gil_annualreport_2003_04

Annual Report 2003-2004

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GODREJ INDUSTRIES LIMITED

DIRECTORS

A.B. Godrej Chairman

J.N. Godrej

N.B. Godrej Managing Director

S.A. Ahmadullah

V.M. Crishna

K.K. Dastur

V.N. Gogate

K.N. Petigara

F.P. Sarkari

V.F. Banaji Executive Director (Group Corporate Affairs)

T.A. Dubash Director (Marketing)

M. Eipe Executive Director & President (Chemicals)

M.P. Pusalkar Executive Director & President (Foods Div.)

COMPANY SECRETARY

S.K. Bhatt

AUDITORS

Kalyaniwalla & Mistry, Chartered Accountants

Industries Limited

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REGISTERED OFFICE : Pirojshanagar,Eastern Express Highway,Vikhroli (East), Mumbai 400 079.Phone: 022 - 2518 8010, 2518 8020, 2518 8030Fax : 022 - 2518 8074, 2518 8066website : http:www.godrejinds.com

FACTORIES : Vikhroli Pirojshanagar, Eastern Express Highway,Vikhroli, Mumbai 400 079.Phone : 022 - 2518 8010, 2518 8020, 2518 8030Fax : 022 - 2518 8068/2518 8074

Valia Burjorjinagar,Plot No. 3, Village Kanerao,Taluka - Valia, District Bharuch,Gujarat 393 135.Phone : 02643 - 270756 to 270760Fax : 02643 - 270018

Wadala L.M. Nadkarni MargNear M.P. T. HospitalWadala (East), Mumbai - 400 037Phone : 022 - 2412 6320/23, 2414 6296Fax : 022 - 2412 6204/2416 4599

Mandideep Plot No. 5, New Industrial Area No. 1Mandideep, District Raisen,Bhopal - 462 046, MPPhone : 07480 - 233405-6Fax : 07480 - 233409

BRANCHES : Delhi Laxmi Insurance Building,2/2-A, Asaf Ali Road, New Delhi 110 002.Phone : 011 - 2323 3775, 2323 3777, 2323 6776Fax : 011 - 2323 3778

Kolkata Block GN, Sector-V,Salt Lake City, Kolkata 700 091.Phone : 033 - 2357 3556, 2357 3555Fax : 033 - 2357 3945

Chennai New No. 102, (Old No. 81),Chamiers Road,Chennai 600 028.Phone : 044 - 2431 5721/2431 5722Fax : 044 - 2431 5723

London 284A, Chase Road, Southgate,London N14 - 6HF., UKPhone : (004420) - 88860145Fax : (004420) - 88869424

BANKERS : Central Bank of IndiaState Bank of IndiaBank of IndiaHDFC Bank Ltd.Citibank N.A.

REGISTRARS : Computech Sharecap Ltd.147, Mahatma Gandhi Road,Opp. Jehangir Art Gallery, Fort,Mumbai 400 023.Phone : 022 - 2267 1824-26Fax : 022 - 2267 0380E-Mail : [email protected]

CONTENTS Page Nos.

Financial Highlights ............................................... 03

Notice ..................................................................... 04

Directors’ Report along with ManagementDiscussion and Analysis Report ............................ 10

Report on Corporate Governance ........................ 18

Shareholders' Information ...................................... 21

Auditors’ Report ...................................................... 23

Accounts ................................................................. 26

Consolidated Accounts ........................................... 45

Statement Pursuant to Section 212 ....................... 59

SUBSIDIARIES

Godrej Agrovet Limited ......................................... 60

Goldmohur Foods & Feeds Limited ...................... 69

Golden Feed Products Limited ............................. 75

Godrej Tea Limited ................................................ 77

Godrej Properties & Investments Limited ............. 82

Girikandra Holiday Homes & Resorts Ltd. .......... 88

Godrej Remote Services Limited .......................... 90

Godrej Global Solutions Limited .......................... 93

Ensemble Holdings & Finance Limited ................ 96

Godrej International Limited ................................. 100

Godrej Global Mid East FZE ................................ 102


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Chemicals 46075

Foods 18415

Estate Management 2071

Processing Charges 3550

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

Total 73355

Materials 46616

Staff Costs 6526

Depreciation 2150

Interest 580

Other Operating Expenses 11101

Total 66973

Break-up of Total IncomeRs. Lac

Break-up of Total ExpenditureRs. Lac

Total Expenditure 2003-2004Total Income 2003-2004

GODREJ INDUSTRIES LIMITED – FINANCIAL HIGHLIGHTS(Rs. lac)

2003-04 2002-03 2001-02 2000-01 1999-00

BALANCE SHEET

SOURCES OF FUNDS :

Shareholders’ FundsShare Capital 2919 2919 3699 5979 5979Reserves & Surplus 26197 21511 21030 27559 25679

Loan FundsSecured Loans 16814 14815 15051 16701 22375Unsecured Loans 4235 7432 13456 9547 11881Deferred Tax Liability 2972 3466 1347 – –

53137 50143 54583 59786 65914

APPLICATION OF FUNDS :

Fixed Assets 25656 28130 29099 33799 32815Investments 26533 18646 14619 17075 19043Net Working Capital 739 2944 9987 8076 12666Miscellaneous Expenditure 209 423 878 836 1390

53137 50143 54583 59786 65914

INCOME AND PROFIT FIGURES

Total Income 73355 67780 53465 79786 71620Expenditure other than Interest and Depreciation 64243 57737 43408 65935 57218

Profit before Interest, Depreciation and Tax 9112 10043 10057 13851 14402Interest (net) 580 2024 3218 3711 4774

Profit before Depreciation and Tax 8532 8019 6839 10140 9628Depreciation 2150 2211 2154 2531 2342

Profit before Tax and exceptional items 6382 5808 4685 7609 7286Exceptional items - expense — — 624 3194 547Provision for Current Tax 365 421 150 350 641

Net Profit after Tax 6017 5387 3911 4065 6098Provision for Deferred Tax (494) 2119 923 — ––

Adjustment in respect of prior years -(Income) (57) (153) (121) (25) (90)

Net Profit after taxes and adjustments 6568 3421 3109 4090 6188

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

Industries Limited

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NOTICE TO SHAREHOLDERSNOTICE is hereby given that the SIXTEENTH ANNUAL GENERALMEETING of the members of GODREJ INDUSTRIES LIMITED will beheld on Monday, July 26, 2004 at 4.00 P.M. at Y B Chavan Centre,Nariman Point, Mumbai-400 021, to transact the following business:ORDINARY BUSINESS :1. To consider and adopt the Audited Profit & Loss Account and Cash Flow

Statement for the year ended March 31, 2004, the Balance Sheet as atthat date, the Auditors’ Report and the Directors’ Report thereon.

2. To declare dividend for the financial year ended March 31, 2004.3. To appoint a Director in place of Mr. A.B. Godrej, who retires by

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

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

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

rotation and being eligible, offers himself for re-appointment.7. To appoint Auditors to hold office from the conclusion of this Annual

General Meeting till the conclusion of the next Annual GeneralMeeting, and to authorise the Board of Directors of the Company tofix their remuneration. M/s. Kalyaniwalla & Mistry, CharteredAccountants, the retiring Auditors are eligible for re-appointment.

SPECIAL BUSINESS :8. To consider and, if thought fit, to pass with or without modification,

the following resolution as a SPECIAL RESOLUTION :RESOLVED THAT subject to the provisions of Sections 269, 309,Schedule XIII and other applicable provisions, if any, of the CompaniesAct, 1956, approval of the Company be and is hereby accorded forthe re-appointment and remuneration of Mr. N.B. Godrej as ManagingDirector of the Company for a period of 3 years from April 1, 2005to March 31, 2008, on the terms and conditions as contained in theAgreement to be entered into between the Company and Mr. N.B.Godrej, a draft of which is placed before the meeting and for thepurpose of identification, initialed by the Chairman.

9. To consider and, if thought fit, to pass with or without modification,the following resolution as a SPECIAL RESOLUTION :RESOLVED THAT subject to the provisions of Sections 314 and otherapplicable provisions, if any, of the Companies Act, 1956, approvalof the Company be and is hereby accorded to the appointment ofMr. Pirojsha A. Godrej, son of Mr. A.B. Godrej, Chairman of theCompany, as an employee of the Company, with effect from June 1,2004, on the following terms and conditions :1. Basic Salary

Basic Salary in the scale of Rs. 13500 - 5000 - 7500 - Rs. 50000.The Basic Salary on appointment will be Rs. 13,500/- per month.

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

3. Allowancesa. House Rent Allowance

If Company’s House – not exceeding 40% of basic salaryp.m.

ORIf own house – not exceeding 55% of basic salary p.m.

b. ConveyanceProvision for use of Company's car with driver or conveyanceallowance as per the Scheme of the Company.At present, the conveyance allowance is Rs. 10000/- p.m.

c. Education AllowanceAs per the Scheme of the Company, applicable to the cadrein which he is appointed.At present, the amount payable is Rs. 2000/- p.m.

d. Joining Allowance - Rs. 12000/-4. Other Benefits

a. Leave Travel AllowanceMaximum of 10% of basic salary per annum.

b. Company’s contribution to Provident FundCompany’s contribution towards Provident Fund,Superannuation Fund or Annuity Fund as per the Rules framedunder the Company’s relevant Scheme.

c. GratuityGratuity not exceeding 50% of average basic salary drawn inlast year of service for each completed year of service. Suchgratuity shall be payable according to the rules of the Company.

d. Reimbursement of Medical Expenses/HospitalisationExpensesAs per the Scheme of the Company, applicable to the cadrein which he is appointed.

e. Leave/Leave encashmentEarned/privilege leave, on full pay and allowance, notexceeding 30 days in a financial year. Encashment of leavewill be permissible in accordance with Rules specified bythe Company. Casual/sick leave as per rules of the Company.

Notes:1. Unless otherwise stipulated, for the purpose of the above, the

perquisites shall be evaluated as per Income Tax Rules whereveractual cost cannot be determined.

2. The following shall not be included in the computation ofperquisites :(a) Provision for use of Company’s cars with driver for official use.(b) Provision of free telephone facilities or reimbursement of

telephone expenses at residence including payment of localcalls and long distance official calls.

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

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

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

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


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11. To consider and if thought fit, to pass with or without modification,the following resolution as a SPECIAL RESOLUTION :RESOLVED THAT pursuant to Section 372A and all other applicableprovisions, if any, of the Companies Act, 1956 (including any statutorymodification or re-enactment thereof for the time being in force andas may be enacted from time to time) (hereinafter referred to as ‘theAct’), and subject to any other approvals, as may be required, theCompany be and is hereby authorised to further invest upto Rs. 2crore (Rupees Two Crore only) in addition to the amounts alreadyinvested, by way of subscription, purchase or otherwise in securitiesof Godrej Agrovet Limited, notwithstanding that the aggregate ofthe loans and investments so far made in or to be made in, and theguarantees so far given or to be given to all bodies corporate, exceedsthe limits laid down by the Act.RESOLVED FURTHER THAT the Board of Directors of the Companybe and is hereby authorised to take from time to time all decisionsand steps necessary or expedient or proper in respect of the aboveinvestment including the timing, the type, the amount and otherterms and conditions of such investment and varying the samethrough transfer, sale, disinvestment or otherwise, either in part or infull, as it may, in its absolute discretion, deem appropriate.

12. To consider and if thought fit, to pass with or without modification,the following resolution as a SPECIAL RESOLUTION :RESOLVED THAT pursuant to Section 372A and all other applicableprovisions, if any, of the Companies Act, 1956 (including any statutorymodification or re-enactment thereof for the time being in force andas may be enacted from time to time) (hereinafter referred to as ‘theAct’), and subject to any other approvals, as may be required, theCompany be and is hereby authorised to further invest upto Rs.2crore (Rupees Two Crore only) in addition to the amounts alreadyinvested, by way of subscription, purchase or otherwise in securitiesof Godrej Properties & Investments Limited, notwithstanding thatthe aggregate of the loans and investments so far made in or to bemade in, and the guarantees so far given or to be given to all bodiescorporate, exceeds the limits laid down by the Act.RESOLVED FURTHER THAT the Board of Directors of the Companybe and is hereby authorised to take from time to time all decisionsand steps necessary or expedient or proper in respect of the aboveinvestment including the timing, the type, the amount and otherterms and conditions of such investment and varying the samethrough transfer, sale, disinvestment or otherwise, either in part or infull, as it may, in its absolute discretion, deem appropriate.

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

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

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

By Order of the Board of Directors

S. K. BHATTGeneral Manager (Corporate Services)`

& Company SecretaryMumbai, May 28, 2004

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

NOTES :1. The relative Explanatory Statement in respect of business under Item

Nos. 8 to 14 set out in the Notice is annexed hereto.2. A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO

APPOINT A PROXY TO ATTEND AND ON POLL, TO VOTE INSTEADOF HIMSELF. SUCH A PROXY NEED NOT BE A MEMBER OF THECOMPANY. PROXIES IN ORDER TO BE EFFECTIVE MUST BERECEIVED BY THE COMPANY NOT LESS THAN 48 HOURS BEFORETHE MEETING. A PROXY SO APPOINTED SHALL NOT HAVE ANYRIGHT TO SPEAK AT THE MEETING.

3. The Register of Members and Share Transfer Books of the Companywill be closed from July 6, 2004 to July 26, 2004 (both days inclusive)for ascertaining the names of the shareholders to whom the dividendwhich shall be declared at the Annual General Meeting is payable.In respect of shares held in electronic form, the dividend will bepayable on the basis of beneficial ownership as per details furnishedby National Securities Depository Ltd. and Central DepositoryServices (India) Ltd., for this purpose.

4. Those Members who have so far not encashed their dividend warrantsfor the below mentioned financial years, may claim or approach theCompany for the payment thereof as the same will be transferred tothe Investor Education and Protection Fund of the CentralGovernment, pursuant to Section 205C of the Companies Act, 1956on the respective dates mentioned thereagainst. Please note that asper Section 205C of the Companies Act, 1956, no claim shall lieagainst the Company or the aforesaid Fund in respect of individualamounts which remain unclaimed or unpaid for a period of sevenyears from the date the dividend became due for payment and nopayment shall be made in respect of such claims.

Dividend for the Due date for transferFinancial Year ended31.03.1997 15.09.200431.03.1998 26.09.200531.03.2000 01.07.200731.03.2001 28.07.200831.03.2002 14.08.200931.03.2003 25.08.2010

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

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

Industries Limited

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EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THECOMPANIES ACT, 1956Item No. 8Mr. N.B. Godrej was appointed as the Managing Director vide resolutionpassed at the Annual General Meeting held on July 28, 2001 for theperiod from April 1, 2002 to March 31, 2005. It is now proposed to seekapproval of shareholders for re-appointment and remuneration ofMr. N.B. Godrej (hereinafter referred to as “the Managing Director”)for a further period of three years from April 1, 2005 to March 31, 2008on the remuneration, terms and conditions as given below :-I. Basic Salary :

In the scale of Rs. 280,000 to Rs. 500,000 per month. TheRemuneration Committee/Board of Directors will determine theamount of Basic Salary payable from time to time depending on theperformance of the Managing Director, profitability of the Companyand other relevant factors.The Basic Salary approved by the Remuneration Committee for 2004-05 is Rs. 280,000 per month.

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

III. Perquisites : Classified into four categories A, B, C and D as detailedbelow :

Category A(1) Housing :

Furnished residential accommodation, the perquisite value for which,shall be calculated in accordance with the Income-tax Rules, 1962.The perquisite value of provision of, or reimbursement of expenditureincurred on, gas, electricity, water and furnishings, which shall bevalued in accordance with the Income-tax Rules, 1962.

ORHouse rent allowance equivalent to 60% of basic salary.

(2) Medical Benefits :a) Payments/Reimbursement of domicilary medical expenses

incurred/insurance premium for the Managing Director and hisfamily (excluding hospitalisation, nursing home and surgicalcharges) subject to a ceiling of one month’s average basic salaryin a financial year.

b) Reimbursement of hospitalisation, nursing home and surgicalcharges for the Managing Director and his family subject to alimit of one month’s average basic salary in a financial yearwhich can be accumulated according to the Company’s Rules.

(3) Leave Travel Concession :Leave Travel Concession for the Managing Director and his familyonce in a financial year incurred in accordance with the Rulesspecified by the Company subject to a ceiling of one month’s averagebasic salary in a financial year.

(4) Club Fees :Payments/Reimbursement of fees of a maximum of two Clubs, subjectto a ceiling of Rs. 1 lac (excluding entrance fees/life membershipfees) in a financial year.For the purposes of medical benefits and leave travel concessionunder Category A, ‘family’ means the spouse and dependent childrenof the Managing Director.

Category B(1) Company’s contributions towards Provident Fund, Superannuation

Fund or Annuity Fund as per the Rules framed under the Company’srelevant Scheme.

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

(3) Earned/privilege leave, on full pay and allowance, not exceeding 30days in a financial year. Encashment/accumulation of leave will bepermissible in accordance with the Rules specified by the Company.

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

Category CThe following shall not be included in the computation of perquisites :(1) Provision for use of Company’s cars with driver for official use.(2) Provision of free telephone facilities or reimbursement of telephone

expenses at residence including payment of local calls and longdistance official calls.

Category DGranting of housing loans according to Company’s Scheme subject toCentral Government’s approval, if any.Notes :I. Unless otherwise stipulated, for the purpose of the above, the

perquisites shall be evaluated as per Income Tax Rules whereveractual cost cannot be determined.

II. The aggregate of salary and perquisites as specified above or paidadditionally in accordance with the rules of the Company in anyfinancial year, which the Board may in its absolute discretion pay tothe Managing Director from time to time, shall not exceed the limitsprescribed from time to time under Sections 198, 309 and all otherapplicable provisions of the Companies Act, 1956 read with ScheduleXIII to the said Act as may for the time being be in force, exceptwith the approval of Central Government.

III. The limits specified above are the maximum limits and the Board/Remuneration Committee may in its absolute discretion pay to theManaging Director lower remuneration and revise the same fromtime to time within the maximum limits stipulated above.

IV. In the event of any re-enactment or re-codification of the CompaniesAct, 1956 or the Income Tax Act, 1961 or amendments thereto, theforegoing shall continue to remain in force and the reference tovarious provisions of the Companies Act, 1956 or the Income TaxAct, 1961 shall be deemed to be substituted by the correspondingprovisions of the new Act or the amendments thereto or the Rulesand notifications issued thereunder.

A draft of the agreement to be entered into with the Managing Directoris available for inspection at the Registered Office of the Company from10.00 A.M. to 12.00 Noon, Monday to Friday (except public holidays)upto the date of the Annual General Meeting.The above constitutes the abstract of the terms of the agreement whichis required to be given to every member under the provisions of Section302 of the Companies Act, 1956.The Statement containing information as required under Schedule XIII ofthe Companies Act, 1956 is enclosed.The Board of Directors of the Company recommends passing of theresolution as set out at Item no.8 of the Notice.Mr. N.B. Godrej may be deemed to be interested in the resolution.Mr. A.B. Godrej, being his relative, may be deemed to be interested inthe resolution. None of the other Directors of the Company areconcerned or interested in the resolution.Item No.9Mr. Pirojsha A. Godrej is the son of Mr. Adi B. Godrej, Chairman of theCompany, and brother of Ms. Tanya Dubash, Director (Marketing). It isproposed to appoint Mr. Pirojsha A. Godrej as an employee of theCompany w.e.f. June 1, 2004 for which the approval of members isbeing sought under Section 314 of the Companies Act, 1956.Mr. Priojsha A. Godrej is a Bachelor of Science in Economics from WhartonSchool, University of Pennsylvania. He obtained his Masters in InternationalAffairs from the School of International and Public Affairs, ColumbiaUniversity, New York.The details of the remuneration payable to Mr. Pirojsha A. Godrej is laiddown in the text of the resolution which is self explanatory. For the sakeof brevity, the particulars of the remuneration, perquisites and benefitsare not being set out again in the Explanatory Statement and the membersare requested to refer to the resolution.The Board recommends the passing of the resolution.Mr. A.B. Godrej and Ms. T.A. Dubash being relatives of Mr. Pirojsha A.Godrej may be interested in the resolution. None of the other Directorsare interested in the resolution.


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Name of the Amount of Principal business of Purpose of Source of funds Nature of concernCompany & investment the Company investment or interest of Directorsaddress of in the resolutionRegd. Office

Godrej Consumer Rs. 50 crore Manufacturing and marketing A good Internal generation Except Mr. V. F. Banaji, all theProducts Limited of fast moving consumer investment of funds/borrowings. other directors may be deemedPirojshanagar, products such as soaps, opportunity to be interested in this resolutionEastern Express detergents, toiletries, personal on account of their being DirectorsHighway, Vikhroli, care products, etc. and/or shareholders in GodrejMumbai-400 079 Consumer Products Ltd.

Godrej Agrovet Ltd. Rs. 2 crore Manufacturing and marketing A good Internal generation Mr. A.B. Godrej, Mr. N.B. Godrej,Pirojshanagar, of Animal Feeds, Agricultural investment of funds/borrowings Mr. J.N. Godrej, Mr. V.M. Crishna,Eastern Express Products, Poultry, Oil Palm opportunity Mr. K.N. Petigara and Ms. T.A.Highway, Vikhroli, Plantations, Micro propagation Dubash may deemed to beMumbai-400 079 of Tissue Culture. interested in this resolution on

account of their being Directorsin Godrej Agrovet Ltd. None ofthe other Directors of theCompany are concerned orinterested.

Godrej Properties Rs. 2 crore Real Estate Development A good Internal generation Mr. A.B. Godrej, Mr. N.B. Godrej,& Investments Ltd. investment of funds/borrowings Mr. J.N. Godrej, and Ms.T.A. DubashPirojshanagar, opportunity may deemed to be interested inEastern Express this resolution on account of theirHighway, Vikhroli, being Directors/shareholders inMumbai-400 079 Godrej Properties & Investments

Ltd. None of the other Directorsof the Company are concernedor interested.

Avestha Gengraine Rs. 4.5 crore Biotechnology A good Internal generation None of the Directors areTechnologies Pvt. investment of funds/borrowings concerned or interested.Ltd. opportunity‘Discoverer’9th Floor, Inter-national TechnologyPark,Whitefield Road,Bangalore-86.

Ingenero US$300,000 Provision of remote A good Internal None of the Directors(Mauritius) Limited Manufacturing Technical investment generation of are concerned or interested.10, Frere Felix De Support services to the opportunity funds/borrowingsValois Street, Port global chemical processLouis, Mauritius. industry.

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


S. K. BHATTGeneral Manager (Corporate Services)

& Company SecretaryMumbai, May 28, 2004

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

Item No. 10 to 14Particulars of the Company where investment is proposed to be made:

Industries Limited

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Statement in Terms of Schedule XIII of the Companies Act, 1956 relatingto Remuneration Payable to the Managing DirectorI. General Information

1. Nature of Industry – Chemicals, Edible oils, Fats, and ProcessedFoods.

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

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

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

Total income 73355

Total expenditure other than interest & depreciation 64243

Profit Before Depreciation, Interest and Tax 9112

Depreciation 2150

Profit Before Interest and Tax 6962

Interest and financial charges (net) 580

Profit Before Tax 6382

Provision for Current Tax 365

Profit after Current Tax 6017

Provision for Deferred Tax (494)Adjustments in respect of prior years – net income (57)

Profit After Tax 6568

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

Rs. lacExports of goods 13279Interest income 12Dividend Income 48

5. Foreign investments as on March 31, 2004.Rs. lac

In shares of Godrej International Ltd., theCompany’s wholly owned subsidiary 960.83In equity shares of Compass Connections Ltd. 124.55

II. Information about the appointee1. Background details :

Mr. N.B. Godrej has a B.S. degree in Chemical Engineeringfrom the Massachusetts Institute of Technology and a M.S. inChemical Engineering from Stanford University. He did his M.B.Aat Harvard Business School in 1976. He has been very activein developing the chemicals business of the Company.

