chairman managing director directors - gsk kumar bankers bank of america citibank n.a. the hongkong...

CONTENTSBoard of Directors, etc. 1

Financial Highlights 2

Financial Statistics 4

Directors’ Report 6

Corporate Governance Report 11

Management Discussion & Analysis Report 17

Auditors’ Report 20

Balance Sheet 22

Profit & Loss Account 23

Schedules 1, 2, 3 & 4 24

Schedules 5, 6 & 7 25

Schedules 8, 9 & 10 26

Schedules 11, 12, 13, 14 & 15 27

Schedules 16 & 17 28

Schedules 18 & 19 29

Balance Sheet Abstract &

General Business Profile 38

Cash Flow Statement 39

CHAIRMANS.J. Scarff, O.B.E

MANAGING DIRECTORNicholas J. Massey (w.e.f. 1.11.2002)

DIRECTORSA. Chatterjee

Ashok Dayal

A.S. Lakshamanan

Kunal Kashyap

P.S. Mukherjee

P. Murari

Sangita Reddy (till 31.10.2002)

S.S. Dugal

V. Thyagarajan

Colin Handcock

P. Dwarakanath

(Alternate Director to Colin Handcock)

Ian McPherson (w.e.f. 5.2.2002)

R. Subbarayan

(Alternate Director to Ian McPherson)

COMPANY SECRETARYSurinder Kumar

BANKERSBank of America

Citibank N.A.

The Hongkong & Shanghai Banking

Corporation Limited

Standard Chartered Bank

State Bank of Patiala

ABN Amro Bank

BNP Paribas

Andhra Bank

Deutsche Bank

AUDITORSPrice Waterhouse

REGISTERED OFFICEPatiala Road

Nabha 147 201 (Punjab)

HEAD OFFICEDLF Plaza Tower

DLF City, Phase-I

Gurgaon-122 002

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INANCIAL HIGHLIGHTSF

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INANCIAL HIGHLIGHTSF

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TEN YEAR FINANCIAL STATISTICS

Rs. Lakhs

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

SOURCES AND APPLICATIONS OF FUNDS

SOURCES OF FUNDS

Share Capital 1418 1418 2836 2836 4538 4538 4538 4538 4538 4538

Reserves & Surplus 5411 6266 6826 10269 12673 18312 25201 32916 39604 43784

TOTAL SHAREHOLDERS’ FUNDS 6829 7684 9662 13105 17211 22850 29739 37454 44142 48322

BORROWINGS 586 1609 729 800 - - 2000 5500 7566 -

FUNDS EMPLOYED 7415 9293 10391 13905 17211 22850 31739 42954 51708 48322

APPLICATION OF FUNDS

Gross Fixed Assets 5439 5929 6898 7387 8836 12005 19574 40218 49690 51556

Depreciation 2059 2489 3007 3591 4311 5122 5867 7004 8455 12270

NET FIXED ASSETS 3380 3440 3891 3796 4525 6883 13707 33214 41235 39286

INVESTMENTS 3814 4540 3641 2900 2900 2900 2900 - - -

Gross Current Assets,Loans and Advances 3882 5115 7803 13788 17208 20341 24290 25680 29815 29343

Current Liabilities & Provisions 3661 3802 4944 6579 7699 8337 11269 17812 18004 17728

NET CURRENT ASSETS 221 1313 2859 7209 9509 12004 13021 7868 11811 11615

DEFERRED TAX ASSETS/(LIABILITIES) - - - - - - - - (2816) (3563)

MISCELLANEOUS EXPENDITURE - - - - 277 1063 2111 1872 1478 984

TOTAL APPLICATION 7415 9293 10391 13905 17211 22850 31739 42954 51708 48322

F INANCIAL STATISTICS

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TEN YEAR TRACK RECORD

Rs. Lakhs

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

TURNOVER 23119 29474 36656 49575 56230 64562 72048 87512 99214 87053

PROFIT BEFORE TAX &EXCEPTIONAL ITEMS 3347 4896 6002 7931 9470 11651 13833 15173 19417 13635

NET PROFIT 1956 2415 3610 4694 6202 8135 9761 11202 12663 8501

DIVIDEND PAYOUT 1418 1560 1631 1702 1906 2269 2587 2859 3177 3177

CORPORATE DIVIDEND TAX - - - - 190 227 284 629 324 -

RETAINED EARNINGS 538 855 1979 2992 4106 5639 6890 7714 9162 5324

DIVIDEND - % 100 110 57.50* 60 42@ 50 57 63 70 70

EARNINGS PER SHARE (Rs.) 13.79 17.03 12.73* 16.55 13.66@ 17.93 21.51 24.68 27.90 18.73

BONUS ISSUE - - 1:1 - 3:5 - - - - -

NUMBER OF SHAREHOLDERS 24986 27621 28836 28831 30145 29413 31690 33019 31442 30607

* POST ISSUE OF BONUS SHARES IN THE RATIO OF 1:1

@ POST ISSUE OF BONUS SHARES IN THE RATIO OF 3:5

F INANCIAL STATISTICS

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Your Directors are pleased to present the Annual Reporton the business and operations of your Company and theaudited accounts of the Company for the year ended 31stDecember, 2002.

FINANCIAL RESULTS(Rs. Lakhs)

2002 2001

Sales 87053.34 99213.83Gross Profit (before 17680.34 21761.14Depreciation, Amortisation,Exceptional Items and Tax)Less: Depreciation 2571.55 1363.55Less: Amortisation of :- Patents and Trade Marks 980.33 490.46- Deferred Revenue Expenditure 493.32 489.87

Profit before Taxand Exceptional Items 13635.14 19417.26Less: Provision for Tax- Current Tax 3639.86 6656.90- Deferred Tax 885.04 349.86- Adjustment of previous years - (269.48)

4524.90 6737.28Profit after Tax and before

Exceptional Items 9110.24 12679.98

Less Exceptional Items 609.73 17.10(Net of Tax)

Net Profit available forAppropriations 8500.51 12662.88

Previous year figures have been regrouped/reclassifiedwherever necessary to conform to this year’s classification.Appropriations

Dividends- First Interim 1497.57 1497.56- Second Interim 1679.08 1679.08Corporate Dividend Tax - 324.02Transferred to General Reserves 5323.86 9162.22

8500.51 12662.88

Earnings Per Share 18.73 27.90(Basic & Diluted)

PERFORMANCE OF THE COMPANY

The year 2002 has been a difficult one for your Company.Three consecutive bad agricultural years impacted thedemand adversely. The GDP growth in the year 2002 - 03is expected to be the lowest in the last decade. Industrialgrowth especially in the manufacturing sector has alsobeen one of the lowest. Consumer spending declined asthe overall confidence in the economic environment waslow. There is a general sense of instability and absence of“feel good factor”. This resulted in a considerable slowdownacross the various FMCG sectors.

As against this backdrop, the turnover of the Company atRs. 87053.34 lakhs declined by 12.26% over 2001. Duringthe year- especially during the second quarter April-June-the trade pipeline inventory of the Company tended to go

up in view of the slowdown of demand when your Companydecided to cut back on sales and bring back the tradeinventory to a normal level in order to mitigate associatedrisks.

The Gross Profit before Depreciation, Amortisation,Exceptional Items and Tax at Rs. 17680.34 lakhs for theyear ended 31st December, 2002 represents a decline of18.75% over the previous year while Profit before Taxand Exceptional Items declined by 29.78 %. Pursuantto the issuance of the mandatory Accounting Standard-26“Intangible Assets” by the Institute of CharteredAccountants of India the Company started amortisingPatents and Trade Marks over a period of 10 years asagainst the earlier policy of amortising over 20 years.Accordingly Patents and Trade Marks have been restatedat Rs. 7924.31 lakhs and the additional amortisation ofRs. 1143.72 lakhs has been adjusted from the openingGeneral Reserves. Further, the current year amortisationis higher by Rs. 489.87 lakhs.

The Profit after Tax and before Exceptional Items hasdeclined by 28.15% over 2001, while the Net Profitavailable for appropriations declined by 32.87%. The GrossProfit as a percentage to sales has marginally declinedfrom 21.93 % last year to 20.31% in 2002. This decline ingrowth in profits has been to some extent mitigated by acontinuing process of value re-engineering, innovations,effective management focus on costs and expenses, theincreasing importance being given to the upgradation ofproduct quality, increased productivity and continuousvalue addition to products and services. The favourableprices of milk / SMP – two of our most important rawmaterials during major part of the year also helped theCompany in controlling the cost of production.

Exceptional Items of Rs. 963.93 lakhs (Gross of tax)comprise of an amount of Rs. 470.55 lakhs paid towardsVoluntary Retirement Scheme (VRS) to the workers andthe staff pursuant to the Company’s restructuringoperations and Rs. 493.38 lakhs paid as an additionalcontribution to the Superannuation/Pension Funds for theeligible management staff. The corresponding tax savingimplications thereon - Current Tax Rs. 215.86 lakhs andDeferred Tax Rs. 138.34 lakhs.

RESERVES

The total Reserves as on 31st December, 2002 stood atRs. 43783.85 lakhs representing an increase of 10.55 %from last year.

DIVIDENDS

The Directors consider that the two Interim dividendsaggregating to Rs. 7.00 per share declared, to bereasonable and commensurate with the results for the yearended 31st December, 2002 and do not recommend afinal dividend for the year.

EXPORTS

During the year the Company’s export earnings amountingto Rs. 4100.32 lakhs covering exports to Bangladesh,Myanmar, Sri Lanka, Middle East, Nepal and other marketsrepresented a decline of 8.45 % over the previous year.

D IRECTORS’ REPORT

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RESEARCH AND DEVELOPMENT

The Research and Development Centre of your Companycontinued to provide valuable support to improve the qualityof existing products. As a result of this we were able torelaunch Horlicks with new claims , Maltova and Boostwith revised formulations and substantially improving thepackaging of other brand variants during the year. Currentlywork is progressing on the development of a number ofnew and improved products, as well as updating ofproduction processes as per international standards.

MODERNISATION OF FACILITIES

The Company continued to modernise its existing Plant &Machinery and production facilities at its Plants at Nabha,Rajahmundry and the various Packing Stations across thecountry. There has been considerable improvements madein GMP standards, basic hygiene and safety parametersat all our manufacturing locations.

CREATION OF NEW CAPACITY

Your Directors are pleased to report that its new SprayDrier plant at Sonepat was commissioned and startedcommercial production effective 1St July, 2002. TheCompany has capitalised the Spray Drier Plant at a costof Rs. 26175.84 lakhs. The plant at Sonepat has a state ofthe art plant and machinery, one of the biggest spray dryingplant in Asia with European GMP and safety standards.The Company, as a responsible corporate citizen, hasincorporated all the eco friendly measures in the new plant.

Further during the year Gussetted Pouch packingoperations were relocated from Nabha factory to a “Stateof Art” greenfield facility set up by a contracted third partyat Mangaldoi, Assam. This would enable your Companyto avail of Tax incentives offered by the Central Governmentto promote development of north-eastern States.

CLOSURE OF THE PACKING UNIT AT KOLKATA

As a result of the ongoing restructuring process andwith a view to enhance cost effectiveness, Company’spacking facility at Kolkata was closed down effectiveSeptember, 2002. The workers and the staff opted for VRSand all issues relating to the closure were amicably settled.

ADDITIONAL BUSINESS

Your Directors are pleased to inform you that effective1st January, 2002 your Company is acting as theConsignment Sales Agent for Marketing, Selling &Distribution of the brand IODEX. The brand will continueto belong to GlaxoSmithKline Pharmaceuticals Limited. Allthe transactions between the principal and the agent aremade at an arm’s length basis and on generally acceptedcommercial terms and conditions.

ISO 9002 ACCREDITATION

Your Company’s manufacturing facility at Rajahmundry andthe packing facility at Hyderabad continue to maintainthe prestigious ISO 9002 certification by SGS, a leadinginternational certification company. The ISO 9002certification for Nabha site and the packing facility atBallabgarh is pending for renewal. Nabha, Rajahmundry

have also accredited with ISO 14000 Certificationindicating our commitment for maintaining GlobalEnvironmental Standards.

INFORMATION TECHNOLOGY

Your Company has always been at the forefront ofInformation Technology having implemented two ERPpackages and connecting up all its business locations allover the country via satellite links and terrestrial links.

During the year the Company extensively used B2Boperations with its leading vendors for the purchase ofraw materials, services and capital items and launchedB2B portal for communicating and networking with all itsemployees. This initiative brought in considerable amountof savings in resources for the Company.

CHANGE OF NAME

The name of your Company has been changed toGlaxoSmithKline Consumer Healthcare Limited with effectfrom 23rd April, 2002.

CONSERVATION OF ENERGY, TECHNOLOGYABSORPTION AND FOREIGN EXCHANGE EARNINGSAND OUTGO

Information required as per the Companies (Disclosure ofParticulars in the Report of the Board of Directors) Rules,1988, is given in the Annexure to this Report.

DIRECTORS

Mr. Colin Handcock ceased to be the nominee Director ofthe Company under Article 97A of the Articles ofAssociation of the Company. Consequently Mr. P.Dwarakanath also ceased to be an Alternate Director toMr. Colin Handcock. Mr. Nicholas J. Massey was nominatedby Horlicks Limited as a Director under Article 97A of theArticles of Association of the Company.

Mr. Nicholas J. Massey was appointed as the ManagingDirector of the Company w.e.f. 1st November, 2002 in placeof Mr. S.J. Scarff who ceased to be the Managing Directorof the Company w.e.f. 31st October, 2002.

Mr. S.J. Scarff was appointed as the Non ExecutiveChairman of the Board of Directors w.e.f. 1st November,2002 and would continue to render valuable advise to theCompany.

Mrs. Sangita Reddy tendered her resignation w.e.f.31st October, 2002 to the Board of Directors and in herplace Mr. Colin Handcock was appointed as a Director incasual vacancy w.e.f. 1st November, 2002. Mr. P.Dwarakanath has been appointed as an AlternateDirector to Mr. Colin Handcock.

