Rs.10 each fully paid 9,33,54 9,33,54

9,33,54 9,33,54

Schedule (1 to 2)


SCHEDULE 2 RESERVES ANDSURPLUS

As at 31st As at 31stMarch 2002 Deductions Additions March 2001

CAPITAL RESERVE Fixed assets revaluationreserve

3,44,59 7,33 2,01* 3,49,91

Capital subsidy 1,00,83 - - 1,00,83Profit on forfeiture of shares /warrants

60,25 - - 60,25

Capital redemption reserve 2,76,78 - - 2,76,78OTHER RESERVES General reserve 96,44,45 17,41,59@ 22,31,84# 91,54,20Debenture redemption reserve 9,12,00 10,31,84# 1,67,00 17,76,84Investment fluctuationreserve

4,00,00 - - 4,00,00

117,38,90 27,80,76 24,00,85 121,18,81Surplus as shown in Profitand Loss Account

10,06,15 9,21,08

127,45,05 130,39,89

# Transferred to General Reserve on completion of the prescribed statutory period @ Deferred tax liability as on 31.3.2001 transferred from General Reserve toDeferred tax liability a/c* Excess depreciation recouped in earlier years (vide note no.10 of Schedule 16)

Schedule (1 to 2)



Schedule (3 to 4) SCHEDULE 3 SECURED LOANS (Rs. in 000's)

Previous Year 31.03.2001

DEBENTURES * 15% Secured Non-Convertible Redeemable Debentures - 6,53,6727,23,638 debentures of Rs.70 each issued for cash at par (redeemable in three annual instalments of Rs.23, Rs.23and

Rs.24 respectively commencing from 9th November 1999) 13.75% Secured Non-Convertible RedeemableDebentures @

4,90,00 9,00,00

7,00,000 (Previous year 9,00,000) debentures of Rs.100each

issued for cash at par (redeemable in three annualinstalments of

Rs.30, Rs.30 and Rs.40 respectively commencing from 13th September 2001) 10,00,000 Secured Non-Convertible RedeemableDebentures of

Rs.100 each issued for cash at par comprising: Series A - 5,00,000 - 13.75% Debentures of Rs.100 each 5,00,00 5,00,00(redeemable in full on 1st August 2003) Series B - 5,00,000 - 14% Debentures of Rs.100 each - 5,00,00(redeemable in full on 1st August 2003. Subject to a putand call

Schedule (3 to 4)


option exercisable on 1st August 2001 which wasexercised)

10,00,000 Secured Non-Convertible Redeemable Debentures of Rs.100 each issued for cash at parcomprising:

Series 1 - 5,00,000 - 11% Debentures of Rs.100 each - 5,00,00(redeemable in full on 29th December 2002. Subject to aput and call

option exercisable on 29th December 2001 which wasexercised)

Series 2 - 5,00,000 - 11.47% Debentures of Rs.100 each (redeemable in full on 19th April 2002) 5,00,00 5,00,00 9.45% Secured Non-Convertible RedeemableDebentures #

20,00,00

20,00,000 debentures of Rs.100 each issued for cash at par (redeemable in three annual instalments of Rs.33,Rs.33and

Rs.34 respectively commencing from 4th January 2005) * Secured by mortgage on certain fixed assets and secondcharge on stocks

@ 2,00,000 debentures prematurely redeemed during theyear

# Pending creation of charge LOANS FROM BANKS CASH CREDIT 17,30,05 11,05,46(Secured by first charge on stock and book debts and a second charge on certain fixed assets)

52,20,05 46,59,13OTHER LOANS - Indian Renewable Energy Development Agency - 59,10

(Secured by bank guarantee / charge on specific fixedassets)

52,20,05 47,18,23

SCHEDULE 4 UNSECURED LOANS@

Fixed Deposits # 4,01,84 9,28,38Commercial Paper [Maximum amount during the yearRs.40,00,00

Schedule (3 to 4)


(previous year Rs.40,00,00)] 40,00,00 40,00,00Short term loan from bank 5,00,00 -

49,01,84 49,28,38

@ Includes maturing within one year 48,55,68 45,20,27# Includes unclaimed fixed deposits Rs.25,53 (Previousyear Rs.27,50)

Schedule (3 to 4)



Schedule (5)Schedule 5FIXED ASSETS

(Rs. in 000's)

Cost Depreciation Written DownValue

As on Additions As on As on Additions As on As on As on1.4.2001 (Deletions) 31.3.2002 1.4.2001 (Deletions) 31.3.2002 31.3.2002 31.3.2001

Goodwill 2,00 - 200 200 - 200 - -

TradeMark

1 - 1 - - - 1 1

Land

Freehold 3,75,38* - 3,75,38 - - - 3,75,38 3,75,38

Leasehold 13,87 - 13,87 - - - 13,87 13,87

Buildings 34,49,88* 2,75,56 37,23,68@ 13,00,24 79,46 13,79,41 23,44,27 21,49,64

(1,76) (29)

Plant &Machinery

163,72,87$ 11,13,76+ 173,61,14 96,79,44 10,31,08 106,13,01 67,48,13 66,93,43

(1,25,49) (97,51)

Furniture& Fixtures

5,06,90 58,91 5,24,16 2,52,57 37,71 2,60,28 2,63,88 2,54,33

(41,65) (30,00)

Vehicles 2,79,38 38,29 3,01,30 1,23,81 19,83 1,38,20 1,63,10 1,55,57

(16,37) (5,44)

Vehiclestaken onlease

64,61 64,61 1,98 1,98 62,63

Total 210,00,29 15,51,13 223,66,15 113,58,06 11,70,06 123,94,88 99,71,27 96,42,23

(1,85,27) (1,33,24)

Schedule (5)


PreviousYear

207,08,52 9,20,93 210,00,29 103,87,28 11,44,80 113,58,06

(6,29,16) (1,74,02)

+ Includes R & D equipments Rs.3,28,94@ Includes Rs.3,10,06 buildings on leasehold land* Land & Building added upto 31st August 1984 are stated as per revaluation done in that

year and Land & Building added upto30th November 1986 of Cutfast division are stated as per revaluation done in that year.

$ Net of subsidy received Rs.7,74

Schedule (5)



Schedule (6)Schedule 6INVESTMENTS

Quantity in Nos. Nominal Value (Rs. 000's)Value

1.4.2001 Additions Deletions 31.3.2002 (Rs.) 1.4.2001 Additions Deletions 31.03.2002

A LONG TERM : ATCOST

I) Quoted (Trade)

a. EQUITY SHARES(Fully Paid)

Wendt (India) Ltd. 3,98,676 3,98,676 10 1,03,60 1,03,60Parry Agro IndustriesLtd. 3,12,739 3,12,739 10 4,01,67 4,01,67

EID Parry (India) Ltd.* 100 100 10 7 7

CholamandalamInvestment

and Finance CompanyLtd. 2,02,936 2,02,836 100 10 54,79 54,76 3

The CoromandelEngineering Co. Ltd 42,900 42,900 10 4,29 4,29

Tube Investments ofIndia Ltd. 100 100 10 7 7

Parry s ConfectioneryLtd. 1,01,144 1,01,144 10 1,29,21 1,29,21

b. OTHERS Chola FreedomTechnology Fund 45,85,812 45,85,812 10 8,00,00 8,00,00

II) Quoted (Non-Trade)


Grindwell Norton Ltd. 100 100 10 3 3John Oakey MohanLtd. 1,900 1,900 10 50 50

Kartik InvestmentTrust Ltd. 24,240 24,240 10 2,68 2,68

Schedule (6)


Orient Abrasives Ltd. 225 225 10 2 2Unidiam AbrasivesLtd. 100 100 10 1 1

Uma MaheshwariMills Ltd. 9,000 9,000 10 5,40 5,40

Mahindra & MahindraLtd. 1,00,000 1,00,000 10 2,01,30 2,01,30

b. NON-CONVERTIBLEDEBENTURES

JK PharmaceuticalsLtd.

(Partly redeemed) 600 600 112 72 5 67c. OTHERS

UTI Units 64 5,47,697 9,890** 5,57,587 10 80,44 99 81,43Less Provision fordimunition in (25,67)

value of investments UTI Master Plus 1,000 1,000 10 13 1314% Tamil NaduGovernment Bonds 38,00 38,00

III) Unquoted (Trade)


TI Diamond ChainLtd. 9,96,400 9,96,400 10 6,00,83 6,00,83

Murugappa MorganThermal

Ceramics Ltd. 14,30,793 14,30,793 10 4,40,44 4,40,44MurugappaManagement

Services Ltd. 29,990 29,990 100 29,99 29,99Sterling Abrasives Ltd. 21,600 21,600 100 1,26,83 1,26,83Southern EnergyDevelopment

Corpn. Ltd. * 2,40,008 2,40,008 10 24,00 24,00Ciria India Ltd. 59,998 2 60,000 10 16,80 16,80Cumi EmployeesCo-operative

Society/Stores 32 32Co-operative HousingSocieties 1 1

b. EQUITY SHARES(Full-Paid)

Subsidiaries Cumi America Inc. 500 500 US$ 100 21,33 21,33ProdoriteAnticorrosives Ltd. 10,00,000 10,00,000 10 1,00,50 1,00,50

Schedule (6)


Net Access (India) Pvt.Ltd. 16,00,000 160,00,000 10 16000 1,60,00

c. REDEEMABLEPREFERENCE SHARES

New Ambadi Estates Pvt.Ltd.

2,00,000 2,00,000 100 2,00,00 2,00,00

Southern Energy Development Corpn.Ltd. * 3,00,000 3,00,000 100 3,00,00 3,00,00

IV) Unquoted (Non-Trade) a. EQUITY SHARES (Fully

Paid)

Cholamandalam FactoringLtd.

6,500 6,500 10 1,17 1,17

Indo-Holland Agri TechLtd.

10,000 10,000 10 1,00 1,00

Kalaivani Steel StructuresLtd.

2,000 2,000 10 20 20

Tichain Investments Pvt.Ltd.

5,000 5,000 10 50 50

Chennai WillingdonCorporate

Foundation 5+ 5 10

b. EQUITY SHARES (FullyPaid)

Subsidiaries Webword Holdings & Management Pvt. Ltd. 1,78,100 1,78,100 10 5,50,74 5,50,74

c. REDEEMABLEPREFERENCE SHARES

Webword Holdings & Management Pvt. Ltd. 12,33,000 12,33,000 100 12,33,00 12,33,00

d. OTHERS 7 Years National SavingsCertificate#

5 5

6 Years National Savings Certificate-8th issue 13 13National Savings Scheme 3 3GIC Fortune 94 4,00,000 4,00,000 10 40,00 40,00Kisan Vikas Patra 1 1UTI Venture Capital Unit Scheme 1990 - Veccaus II 1,120 1,120 1,00 1,12 1,12

B) LONG TERM : AT

VALUATION@

Quoted (Non-Trade) EQUITY SHARES (FullyPaid)

Schedule (6)


Uniplas India Ltd. 67,215 67,215 10 44 44 East Coast Steel Ltd. 500 500 10 Neha International Ltd. 500 500 10 1 1 Jay Flash Ceramics Ltd. 7,500 7,500 10 26 26

TOTAL 37,28,90 19,44,73 55,52 55,92,44

* Covered by a non-disposal undertaking to financial institutions Cost Market value# Deposited with Government (Previous year Rs.5) Quoted 17,43,44 14,69,06** Represents dividend reinvested as per the scheme of

investment

@ Net decretion of Rs.Nil made during the year (Previousyear Rs.66/-)

Unquoted 38,49,00

+ Shares allotted against earlier year's corporatemembership contribution

55,92,44

Schedule (6)



Schedule (7)Schedule 7CURRENT ASSETS, LOANS AND ADVANCES

(Rs. in 000's)


INVENTORIES Stock-in-trade (at lower of cost and net realisablevalue)

Raw materials 8,60,40 8,95,61Work-in-process 12,28,00 13,47,06Finished stock 12,99,49 16,47,16Goods-in-transit 43,49 54,33

Stores and spare parts 3,99,72 4,36,94

38,31,10 43,81,10SUNDRY DEBTORS (Unsecured)