2. Past Remuneration :The remuneration paid during the year ended March 31, 2004 isas under :

Rs.Salary 7685066Perquisites 1435614Total 9120680

3. Job profile and suitability :Mr. N.B. Godrej is well qualified being an Engineer from MIT,USA, MS in Chemical Engineering from Stanford University andan MBA from Harvard Business School. He has a career spanning

27 years in Godrej group as a Board Member/Managing Directorof Godrej Soaps Limited, Gujarat-Godrej Innovative ChemicalsLtd. and Godrej Industries Ltd. He has been very active indeveloping the chemicals business of the Company. He hasdemonstrated outstanding leadership skills in diverse businessareas.

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

Brief particulars of the remuneration are given below:

Description LimitsBasic salary range p.m. In the range of Rs. 2,80,000 to

Rs. 5,00,000 p.m.The present monthly basic salary isRs. 2,80,000 p.m.

Performance Linked Based on performance, as per theVariable Remuneration Company’s Scheme.HRA Furnished residential accommodation

OrHouse Rent Allowance equivalent to60% of basic salary

Perquisites As per rules of the Company

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

6. Pecuniary relationship directly or indirectly with the Company,or relationship with the managerial personnel, if any :Besides the remuneration proposed, the Managing Director doesnot have any other pecuniary relationship with the Companyand its managerial personnel.

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


S. K. BHATTGeneral Manager (Corporate Services)

& Company SecretaryMumbai, May 28, 2004.

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


9

Details of the Directors seeking appointment/reappointment in theforthcoming Annual General Meeting (In pursuance of Clause 49 of theListing Agreement)

Mr. A.B. Godrej (62) : Mr A.B. Godrej is B.S., M.S. from MassachusettsInstitute of Technology, U.S.A. and is a Director since 1988.Directorship in other Companies:Chairman & Managing Director, Godrej Consumer Products Ltd.,Chairman: Swadeshi Detergents Ltd., Godrej Tea Ltd., Godrej InvestmentsPvt. Ltd., Godrej Foods Ltd., Hicare India Ltd., Godrej Sara Lee Ltd.,Vora Soaps Ltd., Godrej Properties & Investments Ltd.Director: Godrej & Boyce Mfg. Co. Ltd., Godrej Agrovet Ltd., GodrejInternational Ltd., Godrej Global Mid East FZE, Godrej Upstream Ltd.

Committee position held in companies :Chairman, Audit Committee – Godrej Properties & investments Ltd.Chairman, Remuneration Committee – Godrej Foods Ltd.Chairman, Audit Committee – Godrej Sara Lee Ltd.Chairman, Shareholders’ Committee – Godrej Industries Ltd.Member, Shareholders’ Committee and Human Resources Committee –Godrej Consumer Products Ltd.

Mr. S.A. Ahmadullah (64) : Mr. S.A. Ahmadullah is B. A. (Cantab.). Heis a Director of the Company since 1995.Directorship in other Companies :Director : Lawkim Ltd., Globe Theatres Pvt. Ltd., Nadir Company PrivateLimited and Motor Sports Association of India.Committee position held in companies :Chairman, Remuneration Committee, Godrej Industries LimitedMember : Audit Committee, Godrej Industries Ltd.

Mr. V.N. Gogate (71) : Mr. V.N. Gogate is a Chartered Accountant anda qualified Company Secretary by profession. Mr. Gogate was headingthe finance function of the former Godrej Soaps Ltd. before retiring in1994. He is a Director of the Company since 1995.

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

Mr. F.P. Sarkari (72) : Mr. F.P. Sarkari is a Practising CharteredAccountant. He was appointed as a Director of the Company fromJanuary 30, 2002.Directorship in other Companies :Director : Godrej & Boyce Mfg. Co. Ltd. and Tropicana Enterprise Pvt. Ltd.

Committee position held in companies :

Chairman : Audit Committee - Godrej Industries Ltd., Godrej & BoyceMfg. Co. Ltd.

Member: Remuneration Committee – Godrej & Boyce Mfg. Co. Ltd.

Mr. N.B. Godrej (52) : Mr. N.B. Godrej has a B.S. degree in ChemicalEngineering from the Massachusetts Institute of Technology and a M.S.in Chemical Engineering from Stanford University. He did his M.B.A atHarvard Business School in 1976. He is a Director of the Companysince 1988.

Directorship in other companies:

Chairman : Godrej Agrovet Limited, Goldmohur Foods & Feeds Ltd.,Godrej Global Solutions Ltd.

Director : Godrej Industries Ltd., Godrej & Boyce Mfg. Co. Ltd., GodrejConsumer Products Ltd. Godrej Foods Ltd., Godrej Properties &Investments Ltd., Unicorn Agrotech Ltd., Mahindra & Mahindra Ltd.,Godrej Tea Limited, Godrej Sara Lee Ltd., KarROX Technologies Ltd.,Unicorn Seeds Ltd., Godrej International Ltd., Godrej Global Mid EastFZE, Compass Connections Ltd., UK, CBay Systems Ltd., USA,Rasa Agrotech Pvt. Ltd., Godrej Upstream Ltd.

Committee position held in companies:

Chairman, Audit Committee – Godrej Tea Ltd. and Godrej Agrovet Ltd.

Member, Audit Committee and Shareholders Committee - GodrejConsumer Products Ltd.

Member, Audit Committee – Godrej Sara Lee Ltd., Godrej Foods Ltd.and Godrej Properties & Investments Ltd.Member, Remuneration Committee – Godrej Industries Ltd.Member, Audit Committee and Remuneration Committee – Mahindra &Mahindra Ltd.

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DIRECTORS’ REPORT FOR THE YEAR ENDED MARCH 31, 2004To the Shareholders,Your Directors have pleasure in submitting the Annual Report alongwith the Audited Accounts for the year ended March 31, 2004.REVIEW OF OPERATIONSYour Company’s performance during the year as compared with thatduring the previous year is summarized below.

(Rs. lac) Year ended March 31,

2004 2003

Sales of products and services 71666 65250

Other Income 1689 2530

Total Income 73355 67780Total Expenditure other than Interestand Depreciation 64243 57737

Profit before Interest, Depreciation and Taxation 9112 10043Depreciation 2150 2211

Profit before Interest and Taxation 6962 7832Interest and Financial Charges (net) 580 2024

Profit before Taxation 6382 5808Provision for Current Tax 365 421

Profit after Current Tax 6017 5387Provision for Deferred Tax (494) 2119

Profit after Current and Deferred Taxation 6511 3268Adjustments in respect of prior years – net income 58 153Surplus brought forward 11215 9234

Profit after Tax available for appropriation 17784 12655

Appropriation

Your Directors recommend appropriation as under:

Dividend on Equity Shares 1459 973Tax on distributed profits 187 125Transfer to General Reserve 657 342Surplus Carried Forward 15481 11215

Total Appropriation 17784 12655

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

DIVIDEND

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

MANAGEMENT DISCUSSION & ANALYSIS

There is a separate section on Management Discussion and Analysis inthis Annual Report, which, inter alia, covers the following :

• Industry Structure and Development• Opportunities and Threats• Risks and Concerns• Internal Control Systems and their adequacy• Human Resources and Industrial Relations• Discussion on financial performance with respect to operational

performance• Segment - wise performance• OutlookThe same is appended as Annexure A to the Directors’ Report.

SUBSIDIARY AND ASSOCIATE COMPANIES

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

Godrej Agrovet Limited (GAVL) performed well during the year with itstotal income increasing to Rs. 49494 lac as compared to Rs. 47639 lacin the previous year and Profit After Tax growing from Rs. 887 Lac to Rs.896 Lac during this year. GAVL declared two interim dividends of 45%and 30% respectively in the current year, as compared to interimdividend of 63% and final dividend of 16% in the previous year.Goldmohur Foods and Feeds Ltd., a wholly owned subsidiary of GAVLrecorded turnover of Rs. 30021 lac during the year as compared to Rs.31693 lac during the previous year. During the year, GAVL formed awholly owned subsidiary, viz. Golden Feed Products Limited (GFPL) tocarry on the business of animal feeds.

Godrej Properties & Investments Ltd. (GPIL) recorded increase in ProfitAfter Tax from Rs. 130 lac in the previous year to Rs. 282 lac during thecurrent year. However, its Total Income declined to Rs. 2924 lac fromRs. 4205 lac in the previous year. GPIL has declared final dividend of31.03% as compared to interim dividend of 15.52% in the previousyear.

Godrej International Limited (GINL) has posted a net profit of US$ 414799as compared to US$ 219771 in the previous year. GINL has proposed afinal ordinary dividend of 9 US cents per ordinary share of £1 aggregatingto US$ 135450 as against a final ordinary dividend of 7 US centsaggregating to US$ 105350, the previous year. Godrej Global MidEastFZE (GGME), a 100% subsidiary of GINL has earned Net Profit of AED196838 as compared to a loss of AED 2480513 in the previous year.

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

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

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

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

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

FINANCIAL POSITION

The financial position of your Company continues to be sound. The loanfunds as at the end of the year reduced to Rs.21049 lac as compared toRs. 22248 lac as at the end of the previous year. This reduction waspossible mainly on account of operating profits and reduction in workingcapital. Your Company continues to hold the topmost rating of A1+ fromICRA for its commercial paper programme. The rating indicates that theprospect of timely repayment of debt/obligation is the best.


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MANUFACTURING FACILITIES

During the year, the factories of the Chemicals Division at Vikhroli andValia recorded increase in throughput, productivity as well as plantreliability. Both the factories are already ISO 9001:2000 certified fortheir quality management systems. Both, Vikhroli and Valia factorieshave been certified to be ISO 14001 compliant by BVQI for theirenvironment management system. Vikhroli factory has also been certifiedfor OHSAS 18001 standards by BVQI. During the year both the factorieshad taken various initiatives for de-bottlenecking, reducing energyconsumption and cost and quality improvement. Total ProductiveMaintenance (TPM) systems being implemented in these factories havegreatly helped in this regard.

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

RESEARCH AND DEVELOPMENT

During the year under review, the R&D efforts of your Company focusedon understanding the customer needs and bringing in process innovationto ensure business continuity. This was done by visiting select customers,understanding their needs & working towards renovation of theseproducts, as a part of the Product Application Group (PAG). PAG is aGroup comprising people from Marketing and R&D Departments, formedwith the objective of translating R&D knowledge into new value addedproducts and applications. Efforts were also made in working on newproducts in new categories in partnership with potential customers, againas part of PAG. R&D was also successful in development of a “treatment”process which enabled use of cheaper raw materials for premiumproducts.

INFORMATION SYSTEMS

Your Company has successfully implemented a ‘best in class’ e-CRMapplication for its valued customers in India. This platform works as adedicated and personalized online channel for customers. The usageand feedback regarding this service has been quite encouraging, andhas prompted us to extend this service for international customers aswell.

Your Company’s leadership role in the information systems area has wonexternal recognition such as ‘IT Security Strategist’ for year 2003 awardby Secure synergy and ABCI award for its Employee portal for ‘Internaldigital communication.’

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

VOLUNTARY DELISTING OF THE COMPANY’S EQUITY SHARESFROM CERTAIN STOCK EXCHANGES

Your Company had obtained approval of shareholders in the AnnualGeneral Meeting held on August 25, 2003 for voluntarily delisting theequity shares of the Company from the Stock Exchange, Ahmedabad(ASE), The Delhi Stock Exchange Association Limited (DSE), MadrasStock Exchange Limited (MSE) and Calcutta Stock Exchange AssociationLimited (CSE) pursuant to the Securities and Exchange Board of India(Delisting of Securities) Guidelines, 2003. This was done with the objectiveof saving listing fees and other administrative costs, but without affectingthe convenience to shareholders, since the shares of the Company wouldcontinue to be listed on the Stock Exchange, Mumbai (BSE) and theNational Stock Exchange (NSE).

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

and February 19, 2004 respectively. Your Company is awaiting thepermission for delisting from CSE.

"GROUP" FOR INTERSE TRANSFER OF SHARES

As required under Clause 3(e) of the Securities and Exchange Board ofIndia (Substantial Acquisition of Shares and Takeovers) Regulations, 1997,persons constituting "Group" (within the meaning as defined in theMonopolies and Restrictive Trade Practices Act, 1969) for the purpose ofavailing exemption from applicability of the provisions of Regulation 10to 12 of the aforesaid SEBI Regulations are given in Annexure C attachedherewith and the said Annexure C forms part of this Annual Report.

ENVIRONMENT AND SOCIAL CONCERN

Your Company continues its efforts for the betterment of the environment.

To prevent pollution of environment, efforts are made to convert wastefrom the factories into an environment-friendly product and then disposeof the same safely. Your Company has entered into an arrangement withTrans Thane Creek Waste Management Association (TTCWMA) for thetreatment of solid waste being generated at the Company’s factories atVikhroli and Wadala. TTCWMA has set up an Integrated HazardousSolid Waste Management Facility at Mahape, Navi Mumbai for treatmentof solid wastes generated by various industries. By improving the designof vent chambers in Fat Splitting Plant in Vikhroli, and recovering theprocess heat, the fatty acid vapours escaping to the atmosphere areminimised thereby resulting in a cleaner environment.

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

FIXED DEPOSITS

Your Company has stopped accepting Fixed Deposits from the public.Public Deposits of an aggregate amount of Rs. 1411 lac which havematured during the year have been paid.

DEPOSITORY SYSTEM

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

DIRECTORS

In accordance with Article 127 of the Articles of association of theCompany, Mr. A.B. Godrej, Mr. S.A. Ahmadullah, Mr. V.N. Gogate andMr. F.P. Sarkari retire by rotation at the ensuing Annual General Meeting.They are eligible and offer themselves for re-appointment.

Mr. K.N. Naoroji, former director of your Company, passed away onDecember 17, 2003. He was on the Board of the Company from 1995.The Board of Directors would like to place on record its appreciation ofthe valuable contribution made by Mr.Naoroji during his association withthe Company.

AUDITORS

You are requested to appoint Auditors for the current year and fix theirremuneration. The retiring auditors, Kalyaniwalla & Mistry, CharteredAccountants, are eligible for re-appointment. A certificate from the Auditorshas been received to the effect that their re-appointment, if made, wouldbe within the limits prescribed under Section 224(1B) of the CompaniesAct, 1956.

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

AUDIT COMMITTEE

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

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ANNEXURE "A" FORMING PART OF DIRECTORS’ REPORTMANAGEMENT DISCUSSION AND ANALYSIS

DIRECTORS’ RESPONSIBILITY STATEMENTPursuant to the provisions contained in Section 217(2AA) of theCompanies Act, 1956, the Directors of your Company confirm:a. that in the preparation of the annual accounts, the applicable

accounting standards have been followed and no materialdepartures have been made from the same;

b. that such accounting policies have been selected and appliedconsistently, and such judgments and estimates have been madethat are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financialyear and of the profit or loss of the Company for that period.

c. that proper and sufficient care has been taken for the maintenanceof adequate accounting records in accordance with the provisionsof this Act for safeguarding the assets of the Company, for preventingand detecting fraud and other irregularities;

d. that the annual accounts have been prepared on a going concernbasis.

CORPORATE GOVERNANCEAs required by the existing clause 49 of the Listing Agreements with theStock Exchanges, a detailed report on Corporate Governance is includedin the Annual Report. The Auditors have certified the Company’scompliance of the requirements of Corporate Governance in terms ofClause 49 of the Listing Agreement and the same is annexed to theReport on Corporate Governance.ADDITIONAL INFORMATIONAnnexure B to this Report gives information in respect of conservation ofEnergy, Technology absorption and Foreign Exchange earnings and outgo,

required under Section 217(1)(e) of the Companies Act, 1956, read withthe Companies (Disclosure of Particulars in the Report of the Board ofDirectors) Rules, 1988 and forms a part of the Directors’ Report.

Information as per Section 217(2A) of the Companies Act, 1956 readwith the Companies (Particular of Employees) Rules, 1975 forms part ofthis Report. As per the provisions of Section 219(1)(b)(iv) of the CompaniesAct, 1956, the Report and Accounts are being sent to the Shareholdersof the Company, excluding the statement of particulars of employeesunder section 217(2A) of the Companies Act, 1956. Any shareholderinterested in obtaining a copy of the same statement may write to theCompany Secretary at the Registered Office of the Company.

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

ACKNOWLEDGEMENT

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

For and on behalf of the Board of Directors

A.B. GodrejMumbai, May 28, 2004. Chairman

INDUSTRY STRUCTURE AND DEVELOPMENTS

The economy witnessed a series of positive trends aided by a goodmonsoon-backed agricultural growth, growth in manufacturing andservice sectors, etc. in financial year 2003-04, aiding a general feelgood factor. The Index of Industrial Production for the manufacturingsector rose to 7.2% during the period April 2003-February 2004 ascompared to 6% for the corresponding period in the previous year.

The overall performance of your Company too has been quite satisfactory.Your Company focused on increasing sales as well as profitability. YourCompany largely operates in the Oleo-Chemicals, edible oils, fats andprocessed food industries. The division-wise performance and outlookhave been covered separately in this report.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONALPERFORMANCE

The highlights of overall performance are as follows :

(Amount in Rs. lac)

Particulars 2003-04 2002-03

Sales 71666 65250Total Income 73355 67780Profit Before Taxation 6382 5808Profit After Current and Deferred Taxation 6511 3268Earnings per Equity Share (Rs.) 13.50 5.87

Profitability ratios are as follows :

PBDIT/Sales 12.71% 15.39%PBT/Sales 8.91% 8.90%PAT/Sales 9.09% 5.01%Return on Capital Employed 14.47% 15.88%Return on Net Worth 22.52% 13.61%Basic EPS (Rs.) 13.50 5.87

The Financial risk ratios are as follows:

Debt/Equity 0.73 0.93Interest coverage 12.00 3.87

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

SEGMENTAL PERFORMANCE

The segment-wise break-up of Revenue, PBIT (including prior periodincome) and capital employed for the year under review is as follows:

(Amounts in Rs.lac)

1. Segment Revenue (Income from Operations) 2003-04 2002-03

Chemicals 49369 44882Foods 19358 17590Estate Management 2087 2177Others 2466 2864

Total 73280 67513

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

Chemicals 7312 5649Foods (1489) 87Estate 1497 1537Others 1336 1798

Profit Before Interest and Tax 8656 9071

Less: Interest (Net) (580) (2024)Unallocated expenses (Net),Prior period items (1637) (1086)

Profit Before Tax 6439 5961

3. Segment Capital Employed

Chemicals 17255 20618Foods 3752 4340Estate 3185 3100Others 28922 21920

Total 53114 49978


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CHEMICALS DIVISION

The Chemicals Division operates in the oleo-chemical and surfactantsindustry. The strength of this Division is its strong manufacturing base,which delivers international quality products at competitive prices andits integrated systems which ensure quick delivery of products atcompetitive costs. The Division continued its position of leadership in theIndian market. The Division has a balanced blend of domestic andinternational operations. Sales of the Division grew 10% in value and2% in volume. The export business grew by a good 37% and domesticbusiness by 3%.

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

Product category-wise performance is reviewed below:

Fatty Alcohol

Fatty Alcohol has been a steadily growing category and has contributed41% to the turnover of this Division. The growth in this category was28% in value and 25% in volume over previous year. Fatty Alcohols aremainly used in laundry and personal care applications in the domesticmarket, and for cosmetics and industrial applications in the internationalmarket. Significant growth in exports this year has helped improve therevenue and contribution of this category. Your Company exports fattyalcohol to more than 50 countries all over the world. Growth in thedomestic market has also been good during the year.

Glycerin

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

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

Alpha Olefin Sulphonate (AOS)

Your Company is the pioneer as well as the market leader in theproduction and marketing of AOS in India. AOS contributed 15% to theturnover of this Division. AOS has grown 10% in volume and 7% invalue as compared to the previous year. Godrej AOS is incorporated ina number of well-known detergent and shampoo brands in the country.The product form and delivery is customized to suit the convenience ofthe end-users. This has helped in improving its usage as a cost effectivealternative surfactant. Your Company continues to grow well in thissegment on the strength of consistent quality and service.

Fatty Acids

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

improvement of 16% in volume, with continuous cost reduction andnew market development initiatives. However, the Sales in this categorydeclined 12% in volume and 3% in value, as compared to previousyear, on account of increased availability and competition from smallplayers. The Company is taking steps to counter competition and furtherstrengthen its position in this category.

Your Company had entered into a Processing Agreement with GodrejConsumer Products Limited (GCPL) for manufacturing of soaps. TheAgreement was terminated by GCPL with effect from April 1, 2004 sinceGCPL has expanded its own manufacturing facilities. However, yourCompany is utilizing the available capacities for making soap noodles.

eCRM

The Chemicals Division has deployed a comprehensive eCRM(electronic Customer Relationship Management) solution as part of itscontinuing endeavor to build a closer and more transparent relationshipwith its valuable customers. This initiative leverages the best ofinformation technology to fulfill the varied needs of customers. Thebasic design of this solution has been defined by the aforesaid principle.With the eCRM application in place, your Company is now capable ofsharing diverse but relevant information with its customers in apersonalised manner. The facilities which are available online includeorder management, monitoring delivery schedule, access to completedispatch details with certificate of analysis, transaction history, financialdetails, new product inquiry and registration and resolution ofcomplaints.

FOODS DIVISION

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

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

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

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

Edible Fats

The turnover during the year under review was Rs. 16042 lac ascompared to Rs.14091 lac in the previous year. Intense competition fromlocal players impacted the majority in this business. The Divisioncontinued to focus on increasing margins and selling only in profitableareas.

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This Division launched a new brand of Sunflower oil “Sunshakti” duringthe year to offer competitively priced edible oil to the consumer inSouth. For the health conscious consumer, the Division launched ablended version of Sunflower oil & Ricebran oil called “Sunrice”.

Processed Foods

The total turnover of products in this category was Rs. 2714 lac ascompared to Rs. 2428 lac in the previous year .

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

The Division introduced “Xs” range of fruit juices. “Xs” juices arepositioned on the ‘Live Life in Excess’ platform wherein the brand attemptsto verbalize the benefits of “Excess Fruit … Excess Taste”. Targetedtowards the new age consumers, Xs range of fruit juices are meant forthe discerning consumer who looks for the best in everything that lifehas to offer.

Further, the Division entered the health beverages market with the launchof ‘Sofit’, a combination of Soy milk and natural fruit juices. Positionedas “The New Taste of Health”, the uniqueness of ‘Godrej Sofit’ soymilklies in offering the consumer a combination of health and taste, by usingSoymilk with real fruit juice. ‘Godrej Sofit’ is the only brand from Indiathat received the ‘Taste 03’ Award, at ANUGA, World’s Largest FoodFair, held at Cologne, Germany in October 2003. The award was for themost innovative and trend setting product offering.

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

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

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

ESTATE MANAGEMENT

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

Your Company continues to effectively utilize the available space bygiving the unutilized space on Leave & Licence basis to other reputedcorporates. Availability of space in central and western parts of the citywill keep the pressure on the revenue generated from this operation.