The Board of Directors wish to place on record theirappreciation of the valuable advise and guidance renderedby Mrs. Sangita Reddy.

AUDITORS

Messrs. Price Waterhouse, Chartered Accountants, whoretire at the conclusion of the forthcoming AnnualGeneral Meeting and being eligible, offer themselves forre-appointment.


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HUMAN RESOURCE DEVELOPMENT

Harmonious industrial relations continued to prevailat all the units throughout the Company. TheCompany continued its focus on training anddeveloping people through internal and externalmanagement development programmes andoverseas assignments.

ENVIRONMENT AND SOCIAL COMMITMENT

Your Company, in its endeavour to serve the community,extended its reach to the villages around theCompany’s new state-of-art Sonepat factory in Khewravillage. Your Company along with Business & CommunityFoundation (BCF) undertook an extensive NeedsAnalysis of the region and is working towardsenhancing the education system, in order to build asecure future of many children.

Your Company has continued to support the Eye Carecentre at Khewra, Sonepat, treating hundreds of patientsand conducting around 1500 cataract operations perannum.

As in previous years your Company had organized regularHealth check-up and animal husbandry camps aroundits factories at Nabha and Rajahmundry.

Your Company also contributed to the community at large,by encouraging the sale of Helpage and CRY cardsduring the season and also organized free Blood DonationCamp along with Rotary Blood Bank. Also Rs. 1 lakh wasdonated to District Red Cross Society, Gurgaon forpurchase of medicines for medical camps organised byHealth Authorities, Gurgaon.

PARTICULARS OF EMPLOYEES

Particulars of employees as required under Section 217(2A) of the Companies Act, 1956 are enclosed.

ACKNOWLEDGEMENTS

The Directors wish to extend their thanks andappreciation to all the employees of the Company atall levels,agents and other business associatesfor their commitment, dedication and respectivecontributions to the Company’s operations during theyear under review.

The Directors would also like to acknowledge thevaluable guidance, technical assistance and advise beingreceived from the Associate Company in the U.K.

Your Directors look forward to the future with confidence.

ANNEXURE TO THE DIRECTORS’ REPORT 2002

Particulars regarding Conservation of Energy,Technology Absorption, Foreign ExchangeEarnings and Outgo.

A. CONSERVATION OF ENERGY

(a) Energy Conservation Measures Taken

1. Steam

In continuation of the energy saving measuresinitiated by the Company the coal usage per tonof production has been reducing gradually overthe years. Consumption of coal per ton ofproduction has shown a reduction of 6.9 %compared to last year. This was achieved throughvarious measures such as improving the Boilerefficiency by closely monitoring and controlling theAir-Fuel ratio based on fuel gas oxygenpercentage, effective utilization of steam, avoidingsteam wastage and by using better grade coal.

2. Electricity

Usage of electricity per unit of production hasincreased by 32.9 % in the current year primarilydue to comparatively higher consumption ofelectricity in our new fully automated Sonepatplant which was not utilised to an optimum extent.In addition our production facilities at both Nabhaand Rajahmundry operated at levels lower thanthe last year. However during the year installationof Co-Generation plant, at Rajahmundry siteresulted in generating more than 25% of the powerrequirement using the steam generated for theprocess utilities. Installation of energy efficientcentralised compressed air system and energyefficient lighting system also resulted in savingsin electricity consumed during the year.

(b) Additional investments and proposals, if any,being implemented for reduction ofconsumption of energy

Various steps and measures are being initiatedto continuously improve on consumption of coalat Nabha and Rajahmundry plants and electricityat all the sites.

(c) In respect of measures at (a) and (b) above forreduction of energy consumption and consequentimpact on the cost of production of goods

As already mentioned in (a) 1. above, the coalconsumption per ton of production has beencontinuously improving over the last five yearsto bring down the usage cost of coal per ton ofproduction.

However in the current year electricity consumptionper ton of production increased due to comparativelyhigher consumption of electricity in our new fullyautomated Sonepat plant which was not utilised toan optimum extent resulting in a relatively increasedcost of electricity per ton of production.

For and on behalf of the Board

S. J. Scarff Nicholas J. Massey A. Chatterjee

Chairman Managing Director Ashok Dayal

P. S. Mukherjee

DirectorsNew Delhi

Dated : 31st January, 2003


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(d) Total energy consumption and energyconsumption per unit of production as per Form“A” of the Annexure in respect of industriesspecified in the Schedule thereto:

FORM “A”

2002 2001

A. Power and Fuel Consumption

1. Electricity

a) Purchased Units (in Lakhs) 192.98 214.88

Total amount(Rs. Lakhs) 770.03 817.44

Rate/Unit (Rs.) 3.99 3.80

b) Own Generation

Units (in Lakhs) 64.97 15.98

Units per litre of Diesel oil 3.79 3.43

Cost/Unit (Rs.) 4.31 4.70

2. Coal Used in Boilers

Quality (Calorific valueranging between 2500to 3500 BTU)Quantity (Tonnes) 23,287 30,238

Total Cost (Rs. Lakhs) 605.78 760.43

Average Rate (Rs.) 2,601.34 2,514.85

B. Consumption per unit of Production:

Current Year Previous Year

Coal Power Coal Power

MT Units MT Units

1. Malted Milkfood/Malted Food/Malt Based Food/Energy andProtein RichFood/ PowderedMilk (Per Ton) 0.480 514 0.516 386

2. Ghee &Butter (Per Ton) 0.383 329 0.395 312

B.TECHNOLOGY ABSORPTION

RESEARCH & DEVELOPMENT (R&D)

(1) Specific Areas in which R&D was carried outby the Company

Research and Development Centre continued toprovide valuable support for improvement inquality of existing products, development of new

products, and processes for better productivity,quality cost effectiveness, superior product claimsand improved packaging.

(2) Benefits derived as a result of the above R&D

Production processes have improved resulting inenhanced productivity, efficiency throughout andvalue addition.

(3) Further Plan of Action

Steps are continuously being initiated to upgradethe processing technologies, development ofscience based innovative products of highernutritional value and to maximise productioncapacity at optimum cost.

(4) Expenditure on R&D

(Rs. Lakhs)

2002 2001

a) Capital 72.39 55.85

b) Recurring 642.47 596.82

c) Total 714.86 652.67

d) Total R&D Exp. as 0.82% 0.66%a percentage of totalturnover

TECHNOLOGY ABSORPTION, ADAPTATIONAND INNOVATION

The Company is continuously taking steps to improvethe product and process technology in an effort toprovide for better value for money to consumers.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

(a) Activities relating to exports : Initiatives takento increase exports: Development of newexport methods for products and services andexport plans

The Foreign Exchange earnings through exportshave declined in the current year primarily fromBangladesh, Myanmar, Sri Lanka and Middle Eastmarkets. The efforts to broaden the export base toother countries in South East Asia and the MiddleEast are continuing.

(b) Total Foreign Exchange used and earned:

(Rs. Lakhs)

2002 2001

Foreign Exchange earnings 2414.03 2291.43

Foreign Exchange outgo 1340.46 2141.88


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INFORMATION AS PER SECTION 217(2A) OF COMPANIES ACT, 1956 READ WITH THE COMPANIES (PARTICULARS OF EMPLOYEES ) RULES, 1975AND FORMING PART OF THE DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST DECEMBER, 2002.

Name Age Date of Designation/ Gross Qualifications Experience Previous Employment/Position Held(Years) Commencement Nature of Duties Remuneration (Years)

of Employment Rs.

A. EMPLOYED THROUGHOUT THE YEAR AND IN RECEIPT OF REMUNERATION AGGREGATING TO RS. 24,00,000/- PER ANNUM OR MORE

1 Abhinandan Chatterjee 52 11-07-1994 Director - Finance & Information Technology 5,769,900 B.Com.(Hons.),F.C.A. 30 General Manager, Eicher Goodearth Ltd.

2 Ambati Venu 33 01-06-1992 General Manager - Sales Eastern Region 2,691,487 B.E.(Mech.), P.G.D.M. 10 —

3 C. H. Lambert 49 01-04-1996 Vice President - G.M.S. 5,746,794 H.N.D.(Food Tech.). 26 Manager,Project-Operations,S.B.C.H. Singapore.

4 D.S.Thomas 36 15-11-2001 General Manager - Marketing (OHC) 3,388,236 B. Comm. (Marketing) 9 Senior Group Product Manager, GlaxoSmithKline, South Africa

5 K.G.K. Prasad 42 05-06-1982 General Manager - Sonepat Factory 2,475,747 B. Sc.(D.T.). 20 —

6 M.S.Chhachhi 48 16-08-1994 General Manager - Corporate Production Services 3,780,713 B.Tech.(Hons.),P.G.D.M.(IIM-C) 24 Factory Manager, Britannia Ind.Ltd.

7 Mohit Jain 36 01-04-1997 General Manager - Procurement 2,560,698 BSC in Chem Engg., M.M.S. 12 Regional Manager- Paper Products Ltd., New Delhi.

8 P. Dwarakanath 56 22-06-1979 Director - Human Resources & Admin. 6,466,683 B.Sc.,B.L.,P.G.D.M.(P.M. & I.R.). 34 Law Officer,I.D.L. Chemicals Ltd.Hyderabad.

9 P. K. Chaudhary 46 01-12-1979 General Manager - R. & D. 3,105,978 M.Sc. 23 —

10 P. M. Mathai * 52 01-05-1986 General Manager - C.E.S. 3,431,924 B.Tech.,P.G.D.M. 28 Branch Manager,Voltas Ltd.

11 P. S. Mukherjee 53 01-04-1977 Director - Legal & Corporate Affairs 5,945,686 M.A.,L.L.B. 30 Legal Assistant,Indian Aluminium Co.Ltd., Calcutta.

12 R. Subbarayan 56 01-05-1972 Director - Sales & Marketing 7,095,853 B.Sc. 36 Sales Officer,Cochin Pharma. Co.

13 Sameer Goel 39 01-05-1987 Head of Sales 3,239,849 B.A.(H), P.G.D.M. 15 —

14 Sucheta Govil 39 01-05-1987 General Manager - Marketing (NHC) 2,690,644 B.A.(H), P.G.D.M. 16 Management Trainee, Burroughs Wellcome (India) Ltd., Mumbai.

15 Surinder Kumar 45 20-06-1984 General Manager Legal & Company Secretary 2,688,440 M.Com.,L.L.B.,F.C.S. 18 —

16 V. K. Chopra 52 01-05-1970 Head of Central Quality 3,313,481 M.Sc. 32 Trainee Chemist,Indian Sugar & Gen.Engg. Co,Yamunanagar.

B. EMPLOYED FOR A PART OF THE YEAR AND IN RECEIPT OF REMUNERATION AGGREGATING TO RS. 2,00,000/- PER MONTH OR MORE

17 Chander Bhan Bhateja 58 03-01-1968 General Manager - Nabha Factory 5,134,574 B.Sc. (Dairying),Dip. in Project Planning. 35 Demonstrator, N.D.R.I.Karnal.

18 G. V. V. Rao 57 15-04-1973 Manager - MPD 1,795,816 B.V.Sc. 30 —

19 Jaswinder Singh Bansal 53 01-03-1983 Senior Manager - Projects 5,585,246 B. Sc. (Engg.). 29 Asstt. Plant Superintendent, D.C.M. Chemical Works, Delhi.

20 J.Banerjee 55 01-04-1972 Sales Training Manager 2,716,430 B.A. 31 Salesman, Tea Cronical.

21 Kashmira Chadha 36 12-08-1996 General Manager - Marketing - (OTC) 2,284,293 B.Com.,M.M.S. 12 Prod.Mgr.Colgate Palmolive (I) Ltd.

22 K. V. V. S. N. Murthy 56 19-10-1973 Deputy Manager - Finance 1,555,540 M. Com. 29 —

23 L. G. Banerjee 57 24-07-1965 Deputy Manager - Production 1,465,162 I.D.D.(D.T.) 37 —

24 L. N. Krishnan 56 17-02-1975 Manager - Board Administration 2,750,786 B.A. 37 Asst. Machine Tools(I) Ltd., New Delhi.

25 M. K. Tyagi 41 27-10-1993 Senior Manager - Manufacturing 3,153,384 M.Sc.Food Tech., M.B.A 18 Asst. G.M.-OPS, Hunter Foods Ltd.

26 Nicholas J. Massey 48 01-11-2002 Managing Director 1,097,501 M.A. in Politics, Philosophy and Economics 20 Vice President & General Manager - GlaxoSmithKline plc, U.K.

27 S. Dhandapani 58 01-07-1965 Manager - C.P.S. 1,590,606 B.Com. 36 —

28 S. J. Scarff 60 01-06-1978 Chairman & Managing Director 4,950,175 G.C.E. (U.K.). 40 Regional Group Manager,Beecham Products International,Dubai.

29 S. R. Chandila 55 12-11-1973 Deputy Manager - Packing Station - Ballabhgarh 2,102,173 I.D.D. 29 Dairy Asst., Haryana Dairy Development Corporation

30 S. Ramakrishna Varma 52 01-07-1974 Manager - Purchase 3,827,266 B.Com. 28 Tr.Asst. Stores, Krishnam Rajee Corporation

31 S. S. Bedi 57 01-07-1966 Manager - Stores 1,872,325 Hr. Sec. 37 —

32 Sushil Kumar 58 11-02-1967 Senior Manager - Milk Procurement 3,655,602 B. Sc.(D.T.). 35 —

33 Swaran Singh 56 02-04-1990 Senior Manager - Projects 3,795,792 B. E. (Mech.). 25 Manager Technical, Delhi Flour Mills. Co. Ltd.

