Annual Report - Havells India - 2008-2009

HAVELLS INDIA LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

To
The Members,

Your Directors are pleased to present the 26th Annual Report along with the
Audited Accounts of your Company for the financial year ended 31st March,
2009.

Financial Highlights (Rs. in crores)
Consolidated Stand Alone
Particulars 2008-09 2007-08 2008-09 2007-08

Net Profit (160.12) 160.96 145.23 143.54
Profit available for
appropriation 162.60 354.16 450.56 336.77
Appropriation of Profits 162.60 354.16 450.56 336.77
Net Sales 5,477.49 5,002.93 2,198.36 2,055.57
Operating Profit before
Interest, Depreciation, 278.34 358.71 203.31 199.14
Tax and Amortisation (EBIDTA)
Less:
Exceptional Items 198.69 - - -
Depreciation 90.50 69.43 17.86 13.06
Interest 108.38 93.92 19.34 20.65
Add: Other Income 2.02 3.25 1.16 0.82
Profit before Tax (117.21) 198.61 167.27 166.25
Tax 42.91 37.65 22.04 22.71
Add: Balance brought forward
from previous year 322.72 193.20 305.33 193.23
Transfer to General Reserve 14.55 14.50 14.55 14.50
Proposed Dividend 15.04 14.48 15.04 14.48
Corporate Dividend Tax 2.56 2.46 2.56 2.46
Balance carried over to
Balance Sheet 130.45 322.72 418.41 305.33


Company Performance

Havells, on a consolidated basis had net sales of Rs. 5,477.49 crores in
financial year 2008-09 against Rs. 5,002.93 crores in previous financial
year 2007-08.

Havells, on stand-alone basis had net sales of Rs. 2,198.36 crores in
financial year 2008-09 against Rs. 2,055.57 crores in financial year 2007-
08. The operating profit before interest and depreciation was Rs. 203.31
crores in financial year 2008-09 against Rs. 199.14 crores in financial
year 2007-08. During third quarter ended 31 December 2008, sharp and
immediate reduction in the general prices of commodities mainly copper and
aluminum caused the margins to decline during current financial year 2008-
09 as compared to financial year 2007-08. The interest charges for
financial year 2008-09 were Rs. 19.34 crores against Rs. 20.65 crores in
financial year 2007-08. Profit after tax was Rs. 145.23 crores in financial
year 2008-09 against Rs. 143.54 crores in financial year 2007-08.

Sylvania, on stand-alone basis recorded a Net Revenue of Rs. 3,279 crores
in financial year 2008-09 against Rs. 2,947 crores in financial year 2007-
08. Operating profit/(loss) before interest and depreciation and
exceptional items was Rs. 75 crores.



Dividend

Your Directors recommend payment of a dividend of Rs.2.50 per equity share
for the financial year ended March 31, 2009 on 601,68,406 equity shares of
Rs 5 each. The proposed dividend, if approved at the ensuing Annual General
Meeting, would result in appropriation of Rs.17.60 crores (including
Corporate Dividend Tax of Rs. 2.56 crores) out of the profits thus giving
12% payout from the net profit of the company. The dividend would be
payable to all shareholders whose names appear in the Register of Members
as on the Book Closure date.

The Register of Members and Share Transfer books shall remain closed from
Friday, 14 August 2009 to Friday, 21 August 2009 (both days inclusive).

Transfer to Investor Education and Protection Fund

Pursuant to the provisions of Section 205C of the Companies Act, 1956, your
Company has transferred Rs.65,514/- lying unclaimed/unpaid with the Company
for a period of seven years from the financial year 2000-01, to the
Investor Education and Protection Fund.

Share Capital

During the year under review, the Company had allotted 22,50,000 equity
shares upon conversion of warrants at an agreed price of Rs.690 per warrant
to Seacrest Investment Limited, a Warburg Pincus group company. These
shares are listed and admitted to dealings on both the Stock Exchanges i.e.
National Stock Exchange and Bombay Stock Exchange. Consequently, the
issued, subscribed and paid up equity share capital of the Company
increased from5,79,18,406 equity shares as at 31st March 2008 to
6,01,68,406 equity shares as at 31 March 2009.

Out of the total 26,00,000 warrants issued to Seacrest Investment Limited,
the balance 350,000 warrants were not exercised and the Company forfeited
the 10% advance amounting to Rs. 2.42 crores received upfront against these
warrants. There is no further security/ instrument which remain pending
conversion into/ allotment of equity shares.

New Corporate Office

Your Company moved its Corporate Headquarters to newer,much larger and
swankier premises at:

QRG Towers,
2D, Sector - 126
Expressway
Noida (U.P.) - 201304.

Located in a commercially sound area, ergonomically designed, it is an
intelligent building equipped with state-of-the-art facilities, serviced by
advanced IT & telephony systems with high quality conference rooms et al.
The infrastructure, the ambience, an in-house recreational area and
cafeteria - all cater to the convenience and comfort of the Company's work
force and offer a productive work-environment. The move signifies Havells'
growth over the years and highlights its intent to continue the growth at
even faster pace.

New Logo

Your company is evolving continuously. Over a period of years, Havells
brand has become stronger and is today seen as a benchmark in the industry.
Your Company has therefore refreshed its logo reflecting Havells' global
and dynamic character. The Global-H is a 3D design representing leadership
and an ever expanding breadth and depth of products and services offered by
us. The rounded H apparently depicts Havells' footprint on the entire globe
and perfectly describes Havells' brand perception - modern, premium and
dependable. The vibrant red colour continues to denote the brand's long-
cherished values.

Board of Directors

The Board of Directors at its meeting held on January 30, 2009 appointed
Shri Vijay Kumar Chopra as an Additional Director of the Company. As per
the provisions of Companies Act, 1956, Shri Vijay Kumar Chopra will vacate
his office at the ensuing Annual General Meeting. Shri V K Chopra,
professionally a Chartered Accountant has vast experience in finance &
banking matters. In his professional career he has held top leadership
positions in various prestigious banking organizations viz. Central Bank of
India, Punjab & Sindh Bank, Corporation Bank & SIDBI. He was also a
wholetime member of SEBI. Presently, he holds directorships in various
prestigious organizations.