MEDICAL DIAGNOSTICS

The Medical Diagnostics Division is in the business of distribution ofdiagnostic equipment and consumables to the medical community. ThisDivision achieved a turnover of Rs. 942 lac for the year, recording agrowth of 39% in value terms over the last year. Sales to GovernmentInstitutions were higher compared to the previous year. Sales in thesegment of cell counters were remarkably higher. The focus of theDivision was on implementation of rigorous sales and operation planning(S&OP) process. The Division plans to increase its product portfolio byintroduction of ESR and impedance cell counters. The Division also

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

FINANCE

Dividend income for the year was at Rs. 1253 lac (previous year Rs.1898 lac). During the year, your Company has made strategic investmentsin its subsidiaries and associate companies. Your Company has investedRs. 38 crore for acquisition of equity shares of Godrej Consumer ProductsLimited (GCPL). Your Company now holds 8.60% of the equity capital ofGCPL. Further, your Company has invested in equity shares of itssubsidiaries, viz. Godrej Global Solutions Limited, Godrej RemoteServices Limited and Godrej Tea Limited to the extent of Rs. 2474 lac,Rs. 292 lac and Rs. 836 lac respectively, to fund their businessrequirements. Your Company has also invested Rs. 455 lac for acquisitionof preferred stock of CBay Systems, USA.

HUMAN RESOURCES, INDUSTRIAL RELATIONS

The emphasis for this year was to engage management attention withthe task of identifying and building the leadership talent andorganisational capability that your Company needs for businessexcellence through the process of ‘Total Talent Management’.

In the area of recruitment, your Company formalized policies governingEmployee Referrals and Internal Recruitment. A well-defined processhas also been instituted to assess employees before moving them fromthe Executive to the Managerial Cadre.

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

An ongoing programme has also been launched to strengthen thecommunication between the employees and the organization through astructured process.

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

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

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

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

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

The internal control is supplemented by documented policies, guidelinesand procedures and an extensive programme of internal and externalaudit and periodic review by management. The system is designed toensure that financial and other records are reliable for preparing financialinformation and other data and for maintaining accountability for assets.

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


15

Dept. Major risks affecting business continuity have been identified anddocumentation for preventive/mitigation measures has been completedwith the active support and help from business managers.

OPPORTUNITIES AND THREATS

Increased global demand and your Company’s reputation for its consistentsupply and quality suited to the needs of the customers, provide goodopportunity for growth and expansion for the Chemicals Division. At thesame time, new capacity addition in the industry is likely to increasecompetition from the supply side. The Product Application Group(mentioned elsewhere in this report) is expected to open up newopportunities for customer partnerships and value added products.

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

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

In the Medical Diagnostics Division, the opportunity is the large growingmiddle class medically aware consumer and the increasing focus onmedical insurance. Threat could be obsolescence of technology/productswhich are more than 10 years old.

RISKS AND CONCERNS

The commodity based businesses (Chemicals and Foods Divisions) arelikely to be affected by vagaries of the weather, demand for edible oil,oilseed production, etc. The Chemicals business growth will also dependon the growth of end user industries like polymer, detergent, cosmeticsand personal care.

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

OUTLOOK FOR 2004-05

The outlook for the various product categories of the Chemicals Divisionremains positive. The expansion of international markets, coupled withtightness in the supply position of some of the finished products augurs wellfor the business and also opens up opportunities for growth in niche markets.

The major focus area of the Foods Division would be to increase capacityutilization in both the categories. In Edible Fats category, the focus wouldbe on expanding edible oil volume through either third partymanufacturing or running innovation promotion scheme to increase salesvolume. In Processed Foods category, the focus would be on expandingXs range of fruit juices by introducing new variants, and on buildingvolumes in sales of “Sofit” through focused launch as a health drink. TheDivision shall also explore the possibility of new business in both thecategories of Foods Division.

The prospects for Medical Diagnostics Division look good. The in-vitrodiagnostic industry in India is growing at 12% per year and the samegrowth rate is expected for 2004-05. The key drivers for this industrywill be increasing automation and accreditation of pathology labs byDST, Govt of India.

CAUTIONARY STATEMENT

Some of the statements in this management discussion and analysis describingthe Company’s objectives, projections, estimates and expectations may be‘forward looking statements’ within the meaning of applicable laws andregulations. Actual results might differ substantially or materially from thoseexpressed or implied. Important developments that could affect theCompany’s operations include a downtrend in domestic industry, significantchanges in political and economic environment in India, tax laws, importduties, litigation and labour relations.

Industries Limited

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ANNEXURE "B" FORMING PART OF THE DIRECTORS’ REPORTINFORMATION PURSUANT TO SECTION 217(1)(e) OF THECOMPANIES ACT, 1956, READ WITH THE COMPANIES (DISCLOSUREOF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS)RULES, 1988 IN RESPECT OF CONSERVATION OF ENERGY,TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS& OUTGO

A. Conservation of Energy

I. (A) Energy Conservation measures undertaken:

• Installation of Plate Heat Exchanger in dirty water serviceswith dedicated pumping arrangement to enable saving of powerand for cleaner environment.

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

• Installation of Waste heat boiler to generate hot water fromexhaust of D.G set.

• Automation of HP boiler to increase its efficiency and for savingpower.

• Installation of separate cooling towers for Plants for saving powerand for reduction of shut down time.

• Installation of Variable Frequency Drive (VFD) on fluid transferpumps in AOS and Soap Plant to save power and improvequality of products.

• Installation of Variable Frequency Drive (VFD) for Boiler andBlower Motor.

• Installation of energy-efficient tube lights resulting in saving ofpower.

• Installation of Twilight Switch for street lighting.• Changed over from LSHS/ FO to piped Natural Gas in LP and

HP Boilers to reduce the fuel cost and improve stack emissionsin the atmosphere.

• Substitution of light diesel oil by furnace oil as fuel to reducecost of production.

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

• Use of Fatty acid pitch and Ginol as fuel.• Installation of Energy conservation unit for lighting circuit.• Replacement of ‘V’ belts with flat belts for chillers and

compressers.

(B) Proposed energy conservation measures

• Installation of Steam Turbine to utilize pressure energy to fullextent and save cost .

• Installation of Steam Generator in Stearic Acid Plant to utilizeheat of evaporation and save cooling water.

• Installation of Steam Generator in Alpha Olefin SulphonationPlant to extract heat from exhaust air.

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

• Increasing the speed of Hydrogen Compressor to enableoperation of Plant at 130% capacity.

• Introduction of water injection in reformer outlet gas to savesteam.

• Installation of energy-efficient transformer.• Installation of energy-efficient tube-lights in Plants.• Installation of Variable Frequency Drive (VFD) for Boilers.• Installation of energy-efficient motors in Plants.• Up-gradation of instrumentation in Hydrogenation Plant.

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

Saving in energy costs during the period under consideration.

III. Details of energy consumption

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

a) Power and Fuel consumption

This Year Previous YearElectricity

i) PurchasedUnits (kWh in lac) 147.29 139.07Total Amount (Rs. in lac) 707.59 731.58Rate per Unit (Rs.) 4.80 5.26

ii) Own generated through D.G. SetsUnits (kWh in lac) 53.38 6.48Cost (Rs. in lac) 236.15 42.46Rate per unit (Rs.) 4.42 6.55

iii) Own generated through SteamTurbine Generator -Co-generationUnits (KWh in lac) 315.73 344.37Cost (Rs. in lac) 1091.66 1249.28Rate per Unit (Rs.) 3.46 3.63Fuel Oil (LSHS, FO, SKO and LDO)Total Quantity (KL) 6385.15 12475.32Total Amount (Rs. in lac) 679.41 1423.40Rate per unit (Rs. per litre) 9.40 11.41Natural GasTotal Quantity (SM3 lac) 245.50 98.50Total Amount (Rs. in lac) 2001.37 979.20Rate per unit (Rs. per SM3) 8.15 9.94PitchesTotal Quantity (MT) 1149.00 1736.00Total Cost (Rs. in lac) 74.53 91.43Rate per unit (Rs. per MT) 6486.51 5266.49

b) Consumption per unit of production

Natural Gas Electricity Furnace Oil Pitches(SM

3/MT) (kWh/MT) (Litre/MT)

2003-04 2002-03 2003-04 2002-03 2003-04 2002-03 2003-04 2002-03

Fatty Acid 57.37 31.92 85.50 91.37 16.99 48.13 17.51 26.00Fatty Alcohol 74.48 87.72 362.77 427.88 4.38 21.47 – –Alpha OlefinSulphonate 44.26 97.78 92.50 127.00 7.16 16.47 1.54 2.00Fruit Juice/ Pulp – – 144.08 138.35 28.62 27.06 – –Oils/Vanaspati – – 147.21 199.06 84.80 121.75 – –

Glycerin 461.80 820.8 618.86 624.86 82.28 214.64 55.21 96.00

B. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

1. Specific areas in which R&D carried out by the Company- Duringthe year under review, Research & Development efforts in thefollowing areas strengthened the Company’s operations throughtechnology absorption, adaptation and innovation :

a. Oils & Fatty Acids

b. Fatty Alcohols

c. Surfactants

d. Glycerin

e. Product Application Group

f. Fruit Juices/Soyamilk

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

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


17

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

1 Godrej & Boyce Mfg. Co. Ltd. 28 Hicare India Limited2 Ensemble Holding & Finance Ltd. 29 Sentinel Foods Pvt. Ltd.3 Godrej Consumer Products Ltd. 30 Cartini India Ltd.4 Godrej Agrovet Ltd. 31 Godrej (Vietnam) Co. Ltd.5 Goldmohur Foods & Feeds Ltd. 32 J T Dragon Pte Ltd.6 Golden Feed Products Ltd. 33 Mr Adi B. Godrej7 Godrej Properties & Investments Ltd. 34 Mrs Parmeshwar A. Godrej8 Girikandra Holiday Homes & Resorts Ltd. 35 Ms Nisa A. Godrej9 Godrej Tea Ltd. 36 Mr Pirojsha A. Godrej10 Godrej Remote Services Ltd. 37 Mr Arvind Darab Dubash11 Godrej Global Solutions Ltd. 38 Mrs Tanya A. Dubash12 Godrej International Ltd. 39 Mst. Aaryan A. Dubash13 Godrej Global Mid East FZE 40 Mst. Azaar A. Dubash14 Swadeshi Detergents Ltd. 41 Mr Jamshyd N. Godrej15 Vora Soaps Ltd. 42 Mrs Pheroza J. Godrej16 Godrej Foods Ltd. 43 Ms Raika J. Godrej17 Tahir Properties Ltd. 44 Mr Navroze J. Godrej18 Godrej Global Mid East FZE 45 Mr Nadir B. Godrej19 Godrej Holdings Pvt. Ltd. 46 Mrs Rati N. Godrej20 Godrej Investments Pvt. Ltd. 47 Mst. Burjis N. Godrej21 Godrej Infotech Ltd. 48 Mst. Sohrab N. Godrej22 Godrej (Malaysia) Sdn Bhd 49 Mst. Hormuzd N. Godrej23 Godrej (Singapore) Pte Ltd. 50 Mr Vijay M. Crishna24 Godrej Appliances Ltd. 51 Mrs Smita V. Crishna25 Lawkim Ltd. 52 Ms Freyan V. Crishna26 Godrej Upstream Ltd. 53 Ms Nyrika V. Crishna27 Prashant Metal Forming Industries Pvt. Ltd. 54 Mrs Dosibai K. Naoroji

55 Mr Rishad K. Naoroji

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

c. Understanding customer compromise & bringing in processinnovation to ensure business continuity.

d. Visiting select customers, understanding their needs & workingtowards renovation of these products as part of the ProductApplication Group.

e. Working on new products in new categories in partnershipwith potential customers, again as part of Product ApplicationGroup.

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

g. Development of orange flavour in X’s Fruit drink.

3. Future Plan of Action

a. Strengthening the activities of Product Application Group.b. Look for opportunities for contract R&D.c. Strengthen Analytical capabilities.d. Focus on products/categories for business growth.

No technology has been imported during the year.

4. Expenditure on R&D

This Year Previous YearRs. Lac Rs. lac

(a) Capital 1.95 Nil(b) Recurring 115.03 94.79(c) Total 116.98 94.79(d) Total R & D expenditure as a percentage 0.16% 0.16%

of total sales turnover

C. Foreign Exchange earnings and outgo

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

This Year Previous YearRs. Lac Rs. lac

Foreign exchange used 22486 19625Foreign exchange earned 13339 9746

Industries Limited

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REPORT ON CORPORATE GOVERNANCEClause 49 of the listing agreement with the Indian Stock Exchangesstipulates the norms and disclosure standards that have to be followedon the corporate governance front by listed Indian companies.

The Company is a part of the Godrej Group which has established areputation for honesty and integrity. The Company’s philosophy ofcorporate governance is to achieve business excellence by enhancingthe long term welfare of all its stakeholders. We believe that corporategovernance is much more than Rules, Boards, Committees. It is aboutcreating outperforming organisations, i.e. organizations that consistentlysucceed in the marketplace against competition and thereby enhancethe value of all its stakeholders.

BOARD OF DIRECTORS

a) Board Structure

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

b) Board meetings held & Directors’ attendance record

The Board meets at least once in a quarter to consider among otherbusiness, quarterly performance of the Company and financial results.To enable the Board to discharge its responsibilities effectively andtake informed decisions, the necessary information is made availableto the Board. During the year four Board meetings were held onMay 28, 2003, July 28, 2003, October 30, 2003 and January 28,2004. The details are given in Table 1.

Table 1: Details about GIL’s Board of Directors & meetings attendedby the Directors during the yearName of Category Board Board Whether Director- NumberDirector meet- meet- attended ships of Chair-

ings ings last AGM held in manship/held attended public member-

during during comp- ship inthe the anies other

year year incorpo- Boardrated Commit-

in India tees as atas at the year

year end end

Chairm- Mem-anship bership

A.B. Godrej Chairman - Non-Executive 4 4 Yes 12(3) 4 2J.N. Godrej Non-Executive 4 3 Yes 13 (5) 2 4N.B. Godrej Managing Director 4 2 Yes 15 (4) 3 7S.A. Ahmadullah Non-Executive -

Independent 4 4 Yes 1(1) 1 1V.M. Crishna Non-Executive 4 2 No 8(3) Nil NilK.K. Dastur Non-Executive -

Independent 4 4 Yes 5(1) Nil NilN.C. Gawankar Non-Executive -[See Note 3] Independent 2 2 No N.A. N.A. N.A.V.N. Gogate Non-Executive -

Independent 4 4 Yes 1(1) Nil 2K.N. Naoroji Non-Executive 2 Nil No N.A. N.A. N.A.[See Note 3]K.N. Petigara Non-Executive -

Independent 4 3 Yes 5(1) Nil 3F.P. Sarkari Non-Executive -

Independent 4 4 Yes 2(1) 2 1V.F. Banaji Whole-time 4 3 Yes 1(1) Nil 1T.A. Dubash Whole-time 4 2 Yes 6(1) Nil 1M. Eipe Whole-time 4 3 Yes 3(1) Nil 1

M.P. Pusalkar Whole-time 4 4 Yes 2(2) 1 2

Notes:

1) Figures in ( ) denote listed companies.2) Board Meetings held during the year represents the no. of

meetings held during the tenure of that director.3) Mr. K.N. Naoroji and Mr. N.C. Gawankar retired at the Annual

General Meeting held on August 25, 2003.None of the Directors is a member of more than 10 Board-levelcommittees, or a Chairman of more than five such committees, asrequired under Clause 49 of the listing agreement.

c) Information supplied to the Board

Among others, this includes:• Annual operating plans and budgets, capital budgets, and any

updates thereon,• Quarterly results of the Company,• Minutes of meetings of audit committee and other committees,• Information on recruitment and remuneration of senior officers

just below the Board level,• Materially important show cause, demand, prosecution and

penalty notices,• Fatal or serious accidents or dangerous occurrences,• Any materially significant effluent or pollution problems,• Any materially relevant default in financial obligations to and

by the Company or substantial non-payment for goods sold bythe Company,

• Any issue which involves possible public or product liabilityclaims of a substantial nature,

• Details of any joint venture or collaboration agreement,• Transactions that involve substantial payment towards goodwill,

brand equity or intellectual property,• Significant labour problems and their proposed solutions,• Significant development in the human resources and industrial

relations front,• Sale of material nature, of investments, subsidiaries, assets, which

is not in the normal course of business,• Quarterly details of foreign exchange exposure and the steps

taken by management to limit the risks of adverse exchangerate movement,

• Risk assessment and minimization procedures, and• Non-compliance of any regulatory, statutory nature or listing

requirements as well as shareholder services such as non-payment of dividend and delays in share transfer.

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

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

Except for drawing remuneration, none of the Directors have anyother materially significant related party transactions, pecuniary orbusiness relationship with the Company.

e) Remuneration of Directors: sitting fees, salary, perquisites andcommissions

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

Table 2: Remuneration in Rupees paid or payable to Directors forthe year ended March 31, 2004Name of Director Relationship with Sitting Commission Salary Perquisites Provident Total

Directors fees on profits Fund

A B Godrej Brother of N.B.Godrej 67000 Nil Nil Nil 67000J N Godrej None Nil Nil Nil Nil NilN B Godrej Brother of A.B.Godrej Nil Nil 7685066 1435614 360000 9480680S A Ahmadullah None 57000 Nil Nil Nil 57000V M Crishna None 16000 Nil Nil Nil 16000K K Dastur None 39000 Nil Nil Nil 39000N C Gawankar None 10000 Nil Nil Nil 10000V N Gogate None 57000 Nil Nil Nil 57000K N Naoroji None Nil Nil Nil Nil NilK N Petigara None 34000 Nil Nil Nil 34000V.F. Banaji None Nil Nil 6392406 340912 201600 6934918F P Sarkari None 55000 Nil Nil Nil 55000T A Dubash Daughter of A.B.Godrej Nil Nil 5489066 1212322 201600 6902988M Eipe None Nil Nil 6100959 1089416 244800 7435175M P Pusalkar None Nil Nil 2220943 395688 161280 2777911


19

Notes:

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

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

f) Committees of the Board

Audit Committee

GIL’s audit committee comprises of three Independent & Non-Executive Directors. They are Mr. F.P. Sarkari (Chairman), Mr. S.A.Ahmadullah and Mr. V.N. Gogate. Mr. V.N. Gogate who had beenthe Chairman stepped down as Chairman on January 28, 2004 andnow functions as a Member. Mr. F.P. Sarkari was elected asChairman on January 28, 2004 in place of Mr. Gogate. Mr. Sarkariis a qualified Chartered Accountant and is knowledgeable in finance,accounts and Company Law. All the members of the committee areeminent professionals and draw upon their experience and expertiseacross a wide spectrum of functional areas such as finance andcorporate strategy. Minutes of each of the audit committee meetingsare placed before the Board meetings. The Company Secretary actsas secretary to the audit committee. The audit committee met fourtimes during the year. Table 3 gives the attendance record.

Table 3: Attendance record of audit committee members

Name of Director No. of meetings held Meetings attended

Mr. F.P. Sarkari 4 4

Mr. S.A. Ahmadullah 4 4

Mr. V.N. Gogate 4 4

The Audit Committee of GIL performs the following functions :

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

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

• Reviewing with management the annual financial statements beforesubmission to the board, focusing primarily on

� Any changes in accounting policies and practices.

� Major accounting entries based on exercise of judgement bythe management.

� Qualifications in draft audit report.

� Significant adjustments arising out of audit.

� The going concern assumption.

� Compliance with accounting standards.

� Compliance with stock exchanges and legal requirementsconcerning financial statements.

� Any related party transactions, i.e. transactions of the Companyof material nature, with promoters or the management, theirsubsidiaries or relatives, etc. that may have potential conflictwith the interests of Company at large.

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

• Reviewing the adequacy of internal audit function including thestructure of internal audit department, staffing and seniority of theofficial heading the department, reporting structure coverage andfrequency of internal audit.

• Discussing with internal auditors any significant findings and followingit up.

• Reviewing the findings of any internal investigations by the internalauditors into matters where there is suspected fraud or irregularityor failure of internal control systems of a material nature andreporting the matter to the Board.

• Discussing with external auditors before the audit commences, natureand scope of audit as well as conducting post-audit discussion toascertain any area of concern.

• Reviewing the Company’s financial and risk management policies.

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

Remuneration Committee

Setting up of a remuneration committee for determining a company’spolicy on remuneration packages for Executive Directors constitutes anon-mandatory provision of Clause 49. GIL set up its remunerationcommittee on February 22, 2002 to review the human resources policiesand practices of the Company and, in particular, policies regardingremuneration of Whole-Time Directors. The committee discusses humanresources policies such as compensation and performancemanagement.

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

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

Shareholders Committee

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

Name and designation of Compliance Officer

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

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

Complaints outstanding as on April 1, 2003 11

Complaints received during the year ended March 31, 2004 428

Complaints resolved during the year ended March 31, 2004 439

Complaints outstanding as on March 31, 2004 Nil

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

MANAGEMENT

a) Management discussion and analysis

This annual report has a detailed chapter on management discussionand analysis.

Industries Limited

20

b) Disclosures by management to the Board

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

SHAREHOLDERS

a) Disclosures regarding appointment or reappointment of Directors

According to the Articles of Association of GIL, at every annualgeneral meeting of the Company one-third of the Directors areliable to retire by rotation. Thus, Mr. A.B. Godrej, Mr. S.A.Ahmadullah, Mr. V.N. Gogate and Mr. F.P. Sarkari shall retire at thisAnnual General Meeting of the Company and being eligible, offerthemselves for re-election.

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

b) Communication to shareholders

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

c) Investor grievances

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

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

d) Share transfer

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

e) Details of non-compliance

There has been no instance of GIL not complying with any matterrelated to capital markets.

f) General Body Meetings

Year Venue Date Time

2000-01 Udayachal Primary July 28, 3.30 P.M.School Hall, 2001Pirojshanagar,Vikhroli (East),Mumbai 400 079.

2001-02 -do- September 28, 3.00 P.M.2002

2002-03 Y.B. Chavan Centre, August 25, 2003 3.00 P.M.Nariman Point,Mumbai 400 021.

g) Postal BallotNo resolutions were moved for passing through postal ballot duringthe year.

Auditors’ Certificate on Corporate Governance

To the Members of,Godrej Industries Limited,Mumbai.

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

The compliance of the conditions of Corporate Governance is the responsibility of the management. Our review was limited to the procedures andimplementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit noran expression of opinion on the financial statements.

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

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

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

For and on behalf ofKALYANIWALLA & MISTRY

Chartered Accountants

V. R. MehtaPartner

Mumbai, May 28, 2004. M. No. 32083


21

10

20

30

40

50

60

70

80

2800

3300

3800

4300

4800

5300

5800

6300

6800

GIL Share Performance compared to the BSE Sensex for FY 03-04

GIL Share Price

GIL Share Price

BSE Sensex

BSE Sensex

SHAREHOLDERS’ INFORMATIONAnnual General Meeting

Date : July 26, 2004Time : 4.00 P.M.Venue : Y. B. Chavan Centre, General Jagannath Bhonsle

Marg,Nariman Point, Mumbai 400 021.

Financial CalendarFinancial year: April 1 to March 31For the year ended March 31, 2004, results were announced on:• July 28, 2003 : First quarter• October 30, 2003 : Half year• January 28, 2004 : Third quarter• May 28, 2004 : Fourth quarter and annual

Record Date/Book ClosureA dividend of Rs.3/- per share of Rs 6/- each has been recommended bythe Board of Directors of the Company. For payment of dividend, thebook closure is from July 6, 2004 to July 26, 2004.Listing informationThe Company’s equity shares are listed and traded on the stockexchanges at Mumbai, the National Stock Exchange and Calcutta StockExchange.