34 T. Suresh 56 01-04-1997 General Manager - H.R. & A. 636,078 B.Sc.,D.S.S.A.,L.L.B. 33 Sr.Mgr., S.B.Pharma .

35 Y. P. Kakria 57 16-07-1965 Manager - Milk Procurement 1,833,700 I.D.D.(D.T.) 37 —

NOTES:

* Services seconded to another company.Remuneration includes Salaries, Bonus, Allowances, Commission, Company’s Contribution to Provident Fund and to Pension Fund, Leave Travel Allowance, Medical Insurance Premium, Personal Accident Insurance Premiumand value ofperquisites, wherever applicable. All appointments are/were on contractual basis. Other terms and conditions are as per Company’s Rules. None of these employees are related to any Director of the Company.

DIRECTORS’ RESPONSIBILITY STATEMENT AS PER SECTION 217(2AA) OF THE COMPANIES ACT, 1956

The financial statements of the Company for the year ended 31st December, 2002 have been prepared in conformity with the accountingstandards issued by the Institute of Chartered Accountants of India and the requirements of the Companies Act, 1956. All the financialstatements have been prepared on a historical cost convention, as a going concern and on the accrual basis. There have been no materialdepartures in the adoption and application of the accounting standards. The accounting policies used in the preparation of the financialstatements have been consistently applied except where otherwise stated in the notes to accounts.

The Board of Directors of GlaxoSmithKline Consumer Healthcare Limited (GSKCH) accept the responsibility for the integrity and theobjectivity of these financial statements. The estimates and judgements relating to the financial statements have been made on a prudentand reasonable basis in order to ensure that the financial statements reflect in a true and fair manner the form and substance of thetransactions and reasonably present the Company’s state of affairs and profits for the year. To ensure this, the Directors have taken properand adequate care for the maintenance of adequate accounting records in accordance with the provision of the Companies Act, 1956. Thesystem of internal controls are reviewed, evaluated and updated on an ongoing basis. Our internal auditors have conducted periodic auditsto provide reasonable assurance that the established policies and procedures of the Company have been followed for safe-guarding theassets of the Company and for protecting any form of fraud and irregularities, subject to the inherent limitations in any system andprocedure and coverage thereof that should be recognized in weighing the assurance provided by system of internal controls and accounts.

The financial statements have been audited by Price Waterhouse, Chartered Accountants. The Audit Committee of GSKCH meets on aquarterly basis to review the manner in which the internal auditors are performing their responsibilities and to discuss auditing, internalcontrols and financial reporting issues. To ensure complete independence, the internal auditors have full and free access to the membersof the Audit Committee to discuss any matter of substance.



S. J. Scarff Nicholas J. Massey A. Chatterjee

Chairman Managing Director Ashok Dayal

New Delhi P. S. Mukherjee

Dated : 31st January, 2003 Directors

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COMPANY’S PHILOSOPHY ON CORPORATE GOVERNANCEGlaxoSmithKline Consumer Healthcare Ltd. an associate of GlaxoSmithKline plc. is committed in adopting the best globalpractices of Corporate Governance. Corporate Governance envisages commitment of the Company towards the attainmentof high levels of transparency, accountability and business prosperity with the ultimate objective of realising long termshareholder value, whilst taking into account the interest of all other stakeholders for wealth creation.

BOARD OF DIRECTORSComposition of the Board of Directors and other details as on 31st December, 2002 is as under:

Name of the Executive/ No. of Board Attendance No. of outside No. of membership/Director Independent/ meetings at previous directorships chairmanship

Non executive attended AGM on 19th held in other BoardApril, 2002 Committees

Mr. S. J. Scarff Chairman & Managing 6 Present 2 1Director (till 31.10.2002)Non Executive Chairman(w.e.f. 1.11.2002)

Mr. Nicholas J. Massey Managing Director 1 NA Nil Nil(w.e.f. 1.11.2002)

Mr. A. Chatterjee Executive Director 6 Present Nil Nil

Mr. Ashok Dayal Independent Director 5 Present 2 Nil

Mr. A. S. Lakshmanan Independent Director 5 Present 6 8

Mr. Colin Handcock Non executive Director Nil Not Present Nil Nil

Mr. P. Dwarakanath Director - H.R.&A. 6 Present Nil NilAlternate Director toMr. Colin Handcock

Mr. Ian McPherson Non executive Director 1 Not Present Nil Nil

Mr. R. Subbarayan Director - Sales & 5 Present Nil NilMarketing.Alternate Director toMr. Ian McPherson

Mr. Kunal Kashyap Independent Director 5 Present 3 3

Mr. P. S. Mukherjee Executive Director 6 Present Nil Nil

Mr. P. Murari Independent Director 4 Present 11 9

Ms. Sangita Reddy Independent Director Nil Not Present 7 Nil(upto 31.10.2002)

Mr. S. S. Dugal Independent Director 5 Present Nil Nil

Mr. V. Thyagarajan Non executive Director 1 Not Present 7 2

Board Meetings held during the year: 5th February, 2002; 19th April, 2002; 30th July, 2002; 29th August, 2002;25th October, 2002 and 20th December, 2002.

AUDIT COMMITTEE

The Company has an Audit Committee comprising of 3 members all of whom are Independent Directors. The Chairman of theCommittee is Mr. Ashok Dayal with Mr. Kunal Kashyap and Mr. P. Murari as its members. Mr. Surinder Kumar, CompanySecretary acts as Secretary to the Committee. The Finance Director and the concerned partners of Price Waterhouse, thestatutory auditors are permanent invitees to the Audit Committee meetings. We also have a multi disciplinary Internal AuditTeam which submits its report directly to the Audit Committee on a quarterly basis. It has been the practice of the Chairman ofthe Audit Committee to extend an invitation to the Chairman and Managing Director to attend each Audit Committee Meeting.

Brief Description of the terms of reference:

The functioning and terms of reference of the Audit Committee are as prescribed under Section 292A of the CompaniesAct, 1956 and the Listing Agreement with the Stock Exchanges including their role, powers and duties, quorum for meetingand frequency of meetings.

The Audit Committee:-

1. is responsible for effective supervision of the financial reporting process, ensuring financial, accounting and operatingcontrols and ensuring compliance with established policies and procedures.

2. determines adequacy of internal controls and ensures its effectiveness.

3. identifies, defines and categorises all the risks that the Company faces and evaluates the steps that the Company takesto mitigate such risks.

4. comprehensively reviews, evaluates and updates the internal control systems on an ongoing basis. It facilitates imbeddingof the self audit process in the work flow alongwith supporting the business objectives.

C ORPORATE GOVERNANCE REPORT

12

5. reviews the financial results for each quarter/period before being placed to the Board of Directors for approval.

6. reviews on a quarterly basis the compliance certificates received from each locational/functional heads on compliancewith company’s laid down policies and practices, accounting standards, all fiscal, commercial and statutory laws, asapplicable.

7. provides an open avenue of communication between the internal audit team, the statutory auditors and the Board ofDirectors.

8. advises on the nature and scope of the Audit work being done by the Internal Audit Team. In order to ensure theindependence of the Audit team, the Chairman of the Audit Committee also evaluates the performance of the Auditteam against their annual targets jointly with the management of the Company.

Four meetings of the Audit Committee were held during the year. Attendance at meetings during the year:

Director No. of meetings attended

Mr. Ashok Dayal 4Mr. Kunal Kashyap 4Mr. P. Murari 4

INVESTOR GRIEVANCE COMMITTEE

The Investor Grievance Committee comprises of 3 members, of which 2 are Independent Directors. The Chairman of theCommittee is Mr. A.S. Lakshmanan with Mr. S.S. Dugal and Mr. P. S. Mukherjee (from 1.11.2002) as its members.Ms. Sangita Reddy who was initially a member resigned from the Board, consequently from the Committee and in her placeMr. P. S. Mukherjee became a member. Mr. Surinder Kumar, Company Secretary acts as Secretary to the Committee andalso as the Compliance Officer.


The functioning and terms of reference of the Committee are as prescribed under and in due compliance with the ListingAgreement with the Stock Exchanges with particular reference to transfer, dematerialisation, complaints of shareholders etc.

Five meetings of the Investor Grievance Committee were held during the year. Attendance at meetings during the year:


Mr. A.S. Lakshmanan 5Ms. Sangita Reddy (upto 31.10.2002) NilMr. S.S. Dugal 5Mr P S Mukherjee (from 1.11.2002) 1

The total number of complaints received and replied to the satisfaction of the shareholders during the year under review were721. The Company attends to the investors correspondence expeditiously and usually a reply is sent within 3 days of receipt,except in cases that are constrained by disputes or legal impediments. There are no pending share transfers as on 31st

December, 2002 and the shares after transfer are despatched within 2 days from their approval at the Share Transfer Committee.

REMUNERATION COMMITTEE

The Remuneration Committee comprises of 3 members. The Chairman of the Committee is Mr. S.S. Dugal, an IndependentDirector and the other members are Mr. Kunal Kashyap also an Independent Director and Mr. P. Dwarakanath. Mr. SurinderKumar, Company Secretary acts as Secretary to the Committee.


The functioning and terms of reference of the Committee are as prescribed under the Listing Agreement with the StockExchanges. It determines the Company’s policy on all elements of remuneration packages of all the Directors includingsalary, benefits, bonus, stock options, pension rights and compensation payment, etc, details of fixed component andperformance linked incentives alongwith performance criteria, service contracts, notice period, severance fees, etc., stockoption details, if any and also to determine the remuneration of the Non Executive Directors. It also reviews all otheraspects of benefits and compensation to employees throughout the Company including policies on the same.

Three meetings of the Remuneration Committee were held during the year. Attendance at meetings during the year:


Mr. S.S. Dugal 3Mr. Kunal Kashyap 3Mr. P. Dwarakanath 3


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REMUNERATION PAID TO DIRECTORS IN THE YEAR 2002(Rs.)

S.No. NAME DESIGNATION/ SALARY BENEFITS PERFORMANCE LTA CONTRIBUTION GRANDPOSITION INCENTIVE TO SUPER TOTAL

ANNUATION1. S. J. Scarff Chairman & 3500000 1450175 - - - 4950175

Managing Director(till 31 Oct, 2002)

2. Nicholas J. Massey #

Managing Director 700000 397501 - - - 1097501

3. A. Chatterjee Director - Finance & 2875140 1290189 977800 200000 426771 5769900Information Technology

4. P. S. Mukherjee Director - Legal & 3706800 877716 799100 200000 362070 5945686Corporate Affairs

5. P. Dwarakanath Director - H.R. & A. 3998970 787997 921820 352000* 405896 6466683(Alternate Director toMr. Colin Handcock)

6. R. Subbarayan Director - Sales & 4696600 864803 928910 200000 405540 7095853Marketing(Alternate Director toMr. Ian McPherson)

* LTA amount of Rs. 1,52,000 for 2001 claimed during the year.# Remuneration paid to him as Managing Director is subject to the Central Government & Shareholders approval.

(Rs.) S.NO NAME PARTICULARS SITTING FEES COMMISSION TOTAL

1. Mr.S S Dugal Independent Director 65000 200000 265000

2. Mr.Ashok Dayal Independent Director 45000 200000 245000

3. Mr.A S Lakshmanan Independent Director 50000 200000 250000

4. Mr.Kunal Kashyap Independent Director 60000 200000 260000

5. Mr.P Murari Independent Director 40000 200000 2400006. Ms.Sangita Reddy Independent Director - 166667 166667

(upto 31.10.2002)

ANNUAL GENERAL MEETINGS

Location and time for the last three AGM’s:

Year Date Venue Time

2000 20th April, 2000 Punjab Public School Auditorium, The Punjab Public School (Senior Wing),

Nabha, 147201 (Punjab) 11.00 a.m.

2001 28th March, 2001 - same as above- 10.00 a.m.

2002 19th April, 2002 - same as above- 10.00 a.m.

No postal ballot resolutions were passed.

DISCLOSURE

During the year 2002, the Company has related party transactions as is envisaged under the Corporate Governance Codewhich have been mentioned in Note 25 under Schedule 19 to the Accounts.

There has not been any non compliance, penalties or strictures imposed on the Company by the Stock Exchanges, SEBIor any other statutory authority, on any matter related to capital markets, during the last year.

MEANS OF COMMUNICATIONS

Half yearly Report to each household of shareholders

Half-yearly report is provided to shareholder on a request made to the Company.

Quarterly ResultsWide publicity is accorded to publication of Quarterly Results which are published in a widely circulated English dailyand a Punjabi daily as is required under the Listing Agreement with the Stock Exchanges. The same are also faxed tothe Stock Exchanges where the Company is listed. The Company also has its own official press releases to variousnewspapers through its Public Relations agency.


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Presentation made to institutional investors or to analystsRegular meetings & teleconferences were held with the Financial Institutions, Foreign Institutional Investorsand Analysts. About ten meetings and seven teleconferences were held during the year with differentFinancial Analysts. They are also provided with a copy of the quarterly results after the same has been faxed tothe Stock Exchanges.

Management Discussion and Analysis is reported in this Annual Report

GENERAL SHAREHOLDER INFORMATIONAnnual General Meeting: Date, time & venueThe Forty fourth Annual General Meeting is scheduled to be held on 17th April, 2003 at 10 a.m. at the Punjab PublicSchool Auditorium, The Punjab Public School (Senior Wing), Nabha, 147 201 (Punjab) as per notice enclosed withthe Annual Report.

Financial Calendar

Particulars Date Particulars Date

1. Quarter ending 31st March, 03 17th April, 03 3. Quarter ending 31st Sept., 03 October, 03

2. Quarter ending 30th June, 03 End July, 03 4. Year ending 31st Dec., 03. Beginning Feb, 04

Date of book closureThe books will be closed for the purposes of the Annual General Meeting from 9th April, 2003 to 17th April, 2003 (bothdays inclusive).

Dividend payment dateNo final dividend has been recommended by the Board of Directors for the year ended 31st December, 2002. Twointerim dividends aggregating to Rs. 7/- per equity share of Rs. 10 each were paid to the shareholders for the yearended 31st December, 2002.