The Board recommends his appointment as Director liable to retire by
rotation. The requisite notice under section 257 of the Companies Act, 1956
along with the prescribed fee has been received from a member proposing the
appointment of Shri Vijay Kumar Chopra as Director of the Company.

Shri Abid Hussain and Shri Avinash P. Gandhi, will retire by rotation at
the forthcoming Annual General Meeting and, being eligible, offer
themselves for re-appointment.

In the accordance with the provisions of Sections 269, 309 read with
Schedule XIII of the Companies Act, 1956, Shri Qimat Rai Gupta, Chairman
and Managing Director and Shri Anil Gupta, Joint Managing Director are
proposed to be re-appointed at the ensuing Annual General Meeting of the
Company on the terms and conditions mentioned in the Notice calling the
Annual General Meeting.

The details of Directors being recommended for appointment and re-
appointment, pursuant to Clause 49 of the Listing Agreement are contained
in the accompanying Notice of the ensuing Annual General Meeting of the
Company.

Auditors

Mr. V. P. Bansal, Proprietor of existing statutory audit firm namely M/s
V.P. Bansal & Co. has informed the Board that the existing audit firm may
be discontinued and it has been proposed that a partnership firm with the
name M/s V.R. Bansal & Associates wherein Mr. V. P. Bansal is the senior
partner along with Mr. Rajan Bansal as another partner,may be appointed as
Statutory Auditors of the Company.

The Company has received a notice u/s 224(2)(b) from the retiring auditors
M/s. V.P. Bansal & Co., Chartered Accountants informing their intention to
discontinue as Auditors and also a requisite certificate from M/s V. R.
Bansal & Associates confirming that their appointment, if made, would be
within the limits prescribed under section 224(1B) of the Companies Act,
1956. The Board of Directors has thus recommended appointment of M/s V. R.
Bansal & Associates as Statutory Auditors of the Company.


Comments on Auditors' Report

The Auditors, in their report, have drawn attention to note no 21 of
Schedule 20 to the Balance Sheet of the Company regarding diminution in the
value of Company's long term investments in its wholly owned subsidiary M/s
Havell's Holdings Limited. The Auditors considered the adequacy of
disclosures made by the Company in the regard and relied upon the
management representations that the diminution in value of investments is
temporary in nature. The referred note 21 of Schedule 20 to the Balance
Sheet is comprehensive and fully explanatory and does not require any
further comments.

Subsidiary Companies

The Company has 58 subsidiaries and as per Section 212(1) of the Companies
Act, 1956, the Company is required to attach the Balance Sheet, Profit and
Loss Account and other documents of each of its subsidiary companies with
the Balance Sheet of the Company. As the consolidated accounts present a
complete picture of the financial results of the Company and its
subsidiaries, the Company had applied to the Central Government seeking
exemption from attaching the documents referred to in the aforesaid
section. In terms of approval granted by the Central Government under
Section 212(8) of the Companies Act, 1956 vide letter No. 47/351/2009-CL-
III dated 19/06/2009, the documents in respect of the aforementioned
subsidiary companies for the year ended March 31, 2009 as set out in
subsection 1 of section 212 of the Companies Act have not been attached
with the Balance Sheet of the Company. Statement pursuant to the approval
under Section 212(8) of the Companies Act, 1956, is included elsewhere in
the Annual Report. The Annual Accounts of these subsidiary companies, along
with the related information, are available for inspection at the Company's
registered office and copies will be made available to shareholders of
Havells India and its subsidiary companies upon request.

On 20th April, 2007, Havell's Netherlands B.V., a step subsidiary of
Havells India Limited completed the acquisition of 'Sylvania'. The
consolidated results of financial year 2007-08 include the financial
statements of Sylvania from 20th April, 2007. Consequently, the data of the
previous year is not comparable.

The Sylvania group of companies generally experienced good market
conditions for the first half of 2008, the second half of the year being
more challenging following the beginning of the European recession.
Sylvania grew at a pace above market rate and the Directors believe the
Group gained overall market share in 2008. This was mainly driven by
expansion into new markets and the offering of new energy efficient
products. Despite the increase in market share the total market has seen a
decline in the latter half of 2008 and this has adversely affected the
operating results of 2008. As a result of this the Group has implemented a
variety of cost reduction measures to manage the costs effectively and
offset this trend. These initiatives include lean manufacturing,
outsourcing of manufacturing to low cost countries, further cost reduction
initiatives on materials and an in-depth analysis of selling and
administration expenses.


At 30 September 2008 Sylvania breached covenants set out in the funding
agreement with banking group led by Barclays Capital. The Banks continued
to extend the waivers and the most recent waiver dated 28 May 2009 waives
the defaults until 30 June 2009. The Sylvania group of companies has
implemented a restructuring plan in late 2008 including the closure
of manufacturing and warehousing facilities as well as selling and
administration expenses and working capital reductions. The restructuring
plan is being executed in line with expectation. As part of the covenant
renegotiation process, we are working closely with Alvarez & Marsal, a
specialist consultancy firm,with a view to restore profitability.

Corporate Governance

As required under Clause 49 of the Listing Agreement of stock exchanges, a
Report on Corporate Governance along with Certificate of Auditors
confirming compliance with the requirements of Corporate Governance form
part of the Annual Report. In accordance with the Listing Agreement
requirements, the Management Discussion and Analysis report and CEO/CFO
Certificate on discharge of finance function is presented in the separate
section forming part of the Annual Report.

Directors' Responsibility Statement

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

i) in the preparation of the annual accounts of the Company, the applicable
accounting standards had been followed along with proper explanations
relating to meterial departures;

ii) the Directors had selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company at the end of the financial year and of the profits of the Company
for that period;

iii) the Directors had taken proper and sufficient care for the maintenance
of adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities; and

iv) the Directors had prepared the annual accounts of the Company on a
going concern basis.