Name of the Stock Exchange Stock codeStock Exchange, Mumbai 500164National Stock Exchange GODREJINDCalcutta Stock Exchange 17038 (for physical)

10017038 (for demat)The ISIN Number of GIL on both NSDL and CDSL is INE233A01027.The Company made applications to Ahmedabad Stock Exchange (ASE),Delhi Stock Exchange (DSE), Madras Stock Exchange (MSE) and CalcuttaStock Exchange (CSE) for voluntary delisting of equity shares under theSecurities and Exchange Board of India (Delisting of Securities)Guidelines, 2003. The Company’s equity shares were delisted from ASE,DSE, and MSE with effect from March 8, 2004, February 11, 2004 andFebruary 19, 2004. The Company is awaiting permission for delistingfrom CSE.Stock DataTables 1 and 2 respectively give the monthly high and low prices andvolumes of equity shares of GIL at The Stock Exchange, Mumbai (BSE)and the National Stock Exchange (NSE) for the year ended March 31,2004. Chart A compares GIL’s share price at the BSE versus the sensex.Table 1: Monthly high and low prices and trading volumes of equityshares of GIL at BSE for the year ended March 31, 2004

Month High Low Volume(Rs.) (Rs.) (No. of Shares)

April-03 16.00 13.50 101106May-03 26.85 15.00 477458June-03 33.65 25.05 5109508July-03 35.00 30.00 308694August-03 39.40 31.60 2840829September-03 47.00 35.00 351580October-03 59.00 45.75 440409November-03 58.50 51.80 198961December-03 76.95 55.50 2669277January-04 70.90 49.10 158665February-04 59.95 49.15 67743March-04 52.65 40.00 192890

Note:

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

Table 2: Monthly high and low prices and trading volumes of equityshares of GIL at NSE for the year ended March 31, 2004

Month High Low Volume (Rs.) (Rs.) (No. of Shares)

April-03 15.65 13.25 114673May-03 26.75 15.20 891027June-03 35.00 22.80 917409July-03 33.45 29.00 474933August-03 40.75 30.50 579534September-03 46.00 32.15 453243October-03 64.00 44.85 364511November-03 58.50 51.25 214505December-03 77.00 56.00 552542January-04 69.00 48.00 212703February-04 60.00 46.50 124634March-04 56.75 39.75 196842

Note

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

Chart A - GIL share performance compared to the BSE Sensex for FY03-04

Distribution of shareholding

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

Table 3: Distribution of shareholding by size class as on March 31, 2004Number of Number of Shareholders Number of Shareholdingshares shareholders % shares held %

1 - 500 12998 93.07% 1209954 2.49%

501 - 1000 446 3.19% 360700 0.74%

1001 - 2000 225 1.61% 343389 0.71%

2001 - 3000 76 0.54% 200279 0.41%

3001 - 4000 34 0.24% 123991 0.25%

4001 - 5000 41 0.29% 196087 0.40%

5001 - 10000 61 0.44% 457696 0.94%

10001 & above 85 0.61% 45749846 94.05%

Total 13966 100.00% 48641942 100.00%

Industries Limited

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Table 4: Distribution of shareholding by ownership as on March 31,2004

Category (as being reported to stock Shares hold % of holdingexchanges) (Nos.)

Promoter’s holding

Promoters 43099770 88.61 %

Persons deemed to act in concertwith promoters 0 0.00 %

Institutional investors

Mutual funds & UTI 607 0.00 %

Banks, financial institutions & insurancecompanies 475205 0.98 %

Foreign institutional investors 1000 0.00 %

Others

Private corporate bodies 832575 1.71 %

Indian public 4107176 8.44 %

NRI/OCBs 125609 0.26 %

Total 48641942 100.00 %

Shares held in physical and dematerialised form

As on March 31,2004, 98.91 per cent of GIL’s shares were held indematerialised form and the remaining 1.09 per cent in physical form.The break up is listed below:

No. of Folios No. of Folios No. of Shares No. of Total Totalin Physical in Demat in Physical shares Folios SharesMode Mode Mode in Demat

Mode

6415 7551 529984 48111958 13966 48641942

Share TransferShare transfers and related operations for GIL are conducted byComputech Sharecap Ltd, which is registered with the SEBI as a Category1 Registrar.Investor correspondence should be addressed to:Computech Sharecap Ltd147, M.G. Road,Opp. Jehangir Art GalleryMumbai 400023Tel: 022-22671824/22671825Email: [email protected]: 022-22670380


23

REPORT OF THE AUDITORS TO THE MEMBERS OF GODREJ INDUSTRIES LIMITED

1. We have audited the attached Balance Sheet ofGODREJ INDUSTRIES LIMITED, as at March 31, 2004, and alsothe Profit and Loss Account and Cash Flow Statement of the Companyfor the year ended on that date annexed thereto. These financialstatements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financialstatements based on our audit.

2. We conducted our audit in accordance with the auditing standardsgenerally accepted in India. Those Standards require that we planand perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material mis-statement. An auditincludes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides areasonable basis for our opinion.

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

4. Further to our comments in the Annexure referred to in paragraph3 above, we report that:

a) We have obtained all the information and explanations whichto the best of our knowledge and belief were necessary for thepurpose of our audit.

b) In our opinion, proper books of account as required by lawhave been kept by the Company so far as appears from ourexamination of such books and proper returns adequate for thepurpose of our audit have been received from the branchesnot visited by us. The Branch Auditor’s Report has beenforwarded to us and has been appropriately dealt with.

c) The Balance Sheet and Profit and Loss Account dealt with bythis report are in agreement with the books of account andwith the audited returns from the branches.

d) In our opinion, the Balance Sheet and Profit and Loss Accountdealt with by this report comply with the Accounting Standardsreferred to in sub-section (3C) of Section 211 of the CompaniesAct, 1956.

e) Reference is invited to note 8 (b) of Schedule 22- Notes toAccounts, regarding the recoverability of advances given tocertain individuals amounting to Rs. 1033 lac being contingentupon the transfer and/or disposal of the shares pledged againstthe loan. The impact thereof on the profit for the year could notbe ascertained.

f) In our opinion and to the best of our information and accordingto the explanations given to us, the said accounts subject toparagraph (e) above, and read with the notes thereon, give theinformation required by the Companies Act, 1956, in the mannerso required and give a true and fair view in conformity withthe accounting principles generally accepted in India:

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

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

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

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

For and on behalf ofKalyaniwalla & MistryChartered Accountants

V.R. MehtaPartner

Mumbai, May 28, 2004 M. No.: 32083

Industries Limited

24

ANNEXURE TO THE AUDITOR’S REPORTReferred to in Paragraph (3) of our report of even date on the accounts of Godrej Industries Limited for the year ended 31st March, 2004.

1) (a) The Company is maintaining proper records showing fullparticulars, including quantitative details and situation of fixedassets.

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

(c) In our opinion, the disposal of fixed assets during the year doesnot affect the going concern assumption.

2) (a) The Management has conducted physical verification ofinventory at reasonable intervals.

(b) In our opinion, the procedures of physical verification ofinventory followed by the management are reasonable andadequate in relation to the size of the Company and the natureof its business.

(c) The Company is maintaining proper records of inventory. Thediscrepancies noticed on verification between physicalinventories and book records were not material in relation tothe operations of the Company and the same have beenproperly dealt with in the books of account.

3) (a) The Company had granted unsecured loans to five companieslisted in the register maintained under Section 301 of theCompanies Act, 1956, of which three loans aggregatingRs. 345.78 lakhs were outstanding at the year end. Themaximum amount of loans granted to the said companies duringthe year was Rs. 1,559.38 lakhs. The Company has not takenany loans, secured or unsecured, from companies, firms orother parties listed in the register maintained under Section301 of the Companies Act, 1956.

(b) In our opinion and according to the information andexplanations given to us, the rate of interest and other termsand conditions of loans given are prima facie not prejudicial tothe interest of the Company, except for the waiver of interestamounting to Rs. 11.36 lakhs from a company which hasexpressed its inability to pay the same.

(c) The loans outstanding at the year end are at call and have notbeen recalled during the year. Except for the above interestwhich was waived, the other companies are generally regularin payment of interest.

(d) There are no overdue amounts exceeding Rs. 1 lakh.

4) In our opinion and according to the information and explanationsgiven to us, there are adequate internal control procedurescommensurate with the size of the Company and the nature of itsbusiness, for the purchase of inventory and fixed assets and for thesale of goods. During the course of our audit no major weaknesshas been noticed in the internal controls.

5) (a) Based on the audit procedures applied by us and according tothe information and explanations provided by the management,we are of the opinion that all the transactions that need to beentered into the register in pursuance of Section 301 of the Acthave been so entered.

(b) In our opinion and according to the information and explanationsgiven to us, having regard to the explanation that many of theitems are of a special nature and their prices cannot becompared with alternative quotations, the transactions made inpursuance of contracts or arrangements entered in the registermaintained under Section 301 of the Companies Act, 1956 andexceeding the value of five lakh rupees in respect of any partyduring the year have been made at prices which are reasonablehaving regard to the prevailing market prices at the relevanttime.

6) In our opinion and according to the information and explanationsgiven to us, the Company has complied with the directives issuedby the Reserve Bank of India and the provisions of section 58A and58AA of the Companies Act, 1956 and the rules framed there underin respect of the deposits accepted from the public.

7) The Company has an internal audit system, which in our opinion, iscommensurate with the size of the Company and the nature of itsbusiness.

8) We have broadly reviewed the books of account maintained by theCompany in respect of the manufacture of vanaspati pursuant to theorder passed by the Central Government for maintenance of costrecords under Section 209(1) (d) of the Companies Act, 1956, andare of the opinion that prima facie the prescribed accounts andrecords have been maintained. We have not, however, made adetailed examination of the records with a view to determinewhether they are accurate or complete. To the best of our knowledgeand according to the information given to us, the CentralGovernment has not prescribed maintenance of cost records underSection 209 (1) (d) of the Companies Act, 1956 for any other productsof the Company.

9) (a) According to the records examined by us, the Company isgenerally regular in depositing undisputed statutory duesincluding Provident Fund, Investor Education and ProtectionFund, Employees’ State Insurance, Income Tax, Wealth Tax,Customs Duty, Excise Duty, cess and other statutory duesapplicable to it with the appropriate authorities. According tothe information and explanations given to us, no undisputedamounts payable in respect of Income tax, Wealth Tax, CustomsDuty and Excise Duty were outstanding, at the year end for aperiod of more than six months from the date they becamepayable.

(b) According to the information and explanations given to us,there are no dues of Sales Tax, Income Tax, Customs Duty,Wealth Tax, Excise Duty or cess outstanding on account of anydispute, other than those stated hereunder:


25

10) The Company does not have accumulated losses as at the end ofthe financial year and it has not incurred any cash losses in thecurrent and immediately preceding financial years.

11) According to the information and explanations given to us and basedon the documents and records produced to us, the Company has notdefaulted in repayment of dues to a financial institution, bank ordebenture holders.

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

13) In our opinion and according to the information and explanationsgiven to us, the nature of activities of the Company does not attractany special statute applicable to chit fund and nidhi/ mutual benefitfund/societies.

14) In our opinion, the Company has maintained proper records of thetransactions and contracts in respect of investments purchased andsold during the year and timely entries have been made therein.The investments made by the Company are held in its own nameexcept for the shares referred to in note (a) of Schedule 6.

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

Name of statute Amount Rs. in lac Period to which the Forum where disputeamount relates is pending

Central Excise Act, 1944 4.79 2003 - 2004 Assistant Commissioner

97.94 1987 - 2001 Commissioner (Appeals)

1,294.66 1986 - 2000 CESTAT

239.90 1978 - 1988 High Courts

114.48 1991 - 1994 High Courts

966.40 1982 -1999 The Supreme Court of India

Customs Act, 1962 29.36 1978 - 1985 Commissioner of Customs

208.65 1982 -1993 High Court

580.24 1995 -1998 High Court

Central Sales Tax Act 1956 0.16 1997-1998 Dy. Commissioner, Kolkata

Sales Tax 35.15 2000 - 2004 Sales Tax Officer

31.43 1994 - 1995 Dy. Commissioner (Appeals)

106.80 1997 - 2001 Dy. Commissioner (Appeals)

4.00 2003 Commissoner

53.51 1990 - 1991 Sales Tax Tribunal

47.63 1994 - 1998 Sales Tax Tribunal

Others

Land Revenue 182.22 2000 Controlling Revenue Authority

Municipal Taxes 628.87 1984 - 1995 The Bombay High Court

U.P. Trade Tax 3.63 1997 - 1998 Dy. Commissioner

Act, 1948 14.52 1997 - 1998 Jt. Commissioner, Appeals

4,644.34

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

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

18) The Company has not made any preferential allotment of shares toparties or companies covered in the register maintained underSection 301 of the Companies Act, 1956.

19) The Company did not issue any debentures during the year.

20) The Company has not raised any money through a public issueduring the year.

21) Based on the audit procedures performed and information andexplanations given by the management, we report that no fraud onor by the Company has been noticed or reported during the year.

For and on behalf ofKalyaniwalla & MistryChartered Accountants

V.R. MehtaPartner

Mumbai, May 28, 2004 M. No.: 32083

Industries Limited

26

BALANCE SHEET AS AT MARCH 31, 2004This Year Previous Year

Schedule Rs. lac Rs. lac Rs. lacSOURCES OF FUNDS1. Shareholders’ Funds

(a) Share capital 1 2918.52 2918.52(b) Reserves & surplus 2 26197.10 21510.77

29115.62 24429.292. Loan Funds

(a) Secured loans 3 16813.64 14815.48(b) Unsecured loans 4 4235.76 7432.16

21049.40 22247.643. Deferred Tax Liability 2972.00 3466.00

TOTAL 53137.02 50142.93

APPLICATION OF FUNDS4. Fixed Assets 5

(a) Gross block 48949.68 49699.03(b) Less : Depreciation 23608.03 21974.28(c) Net block 25341.65 27724.75(d) Capital work-in-progress 313.93 404.75

25655.58 28129.505. Investments 6 26533.28 18646.016. Current Assets, Loans and Advances

(a) Inventories 7 10944.35 10879.01(b) Sundry debtors 8 7102.27 7660.12(c) Cash and bank balances 9 558.37 1877.20(d) Accrued interest 6.28 10.49(e) Loans and advances 10 4650.32 3146.36

23261.59 23573.18Less : Current Liabilities and Provisions(a) Liabilities 11 18499.25 17372.06(b) Provisions 12 4022.81 3256.61

22522.06 20628.67

Net Current Assets 739.53 2944.517. Miscellaneous Expenditure 13 208.63 422.91 (To the extent not written off or adjusted)

TOTAL 53137.02 50142.93

NOTES TO ACCOUNTS 21

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

As per our Report attached Signatures to Balance Sheet and Schedules 1 to 13 and 21

For and on behalf of A. B. Godrej N. B. GodrejKalyaniwalla & Mistry Chairman Managing DirectorChartered Accountants

V. R. Mehta S. K. BhattPartner Company SecretaryMumbai, May 28, 2004


27

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON MARCH 31, 2004

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

As per our Report attached Signatures to Profit & Loss Account and Schedules 14 to 21



This Year Previous YearSchedule Rs. lac Rs. lac

INCOME

Sale of Products & Services 14 71665.91 65250.60

Other Income 15 1689.36 2529.64

73355.27 67780.24

EXPENDITURE

Materials consumed and purchase of goods 16 46236.15 42387.22

Expenses 17 17627.35 16870.83

Inventory change 18 379.64 (1520.83)

Interest and financial charges (net) 19 580.18 2024.26

Depreciation 2149.87 2210.98

(Net of transfer from Revaluation Reserve

Rs. 235.89 lac, Previous year Rs. 235.58 lac) 66973.19 61972.46

Profit Before Tax 6382.08 5807.78

Provision for taxation

— Current Tax 365.00 421.00

— Deferred Tax (494.00) 2119.00

(129.00) 2540.00

Profit for the year after taxation 6511.08 3267.78

Prior Period adjustments (net) 20 57.37 152.85

6568.45 3420.63

Surplus brought forward 11215.25 9234.20

Profit After Tax Available For Appropriation 17783.70 12654.83

APPROPRIATIONS

Proposed Dividend 1459.26 972.84

Tax on distributed profits 186.97 124.64

Transfer to General Reserve 656.80 342.10

Surplus carried forward 15480.67 11215.25

TOTAL 17783.70 12654.83

Basic & Diluted Earnings per share (Face Value Rs. 6 per share) 13.50 5.87

NOTES TO ACCOUNTS 21

Industries Limited

28

This Year Previous YearA. Cash Flow from Operating Activities : Rs. lac Rs. lac

Profit before tax 6382.08 5807.78

Adjustments for :

Depreciation 2149.87 2210.98

Foreign exchange (909.85) (27.82)

Loss/(Profit) on sale of investments 51.02 (39.26)

Loss/(Profit) on sale of fixed assets (16.14) (1.27)

Dividend income (1253.32) (1897.65)

Interest income (211.29) (444.41)

Interest expense 1336.59 1800.46

Voluntary retirement compensation and other

expenses deferred (27.96) (27.31)

Deferred expenditure written off 242.24 482.24

Provision for doubtful debts and sundry balances

written back (net) (148.91) (65.90)

Others 39.75 8.15

Operating profit before working capital changes 7634.08 7805.99

Adjustments for :

Inventories (65.34) (2814.98)

Trade and other receivables (953.83) 835.98

Trade payables 1364.19 7597.55

Cash generated from operations 7979.10 13424.54

Direct taxes paid (429.03) (499.00)

Direct taxes refund received 21.97 828.38

Net Cash from Operating Activities 7572.04 13753.92

B. Cash Flow from Investing Activities :

Purchase of fixed assets (964.73) (1869.88)

Proceeds from sale of fixed assets 1072.20 139.74

Purchase of investments (40348.51) (4158.05)

Proceeds from sale of investments 32828.29 172.02

Intercorporate deposits/Loans (net) (38.88) 611.24

Interest received 204.63 476.98

Dividend received 1253.32 1897.65

Net Cash used in Investing Activities (5993.68) (2730.30)

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2004


29

This Year Previous YearRs. lac Rs. lac

C. Cash Flow from Financing Activities :

Purchase of shares under a scheme of arrangement – (2340.14)

Proceeds from borrowings 19845.01 14023.28

Repayments of borrowings (20570.09) (19021.26)

Bank overdrafts (net) 416.11 (1028.76)

Repayment of finance lease liabilities – (1.47)

Interest paid (1477.41) (1957.16)

Dividend paid (986.19) (364.23)

Tax on distributed profits (124.62) –

Net Cash used in financing activities (2897.19) (10689.74)

Net increase/(decrease) in cash and cash equivalents (1318.83) 333.88

Cash and cash equivalents (Opening Balance) 1877.20 1543.32

Cash and cash equivalents (Closing Balance) 558.37 1877.20

Notes :

1. Cash and Cash equivalentsCash on hand and balances with banks 559.36 1877.53Effect of exchange rate changes (0.99) (0.33)

Cash and cash equivalents 558.37 1877.20

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

3. To finance working capital requirements, the Company’s Bankers have sanctioned a total fund-based limit of

Rs. 5800 lac. Of this, limits utilised as on March 31, 2004 is Rs. 3494.01 lac.

As per our Report attached Signatures to Cash Flow Statement

For and on behalf of A. B. Godrej N. B. Godrej

Kalyaniwalla & Mistry Chairman Managing Director

Chartered Accountants

V. R. Mehta S. K. Bhatt

Partner Company Secretary

Mumbai, May 28, 2004

Industries Limited

30

SCHEDULES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2004


SCHEDULE 1 : SHARE CAPITAL

AUTHORISED :

13,33,33,333 Equity Shares of Rs. 6 each 8000.00 8000.00

10,00,00,000 Unclassified Shares of Rs.10 each 10000.00 10000.00

18000.00 18000.00ISSUED, SUBSCRIBED AND PAID-UP :

4,86,41,942 Equity Shares of Rs. 6 each fully paid 2918.52 2918.52

2918.52 2918.52Of the above :

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

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

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

This Year Previous YearRs. lac Rs. lac Rs. lac

SCHEDULE 2 : RESERVES AND SURPLUS

Securities Premium Account

As per last balance sheet 8.51 469.90

Less : Premium paid on shares purchased and

cancelled as per scheme of arrangement — (469.90)

Add : Premium received during the year — 8.51

8.51 8.51

Capital Investment Subsidy Reserve

As per last balance sheet 25.00 25.00

Revaluation Reserve

As per last balance sheet 3,492.48 3,775.17

Less : Depreciation on revalued component and

deduction due to sale/discard of fixed assets (235.89) (282.69)

3,256.59 3,492.48

Capital Redemption Reserve


General Reserve


Add : Transferred from Profit & Loss Account 656.80 342.10

Less : Premium paid on shares purchased and

cancelled as per scheme of arrangement — (1,098.28)

4,301.33 3,644.53

Profit & Loss Account 15,480.67 11,215.25

26,197.10 21,510.77


31


SCHEDULE 3 : SECURED LOANS

Term loans from banks 13319.63 11619.20

Bank overdrafts 3494.01 3196.28

16813.64 14815.48

Particulars of securities (refer note 5)

SCHEDULE 4 : UNSECURED LOANS

Fixed deposits 3315.12 4726.05

Intercorporate deposits — 500.00

Short term loans from banks 920.64 2206.11

4235.76 7432.16

Amount repayable within one year 4221.16 4089.52

SCHEDULE 5 : FIXED ASSETS

(Rs. lac)

ASSETS GROSS BLOCK DEPRECIATION NET BLOCK

As on Deductions/ As on Upto Deductions/ For the Upto As on As on

01.04.2003 Additions Adjustments 31.3.2004 31.03.2003 Adjustments Year 31.3.2004 31.3.2004 31.03.2003

LAND 259.01 – 6.11 252.90 18.20 – 1.64 19.84 233.06 240.81

BUILDINGS 8945.06 206.36 273.44 8877.98 1882.28 42.68 235.90 2075.50 6802.48 7062.78

PLANT & MACHINERY 36800.92 506.58 1344.40 35963.10 18618.56 618.50 1830.87 19830.93 16132.17 18182.36

RESEARCH CENTRE 114.69 1.95 – 116.64 39.04 – 3.44 42.48 74.16 75.65

FURNITURE & FIXTURES 1130.46 47.30 44.77 1132.99 585.04 24.45 69.68 630.27 502.72 545.42

OFFICE & OTHER EQUIPMENTS 915.30 59.23 31.51 943.02 400.54 15.27 49.75 435.02 508.00 514.76

VEHICLES 725.39 66.68 124.91 667.16 264.16 51.11 62.75 275.80 391.36 461.23

TRADEMARKS 754.00 – – 754.00 163.37 – 75.40 238.77 515.23 590.63

Assets Acquired UnderFinance Lease

VEHICLES 54.20 190.56 2.87 241.89 3.09 – 56.33 59.42 182.47 51.11

TOTAL - This Year 49699.03 1078.66 1828.01 48949.68 21974.28 752.01 2385.76 23608.03 25341.65 27724.75

- Previous Year 48611.88 1534.43 447.28 49699.03 19770.26 242.54 2446.56 21974.28 – –

CAPITAL WORK-IN-PROGRESS 313.93 404.75

TOTAL 25655.58 28129.50

NOTES :

1. Land includes leasehold land of Rs.137.82 lac (Previous Year Rs.139.46 lac) which is being amortised over the period of lease.