Over six monthsConsidered good 5,44,46 2,36,09

Considered doubtful 3,96,05 2,96,33

9,40,51 532,42

Other debts - Considered good 53,22,77 56,87,85

62,63,28 62,20,27

Less: Provision for doubtful debts 3,96,05 2,96,33

58,67,23 59,23,94CASH AND BANK BALANCESCash and cheques on hand and remittances in transit 9,41,72 4,69,33Bank Balances :

Current account 70,95 1,00,97Unclaimed dividend account 20,51 16,77

Schedule (7)


Fixed deposits with banks 2,46 9,75

10,35,64 5,96,82LOANS AND ADVANCES (Unsecured) Advances recoverable in cash or in kind or for valueto be received

Considered good 9,22,86 9,70,71

Considered doubtful 55,99 58,12

9,78,85 10,28,83

Less: Provision for doubtful advances 55,99 58,12

9,22,86 9,70,71Deposits @:Considered good 7,06,08 7,08,80

Considered doubtful 60,80 60,80

7,66,88 7,69,60

Less: Provision for doubtful deposits 60,80 60,80

7,06,08 7,08,80

Deposits with IDBI 25 25Balances with Customs and Central ExciseAuthorities

1,16,98 1,08,56

Advance payments of Income Tax 55,93,96 46,67,21

Less : Provision for taxation 53,82,27 45,47,27

2,11,69 1,19,94

TOTAL LOANS AND ADVANCES 19,57,86 19,08,26

TOTAL CURRENT ASSETS, LOANS ANDADVANCES

126,91,83 128,10,12

@ Includes inter-corporate deposits of whichRs.51,00

2,74,80 4,25,80

is due from subsidiaries

Schedule (7)



Schedule (8 to 11)SCHEDULE 8CURRENT LIABILITIES ANDPROVISIONS

(Rs. in 000's)

Previous

Year

31.03.2001

CURRENT LIABILITIES

Sundry creditors # 24,30,90 27,69,88

Due to small scale industrialundertakings

1,66,76 1,79,31

(vide note no.7 of Schedule 16)

Due to directors 30,38 28,74

Unclaimed dividend 20,51 16,76

Interest accrued but not due on loans 1,45,67 1,77,46

Long term lease liability 61,31 -

28,55,53 31,72,15

PROVISIONS

Proposed Dividend 7,00,16 6,53,48

Dividend tax -- 66,65

7,00,16 7,20,13

35,55,69 38,92,28

Schedule (8 to 11)


# Includes unclaimed debentures and interest thereon 18,46 7,43

SCHEDULE 9 MISCELLANEOUSEXPENDITURE

Balance Incurred Written Balance

as on duringoff

duringas on

1.4.2001 the year the year 31.3.2002

Technical fees 95,81 - 36,08 59,73

ERP software 5,38 - 4,80 58

Public issue expenses of erstwhile 11,66 - 5,83 5,83

Cutfast Abrasive Tools Ltd.

Voluntary retirement scheme 7,86,61 40,64 2,04,78 6,22,47

8,99,46 40,64 2,51,49 6,88,61

Previous year 2,69,88 9,85,89 3,56,31 8,99,46

SCHEDULE 10OTHER INCOME

(Rs. in 000's)


From Investments (Trade) Dividend 3,02,62 78,73From Investments (Non-trade) Dividend 65,12 43,63

Interest on Government securities (Gross) 4,91 4,91

70,03 48,54

Schedule (8 to 11)


Interest - (Gross ) 37,06 71,53Commission income 25,49 85,29Service income 58,37 50,53Profit on sale of fixed assets 4,01 6,17Rent 10,37 10,97Scrap sales/Miscellaneous sales 1,73,08 1,96,57Excess provision for expenses of earlier years 43,37 35,79Excess provision of incentive to wholetime director inprevious year

3,26 -

Miscellaneous income 2,10,34 1,28,28

9,38,00 7,12,40

Tax deducted at source from interest 6,51 11,71

SCHEDULE 11 EMPLOYEE COST Salaries, wages and bonus 26,76,56 26,15,59Contribution to provident and other funds 3,29,27 3,28,60Voluntary retirement scheme - Proportionate charge 2,04,78 1,96,65 for the year (Refer Note 6 of Schedule 16) Remuneration to wholetime directors 59,78 60,94Welfare expenses 6,36,46 6,72,59

39,06,85 38,74,37

Schedule (8 to 11)



Schedule (12 to 13)SCHEDULE 12OTHER COSTS (Rs. in 000's)


Consumption of stores and spares 10,76,19 11,42,96Power and fuel# 25,56,97 26,25,43Rent 1,35,71 1,19,53Rates and taxes 2,33,95 1,90,72

Insurance 1,63,01 1,44,22

Repairs to Buildings 76,27 40,86

Machinery 7,03,85 7,71,49

7,80,12* 8,12,35*Technical fee 36,09 46,22Director's sitting fees 5,35 4,03Commission to non-wholetime directors 11,00 11,00Auditors remuneration 7,34 7,16Travel and conveyance 4,89,65 4,61,04Freight, delivery and shipping charges 6,90,32 6,87,66Selling commission 83,83 91,91Turnover discounts 2,79,17 3,26,46Rebates and allowances 2,29,63 2,66,81Advertisement and publicity 98,24 98,39Printing, stationery and communication 3,13,38 3,33,07Loss on sale of fixed assets 30,15 17,93Loss on sale of investments 65 20,59Contribution to research institution 4,00 4,60

Provision / write off in diminution in value of investments 25,67 66

Bad debts and advances written off 1,04,99 1,61,71

Schedule (12 to 13)


Less : Provision adjusted 97,55 1,61,71

7,44 -Provision for doubtful debts, advances and deposits@ 1,95,14 99,43General services 10,75,97 8,60,82Miscellaneous expenses 6,14,99 6,07,76

91,43,96 89,80,75

# Net of own power generation which includes Rs.30,85 12,15,30 8,83,21(previous year Rs.Nil ) banked with KSEB * Includes stores and spare parts 4,53,54 4,98,26@ Net of write back

SCHEDULE 13 (ACCRETION) / DECRETION TO STOCK Commencing stock Work-in-process 13,47,06 14,19,08 Finished stock 16,47,16 13,31,13

29,94,22 27,50,21

Closing stock Work-in-process 12,28,00 13,47,06 Finished stock 12,99,49 16,47,16

25,27,49 29,94,22

(Accretion) / Decretion to stock 4,66,73 (2,44,01)

Schedule (12 to 13)



Schedule (14)Schedule 14QUANTITATIVE PARTICULARS

1. CAPACITIES, PRODUCTION, TURNOVER AND STOCK

Class ofgoods

Unit Installed Actual Commencing Closing Turnover#

Capacity Production Stock Stock Quantity Value(Rs. 000's)

CoatedAbrasives

Ream 3,37,000 2,20,080 20,249 20,937 2,19,392 78,53,89

(3,37,000) (2,20,320) (19,507) (20,249) (2,19,578) (76,12,66)

BondedAbrasives

Tonne 9,500 7,591 1,214 1,210 7,595 116,04,98@

(9,500) (7,725) (927) (1,214) (7,438) (123,82,77)

Refractories Tonne 12,000 3,871 144 135 3,880 31,66,22

(12,000) (3,944) (48) (144) (3,625) (32,61,29)

Grains Tonne 26,300 16,461 467 293 14,658 35,12,22

(26,300) (18,039) (612) (467) (9,102) (33,39,21)

IndustrialCloth

Metre 18,00,000 10,29,712 84,716 23,931 3,36,265 3,77,05

(18,00,000) (14,82,244) (15,905) (84,716) (5,18,825) (4,69,71)

Others 18,23,06

(15,05,90)

Total 283,37,42

(285,71,54)

Schedule (14)


NotesFigures in brackets are for previous year.# Turnover is exclusive of captive consumption.@ Includes products purchased and sold.

Previous year 2000-01

2. RAW MATERIALSCONSUMED Unit Quantity Value Quantity Value

(inclusive of captiveconsumption)

(Rs. 000's) (Rs. 000's)

Abrasive Grains Tonne 12,475 36,55,76 13,561 40,34,95Bonds and Resins Tonne 3,668 10,92,01 2,783 10,40,98Calcined Alumina Tonne 7,637 11,96,19 6,832 10,41,75Others 46,46,84 55,58,66

Total 105,90,80 116,76,34

Of the above : Imported 12% 12,81,68 14% 16,05,97Indigenous 88% 93,09,12 86% 100,70,37

Total 100% 105,90,80 100% 116,76,34

3. CONSUMPTION OF STORES AND SPAREPARTS

(inclusive of captiveconsumption)

Imported 2% 25,09 1% 13,33Indigenous 98% 15,04,60 99% 16,96,65

Total 100% 15,29,69 100% 17,09,98

Schedule (14)



Schedule (15)Schedule 15ACCOUNTING POLICIES

i) Accounting convention

The financial statements are presented under historical cost convention(except revaluation of certain fixed assets) and applicable mandatoryaccounting standards.

ii) Fixed assets and depreciation

a) All assets are stated at historical cost (net of CENVAT whereverapplicable) except land and buildings added up to 31st August 1984which are shown as per the revaluation done in that year and land andbuildings at Cutfast Division, which were revalued in the year ending30th November 1986. Cost comprises of direct costs including interest onspecific borrowing wherever applicable for new project upto the stage ofcommissioning. Subsidy received from State Government towardsspecific assets are reduced from the cost of Fixed assets.

b) Depreciation on fixed assets has been provided on Straight-line method atrates specified in Schedule XIV to the Companies Act 1956.

c) The difference between the depreciation for the year on the revaluedbuildings and depreciation calculated on the original cost is recoupedfrom the fixed assets revaluation reserve.

d) The assets taken on lease prior to 1st April 2001 are not capitalised andlease rentals are absorbed in the Profit and Loss Account withoutreference to the useful life of the asset. However, to comply withAccounting Standard 19 Leases, fixed assets taken on financial lease onor after 1st April 2001 are capitalised and depreciation has been providedon such assets at rates specified in Schedule XIV of the Companies Act,1956.

e) Plant and machinery given on financial lease prior to 1st April 2001 isdepreciated equally over the period of lease without reference to theuseful life of the asset.

iii) Borrowing costs

Schedule (15)


Borrowing costs are capitalised as part of qualifying fixed assets when it ispossible that they will result in future economic benefits. Other borrowingcosts are expensed.

iv) Inventories

a) Finished stock and work-in-process are valued at lower of cost and netrealisable value. Cost on weighted average basis includes all direct costsand applicable production overheads to bring the goods to the presentlocation and condition. Excise duty on the finished goods is added to thecost.

b) Raw materials, accessories and stores and spares are valued at lower ofcost and net realisable value. Cost on weighted average basis includesfreight, taxes and duties net of CENVAT credit wherever applicable.Customs duty payable on material in bond is added to cost.

v) Investments

Long term investments are stated at cost / valuation. The diminution, if any,in the value of investments stated at cost, is not recognised unless suchdiminution is considered permanent.

vi) Revenue recognition

a) Revenues are recognised and expenses are accounted on their accrual withnecessary provisions for all known liabilities and losses.

b) Sales is inclusive of excise duty. Service income is recognised oncompletion of contract. Scrap sales are accounted on cash basis.

c) Warranty liability on account of after-sales service is accounted onaccrual basis to the extent ascertained, liability unascertainable isaccounted on cash basis.

d) Dividend income on investments are accounted for when the right toreceive the payment is established.

e) Export benefits under advance licence scheme are recognised on receiptof licences.

vii) Research and Development

Revenue expenditure on research and development is charged to profit andloss account. Acquisition of assets are capitalised and depreciated on straightline method at rates as per Schedule XIV of the Companies Act, 1956.

viii) Deferred Revenue Expenditure

a) Compensation to employees who have retired under voluntary retirementscheme is amortised over a period of five years commencing with the yearin which it is incurred.

