Annual Report - Godrej Industries - 2008-2009

GODREJ INDUSTRIES LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

To
The Shareholders,

Your Directors have pleasure in submitting the Annual Report along with the
Audited Accounts for the year ended March 31, 2009.

REVIEW OF OPERATIONS:

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

Rs. lac
Year ended March 31,
2009 2008

Sales of products and services 81,624 73,531
Other Income 15,504 10,351
Total Income 97,128 83,882
Total Expenditure other than Interest 86,747 66,787
and Depreciation
Profit before Interest, Depreciation 10,381 17,095
and Tax
Depreciation 2,646 2,547
Profit before Interest and Tax 7,735 14,548
Interest and Financial Charges (net) 6,085 3,776
Profit before Tax 1,650 10,772
Provision for Current Tax 123 492
Profit after Current Tax 1,527 10,280
Provision for Deferred Tax (341) (369)
Profit after Current and Deferred 1,868 10,649
Taxation
Profit on sale of undertaking, 26 232
extraordinary item (Net of tax)
Net Profit 1,894 10,881
Adjustments in respect of prior years (86) -
Surplus brought forward 32,437 27,321
Profit after Tax available for 34,245 38,202
appropriation
Appropriation:
Your Directors recommend appropriation
as under:
Dividend on Equity Shares 3,997 3,997
Tax on distributed profits 679 679
Transfer to General Reserve 181 1,089
Surplus Carried Forward 29,388 32,437
Total Appropriation 34,245 38,202

The total income increased by Rs.13,246 lac from Rs.83,882 lac to Rs.97,128
lac. The Net Profit for the year was Rs.1,894 lac as compared to Rs.10,881
lac in the previous year.

DIVIDEND:

The Board of Directors of your Company recommends a final dividend of
Rs.1.25 per equity share of Re.1/- each, aggregating Rs. 3997 lac, the same
amount which was paid in the previous year.



MANAGEMENT DISCUSSION AND ANALYSIS:

There is a separate section on Management Discussion and Analysis appended
as Annexure A to this Annual Report, which includes the following:

* Industry Structure and Developments

* Discussion on financial performance with respect to operational
performance

* Segmentwise performance

* Human Resources and Industrial Relations

* Opportunities and Threats

* Internal Control Systems and their adequacy

* Risks and Concerns

* Outlook

SUBSIDIARY, ASSOCIATE AND JOINT VENTURE COMPANIES:

Your Company has interests in several industries including animal feeds,
poultry and agro-products, oil palm plantation, property development,
household insecticides, beverages and confectionery, personal care, etc.
through its subsidiary/associate/joint venture companies.

Godrej Agrovet Limited (GAVL):

GAVL recorded a revenue growth of 11% over the previous year, with the
turnover increasing from Rs.1,15,435 lac to Rs.1,28,346 lac. The profit
after tax and extraordinary items increased from Rs.3,883 lac to Rs.5,838
lac.

The year under review, saw a good turnaround of the animal feed business of
GAVL. This was possible due to strategic linkages for sourcing, focus on
quality, cost control and timely price increases. The agricultural inputs
division of GAVL continued to return a good performance. 'Hitweed', the
herbicide product launched by GAVL saw a good market acceptance.

Based on the court order, approving the scheme of arrangement between
Godrej Agrovet Limited (GAVL) and Goldmohur Foods and Feeds Limited (GFFL),
GFFL was merged with GAVL with retrospective effect from April 1, 2007.

The year under review also witnessed some restructuring, with the processed
chicken business, being transferred to Godrej Tyson Foods Limited (formerly
Godrej Foods Limited)(GTFL). GAVL divested 51% shareholding in GTFL to
Tyson Foods Inc., a global Foods major.

GAVL also transferred the gourmet food retailing business, carried under
the banner of Nature's Basket, to its 100% subsidiary Natures Basket
Limited. This change is expected to bring in a greater focus on this
exclusive food retailing business.

GAVL continues to be the holding company of Godrej Oil Palm Limited
(formerly Godrej Oil Plantations Limited), Cauvery Palm Oil Limited and
Golden Feed Products Limited apart from Natures Basket Limited which was
incorporated in the current year. GAVL ceases to be the holding company of
Godrej Tyson Foods Limited (formerly Godrej Foods Limited) consequent to
divesture of 51% to Tyson Foods Inc.

Godrej Properties Limited (GPL):

GPL has posted a total income of Rs. 18,813 lac and the profit after tax
was Rs.7,474 lac for the year ended March 31, 2009.

During the Financial Year 2008-09 GPL has signed a MOU with the Ahmedabad
Municipal Corporation for the development of a special township project at
village Jagatpur, Gujarat.

GPL has a well diversified portfolio spread across established Tier1 and
emerging Tier-II and III locations. The Company's business model of
partnering with landowners for sourcing of land coupled with outsourcing
strategy for developing each project has helped during this slowdown in the
industry.

GPL has filed the Draft Red Herring Prospectus with SEBI on May 28, 2008 in
relation to the proposed Initial Public Offer of 9,429,750 equity shares of
Rs. 10/- each (including a pre-IPO placement of upto 2,444,750 equity
shares).

Godrej International Limited (GINL):

GINL trades worldwide in vegetable oils. GINL's turnover increased by 15%
to US$ 11,55,04,010 from US$ 10,01,39,390 whilst profits increased by 1.5%
to US$ 13,79,611 from US$ 13,60,464. The company successfully weathered a
massive downturn in vegetable oil prices during the year and emerged
stronger.

Godrej Hershey Limited (GHL):

Your Company holds 43% stake in GHL. During the year under review, GHL
recorded an impressive 38% growth in sales over last year.

The topline growth was led by Beverages which grew 45%. GHL also added 2
new categories viz., confectionery and syrup, in its portfolio. In June
2008, the manufacturing unit at Nalagarh in Himachal Pradesh commenced
operations bringing confectionery into GHL's business. 'Hershey Chocolate
Syrup' manufactured at Mandideep was launched in November 2008. During the
year the sales and marketing functions were restructured to improve focus.
The gross margin was under pressure due to rising commodity costs in 2008-
09. GHL went live on all business processes in SAP in September, 2008 with
connectivity being established across 3 plants, 36 CFAs Ft 4 regions.

With HR initiatives, GHL employee commitment scores improved significantly
in the 'Great places to work' annual survey.

Nutrine Confectionery Company Limited (NCCL):

NCCL, a 100% subsidiary of GHL, is a major player in confectionery business
in India. Its product portfolio includes strong brands such as MahaLacto,
Koko Naka, Milk Eclairs, Honey Fab, Aam Ras, Aasay, SuperStar and Gulkand.