Dividend Date of Declaration Date of Payment Rate per equity share

1st Interim 30th July, 2002 26th August, 2002 Rs. 3.30/-

2nd Interim 20th December, 2002 17th January, 2003 Rs. 3.70/-

Listing on Stock Exchanges & Stock Code

Your Company is Listed at 5 Stock Exchanges in India, the addresses of which are listed below.

Stock Exchange Stock Code

The Ludhiana Stock Exchange Assn. Ltd., Feroze Gandhi Market, Ludhiana - 141 001 SKLN

The Delhi Stock Exchange Assn. Ltd., DSE House, 3/1 Asaf Ali Road, New Delhi - 110 002 000020

The Stock Exchange, Stock Exchange Towers, Dalal Street, Fort, Mumbai - 400 023 Physical 676Demat 50676

The Calcutta Stock Exchange Assn. Ltd., Lyons Range, Kolkata - 700 001 Physical 29047Demat 10029047

Madras Stock Exchange Ltd., 11, Second Line Beach, Chennai - 600 001 HMM

The Listing Fee for the year 2002-2003 has been paid to all the Stock Exchanges.

Market price data :High and Low during each month in last financial year from January, 2002 – December, 2002 onthe Stock Exchange, Mumbai.

MONTH HIGH LOW MONTH HIGH LOW

January, 2002 402.50 383.50 July, 2002 380.00 326.05

February, 2002 409.90 390.00 August, 2002 380.24 290.00

March, 2002 400.00 361.00 September, 2002 300.00 263.50

April, 2002 414.50 370.10 October, 2002 288.00 266.30

May, 2002 388.50 355.00 November, 2002 277.00 260.05

June, 2002 385.00 360.00 December, 2002 281.00 259.10


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Performance in comparison to BSE Sensex

Taking the January 2002 indexed at 100, the BSE sensex moved to 104 throughDecember 2002, whereas GSKCH scrip moved to 67 during the same period

Registrar and Transfer Agents

We have no Registrar and Transfer Agents as we have an inhouse share transfer system. We are also the ShareTransfer Agents for GlaxoSmithKline Pharmaceuticals Ltd. and Burroughs Wellcome (India) Ltd.

Electronic connectivity for the depository mode for both NSDL and CDSL is being provided by MCS Ltd. whoseaddress is given below:

MCS Ltd., Srivenkatesh Bhawan, 212A Shahpurjat, New Delhi – 110 049

Share transfer system

We work on the share package “COSAC” developed by Dolphin Infotek (Pvt.) Ltd. and is adequately fulfilling ourneeds.

Distribution of shareholding as on 31st December, 2002

No of Shares No of Shareholders No of Share Percent of total shares

01 to 250 20845 1876628 4.135

251 to 500 6676 2246452 4.950

501 to 1000 1945 1368189 3.015

1001 to 2000 551 787026 1.734

2001 to 3000 175 431286 0.950

3001 to 4000 96 334846 0.738

4001 to 5000 45 204433 0.451

5001 to 10000 117 867180 1.911

10001 and above 157 37256935 82.099

In transit 7646 0.017

Total 30607 45380621 100.00

Particulars No of Shares Held Percent of shares held(rounded off)

1 Promoters - M/s Horlicks Ltd. 18152243 39.999

2 Mutual Funds & UTI 4619007 10.179

3 Banks Financial Institutions & 7250789 15.978Insurance Companies

4 Foreign Institutional Investors 3696545 8.145

5 Private Corporate Bodies 1489459 3.282

6 Indian Public 10080157 22.213

7 NRIs / OCBs 88324 0.195

8 Any others 4097 0.009

Total 45380621 100.000


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Dematerialisation of shares and liquidity

We have dematerialised 48.742% of our equity share capital, in addition to which 39.99% is held by Horlicks Ltd.,hence only 11.259% of the equity share capital is held in physical form.

Outstanding GDRs/ADRs/warrants or any convertible instruments, conversion date and likely impact on equity.

We have no GDRs/ADRs or any commercial instrument.

Plant locations

Nabha Plant: GlaxoSmithKline Consumer Healthcare Limited, Patiala Road, Nabha – 147 201 (Punjab).

Rajahmundry Plant: GlaxoSmithKline Consumer Healthcare Limited, Industrial Area, Dowleswaram533 124, Andhra Pradesh.

Sonepat Plant: GlaxoSmithKline Consumer Healthcare Limited, 14 km Stone, Sonepat – Meerut Road, VillageKhewra, P.O. Bahalgarh – 130 121, District Sonepat (Haryana).

Address for correspondence

Registered Office: GlaxoSmithKline Consumer Healthcare Limited, Patiala Road, Nabha – 147 201 (Punjab).

Head Office & Share Department: DLF Plaza Tower, DLF City, Phase I, Gurgaon – 122 002 (Haryana)

Email for Investors: [email protected]

AUDITORS’ CERTIFICATE ON COMPLIANCE WITH THE CONDITIONS OF CORPORATEGOVERNANCE UNDER CLAUSE 49 OF THE LISTING AGREEMENT(S)

To the Members of GlaxoSmithKline Consumer Healthcare Limited (formerly known as SmithKline BeechamConsumer Healthcare Limited)

We have reviewed the implementation of Corporate Governance procedures by GlaxoSmithKline Consumer HealthcareLimited (formerly known as SmithKline Beecham Consumer Healthcare Limited) during the year ended December31, 2002, with the relevant records and documents maintained by the Company, furnished to us for our review andthe report on Corporate Governance as approved by the Board of Directors.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examinationwas limited to a review of procedures and implementation thereof, adopted by the Company for ensuring the complianceof the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statementsof the Company.

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

On the basis of our review and according to the information and explanations given to us, the conditions of CorporateGovernance as stipulated in Clause 49 of the listing agreement(s) with the stock exchange (s) have been compliedwith in all material respect by the Company and that no investor grievance(s) is/are pending for a period exceedingone month against the Company as per the records maintained by the Investors Grievance Committee.

S. Berera

Partner

For and on behalf ofPlace : New Delhi Price WaterhouseDated : January 31, 2003 Chartered Accountants


Place : New Delhi S. J. ScarffDated : January 31, 2003 Chairman


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INDUSTRY STRUCTURE AND DEVELOPMENT

The Food Processing Industry in India is one of the largest in the world, both in terms of production and consumption. In theera of economic liberalisation the private, public and co-operative sectors are playing their rightful role in the developmentof Food Processing Industry.A number of incentives and reliefs introduced since 1991 has served to encourage the growth of the processed foodsindustry. The industry attracted investment totalling Rs.603 crores till October 2002. The amount of foreign direct investmentapproved in the Food Processing Industry amounted to Rs. 9379 crores till October 2002. Regulatory norms have beenprogressively liberalised over the decade and 100 per cent foreign direct investment is allowed in food processing units.Your Company is one of the leading healthcare companies of India which believes in increasing health consciousnessthereby improving the quality of human life. The same is achieved by everyone of our people contributing with passion andan unmatched sense of urgency.In the given industrial and regulatory scenario, your Company sees an opportunity for growth as much for itself as for theFood Processing Industry.

OPPORTUNITIES & THREATS

Your Company being a people driven organisation has the ability to exploit newer markets/segments like the interiors andthe rural areas, out of home, institutional segment etc. The Company also sees an opportunity in exploiting the globalpipeline of products with the relaxation of import barriers using the strong equity of your brands. Another opportunity yourCompany sees is increasing health consciousness in the stressful and urban lifestyle by continuing to strongly drive demandfor science based nutritional products.In the event of Value Added Tax (VAT) being introduced w.e.f. 1st April, 2003 and it being federal in structure there are likelyto be state specific variations to the VAT Laws. As the Company’s Production and Distribution structure is situated acrossStates, VAT will impact the entire spread of business. It is unlikely that VAT will have a significant negative impact on ourbusiness. In light of this, at present the situation does not merit any major restructuring of our business processes. It willtake some more time for a definite picture to emerge as regards the actual impact on our business.Your Company is continuously exploring possibilities to overcome the challenges and threats of recession and the inflationarypressures on production inputs, media inflation and people cost increases etc.

RISKS & CONCERNS

Being an agro based industry and thereby dependent on the vagaries of nature the price of raw materials depends on theagricultural output. The Agricultural production has dipped for the third consecutive year in the country. The growth of themanufacturing sector has also been one of the lowest. There is continuing sluggishness in various sectors of FMCGindustry. Other than that your Company has no financial risk of carrying on the day to day business. Your Company faces arisk of any breach of contractual liability it enters into, litigation on intellectual property rights, piracy, counterfeiting etc. YourCompany has a disaster recovery plan at a site in Pune where the entire information system including information of everysite, every category of the product and Information Technology systems are sent on a monthly basis to maintain a back upof entire financial and other data.

FINANCIAL RISK

The Company’s new state of the art plant at Sonepat has been commissioned and it has started commercial production ata time when the recessionary trends and the sluggishness in the demand continue to impact the Indian economy. Theutilisation of the plant at its initial phase has therefore been lower than the projections. This has the risk of increasing theoperating leverage of the Company. However looking at the Company’s current operating margin at 20.4 % the Company’soperating leverage risks are considered to be minimal.The Company repaid during the year the entire loan that it had taken to part finance the Sonepat plant and has become azero debt Company. With the interest cover standing at 54.2 times the Company has no risk of financial leverage.The Company hardly has any import requirements for its production process. The Company’s exports during the year stoodat Rs. 4100.32 lakhs . Hence no risk is envisaged to the business on account of currency fluctuations.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Being a process oriented Company, GlaxoSmithKline Consumer Healthcare Ltd. (GSKCH) has in place well documentedand structured systems and processes which are totally in tune with the Global Best Practices in various functions. InGSKCH there are well-defined and documented roles and responsibilities for people in all functions at various levels.These, coupled with robust monthly information systems, ensure appropriate information flow to facilitate monitoring anddiagnosis of any variance from best practices. Adherence to these best practices is ensured through frequent internalaudits. Additionally, the following measures are in place to ensure proper control :

· Structured Self Assessment Questionnaires covering all functions in the Company are filled in periodically by the respectiveFunctional Heads. This is in confirmation of their compliance to the laid down internal control systems and proceduresand the global best practices

· Any material variance from budget has to be approved by the Management Team

· Any major policy change is approved by the Managing Director

· All Functional Heads submit reports of their functions and achievements every month at the Management Team meetingand these are reviewed by the Managing Director

M ANAGEMENT DISCUSSION AND ANALYSIS REPORT

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· There is a well documented and structured Disaster Recovery policy in place. The Company is in the process of developinga structured Business Continuity plan.

The Directors consider the current internal control systems in place to be robust and adequate for the business.FINANCIAL PERFORMANCE AND RESULTS OF OPERATIONS(A) Results of Operations

1. SalesDue to the continuing sluggishness in the market the Company’s total sales decreased by 12.3% during the yearprimarily driven by decrease in sales of Horlicks. The export sales of Rs. 4100.32 lakhs represented a decline of8.5 % over the previous year.

2. Other IncomeOther Income increased by Rs. 286.52 lakhs primarily driven by the receipt of selling commission from GlaxoSmithKlinePharmaceuticals Ltd worth Rs. 188.46 lakhs on account of marketing and selling of the product Iodex.

3. ExpenditureConsumption of Raw Materials including purchased finished goods as a percentage of sales during the current yearhas come down to 21.1% as against 22.9 % last year. This has been made possible due to the favourable prices ofmilk / SMP – two of our most important raw materials during major part of the year also helped the Company incontrolling the cost of production.Purchase of finished goods represents the quantum of finished goods stock worth Rs.796.12 lakhs ofViva / Maltova which was purchased outright from Jagatjit Industries Ltd. for the purpose of exports.Employees’ cost has gone up to 9.3 % of sales as against 7.1 % of sales last year partially due to employment of 195people at Sonepat plant (Cost Rs. 348 lakhs ) and partially due to restructuring of salary structure by increasing thesalary with corresponding savings in lease rentals and vehicle expenses.Other expenses have declined by 5.7% primarily due to the reduction in carriage and freight, Royalty and other variableoverheads in line with the drop in sales volume and various cost reduction initiatives taken by the management. TheCompany however continued to invest on advertisement and promotion to protect the market share in a difficult marketscenario.Pursuant to the issuance of the mandatory Accounting Standard-26 “Intangible Assets” by the Institute of CharteredAccountants of India the Company started amortising Patents and Trade Marks over a period of 10 years as againstthe earlier policy of amortising over 20 years. Accordingly Patents and Trade Marks have been restated atRs. 7924.31 lakhs and the additional amortisation of Rs. 1143.72 lakhs has been adjusted from the opening GeneralReserves. Further, the current year amortisation is higher by Rs. 489.87 lakhs.Exceptional Items of Rs. 963.93 lakhs ( Gross of tax) comprise of an amount of Rs. 470.55 lakhs paid towardsVoluntary Retirement Scheme (VRS) to the workers and the staff pursuant to the Company’s restructuring operationsand Rs. 493.38 lakhs paid as an additional contribution to the Superannuation / Pension Funds for the eligiblemanagement staff. The corresponding tax saving implications thereon-Current Tax Rs. 215.86 lakhs and DeferredTax Rs. 138.34 lakhs.Depreciation for the year is higher by Rs. 1208.00 lakhs primarily on account of the depreciation of our new plant atSonepat , which commenced commercial production on 1st July, 2002.

4. Profit before Tax and Exceptional ItemsProfit before Tax and Exceptional Items amounted to Rs. 13635.14 lakhs , representing a decline of 29.8 % overprevious year.

5. Provision for TaxThe Company has made provisions for tax for the year amounting to Rs. 4524.90 lakhs (Including a deferred taxprovision of Rs. 885.04 lakhs ) on profits before exceptional Items. The effective tax rate for the year was 33.2 % asagainst the marginal tax rate of 36.75%.

