Annual Report - Kansai Nerolac - 2009-2010

KANSAI NEROLAC PAINTS LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

Dear Members,

Your Directors' are pleased to present the 90th Annual Report and the
Audited Accounts for the year ended 31st March, 2010.



1. Financial Highlights:

1st April, 2009 1st April, 2008
to 31st to 31st
March, 2010 March, 2009
Rs. in lacs Rs. in lacs

Gross Sales 197170.53 166373.85

Net Sales/Income from operations
(Net of excise and discounts). 170638.36 137451.92

Other Income 2038.21 2219.50

Profit before Interest, Depreciation,
Tax and Appropriation 28406.91 17963.20

Interest 119.99 183.80

Depreciation 4425.98 3760.50

Profit Before Tax 23860.94 14018.90

Tax 7310.89 4160.00

Profit After Tax 16550.05 9858.90

Balance brought forward from previous year 27143.88 22053.93

Balance available for appropriations 43693.93 31912.83

Appropriations:

Proposed Dividend 4041.89 3233.52

Tax on Proposed Dividend 671.31 549.54

General Reserve 1660.00 985.89

Balance retained in Profit and Loss Account 37320.73 27143.88
43693.93 31912.83

2. Dividend:

The Directors' recommend for consideration of the Members a dividend of
Rs.15.00 (150%) per equity share of the nominal value of Rs. 10 each for
the year ended 31st March, 2010 as against Rs. 12.00 per equity share
(120%) paid last year.

3. Bonus Shares:

The Directors' have recommended, subject to the approval of the
Shareholders and such other approvals as may be required, an issue of Bonus
Shares in the proportion of one New Equity Share for every one Equity Share
held on a Record Date to be advised later. The approval of the Shareholders
for the proposed issue of Bonus Shares is being sought by means of postal
ballot.

4. New manufacturing facility at Hosur:

During the last quarter of the year, commercial production commenced at the
Company's green-field state-of-the-art paint manufacturing facility at
Hosur.

5. Management Discussion & Analysis:

(A) About the Company:

Kansai Nerolac Paints Ltd. (KNPL), a subsidiary of Kansai Paint, Japan was
established in the year 1920. It is the second largest coating company in
India and the market leader in Industrial Coatings. In the 90th year in the
paint business, Nerolac is a well known brand with a strong recall
proposition.

The journey through these 9 decades has been momentous for KNPL. From its
humble beginnings in 1920, it has grown to be a leader in the Paint
Industry thanks to the support and patronage of its shareholders,
customers, vendors and employees.

Over the last 9 decades, KNPL has been a front runner in the paint industry
bringing in numerous innovations and technologies to the Indian market that
have added significant value to its esteemed customers and has also ensured
technology leadership within the Industry. KNPL has numerous firsts to its
credit, like the introduction of Automotive Coatings in India, introduction
of bumper coatings for the automotive industry as well as numerous
innovations in automotive coatings which have contributed to the aesthetic
appeal and technology offering to consumers. In decorative also Nerolac has
often taken the lead in bringing new consumer products and concepts to the
market over the years.

KNPL operates through 69 sales locations and 5 factories. KNPL's
manufacturing operations are spread across India at state of the art
factories located in Bawal in Haryana, Lote in Maharashtra, Jainpur in UP,
Chennai in Tamil Nadu and a new one at Hosur in Tamil Nadu. The proximity
of the plants to its customers' plants has offered logistic advantage and
enabled high service levels. For the Industrial Coatings, it has a wide
range of products in the Automotive, Powder, General Industrial High
performance Coatings and Pretreatment Chemicals domain. For the Decorative
business, it has been known for its innovative products and services.

With a strong commitment to innovation, style and consumers' needs, KNPL
has embarked on several initiatives like introduction of lead free (no lead
added) paints, opening of Colour Stylers and Impressions Style Zone
outlets.

KNPL has also invested in IT interventions involving a slew of product
implementations across the entire value chain of the organization. These
will be enablers for effective and speedier transactions to various stake
holders.

Over the years, the organization has been credited with numerous awards in
the field of Corporate Governance, Environment, Products, Information
technology and overall management.