NCCL recorded growth in sales of 15%. The topline growth was led by
distribution expansion, marketing focus and innovations.

The brand architecture was defined for the confectionery portfolio with all
rich, creamy and indulgent toffees coming under 'Maha' brand & all fruity
and spicy variants coming under 'Nutrine'. New product 'Maha Choco' was
launched under the 'Maha' brand & became the third largest confectionery
brand in NCCL. 'Santra Goli' was launched under 'Nutrine' brand in addition
to the revamping of Aamras & Gulkand. M.S. Dhoni, was signed up as the
brand ambassador for confectionery portfolio. The gross margin was under
pressure due to rising commodity cost of sugar and milk in 2008-09. NCCL
went live on all business processes in SAP in September, 2008.

Godrej Sara Lee Limited (GSLL):

The consolidated business recorded a sales of Rs. 75465 lac, a 14% growth
during the year 2008-09 over the previous year. The business maintained a
high profitability focus and achieved a net profit of Rs. 10447 lac, a
growth of 19% during the year under review.

GSLL has built its business with consumer at the core of all key activities
undertaken by the business. All the operations and initiatives -
innovations, brand building, continue to be driven around the philosophy of
Consumer Centricity.

Household Insecticides achieved new records in leadership with market share
gains and improving profitability. Good Knight saw two new product launches
on the advanced platform - Good Knight Advanced Low Smoke Coil and Good
Knight Advanced Aerosol. New Television communications for Good Knight
Aerosol won international accolades. Hit drove the growth of aerosol
segment while maintaining the leadership in this segment.

Global brands, Ambipur and Brylcreem saw launch of new products in the
range with Aromatherapy (Lavendar Spa and White Lilies) and Hybridz
respectively. The global brand portfolio was fully integrated in the
business and saw a growth of 56% for the year over last year.

All the innovations and brand building initiatives were strongly supported
by strong on ground activations.

GSLL continued to align sales infrastructure to the growth opportunities in
the market. It significantly improved its service to the traditional
general trade outlets by adopting a segmentation approach and providing
exclusive distributor salesmen for the premium and mass general trade
outlets. This effort has resulted in good growth from the general trade.
Focussed initiatives in small towns and rural markets helped GSLL to drive
growth in these markets. GSLL also continued to strengthen its
relationships with the emerging organised retail. Special emphasis was
given to build the capability of sales team to deliver superior market
execution.

Godrej Consumer Products Limited (GCPL):

GCPL continues to be amongst the fastest growing companies in the FMCG
sector and has maintained strong growth momentum across its business
segments.

During the year GCPL introduced several new products and revamped some of
its current offerings to better suit consumer tastes. During the year under
review, GCPL commenced production at the new Chemical and Soap Noodle Plant
at Malanpur. GCPL launched yet another variant of Godrej No. 1, namely
Strawberry & Walnut'. The Cinthol range was relaunched with new variants
and graphics led by its new brand ambassador Hrithik Roshan.

The year also saw GCPL launch new range of colours in ammonia free powder
and liquids under the Godrej Expert Hair colour' brand. GCPL also launched
new liquid detergent, namely Ezee Bright and Soft' which protects colours
on everyday clothes.

On a consolidated basis, GCPL registered a net income of Rs.1,39,296 lac as
compared to Rs.1,10,256 lac in the previous year and GCPL's profit after
tax increased by 9% from Rs.15,924 lac in the previous year to Rs.17,326
lac in the current year. Like the previous year, GCPL maintained a total
dividend rate of Rs. 4 per equity share (400%) on shares of face value
Re.1.

In May 2008, GCPL allotted 3,22,32,316 equity shares of the face value Re.1
each by way of rights issue at a premium of Rs.122 per share aggregating
Rs. 39,645 lac.

During the year GCPL announced and completed a buyback of its equity shares
from the open market at a maximum price not exceeding Rs.150 per equity
share at an aggregate consideration not exceeding Rs.1490 lac. Under the
buyback, GCPL bought back 11,22,484 equity shares at a total consideration
of Rs.1,490 lac.

With effect from April 1, 2008, GCPL acquired a 100% stake in Kinky Group
Proprietary Ltd., South Africa. 'Kinky', one of the leaders in the South
African Hair Category, is a 36 year old business set up by a family of
entrepreneurs in South Africa and has trademarks registered in South
Africa. Kinky offers a variety of products which include hair, hair braids,
hair pieces, wigs, wefted pieces. Kinky also offers hair accessories like
styling gels, hair sprays, oil free shampoo. This acquisition gives GCPL an
opportunity to enter into a new line of business and diversify its hair
product portfolio.

On April 29, 2009, GCPL executed a share purchase agreement with SCA
Hygiene Products AB (SCA) for the acquisition of the balance 50% stake in
Godrej SCA Hygiene Ltd., the joint venture company between SCA and GCPL.
Post this transaction, Godrej SCA Hygiene Ltd, will become a 100%
subsidiary of GCPL.

GCPL was rated 6th in the 'Best Companies to work for' survey conducted by
Mercer. GCPL was ranked 11th in the 'Best Employers in India' survey
conducted by Hewitt Associates.

FINANCIAL POSITION:

In November 2007, your Company successfully placed 2,79,06,950 equity
shares of Re.1 /- each at a premium of Rs.214/- per share with Qualified
Institutional Buyers, raising Rs. 600 crore. The issue was priced at a
premium of 9% over the floor price calculated in accordance with the SEBI
guidelines. The money raised has since been utilised inter alia to retire
debt as also for investments in subsidiary /associate companies.

The loan funds at the end of the year stand at Rs. 60,096 lac as compared
to Rs. 43,567 lac at the end of the previous year. The debt equity ratio is
0.56 as compared to 0.41 last year.

Your Company continues to hold the topmost rating of A1+ from ICRA for its
commercial paper program (Rs. 100 crore). ICRA has also assigned an A1+
rating for its short term debt instruments (Rs. 570 crore). ICRA also
assigned LAA rating for long-term debt (Rs. 330 crore). This rating
represents high-credit quality carrying low-credit risk.

MANUFACTURING FACILITIES:

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

Valia:

The factory developed the capability to produce one more variant of Fatty
Alcohol which is approved by leading overseas customers.

On the environment front, the factory has developed new irrigation network
and also planted 3000 saplings in the first phase.

The water supply scheme which was operated by G.I.D.C. is taken over by
Valia Industries Association where the factory is also one of the members
and this step has resulted into better reliability for supply of processed
water and approx savings of Rs.15 lac p.a. would be achieved.