(B) FINANCIAL CONDITIONOverviewThe Financial statements have been prepared in compliance with the requirements of the Companies Act and theGenerally Accepted Accounting Principles (GAAP) and the Accounting Standards issued by the Institute of CharteredAccountants of India.1. Reserves and Surplus

The Reserves and Surplus increased by Rs. 4180.14 lakhs representing the transfers made from the Profit & Lossaccount to General Reserves during the year after adjusting an amount of Rs. 1143.72 lakhs for the adjustment ofadditional amortisation upto 31.12.01 consequent to the change in amortisation policy. The transfer was made afterproviding for a dividend payment of Rs. 3176.65 lakhs. The dividend payout (excluding Corporate Dividend Tax) hasbeen maintained with that of last year.

2. Fixed AssetsAdditions of Rs. 27462.49 lakhs during the year include Rs. 26175.84 lakhs capitalised on account of the new SprayDrier Plant at Sonepat.

3. InventoriesInventories amounted to Rs. 8608.28 lakhs as at 31.12.02 as against Rs. 7747.70 lakhs as at previous year end. The


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increase is primarily on account of increase in finished goods inventory from Rs. 5043.17 lakhs to Rs. 5756.78 lakhs.The inventories do not include any obsolete and unserviceable items lying at the locations. Total inventory holding asat end December, 2002 came down to 7 weeks holding from 8 weeks last year end.

4. Sundry DebtorsSundry debtors amounted to Rs. 4432.04 lakhs as at end December, 2002 as against Rs. 5974.82 lakhs as at endDecember, 2001. The debtors have decreased on account of lower December sales in the current year as comparedto last year. The debtors are net of provision for Bad and doubtful debts amounting to Rs. 122.76 lakhs. The debtorsas at end December, 2002 represent 17 days sales value as against 15 days last year.

5. Cash and Bank BalancesCash and Bank balances with scheduled banks amounting to Rs. 9978.90 lakhs include the collectionsin transit for cheques which have been deposited in banks but not realised till 31.12.02 and the short termdeposits of Rs. 6150.00 lakhs with various scheduled banks and Rs. 1119.96 lakhs on dividendaccounts.

6. Loans and AdvancesLoans and advances amounting to Rs. 6323.79 lakhs includes advances paid for raw and packingmaterials, stores and services, pre-paid insurance, loans and advances paid to employees and advances paid toexcise authorities and advance tax (net of provisions). The total loans and advances declined byRs. 1178.21 lakhs compared to the outstanding last year.

7. Current LiabilitiesSundry Creditors amounting to Rs. 13075.37 lakhs include creditors for advertising and promotion spends, rawmaterials, packing materials, creditors for capital purchases, amounts payable on account of consignment agencysales and liabilities to wholesalers for dedicated working capital retained.Other liabilities amounting to Rs. 2672.74 lakhs include statutory dues for miscellaneous taxes and duties payableto various government agencies.

8. Net Working CapitalNet Working Capital excluding cash and bank balances as at year end stood at Rs. 1635.69 lakhs and declined by49.2% due to efficient working capital management.The average Net Working Capital employed during the year was 2.8 % of the total turnover compared to 3.0 % lastyear. The utilization of working capital during the year therefore improved compared to the previous year. Theturnover working capital ratio was 35.9 times for the year compared to 33.1 times last year.

9. ProvisionsProvision for gratuity and accrued leave have been made in accordance with the acturial valuationas at 31.12.2002.

10. Return on Capital EmployedConsequent to the reduction in profits of the Company the return on capital employed (average) during the yeardeclined to 27.3 % from 41.0 % last year. The return also to some extent declined as a result of increase in theaverage capital employed on account of investments made in the construction of the new Spray Drier Plant at Sonepat.The percentage has been computed by dividing PBT (before exceptional items) by the average capital employed(shareholders’ funds plus loan funds) during the year.

11. Debt Equity RatioThe Company has liquidated all its long term / short term loans during the current year.

MATERIAL DEVELOPMENTS ON HUMAN RESOURCE / INDUSTRIAL RELATIONS FRONT

The key resource for GlaxoSmithKline Consumer Healthcare Ltd. (GSKCH) has been its people. Your Company has beenable to create a favorable work environment that motivates performance, customer focus and innovation while adhering tothe highest degree of integrity. Your Company has designed a package of well-balanced competitive compensation to attractand retain the best available talent in the industry. Your Company also creates equal opportunities for male and femaleemployees and arranges overseas assignments for outstanding performers from time to time, depending upon businessneeds.Industrial relations continued to be harmonious at all the units throughout the year. The Company had 2863 number ofpermanent employees on its payroll as on 31.12.2002.Kolkata Packing Station was closed down on 31.08.2002, resulting in a reduction in manpower of 46 numbers. The closurewas professionally managed and based upon mutually agreeable terms and conditions.

CAUTIONARY STATEMENT

The Management Discussion and Analysis Report may contain certain statements that might be considered forward looking.These statements are subject to certain risks and uncertainties. Actual results may differ materiallyfrom those expressed in the statement as important factors could influence the Company’s operations such as Governmentpolicies, local, political and economic development, risks inherent to the Company’s growth and such other factors.


Place : New Delhi S. J. ScarffDated : January 31, 2003 Chairman


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TO THE MEMBERS OF GLAXOSMITHKLINECONSUMER HEALTHCARE LIMITED (FORMERLYKNOWN AS SMITHKLINE BEECHAM CONSUMERHEALTHCARE LIMITED)

1. We have audited the attached Balance Sheet ofGlaxoSmithKline Consumer Healthcare Limited(formerly known as SmithKline BeechamConsumer Healthcare Limited), as at December 31,2002, and both the Profit and Loss Account andthe Cash Flow Statement for the year ended on thatdate, which we have signed under reference to thisReport. These financial statements are theresponsibility of the Company’s management. Ourresponsibility is to express an opinion on thesefinancial statements based on our audit.

2. We have conducted our audit in accordance withauditing standards generally accepted in India.Those Standards require that we plan and performthe audit to obtain reasonable assurance aboutwhether the financial statements are free of materialmisstatement. An audit includes examining, on atest basis, evidence supporting the amounts anddisclosures in the financial statements. An audit alsoincludes assessing the accounting principles usedand significant estimates made by the management,as well as evaluating the overall financial statementpresentation. We believe that our audit provides areasonable basis for our opinion.

3. As required by the Manufacturing and OtherCompanies (Auditor’s Report) Order, 1988 dated7th September, 1988 and issued by the CentralGovernment of India in terms of Sub-section (4A)of Section 227 of the ‘The Companies Act, 1956’ ofIndia (The ‘Act’) and on the basis of such checks aswe considered appropriate and according to theinformation and explanations given to us, we furtherreport that:

i) a) The Company has maintained properrecords to show full particulars includingquantitative details and situation of its fixedassets.

b) The fixed assets of the Company arephysically verified by the Managementaccording to a phased programmedesigned to cover all the items over a periodof three years. Pursuant to the programme,a physical verification of certain assets wascarried out during the year and this revealedno material discrepancies.

ii) The fixed assets of the Company have not beenrevalued during the year.

iii) The stocks of finished goods, stores, spareparts and raw materials of the Company havebeen physically verified by the managementduring the year/at the year-end according to aphased programme normally so designedthat each material item is physically verified at

least once in a year and more often in appropriatecases.

iv) In our opinion, the procedures of physicalverification of stocks followed by themanagement are reasonable and adequate inrelation to the size of the Company and natureof its business.

v) The discrepancies between the physical stocksand the book stocks, which have been properlydealt with in the books of account, were notmaterial.

vi) In our opinion, the valuation of stocks of finishedgoods, stores, spare parts and raw materialshas been fair and proper in accordance withnormally accepted accounting principles in Indiaand, is on the same basis as in the precedingyear.

vii) In our opinion the rates of interest and the termsand conditions of unsecured loans taken bythe Company during the year from a Companylisted in the register maintained underSection 301 of the Act are prima facie notprejudicial to the interests of the Company.There is no company under the samemanagement as defined under Sub-section (1B)of Section 370 of the Act.

viii) The Company has not granted any loans,secured or unsecured, to companies, firms orother parties listed in the register maintainedunder Section 301 of the Act. There is nocompany under the same management asdefined under Sub-section (1B) of Section 370of the Act.

ix) The parties to whom the loans or advances inthe nature of loans have been given by theCompany have generally been regular inrepaying the principal amounts and payinginterest as stipulated, wherever applicable.

x) In our opinion, there is an adequate internalcontrol procedure commensurate with the sizeof the Company and the nature of its business,for purchase of stores, raw materials, includingcomponents, plant and machinery, equipmentand similar assets and for the sale of goods.

xi) The Company has not purchased goods andmaterials or sold goods and materialsaggregating Rs. 50,000/- or more in valuefrom\to any of the parties listed in the registermaintained under Section 301 of the Act. In ouropinion, the consideration received for the saleof services aggregating more than Rs. 50,000/-in value from a party listed in the registermaintained under Section 301 of the Act isreasonable and comparable to market prices.

xii) The Company has a system of determiningunserviceable or damaged stores, raw

A UDITORS’ REPORT

21

materials or finished goods on the basis oftechnical evaluation and on such basisadequate amounts have been written off suchstocks in the accounts.

xiii) The Company has not accepted any depositsfrom the public.

xiv) In our opinion, reasonable records have beenmaintained by the Company for the sale anddisposal of realisable by-products and scrap,where applicable and significant.

xv) In our opinion, the Company’s present internalaudit system is commensurate with its size andnature of business.

xvi) On the basis of records produced, we are ofthe opinion that, prima facie, the cost recordsand accounts prescribed by the CentralGovernment of India under Section 209(1)(d)of the Act have been maintained. However, weare not required to and have not carried out anydetailed examination of such accounts andrecords.

xvii) The Company has regularly deposited, duringthe year, Provident Fund and Employees’ StateInsurance dues with the appropriate authoritiesin India.

xviii) At the last day of the financial year, there wasno amount outstanding in respect of undisputedincome tax, wealth tax, sales tax, customs dutyand excise duty which were due for more thansix months from the date they became payable.

xix) During the course of our examination of thebooks of account carried out in accordance withthe generally accepted auditing practices inIndia, we have not come across any personalexpenses which have been charged to Profitand Loss Account, nor have we been informedof such case by the management other thanthose payable under contractual obligationsand/or accepted business practices.

xx) The company is not a sick industrial companywithin the meaning of clause (o) of Section 3(1)of The Sick Industrial Companies (SpecialProvisions) Act, 1985 of India.

xxi) In respect of services rendered:

(a) The nature of services is such that it doesnot involve consumption of material andstores.

(b) Considering the nature of servicesrendered, it is not necessary to have asystem of allocation of man-hours utilisedto the relative jobs.

(c) In our opinion, there is a reasonable systemof authorisation at proper levels withnecessary controls and the related systemof internal control of the company is

commensurate with the size of theCompany and the nature of its business.

xxii) In respect of trading activities, there are nodamaged goods in the possession of theCompany as at December 31, 2002.

4. Further to our comments in paragraph 3 above, wereport that:

(a) We have obtained all the information andexplanations, which to the best of our knowledgeand belief were necessary for the purposes ofour audit;

(b) In our opinion, proper books of account asrequired by law have been kept by theCompany so far as appears from ourexamination of those books;

(c) The Balance Sheet, Profit and Loss Accountand Cash Flow Statement dealt with by thisReport are in agreement with the books ofaccount;

(d) In our opinion, the Balance Sheet, Profit andLoss Account and Cash Flow Statement dealtwith by this Report have been prepared incompliance with the applicable accountingstandards, issued by the Institute of CharteredAccountants of India, referred to in Section 211(3C) of the Act;

(e) On the basis of written representations receivedfrom the directors and taken on record by theBoard of Directors, none of the directors of theCompany is disqualified as on December31, 2002 from being appointed as a director interms of clause (g) of sub-section (1) of section274 of the Act;

(f) In our opinion and to the best of our informationand according to the explanations given to us,the Balance Sheet, Profit and Loss Account andCash Flow Statement together with the notesthereon and attached thereto give in theprescribed manner the information required bythe Act, and also give a true and fair view inconformity with the accounting principlesgenerally accepted in India:

(i) in the case of the Balance Sheet, of the stateof affairs of the Company as atDecember 31, 2002;

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

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

S. Berera

Partner

For and on behalf of

Place: New Delhi Price WaterhouseDated: January 31, 2003 Chartered Accountants

A UDITORS’ REPORT

22

Schedule As at As atNo. December 31, December 31,

2002 2001 (Rs. Lakhs) (Rs. Lakhs)

SOURCES OF FUNDSSHAREHOLDERS’ FUNDS

Share Capital 1 45,38.06 45,38.06Reserves and Surplus 2 4,37,83.85 3,96,03.71

4,83,21.91 4,41,41.77LOAN FUNDSSecured Loans 3 - 66.52Unsecured Loans 4 - 75,00.00

- 75,66.52

4,83,21.91 5,17,08.29APPLICATION OF FUNDS

FIXED ASSETSGross Block 5 5,12,80.11 2,48,38.38Less:Depreciation 1,22,70.33 84,54.56

Net Block 3,90,09.78 1,63,83.82Capital Work in Progress 2,75.98 2,48,51.48

3,92,85.76 4,12,35.30

INVESTMENTS 6 0.05 0.07

CURRENT ASSETS, LOANS AND ADVANCESInventories 7 86,08.28 77,47.70Sundry Debtors 8 44,32.04 59,74.82Cash and Bank Balances 9 99,78.90 85,90.79Loans and Advances 10 63,23.79 75,02.00

2,93,43.01 2,98,15.31Less: CURRENT LIABILITIES AND PROVISIONS

Current Liabilities 11 1,69,92.31 1,72,80.66Provisions 12 7,36.11 7,23.26

1,77,28.42 1,80,03.92NET CURRENT ASSETS 1,16,14.59 1,18,11.39

DEFERRED TAX ASSETS/(LIABILITIES) 13 (35,63.06) (28,16.36)

MISCELLANEOUS EXPENDITURE 9,84.57 14,77.89(To the extent not written off or adjusted )Schedule 19 [Note 1(j) and 18]

4,83,21.91 5,17,08.29Notes to the Accounts 19

This is the Balance Sheet referred The schedules referred to above form anto in our Report of even date. integral part of the Balance Sheet.