Environment, Health and Safety

Your Company lays great emphasis on environment, occupational health and
safety. We seek to meet leading health, safety and wellness standards to
enhance our business performance while optimizing employee health. Our
facility policies are designed to continually reduce the risk of
occupational injury and illness while promoting employee health and well-
being. The Company's units and offices are equipped with modern amenities
to meet strict requirements of efficient servicing and smooth functioning
at all times. The Company follows strict compliance of pollution and
commercial norms in carrying out the manufacturing activities and in
establishments of plants and offices. The Company has a system in place
which ensures congenial and aesthetic atmosphere for working.

Human Resources

Our people are key to our success. Their skills, knowledge, ideas and
enthusiasm drive our business. We have high-quality, diverse work force and
employees who fulfill their potential. We have achieved this by giving them
development and advancement opportunities along with competitive
compensation and benefits that appropriately reward performance.

We communicate widely with employees to demonstrate how their efforts
contribute to our success and listen their concerns. We also encourage them
to align with our vision. We are committed to open communications and
a work place where everyone's voice is heard.

We use several channels to communicate with employees, including an
internal web portal and company website along with communication sessions
with the top management of the company. These sessions provide assessment
of employee satisfaction and are inputs for business planning, management
decision-making and company strategy development. They also help employees
implement company policies, meet high standards of conduct and ensure that
their behavior reflects company values and policies.

Corporate Social Responsibility

While it acquires companies and builds internally, Havells never loses
sight of its responsibility as a good corporate citizen. Havells believes
that serving people with meager or no means is the duty of every well-to-do
person. It consistently puts that philosophy into action and has initiated
several projects for social causes. Corporate Social Responsibility (CSR)
at Havells portrays the deep symbiotic relationship that the group enjoys
with the communities it is engaged with. As a responsible corporate
citizen, we try to contribute for social and environmental causes on a
regular basis:

-Mid day Meals

Being a responsible and concerned corporate citizen, Havells undertakes
welfare activities in and around its plant locations. In Alwar, Rajasthan
the company is providing mid-day meals close to 15000 students of primary
schools. This has greatly increased the number of children attending school
regularly and also alleviated hunger.

-Medical Aid

With the objective of upliftment of quality of life of underprivileged
people, Havells has donated Rs. 35 Lacs to QRG Foundation, a Trust which is
providing healthcare services through mobile healthcare van for the slum
areas of Delhi region and provide free medical checkups and medicines to
needy people.

Havells in furtherance to CSR initiatives also organizes blood donation
camps, medical checkup camps and had also given donation to flood-affected
areas in Bihar.

Contribution to Exchequer

The Company is a regular payer of taxes and other duties to the Government.
During the year under review your Company paid Rs. 22.04 crores towards
Income Tax as compared to Rs.22.71 crores paid during the last financial
year. The Company also paid Excise Duty of Rs. 135.46 crores, Sales Tax &
Service Tax of Rs. 138.34 crores, contribution to PF, ESI etc. of Rs.4.87
crores totaling Rs.300.71 crores during financial year 2008-09 as compared
to Rs. 326.96 crores paid during last financial year.

Listing of shares

The shares of the Company are listed on National Stock Exchange of India
Limited (NSE) and Bombay Stock Exchange Limited (BSE). NSE has been defined
as the Designated Stock Exchange of the Company. The listing fee in respect
thereof, for the year 2008-09, has already been paid to both the stock
exchanges.

Personnel

Particulars of Employees required under section 217(2A) of the Companies
Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as
amended, form part of this report and are attached herewith as Annexure -
A.

Particulars regarding Conservation of Energy, Technology Absorption and
Foreign Exchange Earnings and Outgo:

Particulars as required to be disclosed as per the Companies (Disclosure of
Particulars in the Report of Board of Directors) Rules, 1988 are set out in
the statement attached hereto in Annexure - B and form part of this report.

Acknowledgment

Your Directors wish to express their grateful appreciation for the
cooperation and support received from vendors, customers, banks, financial
institutions, central and state government bodies, auditors, legal
advisors, consultants, shareholders and the society at large. Your
directors also take on record the appreciation for the contribution and
hard work of employees across all levels. Without their commitment,
inspiration and hardwork, your Company's consistent growth would not have
been possible.

For and on behalf of Board of Directors of
Havells India Limited

(Qimat Rai Gupta)
Chairman and Managing Director

Noida, June 27, 2009

ANNEXURE - B' TO THE DIRECTORS' REPORT

CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION,
FOREIGN EXCHANGE EARNINGS AND OUTGO

Information under Section 217(1)(e) of the Companies Act, 1956 read with
the Companies (Disclosure of Particulars in the Report of the Board of
Directors) Rules 1988 and forming part of the Directors' Report for the
year ended March 31, 2009 is as follows.

1. CONSERVATION OF ENERGY

Energy Conservation Measures;

Your Company gives priority to energy conservation. It regularly reviews
measures to betaken for energy conservation, consumption and its effective
utilization. The energy conservation measures taken at different locations
areas follows:

- Installation of Servo Voltage Stabilizers on machines to control power
fluctuations

- Replacement of higher rating motors with optimum rated motors on machines

- Replacement of pneumatic cylinders with electrical actuators in auto
calibration benches

- Introduction of power saving jackets around the moulding machines

- Installation of temperature compensation factor in auto calibration bench
to replace air-condition system in calibration room.

- Installation of additional Storage Tank and Dryer near paint shop
operations.

- Control on compressed air leakages and wastages

- Awareness of energy saving steps amongst employees

The energy conservative measure taken has reduced the consumption of
electricity and diesel as compared to the previous year.

2. RESEARCH &DEVELOPMENT

2.1 New Products Development

- Brake Motors, Inverter Duty Motors, Crane Duty Motors and Dual speed
Motors

- Two Pole version of Mini MCB

- Two Pole Mini Isolator

- Type S' RCCB &Type A' RCCB

- ACBs 3200-4000A

- Load Break Switches upto 100A

- Change over switches upto 100A

- Submersible Starters

- New Models Ceiling Fans viz Fusion II, Fiesta, Spark, Spark Deco

- Wall Fan models viz Swing Platina, Swing Platina High speed.

2.2 Product Improvements

- Introduction of Glue (resin) in 63A MCBs improved consistency in thermal
tripping of circuit breaker.