Vikhroli:

The Vikhroli factory, after implementation of the Integrated Management
System (ISO 9001-2000, ISO 14001 and OHSAS 18001), has successfully
completed two surveillance audits by 'BUREAU VERITAS' in last year.

Now Vikhroli factory is in the process of getting upgraded for OHSAS
18001:2007 standards.

Vegoils Division:

This Division continues as a contract processor of Edible oils and
Vanaspati. The division recorded a Turnover of Rs. 245 lac as against
Rs.184 lac in the previous year. The focus of the division is to increase
third party processing to improve its profitability.

RESEARCH AND DEVELOPMENT:

During the year under review, the R & D department developed processes for
the manufacturing of premium quality fatty acids from economy grade raw
materials, high value fractionated fatty acids for the polymer, oilfield
and lubricant industries, specialty surfactants for oral care and personal
care products and value added derivatives of glycerin so as to enter
certain niche markets.

INFORMATION SYSTEMS:

Your Company has entered into a strategic alliance with Hewlett Packard
(HP) for a comprehensive IT outsourcing and transformation project that
will include infrastructure solutions, SAP Application services and other
consulting services. HP will help facilitate various business
transformation initiatives and implement tailor made solutions for GIL.
This exercise will involve the implementation of a scalable and reliable
service delivery structure based on ITIL standards. This includes
Application support and management for SAP, Peoplesoft and other critical
business applications.

Your Company has successfully implemented SAP in the Chemicals Business.
Knowledge Management, Business intelligence, Collaboration with customers
and Centralised Architecture are the key components of SAP implementation.
Initiatives like GodrejConnect works as an effective Knowledge Management
tool and ensures speedy and effective information flow within the
organization. SAP's centralised architecture allows business to achieve
operational efficiency with help of consistent data, better controls and
visibility.

Your Company has received recognition for innovation in Business Week's
list of top 25 unsung innovators' for a customer portal (e-CRM) on SAP
which would enable customers to access key information on a real time
basis.

EMPLOYEE STOCK OPTION PLAN (ESOP):

During the financial year 2008-09, 139 employees of the Company and/or its
subsidiaries were granted ESOPs based on their leadership responsibility
and potential.

Date of Grant of ESOP No. of ESOP No. of Employees

May 2, 2008 3,40,000 33
May 26, 2008 8,35,450 93
June 3, 2008 1,50,000 13
Total 13,25,450 139

Disclosure in compliance with Clause 12 of the Securities and Exchange
Board of India (Employee Stock Purchase Scheme) Guidelines, 1999 is given
in Annexure B attached and forms a part of this Report.

GROUP FOR INTERSE TRANSFER OF SHARES:

As required under Clause 3(1)(e) of the Securities and Exchange Board of
India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997,
persons constituting Group (within the meaning as defined in the Monopolies
and Restrictive Trade Practices Act, 1969) for the purpose of availing
exemption from applicability of the provisions of Regulation 10 to 12 of
the aforesaid SEBI Regulations are given in Annexure C attached herewith
and forms a part of this Report.

HUMAN RESOURCE DEVELOPMENT AND INDUSTRIAL RELATIONS:

Your Company encourages a culture that develops and empowers people,
promotes team building and nurtures new ideas. A recent recognition of the
effort to make it a model employer was its inclusion in the list of fifteen
'Best Companies to Work for in India' based on a survey conducted by Mercer
Consulting and Business Today.

Your Company put great emphasis on optimizing people performance through
various people oriented processes starting from recruitment, training,
performance management and talent building.

Industrial relations at all plant locations remained harmonious. Regular
structured safety meetings were held with employees and safety training
programmes were conducted for them throughout the year. Training has also
been an important means of raising productivity. At the Valia factory Skill
Matrix system has been implemented for assessing the skills of every
employee related to their jobs and filling the skill gap through focused
training.

Inclusiveness:

It has been the endeavour of your Company to provide opportunities to
socially and economically underprivileged persons particularly those
belonging to Scheduled Castes/Scheduled Tribes and physically challenged
individuals. The Valia factory of Godrej Industries has partnered with the
Kanerao Primary School, where all children belong to underprivileged
sections of the society. Children in this school are assisted through the
provision of free note books, school bags, water-bottle etc. and by
conducting extra curricular activities like general knowledge, drawing,
dancing and singing competitions every month.

ENVIRONMENT AND SOCIAL CONCERN:

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

Your Company continued 'Rain water harvesting' initiatives undertaken
during the previous year at its factory and in the staff quarters at
Vikhroli. 'Rain water harvesting' is a process by which rain water is
collected and channelised into tanks for domestic consumption. So far 8500
Sq. Meter of roof area has been covered under the rain water harvesting
initiative and 22500 M3 of water has been collected at Vikhroli factory and
staff quarters. This process has resulted in saving water and consequently,
the costs, thereof.

Recharging of two bore wells with rain water has also been undertaken,
which resulted in improvement of yield and quality.

Effluent Drainage System carrying effluent from chemical plants was
upgraded. To prevent pollution to environment, efforts are made to convert
waste from the factories into an environment-friendly product and then
dispose off the same safely. Your Company continued its arrangement with
Trans Thane Creek Waste Management Association for the treatment of solid
waste being generated at the Company's factory at Vikhroli. More Areas of
wasteland have been converted into garden using water from ETP. The process
of bio composting has been enhanced with use of enzyme to reduce frequency
of decomposition.

Vikhroli factory continues to convert the bio degradable waste into bio
compost with the help of an NGO. The Vikhroli factory focused on waste
elimination and also continued energy conservation measures.

FIXED DEPOSITS:

Your Company has started accepting public deposits for 13, 24 and 36
months' tenure. During the year ended March 31, 2009, deposits aggregating
to Rs. 2,164 lac have been mobilised.

DEPOSITORY SYSTEM:

Your Company's equity shares are available for dematerialisation through
National Securities Depository Limited and Central Depository Services
(India) Limited. As of March 31, 2009, 99.66% of the equity shares of your
Company were held in demat form.

BUYBACK:

Your Company had announced Buy-back of fully paid-up equity shares of the
face value Re.1/- each not exceeding 57,00,000 Equity Shares ('Maximum
Offer Shares'), from the existing owners of Equity Shares other than
Persons in Control, at a price not exceeding Rs.275/- (Rupees Two Hundred
and Seventy Five Only) per Equity Share (the 'Maximum Offer Price') payable
in cash, for an aggregate amount not exceeding Rs.99 crore ('Maximum Offer
Size'). The Maximum Offer Size represents 9.90% of the aggregate of the
Company's total paid-up equity capital and free reserves as on March 31,
2008 (the date of the latest standalone audited accounts).