Schedule (15)


b) Non-recurring revenue expenditure yielding benefit beyond theaccounting year is amortised over a period of three to six years duringwhich the benefit endures.

ix) Retirement benefits

a) Contributions to gratuity fund are based on an annual actuarial valuation.

b) Contributions to superannuation fund are funded with Life InsuranceCorporation of India.

c) Monthly contributions to recognised provident fund are considered onaccrual basis in the accounts.

d) Leave encashment benefits to eligible employees has been ascertained onactuarial basis and provided for.

x) Foreign Currency Transaction

Transactions in foreign currency are recorded at exchange rates prevailing onthe date of transactions and realised exchange loss or gain are dealt with inprofit and loss account or capitalised where they relate to fixed assets.Current assets and current liabilities are converted at the year end exchangerates/ forward contracts rates and exchange losses/gains are dealt with inprofit and loss account or adjusted in cost of fixed assets.

xi) Government Grants

Lumpsum capital subsidies, not relating to any specific fixed asset, receivedfrom State Governments for setting up new projects are accounted as capitalreserve

xii) Excise Duty

CENVAT credit on materials purchased for production are taken intoaccount at the time of purchase and CENVAT credit on purchase of capitalitems whereverapplicable are taken into account as and when the assets areacquired.

The CENVAT credits so taken are utilised for payment of excise duty ongoods manufactured. The unutilised CENVAT credit is carried forward inthe books.

xiii) Segment reporting

The accounting policies adopted for Segment reporting are in line with theaccounting policies of the Company with the following additional policies:

a) Inter-segment revenues have been accounted on the basis of pricescharged to external customers.

Schedule (15)


b) Revenue and expenses have been identified to segments on the basis oftheir relationship to the operating activities of the Segment. Revenue andexpenses, which relate to the enterprise as a whole and are not allocable toSegments on a reasonable basis have been included under "UnallocatedCorporate expenses"

xiv) Deferred Taxes

a) Current tax is determined in accordance with the Income tax Act, 1961.

b) Deferred tax is recognised for all the timing differences. Deferred taxassets are recognised when considered prudent.

Schedule (15)



Schedule (16)Schedule 16NOTES ON ACCOUNTS

(Rs. in 000's)

Previous Year31.03.2001

Notes to Balance Sheet1 Estimated amount of contracts remaining to be

executed on

capital account and not provided for including leaserental

commitments for lease agreements entered prior to 01.04.2001 Rs.42,35 (previous year Rs 54,24) 1,65,33 1,45,15

2 Contingent Liabilities: a) Bills discounted outstanding 6,03,59 4,46,29b) Outstanding guarantees / Letters of Comfort 17,39,08 17,44,55c) Outstanding letters of credit 47,41 60,45

3 a) No provision is considered necessary for disputedincome

tax, sales tax, excise duty and property taxdemands under

various stages of appeal proceedings, based onlegal

opinions that these demands are not sustainable inlaw.

However, out of this a sum of Rs.3,67,63(previous year

Rs.1,65,62) has been adjusted by income taxdepartment

against refunds due. 20,10,97 17,02,65b) Claims against the Company not acknowledged as

debt35,41

4 a. Debtors include due by subsidiaries of thecompany:

Schedule (16)


i) CUMI America Inc., 2,16,25 61,74 Maximum amount due at any time during the year 2,16,58 77,22ii) Prodorite Anticorrosive Ltd 24,22 Maximum amount due at any time during the year 24,22b. Advances include due by Net Access (India) Pvt.

Ltd.

a subsidiary of the company 5,66 Maximum amount due at any time during the year 5,66c. Advances include due from Company Secretary 47 Maximum amount due at any time during the year. 54d. Advances include due from President &

Wholetime Director16,00

Maximum amount due at any time during the year 16,00 5 In the opinion of the management, the shortfall in the value of long term

investments held at cost is temporary in nature and the balance in theInvestment Fluctuation Reserve would be adequate to cover any eventual loss atthe disposal of the investments.

6 During the year Rs.40,64 was paid pursuant to a Voluntary Retirement Scheme

and is amortised over five years commencing from the year of payment(previous year Rs 9,83,26).

7 Dues to small scale industrial undertaking units of Rs.1,66,76 (previous year Rs1,79,31) is on the basis of such parties having been identified by themanagement and relied upon by the auditors. The namewise details as on31.3.2002 to parties exceeding Rs.1 lakh each and exceeding 30 days (butwithin the normal credit period) are given below:Abelin Polymers Rajanna Packers Chemisols Phenolics (P) Ltd Safe Corrugated Containers (P) Ltd Chemox Industrial Corporation Sah Petroleums Ltd Delta Manufacturing Company Sark Enterprises Diamond Board International (P) Ltd Sati Box Mfg (P). Ltd Elastomer Coatings Sharpwell Industries Emery (India) P Ltd Sheela Enterprises Eskay Cartons (P) Ltd Shree Balaji Laminating Industries Esterkote (P) Ltd Shri Laxmi Timbers Gopal Metal Company SKS Industries Gripwell Electronics SMS Diamond Tools Hira Tools Southern Starch Products Industrial Manufacturing Industries Sri Vageshwari Enterprises Industrial Marketing Corporation Stickers India Industrial Petroleums Supreme Fibre Glass

Schedule (16)


Marvel Thermostats (P) Ltd Teles Industries Modern Diamond Tools Vinayaga Industrial Packers O.K. Industries VPN Gelatine (P) Ltd P.R.S. Engineering Works Wood Pack Industries R.K. Engineering

8 Share capital is exclusive of 40 equity shares of Rs.10 each pending allotment

to the shareholders of erstwhile Cutfast Abrasive Tools Ltd. (previous year 40equity shares of Rs.10 each)

9 Release from Debenture Redemption Reserve is made after taking in to accountthe balance to be retained in the Reserve.

10 Depreciation on fixed assets acquired on or before 31st March 1993 of Cutfast

Division and depreciation on assets of Polymers division which were hithertoprovided on written down value method are provided on straight line method atthe applicable rate prescribed under Schedule XIV to the Companies Act, 1956from the current year. Consequent to the change, the excess depreciation so farprovided amounting to Rs.1,59 net of depreciation recouped Rs.2,01 fromrevaluation reserve has been recognised in the Profit and Loss Account.

Notes to Profit and Loss Account (Rs. in 000's)


11 Value of Imports on CIF basis Raw materials 11,84,42 11,86,92Components & Spare parts 29,81 33,66Capital goods 82 66,16

12Expenditure in foreign currencies on account of(on cash basis)

Technical fee / royalty (net of tax) - 15,27Other matters 91,46 84,68

13Earnings in foreign exchange on accountof:

Export of goods on FOB value 30,06,08 24,68,14Commission 41 1,52

14Interest and finance charges on fixedloans

4,00,07 5,35,46

Schedule (16)


15Miscellaneous expenses includesdonation to political

parties as given below: 10,05 -

Bharatiya Janata Party 5,25 Thondar Congress 1,00 Communist Party of India (Marxist) 1,50 Kerala Pradesh Congress Committee (I) 1,50 United Democratic Front 75 India Youth Congress (I) 5

16 (a) Wholetime Directors Remuneration

Salaries & Allowances 46,82 47,64 Commission 8,70 8,14

Contribution to provident, gratuity andother funds

4,26 5,16

b)Money value of perquisites (includedunder appropriate

heads of account) 3,00 1,88

c)Computation of commission to directors:

Profit before tax as per Profit and LossAccount

30,94,32 35,75,44

Add: Directors sitting fees 5,35 4,03 Remuneration to wholetime directors 59,78 60,94

Money value of perquisites to wholetimedirectors

3,00 1,88

Commission to non-wholetime directors 11,00 11,00

Loss on sale of investments 65 20,59

79,78 98,44

31,74,10 36,73,88Less:

Excess provision of incentive to whole-timedirector in

the previous year reversed (3,26) - Profit on sale of undertaking - (3,45,77)

Profit on sale of investments (33,73) -

Net profit 31,37,11 33,28,11

1% thereon 31,37 33,28 Commission to directors:

Schedule (16)


Wholetime Director restricted to 8,70 8,14

Non-wholetime director restricted to 11,00 11,00

19,70 19,14

Remuneration to wholetime directorsincludes Rs.7,88 paid to Executive Directorwhich is subject to the approval of theshareholders at the ensuing Annual GeneralMeeting

17 Auditors Remuneration

Statutory audit 5,00 4,00

Tax Audit 25 30

Other services 1,00 2,12

Out of pocket expenses 1,09 74

18 Remittance in foreign currencies on account of dividends

a) Year to which dividend relates - 1999-2000

b) Number of non-resident shareholder - 1

c) Number of equity shares of Rs.10 each - 56,25,00

d) Amount remitted - 33,75

19 Related Party Disclosuresa) List of Related Parties i) Parties where control exists Subsidiaries

CUMI America Inc Prodorite Anticorrosives Ltd Net Access (India) Pvt Ltd Webword Holdings & Management Pvt Ltd Subsidiaries of Webword Holdings & Management Pvt Ltd

Laserwords Pvt Ltd Apex Abstracting & Editing Services Pvt Ltd

Schedule (16)


ii) Other related parties with whom transactions have taken place during the year

Associates

Wendt India Ltd Murugappa Morgan Thermal Ceramics Ltd Southern Energy Development Corporation Ltd Sterling Abrasives Ltd Ciria India Ltd Kalaivani Steel Structures Ltd Murugappa Management Services Ltd Key management Personnel

Mr. M V Murugappan Mr. M M Murugappan Mr. Ramesh Agarwal

(Rs. in 000's)

b. Transactions with RelatedParties

31.3.2002

Subsidiaries Associates KeyManagement

Personnel

Total

1 Income from sales andservices

2,77,93 2,77,98 5,55,91

2 Purchases 11,81 2,73,60 2,85,413 Lease/Rental Income 8,15 8,154 Purchase of power 2,06,49 2,06,495 Expenditure on other

services23,50 23,50

6 Lease rent paid 12,12 12,127 Dividend Income 56,13 2,43,47 2,99,608 Interest Received 1,87 6,20 8,079 Reimbursement towards 34,89 34,89 deputation of employees 10 Purchase of Fixed Assets 3,91 3,9111 Sale of Fixed Assets 6,01 6,0112 Investments made 13,92,96 4 13,93,00

Schedule (16)


13 Inter-corporate depositsplaced

71,00 1,30,00 2,01,00

14 Debtors 2,46,13 97,63 3,43,7615 Creditors 5,01 32,24 37,2516 Inter-corporate deposits

outstanding51,00 1,30,00 1,81,00

17 Managerial Remuneration 62,79 62,7918 Advances lent 16,00 16,00

20. (a) Segment Disclosure (Rs. in 000' s)A. Primary Segment Information 31.3.2002

Abrasives Ceramics Electrominerals Eliminations Total

1. Revenue External Sales 198,56,35 49,87,12 34,93,95 283,37,42Inter-segment Sales 2,47,88 23,22,17 (25,70,05)

Total Revenue 198,56,35 52,35,00 58,16,12 (25,70,05) 283,37,42

2. Result Segment result 28,26,55 8,16,42 9,62,59 46,05,56Unallocatedcorporate expenses

(7,66,27)

Interest expense (11,54,68)Interest and dividendincome

4,09,71

Income taxes (9,42,09)

Net profit 28,26,55 8,16,42 9,62,59 21,52,23

3. Other Information Segment assets 139,63,20 33,29,63 44,53,37 217,46,20Unallocatedcorporate assets

76,47,12

Total assets 139,63,20 33,29,63 44,53,37 293,93,32

Segment liabilities 15,84,86 4,67,08 3,54,96 24,06,90Unallocatedcorporate liabilities

133,07,83

Total liabilities 15,84,86 4,67,08 3,54,96 157,14,73

Capital expenditure 9,78,82 4,33,06 32,81

Schedule (16)


Depreciation 6,45,52 1,66,72 3,13,56 Non-cash expensesother than

depreciation 1,56,32 78,85 2,83

B. Secondary Segment Information 1. Revenue by Geographical market

India 252,09,09Rest of the world 31,28,33

Total 283,37,42

2. Carrying amount of Segment Assets India 207,30,02Rest of the world 10,16,18

Total 217,46,20

3. Additions to Fixed Assets and Intangible Assets India 14,44,69Rest of the world -

Total 14,44,69

20 (b) Notes to Segmental Reporting

i) Business Segments

The Company has considered business segment as the primary segment for disclosure. The businesssegments are : Abrasives, Ceramics and Electrominerals.