- Introduction of parallel circuit in 63Amp breaker to reduce temperature
rise of the breaker

- Upgradation of RCCB from electromechanical design to PCB based electronic
design

- Upgradation of MCCBs with reverse feed applications

- Enhanced repeatability of thermal tripping of MCB

2.3 Process Improvement

- Change in strip layout of the die in manufacturing of moving contact
reduced the copper scrap generation by 1 Gms per component.

- Reduced nylon scrap by reducing length runner

- Increased number of cavity in MCB chassis cover mould from 2+2 to 3+3

2.4 Benefits as a result of R & D Activities
The ongoing benefits accrue to the company as a result of R & D activities
are:

- Approval of ES-50 energy saving ceiling fan for 5 star rating under
energy labeling scheme launched by Bureau of Energy Efficiency, Ministry of
Power, Govt. of India

- Strengthening of technical base

- Improved product quality and reliability

- Increased acceptance of products local as well as global

- Enhance brand image

- Automation of manufacturing process

- Reduction in Cost of production

- Saving in consumption of energy and heat

- Reduction in scrap generation

2.5 Expenditure on Research and Development

Sl. Particulars (Rs. in Crores) (Rs. in Crores)
No. 2008-09 2007-08

A Capital Expenditure 0.24 1.08
B Revenue Expenditure 6.56 4.34
C Total 6.80 5.42
D Total R&D Expenditure as a
percentage of Turnover 0.3% 0.2%

3. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

3.1 Technology Absorption / Adoption, Adaptation and Innovation

- Absorption of technology from Lafert SpA, Italy to develop complete range
of 3 phase motors ('Standard Motors')

- Absorptionof fully automated MCB Assembly System&Zera Caliberation System

- Absorption of fully automated silver Tip Welding System, Latch Assembly
System and Knob printing SPM

- Implementation of Real Time Data acquisition system in RCCB / RCBO bench
for complete traceability

- Absorption of automated computerized ceiling fans' motor testing line.

- Absorption of automated computerized air delivery measurement system for
ceiling fans.

- Absorption of automated computerized ceiling fan testing system for
various performance parameters

- Automation of calibration process

- Adoption of automatic product testing bench for testing of higher rating
MCBs & RCCBs

- Adoption of Windchill PDM Link-Data Management System

3.2 Information on technology imported during last five years reckoned from
the beginning of the financial year:

Technology Imported A B C


Continuous catiniery vulcanizing 2005-06 Yes N.A.
extrusion machine
54 bobbin stranding machine 2005-06 Yes N.A.
Cable print machine 2005-06 Yes N.A.
Automated Capacitor Winder 2006-07 Yes N.A.
CFL machine to manufacture Ginni 2006-07 Yes N.A.
Lamp
Manufacturing technology, design 2007-08 Yes N.A
technology plant & machinery to
manufacture electric motors from
0.12 hp to 300 hp
Ceiling fan motor testing line 2008-09 Yes N.A
Air delivery measurement system 2008-09 N.A
for ceiling fans
MCB assembly system 2008-09 Yes N.A
Zera Calibration System 2008-09 Yes N.A

A = Year of Import

B = Has technology been fully absorbed?

C = If not fully absorbed, areas where this has not taken place, reasons
thereof and future plans of actions.

4. FOREIGN EXCHANGE EARNINGS AND OUTGO

(a) Activities relating to exports; initiatives taken to increase exports;
development of new export markets for products and services; export plans

The Company is continuously increasing its market share in the export
market. Several strategies adopted in past few years have resulted in
significant growth in export revenues. During financial year 2008-09 the
exports have grown by 47% from Rs. 141 crores in financial year 2007-08 to
Rs. 207 crores in current financial year.

The visibility of the group has enhanced considerably through participation
in prestigious international fairs. In collaboration with Sylvania, the
Company has great opportunity to expand in the international market with
the entire range of electrical products and a young and energetic team of
International Business Division will further strengthen its global
presence.

(b) Total foreign exchange used and earned

(Rs. in Crores)
2008-09 2007-08

Foreign exchange earned 206.76 141.48
Foreign exchange used 137.57 304.99

For and on behalf of Board of Directors of
Havells India Limited

(Qimat Rai Gupta)
Noida, June 27, 2009 Chairman and Managing Director

MANAGEMENT DISCUSSION AND ANALYSIS

The Financial Year 2008-09:

- Amidst a challenging business environment, Havells has registered a
growth of 10% during financial year 2008-09.

- The current global business environment is under significant financial
strain owing to the turmoil and uncertainty of the economic environment
globally. In response, we proactively expanded and accelerated
restructuring programmes across all regions and stepped up our focus on
cost and cash management.

- Indian business grew faster in the first half of the year with 18% growth
in the revenue and 24% growth in the profit. However, due to sharp decline
in the value of commodity prices in the third quarter, revenue growth for
full year was 7% and profit margin growth was 1%.

- Sylvania shows a decline of 2% in revenue in Euro in the financial year
2008-09 as compared to financial year 2007-08. Operating profit before
exceptional items declined by 310 bps. A restructuring plan has been
implemented at Sylvania aimed at further increasing organizational
effectiveness in the changed economic environment and reducing the fixed
cost base.

- Integration process between Havells and Sylvania has further crystallized
by forming Management Committees including the senior persons from both the
organizations led by Shri Qimat Rai Gupta, Chairman and Managing Director.
The key objective is to ensure that collective strengths are leveraged
towards a common shared vision through consolidating manufacturing into
global hubs, combining procurement activities in order to gain economies of
scale, cross fertilization of research and development capabilities and
operational best practices and consolidating finance and corporate
functions.

- Havells generated strong cash flows from operating activities both in
Indian business and Sylvania of Rs. 220 crores despite lower earnings,
driven by rigorous working capital management. In addition we completed the
raising of capital through conversion of 2,250,000 warrants into similar
number of equity shares at an agreed price of Rs. 690 per share. The
conversion substantiates the confidence of Warburg Pincus, the Investor, in
the business of your company.