(B) Industry Progress:

The year 2009-10 began against the background of the slow down. While
initially there was a lot of skepticism on the recovery, with time those
doubts evaporated and we saw the Indian economy do really well.

The industry is estimated to have grown around 15% with all players
recording good growths. The size of the industry is estimated at Rs. 21,000
crores as on Mar 2010 wherein the organized sector accounts for 65% while
the remaining is with the unorganized sector.

Kansai Nerolac, had taken a series of steps in the previous year much
before the recession effect started and that helped KNPL to take full
benefit of the recovery in the Indian economy. It has been able to increase
its presence in the decorative sector and consolidate its leadership in the
industrial, automotive and powder coatings.

Towards the end of the last financial year we have seen a gradual rise in
raw material costs. In addition there has been a tightening of liquidity
through the gradual withdrawal of the stimulus package. With this, the
outlook for the near term future remains cautiously optimistic.

Over the long term, industry is expected to do well with many positive
factors like internal demand, favorable demographics and expected good
monsoon which should see the GDP grow at 8%. The just released figures for
the twelfth five year plan also envisage good investments and as such the

long term story for the Industry appears favorable.

(C) Marketing Initiatives:

KNPL has been at the forefront in introducing new products and technologies
in the paints industry. The organization has been proactively involved in
eliminating use of hazardous materials in paints and making the products
Environment friendly through the Lead Free (no lead added) Campaigns and
launch of Eco friendly products. KNPL has been the pioneers in introducing
the lead free (no lead added) campaigns.

A number of campaigns were done in the current year. The 'Impressions'
television campaign, aired on all leading channels, with the base line of
'Apke Rang, Apki Pehchan' aimed at rediscovering oneself through the
process of painting. Similarly, the Ad campaign for Nerolac Excel Total,
started on leading television channels focuses on 'anti peel' property of
the paint that ensures that the paint bonds strongly with the walls and
doesn't peel off, irrespective of weather conditions. Awareness Campaigns
through Beauty TVC Advertisement have focused on the economy range of
products with aesthetic results. The tag line of the advertisement, 'Beauty
kare hairan, jeb par bhi asaan' suggests that the product is economical and
value for money. With the Beauty Ad campaign, the Nerolac jingle was also
introduced to drive recall.

For the consumers of the present times, it is important to make the process
of buying paint an involved experience wherein they can touch and feel the
products. These aspects have been catered by the opening of the Nerolac
Colour Stylers in a few select zones wherein these are formed on shop-in-
shop model, opened by the combined effort of the dealers and KNPL.

Considering the current trend of the customers being engaged while buying
paints, Impression Style zone outlets have been launched. These shops
provide end to end solution, beginning from helping the consumers to choose
the right kind of paint and finishes to how the products will look in their
living space. The company believes that the Impression Style zone is a game
changer from the Industry perspective, once again outlining KNPL's
leadership role.

In the industrial business, both in the Automotive and Non Automotive
Coatings the organization has done well and the prospects are huge.

KNPL participated in various exhibitions and trade fairs related to the
Industrial business both in the Automotive and Non Automotive space of
Industrial Coatings. KNPL has continued to work with its customers in
offering greater value addition through the launch of new products,
technologies and value engineering. KNPL has also been awarded approvals at
various agencies like Nuclear Power, Thermal Power for its High Performance
coatings.

Several CED lines awarded this year to Nerolac indicate that KNPL's
position is further strengthened in the industrial sector.

(D) Opportunities and Threats:

Some of the global economies are yet to revive from the slowdown and
uncertainty still persists due to inflation, withdrawal of the stimulus
packages and raising of interest rates. KNPL is cautious and is geared to
take the challenge.

It continues to identify the gaps in the consumers' needs and the products
available. It aims to increase the brand portfolio so that all the
requirements of the Decorative and Industrial customers are catered
effectively. Growth plans have been devised balanced with investments in
production capacity enhancements, introduction of new products, services
and people development initiatives.

Environmental legislations are also a threat wherein KNPL is prepared to
face the challenge through introduction of Eco friendly products.