Abrasive segment comprise of bonded, coated, processed cloth, polymers and coolants. Captivepower generation from windmill is utilised for production in this segment. Ceramics comprise ofbonded refractories, electrocast refractories and industrial ceramics. Electrominerals include theabrasive / refractory grains and the captive power generation from hydel power plant.

The above segments have been identified taking into account the organisation structure as well asthe differing risks and returns of these segments.

ii) Geographical Segments

Schedule (16)


The geographical segments considered for disclosure are : India and rest of the world. All themanufacturing facilities and sales offices are located in India. Sales to the rest of the world are alsoserviced by Indian sales offices.

Geographical revenues are segregated based on the location of the customer who isinvoiced or in relation to which the revenue is otherwise recognised

iii) Segmental assets includes all operating assets used by respective segment and consists principallyof operating cash, debtors, inventories and fixed assets net of allowances and provisions. Segmentalliabilities include all operating liabilities and consist primarily of creditors and accrued liabilities.Segment assets and liabilities do not include income tax assets and liabilities

21 Notes relating to Leases

a. Vehicles

Cost of leased assets acquired after 01.04.2001 as on 31.03.2002 64,61

b. Net carrying amount as on 31.03.2002 (written-down value) 62,63

c. Reconciliation between total minimum lease payments and their present value:

Total minimum lease payments as on 31.03.2002 87,15Less: Future liability on interest account (25,84)Present value of lease payments as on 31.03.2002 61,31

d. Yearwise future minimum lease rental payments on contracts entered after 01.04.2001

Total minimum Present value of lease payments lease payments as on 31.03.2002 as on 31.03.2002

i) Not later than one year 15,60 7,73ii) Later than one year and not later than five years 71,55 53,58iii) Later than five years Nil Nil

22 Notes to Earnings per share

Information relevant for Earnings per share[EPS] Accounting Standard 20a. There are no potential equity shares and hence the basic and diluted EPS are the sameb. Numerator: The company has only one class of equity share, hence the profit after

Schedule (16)


tax is used for computation of EPS without any adjustmentc. Denominator: Weighted average number of equity shares arrived at after adjusting the time factor

Reconciliation of Denominator:

31.03.01Nos Nos

No. of Equity shares at the beginning 93,35,400* 1,21,03,200*

Less:Bought back during the year - (27,67,800)

No. of Equity shares at the end of year 93,35,400 93,35,400Add:Adjustment for time factor towards buy back - 16,98,595

Weighted average number of Equity shares 93,35,400 1,10,33,995* Includes shares pending allotment toshareholdersof erstwhile Cutfast Abrasive Tools Ltd

23. Information relating to deferred taxThe accounting standard AS 22 - Accounting for taxes on income has come into effect from April1,2001 and accordingly the provision for deferred tax liability has been made. Consequently thecumulative net deferred tax liability upto March 31, 2001 amounting to Rs.17,41,59 has been chargedto general reserve on April 1, 2001. Further the deferred tax of Rs.1,07,09 relating to the current yearhas been recognised in the profit.

(Rs. in 000's)

a. Deferred tax assets arising out of timing difference relating to: Provision for bad and doubtful debts and advances 1,88,47

b.Deferred tax liability arising out of timing difference relatingto:

Depreciation 20,36,46 Software expenses 21 Leased assets 48

24 Previous year figures have been regrouped wherever necessary.

Schedule (16)



Statement of Holding Company'sInterest in Subsidiary Companies(Pursuant to Section 212(1)(e) and (f) of the Companies Act,1956)

1. Name of the Company CUMI Prodorite Net Access Webword Laserwords Apex AmericaAnticorrosives (India) Holdings and Pvt. Ltd.* Abstracting Inc. Ltd. Pvt. Ltd.* Management & Editing Pvt. Ltd.* Service Pvt. Ltd.*

2. The financial year of the 31st March 31st March 31st March 31st March 31st March 31st Marchsubsidiary ended on 2002 2002 2002 2002 2002 2002

3(a)i) Number of ordinaryshares

500 10,00,000 16,00,000 1,78,100 Subsidiary Subsidiary

held by CarborundumUniversal

of Webword of Webword

Ltd. in the subsidiaryCompany

Holdings and Holdings and

on the above date. Management Management Pvt. Ltd. Pvt. Ltd

ii)Face value and paid value US$ 100 Rs. 10 Rs. 10 Rs. 10Not Applicable Not Applicableper share fully paid fully paid fully paid fully paid

iii) Interest of Carborundum Universal Ltd. % 100% 100% 100% 68.5%Not Applicable Not Applicable

3(b)i) Number of preference

shares held- - - 12,33,000Not Applicable Not Applicable

by Carborundum UniversalLtd.

in the subsidiary Companyon the

above date.

ii)Face value and paid valueper share

- - - Rs. 100Not Applicable Not Applicable

iii) Interest of CarborundumUniversal

- - - 68.5%Not Applicable Not Applicable

Ltd. %

(Rs. in 000s)4. The net aggregate

profit/(loss) of

Statement of Holding Company's




subsidiary company so faras it

concerns the holdingcompany

i) Not dealt with in the

accounts

of Carborundum UniversalLtd.

a)For the subsidiary sfinancial

3,55 3,27 (33,84) 5,69 54,75 45

year ended 31st March 2002

b) For the previous financial 8,38 41,25Not ApplicableNot ApplicableNot Applicable Not Applicableyears of the subsidiary sinceit

became a subsidiary of Carborundum UniversalLtd.

ii) Dealt with in the accounts

of

Carborundum UniversalLtd. by

way of dividends on theshares

held in the subsidiary.

a)For the subsidiary sfinancial

- - - 53,75Not Applicable Not Applicable

year ended 31st March 2002

b)For the previous financial 2,38 - - -Not Applicable Not Applicableyear of the subsidiary ssince it

became a subsidiary of Carborundum UniversalLtd.

* Became subsidiaries of the Company during the financial year 2001-02






Balance Sheet Abstract and Company'sGeneral Business Profile

(Pursuant to Schedule VI Part IV of the Companies Act,1956)

I Registration details

Registration No: 318 State Code: 18Balance Sheet Date : 31.03.2002

II Capital raised during the year (Amount in Rs. 000's)Public Issue Nil Rights Issue NilBonus Issue Nil Private Placement Nil

III Position on mobilisation and development of funds (Amount in Rs. 000's)Total Liabilities 238,00,48 Total Assets 238,00,48

Sources of funds Application of funds Paid up Capital 9,33,54 Net Fixed Assets 102,31,97Reserves & Surplus 127,45,05 Investments 55,92,44Secured Loans 52,20,05 Net Current Assets 91,36,14Unsecured Loans 49,01,84 Misc. Expenditure 6,88,61 Deferred Tax Liability (18,48,68)

238,00,48 238,00,48

IV Performance of Company (Amount in Rs. 000's)Turnover 293,09,15 Total Expenditure 262,14,83Profit before tax 30,94,32 Profit after tax 21,52,23Earnings per share (Rs.) 23.05 Dividend (%) 75%

V Generic names of three principal products/services of Company (as permonetary terms)

Balance Sheet Abstract and Company's General Business Profile




Item Code No. (ITCCode)

Product Description

680422.01 & 68.05 Abrasives - Bonded andCoated

69.02 & 69.03 Refractories 28.18 & 28.49 Electrominerals



Balance Sheet Abstract and Company's General Business Profile



Subsidiary CompaniesCUMI America Inc.Prodorite Anticorrosive Ltd.Webword Holdings and Management Private Ltd.Laserwords Private Ltd.Apex Abstracting & Editing Services Private Ltd.Net Access (India) Private Ltd

Subsidiary Companies







Consolidated Financial Statements2001-2002Auditors' ReportConsolidated Balance SheetConsolidated Profit and Loss AccountScheduleConsolidated Cash Flow Statement

Consolidated Financial Statements 2001-2002

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Carborundum Universal Ltd.‘TIAM HOUSE', NO. 72 (OLD NO 28), RAJAJI SALAI, CHENNAI 600 001

Notice to MembersNOTICE is hereby given that the forty-eighth annual general meeting of theCompany will be held on Wednesday, the 31st July 2002 at 3.30 P.M.. at TTKAuditorium, Music Academy, Old No. 306, New No. 168, TTK Road, Royapettah,Chennai 600 014 to transact the following business:

1. To receive, consider and adopt the Directors' Report and the Audited Profitand Loss Account for the financial year ended 31st March 2002 and theBalance Sheet as at that date and the Auditors' Report thereon.

2. To declare a dividend

3. To elect a Director in the place of Mr. M V Murugappan who retires byrotation and being eligible offers himself for re-appointment.

4. To elect a Director in the place of Mr. K N Shenoy who retires by rotation andbeing eligible offers himself for re-appointment.

5. To consider and if deemed fit to pass, with or without modification, thefollowing as an Special Resolution: Resolved that M/s Fraser & Ross,Chartered Accountants, Chennai be and are hereby reappointed as Auditors ofthe Company to hold office from the conclusion of the forty-eighth annualgeneral meeting till the conclusion of the forty-ninth annual general meetingon a remuneration of Rs. 5,00,000/- (Rupees five lakhs only), exclusive ofservice tax as applicable, in addition to reimbursement of actual travelling andout of pocket expenses incurred by them in connection with the audit.

SPECIAL BUSINESS

6. To consider and if deemed fit to pass, with or without modification, thefollowing as an Ordinary Resolution:

Resolved that pursuant to Section 269, Schedule XIII and other applicableprovisions of the Companies Act, 1956, Mr. M M Murugappan be and ishereby appointed as a wholetime director of the Company for a period of fiveyears commencing from 1st February 2002.

Notice to Members



Resolved Further that subject to the provisions of Section 198, 269, 309,Schedule XIII and other applicable provisions of the Companies Act, 1956,Mr. M M Murugappan shall during his tenure as wholetime director, be paidremuneration as specified below, subject to an overall limit of 5% of the netprofits of the Company for each financial year computed in the mannerprescribed in Sections 349 and 350 of the Companies Act, 1956.

a. Salary Rs 1,35,000/- per month in the scale of Rs

1,35,000/- to Rs 2,70,000/-(increments to bedecided by the Remuneration andNomination Committee)

b. Personal Allowance 15% of the salary per month c. Commission 1 % of the net profits of the Company for

each financial year computed in the mannerprescribed under Sections 349 and 350 ofthe Companies Act, 1956 subject to amaximum amount equal to the annual salarypayable to him for the respective financialyear.

d. Perquisites i) Housing Furnished / unfurnished residential

accommodation or house rent allowance of30% of salary per month in lieu thereof.

ii) Leave Travel Allowance For self & family, once in a year, in

accordance with rules of the Company,subject to a maximum of 15% of the annualsalary

iii) Medical Reimbursement Actual expenses incurred by Mr. M M

Murugappan and his family(For the purposeof (ii) & (iii) above, 'Family' means spouse,dependent children and dependent parentsof Mr. M M Murugappan.)

iv) Club Fees Subscription fees for 2 clubs. This will not

include admission and life membershipfees.

v) Personal Accident

InsurancePremium shall not exceed Rs. 10,000/- perannum.

Notice to Members


vi) Encashment of leave not

availed ofAs per the rules of the Company

vii) Provident Fund/

Superannuation FundContribution to Provident Fund andSuperannuation Fund shall be in accordancewith the approved scheme / fund of theCompany as in force from time to time.

viii) Gratuity In accordance with the rules of the

approved fund of the Company as in forcefrom time to time.

ix) Transportation Provision of two cars (including cost of

fuel, insurance and maintenance) as per therules of the Company in force from time totime.

x) Others Such other perquisites, benefits, amenities

and facilities as opted by Mr. M MMurugappan, the annual value of whichshall not exceed three months salary

General

i) Telephone at residence (including payment of local calls and long distanceofficial calls) shall not be reckoned as perquisites.

ii) For the purposes of the above, perquisites shall be valued as per Income TaxRules. In the absence of any such rule, perquisites shall be valued at actualcost. In case of provision of air-conditioners and furniture under the respectiveschemes, 10% of the original cost of the asset shall be reckoned as theperquisite value.

iii) In the event of inadequacy or absence of profits in any financial year, Mr. MM Murugappan shall be entitled to the maximum remuneration by way ofsalary, allowance, perquisites, benefits, amenities and facilities as per theprovisions of the Companies Act, 1956 and the rules made thereunder or anystatutory modification or reenactment thereof.