Highlights of Financial Results (Rs. in crores)

Particulars Havells Sylvania Consolidated
2007-08 2008-09 2007-08 2008-09 2007-08 2008-09

Net Revenue 2,056 2,198 2,948 3,279 5,003 5,477
EBITDA 200 203 159 75 359 278
Less: Depreciation 13 18 56 72 69 90
Less: Interest 21 19 73 89 94 108
Less: Exceptional Items - - - 199 - 199
Add: Other Income 0.8 1.2 2.5 0.8 3.3 2.0
PBT 167 167 32 (284) 199 (117)
Less: Tax 23 22 15 21 38 43
PAT 144 145 17 (305) 161 (160)

Industry Overview:

With unprecedented economic turbulence in the world economy, Indian
industry faced its most difficult challenge in the history to continue to
show signs of growth. The industry that started 2008 with massive expansion
and acquisition drive felt the pinch of the downturn more than anybody and
is quick in responding with large scale retrenchments, write backs in the
books. Jolts of world economic crisis were felt in India in October,
prompting the government and industrialists to go for course correction to
prevent the economy from collapsing. Investment decisions were delayed for
ongoing large scale projects in infrastructure, power and real-estate
developments. Electrical industry witnessed slower growth, surprised
reduction in the prices of major metals, fading capital with increased cost
of funding.

European economic conditions deteriorated progressively over the course of
2008. Output growth, which had begun to weaken in 2007, continued to
decline, with the slowdown becoming increasingly exacerbated by the effects
of the international financial market crisis. As of third quarter of 2008,
the Euro zone entered the first technical recession in its history. Latin
America on the other side shows a mixed trend with correction in the
economic activities shown in the end of 2008; some economies have already
started to show signs of recovery and have even forecasted growth in 2009.
The impact of overall economy on Lighting and Fixture markets became
increasingly obvious during 2008.

Both global and domestic demand will increasingly benefit from the effects
of the significant economic stimulus under way and the enormous efforts
undertaken to restore confidence and the functioning of the financial
system inside and outside.

2009 promises to be a year of challenges, with the change in market
dynamics, strong brand and distribution channel, strong capital base,
profuse product mix and capable team of professionals will ensure Havells'
profitable growth. Managing earnings volatility is more vital than ever
before as stability is greatly valued by investors. Havel ls' philosophy of
collective growth with values and ethics will drive its way forward.

Havells India Performance (standalone entity in India)

During financial year 2008-09 (FY09) Havells India has shown a growth of 7%
in Net Revenue from Rs. 2,056 crores to Rs. 2,198 crores in the financial
year 2007-08. Operating Profit (Earnings before interest, depreciation, tax
and amortization) was up marginally from Rs 200 crores in FY08 to Rs. 203
crores in FY09. Profit After Taxwas up marginally from Rs. 144 crores in
FY08 to Rs. 145 crores in FY09.

(Rs. in crores)
Particulars FY08 FY09 Change Change(%)

Net Revenue 2,056 2,198 143 7%
Operating Profit (EBIDTA) 200 203 3 2%
Less: Depreciation 13 18 5 38%
Less: Interest 21 19 -2 -10%
Add: Other Income 0.8 1.2 .4 50%
Profit before Tax 167 167 0 -1%
Less: Tax 23 22 -1 -
Profit after Tax 144 145 1 1%

Segment wise Revenue:

The results achieved by major business segments of the Group are as given
below:

FY 08:

Switchgear, 26%
Cable & Wire, 45%
Lighting & Fixtures, 14%
Electrical Consumer Durables, 12%
Others, 3%

FY09:

Electrical Consumer Durables, 13%
Others, 1%
Switchgear, 28%
Lighting & Fixtures, 13%
Cable & Wire, 45%

Net Revenue of each product:

(Rs. in crores)
Name of the Segment FY08 FY09 Change Change(%)

Switchgears 543 609 66 12
Cables & Wires 924 991 67 7%
Lighting and Fixtures 284 277 (7) -
Electrical Consumer Durable 240 277 37 15%
Others 78 50 (28) -
TOTAL (Including other income) 2,069 2,204 135 7%

Switchgears:

12% y-o-y growth in Switchgear segment with Net Revenue of Rs. 609 crores
in FY09 as compare to Rs. 543 crores in FY08. Switchgear margin improved
during FY09 at 33.3% as compared to 31.9% during FY08. Switchgear segment
includes Domestic Switchgears with Miniature Circuit Breakers, Distribution
Boards, HRC Fuses, Industrial Switchgears, Electrical Wire Accessories,
Capacitors and Motors. Havells, the Indian power distribution equipment
major is one of the market leaders in Low Voltage Switchgear, Circuit
Breakers, MCBs, ELCBs, MCCBs and Air Circuit Breakers.

Havells is one of the top 10 manufacturers of MCB in the world and one of
the leading market brand in India's Switchgear market. Havells manufactures
a wide range of MCBs, RCCBs, and distribution board suitable for every
application and need. The quality and process systems ensure that Havells
not only remains the market leader in India but also 40% of its production
is exported mainly to European countries. Its state-of-the-art
manufacturing plant at Baddi, Himachal Pradesh having fully automated
production lines of calibration, testing, printing and packing is at par
with the best facilities world wide. Neemrana (Rajasthan) is one of the
largest LV Motor Plant in Asia spread over 42 acres and will manufacture
energy efficient motors ranging from 0.12 HP to 300 HP. The plant and
machinery has been imported from AEG, Spain. Havells' Industrial
Switchgears is synonymous with the best international technology standards;
it includes control gear and distribution products like Loadline MCCB,
Kompact, SDF9 Switch Disconnector Fuse, Powerline Contactor, Overload Relay
and Motor Starter, Instaline Auto Transfer Switch and Euro load Changeover
Switch.

CABLE & WIRES

Despite one time loss due to sharp fall in commodity prices during third
quarter of this financial year, the cable & wires division registered a
growth of 7% with net revenue of Rs. 991 crores in FY09 as compared to Rs.
924 crore in FY 08. The division shows a marginal drop in margin percentage
at 6% in FY09 for the same reason Havells' cables are available with
aluminum and copper conductor and polymer insulation to ensure the highest
quality standard and safety. The Company is recognized as quality
manufacturer of cable & wires and offers a complete range of low and high
voltage PVC and XLPE cables besides domestic FR/FRLS wires, Co-Axial TV and
telephone cables. Havells' world class manufacturing plant, located at
Alwar, Rajasthan is an ISO 9001 certified facility. Havells' wires ensure
longer life and are the safest domestic wires in the industry.