Your Company had published a Public Notice dated July 30, 2008, pursuant to
a decision of the Board approving the Buy-back, in compliance with
Regulation 5A of the Buy-back Regulations ('Notice'). Subsequent to the
Notice, the Company had filed an application with the Securities and
Exchange Board of India ('SEBI') under Regulation 4(2) of the Securities
and Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997 ('SEBI Takeover Regulations') seeking an
exemption on behalf of the promoters, whose shareholding may increase
consequent to the Buy-back, from applicability of Chapter III of the SEBI
Takeover Regulations. SEBI vide its order dated March 23, 2009 (the 'SEBI
Order') had granted the exemption to the Persons in Control from the
applicability of the said regulations.

SEBI has since approved the public announcement with minimum offer shares
of 20,00,000 equity shares and the buyback is expected to commence shortly.

DIRECTORS:

In accordance with Article 127 of the Articles of Association of the
Company, Mr. J.N. Godrej, Ms. TA. Dubash, Mr. M. Eipe and Mr. V.F. Banaji
retire by rotation at the ensuing Annual General Meeting. They are eligible
and offer themselves for re-appointment.

To comply with the terms of the amended Clause 49 of the listing agreement
with the Stock Exchanges, the Company was required to appoint three
directors who are independent as defined under the said clause, which would
take the strength of the Board to 16 directors. Since the Company had
permission for a maximum of 15 directors, the Board of Directors had on May
2, 2008, approved increase in the size of the Board to a maximum of 18
Directors, subject to approval of Shareholders and the Central Government.
The Shareholders' and Central Government's approvals were received on June
25, 2008 and December 1, 2008 respectively. The Company has appointed three
eminent persons for the position of independent directors, viz. Mr. J.S.
Bilimoria, Mr. A. Maira, and Dr. N.D. Forbes with effect from January 27,
2009. They are being appointed as Directors, liable to retire by rotation
at the forthcoming Annual General Meeting (AGM). Their brief profiles are
given along with the Notice of the AGM.

The terms of appointment and remuneration payable to the Wholetime
Directors, Ms. T.A. Dubash, Mr. V.F. Banaji, Mr. M. Eipe and Mr. M.P.
Pusalkar will be expiring on March 31, 2010 and it is proposed to re-
appoint them with revised terms at the forthcoming Annual General Meeting.
Their profiles are given along with the Notice of the AGM.

AUDITORS:

You are requested to appoint Auditors for the current year and to authorize
the Board to fix their remuneration. The retiring auditors, Kalyaniwalla
and Mistry Chartered Accountants, are eligible for re-appointment. A
certificate from the Auditors has been received to the effect that their
re-appointment, if made, would be within the limits prescribed under
Section 224(1B) of the Companies Act, 1956.

AUDIT COMMITTEE:

The Audit Committee which was constituted pursuant to the provisions of
Section 292A of the Companies Act, 1956 and the listing agreement has
reviewed the Accounts for the year ended March 31, 2009. The members of the
Audit Committee are Mr. F.P. Sarkari (Chairman), Mr. V.N. Gogate, Mr. S.A.
Ahmadullah and Mr. K.N. Petigara, all Independent Directors.

DIRECTORS' RESPONSIBILITY STATEMENT:

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

a) That in the preparation of the annual accounts, the applicable
accounting standards have been followed and no material departures have
been made from the same;

b) That such accounting policies have been selected and applied
consistently, and such judgments and estimates have been made that are
reasonable and prudent so as to give a true and fair view of the state of
affairs of the Company at the end of the financial year and of the profit
or loss of the Company for that period;

c) That proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of this Act
for safeguarding the assets of the Company, for preventing and detecting
fraud and other irregularities; and

d) That the annual accounts have been prepared on a going concern basis.

CORPORATE GOVERNANCE:

As required by the existing clause 49 of the Listing Agreements with the
Stock Exchanges, a detailed report on Corporate Governance is included in
the Annual Report. The Auditors have certified the Company's compliance of
the requirements of Corporate Governance in terms of Clause 49 of the
Listing Agreement and the same is annexed to the Report on Corporate
Governance.

ADDITIONAL INFORMATION:

Annexure D to this Report gives information in respect of Conservation of
Energy, Technology absorption and Foreign Exchange Earnings and Outgo,
required under Section 217(1)(e) of the Companies Act, 1956, read with the
Companies (Disclosure of Particulars in the Report of the Board of
Directors) Rules, 1988 and forms a part of the Directors' Report.

Information as per Section 217(2A) of the Companies Act, 1956, read with
the Companies (Disclosure of Particulars in the Report of the Board of
Directors) Rules, 1988 forms a part of the Directors' Report. As per the
provisions of Section 219(1) (b) (iv) of the Companies Act, 1956, the
Report and Accounts are being sent to the Shareholders of the Company,
excluding the statement of particulars of employees u/s. 217(2A) of the
Companies Act, 1956. Any shareholder interested in obtaining a copy of the
same may write to the Company Secretary at the registered office of the
Company.

The Notes to the Accounts referred to in the Auditors' Report is self-
explanatory. However in respect of the qualifications in the Audit Report,
we state as follows:

The shares referred to were pledged with us as security for loans given and
since the loans were not being repaid, your Company enforced the securities
by lodging the shares for transfer. On the refusal of the Company to
transfer the shares, your Company has moved the Company Law Board, Western
Bench and we expect a favourable decision.

ACKNOWLEDGEMENT:

Your Directors thank the Union Government, the Governments of Maharashtra
and Gujarat as also all the Government agencies, banks, financial
institutions, shareholders, customers, employees, fixed deposit holders,
vendors and other business associates, who, through their continued support
and co-operation, have helped as partners in your Company's progress.