2. Buildings, Plant & Machinery and Research Centre at Vikhroli Factory were revalued on 30th June, 1992 on the basis of a Valuation Reportsubmitted by professional valuers.

3. Depreciation for the year include Rs. 235.89 lac (Previous Year Rs. 235.58 lac) being depreciation on revalued component of the fixed assets.

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

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

6. Buildings includes Rs. 2651.08 lac (Previous year Rs. 2651.08 lac) being the cost of equity shares in Tahir Properties Ltd., representing the rightof the Company to five flats in the property.

Industries Limited

32

Investee Company/Institutions Face Number AmountValue Qty. Acquired Sold Qty. As on As on

as on during during as on Notes 31.03.04 31.03.03(Rs.) 01.04.03 Year Year 31.03.04 Rs. lac Rs. lac

LONG TERM INVESTMENTS - At Cost

A. TRADE INVESTMENTSQuoted :Equity Shares : Fully PaidGodrej Consumer Products Ltd. 4 22,00,000 27,00,000 – 49,00,000 6214.03 2404.11Unquoted :Equity Shares : Fully PaidCompass Connections Ltd. £0.25 13,692 – – 13,692 124.55 124.55Gharda Chemicals Ltd. 100 114 – – 114 (a) 11.57 11.57Godrej Sara Lee Ltd 4 66,29,437 – – 66,29,437 5881.63 5881.63Godrej Tea Ltd. 10 13,86,496 83,63,500 – 97,49,996 975.00 138.65Hicare India Ltd. 10 9,71,100 – 9,71,100 97.11 97.11(formerly Godrej Photo-Me Ltd.)Hybrigene Biotechnology Ltd. 10 25,000 – 25,000 – (b) – 2.50Swadeshi Detergents Ltd. 10 2,09,370 – – 2,09,370 191.33 191.33Tahir Properties Ltd. (Partly Paid) 100 25 – – 25 (c) 0.01 0.01Preference Shares : Partly PaidGodrej Foods Ltd. 10 50,00,000 – – 50,00,000 (d) 450.00 425.00(8% 10 year Redeemable CumulativePreference Shares)Tahir Properties Ltd. (Class-A) 100 25 – – 25 (e) 0.02 0.02Optionally Convertible Subordinated NotesC Bay Systems Ltd. $800,000 – – – – (f) – 390.50(converted into 3,07,693 Prefered Stock-E series)Preferred Stock - Series E :C Bay Systems Ltd. $0.01 – 8,91,394 – 8,91,394 845.70 –

INVESTMENT IN SUBSIDIARY COMPANIES :Unquoted :Equity Shares: Fully PaidEnsemble Holdings & Finance Ltd. 10 37,70,160 – – 37,70,160 1318.14 1318.14Godrej Agrovet Ltd. 10 41,06,956 – – 41,06,956 3367.11 3367.11Godrej Global Solutions Ltd. 10 6,00,000 2,43,50,000 – 2,49,50,000 2495.00 20.70Godrej International Ltd. £1 15,05,000 – – 15,05,000 960.83 960.83Godrej Properties & Investments Ltd. 10 50,73,965 – – 50,73,965 3836.46 3836.46Godrej Remote Services Ltd. 10 47,95,648 29,16,994 – 77,12,642 771.25 479.56

B. OTHER INVESTMENTS :Equity Shares : Fully PaidQuoted :Gesco Corporation Ltd. 10 9 – 9 – – –Tata Engineering & Locomotive Co. Ltd. 10 9,376 – 9,376 – – 30.00The Great Eastern Shipping Co. Ltd. 10 86 – 86 – – 0.01Unquoted :Bharuch Eco-Aqua Infrastructure Ltd. 10 4,40,000 – – 4,40,000 44.00 17.60Government SecuritiesUnquoted :Kisan Vikas Patra 31,600 – – – – 0.32 0.32National Plan Certificate 1,500 – – – – 0.02 0.02Units of Mutual FundsUnquoted :Unit Trust of India - Unit Scheme 1964 10 25,20,939 – 25,20,939 – – 383.00(Converted into 6.75% Tax Free US-64 Bonds)Bonds of Unit Trust of India :Unquoted6.75% Tax Free US-64 Bonds 100 – 2,52,193 – 2,52,193 252.20 –Shares in Co-operative Societies - Fully PaidUnquoted :The Saraswat Co-op. Bank Ltd. 10 1,000 – – 1,000 0.10 0.10

27836.38 20080.83

Less : Provision for diminution in value of Investments (1303.10) (1434.82)

26533.28 18646.01

SCHEDULE 6 : INVESTMENTS


33

Investee Company/Institutions Face Number AmountValue Qty. Acquired Sold Qty. As on As on

as on during during as on Notes 31.03.04 31.03.03(Rs.) 01.04.03 Year Year 31.03.04 Rs. lac Rs. lac

Aggregate Book Value of InvestmentsQuoted 6214.03 2434.12

Unquoted 20319.25 16211.89

26533.28 18646.01

Market Value of Quoted Investments 8018.85 2310.33

NOTES :

(a) The said shares have been refused for registration by the investee company.(b) Hybrigene Biotechnology Ltd. has been dissolved as per the provision of Sec 560 of the Companies Act, 1956.(c) Rs. 80/- per share is payable in one or more calls on these shares.(d) Re. 1/- per share is payable in one or more calls on these shares.(e) Rs. 30/- per share is payable in one or more calls on these shares.(f) Optionally Convertible Subordinated Notes are converted into 307693 8% Series E Cumulative Redeemable Preferred

Stock of US $ 0.01 par value at the conversion price of US $ 2.60 per share in July 2003.


SCHEDULE 7 : INVENTORIES(at lower of cost and net realisable value)Stores and spares 697.73 488.27Raw materials 6096.76 5861.21Work-in-progress 1036.35 1180.36Finished goods 3113.51 3349.14

10944.35 10879.01SCHEDULE 8 : SUNDRY DEBTORS(Unsecured)Debts outstanding over six monthsConsidered good 39.10 66.50Considered doubtful 234.44 296.29

273.54 362.79Other debts, considered good 7063.17 7593.62

7336.71 7956.41Less : Provision for doubtful debts 234.44 296.29

7102.27 7660.12SCHEDULE 9 : CASH AND BANK BALANCESCash and cheques on hand 25.55 25.64Balances with scheduled banks– on current accounts 504.57 1070.58– on deposit accounts (refer note 7 ) 28.25 780.98

558.37 1877.20

SCHEDULE 10 : LOANS AND ADVANCES(Unsecured and considered good unlessotherwise stated)Loans and Advances (refer note 8 ) 1372.42 1418.16Advances recoverable in cash or in kind or for value to bereceived (net of provision for doubtful advancesRs. 668.18 lac, Previous year Rs. 594.31 lac) 1118.18 510.82Intercorporate deposits– Subsidiary companies 244.50 232.50– Others 101.28 89.40Deposits and balances with– Customs & excise authorities 1180.44 172.14– Others 610.06 723.34Advance payment of taxes 23.44 –(Net of provision for tax of Rs. 1013.93 lac)

4650.32 3146.36

Industries Limited

34

This Year Previous YearSCHEDULE 11 : CURRENT LIABILITIES Rs. lac Rs. lac Rs. lacAcceptances 319.55 –Sundry creditors– due to small scale industrial undertakings 74.60 80.38– others 13715.64 14205.06

13790.24 14285.44Advances from customers 479.09 31.08Sundry deposits 958.62 1114.70Investor Education & Protection Fund *– Unclaimed dividend 65.93 79.28– Unpaid Application Money – 3.43– Unpaid Matured Deposits 92.50 122.46– Unpaid Matured Debentures 147.61 133.60– Interest accrued on above 50.90 66.60Other liabilities 2543.17 1343.01Interest accrued but not due 51.64 192.46

18499.25 17372.06* There is no amount due and outstanding to be credited to the InvestorEducation and Protection Fund. (Previous year Rs. 3.73 lac).SCHEDULE 12 : PROVISIONSProposed dividend 1459.26 972.84Provision for tax on distributed profits 186.97 124.64Provision for Taxation – 36.52(Previous year net of advance tax Rs. 1045.42 lac)Provision for retirement benefits 2376.58 2122.61

4022.81 3256.61SCHEDULE 13 : MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)Deferred revenue expenditure– Gratuity

Balance at the beginning of the year 11.00 51.00Less : Amortised during the year (11.00) (40.00)Balance at the end of the year – 11.00

– Voluntary retirement compensationBalance at the beginning of the year 411.91 599.76Add : Deferred during the year 27.96 27.31Less : Amortised during the year (231.24) (215.16)Balance at the end of the year 208.63 411.91

– Deferred Revenue ExpenditureBalance at the beginning of the year – 227.08Less : Amortised during the year – 227.08Balance at the end of the year – –

208.63 422.91SCHEDULE 14 : SALE OF PRODUCTS AND SERVICESSales (gross) 70868.47 63714.28Less : Excise duty 5211.91 4791.81Sales (net) 65656.56 58922.47Processing charges 3550.34 3914.09Export incentives 388.36 242.42Licence fees and service charges 2070.65 2171.62

71665.91 65250.60SCHEDULE 15 : OTHER INCOMEInterest :– Government Securities 24.71 36.00– Income tax refund 75.08 266.62Dividend– from subsidiary companies 421.99 534.30– from long term trade investments 831.33 1363.35Miscellaneous income 239.41 286.58Profit on sale of fixed assets (Net) 16.14 1.27Profit/(loss) on sale of long term investments (51.02) 39.26Provision for depletion in value of investments written back 131.72 2.26

1689.36 2529.64


35

This Year Previous YearRs. Lac Rs. lac Rs. lac

SCHEDULE 16 : MATERIALS CONSUMED AND PURCHASE OF GOODSRaw materials consumed :Stocks at the commencement of the year 5861.24 4656.23Add : Purchases (net) 38387.28 39439.35

44248.52 44095.58Less : Stocks as at the close of the year 6096.76 5861.24Raw Materials consumed during the year 38151.76 38234.34Purchase of goods for resale 8084.39 4152.88

46236.15 42387.22SCHEDULE 17: EXPENSESSalaries, wages and allowances 5698.38 5460.20Contribution to provident fund and other funds 343.78 337.32Employee welfare expenses 483.43 453.39Stores and spares consumed 914.20 865.96Power and fuel 3618.98 4021.28Processing charges 48.42 34.91Rent 1159.82 128.99(Including lease rent of Rs. 1,008 lac, an exceptional itemRefer note 15 (c) of Schedule 21)Rates and taxes 526.69 432.33Repairs and maintenence– Machinery 583.08 761.03– Buildings 235.54 260.07– Other assets 28.09 27.48Insurance 120.91 118.56Freight 1387.06 1166.41Commission 419.55 357.01Discount 183.81 158.50Advertisement and publicity 81.94 174.04Sales promotion 337.76 300.22Selling and distribution expenses 569.24 494.84Bad debts written off 16.81 45.90Provision for doubtful debts and advances written off/(back) 31.06 (35.60)Miscellaneous expenses 1586.04 2043.96Less : Expenses recovered for shared services (747.24) (735.97)

17627.35 16870.83SCHEDULE 18 : INVENTORY CHANGEStocks at the commencement of the year

Finished goods 3349.14 1914.24Work-in-progress 1180.36 1094.43

4529.50 3008.67Less : Stocks at the close of the year :

Finished goods 3113.51 3349.14Work-in-progress 1036.35 1180.36

4149.86 4529.50(Increase)/Decrease in Inventory 379.64 (1520.83)

SCHEDULE 19 : INTEREST AND FINANCIAL CHARGES (Net)Interest paid– on fixed loans 839.87 1280.22– on bank overdrafts 94.89 212.05– other interest 123.03 39.18

1057.79 1531.45Less : Interest received– on loans & deposits 77.86 95.22– on Customer balances, etc. 33.64 46.57

111.50 141.79Net Interest 946.29 1389.66Brokerage and other financial charges 278.80 269.01Foreign exchange (gain)/loss (644.91) 365.59

580.18 2024.26SCHEDULE 20 : PRIOR PERIOD ADJUSTMENTSExcess provision for Income-tax 57.37 152.85

57.37 152.85

Industries Limited

36

SCHEDULE 21 : NOTES TO ACCOUNTS

1. Background

The Company was incorporated under the Companies Act, 1956 onMarch 7, 1988 under the name of Gujarat-Godrej InnovativeChemicals Limited. The business and undertaking of the erstwhileGodrej Soaps Limited was transferred to the Company under ascheme of amalgamation with effect from April 1, 1994 and theCompany’s name was changed to Godrej Soaps Ltd. Subsequently,under a scheme of arrangement the Consumer Products division ofthe Company was demerged with effect from April 1, 2001 into aseparate company, Godrej Consumer Products Limited (GCPL) andthe vegetable oils and processed foods manufacturing business ofGodrej Foods Ltd was transferred to the Company with effect fromJune 30, 2001. The Company’s name was changed to Godrej IndustriesLimited on April 2, 2001.

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

2. Significant Accounting Policies

a) Accounting Convention

The financial statements are prepared under the historical costconvention, on the accrual basis of accounting, in accordancewith the generally accepted accounting principles in India, andthe Accounting Standards issued by the Institute ofChartered Accountants of India.

b) Fixed Assets

Fixed Assets are stated at cost or as revalued as the case may be,less accumulated depreciation. Cost includes expenses related toacquisition and installation of the concerned assets. Exchangedifferences arising on account of repayment and year endtranslation of foreign currency liabilities relating to acquisition offixed assets is adjusted to the carrying cost of the respective assets.

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

c) Borrowing Costs

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

d) Investments

Long term investments are carried at cost. Provision fordiminution, if any, in the value of each long term investment ismade to recognise a decline, other than of a temporary nature.The fair value of a long term investment is ascertained withreference to its market value, the investee’s assets and resultsand the expected cash flows from the investment.

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

e) Inventories

Inventories are valued at lower of cost and net realisable value.Cost is computed on weighted average basis and is net of modvat.Finished goods and work-in-progress include cost of conversionand other costs incurred in bringing the inventories to theirpresent location and condition. Provision is made for the cost ofobsolescence and other anticipated losses, wherever considerednecessary.

f) Foreign Exchange Transactions

Transactions in foreign currency are recorded at the exchangerates prevailing on the date of the transaction. Assets and liabilitiesrelated to foreign currency transactions, remaining unsettled atthe year end, are stated at the contracted rates, when coveredunder forward foreign exchange contracts and at year-end ratesin other cases. The premium payable on forward foreignexchange contracts is amortised over the period of the contract.Exchange gains and losses are recognised in the Profit and LossAccount except in respect of liabilities incurred to acquire fixedassets in which case they are adjusted to the carrying amount ofsuch fixed assets.

g) Revenue Recognition

Sales are recognised when goods are supplied and are recordednet of returns, trade discounts, rebates, sales taxes and excise duties.

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

Export incentives are accounted on accrual basis and includethe estimated value of duty free import entitlement under theAdvance Licence Benefit Scheme and export incentivesreceivable under the Duty Entitlement Pass Book Scheme andthe Duty Drawback Scheme.

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

Interest income is recognised on a time proportion basis.

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

h) Research and Development Expenditure

Revenue expenditure on Research & Development is chargedto the Profit and Loss Account of the year in which it is incurred.Capital expenditure incurred during the year on Research &Development is shown as addition to fixed assets.

i) Depreciation

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

Trademarks are amortised over a period of ten years.

Depreciation is provided on the straight line method at the ratesspecified in Schedule XIV to the Companies Act, 1956, exceptfor computer hardware. Computer hardware is depreciated overits estimated useful life of 4 years.

Depreciation on assets acquired during the year is provided forthe full accounting year and no depreciation is charged on theassets sold/discarded during the year, except in case of majoradditions and deductions exceeding rupees one crore in whichcase, proportionate depreciation is provided.

Depreciation on the revalued component is provided on thestraight line method based on the balance useful life of the assetsas certified by the valuers. Such depreciation is withdrawn fromRevaluation Reserve and credited to Profit and Loss Account.

j) Retirement Benefits

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


37

Schedule 21 : Notes to Accounts (contd.)

payment of gratuity to retiring employees and leave encashmentbenefit on retirement is provided on the basis of an actuarialvaluation at the end of each financial year.

k) Incentive Plans

The Company has a scheme of Performance Linked VariableRemuneration (PLVR) which rewards its employees based onEconomic Value Addition (EVA). The PLVR amount is related toactual improvement made in EVA over the previous year whencompared with expected improvements. The EVA awards flowthrough a notional bank whereby only the prescribed portion ofthe bank is distributed each year and the balance is carriedforward. The amount distributed out of the notional bank ischarged to Profit & Loss Account. The notional bank is held atrisk and charged to EVA of future years and is payable at thattime, if future performance so warrants.

l) Hedging

Import of crude palm oil by the Company is being hedged byfutures contract on offshore Commodities Exchange. Gains orlosses on settled contracts is recognised in the Profit and LossAccount and is included in the cost of materials consumed. Futurescontracts not settled as on the Balance Sheet date are marked tomarket and losses, if any, are recognised in the Profit and LossAccount, whereas, the unrealized profit is ignored.

m) Deferred Revenue Expenditure

The compensation payable under the Voluntary Retirement Schemes,the benefit of which is expected to accrue in future is deferred overits pay back period. The compensation is generally amortised overthree to five years depending on the pay back period.

n) Taxes on Income

Current tax is the amount of tax payable on the taxable incomefor the year determined in accordance with the provisions of theIncome Tax Act, 1961.

Deferred tax is recognised on timing differences, being thedifferences between the taxable income and accounting incomethat originate in one period and are capable of reversal in oneor more subsequent periods. Deferred tax assets subject to theconsideration of prudence are recognised and carried forwardonly to the extent that there is a reasonable certainty thatsufficient future taxable income will be available against whichsuch deferred tax assets can be realised. The tax effect iscalculated on the accumulated timing differences at the yearend and based on the tax rate and laws enacted or substantiallyenacted on the balance sheet date.

o) Segment Reporting

The Accounting Policies adopted for segment reporting are in linewith the Accounting Policies of the Company. Segment assetsinclude all operating assets used by the business segments andconsist principally of fixed assets, debtors and inventories. Segmentliabilities include the operating liabilities that result from theoperating activities of the business segment assets and liabilitiesthat cannot be allocated between the segments are shown as partof unallocated corporate assets and liabilities respectively. Income/Expenses relating to the enterprise as a whole and not allocableon a reasonable basis to business segments are reflected asunallocated corporate income/expenses.

3. Contingent Liabilities


a) Claims for excise duties, taxes andother matters not acknowledged bythe Company :i) excise duty - Rs. 2718.25 lac

(Previous Year Rs. 3736.80 lac)- net of tax : 1743.08 2363.53

ii) lease rent claimed by MumbaiPort Trust in respect of landleased to the Foodsdivision. Rs. Nil (Previous YearRs. 1150.00 lac) – net of tax : Nil 727.38

iii) other matters - Rs. 3374.86 lac(Previous Year Rs. 3861.50 lac)– net of tax : 2346.65 2676.27

b) Guarantees issued by banks,excluding guarantees issued inrespect of matters reported in(a) above 1389.96 590.79

c) Guarantees given by the Companyin respect of credit/guarantee limitssanctioned by banks to subsidiary and other companies. 3666.00 3560.00

d) Uncalled liability on partly paidshares/debentures 50.03 140.73

4. Capital Commitments

This year Previous YearRs. lac Rs. lac

Estimated value of contracts remainingto be executed on capital account,to the extent not provided 80.58 51.60

5. Secured Loans

a) Term loans from banks are secured by :

- first charge by way of equitable mortgage of the immovableproperties at Vikhroli factory,

- hypothecation of specified movable assets of the Companyat Vikhroli and Valia factories,

- first charge by way of equitable mortgage of the immovableproperties at Valia factory.

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

6. Sundry Debtors


Sundry Debtors include amount duefrom a Company under the samemanagement :Godrej Consumer Products Ltd. 95.52 195.80

7. Cash and Bank Balances

Balances with Scheduled Banks inDeposit Accounts include deposits heldby bank as security against guaranteesissued on behalf of suppliers of theCompany 18.34 17.11

Industries Limited

38


8. Loans and Advances

a) Loans and Advances include an amount of Rs. 5.61 lac (PreviousYear Rs. 6.69 lac) due from directors and Rs. Nil (Previous YearRs. 0.20 lac) from an Officer of the Company under the contingencyand housing loan scheme of the Company. Maximum balanceduring the year Rs. 6.89 lac (Previous Year Rs. 14.60 lac).

b) Loans and Advances include Rs. 1033 lac (Previous Year Rs.1033 lac) advanced by the Company to certain individuals againstpledge, by way of deposit, of equity share of Gharda ChemicalsLtd. The Company is in the process of enforcing the security andgetting the shares transferred in its name. Interest on the aforesaidloans and advances amounting to Rs. 315 lac was accrued uptoMarch 31, 2000 and has been fully provided for, no interest isbeing accrued thereafter. The recoverability of the advance iscontingent upon the transfer and/or disposal of said shares. In theopinion of the management, the value of the said shares is greaterthan the amount of the loans and advances.

c) Loans and Advances to subsidiary companies

Maximum balance Balance at year endduring the year This Year Previous Year

Rs. lac Rs. lac Rs. lac

i) Ensemble Holdings& Finance Ltd. 244.50 244.50 232.50

ii) Godrej Properties &Investments Ltd. 585.00 Nil Nil

iii) Godrej Agrovet Ltd. 600.00 Nil Nil

d) Loans & Advances toassociate companiesi) Swadeshi Detergents Ltd. 94.40 65.80 89.40ii) Hicare India Ltd. 107.48 107.48 –

e) Ensemble Holdings & Finance Ltd., to whom Godrej IndustriesLtd. have given a loan, has made investments in Godrej IndustriesLtd. and its subsidiaries.i) Godrej Industries Ltd. (shares received pursuant to scheme

of arrangement with Godrej Foods Ltd.)ii) Godrej Global Solutions Ltd.iii) Hicare India Ltd. (earlier known as Godrej Photo-me Ltd.)iv) Godrej Remote Services Ltd.v) Godrej Properties & Investments Ltd.

f) Loans and Advances where there is no repayment schedule orrepayment is beyond seven years :


i) D. Kavasmanek and Others(refer (b) above). 1033.00 1033.00

9. InvestmentsThe Company has acquired and sold the following investments duringthe year :Mutual Funds - Liquid Funds - Growth Plan

This Year Previous YearNo. of Purchase No. of PurchaseUnits Cost Units Cost

Rs. lac Rs. lac

Birla Cash Plus Liquid 4,16,02,898 6980.00 Nil NilPrudential ICICI Liquid 1,93,22,924 2940.00 Nil NilKMMF Liquid 6,02,12,581 7506.00 Nil NilTempleton India Liquid 1,93,22,924 10030.00 Nil NilJMMF Liquid 52,01,696 545.00 Nil Nil

Mutual Funds - Short Term Funds - Growth PlanThis Year Previous Year

No. of Purchase No. of PurchaseUnits Cost Units Cost

Rs. lac Rs. lac

Birla Bond Plus 1,07,92,062 1220.00 Nil NilPrudential ICICI ShortTerm Fund 1,43,92,412 1660.00 Nil NilKMMF K Bond ShortTerm Fund 60,80,618 665.00 Nil NilTempleton India ShortTerm Income Plan 28,158 315.00 Nil NilDeutsche Short MaturityFund 82,35,631 855.00 Nil Nil

10. Liabilities

a) The liability for future payment of Voluntary RetirementCompensation aggregating Rs. 5.66 lac (Previous Year Rs. 3.77lac) will be accounted in subsequent years as and when thesame accrues and becomes due to the workmen. Thiscompensation is payable in future and is over and above thecompensation already paid under other schemes and includedin deferred revenue expenditure.

b) No amount has been claimed from the Company under theInterest on Delayed Payments to Small Scale and AncillaryIndustrial Undertakings Act, 1993.

c) The names of small scale industrial undertakings to whom anamount is outstanding for more than 30 days are as under :Akshay Inorganics Jaynam PackersAlguj Chemical Industries Kandoi Fabrics Pvt. Ltd.Ambica Chemicals Industries Mahawar Packaging IndustriesAmelon Synthetics Corpn. Mevada Engineering WorksAnupam Enterprise N. R. Packaging IndustriesAsian Electronics Ltd. Neo FabConserve Watercare Pvt. Ltd. Sanjoo PrintersConserve Watercare System Shanti IndustriesDhanvantri Eng. Pvt. Ltd. Shree Diamond Silicates Co.General Foundries Shree Satyanarayan PlasticsHRP Industries Sungrace Agro Process Pvt. Ltd.Jalaram Box Makers (P) Ltd. United Paper IndustriesJay Gaskets Pvt. Ltd. Vraj Packaging Pvt. Ltd.Jayant Packing Industry Yash Polychem Pvt. Ltd.

d) The above information regarding small scale industrialundertakings has been determined to the extent such partieshave been identified on the basis of information available withthe Company, and has been relied upon by the Auditors.