S. BERERA S. J. SCARFF A. CHATTERJEEPartner Chairman ASHOK DAYALFor and on behalf of P. S. MUKHERJEEPRICE WATERHOUSE NICHOLAS J. MASSEY DirectorsChartered Accountants Managing Director

New Delhi SURINDER KUMARDated : January 31, 2003 Company Secretary

B

AS AT DECEMBER 31, 2002

ALANCE SHEET

23

Schedule Year ended Year endedNo. December 31, December 31,

2002 2001(Rs. Lakhs) (Rs. Lakhs)

INCOMESales [Schedule 19 (Note 9)] 8,70,53.34 9,92,13.83Other Income 14 14,63.03 11,76.51

8,85,16.37 10,03,90.34

EXPENDITUREConsumption of Raw Materials 1,76,00.05 2,21,26.48Purchased Finished Goods 7,96.12 5,76.68Packing Material Expenses 78,51.65 84,79.91Employees’ Cost 15 80,74.27 70,39.51Excise Duty 16 1,18,06.53 1,32,27.74Expenses 17 2,57,44.14 2,73,00.13Depreciation- On Patents and Trade Marks

[Schedule 19 (Note 1(b) and 24)] 9,80.33 4,90.46- On Other Fixed Assets 25,71.55 35,51.88 13,63.55 18,54.01

Adjustment due to (Increase)/Decrease in Stock of Finished Goods and Goods in Process 18 (5,43.41) 3,68.62

7,48,81.23 8,09,73.08

PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS 1,36,35.14 1,94,17.26

Tax for the year - Current Tax (36,39.86) (66,56.90)- Deferred Tax (8,85.04) (3,49.86)- Adjustment of previous years - 2,69.48

[Schedule 19 (Notes 1(i) ,2 and 19)]

PROFIT AFTER TAX AND BEFORE EXCEPTIONAL ITEMS 91,10.24 1,26,79.98

EXCEPTIONAL ITEMS (net of tax) 6,09.73 17.10Schedule 19 (Note 2)]

NET PROFIT 85,00.51 1,26,62.88

APPROPRIATIONS:Dividend

- First interim 14,97.57 14,97.56- Second interim 16,79.08 16,79.08

Corporate Dividend Tax - 3,24.02Transferred to General Reserve 53,23.86 91,62.22

85,00.51 1,26,62.88

Earnings Per Share (Nominal value of Rs 10 each)- Basic/Diluted (Rs.) [Schedule 19 (Note 23)] 18.73 27.90

Notes to the Accounts 19

This is the Profit and Loss Account referred The schedules referred to above form anto in our Report of even date. integral part of the Profit and Loss Account.

S. BERERA S. J. SCARFF A. CHATTERJEEPartner Chairman ASHOK DAYALFor and on behalf of P. S. MUKHERJEEPRICE WATERHOUSE NICHOLAS J. MASSEY DirectorsChartered Accountants Managing Director


P

FOR THE YEAR ENDED DECEMBER 31, 2002

ROFIT AND LOSS ACCOUNT

24

As at As atDecember 31, December 31,


1. SHARE CAPITAL

AUTHORISED6,00,00,000 Equity Shares of Rs.10 each 60,00.00 60,00.00

ISSUED AND SUBSCRIBED4,53,80,621(Previous year 4,53,80,621) EquityShares of Rs.10 each fully paid-up 45,38.06 45,38.06

Notes:

1. 2,17,386 Equity Shares of Rs.10 each were allottedas fully paid-up pursuant to a contract forconsideration other than cash.

2. 2,77,60,539 Equity Shares of Rs.10 each were allotted asfully paid-up bonus shares by capitalisation of reservesRs. 2710.02 lakhs and share premium Rs. 66.03 lakhs in theyear 1995.

3. 1,70,17,733 Equity Shares of Rs.10 each were allotted asfully paid-up bonus shares by capitalisation of reservesRs.1701.77 lakhs in the year 1997.

2. RESERVES AND SURPLUS

GENERAL RESERVEAs per last Balance Sheet 3,96,03.71 3,29,15.58Transferred from Profit and Loss Account 53,23.86 91,62.22Transitional Deferred Tax Assets/(Liabilities) as atJanuary 1, 2001* - (24,74.09)Transitional amortisation of Patents and Trade Marksas at January 1, 2002** (11,43.72) -

4,37,83.85 3,96,03.71

* Schedule 19 [ Notes 1(i)(b) and 19]** Schedule 19 [ Notes 1(b) and 24 ]

3 . SECURED LOANSShort term loans

From Banks- Packing Credit Loan - 66.52

- 66.52

NOTE:The Company has an arrangement for a working capital facility with a consortium of scheduledbanks,whereby it has secured by way of hypothecation of all the current assets of the Company, namely,stocks of raw materials, good in process, semi finished & finished goods, stores and spares, bills receivableand book debts and all other moveables both present and future.

4. UNSECURED LOANSFrom Others - 75,00.00

- 75,00.00

FORMING PART OF THE ACCOUNTS

S CHEDULES

25

5. FIXED ASSETS *

GROSS BLOCK DEPRECIATION NET BLOCK

Cost as at Additions Deductions Cost as at Upto Charged/ Deductions Upto As at As atJanuary during during December January Adjustments during December December January1, 2002 the Year the Year 31, 2002 1, 2002 during the Year the Year 31, 2002 31, 2002 1, 2002

(Rs. Lakhs) (Rs. Lakhs) (Rs. Lakhs) (Rs. Lakhs) (Rs. Lakhs) (Rs. Lakhs) (Rs. Lakhs) (Rs. Lakhs) (Rs. Lakhs) (Rs. Lakhs)

Land (Freehold) 2,14.58 10.55 - 2,25.13 - - - - 2,25.13 2,14.58Buildings 21,65.31 62,39.21 73.24 83,31.28 5,27.59 1,57.54 71.56 6,13.57 77,17.71 16,37.72Plant & Machinery ** 76,11.04 1,98,42.30 2,39.33 2,72,14.01 43,10.00 15,66.31 2,21.66 56,54.65 2,15,59.36 33,01.04Information TechnologyEquipment 31,12.91 4,36.80 5,08.59 30,41.12 22,07.06 5,53.52 5,06.68 22,53.90 7,87.22 9,05.85Furniture & Fixtures 13,74.91 6,65.82 73.42 19,67.31 4,92.73 2,00.75 48.42 6,45.06 13,22.25 8,82.18Patent and Trade Marks *** 98,03.28 - - 98,03.28 7,35.25 21,24.05 - 28,59.30 69,43.98 90,68.03Motor Vehicles 5,56.35 2,67.81 1,26.18 6,97.98 1,81.93 1,12.48 50.56 2,43.85 4,54.13 3,74.42

2,48,38.38 2,74,62.49 10,20.76 5,12,80.11 84,54.56 47,14.65 8,98.88 1,22,70.33 3,90,09.78 1,63,83.82

Previous Year 2,35,14.27 17,92.04 4,67.93 2,48,38.38 70,04.28 18,78.59 4,28.31 84,54.56

Capital work in progress includes 2,75.98 2,48,51.48- Capital advances - Rs. 60.49 lakhs (Previous year Rs. 84.34 lakhs)- Pre operative expenses Rs. Nil lakhs (Previous year Rs. 66,17.62 lakhs) 3,92,85.76 4,12,35.30

* Schedule 19 (Notes 1(b),4, 5 and 24)** Includes Rs. 64.49 lakhs paid to State Electricity Board for electrical installations not represented by physical assets owned by the Company and depreciated over

a period of 5 years*** Registration awaited by the Company.



6. INVESTMENTS *

Long Term - Other Investments

Unquoted Government Securities at Cost7 - Year National Savings Certificates 0.05 0.07(Written off during the year Rs. 0.02 lakhs)(Lodged with Government Authorities)

0.05 0.07

* Schedule 19 [Note 1(d)]

7. INVENTORIES *

At lower of Cost and Net Realisable ValueRaw materials [Includes Goods in Transit Rs. 15.61 lakhs 13,55.27 11,24.05(Previous year- Rs. 4.92 lakhs)]Packing materials 3,99.98 4,39.40Goods in process 3,95.75 4,10.20Finished goods 57,56.78 50,43.17Stores and spare parts 6,57.05 5,31.68By-products (at Net Realisable Value) 43.45 1,99.20

86,08.28 77,47.70

* Schedule 19 [Note1(e)]


S CHEDULES

26



8. SUNDRY DEBTORS

Over six monthsSecured - Considered good 9.13 0.68

Unsecured - Considered good 34.79 32.17

Unsecured - Considered doubtful 51.22 6.66

Less: Provision for doubtful debts (51.22) 43.92 (6.66) 32.85

Others

Secured - Considered good 20,61.16 13,69.73

Unsecured - Considered good 23,26.96 45,72.24

Unsecured - Considered doubtful 71.54 0.79

Less: Provision for doubtful debts (71.54) 43,88.12 (0.79) 59,41.97

44,32.04 59,74.82

9. CASH AND BANK BALANCES

Cash and cheques in hand 5.64 35.76

With Scheduled Banks:

On Current accounts 27,02.20 33,73.42

[Net of book overdrafts -Rs. 20.71 lakhs (Previous

year- Rs. 3,76.97 lakhs)]

On Dividend accounts 11,19.96 11,05.51

On Deposit accounts 61,50.00 40,75.00

With Post Office in Savings Bank Accounts (Lodged 1.10 1.10

as security deposits) [Maximum amount during the year

Rs. 1.10 lakhs (Previous year Rs. 1.10 lakhs)]

99,78.90 85,90.79

10. LOANS AND ADVANCES(Considered Good)

Loan to a company @ - 9,00.00

Advances recoverable in cash or in kind or for

value to be received

- Unsecured 55,20.67 69,09.35

- Secured 3,30.71 3,52.83

Interest accrued on deposits 27.25 19.03

Deposits with excise authorities 2,13.75 45.27

Advance Tax, net of provisions 2,31.41 (7,24.48)

63,23.79 75,02.00@ Secured by an unconditional Guarantee issued by

GlaxoSmithKline Plc.

Included in advances, amount due from Directors and anofficer of the Company. 19.85 1,33.69

Maximum amount due during the year 1,37.70 1,52.40


S CHEDULES

27

11. CURRENT LIABILITIESSundry creditors:

- Total outstanding dues of small scale industrialundertakings * 2,24.70 2,70.19

- Total outstanding dues of creditors other thansmall scale industrial undertakings 1,28,50.67 1,27,61.86

Other liabilities 26,72.74 29,74.05Advances from customers 1,83.40 1,69.05Investor Education and Protection Fund : Unpaid dividend 1,12.51 98.06Second Interim dividend 9,48.29 10,07.45

1,69,92.31 1,72,80.66

*There are no amounts due and outstanding for more than 30 days.

12. PROVISIONS

Gratuity * 12.13 1,19.69Accrued leave * 7,23.98 6,03.57

7,36.11 7,23.26* Schedule 19 [Note 1(g)]

13. DEFERRED TAX ASSETS/(LIABILITIES) *

Deferred tax liability -- Opening Balance (28,16.36) (24,74.09)- Additional adjustment for current year (7,46.70) (3,42.27)

(35,63.06) (28,16.36)* Schedule 19 [Notes 1(i)(b) and 19]



Year ended Year endedDecember 31, December 31,


14. OTHER INCOMEMiscellaneous sales 3,12.26 3,58.99Insurance and other claims 1,05.99 77.91Miscellaneous income * 7,29.72 3,77.68Release of accruals/refunds 3,06.07 3,34.86Gain on disposal of fixed assets 8.99 6.99Exchange fluctuations - 20.08

14,63.03 11,76.51* Schedule 19 [Note 22]

15. EMPLOYEES’ COSTSalaries, Wages and Bonus 66,72.12 58,69.10Contribution to Provident and Other Funds 8,96.72 9,35.28Welfare Expenses 15,14.00 11,12.96Less : Recoveries made * (10,08.57) (8,77.83)

80,74.27 70,39.51* Schedule 19 [Note 17]


S CHEDULES

28



16. EXCISE DUTY

Excise duty paid 1,16,38.80 1,33,24.41

Add : Excise Duty on Closing Stock 8,48.46 6,80.73

Less : Excise duty on Opening Stock (6,80.73) (7,77.40)

1,18,06.53 1,32,27.74

17. EXPENSES

Stores consumed 6,54.70 1,33.34

Conversion charges to third parties 19,14.98 25,77.42

Repairs - Building 1,44.48 1,70.30

- Machinery 3,97.66 3,40.95

- Others 4,50.52 3,88.57

Power and fuel 14,26.36 16,19.50

Rent 8,98.20 9,03.02

Rates and taxes 16,45.86 15,80.66

Insurance 6,06.36 5,86.22

Travelling expenses 12,14.43 11,39.12

Carriage and freight 32,43.23 38,29.61

Service charges paid to selling agents 16.66 22.76

Discounts -Sales 3,25.02 3,37.08

Donations 9.05 12.61

Advertising and promotions* 85,91.05 77,58.58

Royalty 28,94.78 33,48.82

Exchange fluctuations 10.98 -

Development and Scientific research 24.44 18.76

Interest paid - others 7,49.72 12,32.56

Less : Interest Income

[Tax Deducted at Source- Rs. 24.12 lakhs

(Previous Year Rs. 27.66 lakhs)]

- Loans/Advances (44.93) (67.62)

- Bank Deposits (76.36) (30.02)

- Income tax refunds (3,45.91) (3,93.78)

- Others (44.67) 2,37.85 (29.41) 7,11.73

Amortisation ** 4,93.32 4,89.87

Other general expenses 26,59.80 31,44.18

Less : Recoveries made *** (21,15.59) (18,12.97)