7. To consider and if deemed fit to pass, with or without modification, thefollowing as an Ordinary Resolution:

Notice to Members


Resolved that the consent be and is hereby accorded in terms of Section293(1)(a) and other applicable provisions, if any, of the Companies Act, 1956to the Board of Directors for creating a mortgage and/or charge on all or anyof the immovable and movable properties of the Company wheresoeversituate, both present and future, and the whole or any part of the undertakingof the Company together with powers to takeover the management of thebusiness and concern of the Company in certain events, to and in favour of theAgents and Trustees (hereinafter called 'the Trustees') for the holders of20,00,000 - Secured Redeemable Non Convertible Debentures of theaggregate nominal value of Rs 20 crores privately placed with banks, forsecuring the repayment of the aforesaid debentures together with interestthereon, further interest, liquidated damages, remuneration of the Trustees,costs, charges and expenses and other moneys in terms of the agreements to beentered into between the C ompany and the Trustees, with such ranking andasset coverage as may be decided in consultation with the Trustees.

Resolved Further that the Board of Directors of the Company be and ishereby authorised to finalise with the debenture holders and/or the Trustees thedocuments for creating the aforesaid mortgage and/ or charge and to do allsuch acts and things as may be necessary for giving effect to the aboveresolution.

By Order of the BoardChennai S DHANVANTH KUAAAR15th May 2002 Secretary

NOTES 1. A member entitled to attend and vote is entitled to appoint aproxy. A PROXY NEED NOT BE A MEMBER OF THECOMPANY. Proxy to be valid must be deposited at the registeredoffice before 3.30 p.m on 29th July 2002.

2. The Explanatory Statement under Section 1 73 of the Companies Act,1956 is annexed.

ANNEXURE TO THE NOTICEInformation pursuant to clause 49 of the Listing Agreement with Stock Exchanges

Item 3

Mr. M V Murugappan is aged 67. He is a honours graduate in civil engineeringfrom the Birmingham University, England. He spent 20 years in the constructionbusiness as Managing Director of Coromandel Engineering Company Ltd., apremier building construction company with a number of landmarks in South Indiato its credit.

Notice to Members


While with Coromandel, Mr. M V Murugappan was Chairman of theBuilders'Association of India (Southern Centre) in 1972 and also led the Indiandelegation to the IFAWPCA (International Federation of Asian and WesternPacific Contractors Association) Convention at Seoul, South Korea, in September1975.

In 1979, Mr. M V Murugappan took over as Managing Director of CarborundumUniversal Ltd. and continued till June 2000. During his tenure the Companyexpanded rapidly and entered into new product lines. He was thereafter ExecutiveChairman of the Company till 31 st January 2002 when he relinquished hisexecutive position. Since then he has continued as non-executive Chairman of theCompany. He is the Chairman of the Share Transfer & Finance Committee andColour Project Committee.

Mr. M V Murugappan was on the Managing Committee of the AssociatedChambers of Commerce and Industry of India for many years and was Chairmanof the Madras Chamber of Commerce and Industry in 1987-88. In September1990, Mr. M V Murugappan was the Chairman of the India-Australia JointBusiness Council and in March 1 992 he led the Indian delegation to Australia forthe 6th Joint Business Council Meeting.

The details of his directorship and committee membership in other Companies is as follows:

Chairman

New Ambadi Estates Private Ltd.The Coromandel Engineering Co. Ltd.Southern Energy Development Corp. Ltd.Coromandel Bathware Ltd.

Director

Valli Engineering & Investment Pvt. Ltd.The Adayar Property Holding Co. Ltd.CUMI America Inc., USA

Committee Membersh/ Shares & DebenturesCommittee

The Coromandel Engineering Co. Ltd.

Mr. M V Murugappan retires by rotation at the forthcoming annual general meetingand is eligible for reappointment. The Remuneration and Nomination Committeehas recommended his reappointment.

Item 4

Mr. K N Shenoy is aged 71. He is a graduate in electrical engineering fromBenaras Hindu University. He also holds a Masters degree in businessmanagement from IMD, Lausanne. He is the Fellow of the Institution of Engineers(India) and also of the National Academy of Engineers.

Notice to Members


He started his career in 1955 with Brown Boveri Engineering Division of VoltasLimited. He joined Hindustan Brown Boveri Limited (now Asea Brown BoveriLimited) in 1962 as Senior Engineer and rose to the position of Managing Directorby 1974. He continued as Managing Director of Asea Brown Boveri Limited tillSeptember 1 994 when he was appointed as Executive Chairman. Since September1 996 he has relinquished his executive position and has continued as Chairman ofAsea Brown Boveri.

He was the past President of the Confederation of India Industry (CII), IndianElectrical & Electronics Manufacturers' Association (IEEMA) and ElectricalResearch & Development Association (ERDA). He was the past Chairman ofProductivity Council and the past member of the governing council of CentralPower Research Institute, Bangalore.

He is a member of the Governing Board of the Indian Institute of Management,Bangalore, Xavier Institute of Management & Entrepreneurship, Bangalore,Development Council for Heavy Electricals & Allied Industries, Centre forTechnology Development, Indo-German Consultative Group and Expert Group ofRailways and several others.

He joined the Board of Carborundum Universal Ltd. in 1996. He is presently theChairman of the Audit Committee, Remuneration and Nomination Committee anda member of the Colour Project Committee.

The details of his directorship and committee membership in other Companies is asfollows:

Chairman Director

Asea Brown Boveri Limited GVK Industries Ltd.

ABB Holdings (South Asia) Ltd. Nagarjuna Oil Corporation Ltd.

Vice Chairman Sobis Software (India) Pvt. Ltd.

Volvo India Private Ltd. Shelk Software Private Limited.

Kalpatharu Power Transmission Ltd.

Committee Member

Audit Committees Asea Boveri Ltd.

Nagarjuna Oil Corporation Limited

Remuneration Committee Asea Boveri Ltd.

Investors' Grievance Committees Asea Boveri Ltd.

Mr. K N Shenoy retires by rotation at the forthcoming annual general meeting. TheRemuneration and Nomination Committee has recommended his reappointment.

Explanatory Statement under Section 173 of the Companies Act, 1956

Item 6

Notice to Members


The Board appointed Mr. M M Murugappan as a wholetime director of theCompany effective 1 st February 2002 on the terms of remuneration as set out inthe resolution under item 6 of the Notice. Mr. M M Murugappan (46 years) holds amasters degree in engineering. He joined the Board in 1996. He was the JointManaging Director of the Company from November 1996 to October 1999.Approval of the members is sought for the appointment as required under Section269 read with Schedule XIII of the Companies Act, 1956. The abstract of the termsof appointment of Mr. M M Murugappan pursuant to Section 302 of theCompanies Act, 1 956 was mailed to all shareholders after the appointment.

Accordingly the ordinary resolution set out under item 6 of the notice is submittedfor approval of the members.

Interest of Directors

Mr. M M Murugappan is interested in the resolution to the extent of hisappointment and remuneration. Mr. M V Murugappan may be deemed to beinterested in the appointment and remuneration of Mr. M M Murugappan by virtuehis being a partner along with Mr. M M Murugappan in certain partnership firms.None of the other directors is interested or concerned in this resolution.

Item 7

The Company issued secured redeemable non convertible debentures to banks onprivate placement basis for an aggregate amount of Rs 20 crores to restructureexisting debt. These debentures are required to be secured by a mortgage/charge onthe properties of the Company as specified under Item 7 of the notice. Creation ofmortgage/charge as stated above may be deemed to be disposal of the undertakingof the Company within the meaning of Section 293(1 )(a) of the Companies Act, 1956. Accordingly the ordinary resolution set out under Item 7 of the Notice issubmitted for approval of members.

Interest of Directors

None of the directors is concerned or interested in the resolution.

By Order of the BoardChennai S DHANVANTH KUMAR15th May 2002 Secretary

Notice to Members



Pursuant to Clause 32 of the Listing Agreement with Stock Exchanges

Auditors' ReportAuditors' REPORT TO THE BOARD OF DIRECTORS OFCARBORUNDUM UNIVERSAL LIMITED ON THE CONSOLIDATEDFINANCIAL STATEMENTS OF CARBORUNDUM UNIVERSALLIMITED AND ITS SUBSIDIARIES

We have examined the attached Consolidated Balance Sheet of CarborundumUniversal Limited and its subsidiaries -CUMI America Inc., ProdoriteAnticorrosives Limited, Net Access (India) Private Limited, Webword Holdingsand Management Private Limited and its subsidiaries : Laserwords PrivateLimited, Apex Abstracting & Editing services Private Limited as at 31st March2002 and the Consolidated Profit and Loss Account for the year then ended.

These financial statements are the responsibility of Carborundum UniversalLimited s management. Our responsibility is to express an opinion on thesefinancial statements based on our audit. We conducted our audit in accordancewith generally accepted auditing standards in India. These Standards require thatwe plan and perform the audit to obtain reasonable assurance whether the financialstatements are prepared, in all material respects, in accordance with an identifiedfinancial reporting framework and are free of material misstatements. An auditincludes, examining on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as wellas evaluating the overall financial statements. We believe that our audit provides areasonable basis for our opinion.

We did not audit the financial statements of these subsidiaries other than ProdoriteAnticorrosives Limited, whose financial statements reflect total assets of Rs.3213.29 lakhs as at 31st March 2002 and total revenues of Rs.1339.95 lakhs forthe year then ended. These financial statements have been audited by otherauditors whose report has been furnished to us, and our opinion, in so far as itrelates to the amounts included in respect of the subsidiaries, is based solely on thereport of the other auditors.

Auditors' Report



We report that the consolidated financial statements have been prepared by theCompany in accordance with the requirements of Accounting Standard (AS) 21,Consolidated Financial Statements, issued by the Institute of CharteredAccountants of India and on the basis of the separate audited financial statementsof Carborundum Universal Limited and its subsidiaries included in theconsolidated financial statements.

On the basis of the information and explanations given to us and on theconsideration of the separate audit reports on individual audited financialstatements of Carborundum Universal Limited and its aforesaid subsidiaries, weare of the opinion that:

a) the Consolidated Balance Sheet gives a true and fair view of the consolidatedstate of affairs of Carborundum Universal Limited and its subsidiaries as at31st March 2002; and

b) the Consolidated Profit and Loss Account gives a true and fair view of theconsolidated results of operations of Carborundum Universal Limited and itssubsidiaries for the year then ended.