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

12. Leases

a) The Company has entered into leave and licence agreements inrespect of its commercial and residential premises. These are notnon-cancelable and range between 11 months to 35 months andare renewable by mutual consent on mutually acceptable terms.Leave and licence arrangements being similar in substance tooperating leases, the particulars of the premises under leave andlicence arrangement are as under :


39


Gross carrying amount of premises 3944.29 3732.82

Accumulated depreciation 876.16 743.52

Depreciation for the period 132.63 90.59

b) Finance Leases :

The Company has acquired vehicles under Finance Lease.Liability for minimum lease payment is secured by hypothecationof the vehicles acquired under the lease. The minimum leasepayments outstanding as on March 31, 2004, in respect ofvehicles acquired under lease are as under :

Period Total minimum lease Present valuepayments outstanding Un-matured of minimum

as on March 31, 2004 Interest lease paymentsRs. Lac Rs. Lac Rs. Lac

Within one year 70.08 12.63 66.36Later than one year andnot later than five years 141.55 11.12 121.58

211.63 23.75 187.94

13. Deferred Tax

a. Major components of deferred tax arising on account of timingdifferences as on March 31, 2004 are :

Assets This Year Previous YearRs. lac Rs. lac

Business Losses 319 1481Provision for retirement benefits 733 586Provision for doubtful debts/advances 324 317Others 33 40

1409 2424

Liabilities

Depreciation 4338 5751VRS Expenses 43 134Deferred Revenue Expenditure — 5

4381 5890

Net Deferred Tax Liability 2972 3466

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

deferred tax liability amounting to Rs. 1420 lac due to the increasein brought forward losses pursuant to finalisation of appellateproceedings and revised depreciation claim of earlier yearsrespectively.

14. Hedging

Reserve Bank of India has permitted the Company to hedge itsexposure on Crude Palm Oil on offshore exchanges to the extent ofits imports. Accordingly, the Company is hedging import of crudepalm oil on the Malaysian Commodities Exchange by way of futurescontracts. The particulars of the futures contracts for the year are asunder:

This Year Previous YearDetails Purchase Sale Purchase Sale

Total number of contractsentered during the year 33 28 56 66Number of units (25 MT per unit)under above contracts 1,401 1,281 206 326Future contracts not settled as onMarch 31, 2004 – – – 10Number of units under above contracts – – – 120

15. Profit & Loss Accounta) The amount of exchange loss on account of fluctuation of the

rupee against foreign currencies and the net charges for forwardforeign exchange contracts added to the carrying amount offixed assets during the year is Rs. 14.77 lac (Previous Year Rs.85.62 lac). The exchange difference included in the Profit & LossAccount is a profit of Rs. 1,129.12 lac (Previous Year loss of Rs.370.36 lac). The exchange difference in respect of forwardexchange contracts to be recognised in subsequent accountingperiods is Rs. 44.33 lac (Previous Year Rs. 29.20 lac).

b) Research & Development Expenditure of revenue nature chargedto the Profit & Loss Account amounts to Rs. 115.04 lac (PreviousYear Rs. 94.79 lac).

c) Rent includes an amount of Rs. 1,008 lac on account of leaserent payable to Mumbai Port Trust, which has crystallised duringthe year, pursuant to finalisation of litigation proceedings as perthe order of the Honourable Supreme Court of India dated 13January, 2004 – an exceptional item.


Industries Limited

40


16. Segment InformationInformation about Primary Business Segments Rs. lac

Chemicals Foods Estate Others TotalThis Year Previous Year This Year Previous Year This Year Previous Year This Year Previous Year This Year Previous Year

RevenueExternal Sales 49368.60 44882.04 19358.07 17590.02 2087.88 2177.39 2465.64 2864.17 73280.19 67513.62

Results

Segment result before

interest and tax 7312.58 5649.28 (1489.30) 87.17 1497.36 1536.84 1335.60 1798.08 8656.24 9071.37

Unallocated expenses netof unallocated income (1636.62) (1086.48)

Interest Expense (net) (580.18) (2024.26)


Taxes 129.00 (2540.00)

Profit after taxes 6568.44 3420.63

Segment Assets 34687.52 36476.81 7631.34 8326.34 3970.98 3978.27 29353.49 21990.18 75643.33 70771.60Unallocated Assets 23.44 —Total Assets 75666.77 70771.60

Segment Liabilities 17432.62 15858.42 3879.45 3986.08 786.08 878.09 431.61 70.18 22529.76 20792.77Unallocated Liabilities 24021.40 25549.54Total Liabilities 46551.16 46342.31

Total Cost incurred duringthe year to acquire segmentassets 741.29 1102.62 136.79 183.00 200.58 248.81 – – 1078.66 1534.43Segment depreciation 1727.52 1778.46 256.06 300.00 132.85 98.95 33.45 33.57 2149.88 2210.98

Information about Secondary Business Segments

Revenue by Geographical markets

India 59940.50 57766.99

Outside India 13339.69 9746.63

Total 73280.19 67513.62

Carrying Amount of Segment assets

India 75666.77 70771.60

Outside India – –

Total 75666.77 70771.60

Notes :

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

2. The Chemicals segment includes Oleo Chemicals such as Fatty Alcohols, Fatty Acids, Alfa Olefin Sulphonates and Refined Glycerin.The Foods segment includes refined vegetable oils and vanaspati, fruit and vegetable puree, pulp juices and fruit beverages.The Estate segment comprises the business of giving premises on leave and licence basis.Others includes medical diagnostics business and finance operations.

3. The geographical segments are as follows :

– Sales in India represent sales to customers located in India.

– Sales outside India represent sales to customers located outside India.


41


17. Related Party Disclosuresa) Related Parties with whom transactions have taken place

during the year, with the name and description ofrelationship.Parties where control exists :Godrej & Boyce Mfg Co. Ltd., the holding company.Subsidiary companies :Ensemble Holdings & Finance Ltd.Godrej Agrovet Ltd.Godrej Global Solutions Ltd.Godrej International Ltd.Godrej Properties & Investments Ltd.Godrej Remote Services Ltd.Godrej Tea Ltd.Fellow Subsidiaries :Godrej Appliances Ltd.Godrej Consumer Products Ltd.

b) Transactions with Related PartiesRs. lac

Enterprisesover which

KeyManagement

Relative PersonnelAssociate/ Key of Key exercise

Holding Subsidiary Fellow Joint Venture Management Management significantNature of Transaction Company Companies Subsidiaries Companies Personnel Personnel influence Total

Sale of Goods 17.53 – 2539.42 3.88 – – – 2560.83Previous Year 17.95 0.47 2930.84 3.25 – – 0.44 2952.95Sale of Fixed Assets – 1.34 153.07 – – – – 154.41Previous Year – – – – – – – –Purchase of goods & equipment 38.61 98.83 708.26 14.44 – – – 860.14Previous Year 56.86 6.24 1173.27 43.24 – – – 1279.61Processing charges received – – 2845.71 – – – – 2845.71Previous Year – – 1931.99 – – – – 1931.99Commission received – – 19.62 – – – – 19.62Previous Year – – 33.00 – – – – 33.00Recovery of establishment &other expenses 10.46 395.47 1011.19 237.09 – – 0.04 1654.25Previous Year 4.49 244.70 1121.73 229.35 – – 0.06 1600.33Establishment & other expenses paid 169.17 42.34 65.30 1.90 – – – 278.71Previous Year 151.34 211.32 55.60 1.82 – – – 420.08Refund of Deposit – 3410.75 – 38.55 – – – 3449.30Previous Year – 12.71 2.00 23.20 – – – 37.91Interest received – 40.42 – – – – – 40.42Previous Year – 18.05 24.39 – 0.35 – – 42.79Interest paid – – – – 0.28 – – 0.28Previous Year – – 4.16 – – – – 4.16Finance provided including loans & equitycontributions – 7010.35 25.00 112.48 – – – 7147.83Previous Year 23.02 1149.09 3029.00 429.58 – – – 4630.69Finance received during the year – – – – – – – –Previous Year – 0.70 200.00 – 1.98 – – 202.68Finance repaid during the year – 11.00 – 28.60 – – – 39.60Previous Year – – 500.00 – – – – 500.00Guarantees & collaterals given – 3666.00 – – – – – 3666.00Previous Year – 3500.00 – 60.00 – – – 3560.00Dividend income – 421.99 284.00 546.93 – – – 1252.92Previous Year – 534.30 88.00 1275.33 – – – 1897.63Dividend paid 716.51 1.98 – – 8.58 – – 727.07Previous Year 246.36 0.59 – – 3.25 – – 250.20Remuneration – – – – 338.66 – – 338.66Previous Year – – – – 255.28 6.40 – 261.68Write-back of Provisions – – 0.18 0.11 – – – 0.29Previous Year – – – – – – – –Balance Outstanding as on March 31, 2004Receivables 69.93 289.82 191.30 106.04 – – 0.02 657.11Previous Year 1.94 279.31 195.80 105.02 – – 0.02 582.09Payables 0.36 148.90 195.52 206.28 – – 0.11 551.17Previous Year 1.23 73.53 85.36 4.65 – – 0.11 164.88

Godrej Foods Ltd.Godrej Infotech Ltd.Associate/Joint Venture Companies :Tahir Properties Ltd.Hicare India Ltd. (earlier known as Godrej Photo-Me Ltd.)Godrej SaraLee Ltd.Swadeshi Detergents Ltd.Key Management Personnel :Mr. N.B. GodrejMs. T.A. DubashMr. Mathew EipeMr. V. BanajiMr. M.P. PusalkarEnterprises over which key management personnelexercise significant influenceBahar Agrochem & Feeds Pvt. Ltd.

Industries Limited

42


18. Earnings per ShareThis Year Previous Year

a. Calculation of weighted average number of equity sharesNumber of shares at the beginning of the year Nos. 4,86,41,942 6,17,10,218Shares bought back pursuant to the scheme of arrangement for buy back Nos. – 1,30,68,276Number of equity shares outstanding at the end of the year Nos. 4,86,41,942 4,86,41,942Weighted average number of equity shares outstanding during the year Nos. 4,86,41,942 5,82,37,279

b. Net profit after tax available for equity shareholders Rs. lac 6568.45 3420.63c. Basic and diluted earnings per share of Rs. 6 each Rupees 13.50 5.87

19. Computation of Profits under Section 349 of the Companies Act, 1956

This Year Previous YearRs. lac Rs. lac Rs. lac

Profit for the year after tax as per Profit & Loss Account 6511.07 3267.78Add : Depreciation as per accounts 2149.88 2210.98

Managerial Remuneration 338.66 311.37Profit on sale of assets underSection 349 34.79 38.66Provision for doubtful debts/advances anddepletion in value of investments (100.66) (37.86)Provision for Tax (129.00) 2540.00

2293.67 5063.158804.74 8330.93

Less : Losses of the earlier year 2117.65 8210.79Depreciation under Section 350of the Companies Act, 1956 2099.66 2197.26Profit on sale of assets as per books 16.14 1.27Profit/(loss) on sale of investments (51.02) 39.26

4,182.43 10448.58Net Profit/(Loss) for the purpose of Directors’ Remuneration 4622.31 (2117.65)Managerial remuneration to Managing and Executive Directors@ 10% of the net profits 462.23 —Managerial remuneration paid/payable 338.66 311.37

21. Auditors’ RemunerationThis PreviousYear Year

Rs. lac Rs. lac

Audit fees (including Rs. 0.96 lac tobranch auditors, Previous Year Rs. 0.75 lac) 27.96 21.55Tax audit fees 4.50 3.75Certification and other services 6.98 11.28Tax Consultation and representation 13.85 4.92Consultation and management services 4.76 3.80Out of pocket expenses 1.76 0.62Service Tax 4.20 2.23TOTAL 64.01 48.15

20. Managerial RemunerationThis PreviousYear Year

Rs. lac Rs. lac

Salaries and allowances 278.88 268.62

Contribution to Provident Fund 11.69 10.43

Estimated Monetary value ofperquisites 44.74 28.50

Directors’ Fees 3.35 3.82

TOTAL 338.66 311.37

22. SalesThis Year Previous Year

Item Unit Quantity Value Quantity ValueRs. lac Rs. lac

Fatty Acids MT 47241 15096.48 53591 15744.58Glycerin MT 8338 4262.86 7955 4306.97Alpha Olefin and its precursorsand derivatives MT 68959 26327.26 58603 21206.52Oils & Vanaspati MT 34663 15900.63 30286 14091.43Fruit & Vegetable Puree, Pulp & Juices MT 2482 691.52 2843 945.25Fruit beverages and fruit based products KL 7063 1823.29 5487 1483.14Medical Diagnostic Products 935.91 714.11Others 618.61 430.47

TOTAL 65656.56 58922.47


43

26. Licensed, Installed and Utilised Capacity

Item Unit Licensed Installed Capacity ActualCapacity Production

This Previous This PreviousYear Year Year Year

SCHEDULEDFatty Acids MT } 32000 32000 39815 49201Glycerin MT } 8280 8280 8316 8139Alpha Olefin and its precursors }and derivatives MT } 35000 35000 74714 63579Soaps MT } 26381 26381 19864 20729Cosmetics MT } 1200 1200 – –Fruit Beverages & Fruit }based products KL } 30000 30000 6887 5834Fruit & Vegetable Puree, } N.APulp & Juices. MT } 5000 5000 2616 4860Refined Oils & Vanaspati MT } 38700 38700 15648 20358Dietetic & Geriatric foods MT } 250 250 21 41U.H.T./Sweetend Flavoured }Milk KL } 1800 1800 117 –Instant Tea/Coffee Plant MT } 3000 – – –Synthetic Detergents MT } 11250 11250 13506 13384Hydrogen (Captive }consumption) NM3 } 1224000 1224000 448570 569748Oxygen (By-Product) NM3 } 612000 612000 224285 284874

Notes :a. The Licensed capacities are not applicable in view of the exemption from licensing granted under Notification SO 477(E) dated 25th July

1991, issued under the Industries (Development & Regulation) Act, 1951.b. Alpha Olefin and its precursors and derivatives includes Fatty Alcohols and A.O. Sulphonates.c. Installed capacity excludes the installed capacity for manufacture of intermediates which are intended to be used for internal consumption

to manufacture A.O and its precursors and derivatives.


23. Inventories - Finished Goods

March 31, 2004 March 31, 2003 March 31, 2002Item Unit Quantity Value Quantity Value Quantity Value

Rs. lac Rs. lac Rs. lacFatty Acids MT 2245 878.39 1959 731.61 949 318.65Glycerin MT 121 63.46 309 180.19 37 19.54Alpha Olefin and its precursorsand derivatives MT 1867 723.39 3256 1190.39 2066 732.63Oils & Vanaspati MT 1098 575.99 786 396.00 1127 455.15Fruit & Vegetable Puree, Pulp & Juices MT 1576 343.99 1751 388.07 220 52.00Fruit beverages and fruit based products KL 650 153.89 944 262.10 652 149.00Medical Diagnostic Products 307.60 177.60 187.27Others 74.50 23.18 –

TOTAL 3121.21 3349.14 1914.24

24. Raw Materials Consumed

This Year Previous YearUnit Quantity Value Quantity Value

Rs. lac Rs. lacOils & Fats MT 124477 27546.15 138129 30145.40Chemicals and Catalysts MT 17217 4319.94 13500 3799.78Fruit Pulp & Concentrates KL 5658 457.21 10496 947.97Packing Materials, etc. 5828.46 3341.19

TOTAL 38151.76 38234.34Note :Raw materials consumption includes consumption for production of captively consumed items.

25. Purchase of Goods

This Year Previous YearUnit Quantity Value Quantity Value

Rs. lac Rs. lacFatty Acids MT 65 20.48 191 55.00Oils & Vanaspati MT 18497 7190.64 8872 3454.93Medical Diagnostic Products 579.02 531.55Others 164.17 111.40

TOTAL 7954.31 4152.88

Industries Limited

44



27. Value of Imports on CIF Basis(includes only Imports directly made)Raw materials 20247.20 18372.53Goods for resale 1224.94 163.72Stores & spares 140.23 119.50Capital goods 19.00 51.12

TOTAL 21631.37 18706.8728. Expenditure in Foreign Currency

Interest 529.91 509.21Travelling expenditure 85.76 76.08Other expenditure 185.42 206.18Expenses for Foreign Branch :– Salaries and allowance 77.42 80.24– Rent 22.77 20.14– Others 31.49 26.14

TOTAL 932.77 917.99


29. Value of Consumption ofRaw Materials & Spares % %Raw MaterialsImported (including dutycontent) 23954.60 63 24552.99 64Indigenous 14197.16 37 13681.35 36

38151.76 100 38234.34 100SparesImported (including dutycontent) 116.78 13 335.50 37Indigenous 797.42 87 530.46 58

914.20 100 865.96 9530. Dividends Remitted in Foreign

Currency (subject to deductionof tax, as applicable)Final Dividend for FinancialYear 2002-03 to 3 shareholderson 180 shares – 0.05

TOTAL – 0.05

31. Earnings in Foreign ExchangeExport of goods ( F.O.B. : thisyear Rs. 12670.02 lac 13279.26 9719.01Previous Year Rs. 9202.81 lac)Dividend 48.26 –Interest 12.17 27.62

TOTAL 13339.69 9746.63

This year Previous yearRs. lac Rs. lac

I. ASSETS1. Fixed Assets 1275.03 1312.472. Investments – 45.333. Current Assets, Loans and Advances

a) Inventories 1278.71 1356.89b) Sundry Debtors 374.07 535.65c) Cash and Bank Balances 944.14 257.25d) Other Current Assets 0.73 0.75e) Loans and Advances 360.62 360.33

II. LIABILITIES1. Loan Funds

a) Secured Loans 148.61 –b) Unsecured Loans 438.55 424.13

2. Current Liabilities and Provisionsa) Liabilities 1878.01 2282.54b) Provisions 101.64 51.69

3. Deferred Tax- Net 44.35 39.28III. INCOME

1. Sales and Income from operations 10654.76 9790.972. Other Income 122.01 37.14

IV. EXPENSES1. Materials consumed and purchase of goods 4774.40 5064.662. Expenses 4368.12 3712.713. Inventory change 74.66 (281.11)4. Depreciation 171.52 135.745. Interest 22.52 58.426. Provision for Taxation 83.88 78.30

V. OTHER MATTERS1. Contingent Liabilities 299.64 296.882. Capital Commitments 11.16 –

33. Figures for the previous year have been regrouped wherevernecessary.

34. Additional Information as Required Under Part IV of Schedule VITo the Companies Act, 1956

1. Registration DetailsRegistration No. : 97781State Code : 11Balance Sheet Date : 31/3/2004

2. Capital raised during the year (Amount in Rs. lac)Public Issue : NilRights Issue : NilBonus Issue : NilPrivate Placement (Preference) : Nil

3. Position of mobilisation and deployment of funds(Amount in Rs. lac)Total Liabilities : 53137.02Total Assets : 53137.02Sources of Funds

Paid-up Capital : 2918.52Reserves & Surplus : 26197.10Secured Loans : 16813.64Unsecured Loans : 4235.76Defered Tax Liability : 2972.00

Application of FundsNet Fixed assets : 25655.58Investments : 26533.28Net Current Assets : 739.53Misc. Expenditure : 208.63Accumulated Losses : –

4. Performance of Company (Amount in Rs. lac)Turnover (Income from Operations) : 71665.91Total Expenditure (Net of Other Income) : 65283.84Profit/(Loss) before tax : 6382.08Profit/(Loss) after tax : 6568.45Earning per Share in Rs.(on an annualised basis) : 13.50Dividend rate % : 50.00%Generic Names of three principal products/services of CompanyItem Code No. : 38.23 *Product description : Fatty Acids/Fatty AlcoholsItem Code No. : 15.16 *Product description : Vanaspati/Refined OilsItem Code No. : 22.02 *Product description : Fruit Drinks(*represents Heading No. of the Harmonized CommodityDescription and Coding System)

32. Interest in Joint VenturesThe Company’s interests, as a venturer, in jointly controlled entitiesare:Name Countries Principal Percentage of

of activities OwnershipIncorporation interest as at

31st March, 2004GodrejSaraLee Ltd. India Household 25.96%

InsectisidesHi Care India Ltd. India Pest Control 40.66%

The Company’s interests in Joint Venture are reported as Long TermInvestments (Schedule “6”) and stated at cost less provision, if any, forpermanent diminution in value of such investments. The Company’s shareof each of the assets, liabilities, income and expenses, etc. (each withoutelimination of the effect of transactions between the Company and theJoint Ventures) related to its interests in these joint ventures are :

45

Industries Limited – Consolidated Accounts Annual Report 2003-2004

1. We have examined the attached Consolidated Balance Sheet ofGodrej Industries Limited, its subsidiaries, joint ventures andassociates as at March 31, 2004, and the Consolidated Profit andLoss Account and Consolidated Cash Flow Statement for the yearended on that date annexed thereto. These consolidated financialstatements are the responsibility of the management of GodrejIndustries Limited. Our responsibility is to express an opinion onthese financial statements based on our audit.

2. We conducted our audit in accordance with generally acceptedauditing standards in India. These Standards require that we planand perform the audit to obtain reasonable assurance whether thefinancial statements are prepared, in all material aspects, inaccordance with an identified financial reporting framework andare free of material misstatements. An audit includes, examining ona test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. Webelieve that our audit provides a reasonable basis for our opinion.

3. We did not audit the financial statements of certain subsidiaries,joint ventures and associates, whose financial statements reflecttotal assets of Rs. 26,262.76 lakh as at March 31, 2004, total revenuesof Rs. 60,788.49 lakh and net profit of Rs. 4,389.51 lakh for the yearthen ended. These financial statements have been audited by otherauditors whose report has been furnished to us and our opinion,insofar as it relates to the amounts included in respect of thesubsidiaries, joint ventures and associates is based solely on thereport of the other auditors. The financial statements of twoassociates, which reflects net loss for the year of Rs. 312.65 lakhwere not audited as on the date of this report. The Company’s shareof loss thereof amounting to Rs. 134.72 lakh has been included inthe consolidated financial statements on the basis of unauditedmanagement accounts.