2,57,44.14 2,73,00.13

* Schedule 19 [Note 22]

** Schedule 19 [Note1(j) and 18]

*** Schedule 19 [Note 17]


S CHEDULES

29

19. NOTES TO THE ACCOUNTS:

1. Significant Accounting Policies :

a Accounting Convention

The financial statements are prepared under the historical cost convention on an accrual basis and inaccordance with the mandatory accounting standards issued by the Institute of Chartered Accountantsof India.

b. Fixed Assets and Depreciation

All tangible fixed assets are stated at cost less accumulated depreciation. Cost includes all incidentalexpenditure net of MODVAT/CENVAT wherever applicable. The Company follows the Straight LineMethod of charging depreciation, on all its tangible fixed assets, on pro-rata basis. The Company hasprovided depreciation at higher of the rates determined by the management or those specified inSchedule XIV to the Companies Act, 1956. The depreciation rates which are different from the principalrates specified in Schedule XIV to the Companies Act, 1956 are as follows : -

(Rates in Percentages)

Assets acquired Assets acquired Assets acquired Assets acquiredafter December after April 30, after March 31, upto March

31, 1994 1986 but upto 1983 but upto 31, 1983December 31, 1994 April 30, 1986

Buildings - Factory - - 3.5 2/3.5/5.5

- Non - factory 2 2 2 2/2.5

- Tubewells 10 10 10 10/100

Plant and Machinery

Depreciated at

- Triple Shift 12.5/14.28 12.5/14.28 10/11/25 7.5/10/12.5

- Double Shift 10/12.5/14.28 10/12.5/14.28 10/11/25 7.5/10/12.5

- Single Shift 10/12.5/14.28 10/12.5/14.28 10/11/25 7.5/10/12.5

Information Technology Equipment 25/33.33 25 25 25

Motor Vehicles 14.28/20 14.28/20 14.28/20 14.28/20/25

Furniture and Fixtures 10/20 10/20 10/20 10/20

18. ADJUSTMENT DUE TO (INCREASE)/DECREASEIN STOCK OF FINISHED GOODS AND GOODSIN PROCESS

Opening StockFinished Goods 50,43.17 54,35.23Goods in Process 4,10.20 3,03.42Purchased Finished Goods - 7.12By-products 1,99.20 56,52.57 2,75.42 60,21.19

Less: Closing StockFinished Goods 57,56.78 50,43.17Goods in Process 3,95.75 4,10.20Purchased Finished Goods - -By-products 43.45 61,95.98 1,99.20 56,52.57

Net (Increase)/Decrease (5,43.41) 3,68.62




S CHEDULES

30

Patents and Trade Marks are accounted at their cost of acquisition .The Company has with effectfrom January 1, 2002 started amortising the same over a period of 10 years from the date of theiravailability as against 20 years earlier. This is in line with the mandatory Accounting Standard 26“Intangible Assets” issued by the Institute of Chartered Accountants of India.

c. Foreign Currency Transactions

Transactions in Foreign Exchange other than those covered by forward contracts are accounted for atthe exchange rates prevailing on the date of transactions. The exchange differences arising out of thesettlements, other than those on liabilities relating to fixed assets are dealt with in the Profit and LossAccount. Foreign currency assets and liabilities other than those covered by forward contracts arerevalued at the year end rates. Resultant gains or losses are recognised in the Profit and Loss Accountexcept exchange differences arising on settlement and/or translation of foreign currency liabilities onacquisition of fixed assets which are adjusted against the carrying costs of corresponding fixed assets.

d. Investments

Long term investments are stated at cost less provision, if any, for diminution in the value of suchinvestments other than temporary. Current investments are valued at lower of cost and net realisable/fair value.

e. Inventories

Inventories are valued at lower of cost and net realisable value, except for ghee, a by-product, whichis valued at selling price.

Cost is determined on the basis of the weighted average method. It includes all the appropriateallocable overheads and excise duty wherever applicable.

f. Research and Development

The revenue expenditure is charged against the profit for the year in which it is incurred. Capitalexpenditure is treated in the same way as fixed assets.

g. Retirement Benefits

The Company has various schemes of retirement benefits namely Provident, Superannuation andGratuity Funds recognised by the Income Tax Authorities. These Funds are administered throughTrustees and the Company’s contributions thereto are charged to revenue every year. Contribution toEmployees Pension Scheme, 1995 are deposited with respective authorities and are charged torevenue every year. Accruals are made for leave encashment and gratuity on the basis of actuarialvaluation done at the year end.

h. Revenue Recognition

Sales comprise of value of sale of goods, excluding sales tax but including excise duty . Sales arerecognised at the point of despatch to the customers. Interest income and Insurance claims arerecognised on accrual basis.

i. Taxation

Tax expense /saving is the aggregate of current year tax and deferred tax charged/ credited to theProfit and Loss Account for the year.

a) Current year Charge

Provision for taxation for the Company’s financial year ended December 31, 2002 has beendetermined based on the results for 3 months ended March 31,2002 (Assessment Year 2002-2003) and for the 9 months ended December 31, 2002 (Assessment Year 2003-2004). Theultimate liability for the Assessment Year 2003-2004, however, will be determined on the totalincome of the Company for the year ending on March 31, 2003.

The Provision for taxation is based on assessable profits of the Company as determined under theIncome Tax Act, 1961. The Company also provides for such disallowances made on completion ofassessments pending appeals, as considered appropriate depending on the merits of each case.


S CHEDULES

31

b) Deferred Tax

The Company provides for deferred tax using the liability method, based on the tax effect oftiming differences resulting from the recognition of items in the financial statements and inestimating its current income-tax provision.

j. Miscellaneous Expenditure- Deferred Revenue Expense

Revenue expenditure incurred, the benefit of which extends over a period of time are deferred andamortised over a period of three to five years commencing from the year the resource/facility gets fullyfunctional in an integral way and the corresponding benefit starts accruing to the business.

k. Interest on Borrowings

The interest on working capital management is charged against the profits for the year in which it isincurred. Interest on borrowings for capital assets is capitalised till the date of commencement ofcommercial use of the asset.

l. Leases

Lease rental in respect of asset taken on cancelable operating leases are charged to the Profit andLoss Account on accrual basis.



2. Exceptional Items include :

a) Voluntary Retirement Schemes 4,70.55 26.59

b) Cost of Annuities purchased for Superannuation and Pension 4,93.38 -

Total Exceptional items : 9,63.93 26.59

Tax

- Current Tax 2,15.86 1.90

- Deferred Tax 1,38.34 7.59

Total Tax 3,54.20 9.49

Exceptional Items (Net) 6,09.73 17.10



3. a) Estimated amount of Contracts remaining to be executedon capital account and not provided for 1,65.09 1,80.63

b) Contingent Liabilities not provided for :

- In respect of guarantees given by banks 50.00 50.00

4. Fixed assets include dwelling units valuing Rs.1,23.95 lakhs (Previous year Rs. 1,23.95 lakhs) pendingregistration in the name of the Company.

5. In line with the long term manufacturing strategy of the Company its new Spray Drier plant at Sonepatstarted commercial production with effect from July 1,2002. All the expenses incurred upto June 30,2002amounting to Rs. 77,07.81 lakhs which can be regarded as part of indirect cost, incidental and related toconstruction of the project, have been allocated to Buildings and Plant and Machinery at Sonepat in theratio of their respective book values as on June 30,2002 .The detail of Pre operative expenses allocatedare as under:


S CHEDULES

32

Particulars Year ended Year endedDecember 31, December 31,


Opening Balance 66,17.62 38,04.37Consultancy fees * (2,56.91) 5,22.02Rent 83.73 1,59.22Power and Fuel 1,44.98 4,23.62Salaries, wages and benefits 2,66.55 3,13.30Insurance 44.68 47.03Interest on loans 3,81.92 9,41.81Depreciation 19.05 24.58Consumption of materials for trial production - 79.56Travelling expenses 30.97 61.81Stores and spares consumed 13.26 12.73Rates and Taxes 1.55 1.58Other expenses 4,19.61 2,25.99Recovery (Net) (59.20) -Less Capitalised 77,07.81 -Total - 66,17.62* Transferred to identified fixed assets

6. Managerial RemunerationAmount paid/payable to Directors:Salaries and allowances 2,39.05 1,51.01Contribution to Provident and Superannuation Funds 33.85 26.64Value of other perquisites 35.53 31.15Directors’ sitting fees 1.20 1.30Commission to non-executive directors 11.67 9.00

3,21.30 2,19.10NOTE :1. The contribution to Gratuity funds and leave encashment have been made on a group basis and separate figures

applicable to an individual employee are not available and therefore, contribution to Gratuity funds and leave encashment havenot been considered in the above computation.

2. Appointment during the year and remuneration of Rs. 11.72 lakhs of the Managing Director is awaiting shareholders andCentral Government approval.

3. Appointment of a Director and remuneration of Rs. 8.27 lakhs (Previous year Rs. 79.45 lakhs including commission ) is awaitingshareholders approval.

Computation of net profit under Section 198/349 of the Companies Act,1956, and calculation of commissionpayable to non-executive directors:Profit before Taxation and Exceptional Items 1.36,35.14 1,94,17.26Add: Director’s Remuneration 3,08.43 2,08.80

Directors’ sitting fees 1.20 1.30Commission to non-executive directors 11.67 9.00Provision for bad and doubtful debts 1,15.31 7.45

Less: Exceptional item (Cost of Annuities purchased forSuperannuation and Pension) 4,93.38 -

Profit on sale of Fixed assets (Net) 8.99 6.99Net Profit under section 198/349 on which commission is payable 1,35,69.38 1,96,36.82Commission payable to non-executive directors:Maximum allowed as per Companies Act,1956 at 1% 1,35.69 1,96.37Restricted by the Board of Directors to 11.67 9.00NOTE:The Company depreciates fixed assets based on estimated useful lives that in certain cases are lower than those implicit in ScheduleXIV of the Companies Act,1956. Accordingly, the rates of depreciation used by the Company in such cases, are higher than theminimum rates prescribed by Schedule XIV.


S CHEDULES

33

Year ended Year endedDecember 31, 2002 December 31, 2001

Unit Quantity Value Quantity Value(Rs. Lakhs) (Rs. Lakhs)

11. Raw Materials Consumed (Refer Note 22):(Includes goods processed by third parties)Milk Powder MT 6,108 46,08.93 7,600 59,05.47Milk Fluid MT 52,051 55,42.93 70,017 76,65.17Malt and Malt Extract MT 32,181 37,38.60 36,777 41,91.83Flour (Wheat) MT 19,110 16,93.93 23,481 20,52.08Others 30,70.19 36,35.67

1,86,54.58 2,34,50.22



7. Provisions and/or payments in respect of Auditors’ Remuneration(i) Audit fee 9.00 7.50(ii) Tax audit fee 6.50 5.50(iii) In other capacity 8.52 14.78(iv) Out-of-pocket expenses 7.13 4.96

31.15 32.748. Expenditure indicated below allocated to other Revenue Accounts

Consumption of stores and spares 10,50.67 5,28.69Insurance 2,32.49 1,71.02Development and scientific research 6,18.03 5,78.06


Unit Quantity Value Quantity Value(Rs. Lakhs) (Rs. Lakhs)

9. Turnover:Class of Goods:a) Manufactured Goods

(i) Malted Milk Food/Malted Food/Malt Based Food DOZS 85,45,750 8,08,01.67 1,01,85,787 9,13,49.25

(ii) Biscuits MT 228 1,03034,70.45 47,05.55

DOZS 51,28,333 62,77,410(iii) Ghee/Cream MT 1,716 17,72.37 2,522 24,56.17

b) Traded Goods(i) Malted Milk Food/Malted Food/

Malt Based Food DOZS 2,34,083 10,08.85 1,70,929 7,02.868,70,53.34 9,92,13.83


S CHEDULES

10. Details of Purchased Finished goods:

Opening stock Purchases Closing Stock

As on As on Year Ended Year Ended As on As onJanuary 1, 2002 January 1, 2001 December 31, 2002 December 31, 2001 December 31, 2002 December 31, 2001

Unit Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value(Rs. Lakhs) (Rs. Lakhs) (Rs. Lakhs) (Rs. Lakhs) (Rs. Lakhs) (Rs. Lakhs)

Malted Milk Food/Malted Food/MaltBased Food MT Nil Nil 7.11 7.12 1404.50 7,96.12 1025.58 5,76.68 Nil Nil Nil Nil

Nil 7.12 7,96.12 5,76.68 Nil Nil

34



12. Value of Imports calculated on C.I.F. basis:Capital Goods 48.22 54.07Spares 53.87 13.97Software 1.03 2.24

1,03.12 70.2813. Expenditure in Foreign Currency on account of:

(Cash basis)Travelling 25.31 40.17Advertisement/Promotions 84.69 1,22.29Others 47.28 39.46

1,57.28 2,01.92


Percentage Value Percentage Value(Rs. Lakhs) (Rs. Lakhs)

14. Imported and Indigenous Raw Materials,Spare Parts and Components consumed:(a) Raw Materials (Refer Note 22):

Imported - - - -Indigenous 100.00 1,86,54.58 100.00 2,34,50.22

100.00 1,86,54.58 100.00 2,34,50.22(b) Spare Parts and Components consumed:

Imported 0.48 8.18 2.06 13.65Indigenous 99.52 16,97.19 97.94 6,48.38

100.00 17,05.37 100.00 6,62.03


(Rs. Lakhs) (Rs. Lakhs)15. Amount remitted in Foreign Currencies

for Dividend:(a) Number of non-resident shareholders 1 1(b) Number of shares held (Equity Shares

of Rs. 10 each) 1,81,52,243 1,81,52,243(c) Dividend remitted,

- Current Year 10,80.06 12,70.66- Previous Year - 5,99.02

16. Earnings in Foreign Exchange:Value of export of goods on F.O.B. basis 41,00.32 44,78.89[Including sales to Nepal and BhutanRs. 1686.29 lakhs (Previous year Rs. 21,87.46 lakhs )]

17. During the year, the Company shared the services of some of it’s employees and facilities with two othercompanies. Consequently, the value of share of costs attributable to that company calculated in accordancewith the service agreement based on the recommendations of an independent study, has been recovered.