LIGHTING & FIXTURES

Lighting and Fixtures division shows a marginal drop of 2% with revenue at
Rs. 277 crores in FY09 from Rs. 284 crores in FY08 due to detoriating
market conditions for Compact Fluorescent Lamps (CFL). Luminaries division
on the other side shows improvement in both revenue and margins. Lighting
and Fixtures margin improved at 19% during FY09 as compared to 12% during
FY 08. Havells had also started selling its CFLs produced in India through
the Sylvania channel in Europe.

Electrical Consumer Durables

Havells continues to gain its market position in the consumer segment of
its fans with 15% growth in FY 09 at Rs. 277 crores as compared to Rs. 240
crores in FY08. Margins shows the same trend during FY09 at 21 % as
compared to 21 % in FY08. Havells entered fan business in mid-2003 and has
emerged as one of the fastest growing fan brand in the Indian market.
Havells has captured the customer's fancy with innovative designs and
excellent finishes. From premium fans in exquisite antique finishes to fans
specially designed for kids to dual color fans and super speed fans,
Havells offers a complete range to meet varied individual needs. Innovation
and technical upgradation has been a constant part of Havells production
processes. The company has set up India's largest integrated fan plant with
a capacity of 4.8 million fans per annum located at Haridwar, Uttarakhand.
The state-of-the-art manufacturing plant includes in-house CNC machining
facility, electrostatic conveyorised paint shop, automatic stator winding
machines, conveyorised assembly lines &computerized testing facility.

Sylvania performance (stand alone)

Acquired in April 2007, Sylvania lighting business worldwide (excluding
Australia, Canada, Mexico, New Zealand and the United States) is now owned
by Havells India Ltd. The Havells Sylvania Group ('Group') is a leading
global designer and provider of lighting systems. The Group has a leading
presence in selected markets across Europe and Latin America with a focus
on growth in LATAM, Asia, the Middle East and North America. The Group's
key strengths include:

- design and engineering capabilities;

- breadth of lighting product offerings;

- supply chain management expertise

- the Sylvania brand.

The Group markets fixtures, lamps and other lighting products to targeted
high value customers, including architects, designers, electrical
distributors and wholesalers, select retailers, installers / end-users,
original equipment manufacturers and other lighting manufacturers (together
'OEMs'). Its product portfolio includes a diverse selection of fixtures
(architectural / accent and industrial / commercial ('I/C') and a
comprehensive range of lamps (fluorescent, incandescent, compact
fluorescent ('CFL'), high intensity discharge ('HID'), halogen and light
emitting diode ('LED'). The combination of its portfolio of lighting
technology and its Sylvania brand positions the Group to compete
effectivelywith all other global and local lighting companies. The Group
participates in all segments of the lighting industry, with a focus on
specialty and niche segments, where it competes primarily on the basis of
brand strength and design / service capabilities to develop and grow its
market shares. Sylvania Lighting leverages its developed supply chain
practices to achieve cost advantages throughout the global markets.

The year 2007-08, first year after acquisition, showed a growth of 7% in
Net Revenue. However 2008-09 was affected due to the worldwide economic
slowdown. The Net Revenue although increase by 11 % in FY09 to Rs. 3,279 cr
from Rs 2,948 cr in FY 08 but in Euro term the same has declined marginally
by 2% from Euro 504 in FY09 as compared to Euro 515 in FY08. Adjusted
EBITDA was Euro 12 mn in FY 09 as compared to Euro 28 mn in FY08.

In response to slowdown we have worked out a plan for performance
streamlining. Major actions are being taken to correct the costs and
infrastructure to ensure that we are lean and efficient. The process will
require investments but with a payback of maximum one year and once the
full year effect of all these actions start showing, the company should
show a healthy bottom line.

Highlights in Indian rupees (figures in crores)

Particulars FY08 FY09 Change

Net Revenue 2,948 3,279 331
Net Revenue (in Euro million) 515 504 (11)
Operating Profit (EBITDA) 159 75 (84)
Less: Depreciation 56 72 16
Less: Interest 73 89 16
Less: Exceptional Items - 199 -
Add: Other Imcome 2.5 0.8 (1.7)
Profit before Tax 32 (284) (316)
Less: Tax 15 21 6
Profit after Tax 17 (305) (322)

Area wise sales breakup:

During FY09 Europe contribution to the Net revenue was 70% as compared to
74% in FY08. America's contribution to Net Revenue was 27% in FY09 as
compared to 23% in FY08. America's region mainly includes Latin America.
Asia's contribution to Net revenue was 3% in FY09 and 3% in FY08.

Due to sales decline in Europe, its contribution in total revenue has
dropped from 74% in FY08 to 70% in FY 09. Decline in Europe revenue is due
to economic slowdown and exchange rate fluctuations majorly GBP vs Euro.
Despite general economic challenges, the America's region has grown during
FY 09 as compared to FY 08. This growth is mainly driven by growing economy
countries such as Argentina, Mexico, Ecuador and Venezuela.

Consolidated Debt position as at 31 March 2009:

The structure of consolidated debt as on 31 March 2009 is as follows:

(Rs. in crores)

Company Name Nature of Financing Amount
outstanding
as on
31 March 2009

Havells India Limited-stand alone Term Loan 15.61
Working Capital loan 5.21
Other Secured Loans 3.54
Unsecured Loans 45.92
Sub-Total 70.28

Havell's Netherlands Holding B. V. Term Loan guaranteed by 157.45
Step Subsidiary of Havells India Ltd. Havells India Ltd. (Euro 23.33
mn)
Sylvania -without any guarantee Term Loan 512.84
from Havells India Limited (Euro 76 mn)
Working Capital 267.59
(Euro 40 mn)
Other secured loans 100.14
Unsecured Loans 119.53
Sub-Total * 1157.55
Grand Total 1227.83

*Deutsche Bank has provided various credit facilities to Sylvania for an
amount equivalent to Euro 14 million, the payment of which is obligation of
Sylvania, and has been guaranteed by Havells India Limited.