For and on behalf of the Board of Directors

Place: Mumbai A.B. Godrej
Dated: May 27, 2009 Chairman

ANNEXURE 'A' FORMING PART OF THE DIRECTORS' REPORT

MANAGEMENT DISCUSSIONS AND ANALYSIS:

INDUSTRY STRUCTURE AND DEVELOPMENTS:

Despite difficult global conditions witnessed in the second half of the
fiscal year, the growth rate of the Indian economy is expected to remain
relatively strong in 2008-09 at around 7%. With extreme commodity price and
foreign exchange fluctuations, the year was indeed challenging. However
with inflation falling and with more stable commodity prices seen at the
start of year, the outlook for the coming year looks much more promising.
The per capita income trend still remains high and demonstrates the overall
health and strength of the economy. The Indian Government has attempted to
curb the effects of the global recession through several fiscal and
monetary stimulus packages to boost production and demand across sectors.
These include a combination of planned and unplanned expenditure, cuts in
fuel prices, repo rate and excise duty. With the formation of a stable
Government at the Centre, there is greater expectation of decisive measures
being taken to revive growth helping the Indian economy ride out the global
crisis.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

The highlights of overall performance are as follows:

Rs. in Lac
Particulars 2008-09 2007-08

Sales 81,623.72 73,530.54
Total Income 97,127.60 83,881.74
Profit Before Taxation 1,650.08 10,771.56
Profit After Current Taxation 1,526.81 10,280.00
Profit After Current E Deferred Taxation 1,867.81 10,649.36
Earnings per Equity Share (Rupees) 0.58 3.53
Profitability ratios are as follows:
PBDIT/Total Income 10.67 20.38
PBT/Total Income 1.70 12.84
PAT/Total Income 1.92 12.70
Return on Capital Employed 4.70 11.50
Return on Net Worth 1.71 14.03
Basic EPS (Rs.) 0.58 3.53
The Financial risk ratios are as follows:
Debt/Equity 0.56 0.41
Interest coverage 1.27 3.85

Rs. in Lac
Segment Performance 2008-09 2007-08

1. Segment Revenue:
Chemicals 77,818.57 69,238.46
Vegoils 865.59 650.93
Estate 3,154.26 2,946.11
Finance & Investments 14,705.36 9,802.34
Others 583.82 1,243.90
Total 97,127.60 83,881.74
2. Segment Results (PBIT):
Chemicals (2,302.66) 8,223.61
Vegoils (588.78) (515.83)
Estate 2,177.91 1,845.94
Finance & Investments 14,705.36 8,213.41
Others 108.68 289.91
Total 14,100.51 18,057.04
Less: Interest (Net) (6,062.71) (3,776.36)
Less: Unallocated expenses (Net) (6,387.72) (3,509.12)
Profit Before Tax 1,650.08 10,771.56
3. Segment Capital Employed:
Chemicals 26,817.23 36,457.27
Vegoils 155.54 362.42
Estate 4,235.56 1,531.21
Finance & Investments 137,119.37 116,603.03
Others 2,435.44 2,750.59
Total 170,763.14 157,704.52

CHEMICALS DIVISION:

The Chemicals division operates in the oleo-chemical and surfactant
industries. The division has a blend of domestic and international
operations and continued its leadership position in the Indian market. The
export turnover of the division touched a high of Rs.322 crore in this
fiscal, accounting for about 41 % of the division's turnover.

The performance of the business was significantly affected both on cost and
margin front by unforeseen fluctuations in the commodity prices and rupee-
dollar exchange rate, curtailment in the supplies of natural gas to the
factories and depressed demand owing to global recession and economic
downturn.

The product category-wise review follows:

Fatty Alcohols:

Fatty alcohols accounted for 38% of the sales revenue of the Chemicals
division. Revenue decreased by 2% and volume decreased by 17%.

Through effective customer relationship management and supply chain
initiatives, the division could maintain its share with some global
companies. The sale of Fatty Alcohols in Europe was improved by providing
Just in Time (JIT) supplies with better logistics management. With the
expansion of its customer base, your Company has reached over 65 countries
in the world through its exports.

With focused manufacturing and marketing strategies, it is expected that
revenue from this segment will improve in the coming year.

Fatty Acids:

The Fatty Acids portfolio, comprising stearic acid, oleic acid, as well as
specialty fatty acids, accounted for about 36% of the turnover of the
division. Continuous cost reduction and market development initiatives have
helped grow this category by about 2% in value terms. The new fractionation
column at Vikhroli capable of producing premium and specialty fatty acids
is working to its capacity and turning out good quality output. The
division plans to enhance the sales of its specialty fatty acids in the
domestic as well as export markets.

Surfactants:

Surfactants contributed 16% to the turnover of the division.

As a forward integration and derisking strategy, the division has started
the production of value added sulphonated products such as Sodium Lauryl
Ethoxy Sulphate (SLES) and Sodium Lauryl Sulphate (SLS) in addition to
Alpha Olefin Sulphonate (AOS). The division is focusing on improving the
presence of this category in the international market and has started
exporting SLES and SLS to various countries. Sales value of SLS grew by
487.5% and SLES by 304% as compared to last year. Growth in SLS/SLES
portfolio is expected to continue in future.

Glycerin:

Glycerin accounted for 6.5% of the turnover of this division. Revenues
decreased by 5% in view of the low price of Glycerin.

Other initiatives:

Chemicals division continues to strongly focus on cost reduction and
efficiency improvement initiatives apart from emphasizing on growing the
specialty and value added product portfolio. The business is developing a
customer relationship website that will enable customers to track orders
and transactions and receive updates through personalized web pages.

Outlook:

The outlook for the coming year 2009-10 is mixed at this point in time.
International prices and demand are showing signs of improvement and if
recovery trend continues, the chemicals business is well poised to take
advantage. If the new capacities for oleo-chemicals that were announced
earlier go on stream, there could be an oversupply situation in the market.
Most of the new plants are set up to produce mid chain alcohols. Your
company has a competitive advantage due to its unique strategy of offering
higher chain alcohols.

Focus on increasing sales of integrated specialty derivative products is
expected to improve profitability as well as derisk the business from the
vagaries of the fatty alcohol market.

ESTATE MANAGEMENT:

The rapid infrastructure development in the central and northern suburbs of
Mumbai has prompted the shift of banking, financial services, insurance and
IT/ITES sectors to the suburbs. The suburbs in and around the registered
office of your Company at Vikhroli is witnessing major development
activity. The MMRDA proposal to develop Kanjurmarg, a close suburb into a
business district and the plan for a Metro terminal in the vicinity of your
company premises have spurred construction activity in the area.

Your Company continues to effectively utilize available space by leasing
area to reputed corporates for their business operations. The excellent
infrastructure and the green environment with close proximity to the CBD,
airport, New Mumbai and the suburbs are major advantages making Vikhroli a
preferred location. Your Company has also signed a MoU with Godrej
Properties Ltd. to develop Vikhroli property which is taken on lease from
Godrej & Boyce Mfg. Co. Ltd.

The total income from this business for the year was about Rs. 3154.26 lac,
as compared to Rs. 2946.11 Lac in the previous year, an increase of about
7%.