4. We report that the consolidated financial statements have beenprepared by the Company in accordance with the requirements ofAccounting Standard (AS) 21 - Consolidated Financial Statements,Accounting Standard (AS) 23 - Accounting for Investments inAssociates in Consolidated Financial Statements and Accounting

CONSOLIDATED ACCOUNTSREPORT OF THE AUDITORS TO THE BOARD OF DIRECTORS OF GODREJ INDUSTRIES LIMITED

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

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

6. On the basis of the information and explanation given to us and onthe consideration of the separate audit reports on the individualaudited financial statements of Godrej Industries Limited and itsaforesaid subsidiaries, joint ventures and associates, in our opinion,the consolidated financial statements, subject to paragraph 5 above,give a true and fair view in conformity with the accounting principlesgenerally accepted in India:

a) in case of the Consolidated Balance Sheet, of the consolidatedstate of affairs of Godrej Industries Limited, its subsidiaries and itsinterests in joint ventures and associates as at March 31, 2004;

b) in case of the Consolidated Profit and Loss Account, of theconsolidated results of operations of Godrej Industries Limited,its subsidiaries and its interests in joint ventures and associatesfor the year then ended; and

c) in case of the Consolidated Cash Flow Statement, of theconsolidated cash flows of Godrej Industries Limited, itssubsidiaries and its interests in joint ventures and associates forthe year then ended.

For and on behalf of

KALYANIWALLA & MISTRYChartered Accountants

V. R. MEHTAPartner

Mumbai: May 28, 2004. M. No.: 32083

Industries Limited – Consolidated Accounts

46

This Year Previous YearSchedule Rs. lac Rs. lac Rs. lac

SOURCES OF FUNDS1. Shareholders’ Funds

(a) Share capital 1 2912.58 2912.58(b) Reserves & surplus 2 28470.19 24988.62

31382.77 27901.202. Minority Interest 2798.28 4753.643. Loan Funds

(a) Secured loans 3 26835.31 26791.60(b) Unsecured loans 4 11473.35 13770.42

38308.66 40562.024. Deferred Tax Liability 3208.13 3841.67

TOTAL 75697.84 77058.53

APPLICATION OF FUNDS

5. Fixed Assets 5(a) Gross block 65238.97 65620.45(b) Less: Depreciation 29137.21 26590.31(c) Net block 36101.76 39030.14(d) Capital work-in-progress 331.27 481.65

36433.03 39511.796. Goodwill (on Consolidation) 11264.45 11602.237. Investments 6 9647.34 4085.718. Current Assets, Loans and Advances

(a) Inventories 7 23268.27 24148.25(b) Sundry debtors 8 15988.46 15192.34(c) Cash and bank balances 9 3725.58 3764.71(d) Other Current Assets 8.02 12.15(e) Loans and advances 10 17006.50 13428.88

59996.83 56546.33Less : Current Liabilities and Provisions(a) Liabilities 11 37527.58 32303.71(b) Provisions 12 4360.15 3702.14

41887.73 36005.85Net Current Assets 18109.10 20540.48

9. Miscellaneous Expenditure 13 243.92 1318.31(To the extent not written off or adjusted)

TOTAL 75697.84 77058.53

Notes to Accounts 21

CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2004

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

As per our Report attached Signatures to Balance Sheet and Schedules 1 to 13 and 21




47

This Year Previous YearSchedule Rs. lac Rs. lac

INCOME

Sale of Products & Services 14 182292.59 166163.18Other Income 15 1071.86 2405.52

183364.45 168568.70EXPENDITUREMaterials consumed and purchase of goods 16 131696.96 122919.46Expenses 17 40160.47 34705.01Inventory change 18 273.79 (2693.55)Interest and financial charges (net) 19 1654.76 3525.35Depreciation 3277.19 3249.55(including share in jointly controlled entities Rs. 171.52 lac,Previous year Rs. 135.74 lac)(Net of transfer from Revaluation ReserveRs. 235.89 lac, Previous year Rs. 235.58 lac)Amount transferred to project in progress – (9.02)

177063.17 161696.80

Profit Before Tax 6301.28 6871.90Provision for taxation- Current Tax (including share in jointly controlled entities Rs. 78.81 lac) 952.02 772.38- Deferred Tax (including share in jointly controlled entities Rs. 5.07 lac) (633.54) 1902.59

Profit For The Year After Taxation 5982.79 4196.93Prior Period adjustments (net) 20 112.69 82.13

6095.48 4279.06Share of Loss in Associates (201.47) (125.45)

Profit before Minority Interest 5894.01 4153.61Share of Minority Interest (43.05) (744.14)

Profit After Minority Interest 5850.96 3409.47Surplus brought forward 12223.03 10606.04Adjustment for subsidiaries added/deleted 316.39 1276.35Share in jointly controlled entities – (209.68)

Profit After Tax Available For Appropriation 18390.38 15082.18

APPROPRIATIONS:Dividend on Equity Shares- Interim 225.90 1091.57- Final 1493.56 1021.03Tax on distributed profits 447.90 139.23Transfer to General Reserve 905.85 607.32Surplus carried forward 15317.17 12223.03

TOTAL 18390.38 15082.18

Basic & Diluted EPS of Rs. 6 per share 12.05 5.86

Notes to Accounts 21

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2004

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

As per our Report attached Signatures to Profit & Loss Account and Schedules 14 to 21




48


A. Cash Flow from operating activities :Profit before tax 6301.28 6871.91Adjustments for :Depreciation 3277.19 3249.55Foreign exchange (959.66) (25.42)Loss/(Profit) on sale of investments 51.00 (23.71)Loss/(Profit) on sale of fixed assets (30.37) (12.90)Dividend income (286.39) (1363.38)Interest income (682.04) (1094.88)Interest expense 2816.96 4222.15Voluntary retirement compensation and other expenses deferred (394.08) (880.64)Deferred expenditure written off 1435.17 581.91Provision for doubtful debts and sundry balances written off (net) (125.14) (83.78)Others 5.95 (55.91)Operating profit before working capital changes 11409.87 11384.90Adjustments for :Inventories 708.49 (2955.08)Trade and other receivables (3310.87) 2483.37Trade payables 5112.77 5736.57Cash generated from operations 13920.26 16649.76Direct taxes paid (1332.40) (1061.13)Direct taxes refund received 22.22 964.83Net Cash from operating activities 12610.08 16553.46

B. Cash Flow from investing activities :Purchase of fixed assets (2083.53) (3123.57)Proceeds from sale of fixed assets 1228.76 312.09Purchase of investments (39578.13) (3691.49)Proceeds from sale of investments 32828.63 180.16Intercorporate deposits / Loans (net) (18.88) 799.74Interest received 675.33 1696.27Dividend received 286.40 1363.38Net Cash used in investing activities (6661.42) (2463.42)

C. Cash Flow from financing activities :Purchase of shares under a scheme of arrangement – (2,341.40)Proceeds from share capital 25.00 376.25Proceeds from borrowings 22750.31 21971.69Repayments of borrowings (25451.31) (25915.14)Bank overdrafts (net) 1107.60 (1473.66)Repayment of finance lease liabilities – (1.47)Interest paid (2951.36) (5015.21)Dividend paid (1144.06) (1844.93)Tax on distributed profits (323.97) (51.28)Net Cash used in financing activities (5987.79) (14295.15)Net decrease in cash and cash equivalents (39.13) (205.11)Cash and cash equivalents (Opening Balance) 3764.71 3271.77Add : Share in opening cash & cash equivalents of jointly controlled entities – 698.05

3764.71 3969.82

Cash and cash equivalents (Closing Balance) 3725.58 3764.71(including share in jointly controlled entities - Rs. 944.14 lac)

Notes :1. Cash and Cash equivalents.

Cash on hand and balances with banks 3725.70 3765.74Effect of exchange rate changes (0.12) (1.03)Cash and cash equivalents 3725.58 3764.71

2. The above cashflow statement includes share of cashflows from jointly controlled entities as under:a. Net cash from operating activities 1287.95b. Net cash used in investing activities (80.28)c. Net cash used in financing activities (520.81)

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2004

As per our Report attached Signatures to Cash Flow Statement

For and on behalf ofKalyaniwalla & Mistry A. B. Godrej N. B. GodrejChartered Accountants Chairman Managing Director

V. R. Mehta S. K. BhattPartner Company Secretary

Mumbai, May 28, 2004


49

GROSS BLOCK DEPRECIATION NET BLOCK ASSETS As on Deductions/ As on Upto Deductions/ For the Upto As on As on

01.04.2003 Additions Adjustments 31.3.2004 31.03.2003 Adjustments Year 31.3.2004 31.3.2004 31.03.2003LAND 1464.48 13.16 6.26 1471.38 45.49 0.15 9.23 54.57 1416.81 1418.99BUILDINGS 11540.64 508.03 725.05 11323.62 2284.13 (31.44) 319.14 2634.71 8688.91 9256.51PLANT & MACHINERY 42083.44 1027.86 1539.69 41571.61 20309.67 697.22 2230.80 21843.25 19728.36 21773.77RESEARCH CENTRE 150.34 2.87 0.00 153.21 51.39 0.00 5.18 56.57 96.64 98.95FURNITURE & FIXTURES 1491.45 117.02 133.65 1474.82 783.16 92.41 118.92 809.66 665.16 708.29OFFICE & OTHER EQUIPMENTS 1233.57 235.61 100.38 1368.80 618.22 61.24 154.14 711.12 657.68 615.35VEHICLES 1369.82 188.92 261.79 1296.95 565.06 133.24 157.36 589.18 707.77 804.76TREES DEVELOPMENT COST 464.09 0.00 9.40 454.69 148.56 0.00 30.33 178.89 275.80 315.53TECHNICAL KNOWHOW FEES 200.00 0.00 0.00 200.00 129.03 0.00 33.33 162.36 37.64 70.97TRADEMARKS 3121.99 – – 3121.99 518.56 – 233.28 751.84 2370.15 2603.43Assets Acquired Under Finance LeaseVEHICLES 54.20 190.56 2.87 241.89 3.09 0.00 56.33 59.42 182.47 51.11Share in jointly controlled entities 2,446.43 138.32 24.73 2560.01 1,133.96 19.85 171.52 1285.64 1274.37 1312.47TOTAL - This Year 65620.45 2422.35 2803.82 65238.97 26590.32 972.67 3519.56 29137.21 36101.76 39030.13

- Previous Year 62272.70 4150.06 802.31 65620.45 23612.61 507.09 3484.79 26590.31

CAPITAL WORK-IN-PROGRESS 331.27 481.65TOTAL 36433.03 39511.78

1. Land includes leasehold land of Rs.236.93 lac (Previous Year Rs.240.87 lac) which is being amortised over the period of lease.2. Buildings, Plant & Machinery and Research Centre at Vikhroli Factory were revalued on 30th June, 1992 on the basis of a Valuation Report submitted by

professional valuers.3. Depreciation for the year includes Rs.235.89 lac (Previous Year Rs.235.24 lac) being depreciation on revalued component of the fixed assets.4. Gross block, deductions / adjustments includes Rs. Nil lac (Previous Year Rs. 47.11 lac) being the revalued component of assets sold/discarded during the year.5. Buildings includes Rs.0.01 lac (previous year Rs.0.01 lac) being the value of investment in shares of Co-operative Housing Society.6. Buildings includes Rs. 2651.08 lacs (previous year Nil ) being the cost of equity shares in Tahir Properties Ltd., representing the right of the Company to

five flats in the property.


SCHEDULE 1 : SHARE CAPITALAuthorised:13,33,33,333 Equity shares of Rs.6 each 8000.00 8000.0010,00,00,000 Unclassified Shares of Rs.10 each 10000.00 10000.00

18000.00 18000.00Issued, Subscribed and Paid Up:4,85,42,952 Equity shares of Rs. 6 each fully paid 2912.58 2912.58

2912.58 2912.58Of the above,(i) 4,01,02,008 Shares are held by Godrej & Boyce Mfg. Co. Limited, the holding company

SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AND PROFIT AND LOSSACCOUNT FOR THE YEAR ENDED MARCH 31, 2004

SCHEDULE 5 : FIXED ASSETS (Rs. lac)

SCHEDULE 2 : RESERVES AND SURPLUSCapital ReservesSecurities Premium Account 1099.16 1099.16Capital Investment Subsidy Reserve 65.97 51.55Revaluation Reserve 3256.59 3492.48Capital Redemption Reserve 3125.00 3125.00Share in jointly controlled entities 228.89 228.89Total Capital Reserve 7775.61 7997.08Revenue ReservesGeneral Reserve 4899.43 4420.35Profit and Loss Account 15317.17 12223.01Share in jointly controlled entities 477.98 348.18Total Revenue Reserves 20694.58 16991.54Total Reserves 28470.19 24988.62


SCHEDULE 3 : SECURED LOANSTerm loans from financial institutions 1448.92 950.00Term loans from banks 19360.40 19364.91Bank overdrafts 5877.38 6476.69Share in jointly controlled entities 148.61 —

26835.31 26791.60


SCHEDULE 4 : UNSECURED LOANSFixed deposits 3751.20 5518.74Intercorporate deposits 1780.00 1436.83Commercial paper – 1000.00Short term loans from banks 5237.14 800.00Loan from financial institutions – 4331.11Sales tax deferment facility 266.46 259.61Share in jointly controlled entities 438.55 424.13

11473.35 13770.42


50

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


SCHEDULE 6 : INVESTMENTS

LONG TERM INVESTMENTSAt cost less diminution in value

A. IN ASSOCIATES

Equity Shares (Unquoted)

Cost of Investment 1326.16 426.16(including Rs. 295.01 lac of goodwill on acquisition,previous year Rs. 251.52 lac)Less : Share of post acquisition losses (326.94) (125.47)

999.22 300.69B. OTHERS

Equity Shares (Quoted) 6227.98 2448.14

Equity Shares (Unquoted) 1777.47 129.67

Perference Shares (Unquoted - partly paid) 450.02 425.02

Optionally Convertible Subordinated Notes – 314.52

Preferred Stock (Unquoted) 1311.00 465.30

Government Securities (Unquoted) 1.24 1.32

Units of Mutual Funds (Unquoted) 252.20 383.00

Shares in Co-operative societies 0.22 0.22

Share in jointly controlled entities – 45.33

11019.35 4513.21

Less : Provision for diminution in value of investments (1372.01) (427.50)

9647.34 4085.71


SCHEDULE 7 : INVENTORIES(at lower of cost and net realisable value)Stores and spares 801.59 611.18Raw materials 11924.42 12142.98Work-in-progress 1340.45 1525.41Finished goods 6208.03 6110.49Stock-in-trade 462.16 1437.86Projects-in-progress 1252.91 963.44Share in jointly controlled entities 1278.71 1356.89

23268.27 24148.25

SCHEDULE 8 : SUNDRY DEBTORS(Unsecured)Debts outstanding over six monthsConsidered good 1218.59 1232.49Considered doubtful 509.81 961.51

1728.40 2194.00


Other debts, considered good 14395.80 13424.20

16124.20 15618.20Less: Provision for doubtful debts (509.81) (961.51)

15614.39 14656.69Share in jointly controlled entities 374.07 535.65

15988.46 15192.34

SCHEDULE 9 : CASH AND BANK BALANCESCash and cheques on hand 148.88 147.97Balances with scheduled banks– on current accounts 2085.48 2363.05– on deposit accounts 547.09 996.44Share in jointly controlled entities 944.13 257.25

3725.58 3764.71


51


SCHEDULE 14 : SALE OF PRODUCTSAND SERVICESSales (gross) 169991.86 154144.30Less: Excise duty 5262.04 4791.81Sales (net) 164729.82 149352.49Processing charges 3550.34 3914.09Storage charges – 12.18Export incentives 388.36 242.42Licence fees and service charges 1829.95 2054.56Project / Development Management Fees 1139.37 796.47Share in jointly controlled entities 10654.76 9790.97

182292.59 166163.18

SCHEDULE 15 : OTHER INCOMEInterest :- Government Securities 24.71 36.00- Income tax refund 75.09 277.91- Others 54.61 69.75Provision for depletion in value of long terminvestments written back 92.43 2.26Dividend 286.39 1,363.38Miscellaneous income 434.03 583.72Profit on sale of fixed assets (Net) 33.59 11.65Profit on sale of long term investments (51.00) 23.71Share in jointly controlled entities 122.01 37.14

1071.86 2405.52

SCHEDULE 16 : MATERIALS CONSUMEDAND PURCHASE OF GOODSRaw materials consumed :Stocks at the commencement of the year 14293.76 13472.31Add : Purchases (net) 114352.71 110129.43

128646.47 123601.74Less : Stocks as at the close of the year 13698.21 14041.97Raw Materials consumed during the year 114948.26 109559.77Purchase of goods for resale 11974.30 8295.03Share in jointly controlled entities 4774.40 5064.66

131696.96 122919.46

SCHEDULE 17 : EXPENSESSalaries, wages and allowances 9082.29 8170.86Contribution to provident fund and other funds 561.67 498.23Employee welfare expenses 797.92 762.64Stores and spares consumed 1320.50 1217.51Power and fuel 5064.45 5211.13Processing charges 3154.94 2809.83Rent 1409.91 422.56Rates and taxes 778.58 506.40Repairs and maintenence- Machinery 816.20 878.03- Buildings 254.02 286.03- Other assets 81.67 50.87Insurance 179.36 172.77Freight 2506.71 2282.35Commission 2702.62 2024.20


SCHEDULE 10 : LOANS AND ADVANCES(Unsecured and considered good unlessotherwise stated)Loans and Advances (refer note 6 ) 2713.57 2468.47Advances recoverable in cash or in kind orfor value to be received (net of provisionfor doubtful advances Rs. 917.66 lac,previous year Rs. 830.63 lac) 11598.96 8865.54Intercorporate deposits– Associate companies – 89.40– Others 424.01 239.10Deposits and balances with– Customs & excise authorities 1180.44 185.60– Others 694.07 1109.54Advance payment of taxes 34.83 110.90(Net of provision for tax of Rs. 2147.55 lac,previous year Rs. 4586.34 lac)Share in jointly controlled entities 360.62 360.33

17006.50 13428.88

SCHEDULE 11 : CURRENT LIABILITIESAcceptances 3323.64 686.49Sundry creditors 25193.61 23600.65Advances from customers 1283.47 421.74Sundry deposits 2073.01 2275.88Investor Education & Protection Fund*- Unclaimed dividend 65.93 79.28- Unpaid Application Money – 3.43- Unpaid Matured Deposits 139.20 122.46- Unpaid Matured Debentures 147.61 133.60- Interest accrued on above 50.90 66.60Other liabilities 3303.18 2408.51Interest accrued but not due 69.02 222.53Share in jointly controlled entities 1878.01 2282.54

37527.58 32303.71

SCHEDULE 12 : PROVISIONSProposed final dividend 1493.56 1021.03Provision for tax on distributed profits 186.97 139.23Provision for retirement benefits 2577.98 2490.19Share in jointly controlled entities 101.64 51.69

4360.15 3702.14

SCHEDULE 13 : MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)Deferred revenue expenditure- Gratuity – 11.00- Voluntary retirement compensation 208.63 411.91- Preliminary Expenses 28.77 104.07- Brand Promotion Expenses – 620.56- Software Development Expenses – 121.75- Others 6.52 39.05Share in jointly controlled entities – 9.97

243.92 1318.31



52



Discount 217.97 163.78Advertisement and publicity 2056.32 680.90Sales promotion 558.24 434.34Selling and distribution expenses 596.70 520.12Bad debts written off 784.09 45.90Provision for doubtful debts andadvances written back (345.63) 273.85Provision for depletion in value oflong term investments – 0.59Cost of Project Management 6.86 5.99Miscellaneous expenses 3206.96 3573.42Share in jointly controlled entities 4368.12 3712.71

40160.47 34705.01SCHEDULE 18 : INVENTORY CHANGEStocks at the commencement of the year

Finished goods 6386.29 4055.92Work-in-progress 1280.43 1198.36Share in jointly controlled entities 950.28 663.76

8617.00 5918.04Less: Stocks at the close of the year :

Finished goods 6127.14 6044.91Work-in-progress 1340.45 1621.81Share in jointly controlled entities 875.62 944.87

8343.21 8611.59

(Increase)/Decrease in Inventory 273.79 (2693.55)

SCHEDULE 19 : INTEREST AND FINANCIAL CHARGES (Net)Interest paid- on debentures and fixed loans 1126.28 1293.10- on bank overdrafts 700.30 1292.64- to Financial Institutions 55.32 289.72- on Inter Corporate Deposits 169.55 331.93- other interest 242.74 160.83

2294.19 3368.22Less: Interest received- on loans & deposits 37.67 86.13- on Customer balances, etc 35.29 46.99- projects and landlords 438.68 549.14- others 5.65 14.55

517.29 696.81

Net Interest 1776.90 2671.41Brokerage and other financial charges 500.25 429.93Foreign exchange (gain) / loss (644.91) 365.59Share in jointly controlled entities 22.52 58.42

1654.76 3525.35

SCHEDULE 20 : PRIOR PERIOD ADJUSTMENTSExcess provision for Income-tax 122.63 136.94Depreciation (6.39) –Excess provision for expenses (net) (3.55) (55.89)Share in jointly controlled entities – 1.08

112.69 82.13

SCHEDULE 21 : NOTES TO ACCOUNTS1. Significant Accounting Policies:

a) Accounting ConventionThe financial statements are prepared under the historical costconvention, on the accrual basis of accounting, in accordancewith the generally accepted accounting principles in India andthe Accounting Standards issued by the Institute of CharteredAccountants of India.

b) Principles of ConsolidationThe consolidated financial statements relate to Godrej IndustriesLimited, the holding company, its majority owned subsidiaries,Joint ventures and Associates (collectively referred to as Group).The consolidation of accounts of the Company with its subsidiarieshas been prepared in accordance with Accounting Standard(AS) 21 ‘Consolidated Financial Statements’. The financialstatements of the parent and its subsidiaries are combined on aline by line basis and intra group balances, intra group transactionsand unrealized profits or losses are fully eliminated.In the consolidated financial statements, ‘Goodwill’ representsthe excess of the cost to the Company of its investment in thesubsidiaries and/or joint ventures over its share of equity, at therespective dates on which the investments are made.Alternatively, where the share of equity as on the date ofinvestment is in excess of cost of investment, it is recognised as‘Capital Reserve’ in the consolidated financial statements.Minority interest in the net assets of consolidated subsidiariesconsists of the amount of equity attributable to the minorityshareholders at the respective dates on which investments aremade by the Company in the subsidiary companies and furthermovements in their share in the equity, subsequent to the datesof investment as stated above.Investments in Joint Ventures are dealt with in accordance withAccounting Standard (AS) 27 ‘Financial Reporting of Interestsin Joint Ventures’. The Company’s interest in jointly controlledentities are reported using proportionate consolidation, wherebythe Company’s share of jointly controlled assets and liabilitiesand the share of income and expenses of the jointly controlledentities are reported as separate line items.Investments in Associates are dealt with in accordance withAccounting Standard (AS) 23 ‘Accounting for Investments inAssociates in Consolidated Financial Statements’ issued by theInstitute of Chartered Accountants of India. Effect has beengiven to the carrying amount of investments in associates usingthe ‘Equity method’. The Company’s share of the post acquisitionprofits or losses is included in the carrying cost of investments.The financial statements of the subsidiaries, joint ventures andassociates used in the consolidation are drawn upto the samereporting date as of the Company i.e. year ended March 31, 2004.

c) Information on subsidiaries, joint ventures and associates(i) The subsidiary companies considered in the consolidated

financial statements are:S. No. Name of the company Country of Percentage of Holding

Incorporation This PreviousYear Year

1. Godrej Agrovet Ltd. India 57.69% 57.69%2. Goldmohur Foods & Feeds Ltd. India 57.69% 57.69%

(100% subsidiary ofGodrej Agrovet Ltd.)