The industry is also witnessing an influx of foreign players in various
segments of the market. The company is striding ahead to provide value
additions, customer responsiveness and satisfaction for higher performance
and retention of market share.

KNPL, in the backdrop of the emerging favorable market conditions is geared
to meet the challenges and sustain the leadership in the industrial sector
and gain higher market share in the decorative sector.

(E) Segment wise Performance:

The company has only one segment of activity named paints, in accordance
with the definition of 'Segment' as per the Accounting Standard 17 issued
by the Institute of Chartered Accountants of India. The performance of the
company is discussed separately in this Report.

(F) Risks and Concerns:

KNPL has earmarked function wise risk areas along with its probability and
severity of the effects. A detailed Enterprise Risk Management (ERM)
Framework is in place wherein the risks are identified and the ways in
which they can be mitigated have been highlighted. An internal process has
been set up in which the Risk Committee periodically meets for monitoring
the framework, projects identified for extenuating risks and the status of
actionables.

The fluctuations in the global economy, rising petroleum prices and its
derivatives, political instability, crop failures, natural calamities, may
affect business. Therefore the business cannot be risk free and it has to
be prepared to face them with an action plan.

Proper inventory planning, maintaining the quality of stock, productivity,
overhead control and working capital management are some of the focus
areas. Technology definitely is the cutting edge for the organization
wherein it has the advantage of launching innovative products at
competitive prices, thereby improving the sales figures. KNPL has also
leveraged technology to bring in enhancements in processes, products and
people productivity.

KNPL has also stepped up its initiative of further strengthening its brand

equity amongst consumers through a slew of activities in the media as well
as through launch of superior innovative products, service backup, retail
concept and strong distribution network as mechanism geared to protect the
organization.

(G) Research and Development:

Research and Development department of the company is focused on the
product innovations, quality enhancements and value addition for all
segments of consumers. There is continued vigor in ensuring formulation
optimization, standardization of raw materials, optimization of processes
and value engineering support to the esteemed customers. Break through
innovations have been achieved in:

* Making all the decorative range of products lead free (no lead added).

* Patent Certification for 'A Bird Repellant Polymeric Composition and
method of manufacturing the same' introduced under the trade name of 'Bird
Go'.

* Rapgard Transit Protection film.

* Hygiene Coatings.

The innovations offered are indicative of the crucial role R&D function has
played in maintaining the leadership role in the industrial / auto coatings
and creating pathways for decorative sector. This has been done, with the
focus on the environment friendly product requirements of customers.

(H) Information Technology:

During the year, KNPL has embarked on a defining IT initiative. This
initiative involves a complete business process transformation through the
implementation of many new IT packages from SAP.

The initiative involved using IT to create value in various processes in
the domain of Customer interaction, Sales Team Interaction, Product
development, financial supply chain, Manufacturing, vendor management.
Supply Chain, Warehousing and distribution, Knowledge Management, Document
management, Process Monitoring and Control and Governance. In addition,
KNPL has also upgraded its core IT systems of ERP, Supply Chain and Data
warehousing. KNPL has also used this opportunity to automate reporting and
enable faster and qualitative decision making through the implementation of
dashboards. These initiatives we believe are path breaking and are capable
of giving KNPL an edge in the market place.

KNPL has also done a complete technology refresh of its core IT
infrastructure of servers, storage, databases, network and security. It has
used this opportunity to implement many contemporary IT technologies like
Green IT, Virtualization amongst others.

KNPL has ensured through these initiatives that the risk of technology
obsolescence is minimized and a long term sustainable road map for various
business applications which are of strategic nature is in place.

(I) Human Resources:

KNPL values the people as the key pillars of strength. The organization is
vibrant with the average age of the employees being 34 and has been
actively investing in people related processes and systems. With a view
towards developing future leaders, KNPL has strengthened its Talent
Management program.

There has been a strong focus on competency enhancement at the grass root
level. Special attention was given to Skill Development for Operators and
Officers in the plants and as planned, operators have been promoted to the
officer cadre. In order to develop the career and competencies of its sales
team KNPL has institutionalized various HR initiatives.