S CHEDULES

35

18. Miscellaneous expenditure includes Rs. 7,52.92 lakhs (Previous year Rs. 11,29.39 lakhs) and Rs. 2,31.65lakhs (Previous year Rs. 3,48.50 lakhs) on account of implementation of business processes/systemsand renovation/ interior decoration at one of its office premises respectively. The details are given below:


(Rs. Lakhs) (Rs. Lakhs)Opening Balance 1477.89 18,71.65Renovation/ Interior decoration 96.11Less : Amortised (493.32) (489.87)

Total 984.57 14,77.89

19. The Company estimates the deferred tax charge/(credit) using the applicable rate of taxation based on theimpact of timing differences between financial statements and estimated taxable income for the currentyear. The movement of provision for deferred tax is given below:

(Rs. Lakhs)

Provision for Deferred Tax Opening Charge/(Credit) ClosingAs at 01.01.02 during the year As at 31.12.02

Depreciation 21,63.25 18,15.10 39,78.35Interest on loan capitalised 7,77.65 (7,77.65) -Expenses on office renovation/interior decoration 1,24.42 (39.29) 85.13Section 43B disallowance (2,38.70) (74.11) (3,12.81)VRS Payment (7.60) (1,34.90) (1,42.50)Provision For Doubtful Debts (2.66) (42.45) (45.11)Net deferred tax liability 28,16.36 7,46.70 35,63.06

20. Segmental Reporting:The Company is focussed in the business segment of Nutritionals in India. Therefore there is no reportablesegment as per the Provisions of Accounting Standard 17 “Segment Reporting” issued by the Institute ofChartered Accountants of India.

Notes :1. The installed capacities and the permitted liberalisation of licensed capacities are as per certificates given by the the Vice President - Operations and not verified by the

Auditors, being a technical matter.2. Production figures are net of captive consumption.3. Powdered milk / Boost Intermediate is for captive consumption and accordingly the same has been included in Goods in Process in Schedule 7 & 18.4. Production capacity listed under Serial No.1 , 3 , 4 & 5 above are in respect to all the three factories of the Company and are covered by Industrial Entrepreneurs’

Memorandums (IEMs) in terms of Notification No. 477 (E) dated 25th July, 1991 of the Department of Industrial Development, Ministry of Industry, Government of India.Capacity of 228 MT listed under Serial No.2 and capacity of 528 MT included under Serial No. 3 pertains to licences granted under the Industries (Development andRegulation) Act, 1951.

5. The products under Serial No. 2 to 4 are manufactured in an integrated plant and, therefore, installed capacity can not be given seperately.6. The Products listed under Serial No. 6 & 7 are processed by third parties.

21. Class of Goods

ANNUAL CAPACITY ACTUAL PRODUCTION* STOCK OF GOODS PRODUCED

Licensed pluspermitted Year Year OPENING CLOSING

Liberalisation Installed Ended Ended31.12.02 31.12.01 31.12.02 31.12.01 31.12.02 31.12.01 As on 01.01.02 As on 01.01.2001 As on 31.12.02 As on 31.12.01

Qty Qty Qty Qty Qty Qty Qty Value Qty Value Qty Value Qty ValueMT MT MT MT MT MT MT Rs. Lakhs MT Rs. Lakhs MT Rs. Lakhs MT Rs. Lakhs

1. MALT BASED FOODS/MALTED FOODS 91100 65000 83983 55800 47058 54392 7351 4450.11 6426 4053.34 6963 4941.90 7351 4450.11

2. MILKOSE BABY FOODS 228 228

3. POWDERED MILK 3528 3528 1440 1440 65 9 0 0.00 3 2.75 - - - -

4. PROTEIN RICH FOODS 1000 1000 409 420 78 77.70 59 66.64 97 106.54 78 77.70

5. GHEE AND BUTTER 6000 6000 3076 2800 1556 2435 201 199.20 288 275.42 41 43.45 201 199.206. BISCUITS 7115 11012 206 89.33 466 182.41 305 127.69 206 89.33

7. MALT BASED FOODS/

MALTED FOODS 5240 7690 635 426.03 1502 1,132.84 827 580.65 635 426.03

5242.37 5713.40 5800.23 5242.37* Does not include Trial Production.


S CHEDULES

36

22. Raw Materials consumed as shown under Note 11 and 14 (a) of Schedule 19 also includes Rs. 7,11.04lakhs (Previous year Rs. 9,53.27 lakhs) being the cost of materials consumed on samples used forpromotional purposes included under Advertising and Promotion expenses (schedule 17 ) and Rs. 3,43.49lakhs (Previous Year- Rs. 1,37.11 lakhs) being the cost of stocks replaced which has been correspondinglynetted off from the miscellaneous income reflected under the heading of Other Income. (Schedule 14)

23. Earnings Per Share (EPS) – The numerators and denominators used to calculate Basic and Diluted EarningsPer Share:


- Profit attributable to the Equity Shareholders (Rs.)- (A) 850,051,262 1,26,62,87,582

- Basic/ Weighted average number of Equity Sharesoutstanding during the year- (B) 4,53,80,621 4,53,80,621

- Nominal value of Equity Shares (Rs.) 10.00 10.00

- Basic/ Diluted Earnings per Share (Rs.) – (A)/(B) 18.73 27.90

24. The Company has with effect from January 1, 2002 started amortising Patents and Trade Marks over aperiod of 10 years from the date of their availability as against 20 years earlier. This is in line with themandatory Accounting Standard 26 “Intangible Assets” issued by the Institute of Chartered Accountantsof India. Accordingly Patents and Trade Marks have been restated at Rs. 7924.31 lakhs and the additionalamortisation of Rs. 1143.72 lakhs has been adjusted from the opening General Reserves. Further, thecurrent year amortisation is higher by Rs 489.87 lakhs.

25. In accordance with the requirements of Accounting Standard (AS) – 18 ‘Related Party Disclosures’ thenames of the related party where control exists/able to exercise significant influence along with theaggregate transactions and year end balances with them as identified and certified by the managementare given below :

A Parent Company

Horlicks Ltd., which is a subsidiary of GlaxoSmithKline Plc, U.K , holds 40% of equity shares of the Company.

B Other related parties in GSK group where common control exist

a. GlaxoSmithKline Asia Private Limited k. SB Exportsb. GlaxoSmithKline Pharmaceuticals Limited l. China SBTc. GlaxoSmithKline Manila m. Burroughs Wellcome (India) Limitedd. GlaxoSmithKline Mauritius n. SB Gulf – Qatare. GlaxoSmithKline Nigeria o. SB Gulf – Bahrainf. GlaxoSmithKline Malaysia p. SB Gulf – Omang. GlaxoSmithKline Mackwoods (Sri Lanka) q. SB Gulf – Dubaih. GlaxoSmithKline Exports r. SB Gulf – Abu Dhabii. GlaxoSmithKline Trinidad s. SB Gulf – Kuwaitj. GlaxoSmithKline Jamaica t. GSK Hong Kong

C Trusts under Control of the Company

a. Gratuity Fund c. Superannuation Fundb. Provident Fund Trust d. British Business Group Trust

D Directors/Key Managerial Personnel and their relatives

Directors/Key Managerial Personnel: Relatives of Directors/Key Managerial Personnel:

a. Nicholas J. Massey a. Urmi Chatterjee, wife of A. Chatterjeeb. S. J. Scarff b. Minoti Mukherjee, wife of P. S. Mukherjeec. A. Chatterjee c. Rajat Mukherjee, son of P. S. Mukherjeed. P. S. Mukherjee d. P. Usha Rani, wife of P. Dwarakanathe. P. Dwarakanath e. Raji Subbarayan, wife of R. Subbarayanf. R. Subbarayan f. Kamla Subbarayan, daughter of R Subbarayang. C. H. Lambert


S CHEDULES

37


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38

I. REGISTRATION DETAILS

Registration No. 0 2 2 5 7 State Code 1 6

Balance Sheet Date 3 1 1 2 0 2

II. CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousands)

Public Issue Rights Issue

N I L N I L

Bonus Issue Private Placement

N I L N I L

III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousands)

Total Liabilities Total Assets

6 9 6 1 3 3 9 6 9 6 1 3 3 9

SOURCES OF FUNDS *

Paid -up Capital Reserves & Surplus

4 5 3 8 0 6 4 3 7 8 3 8 5

Secured Loans Unsecured Loans

N I L N I L

* Do not include Deferred Tax Liabilities/(Assets)

APPLICATION OF FUNDS

Net Fixed Assets Investments3 9 2 8 5 7 6 0 5

Net Current Assets Misc Expenditure

1 1 6 1 4 5 9 9 8 4 5 7

Accumulated Losses

N I L

IV PERFORMANCE OF THE COMPANY (Amount in Rs. Thousands)

Turnover ( Sales and Other Income) Total Expenditure

8 8 5 1 6 3 7 7 5 8 4 5 1 6

Profit/Loss Before Tax Profit/Loss After Tax

+ 1 2 6 7 1 2 1 + 8 5 0 0 5 1

Earning per share in Rs. * Dividend @%

1 8 . 7 3 7 0 . 0 0

* Basic

V. GENERIC NAMES OF THREE PRINCIPAL PRODUCTS/SERVICES OF COMPANY

Item Code No.(ITC Code) 1 9 0 1 1 0 . 0 1

Product Description M A L T B A S E DF O O D

Item Code No.(ITC Code) 1 9 0 5 3 0 . 0 3

Product Description B I S C U I T S

B

AND COMPANY’S GENERAL BUSINESS PROFILE

ALANCE SHEET ABSTRACT

39

Year ended Year ended

December 31, December 31,

2002 2001

(Rs. Lakhs) (Rs. Lakhs)

A. CASH FLOW FROM OPERATING ACTIVITIES

PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS 13,635.14 19,417.26

Add : Depreciation

- On Patents and Trade Marks 980.33 490.46

- On Other Fixed Assets 2,571.55 1,363.55

Amortisation 493.32 489.87

Provision For Doubtful Debts 115.31 7.45

Interest Expenses 749.72 1,232.56

Invesments written off 0.02 -

Less : Interest Income 511.87 520.83

Release of accruals / refunds 306.07 334.86

Exchange Fluctuation Gain/ (Loss) ( Unrealised) (5.61) 2.18

Gain on Disposal of Fixed Assets 8.99 6.99

Operating Profit Before Working Capital Changes 17,724.07 22,136.29

Add/(Less): (Increase)/Decrease in Current Assets

Sundry Debtors 1,421.86 (2,249.71)

Loans & Advances 1,242.33 399.63

Inventories (860.58) 1,391.65

Add/(Less): Increase/(Decrease) in Current Liabilities & Provisions

Current Liabilities & Provisions 1,044.70 1,756.81

Cash Generated from Operations 20,572.38 23,434.67

Less: Income Tax paid (Net) 4,379.90 5,870.38

Net Cash from Operating Activities before Exceptional Items 16,192.48 17,564.29

Less: Exceptional Items:

Voluntary Retirement Schemes 470.55 26.59

Cost of Annuities purchased forSuperannuation and Pension 493.38 -

Net Cash from Operating Activities 15,228.55 17,537.70

B. CASH FLOW FROM INVESTING ACTIVITIES

Fixed Assets:

- On Patents and Trade Marks - (11.88)

- On Other Fixed Assets (3,851.67) (10,747.60)

Sale of Fixed Assets 130.87 46.62

Interest Received 503.65 520.12

Loan to a company 900.00 (900.00)

Miscellaneous Expenditure - (96.11)

Net Cash from Investing Activities (2,317.15) (11,188.85)

C

FOR THE YEAR ENDED 31ST DECEMBER, 2002

ASH FLOW STATEMENT


2002 2001(Rs. Lakhs) (Rs. Lakhs)

C. CASH FLOW FROM FINANCING ACTIVITIESLong Term Borrowings (7,500.00) 2,000.00

Short Term Borrowings (66.52) 66.52

Interest Paid (735.41) (1,230.98)

Dividends Paid (3,221.36) (3,678.27)

Net cash from Financing Activities (11,523.29) (2,842.73)

Net Increase/(Decrease) in Cash and Cash Equivalents 1,388.11 3,506.12

Cash and Cash Equivalents at the beginning of the year

Cash and Bank Balances 8,590.79 5,084.67

8,590.79 5,084.67

Cash and Cash Equivalents at the end of the year

Cash and Bank Balances 9,978.90 8,590.79

9,978.90 8,590.79

Net Increase/(Decrease) in Cash and Cash Equivalents 1,388.11 35,06.12

Notes:

1. The above Cash Flow Statement has been prepared under the ‘Indirect Method’ as set out in theAccounting Standard-3 on Cash Flow Statement issued by ICAI.

2. Total Taxes paid during the year (including Tax deducted at source on interest received of Rs.24.12 lakhs , which is included in interest received from investing activities) amounted to Rs.4404.02 lakhs.

3. Cash and Cash equivalents include balances with Scheduled Banks on Dividend accounts - Rs.1119.96 lakhs which are not available for use by the company.

4. Previous year’s figures have been regrouped wherever necessary to conform to the currentyear’s classification.

This is the Cash Flow Statement referred to in our report of even date .

S. BERERA S.J. SCARFF A. CHATTERJEEPartner Chairman ASHOK DAYALFor and on behalf of P.S. MUKHERJEEPRICE WATERHOUSE NICHOLAS J. MASSEY DirectorsChartered Accountants Managing Director


40

C ASH FLOW STATEMENT

chairman managing director directors - gsk kumar bankers bank of america citibank n.a. the hongkong...

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