FINANCE AND INVESTMENTS:

During the year, your Company continued to earn return from its investments
in the form of Dividend of Rs. 5021.39 Lac (previous year Rs. 1393.16 Lac)
and realized capital appreciation of Rs. 5626.55 Lac (previous year
Rs.6672.90 Lac).

During the year, 100% stake in Godrej Global Solutions Limited was sold to
Tricom India Limited. Your company also sold its 100% stake in Godrej
Hicare Limited to ISS Facility Services India Pvt. Ltd. (ISS). ISS is one
of the world's largest facility services provider.

Other major investments made by your company during the year include
investment in Godrej Consumer Products Limited including subscription to
their Rights Issue, subscription to the rights issue of Godrej Hershey
Limited (Rs. 34.4 crore) to support their growth plans, investment in
Godrej Hygiene Care Private Limited (formerly Build Tough Properties
Private Limited), a 100% subsidiary acquired during the year (which holds
20% stake in Godrej Sara Lee Limited).

HUMAN RESOURCES, INDUSTRIAL RELATIONS:

Industrial Relations at all locations were cordial. The total number of
persons employed in your Company as on March 31, 2009 was 1,314.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Your Company has a proper and adequate system of Internal Controls, to
ensure that all assets are safeguarded and protected against loss from
unauthorised use or disposal and that transactions are authorized, recorded
and reported correctly. Your Company's Corporate Audit and Assurance
Department which is ISO 9001 certified, issues well documented operating
procedures and authorities with adequate built-in controls at the beginning
of any activity and any time there is any major change. The internal
control is supplemented by an extensive programme of internal, external
audits and periodic review by the management. The system is designed to
adequately ensure that financial and other records are reliable for
preparing financial information and other data and for maintaining
accountability of assets.

Corporate Audit & Assurance Dept., during the year, facilitated a review of
your company's risk management programme. The risks Ft mitigation measures
were reviewed by your company's Risk Committee and corrective measures
initiated.

During the year the Corporate Audit & Assurance Dept was involved in
facilitating IT outsourcing & other initiatives for leveraging SAP for
business benefits.

INFORMATION SECURITY:

Your Company accords great importance to the security of its information
assets. To ensure that this gets desired focus and attention, a Chief
Information Security Officer, who is attached to the Corporate Audit and
Assurance Department, is entrusted with the task of ensuring that your
Company has the requisite security posture.

Your Company has in place, all the procedures and practices that are in
line with the ISO Security Standards. Your company has since obtained ISO
27001 certification for its HO location and is in the process of obtaining
for its factories.

OPPORTUNITIES AND THREATS:

The improvement in the global economic and liquidity situation coupled with
more stable commodity prices, the stimulus packages by the Indian
Government and various Governments globally, provides an opportunity for
growth for the Chemicals division. At the same time, if new capacity
additions announced earlier go on stream, there could be an over-supply
situation in the market which can put pressure on margins.

The Estate management business has the potential to increase revenues by
giving space on leave and licence basis by optimum re-sizing of the
existing operational areas as also developing new areas over the next few
years. The factors that can aid further revenue growth include assured
power supply, upcoming infrastructural facilities like metro rail and
better connectivity that reduces travel time. At the same time, the real
estate market has been affected by depressed prices during the year and
there could be a spill-over effect.

RISKS AND CONCERNS:

Your Company has put a risk management framework in place post a
comprehensive review of its risk management process. The review involved
understanding the existing risk management initiatives, zero-based
identification and assessment of risks in the various businesses as also
the relative control measures and arriving at the desired counter measures
keeping in mind the risk appetite of the organization. The Risk Committee
has periodically reviewed the risks in the various businesses and
recommended appropriate risk mitigating actions.

The commodity based businesses are likely to be affected by vagaries of the
weather, demand for edible oil, oilseed production, etc. The increase in
bio-diesel manufacturing capacity is expected to impact vegetable oil
prices. The business is exposed to commodity price risks relating to raw
materials which account for the largest portion of the costs of both the
Chemicals & Vegoils businesses. The Chemicals business growth will also
depend on the growth of end user industries like polymer, detergent,
cosmetics and personal care.

As a significant employer and chemicals producer, to ensure occupational
safety, employment standards, production safety, and environmental
protection, your Company maintains strict safety, health, environmental
protection and quality control programs to monitor and control these
operational risks.

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

CAUTIONARY STATEMENT:

Some of the statements in this management discussion and analysis
describing the Company's objectives, projections, estimates and
expectations may be forward looking statements' within the meaning of
applicable laws and regulations. Actual results might differ substantially
or materially from those expressed or implied. Important developments that
could affect the Company's operations include a downtrend in industry,
significant changes in political and economic environment in India and
abroad, tax laws, import duties, litigation and labour relations.

ANNEXURE-'B' FORMING PART OF THE DIRECTORS' REPORT:

As per the Securities & Exchange Board of India (Employee Stock Option
Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 following
information is disclosed in respect of Godrej Industries Limited Employee
Stock Option Plan:

Heading Particulars

a. Options granted during the year 13,25,450

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

c. Options vested during the year 3,00,000

d. Options exercised during the year NIL

e. The total number of shares arising N.A.
as a result of exercise of option

f. Options lapsed/revoked during the year 8,35,000

g. Variation of terms of options Annexure 2

h. Money realized by exercise of options NIL

i. Total number of options in force 77,99,950 equity shares of
nominal value of Re.1/- each

j. Employee wise details of options
granted to:

i) Senior managerial personnel; Annexure 1

ii) Any other employee who receives a Annexure 1
grant in any one year of option
amounting to 5% or more of option
granted during that year;

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

k. Diluted Earnings Per Share (EPS) There is no fresh issue of
pursuant to issue of shares on shares hence, not applicable.
exercise of option calculated in
accordance with Accounting Standard
(AS) 20 Earnings Per Share'.

l. Where the Company has calculated The Company has calculated the
the employee compensation cost using employee compensation cost
the intrinsic value of the stock using the intrinsic value of
options, the difference between the stock options. Had the fair
employee compensation cost so value method been used in
computed and the employee respect of stock options
compensation cost that shall have granted, the employee
been recognized if it had used the compensation cost would have
fair value of the options, shall be been higher by Rs. 26.45
disclosed. The impact of this crore, Profit after tax lower
difference on profits and on EPS of by Rs.26.45 crore and basic
the company shall also be disclosed. EPS would have been lower by
Rs.0.83.

m. Weighted-average exercise prices and Weighted average exercise
weighted-average fair values of options price of the options granted
shall be disclosed separately for options during the year is Rs.276.71
whose exercise price either equals or plus interest. Weighted
exceeds or is less than the market price Average fair value of the
of the stock. option granted during the
year is Rs.03.83.

n. A description of the method and The fair value of the
significant assumptions used during options granted has been
the year to estimate the fair values calculated using Black-
of options, including the following Scholes Options pricing
weighted-average information: formula and the significant
assumptions made in this
regard are as follows:


i) risk-free interest rate, 5.50%

ii) expected life, 4 years

iii) expected volatility, 122%

iv) expected dividends, and 0.45%
Rs.1.25 per share

v) the price of the underlying share in Weighted average market
market at the time of option grant price at the time of grant
of option Rs.276.21 per
option.