In order to promote a healthy work life balance, numerous welfare
activities have been conducted.

Industrial relations remained cordial. Employee Strength is 2148 as on 31st
March 2010.

(J) Awards & Recognition:

KNPL takes pride in the recognition it has received in various fields. The
Awards given by the External Agencies are:

* Golden Peacock Innovative Product / Service Award.

* Lote Plant was awarded with Golden Peacock Environment Management GOLD
Award.

* Nerolac Excel Total won Product of the Year Award in the paints category.

* A 'Silver Certificate of Merit' was awarded to Jainpur Plant by Frost &
Sullivan for Asia Manufacturing Excellence Award (AMEA).

* Readers Digest Award.

Some of the Awards by our Customers:

* 'Best Delivery Performance Award to Bawal Plant for the year 2009 by
Whirlpool India.

* MSIL awarded 'Overall Vendor Performance Award' during the Annual
Suppliers Meet.

* Award of Excellence was presented to KNPL in recognition of outstanding
performance by Krishna Group of Companies (M/s Krishna Maruti / SKH Metals)
during their Vendor Performance.

(K) Community Development:

As a part of the Corporate Social Responsibility (CSR) initiative, KNPL is
committed to rendering support to communities around locations. Kansai
Nerolac is a Socially Active Corporate Citizen, wherein the employees
volunteer for the activities wherever possible. Several initiatives have
been undertaken this year under the domains of Health, Education, Community
Development and Environment.

Under the Health domain, AIDS Awareness Program has been conducted at
Bawal. Free Eye Camp at Perungudi was well appreciated wherein over three
hundred villagers benefited. Similar Health Check-up Camp was carried out
at Jainpur where Medical Consultation & Advice by Specialists Doctors were
provided. Pathology Tests were also done for the villagers and poor people
who were not able to afford Medical Services and were also not aware about
the diseases. KNPL in association with NGOs and local Administration
participated in health awareness rallies like the AIDS Awareness one
conducted at Rewari, near Bawal plant. Slogan and Poster competition,
conducted on the day led to greater awareness of the disease.

The health awareness programs have not been limited to just factories. They
have been carried out at the depots as well.

For community development, the company provided Hand Pumps in nearby
villages of Jainpur factory. The aim was to provide a solution to the
persistent 'water scarcity' issues at villages. Initiatives like
Distribution of blankets for the old and bags for the school children were
aimed at helping the needy. Similar activities of providing drinking water
facilities and creating the infrastructure for basic facilities like
toilets, overhead tanks and taps were initiated at Hosur plant.

Besides, Nerolac has also supported various organizations and activities
like providing financial assistance to Senior Citizens' Settlement
foundation, Hemophilia Society, Thallasemic Children Welfare Society,
Shanmukhananda Jasubhai RK Shah Medical Center.

As a part of Environmental awareness, Energy Conservation Day has been
celebrated to spread awareness.

The work done by the Company in the area of Corporate Social
Responsibility(CSR) is separately published as the Corporate Social
Responsibility Report.

(L) Environmental and Industrial Safety:

As a responsible corporate citizen, KNPL gives high priority to health and
safety of its employees with due importance to conservation of the
environment and its correlation with achieving business goals.

In order to improve activities for environment and safety, KNPL carries out
internal audits at the plants selecting areas for improvement and creating
new measures. Recertification audits have been conducted at Lote plant
along with the ISO 14001 &OHSAS 18001 surveillance.

ENCON Week celebrated at corporate office and plants reiterate the
relevance of energy conservation and its benefits for environmental safety.
Employee involvement was evident in the participation for the competitions
of poster making and 'Best out of the Waste', and suggestions given by them
for energy conservation.

Release of CARE bulletins focus on educating the employees on environmental
hazards and the steps that can be taken for its prevention.

KNPL implemented various measures in order to reduce the usage of
pollutants. The environmental initiatives of 2009 were formulated with the
aim of protecting the environment and causing minimal impact to the
environment from the medium and long term viewpoint.

The detailed work done by the company in the area of Environment, Health
and Safety is published as the Environmental Report annually.