Total guaranteed financial obligation of Havells India Limited as at 31
March 2009 was Euro 37.33 mn (Euro 23.33 mn + Euro 14 mn) as against Euro
72 mn standing as at 31 March 2008. During the financial year 2008-09 Rs.
226.25 crores was invested by Havells India Limited in the shares of the
subsidiary company to repaythe guaranteed obligation.

ISSUE OF EQUITY SHARES TO WARBURG PINCUS

Havells India Limited had issued 41,60,000 Equity Shares to Seacrest
Investment Ltd (A Warburg Pincus Group Company) at an issue price of
Rs.625/- per share on 26th November 2007 aggregating Rs. 260 crores. The
proceeds so received were used to repay the Euro 50 mn Bridge facility
taken for the acquisition of Sylvania.

Havells India Ltd. in addition to equity also issued 26,00,000 warrants
convertible into same number of equity shares at Rs. 690/- per warrant.

During the year 2008-09 Secreast Invetment Ltd. had converted 22,50,000
warrants into similar number of equity shares at an agreed price of Rs. 690
per warrant on 4 February 2009 aggregating Rs. 155.25 crores. The proceeds
so received have been used to payoff the existing debts of the company
and/or its subsidiaries taken for the purpose of CAPER in India.

After these allotments Seacrest Investment Ltd. holds 64,10,000 shares
representing 10.7% of the total paid up share capital. Along with Secreast
Investment, Warburg Pincus Group now holds 87,13,800 equity shares
representing 14.5% of the total paid up share capital. There are no further
warrants or any other instruments pending for allotment.

The Company had cancelled the unexercised 350,000 warrants on 26 May 2009
that were not exercised by Secreast Investment Ltd within 18 months from
the date of their allotment and forfeited the 10% advance equivalent to Rs.
2.41 crores paid in advance by Secreast Investment Ltd. at the time of
allotment thereof in accordance with the provisions of the SEBI (Disclosure
and Investor Protection) Guidelines 2000.

WORKING CAPITAL CYCLE

HAVELLS INDIA LIMITED - STAND ALONE

(Rs. in crores)
Particulars FY 08 FY 09
Amount No.of days Amount No. of days
to Net Revenue to Net Revenue

Debtors 66 12 87 14
Inventories
- Raw Materials 139 25 87 14
- Finished Goods 291 52 120 20
Less: Creditors 353 63 277 46
Total Working Capital 143 26 17 2

Total Working Capital of Havells India Limited shows a major drop of 88% to
Rs. 17crores in FY09 as compared to Rs. 143 crores in FY08, due to major
drop in Inventories in FY09. Total Inventory shows a drop of 52% with an
amount of Rs. 207 crores in FY09 as compared to Rs. 430 crores in FY08
which includes raw material dropping by 37% with an amount of Rs. 87 crores
in FY09 as compared to Rs. 139 crores in FY08 and finished goods dropping
by 59% with an amount of Rs. 120 crores in FY09 as compare to Rs. 291
crores in FY08. Debtors show a growth of 32% with an amount of Rs.87 crores
in FY09 as compared to Rs. 66 crores in FY08. Creditors show a drop of 22%
with an amount of Rs. 277 crores in FY09 as compared to Rs. 353 crores in
FY08.

SYLVANIA- STANDALONE (Euro in mm)

Particulars FY 08 FY 09
Amount No.of days Amount No.of days
to Net Revenue to Net Revenue

Debtors 120 85 99 72
Inventories
- Raw Materials 22 16 19 14
- Finished Goods 75 53 68 49
Less: Creditors 62 44 51 37
Total Working Capital 155 110 135 98

Total Working Capital of Sylvania standalone in Euro shows a drop of 13%
with Euro 135 mn in FY09 as compared to Euro 155 mn in FY08. Total
Inventory shows a drop of 10% with Euro 87 mn in FY09 as compared to Euro
97mn in FY08,which includes raw material shows a drop of 14% with Euro 19mn
in FY09 as compare to Euro 22mn in FY08 and Finished Goods showing a drop
of 9% with Euro 68mn in FY09 as compared to Euro 75mn in FY08. Debtors show
a drop of 18% with Euro Rs. 99 mn in FY09 as compared to Euro120 mn in
FY08. Creditors show a drop of 18% with Euro 51 mn in FY09 as compared to
Euro 62 mn in FY08.

OPPORTUNITIES & THREATS

The scope for opportunities is wide ranging in that a company will try to
make better use of finance, marketing and other resource based aspects of
the business work more smoothly and efficiently. Threats include where a
company has a successful product on the market or product concept, then the
threats would be that someone else would try to copy that concept and
market it at a similar or at a lower cost.

We believe our competitive strengths include:

GROWTH OF ENERGY EFFICIENT ELECTRICAL PRODUCTS

Energy efficient lighting solutions market witnessed impressive growth in
the current arena. Lighting majors are charting out new investment plans to
launch new lighting solutions, adding more capacities apart from increasing
distribution reach in order to meet the growing future demand. Lighting is
now looking at continuing investments in introducing new lighting solutions
that cater to the lifestyle aspirations of people apart from creating
awareness around energy efficiency in the year 2009. Havells has captured a
high premium position in the fan segment, by providing the market with
innovative designs, premium finishes and energy efficient performance.

GREEN PRODUCTS

Havells recently launched its revolutionary Green CFL in the Indian market,
which heralds innovation in CFLs by making them more environment friendly.
With Green CFL, Havells has modified its CFL production lines and adopted
PDT (Pill Dosing Technology).With PDT, we now use amalgamated mercury pills
which are less harmful to the environment as compare to the conventional
use of liquid mercury in CFLs thereby contributing towards prevention of
global warming and use of energy saving products.

EMERGING MARKETS

The current adjustment period of the world economy for the markets may
extend until the third quarter of 2009 as some of the LATAM economies have
already started showing signs of recovery and have even forecasted growth
in 2009. Africa, Asia and more particularly

India have almost been a standout. Global investors have made ajudgment
that among all emerging markets, they are bullish on India as it seems
relatively more attractive.