Annexure 1: Senior managerial personnel:

Name Options granted
A. Mahendran 1,00,000
B.S. Yadav 55,000
D.S. Bhullar 37,500
B.N. Vyas 22,500
R.R. Govindan 22,500
S. Varadaraj 22,500
S.S. Sindhu 22,500
P.N. Narkhede 22,500
Adrian Terron 50,000
Praful Bhat 25,000

Options granted to Mr. A. Mahendran is in excess of 5% of the total options
granted during the year.

Annexure 2:

Amendment to ESOP terms for employees who were granted ESOP's on February
14, 2006:

(a) Existing Clause No. 5.4 be replaced with the amended Clause 5.4;

The Employee Stock Options granted under GIL ESOP shall vest as follows:

The Options shall vest in the eligible Employees within such period as may
be prescribed by the Compensation Committee, which period shall be not less
than one year and may extend upto five years from the date of grant of
Options. Vesting may occur in tranches, subject to the terms and conditions
of Vesting, as may be stipulated by the Compensation Committee.

In the event that, during the 4th and 5th year of the vesting period, the
average of the closing market price of the shares of the company on the
Bombay Stock Exchange and National Stock Exchange on each day exceeds the
Exercise Price by not less than Rs.50/- for a consecutive period of thirty
days, the options shall be deemed to have vested on the day immediately
following the 30th day, as determined by the Compensation Committee.

(b) Existing Clause No. 5.5 be replaced with the amended Clause 5.5;

From the date of Vesting of the Options, the Option Grantee shall be
entitled to Exercise the Options within such period as may be prescribed by
the Compensation Committee which period shall not exceed a period of three
years from the date of the respective Vesting of the Options.

Amendment of ESOP terms:

(a) Existing Clause No.5.7(a) be replaced with the amended Clause 5.7(a):

In the event of the death of an Employee while in employment with a
Participating Company, (i) all Vested Options shall be exercised by the
Option Grantee's nominee or legal heirs within the applicable exercise
period, (ii) all Unvested Options will vest immediately subject to the
minimum vesting period as prescribed under the SEBI Guidelines.

(b) Existing Clause No.5.7(c) be replaced with the amended Clause 5.7(c):

In the event of separation from employment for reasons of normal Retirement
or Retirement specifically approved by a Participating Company, (i) all
Vested Options shall be exercised by the Option Grantee within the
applicable exercise period, (ii) all Unvested Options will lapse as on the
date of such Retirement, unless otherwise determined by the Compensation
Committee and which determination shall be final and binding.

(c) After the existing Clause No. 5.7(g), the following Clause be inserted:

Clause No.5.7(h)

In the event of any of the participating companies (excluding GIL), being
reconstituted by way of demerger, amalgamation, merger, sale of business,
sale of shares of such participating company or in any other manner

(collectively referred to as Reorganisation') resulting in a situation
whereby the ESOP cannot be implemented as envisaged in this Plan or where
the options lapse as a result of such Reorganisation, the Plan may be
suitably amended in line with the arrangement or scheme for such
Reorganisation (referred to as the Revised Plan) and shall be communicated
by the Compensation Committee to the option grantees, which Revised Plan
shall be final and binding on the option grantees.

ANNEXURE-'C' FORMING PART OF THE DIRECTORS' REPORT

The following is the list of persons constituting Group (within the meaning
as defined in the Monopolies and Restrictive Trade Practices Act, 1969) for
the purpose of availing exemption from applicability of the provisions of
regulation 10 to 12 of Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulation, 1997 ('the said
Regulations'), provided Clause 3(1)(e) of the said Regulations:

1. Bahar Agrochem and Feeds Private Limited
2. Godrej Hygiene Care Private Limited
3. Cauvery Palm Oil Limited
4. Cartini India Limited
5. Ensemble Holdings & Finance Limited
6. Godrej Developers Private Limited
7. Godrej Real Estate Private Limited
8. Godrej Realty Private Limited
9. Godrej Sea View Properties Private Limited
10. Godrej Waterside Properties Private Limited
11. Godrej Estate Developers Pvt. Ltd.
12. Godrej Agrovet Limited
13. Godrej International Limited
14. Godrej Properties Limited
15. Godrej Investments Pvt. Limited
16. Godrej & Boyce Manufacturing Company Limited
17. Godrej Holdings Private Limited
18. Godrej Infotech Limited
19. Godrej (Malaysia) Sdn. Bhd.
20. Godrej (Singapore) Pte. Limited
21. Golden Feed Products Limited
22. Godrej Oil Palm Limited
23. Godrej Hershey Limited
24. Godrej Sara Lee Limited
25. Godrej SCA Hygiene Limited
26. Godrej Gold Coin Aqua Feed Limited
27. Godrej IJM Plantations Limited
28. Godrej Tyson Foods Limited
29. Godrej (Vietnam) Co. Limited
30. Geometric Limited
31. Godrej Efacec Automation Robotics Limited
32. Godrej & Khimji (Middle East) LLC
33. Godrej Consumer Products Limited
34. Godrej Global Mideast Fze
35. Godrej Netherlands BV
36. Godrej Consumer Products (UK) Limited
37. Godrej Consumer Products Mauritius Limited
38. Godrej Kinky Holdings Limited
39. Happy Highrise Limited
40. Keyline Brands Limited
41. Kinky Group Pty Limited
42. JT Dragon Pvt. Limited
43. Inecto Manufacturing Limited
44. Mercury Mfg Co. Limited
45. Natures Basket Limited
46. Nutrine Confectionary Co. Limited
47. Godrej ConsumerBiz Private Limited
48. Rapidol (Pty) Limited
49. Swadeshi Detergents Limited
50. Veromatic International BV
51. Vora Soaps Limited
52. Wadala Commodities Limited
53. Water Wonder Benelux BV
54. Mr. Adi B. Godrej
55. Mrs. Parmeshwar A. Godrej
56. Ms. Nisa A. Godrej
57. Mr. Pirojsha A. Godrej
58. Mrs. Tanya A. Dubash
59. Mr. Jamshyd N. Godrej
60. Mrs. Pheroza J. Godrej
61. Ms. Raika J. Godrej
62. Mr. Navroze J. Godrej
63. Mr. Nadir B. Godrej
64. Mrs. Rati N. Godrej
65. Mst. Burjis N. Godrej
66. Mst. Sohrab N. Godrej
67. Mst. Hormuzd N. Godrej
68. Mr. Vijay M. Crishna
69. Mrs. Smita V. Crishna
70. Ms. Freyan V. Crishna
71. Ms. Nyrika V. Crishna
72. Mr. Rishad K. Naoroji