(M) Internal Control Systems and their adequacy:

KNPL has adequate internal control measures to ensure that all transactions
are under the purview of Corporate Governance. They are well documented,
authorized and reported and are within the laid down policies and
procedures.

All business transactions are conducted using the SAP ERP system. In order
to ensure that its business processes and systems are operating in the
manner intended, the Company has these audited by the Internal Auditor as
per the Internal Audit Plan in addition to the statutory audits. Compliance
towards J-SOX audits has also been initiated.

The recommendations arising out of the various audits are taken on board at
the Audit Committee meetings of the board and are tracked and reported for
implementation.

The well defined organization structure with limited authorizations, KRAs
at all levels, annual business plans for every function and monitoring of
statutory compliances through individual BSCs are indicative of the laid
down internal control systems.

(N) Affirmative Action:

The company has adopted a Code of Conduct for affirmative action for the
purpose of providing employment opportunities for the socially
disadvantaged.

(O) Financials:

Gross sales for the year aggregated to Rs. 1972 crores reflecting a growth
of 18.5% over the previous year. Sales net of excise duty grew by 24%.

The Company had undertaken a lot of initiatives during the slow down to
reduce procurement cost and reduce operational costs. These initiatives
helped the Company in the current year to keep the operational costs under
control and improve the bottom line.

Depreciation is higher due to commissioning of the plant at Hosur and CED
project at Bawal. Current year's depreciation is at Rs. 44.26 crores as
compared to Rs. 37.61 crores of the previous year.

Interest was lower at Rs. 1.2 crores as compared to Rs. 1.84 crores of the
previous year due to effective cash management.

Profit Before Tax is higher at Rs. 238.61 crores as compared to Rs. 140.19
crores of the previous year reflecting a growth of 70.2%. This good
improvement in the bottom line was mainly due to robust sales growth and
effective cost management.

Cautionary Statement:

Statements in this Management Discussion and Analysis Report describing the
Company's objective, estimates and expectations may be 'forward looking
statements' within the meaning of applicable laws and regulations. Actual
results might differ materially from those either expressed or implied.

6. Fixed Deposits:

The Company has not accepted any Fixed Deposits (FD) during the year.
Deposits aggregating to Rs. 1.75 lacs, due for re-payment have not been
claimed by the FD holders as on 31st March, 2010. Barring these, the
Company has refunded all the deposits, which were due for payment as on
31st March, 2010. During the year, unclaimed deposits amounting to Rs. 0.20
lac were transferred to the credit of the Investor Education and Protection
Fund (IEPF) as required under Section 205C of the Companies Act, 1956.

7. Unclaimed Dividend:

During the year, dividend amounting to Rs. 1,21,955 lacs that had not been
claimed by the shareholders for the year ended 31st March, 2002, was
transferred to the credit of Investor Education and Protection Fund as
required under Section 205A read with Section 205C of the Companies Act,
1956. As on 31st March, 2010, dividend amounting to Rs. 43.90 lacs has not
been claimed by shareholders of the Company. Shareholders are required to
lodge their claims with the Registrars, Sharepro Services (India) Pvt.
Ltd., for unclaimed dividend.

8. Collaboration:

The Directors' record their appreciation for the contribution made and
support provided by Kansai Paint Co. Ltd., Japan (Kansai). Kansai continues
to provide support on process design, quality improvement, world class
technology which has helped the Company in maintaining market leadership in
the industrial business including automotive coatings, by servicing
existing customers better and adding new lines. Kansai also provides
technology for manufacture of architectural coatings.

The Company also has Technical Assistance Agreement with Oshima Kogyo Co.
Ltd., Japan, for manufacturing heat resistance coatings and with PPG
International Performance Coatings & Finishes, USA (formerly Ameron
International Performance coatings and Finishes) for High Performance
coatings. The Directors record their appreciation for the co-operation from
these collaborators.

9. Auditors' Report:

The Auditors' Report is clean and there are no qualifications in their
Report.

10. Directors:

In accordance with the Articles of Association of the Company, Mr. D. M.
Kothari, Mr. S. M. Datta and Mr. P. P. Shah retire by rotation and being
eligible, offer themselves for re-appointment.