INCREASED INFRASTRUCTURAL INVESTMENTS

A slower economy provides advantages for infrastructure investment. Work
can be done more cheaply because of lower interest rates and labor costs.
Improvements in infrastructure position the economy for future growth. At
the same time, there have also been proposals at the national level to
create infrastructure investment banks designed to improve or enhance the
financing streams of infrastructure projects.

THREATS

A slowdown of the World Economy coupled with Indian economy is quite
possible for the short term due to current global developments. Due to the
strong linkage of the manufacturing industry to the economy, such an event
would adversely impact growth in the short term for the company.

COMPETITION

Competition whether domestic or international is always a challenge and
transforming challenges into opportunities has been a practice at Havells.
We believe that the principal competitive factors in our business include
the ability to:

- attract and retain high quality technology professionals

- maintain financial strength to make strategic investments in human
resources and physical infrastructure through business cycles.

- increase scale and breadth of service offerings to provide one-stop
solutions.

We believe we compete favourably with respect to these factors.

COST OF RAW MATERIAL

Metal being a major raw material to almost all of our products, may affect
our contribution margins. Havells had adopted various measures to minimize
the effect of volatile prices of raw material.

INTEGRATION RISK

Havells India recognizes that there could be considerable risk emanating
from a possible lack of adequate alignment of management of Havells and
Sylvania on strategic issues and in common functional areas. Havells India
has therefore taken some substantive measures to mitigate the above risks:-

a) An Operating Model has been instituted to govern management
collaboration and decision making in areas such as Marketing, Finance,
Strategy, IT, Continuous Improvement. A Joint Executive Committee
comprising executive leadership of both entities, provides high level
direction and guidance.

b) To ensure that synergies in operations are identified and implemented
for pre-defined bottom line impact, the following enabling mechanisms have
been set up:

- Focused integration teams

- Setting up an Integration Programme Office to facilitate synergy
identification

RISK MANAGEMENT

The risk classification frame work of Havells India Limited provides a
comprehensive categorization of business risks. The risk classification
framework has been divided into four broad risk categories as under:

- Strategic Risks: are associated with the primary long term purpose,
objectives and direction of the business-these risks may arise from the
actions of other participants in the market place and/or the opportunities
selected and decisions made by the business

- Operational Risks: are associated with the on-going day to day operation
of the business. These include the risks concerned with the business
processes employed to meet the objectives

- Financial Risks : are related specifically to the processes, techniques
and instruments utilized to manage the finances of the organization as well
as those processes involved in sustaining effective financial relationships
with customers and third parties

- Knowledge Risks: are associated with the management and protection of
knowledge and information.

Risk Mitigation;

To mitigate the above risks Ernst & Young as our co partner in Risk
Management has developed a Risk Management and Internal Control framework.
In addition to that we have deployed a technology tool 'Risk Manager' that
would perform as a repository of all risk related information and would
also provide relevant and timely information to risk management owners and
the Board relating to risk assessment and mitigation.

Internal control:

Havells India Ltd. has adequate internal control systems, which foster
reliable financial reporting, safeguard assets, encourage adherence to
management policies as well as international agreements and conventions -
as far as they are applicable - and promote ethical conduct. Havells' well
defined organization structure, documented policy guidelines, defined
authority matrixand internal controls ensures efficiency of operations,
compliance with internal policies and applicable laws and regulations,
protection of resources and accurate reporting of financial transactions.

The Board has responsibility for the Group's system of internal control and
for monitoring and reviewing its effectiveness. Any system of internal
control is designed to manage, rather than eliminate, the risk of failure
to achieve business objectives. The system can only provide reasonable, and
not absolute, assurance against material financial misstatement or loss.
The Board reviewed the effectiveness of internal control procedures during
2009. The principal features of the Group's systems of internal control
are:

Monitoring:

The Board reviews the effectiveness of established internal controls
through the Audit Committee which receives reports from management, the
Risk Committee, the Group's internal audit function and the external
auditor on the systems of internal control and risk management
arrangements. The internal audit department reviews the effectiveness of
internal controls and risk management through a work program which is based
on the Group's objectives and risk profile and is agreed with the Audit
Committee. Findings are reported to operational and executive management
and the Audit Committee.

Business unit managers provide half yearly self-certification statements of
compliance with procedures. These statements give assurance that controls
are in operation and confirm that programs are in place to address any
weakness in internal control. The certification process embraces all areas
of material risk. The internal audit department reviews the statements on
behalf of the Committee and reports any significant issues to the Audit
Committee. This department is responsible for conducting internal audits of
the company as well as its group & subsidiary companies in India &abroad.

Control procedures;

Control procedures have been established in each of the Group's operations
to safeguard the Group's assets from loss or misuse and to ensure
appropriate authorization and recording of financial transactions. All
acquisition and investment decisions are subject to disciplined investment
appraisal processes.

Material Developments in Human Resources/Industrial relations:

The concept of industrial relations has a very wide meaning and connotation
in Havells India Limited. It means that the employer, employee relationship
confines itself to the relationship that emerges out of the day to day
association of the management and the employee. Industrial relations
include the relationship between an employee and an employer in the course
of the running of an industry and may project it to spheres, which may
transgress to the areas of quality control, marketing, price fixation and
disposition of profits among others.

At Havells the team shares a common vision of achieving excellence in every
sphere of business. Our Code of Conduct' clearly defines our ethics for
performance, behavior at work and our relationships. To promote competent
and conducive working environment company follows following set of
practices:

- A flat organization;

- Competency mapping at the time of joining to ensure right person at the
right job and to enhance productivity

- Open to ideas, suggestions and communications for accelerated decision
making;

- Recognition and rewards for performers.

Disclaimer clause:

Statements in the Management Discussion and Analysis Report describing the
Company's objectives, projections, estimates, expectations may be 'forward-
looking statements' within the meaning of applicable securities laws and
regulations. Actual results could differ materially from those expressed or
implied. Important factors that could make a difference to the Company's
operations include economic conditions affecting demand/supply and price
conditions in the domestic and overseas markets in which the Company
operates, changes in the Government regulations, tax laws and other
statutes and incidental factors.