ANNEXURE 'D' FORMING PART OF THE DIRECTORS' REPORT:

INFORMATION PURSUANT TO SECTION 217(1)(e) OF THE COMPANIESACT, 1956, READ
WITH THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF
DIRECTORS) RULES, 1988 IN RESPECT OF CONSERVATION OF ENERGY, TECHNOLOGY
ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

A. Conservation of Energy:

I. (A) Energy Conservation measures undertaken:

1. Installation of Energy Saving Device for saving on lighting power in EOU
plant worth Rs. 2.6 Lac p.a.

2. Installation of VFD in pumps in sulphonation plant which resulted a
savings of about 51234 KWH p.a. amounting to Rs. 3 Lac p.a.

3. Better planning in receipt of Raw Material from storage location to
factory was introduced, which resulted in savings of Steam.

4. Installation of Energy Efficient Metal Halide fittings in other areas.

5. Installation of Energy Efficient Motors in Boiler House.

6. Installation of High Pressure Boiler from Thermax.

(B) Proposed Energy Conservation Measures:

1. Installation of New High efficient Medium Pressure Steam Boiler.

2. Installation of Energy Saving Device to save on Street light energy of
DTA plant.

3. Heat Exchanger for flaker to reduce the power consumption & improve the
quality of stearic acid.

4. Working in consultation with CII for the Mission for Sustainable Growth.

5. Dedicated lines for Fatty Acid transfer to eliminate steam wastages.

II. Impact of measures on reduction of energy consumption and consequent
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 details cover the
operations of your Company's factories at Vikhroli, Valia and Wadala.

a) Power and Fuel consumption:

This Year Previous Year

Electricity:
i) Purchased:
Units (KWH in lac) 284.22 350.92
Total Amount (Rs. in lac) 1,697.41 1,928.02
Rate per Unit (Rs.) 5.97 5.49
ii) Own generated through D.G. Sets:
Units (KWH in lac) 6.21 1.73
Cost (Rs. in lac) 69.09 32.71
Rate per unit (Rs.) 11.12 18.91
iii) Own generated through Steam
Turbine Generator:
Co-generation:
Units (KWH in lac) 263.88 314.06
Cost (Rs. in lac) 788.11 1,331.58
Rate per Unit (Rs.) 2.99 3.95
Fuel Oil (LSHS, FO and LDO):
Total Quantity (KL) 4,617.82 3,191.44
Total Amount (Rs. in lac) 807.86 501.26
Rate per unit (Rs. per litre) 17.49 15.71
Natural Gas:
Total Quantity (SM3 lac) 166.70 175.30
Total Amount (Rs. in lac) 1,817.00 1,618.00
Rate per unit (Rs. per SM3) 10.90 9.23
Pitches:
Total Quantity (MT) 1,633.00 677.00
Total Cost (Rs. in lac) 214.33 85.35
Rate per unit (Rs. per MT) 13,124.92 12,607.41

b) Consumption per unit of production:

Particulars Natural Gas Electricity Furnace Oil
(SM3/MT) (kwh/mt) (Litre/MT)
2008-09 2007-08 2008-09 2007-08 2008-09 2007-08

Fatty Acid 56.95 52.07 76.01 84.55 24.69 15.76
Fatty Alcohol 89.57 72.35 424.64 400.78 7.61 2.17
A.O.S. 16.39 18.42 146.22 140.97 4.38 5.02
Glycerin 247.43 338.35 614.59 708.03 109.08 98.49
Oils & - - 174.72 174.31 60.00 61.12
Vanaspati

Particulars Pitches
2008-09 2007-08

Fatty Acid 15.86 24.61
Fatty Alcohol - -
A.O.S. 1.38 2.84
Glycerin 49.46 78.61
Oils & 85.86 -
Vanaspati

B. Technology Absorption, Adaptation and Innovation:

1. Specific areas in which RECD carried out by the Company:

During the year under review, Research and Development efforts in the
following areas strengthened the Company's operations through technology
absorption, adaptation and innovation:

a) Oils and Fatty Acids
b) Fatty Alcohols
c) Surfactants
d) Glycerin
e) Customer Centric Formulations for Personal Care Product Applications

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

a) Premium quality fatty acids from economy grade raw materials.

b) Understanding the impact of raw material quality and manufacturing
process on the quality of the finished goods.

c) Manufacture of high value pure cut fatty acids, specifically for the
polymer, oilfield and lubricant industries.

d) Manufacture of specialty surfactants for oral care and personal care
products.

e) Value added derivatives of glycerin so as to enter certain niche
markets.

f) Value added formulations of Fatty Alcohols so as to enter niche markets.

g) One new process patent application filed.

3. Future Plan of Action:

a) Specialty Chemicals from Glycerin, so as to enter niche markets in the
field of Pharmaceuticals, Personal Care and Industrial Lubricants.

b) Specialty chemicals used in the personal care formulations - foam
boosters, conditioning agents, co-surfactants, viscosifying and pearlizing
agents.

4. Expenditure on R&D:

This Year Previous Year
Rs. lac Rs. lac

(a) Capital Nil 13.55

(b) Recurring 173.30 172.75

(c) Total 173.30 186.30

(d) Total R&D expenditure as a 0.21% 0.25%
percentage of total sales turnover

C. Foreign Exchange earnings and outgo:

The Chemicals Division's exports were Rs.36,774 lac in the current year
(including deemed exports of Rs.4,591 lac) as compared to Rs.32,851 lac in
the previous year (including deemed exports Rs.2,654 lacy. The Company
continues to export refined glycerin, fatty alcohol and other chemicals to
over 65 countries including U.S.A., U.A.E., Japan, South Africa, Germany,
U.K., France, Malaysia, China, Australia, Mexico, Singapore and Srilanka.

This Year Previous Year
Rs. lac Rs. lac

Foreign exchange 25,741 34,618
used
Foreign exchange 32,392 30,227
earned