Mr. Y. Kawamori, a nominee of Kansai Paint Co. Ltd., Japan, on the Board,
resigned from the Directorship with effect from 26th March, 2010. The
Directors have placed on record their sincere appreciation for the very
valuable contribution made by Mr. Kawamori during his tenure as a Director.
With effect from 26th March, 2010, Mr. Y. Takahashi, a nominee of Kansai
Paint Co. Ltd., Japan, has been appointed as an Additional Director on the
Board. Mr. Takahashi holds office upto the date of the Annual General
Meeting, but being eligible, offers himself for re-appointment.

None of the Directors of the Company is disqualified under Section 274(1
)(g) of the Companies Act, 1956. As required by law, this position is also
reflected in the Auditors' Report.

11. Corporate Governance:

As required by the existing Clause 49 VII of the Listing Agreements entered
into with the Stock Exchanges, a detailed report on Corporate Governance is
given as a part of the Annual Report. The Company is in full compliance
with the requirements and disclosures that have to be made in this regard.
The Auditors' Certificate of the compliance with Corporate Governance
requirements by the Company is attached to the Report on Corporate
Governance.

The Company is in compliance with the Secretarial Standards issued by the
Institute of Company Secretaries of India.

12. General Shareholder Information:

General Shareholder Information is given in Item No. 9 of the Report on
Corporate Governance forming part of the Annual Report.

13. Particulars regarding Employees:

Particulars of Employees as required under Section 217(2A) of the Companies
Act, 1956, and the Companies (Particulars of Employees) Rules, 1975, as
amended, forms part of this 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 excluding the statement of particulars of
employees under Section 217(2A) of the Companies Act, 1956. Any shareholder
interested in obtaining a copy of the said statement may write to the
Company Secretary at the Registered Office of the Company.

14. Directors' Responsibility Statement:

As stipulated under the provisions contained in Section 217(2AA) of the
Companies Act, 1956, the Directors hereby confirm as under:

(i) That in the preparation of the annual accounts, the applicable
accounting standards have been followed along with the explanation relating
to material departures;

(ii) That the Directors' have selected such accounting policies and applied
them consistently and made judgements 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 profit of the Company
forthat period;

(iii) That the Directors have taken proper care of the maintenance of
adequate accounting records in accordance with the provisions of this Act
for safeguarding the assets of the Company and for preventing and detecting
fraud and other irregularities;

(iv) That the Directors' have prepared the annual accounts on a going
concern basis.

In accordance with the Corporate Governance Voluntary Guidelines, 2009
issued by the Ministry of Corporate Affairs, Government of India, it is
hereby confirmed that proper systems are in place to ensure compliance of
all laws applicable to the Company.

15. Energy, Technology Absorption & Foreign Exchange:

Statement giving the particulars relating to conservation of energy,
technology absorption and foreign exchange earnings and outgo, as required
undertheCompanies (Disclosures of particulars in report of the Board of
Directors) Rules, 1988, is annexed.

16. Auditors:

The Company Auditors, M/s BSR & Co. Chartered Accountants, retire at the
conclusion of the forthcoming Annual General Meeting and are eligible for
re-appointment.

17. Acknowledgements:

Your Directors' wish to express their grateful appreciation for the co-
operation and support received from customers, parent company,
collaborators, vendors, shareholders, financial institutions, banks,
regulatory authorities and the society at large.

Deep appreciation is also recorded for the dedicated efforts and
contribution of the employees at all levels, as without their focus,
commitment and hard work, the Company's consistent growth would not have
been possible, despite the challenging environment.

For and on behalf of the Board

J.J.Irani
Chairman
Place: Mumbai
Date : 3rd May, 2010.