For FRASER & ROSS Chartered Accountants

Place: Chennai K.N. RAMASUBRAMANIANDated: 15th May, 2002 Partner

Auditors' Report



Consolidated Balance SheetAs at 31st March 2002

Schedule Rs. in 000's

SOURCES OF FUNDS

SHAREHOLDERS FUNDS

Capital 1 9,33,54

Reserves and Surplus 2 128,08,64

137,42,18

LOAN FUNDS

Secured Loans 3 55,45,65

Unsecured Loans 4 49,86,36

105,32,01

MINORITY INTEREST 9,77,00

Total 252,51,19

APPLICATION OF FUNDS

FIXED ASSETS

Goodwill 3,40,27

Gross block 229,54,38

Less: Depreciation 125,26,33

Net Block 5 104,28,05

Capital work-in-progress at cost 2,65,93

106,93,98

INVESTMENTS 35,26,87

CURRENT ASSETS, LOANS & ADVANCES 6

Inventories 42,22,89

Consolidated Balance Sheet



Sundry Debtors 65,92,92

Cash & Bank Balances 12,81,70

Loans & Advances 20,42,22

141,39,73

Less : CURRENT LIABILITIES & PROVISIONS 7

Current Liabilities 32,66,30

Provisions 7,38,26

40,04,56

NET CURRENT ASSETS 101,35,17

Deferred tax asset 1,97,86

Deferred tax liability (20,48,14)

NET DEFERRED TAX LIABILITY (18,50,28)

MISCELLANEOUS EXPENDITURE

(Deferred revenue expenditure to the extent not writtenoff)

8 24,05,18

Total 252,51,19

Significant Accounting Policies 13

Notes on Accounts 14




Consolidated Balance Sheet



Consolidated Profit and Loss AccountFor the year ended 31st March 2002

Schedule Rs. in 000's

INCOME

Sales 298,58,47

Income from processing charges 6,85,47

Other income 9 8,65,16

Profit on sale of investments 33,73

314,42,83

EXPENDITURE

Raw materials consumed 78,17,71

Employee cost 10 42,96,45

Other costs 11 95,32,04

Excise duty 35,90,59

Depreciation 11,94,94

Less: Transfer from fixed assets revaluation reserve 5,32

11,89,62

Interest and finance charges 12,18,04

(Accretion) / Decretion to stock 12 4,79,22

281,23,67

PROFIT BEFORE TAX 33,19,16

Less: Provision for income tax

Current tax 8,38,74

Deferred tax 1,10,80

PROFIT AFTER TAX 23,69,62

Less: Dividend tax 46,69

Consolidated Profit and Loss Account



Less: Minority Interest 1,53,73

Add: Unappropriated profits from previous year 9,45,27

Profit available for appropriation 31,14,47

APPROPRIATIONS

Transfers to:

General Reserve 12,00,00

Debenture Redemption Reserve 1,87,00

Proposed Dividend @ 75% 7,00,16

Balance carried over to Balance Sheet 2 10,27,31

31,14,47

E P S - Basic and Diluted (Rs.) Face value Rs.10 23.74

Significant Accounting Policies 13

Notes on Accounts 14




Consolidated Profit and Loss Account



ScheduleShare CapitalReserves and SurplusSecured LoansUnSecured LoansFixed AssetsCurrent Assets, Loans and AdvancesCurrent Liabilities ProvisionsMiscellaneous ExpenditureOther IncomeEmployees CostOther Cost(Accretion ) / Decretion to StockSignificant Accounting PoliciesNotes to the Accounts

Schedule

http://www.cumi.co.in/che/cul/2002/a0/106a.html [1/14/2003 3:52:04 PM]



NET ACCESS (INDIA) PRIVATE LTD.Annual Report 2001-2002

Net access (India) Private Ltd.Board of DirectorsDirector's ReportAnnexure to the Director's ReportAuditors' Report to the MembersAnnexure to the Auditors' ReportBalance SheetProfit and Loss AccountScheduleBalance Sheet Abstract and Company's General Business Profile

Laserwords Private Limited



Consolidated Cash Flow StatementFor the year ended March 31, 2002

A. Cash flow from operating activities (Rs. in 000' s)

Net profit before tax and extraordinary items 33,19,16


Interest and finance charges 12,18,04

(Profit)/Loss on sale of fixed assets (net) 25,47

Provision for doubtful debts and advances 1,95,14

(Profit)/Loss on sale of investments (net) (33,08)

Interest and dividends received (3,58,73)

Excess provision for expenses of earlier years released (43,37)

Excess provision of incentive to Wholetime director inthe previous year

(3,26)

Deferred revenue expenditure 2,95,59

Exchange currency fluctuation (22,01)

Diminution in value of investments 25,67

24,89,08

Operating profit before working capital changes 58,08,24

Adjustments for:

Trade and other receivables (2,15,89)

Trade payables (2,45,32)

Inventories 5,52,12 90,91

Cash generated from operations 58,99,15

Direct taxes paid (9,38,39) (9,38,39)

49,60,76

Deferred revenue expenditure (18,01,05) (18,01,05)

Consolidated Cash Flow Statement


Net Cash Flow from operating activities afterextraordinary items

31,59,71

B. Cash Flow from investing activities

Purchase of fixed assets (14,47,09)

(including capital work in progress)

Sale of fixed assets 27,48

Purchase of investments (5,51,77)

Sale of investments 1,18,69

Loans given to third parties (1,50,00)

Receipt of loans given to third parties 3,72,00

Dividend received 3,14,27

Interest received 44,83

Net cash used in investing activities (12,71,59)

C. Cash Flow from financing activities

Issue of Shares 5,66,90

Borrowings 31,22,70

Repayments on borrowings (29,23,94)

Interest paid (12,49,72)

Dividend paid (inclusive of dividend tax) (9,53,93)

Net cash used in financing activities (14,37,99)

Net increase/(decrease) in cash and cash equivalents 4,50,13

Cash and cash equivalents opening balance:

Cash and bank balances 8,31,57

Cash and cash equivalents closing balance:

Cash and bank balances 12,81,70

4,50,13





Schedule (1 to 2)SCHEDULE 1

SHARE CAPITAL (Rs. in 000's)

AUTHORISED

1,60,00,000 equity shares of Rs.10 each 16,00,00

ISSUED AND SUBSCRIBED

1,21,03,160 equity shares of Rs.10 each fully paid (Includes 1,78,713 shares allotted as fully paid up forconsideration other than cash pursuant to contracts, 4,67,859 shares allotted to shareholders ofamalgamating companies and 72,29,624 shares allotted as fully paid up bonus shares by capitalisation ofshare premium and general reserve)

93,35,360 equity shares of Rs.10 each fully paid 9,33,54

9,33,54

SCHEDULE 2

As at 31st As at 31st March 2002 Deductions Additions March 2001

RESERVES AND SURPLUS

CAPITAL RESERVE

Fixed assets revaluationreserve

3,44,59 7,33 2,01* 3,49,91

Capital subsidy 1,00,83 1,00,83

Profit on forfeiture of shares /warrants

60,25 60,25

Capital redemption reserve 2,76,78 2,76,78

OTHER RESERVES

General reserve 96,46,88 17,39,16@ 22,31,84 91,54,20

Debenture redemptionreserve

9,52,00 10,31,84# 1,87,00 17,96,84

Schedule (1 to 2)


Investment fluctuationreserve

4,00,00 4,00,00

117,81,33 27,78,33 24,20,85 121,38,81

Surplus as shown in Profitand Loss Account

10,27,31 9,45,27

128,08,64 130,84,08

# Transferred to General reserve on completion of the prescribed statutory period

@Deferred tax liability as on 31.3.2001 transferred from general reserve todeferred tax liability a/c

* Excess depreciation recouped in earlier years

Schedule (1 to 2)



Schedule (3)SCHEDULE 3

SECURED LOANS (Rs. in 000's)

i) DEBENTURES

13.75% Secured Non-Convertible Redeemable Debentures*

7,00,000 debentures of Rs.100 each issued for cash at par

(redeemable in three annual instalment of Rs. 30, Rs. 30 and Rs. 40

respectively commencing from 13th September 2001) 4,90,00

10,00,000 Secured Non-Convertible Redeemable Debentures of Rs.100 each

issued for cash at par comprising:*

Series A - 5,00,000 - 13.75% Debentures of Rs.100 each

(redeemable in full on 1st August 2003) 5,00,00

10,00,000 Secured Non-Convertible Redeemable Debentures of Rs.100 eachissued for cash at par comprising : *

Series 2 - 5,00,000 - 11.47% Debentures of Rs.100 each

(redeemable in full on 19th April 2002). 5,00,00

9.45% Secured Non-Convertible Redeemable Debentures #*

20,00,000 debentures of Rs.100 each issued for cash at par

(redeemable in three annual instalments of Rs.33, Rs.33 and Rs.34

respectively commencing from 4th January 2005). 20,00,00

14.25% Secured Non convertible redeemable Debentures @

4,00,000 debenture of Rs. 100 each issued for cash at par

(redeemable in 10 half-yearly instalments commencing from 24.05.2001) 3,20,00

* Secured by mortgage on certain fixed assets and second charge on

stocks of Carborundum Universal Ltd.

# Pending creation of charge

@ Secured by hypothecation of plant and machinery and by way of equitablemortgage of

Schedule (3)


land and building of a subsidiary

ii) CASH CREDIT 17,34,86

(Secured by first charge on stock and book debts and a second charge on certainfixed assets)

iii) OTHERS - Hire purchase finance 79

(Secured by respective assets acquired under the scheme)

55,45,65

Schedule (3)



Schedule (4 to 5)SCHEDULE 4 (Rs. in 000's)

UNSECURED LOANS @

Fixed Deposits # 4,01,84

Commercial Paper (Maximum amount during the year Rs.40,00,00)

40,00,00

Short term loan from bank 5,00,00

From directors 8,06

From others * 76,46

* including inter-corporate deposits of Rs.74,00

49,86,36

@ Includes maturing within one year 49,19,93

# Includes unclaimed fixed deposit Rs. 25,53

SCHEDULE5

FIXEDASSETS

Cost Depreciations Written Down Value

As on Additions As on As on Additions** As on As on As on

1.4.2001 (Deletions) 31.3.2002 1.4.2001 (Deletions) 31.3.2002 31.3.2002 31.3.2001

Goodwill - 50,96 50,96 11,79 9,79 21,58 29,38 39,17

Trade Mark 1 1 1 1

Land

Freehold 3,85,28* 3,85,28 3,85,28 3,85,28

Leasehold 13,87 13,87 13,87 13,87

Buildings 34,90,72*@ 2,76,19 37,65,15@ 13,01,46 80,67 13,81,84 23,83,31 21,89,26

(1,76) (29)

Plant &Machinery

166,82,92$ 12,04,18# 177,58,90 97,19,70 10,89,69 107,08,66 70,50,24 69,63,22

Schedule (4 to 5)


(1,28,20) (1,00,73)

Furniture &Fixtures

5,67,91 70,92 5,97,02 2,58,13 42,34 2,69,19 3,27,83 3,09,78

(41,81) (31,28)

Vehicles 3,00,59 38,70 3,18,58 1,29,53 22,42 1,43,08 1,75,50 1,71,06

(20,71) (8,87)

Vehiclestaken onlease

64,61 64,61 1,98 1,98 62,63

TOTAL 214,92,26 16,54,60 229,54,38 114,20,61 12,46,89 125,26,33 104,28,05 100,71,65

(1,92,48) (1,41,17)

# Includes R & D equipments Rs. 3,28,99@ Includes Rs.3,10,06 buildings on leasehold land

*Land & Building added upto 31st August 1984 are stated as per revaluation done in that year and land& building added upto 30th November 1986 of Cutfast division are stated as per revaluation done inthat year.