3. Golden Feed Products Ltd. India 57.69% –(100% subsidiary ofGodrej Agrovet Ltd.)


53


S. No. Name of the company Country of Percentage of HoldingIncorporation This Previous

Year Year

4. Godrej Properties &Investments Ltd. India 82.85% 82.85%

5. Girikandra HolidayHomes & Resorts Ltd. India 82.85% 82.85%(100% subsidiary of GodrejProperties & Investments Ltd.)

6. Tahir Properties Ltd. India – 62.86%7. Godrej Remote Services Ltd. India 99.99% 99.99%8. Ensemble Holdings &

Finance Ltd. India 99.95% 99.95%9. Sahyadri Aerosols Ltd. India – 100.00%10. Godrej International Ltd. U.K. 100.00% 100.00%11. Godrej Global Mid-East FZE U.A.E. 100.00% 100.00%

(100% subsidiary ofGodrej International Ltd.)

12. Godrej Tea Ltd. India 70.91% 53.08%13. Godrej Global Solutions Ltd. India 100.00% 99.98%14. Hybrigene Biotechnology Ltd. India – 99.92%

Notes:1. Tahir Properties Ltd. has been excluded from the consolidated

financial statements as the Group’s percentage of holding hasreduced to 50.08% and is intended to be further reduced onconversion of the remaining preference shares of a minorityshareholder into equity. Moreover, the shareholding in the Companyrepresents certain rights in the property and does not necessarilyrepresent control over the Company.

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

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

(ii) Interests in Joint Ventures:

S. No. Name of the company Country of Percentage ofIncorporation Ownership Interest

This PreviousYear Year

i) Godrej SaraLee Ltd. India 25.96% 25.96%

ii) Hicare India Ltd.(earlier known as GodrejPhoto-Me Ltd.) India 40.46% 40.46%

iii) Investments in Associates:

S. No. Name of the company Country of Percentage of HoldingIncorporation This Previous

Year Year

i) Swadeshi Detergents Ltd. India 41.08% 41.08%

ii) Godrej Upstream Ltd. India 42.33% –(held by Godrej GlobalSolutions Ltd.)

iii) Compass Connections Ltd. U.K. 21.16% 21.16%

iv) Personalitree Academy Ltd. India 26.00% 26.00%(held by EnsembleHoldings & Finance Ltd.)

The break-up of Investment in Associates is as under :Rs. In Lac

Swadeshi Godrej Compass PersonalitreeDetergents Upstream Connections Academy

Ltd. Ltd. Ltd. Ltd.

(i) Cost ofAcquisition 191.34 900.00 124.54 110.28

(ii) Goodwillincluded incost ofacquisition 91.48 95.27 79.66 42.84

(iii) Share inprofits/(loss)of associatespost acquisition (b) (142.84) (125.14) (16.92) (42.04)

(iv) Provision fordiminution inthe value ofinvestments – – – 68.24Carrying cost ofInvestments 48.50 774.86 107.62 Nil

d) Fixed Assets

Fixed Assets are stated at cost or as revalued as the case maybe, less accumulated depreciation. Cost includes all expensesrelated to acquisition and installation, of the concerned asset.Exchange differences arising on account of repayment andyear end translation of foreign currency liabilities relating toacquisition of fixed assets are adjusted to the carrying cost ofthe respective assets.

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

e) Borrowing Costs

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

f) Investments

Long term investments are carried at cost. Provision fordiminution, if any, in the value of each long term investment ismade to recognise a decline, other than of a temporary nature.The fair value of a long term investment is ascertained withreference to its market value, the investee’s assets and resultsand the expected cash flows from the investment.

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

g) Inventories

Inventories are valued at lower of cost and net realisable value.Cost is computed on weighted average basis and is net ofmodvat. Finished goods and work-in-progress include cost ofconversion and other costs incurred in bringing the inventoriesto their present location and condition. Obsolescence and otheranticipated losses are provided for wherever considerednecessary.

Construction work-in-progress is valued at cost. Constructionwork-in-progress includes cost of land, premium fordevelopment rights, construction costs, allocated interest andexpenses incidental to the projects undertaken by the Company.


54


h) Foreign Exchange Transactions

Transactions in foreign currency are recorded at the exchangerates prevailing on the date of the transaction. Assets andliabilities related to foreign currency transactions, remainingunsettled at the year end, are stated at the contracted rates,when covered under forward foreign exchange contracts andat year-end rates in other cases. The premium payable onforward foreign exchange contracts is amortised over the periodof the contract. Exchange gains/losses are recognised in theProfit and Loss Account except in respect of liabilities incurredto acquire fixed assets in which case they are adjusted to thecarrying amount of such fixed assets.

i) Revenue Recognition

Sales are recognised where goods are supplied and arerecorded net of returns, trade discounts, rebates, sales taxesand excise duty.

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

Export incentives are accounted on accrual basis and includethe estimated value of duty free import entitlement under theAdvance Licence Benefit Scheme and export incentivesreceivable under the Duty Entitlement Pass Book Scheme andthe Duty Drawback Scheme.

Revenue from construction activity is recognized on“Percentage of Completion Method” of accounting. As per thismethod, revenue in Profit & Loss Account at the end of theaccounting year is recognized in proportion to the actual costincurred as against the total estimated cost of projects underexecution with the Company.

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

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

Interest income is recognised on a time proportion basis.

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

j) Depreciation

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

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

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

Depreciation on assets acquired during the year is providedfor the full accounting year and no depreciation is charged onthe assets sold/discarded during the year, except in case ofmajor additions and deductions exceeding rupees one crore inwhich case, proportionate depreciation is provided.

Depreciation on the revalued component is provided on thestraight line method based on the balance useful life of theassets as certified by the valuers. Such depreciation iswithdrawn from Revaluation Reserve and credited to Profitand Loss Account.

k) Retirement Benefits

Retirement benefits to employees comprise payments underapproved provident fund plans, leave encashment and gratuityto eligible employees. Payments under approved provident fundplans are charged to revenue. The liability in respect of futurepayment of gratuity to retiring employees and leave encashmentbenefit on retirement is provided on the basis of an actuarialvaluation at the end of each financial year.

l) Deferred Revenue Expenditure

The compensation payable under the Voluntary RetirementSchemes, the benefit of which is expected to accrue in futureis deferred over its payback period. The compensation isgenerally amortised over three to five years depending on thepay back period.

Preliminary Expenses and Share issue expenses are amortisedin ten equal instalments.

m) Hedging

Import of crude palm oil by the Company are being hedged byfutures contract on offshore Commodities Exchange. Gains orlosses on settled contracts is recognized in the profit and lossaccount and is included in the cost of materials consumed.Futures contracts not settled as on the Balance Sheet date aremarked to market and losses, if any, are recognized in theprofit and loss account, whereas, the unrealized profit is ignored.

n) Taxes on Income

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

Deferred tax is recognized on timing differences, being thedifferences between the taxable income and accounting incomethat originate in one period and are capable of reversal in oneor more subsequent periods. Deferred tax assets subject to theconsideration of prudence are realized and carried forwardonly to the extent that there is a reasonable certainty thatsufficient future taxable income will be available against whichsuch deferred tax assets can be realized. The tax effect iscalculated on the accumulated timing differences at the yearend and based on the tax rate and laws enacted or substantiallyenacted on the balance sheet date.

o) Segment Reporting

The Accounting Policies adopted for segment reporting are inline with the Accounting Policies of the Company. Segmentassets include all operating assets used by the business segmentsand consist principally of fixed assets, debtors and inventories.Segment liabilities include the operating liabilities that resultfrom the operating activities of the business segment. Assetsand Liabilities that cannot be allocated between the segmentsare shown as part of unallocated corporate assets and liabilitiesrespectively. Income/Expenses relating to the enterprise as awhole and not allocable on a reasonable basis to businesssegments are reflected as unallocated corporate income/expenses.


55

2. Contingent Liabilities

This PreviousYear Year

a) Claims for excise duties, taxes and Rs. lac Rs. lacother matters not acknowledgedby the Company:

i) excise duty - Rs. 2941.10 lac(Previous Year Rs. 3742.80 lac)- net of tax: 1886.10 2367.33

ii) lease rent claimed by MumbaiPort Trust in respect of land leasedto the Foods division. Rs. Nil(Previous Year Rs. 1150.00 lac) – 727.38

iii) other matters - Rs. 3478.77 lac(Previous Year Rs. 4096.78 lac)- net of tax: 2413.28 2990.85

b) Guarantees issued by banks,excluding guarantees issued inrespect of matters reportedin (a) above 1516.40 716.61

c) Guarantees given by the Company inrespect of credit/guarantee limitssanctioned by banks to subsidiaryand other companies. 12166.00 9260.00

d) Uncalled liability on partly paidshares/debentures 126.11 140.81

e) Share in Jointly Controlled Entities 299.64 296.88

3. Capital Commitments

Estimated value of contracts remaining to beexecuted on capital account, to the extentnot provided 181.96 81.98

Share in Jointly Controlled Entities 11.16 –

4. Deferred Tax:

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

Assets This Year Previous YearRs. lac Rs. Lac

Business Losses 1515.80 2069.40Provision for retirement benefits 733.00 586.00Provision for doubtful debts/advances 428.31 562.44Others 164.26 198.80Share in Jointly Controlled Entities 57.81 80.47

2899.18 3497.11

LiabilitiesDepreciation 5533.45 6791.17VRS Expenses 43.00 134.00Deferred Revenue Expenditure 428.70 293.86Share in Jointly Controlled Entities 102.16 119.74

6107.31 7338.77

Net Deferred Tax Liability 3208.13 3841.67

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

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

6. Leases:

a) The group has entered into leave and licence agreements inrespect of its commercial and residential premises. These arenot non-cancelable and range between 11 months to 35 monthsand are renewable by mutual consent on mutually acceptableterms. Leave and licence arrangements being similar insubstance to operating leases, the particulars of the premisesunder leave and licence arrangement are as under:

This Year Previous YearRs. lac Rs. Lac

Gross carrying amount of premises 3959.07 3732.82

Accumulated depreciation 883.36 743.52

Depreciation for the period 133.03 90.59

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

Period Minimum Jointlyfuture lease controlled

rentals entitiesRs. Lac Rs. Lac

Within one year 153.06 50.29

Later than one year and notlater than five years 194.63 33.19

Later than five years 75.96 –

Total 423.65 83.48

Amount recognized during the year 130.25 75.68

c) Finance Leases

The group has acquired assets under Finance Lease. Liabilityfor minimum lease payment is secured by hypothecation of thevehicles acquired under the lease. The minimum lease paymentsoutstanding as on March 31, 2004, in respect of vehiclesacquired under lease are as under :

Period Total minimum Un-matured Present valuelease payments Interest of minimum

outstanding as on leaseMarch 31, 2004 payments

Rs. Lac Rs. Lac Rs. Lac

Within one year 70.08 12.63 66.36

Later than one yearand not later thanfive years 141.55 11.12 121.58

211.63 23.75 187.94

7. Hedging

Reserve Bank of India has permitted the Company to hedge itsexposure on Crude Palm Oil on offshore exchanges to the extent ofits imports. Accordingly, the Company is hedging import of crudepalm oil on the Malaysian Commodities Exchange by way of futurescontracts. The particulars of the futures contracts for the year are asunder:



56

This Year Previous Year

Details Purchase Sale Purchase Sale

Total number of contractsentered during the year 33 28 56 66

Number of units(25 MT per unit) underabove contracts 1,401 1,281 206 326

Future contracts not settledas on March 31, 2004 – – – 10

Number of units underabove contracts – – – 120

8. Profit & Loss Account

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

b) Rent includes a provision of Rs. 1,008 lac on account of leaserent payable to Mumbai Port Trust pursuant to finalization oflitigation proceedings as per the order of the HonourableSupreme Court of India dated 13 January 2004 – an exceptionalitem.

9. Related Party Disclosures :

a) Parties where control exists

Godrej & Boyce Mfg Co. Ltd, the holding company.

b) Related Parties with whom transactions have taken placeduring the year.

Fellow Subsidiaries:

Godrej Consumer Products Ltd.

Godrej Infotech Ltd.

Godrej Appliances Ltd.

Godrej Foods Ltd.

Associate / Joint Venture Companies

Godrej SaraLee Ltd.

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

Swadeshi Detergents Ltd.

Personalitree Academy Ltd.

Key Management Personnel

Mr. N. B. Godrej

Mr. V. F. Banaji

Ms. T. A. Dubash

Mr. Mathew Eipe

Mr. M. P. Pusalkar

Enterprises over which key management personnel excerisesignificant influence

Bahar Agrochem & Feeds Pvt. Ltd.

Vora Soaps Ltd.



57

Sale of Goods 23.20 2606.48 25.73 – – 0.88 2656.29Previous Year 17.95 2940.15 3.25 – – 0.44 2961.79Sales of Fixed Assets – 153.07 – – – – 153.07Previous Year – – – – – – –Purchase of goods & equipment 92.12 713.37 14.44 – – 696.26 1567.19Previous Year 65.79 1342.13 43.24 – – – 1451.16Processing charges received – 2845.71 – – – – 2845.71Previous Year – 1931.99 – – – – 1931.99Commission received – 19.62 – – – – 19.62Previous Year – 33.00 – – – – 33.00Recovery of establishment &Other Expenses 10.46 1012.13 237.09 – – 0.04 1259.72Previous Year 4.49 1121.73 229.35 – – 0.06 1355.63Establishment & other exps paid 395.48 86.60 18.95 – – – 501.03Previous Year 155.99 78.59 25.04 – – – 259.62Refund of Deposit – – 46.55 – – – 46.55Previous Year – 2.00 23.20 – – – 25.20Interest received – – 0.06 – – – 0.06Previous Year – 24.58 – 0.35 – 0.03 24.96Interest paid – – – 0.28 – – 0.28Previous Year – 4.64 – – – – 4.64Finance provided includingloans & equity contributions 8.00 25.00 115.48 – – – 148.48Previous Year 23.02 3066.00 448.68 – – 8.00 3545.70Finance received during the year – – – – – – –Previous Year – 300.00 – 1.98 – – 301.98Finance repaid during the year – – 28.60 – – – 28.60Previous Year – 500.00 – – – – 500.00Guarantees & collaterals given – – – – – – –Previous Year – – 60.00 – – – 60.00Dividend income – 284.00 546.93 – – – 830.93Previous Year – 88.00 1275.33 – – – 1363.33Dividend paid 716.51 – – 14.55 – 4.46 735.52Previous Year 246.36 – – 6.23 – 2.18 254.77Remuneration – – – 338.66 – – 338.66Previous Year – – – 255.28 6.40 – 261.68Write-back of Provisions – 0.18 0.11 – – – 0.29Previous Year – – – – – – –Provisions for doubtful advances/investments – – 113.28 – – – 113.28Previous Year – – – – – – –Balance Outstanding as on March 31, 2004Receivables 70.24 200.94 337.49 – – 0.02 608.69Previous Year 23.83 204.34 8.93 6.69 – 89.42 335.21Payables 0.51 195.60 206.28 – – 0.11 402.50Previous Year 1.23 85.45 4.74 – – 0.11 91.53

10. Earnings Per Share This Year Previous Year

a. Calculation of weighted average number of equity sharesNumber of shares at the beginning of the year Nos. 4,85,42,952 6,16,11,228Shares bought back pursuant to the scheme of arrangement Nos. – 1,30,68,276Number of equity shares outstanding at the end of the year Nos. 4,85,42,952 4,85,42,952Weighted average number of equity sharesoutstanding during the year Nos. 4,85,42,952 5,81,38,289

b. Net profit after tax available for equity shareholders Rs. Lac 5850.96 3409.47c. Basic and diluted earnings per share of Rs.6 each Rupees 12.05 5.86

c) Transactions with Related Parties Rs. Lac

Nature of Transaction Holding Fellow Associate/ Key Relative of Key EnterprisesCompany Subsidiaries Joint Venture Management Management over which Key

Companies Personnel Personnel MangementPersonnelexercise

significantinfluence Total

Industries

Lim

ited – C

onsolid

ated

A

ccounts

58 11. Segment Information (Rs. lac)

Information about primary Chemicals Animal Feed Foods Estate & Property Household Tea Others Total

business segments Development Insecticides

This Previous This Previous This Previous This Previous This Previous This Previous This Previous This Previous

Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year Year

(A) Revenue

External Sales 49364.25 44877.54 65549.07 66627.19 19358.07 17590.02 4763.57 6204.45 10776.77 9805.98 3507.11 1171.08 29759.54 21626.74 183078.38 167903.00

Intersegment Sales 4.15 4.50 – 1534.03 – – 247.24 177.80 – – 104.76 – 996.86 576.98 1353.01 2293.31

Total Sales 49368.40 44882.04 65549.07 68161.22 19358.07 17590.02 5010.81 6382.25 10776.77 9805.98 3611.87 1171.08 30756.40 22203.72 184431.39 170196.31

Less: Intersegment Sales (4.15) (4.50) – (1534.03) – – (247.24) (177.80) – – (104.76) – (996.86) (576.98) (1353.01) (2293.31)

Total Revenue 49364.25 44877.54 65549.07 66627.19 19358.07 17590.02 4763.57 6204.45 10776.77 9805.98 3507.11 1171.08 29759.54 21626.74 183078.38 167903.00

(B) Results

Segment result before interest,

exceptional items and tax 7311.51 5644.78 2916.73 2853.67 (1391.41) 87.18 1886.72 1761.43 1388.27 1190.92 (2200.34) (665.76) 149.92 914.93 10061.40 11787.15

Exceptional items – –

Unallocated expenses net

of unallocated income (1992.65) (1307.76)

Interest Expense (net) (1654.77) (3525.35)


(including prior period adjustments)

Taxes (318.49) (2674.98)

Profit after taxes 6095.48 4279.06

Share of loss in associates (201.47) (125.45)

Profit before Minority Interest 5894.01 4153.61

Share of Minority Interest (43.05) (744.14)

Net Profit after Minority Interest 5850.96 3409.47

Segment Assets 34687.52 36476.81 16833.19 15010.35 7623.64 8326.34 16886.69 19182.24 4232.40 9190.10 2744.05 4662.84 34542.36 20174.13 117549.85 113022.81

Unallocated Assets 35.72 41.59

Total Assets 117585.57 113064.40

Segment Liabilities 17432.62 15858.42 12649.47 8063.92 3871.75 3986.08 10169.59 3968.56 2566.81 2313.47 4312.46 4800.65 6240.41 3689.54 57243.11 42680.64

Unallocated Liabilities 28959.69 42482.54

Total Liabilities 86202.80 85163.18

Total Cost incurred during

the year to acquire segment assets 747.04 1102.62 302.65 299.77 136.79 183.00 288.51 1679.41 138.32 106.23 57.25 172.77 751.79 606.26 2422.35 4150.06

Segment depreciation 1727.52 1778.46 489.56 479.06 256.06 300.00 160.09 126.81 171.52 133.60 27.06 17.57 445.38 414.05 3277.19 3249.55

Information about Secondary

Business Segments

Revenue by Geographical markets

India 151798.27 148384.76

Outside India 31280.11 19518.24

Total 183078.38 167903.00

Carrying Amount of Segment assets

India 115005.68 111384.11

Outside India 2579.89 1680.29

Total 117585.57 113064.40

Notes:

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

2. Chemicals segment includes the business of Oleochemicals such as Fatty Acids, Fatty Alcohols and Alfa Olefin Sulphonates and Refined Glycerin. Animal Feed segment includes the business of compound feed for cattle, poultry, acquatic animals. Foods segment

includes the business of refined vegetable oils and vanaspati, fruit and vegetable puree, pulp, juices and fruit beverages. Estate segment comprises the business of developing commercial & residential property and giving premises on leave and licence basis.

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

3. The geographical segments are as follows :

– Sales in India represent sales to customers located in India.

– Sales outside India represent sales to customers located outside India.


59

1. Name of the Company Godrej Godrej Godrej Ensemble Godrej Godrej Godrej Golden Godrej Goldmohur Girikandra HolidayAgrovet Properties & Remote Holdings International Global Tea Feed Global Foods & Homes & ResortsLimited Investments Services & Finance Limited Solutions Limited Products MidEast Feeds Limited

Limited Limited Limited Limited Limited FZE Limited

2. The Company’s interest in the

subsidiaries as on March 31, 2004

a. Number of Equity Shares 4106956 5073965 7712642 3770160 1505000 24950000 9749996 (See note (See note (see note (see note

Total Number of Shares 7118752 6444545 7723525 3774160 1505000 25000000 13750000 4 below) 5 below) 6 below) 7 below)

b. Face Value 10 10 10 10 £1 (US$1.52) 10 10

c. Extent of Holding 57.69% 78.73% 99.86% 99.89% 100% 99.80% 70.91%

3. Net aggregate profit/(Loss) of the

subsidiary company so far it concerns Rs. lac Rs. lac Rs. lac Rs. lac US$ Rs. lac Rs. lac _ _ _ _

the members of the Company

A. For the financial year ended on

March 31, 2004

i. Not dealt with in the books of

Account of the Company 260.82 192.99 (180.88) (102.29) 414,799 (173.38) (598.52) _ _ _ _

ii. Dealt with in the books of Account

of the Company 308.02 Nil Nil Nil Nil Nil Nil _ _ _ _

B. For the subsidiary company’s

previous financial years since it

became a subsidiary

i. Not dealt with in the books of

Account of the Company 1,489.33 576.60 (302.07) (659.88) 1,554,943 Nil Nil _ _ _ _

ii. Dealt with in the books of

Account of the Company 1,549.51 847.53 Nil Nil 841,955 Nil Nil _ _ _ _

Notes:

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

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

3. 4,000 Equity Shares of Rs.10 each in Ensemble Holdings & Finance Ltd., are held by Godrej Agrovet Ltd., a subsidiary of the Company.

4. 50,000 Equity Shares of Rs. 10 each fully paid up in Golden Feed Products Ltd. (representing 100% of the Share Capital) are held by Godrej Agrovet Ltd., a subsidiary of the Company.

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

6. 21,58,170 equity shares of Rs.10 each fully paid up in Goldmohur Foods & Feeds Ltd. (representing 100% of the share capital) are held by Godrej Agrovet Ltd, a subsidiary of the Company.

7. 500 equity shares of the face value of Rs.1000 each fully paid up in Girikandra Holiday Homes and Resorts Ltd. (representing 100% of the share capital) are held by Godrej Properties & Investments Ltd.,

a subsidiary of the Company.

8. 10,883 Equity Shares of Rs.10 each fully paid up in Godrej Remote Services Ltd. are held by Ensemble Holdings & Finance Ltd., a subsidiary of the Company.

A.B. GODREJ Chairman

N.B. GODREJ Managing Director

S.K. BHATT

Mumbai, May 28, 2004 Company Secretary

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

gil_annualreport_2003_04

Documents

godrej tea limited

godrej chairmanj

godrej remote services

directors report

analysis report

annual report

auditors report

goldmohur foods feeds