$ Net of subsidy received Rs. 7,74

**Current year depreciation includes pre-acquisition depreciation of Rs. 51,95 being the depreciationprovided by subsidiaries

Assets acquired under hire purchase agreements represent: Computers (Included in Plant & Machinery) Rs. 5,44 Vehicles Rs. 2,21

Schedule (4 to 5)




CURRENT ASSETS, LOANS AND ADVANCES (Rs. in 000's)

INVENTORIES

Stock-in-trade (at lower of cost and net realisable value)

Raw Materials 8,80,83

Work-in-process 13,81,67

Finished Stock 13,23,82

Traded Stock 1,58,73

Goods-in-transit 43,98

Stores and spare parts 4,33,86

42,22,89

SUNDRY DEBTORS (Unsecured)

Over six months

Considered good 7,76,91

Considered doubtful 4,10,27

11,87,18

Other debts - Considered good 58,15,86

70,03,04

Less: Provision for doubtful debts 4,10,12

65,92,92

CASH AND BANK BALANCESCash and cheques on hand and remittances in transit 9,44,70

Bank Balances :

Current Account 3,09,60

Unclaimed Dividend Account 20,51

Fixed Deposits with Banks 6,89

12,81,70

Schedule (6)


LOANS AND ADVANCES

a) Secured and considered good 5,61

b) Unsecured

Advances recoverable in cash or in kind or for value to bereceived


Considered doubtful 55,99

10,23,38

Less: Provision for doubtful advances 55,99

9,67,39

Deposits @ :


Considered doubtful 60,80

7,81,29

Less: Provision for doubtful deposits 60,80

7,20,49

Deposits with IDBI 25

Balances with Customs and Central Excise Authorities 1,16,98

Advance Payments of Income Tax 56,40,39

Less : Provision for Taxation 54,08,89

2,31,50

TOTAL LOANS AND ADVANCES 20,42,22

TOTAL CURRENT ASSETS, LOANS AND ADVANCES 1,41,39,73

@ Includes inter corporate deposits 2,23,80

Schedule (6)



Schedule (7 to 9) (Rs. in 000's)

SCHEDULE 7

CURRENT LIABILITIES AND PROVISIONS

CURRENT LIABILITIES Sundry Creditors # 28,04,86

Due to small scale industrial undertakings 1,84,93

Due to Directors 30,41

Unclaimed Dividend 20,51

Interest accrued but not due on loans 1,64,28

Long term lease liability 61,31

32,66,30

PROVISIONS Provision for Gratuity 38,10

Proposed Dividend 7,00,16

7,38,26

40,04,56

# Includes unclaimed debentures and interest thereon 18,46

SCHEDULE 8

MISCELLANEOUS EXPENDITURE

Technical fees 59,73

ERP Software 58

Public issue expenses 14,08

Voluntary Retirement Scheme 6,22,46

Non compete fees 17,08,33

24,05,18

SCHEDULE 9

OTHER INCOME

Schedule (7 to 9)


From Investments (Trade)

Dividend 2,48,87

From Investments (Non-trade)

Dividend 65,41

Interest on Government securities (Gross) 4,91

70,32

Interest - (Gross ) 39,54

Commission income 25,49

For services rendered 34,88

Profit on sale of fixed assets 4,85

Rent 22,49

Scrap sales/Miscellaneous sales 1,73,08

Excess provision for expenses of earlier years released 43,37

Excess provision of incentive to wholetime director in previous year 3,26

Miscellaneous Income 1,99,01

8,65,16

Tax deducted at source from interest 6,51

Schedule (7 to 9)



Schedule (10 to 12) (Rs. in 000's)

SCHEDULE 10

EMPLOYEE COST

Salaries, wages and bonus 29,85,23

Contribution to provident and other funds 3,58,89

Voluntary Retirement Scheme - proportionate charge for the year 2,04,78

Remuneration to wholetime directors 68,78

Welfare expenses 6,78,77

42,96,45

SCHEDULE 11

OTHER COSTS

Consumption of stores and spares 11,10,69

Power and fuel # 25,79,93

Rent 1,58,67

Rates and taxes 2,65,54

Insurance 1,67,30

Repairs to Buildings 81,89

Machinery 7,06,28*

7,88,17

Data processing charges 6,90

Technical fee 36,09

Directors sitting fees 5,35

Commission to non-wholetime directors 11,00

Auditors remuneration 11,02

Travel and conveyance 5,37,37

Freight, delivery and shipping charges 6,90,32

Schedule (10 to 12)


Selling commission 1,43,95

Turnover discounts 2,79,17

Rebates and allowances 2,29,63

Advertisement and publicity 1,32,45

Printing, stationery and communication 3,56,80

Loss on sale of fixed assets 30,32

Loss on sale of investments 65

Contribution to research institution 12,22

Diminution in value of investments written off 25,67

Bad debts and advances written off 1,29,73

Less : Provision adjusted 1,06,16

23,57

Provision for doubtful debts, advances and deposits@ 1,95,14

General services 11,09,00

Miscellaneous expenses 6,25,12

95,32,04

# Net of own power generation which includes Rs.30,85 banked withKSEB

12,15,30

* Includes stores and spare parts 4,53,54

@ Net of write back

SCHEDULE 12

(ACCRETION ) / DECRETION TO STOCK

Commencing Stock


Finished stock 16,70,67

31,84,71

Closing Stock


Finished stock 13,23,82

27,05,49

(Accretion) / Decretion to Stock 4,79,22

Schedule (10 to 12)


Schedule (10 to 12)




SIGNIFICANT ACCOUNTING POLICIES

i) Basis of preparation

The consolidated financial statement of Carborundum Universal Limited and its subsidiaries havebeen prepared under historical cost convention (except revaluation of certain fixed assets) andapplicable mandatory accounting standards.

ii) Basis of Consolidation

The financial statements are prepared in accordance with the principles and procedures for thepreparation and presentation of consolidated financial statements as laid down under AccountingStandard 21. Consolidated financial statements are prepared using uniform accounting policies.

iii) Fixed assets and depreciation

a) All assets are stated at historical cost (net of CENVAT wherever applicable) except land andbuildings added up to 31st August 1984 which are shown as per the revaluation done in that yearand land and buildings at Cutfast Division, which were revalued in the year ending 30thNovember 1986. Cost comprises of direct costs including interest on specific borrowingwherever applicable for new project upto the stage of commissioning. Subsidy received fromState Government towards specific assets are reduced from the cost of fixed assets.

b) Depreciation on fixed assets is provided on straight line / written-down value method at ratesspecified in Schedule XIV of the Companies Act, 1956. Depreciation in the foreign subsidiary isprovided using accelerated method over the estimated useful life of the assets.

c) The difference between the depreciation for the year on the revalued buildings and depreciationcalculated on the original cost is recouped from the fixed assets revaluation reserve.

d) The assets taken on lease prior to 1st April 2001 are not capitalised and lease rentals areabsorbed in the Profit and Loss Account without reference to the useful life of the asset.However, to comply with Accounting Standard 19 Leases, fixed assets taken on financial leaseon or after 1st April 2001 are capitalised and depreciation has been provided on such assets atrates specified in Schedule XIV of the Companies Act, 1956. With regard to assets acquiredunder Hire purchase, the cost of assets are capitalised while the annual charges are charged torevenue

e) Plant and machinery given on financial lease prior to 1st April 2001 is depreciated equally overthe period of lease without reference to the useful life of the asset.

Schedule (13)



f) Goodwill arising out of the acquisition of a Company by a subsidiary is amortised over a periodof five years from the date of acquisition

iv) Borrowing costs

Borrowing costs are capitalised as part of qualifying fixed assets when it is possible that they willresult in future economic benefits. Other borrowing costs are expensed.

v) Inventories

a) Finished stock and work-in-process are valued at lower of cost and net realisable value. Cost onweighted average basis includes all direct costs and applicable production overheads to bring thegoods to the present location and condition. Excise duty on the finished goods is added to thecost.

b) Raw materials, accessories and stores and spares are valued at lower of cost and net realisablevalue. Cost on weighted average / first-in first-out basis includes freight, taxes and duties net ofCENVAT credit wherever applicable. Customs duty payable on material in bond is added tocost.

c) Trading stocks are valued at first-in-first-out method

d) Work-in-process is valued at cost / proportionate completion method. Direct expensesidentifiable to a specific job are debited to that job. Indirect expenses are not allocated butcharged as period cost in the year it is incurred.

vi) Investments

Long term investments are stated at cost / valuation. The diminution, if any, in the value ofinvestments stated at cost, is not recognised unless such diminution is considered permanent.

vii) Revenue recognition

a) Revenues are recognised and expenses are accounted on their accrual with necessary provisionsfor all known liabilities and losses.

b) Sales is inclusive of excise duty. Service income is recognised on the basis of percentage ofcompletion. Scrap sales are accounted on cash basis. Revenue for divisible contracts isrecognised in respect of supplies as and when the supplies are completed. Revenue forindivisible contracts is recognised on a percentage completion method based on the billingschedules agreed with customers. The relevant cost including the foreseeable loss, if any isrecognised in accounts in the year of recognition of revenue. Profit so recognised is adjusted toensure that it does not exceed the estimated overall contract margin. The total costs of thecontracts are estimated based on technical and other estimates.

c) Warranty liability on account of after-sales service is accounted on accrual basis to the extentascertained, liability unascertainable is accounted on cash basis.

d) Dividend income on investments are accounted for when the right toreceive the payment is established.

e) Export benefits under advance licence scheme are recognised on receiptof licences.

viii)Research and Development

Schedule (13)


Revenue expenditure on research and development is charged to profit andloss account. Acquisition of assets are capitalised and depreciated on straightline method at rates as per Schedule XIV of the Companies Act, 1956.

ix) Deferred Revenue Expenditure

a) Compensation to employees who have retired under voluntary retirementscheme is amortised over a period of five years commencing with the yearin which it is incurred.

b) Non-recurring revenue expenditure yielding benefit beyond theaccounting year is amortised over a period of three to six years duringwhich the benefit endures.

c) Non-compete fees paid for acquiring the business of a subsidiary isamortised over a period of 84 months during which the benefit endures.

d) Preliminary / pre-operative expenses incurred by a subsidiary is amortisedover a period of five years.

x) Retirement benefits

a) Future liability towards gratuity to employees, wherever determined onactuarial valuation are funded through a Trust or through a policy withLife Insurance Corporation of India. Where it is determined on the basisof the Payment of Gratuity Act by a subsidiary, it is provided but notfunded.

b) Contributions to superannuation fund are funded with Life InsuranceCorporation of India.

c) Monthly contributions to recognised provident fund are considered onaccrual basis in the accounts.

d) Leave encashment benefits to eligible employees has been ascertained onactuarial / actual basis and provided for.

xi) Foreign Currency Transaction / Translation

Transactions in foreign currency are recorded at exchange rates prevailing onthe date of transactions and realised exchange loss or gain are dealt with inprofit and loss account or capitalised where they relate to fixed assets.Current assets and current liabilities are converted at the year end exchangerates/ forward contract the rates and exchange losses/gains are dealt with inthe profit and loss account or adjusted in cost of fixed assets. The accounts ofthe foreign subsidiary, CUMI America Inc., has been translated inaccordance with Accounting Standard 11.

xii) Government Grants Lumpsum capital subsidies, not relating to any specificfixed asset, received from State Governments for setting up new projects areaccounted as capital reserve.

Schedule (13)


xiii) Excise Duty CENVAT credit on materials purchased for production aretaken into account at the time of purchase and CENVAT credit on purchaseof capital items wherever applicable are taken into account as and when theassets are acquired.

The CENVAT credits so taken are utilised for payment of excise duty ongoods manufactured. The unutilised CENVAT credit is carried forward inthe books.

xiv)Segment reporting

The accounting policies adopted for segment reporting are in line with theaccounting policies of the Group with the following additional policies:

a. Inter-segment revenues have been accounted on the basis of pricescharged to external customers.

b. Revenue and expenses have been identified to segments on the basis oftheir relationship to the operating activities of the segment. Revenue andexpenses, which relate to the enterprise as a whole and are not allocable tosegments on a reasonable basis have been included under Un-allocatedCorporate Expenses

xv) Deferred Taxes

a. Current Tax is determined in accordance with the Income tax Act, 1961

b. Deferred tax is recognised for all the timing differences. Deferred taxassets are recognised when considered prudent.

Schedule (13)




Schedule (14)SCHEDULE 14NOTES TO THE ACCOUNTS1 Information on consolidated financials statements of Carborundum

Universal Ltd. (CUMI) as per AS 21a. List of subsidiaries included in the consolidated financial statements

Name of the subsidiary Country of Share in ownership and Shares held

Incorporation voting power by

Direct Holdings

CUMI America Inc., USA 100% CUMI

ProdoriteAnticorrosives Ltd

India 100% CUMI

Net Access (India) PvtLtd

India 100% CUMI

Webword Holdings &Management Pvt. Ltd

India 68.50% CUMI

("Webword")

Holdings throughSubsidiary

Laserwords Pvt Ltd India 65% Webword

Apex Abstracting &Editing Services PvtLtd

India 100% Webword

b. Consolidation is done based on the audited financials of the subsidiaries as on31.03.2002. In respect of CUMI America Inc., the audited financials weretranslated into Indian currency as per Accounting Standard 11 - "Accounting forthe effects of changes in foreign exchange rates"

c. Previous year's figures are not given since the Accounting Standard 21 -"Consolidated financial statements" is mandatory only from 1st April 2001

d. Effect on the consolidated financials of the parent company on acquisition ofthe subsidiaries is given below:

Annexure A



Goodwill / (Capital Reserve) arising on acquisition of :

(Rs.in 000's)

Goodwill (CapitalReserve)

Total

CUMI America Inc., - - -

Prodorite Anticorrosives Ltd - (5,92) (5,92)

Net Access (India) Pvt Ltd 1,39,01 - 1,39,01

Webword Holdings &Management Pvt Ltd

2,07,18 - 2,07,18

3,46,19 (5,92) 3,40,27*

*Net of goodwill and capitalreserve

e. Proportionate share of revenue profits earned during the current year fromsubsidiaries :

CUMI America Inc., 3,55

Prodorite Anticorrosives Ltd 3,21

Net Access (India) Pvt Ltd (33,35)

Webword Holdings & Management Pvt Ltd 44,52

17,93

2. Estimated amount of contracts remaining to be executed oncapital account

and not provided for (including lease rental commitments forlease

1,65,33

agreements entered prior to 01.04.2001- Rs 42,35)

3 Contingent Liabilities:

a) Bills discounted outstanding 6,03,59

b) Outstanding guarantees / Letters of Comfort 17,39,08

c) Outstanding letters of credit 47,41

(Rs. in 000's)

31.03.2002

4 a) No provision is considered necessary for disputed Income tax,sales tax, excise duty and property tax demands under various stagesof appeal proceedings, based on legal opinions that these demandsare not sustainable in law. However, out of this a sum of Rs.3,67,63has

Annexure A


been adjusted by income tax department against refunds due. 20,10,97

b) Claims against the company not acknowledged as debts 35,41

5 Release from debenture redemption reserve is made after taking intoaccount the balance to be retained in the Reserve.

6 In the opinion of the management of the parent company, theshortfall in the value of long term investments held at cost istemporary in nature and the balance in the investment fluctuationreserve would be adequate to cover any eventual loss at the disposalof the investments

7 Interest and finance charges on fixed loans 4,73,00

8 Share capital is exclusive of 40 equity shares of Rs.10 each pendingallotment to the shareholders of erstwhile Cutfast Abrasive ToolsLtd.

9 Related Party Disclosures (covers only related party transactionsapplicable to the parent Company excluding intra group transactionssince all subsidiary companies are exempt from this requirementunder Accounting Standard 18 - Related Party Disclosures)

a) List of related parties

i List of related parties where control exists - None

ii List of related parties with whom transactions have taken place during the year

Associates

Wendt (India) Ltd.

Murugappa Morgan Thermal Ceramics Ltd.

Southern Energy Development Corporation Ltd.

Sterling Abrasives Ltd.

Ciria India Ltd.

Kalaivani Steel Structures Ltd.

Murugappa Management Services Ltd

Key management personnel

Mr. M V Murugappan

Mr. M M Murugappan

Mr. Ramesh Agarwal

b) Transactions with Related party

Associates Key Management Total

Personnel

Income from sales and services 2,77,98 - 2,77,98

Purchases 2,73,60 - 2,73,60

Annexure A


Lease/Rental Income 8,15 - 8,15

Purchase of power 2,06,49 - 2,06,49

Reimbursement towards deputation ofemployees

34,89 - 34,89

Dividend income 2,43,47 - 2,43,47

Interest Received 6,20 - 6,20

Purchase of fixed assets 3,91 - 3,91

Sale of fixed assets 6,01 - 6,01

Investments 4 - 4

Inter-corporate deposits placed andoutstanding

1,30,00 - 1,30,00

Debtors 97,63 - 97,63

Creditors 32,24 - 32,24

Managerial remuneration - 62,79 62,79

Advances lent - 16,00 16,00

10 A) SEGMENT DISCLOSURE (Rs. in 000' s)

a. PRIMARY SEGMENT INFORMATION

Abrasives Ceramics Electrominerals ITEnabledServices

Eliminations Total

1. REVENUE

ExternalSales

199,67,33 63,94,21 34,93,95 6,88,45 - 305,43,94

IntersegmentSales

- 2,48,80 23,22,17 29,16(26,00,13) -

TotalRevenue

199,67,33 66,43,01 58,16,12 7,17,61(26,00,13) 305,43,94

2. RESULT

Segmentresult

28,26,25 8,78,46 9,62,59 2,77,44 - 49,44,74

Unallocatedcorporateexpenses

- - - - - (7,66,27)

Annexure A


Interestexpense

- - - - - (12,18,04)

Interest anddividendincome

- - - - - 3,58,73

Incometaxes

- - - - - (9,49,54)

Net profit 28,26,25 8,78,46 9,62,59 2,77,44 - 23,69,62

3. OTHERINFORMATION

Segmentassets

139,58,42 41,46,29 44,53,37 27,94,81 - 253,52,89

Unallocatedcorporateassets *

- - - - - 59,51,00

Total assets 139,58,42 41,46,29 44,53,37 27,94,81 - 313,03,89

Segmentliabilities

15,47,73 8,26,40 3,54,96 1,26,67 - 28,55,76

Unallocatedcorporateliabilities#

- - - - - 147,05,95

Totalliabilities

15,47,73 8,26,40 3,54,96 1,26,67 - 175,61,71

Capitalexpenditure

9,78,82 4,36,16 32,81 66,30 -

Depreciation 6,45,98 1,74,61 3,13,56 16,53 -

Non-cashexpenses otherthan

depreciation 1,56,32 79,10 2,83 43,85 -

* Includes goodwill of Rs.3,40,27

# Includes minority interest of Rs.9,77,00

b. SECONDARY SEGMENT INFORMATION

1. Revenue by Geographical market

Annexure A


India 2,63,36,16

Rest of the world 42,07,78

Total 3,05,43,94

2. Carrying amount of Segment Assets

India 2,43,39,76

Rest of the world 10,13,13

Total 2,53,52,89

3. Additions to Fixed Assets and Intangible Assets

India 15,14,09

Rest of the world -

Total 15,14,09

10 B) Notes to Segmental Reportinga Business Segments

The Company has considered business segment as the primary segment for disclosure. Thebusiness segments are : Abrasives, Ceramics, Electrominerals and IT enabled services. Abrasivesegment comprise of bonded, coated, processed cloth, polymers and coolants. Captive powergeneration from windmill is utilised for production in this segment. Ceramics comprise ofbonded refractories, Electrocast Refractories, industrial ceramics and anti-corrosives.Electrominerals include the abrasive/refractory grains and the captive power generation fromhydel power plant. IT enabled services include web enabling services and digitised data capture.The above segments have been identified taking into account the organisation structure as wellas the differing risks and returns of these segments.

b. Geographical SegmentsThe geographical segments considered for disclosure are: India and Rest of the world. All themanufacturing facilities and Sales offices are located in India and in USA. Sales to the rest of theworld are also serviced by Indian sales offices and US office. Geographical revenues aresegregated based on the location of the customer who is invoiced or in relation to which therevenue is otherwise recognised.

c. Segmental assets includes all operating assets used by respective segment and consistsprincipally of operating cash, debtors, inventories and fixed assets net of allowances andprovisions. Segmental liabilities include all operating liabilities and consist primarily of creditorsand accrued liabilities. Segment assets and liabilities do not include income tax assets andliabilities.

11 Notes relating to Leases

a. Vehicles

Cost of Leased Assets acquired after 01.04.2001 (as on 31.03.2002) 64,61

b. Net Carrying amount as on 31.03.2002 (written down value) 62,63

Annexure A


c. Reconciliation between total minimum lease payments and theirpresent value:

Total minimum lease payments as on 31.03.2002 87,15

Less : Future liability on interest account (25,84)

Present value of lease payments as on 31.03.2002 61,31

d. Yearwise future minimum lease rental payments on contracts enteredafter 01.04.2001

Total minimum lease Present value of lease

payments as on payments as on

31.03.2002 31.03.2002

i) Not later than one year 15,60 7,73

ii)Later than one year and not laterthan five years

71,55 53,58

iii) Later than five years Nil Nil

12 Information relevant for Accounting Standard 20 - Earnings per share(EPS)a. There are no potential equity shares and hence the basic and diluted EPS are the

same

b. Numerator - The company has only one class of equity share, hence the profitafter tax net of minority interest is used for computation of EPS without anyadjustment

c. Denominator - Weighted average number of equity shares arrived at afteradjusting the time factor (Reconciliation of Denominator)

Nos

Weighted average number of Equity shares at the beginning and endof the year

93,35,400

13 Information relating to Deferred tax

The accounting standard AS 22 - Accounting for taxes on income has come intoeffect from April 1, 2001 and accordingly the provision for deferred tax liabilityhas been made. Consequently the cumulative net deferred tax liability upto March31, 2001 amounting to Rs.17,39,48 has been charged to general reserve on April 1,2001. Further the deferred tax of Rs.1,10,80 relating to the current year has beenrecognised in the profit.

Details of deferred tax as on 31.3.2002:

a. Deferred Tax Assets arising out of timing difference relating to:

Annexure A


Provision for bad and doubtful debts and advances 1,93,64

Unabsorbed loss 4,22

b. Deferred Tax Liability arising out of timing difference relating to:


Software expenses 21

Preliminary expenses 8

Leased Assets 48

c. In the opinion of the management, future business prospects of the subsidiariesindicate adequate taxable income to cover the unabsorbed depreciationallowance and accordingly deferred tax asset has been recognised

Annexure A




Plant LocationsAbrasives

Carborundum Universal Ltd., PB No. 2272,Tiruvortiyur, Chennai 600 019, Tamil Nadu Tel:+91-44-5733322 / 5733324 / 5733326 / 5733329 Fax:+91-44-5733499 / 5733280

●

Carborundum Universal Ltd., Bonded Division, PlotNo. 47 & 48 SIPCOT Industrial Complex, Hosur 635126, Dharmapuri District, Tamil Nadu Tel:+91-4344-576864 / 577058 / 577059 / 576630 Fax:+91-4344-577060

●

Carborundum Universal Ltd., Cutfast Division,Pallikaranai Post, Chennai 601 302, Tamil Nadu Tel:+91-44-2460484 / 2460083 / 2460345 Fax:+91-44-2460174

●

Carborundum Universal Ltd., Village GopalpurChandigarh, PO. Ganga Nagar North 24 ParganasDistrict 743 250, West Bengal Tel: +91-33-5384418Fax: +91-33-5386331

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Carborundum Universal Ltd., Cloth Processing Plant,C-4 & C-5, Kamaraj Salai MMDA IndustrialComplex, Maraimalai Nagar 603 209, KancheepuramDistrict, Tamil Nadu Tel: +91-4114-453093 / 453097Fax: +91-4114-453110

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CUMI Windfarm, 160-0/C Moopanar CompoundTravellers' Bungalow Road, Valliyur 627117,Tirunelveli District, Tamil NaduTel:+91-4637-531884/520654

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Ceramics

Plant Locations




Carborundum Universal Ltd., Industrial CeramicsDivision Plot No. 47, PB No. 17, SIPCOT IndustrialComplex Hosur 635 126, Dharmapuri District, TamilNadu Tel: +91-4344-576027/576418 Fax:+91-4344-576028

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Carborundum Universal Ltd., Super RefractoriesDivision Plot No. 102 & 103, SIPCOT IndustrialComplex (Phase II) Ranipet 632 403, Tamil Nadu Tel:+91-4172-44582 Fax: +91-4172-44982

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Electrominerals

Carborundum Universal Ltd., ElectromineralsDivision, PB No. 1 Kalamassery Development PlotPO., Kalamassery 683 109, Ernakulam District, KeralaTel: +91-484-541058 / 540309 Fax: +91-484-532019

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Carborundum Universal Ltd., ElectromineralsDivision, PB No. 3, Nalukettu, Koratty 680 308Trichur District, Kerala Tel: +91-488-732313 / 732061Fax: +91-488-732821

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Carborundum Universal Ltd., Bhatia Mines, BhatiaWestern Railway, Jamnagar District Gujarat 361 315Tel:+91-2891-33464

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Carborundum Universal Ltd., Maniyar HydroelectricWorks, Maniyar PO., Vadaserikara PathanamthittaDistrict, Kerala 689 662. Telefax: + 91 -473-552523

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Plant Locations




carborundum universal limited annual report 2001-2002

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