ANNEXURETO DIRECTORS' REPORT

FORM A

(1) Disclosure of Particulars with respect of Conservation of Energy:

A. POWER AND FUEL CONSUMPTION 2009-2010 2008-2009

(1) ELECTRICITY

(a) Purchased
Units ('OOOKWH) 20147 16010

Total Amount (Rs. in lacs) 956.23 761.77

Rate/Unit (Rs.) 4.75 4.76

(b) Own Generation Through Diesel Generator:

Units ('OOOKWH) 6578 4422

Units per litre of Diesel oil 3.40 3.24

Cost/Unit (Rs.) (of diesel oil only) 10.09 10.82

(2) LIGHT DIESEL OIL AND HIGH SPEED DIESEL:

Quantity (KL) 2376 1835

Total Amount (Rs. in lacs) 813.65 601.26

Average Rate (Rs.) 34.24 36.60

(3) STEAM:

Quantity (MT) 5342 -

Total Amount (Rs. in lacs) 98.29 -

Average Rate (Rs.) 1.84 -

B. CONSUMPTION PER UNIT OF PRODUCTION:

ELECTRICITY LIGHT DIESEL OIL
(KWH/TONNE) HIGH SPEED DIESEL
(LT/TONNE)
2009-2010 2008-2009 2009-2010 2008-2009
Paints, Varnishes,
Enamels and Powder
Coatings (including
Synthetic Resins
for captive use) 131 127 12 11

STEAM
(KG/TONNE)

2009-2010 2008-2009
Paints, Varnishes,
Enamels and Powder
Coatings (including
Synthetic Resins
for captive use) 26 -

FORMB B

(2) Disclosure of Particulars with respect to Technology Absorption:

I. RESEARCH AND DEVELOPMENT (R & D):

1. Specific areas in which R&D carried out by the Company:

- Development of new coatings / paints.

- Quality upgradation of existing products.

- Development of resins and polymers for paints.

- Value engineering.

- Process development.

- Import substitution.

2. Benefits derived as a result of R & D: Patents received:

The following products have been developed & commercialized.

- 'A Bird Repellent Polymeric Composition And Method Of Manufacturing The
Same' (Patent No. 237307). This is a product which drives away birds,
without causing them any harm.

- 'Modified Resin From Cashew Nut Shell Liquid And Method Of
Manufacturing The Same' (Patent No. 239152) -This resin can be used in
economical Air drying or Force drying.

- 'Novel Aqueous Polyurethane Acrylic Hybrid Resin Dispersion'. (Patent No.
239611). This PU dispersion is useful in Water borne wood finishes.

Eco-friendly products:

- The premium & mid segment architectural Emulsion paints have been made
Ammonia free.

- The following product categories have been made low VOC, to meet the GS-
11 VOC Standards:

* Premium Exterior emulsion paint.

* Mid Segment Exterior emulsion paint.

* Economy Exterior emulsion paint.

* Mid Segment Interior emulsion paint.

* Economy Interior emulsion paint.

The following products have been developed & commercialized:

- High Solid Basecoats for passenger cars.

- Lead free painting system for two wheelers.

- Low bake primers for passenger cars.

- Pearl White coating system for two wheelers.

- Single component common basecoat for two wheelers.

- Low bake Poly Urethane Clear coats for two wheelers.

3. Further Plan of Action: Development of the following:

- Water based primer for wood, concrete & metal, having excellent
anticorrosive properties.

- Premium Matt Emulsion Paint with excellent scratch & stain resistance.

- Long Life Exterior durable paint.

- High solid 3-Wet base coat.

- Common base coat for automobile body & bumper.

- Mar resistant clear coat for four wheelers.

4. Expenditure on R & D:

(Rs. in lacs)
2009-2010 2008-2009

(a) Capital 72.91 73.82

(b) Recurring 1146.85 1154.07

(c) Total 1219.76 1227.89

(d) Total R&D Expenditure as
percentage of total turnover 0.62 0.74

II. A. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION:

1. Kansai Paint Co. Ltd., Japan.

- Resins for Cathodic Electrodeposition primers have been successfully
localized at the plant.

2. Oshima Kogyo Company Ltd., Japan.

- Heat resistant paint for motor cycle engines & Primers & Topcoats for
Mufflers - Commercialized.

3. PPG International Performance Coatings and Finishes, USA. (Ameron)

- Range of High Performance coating products for Thermal Power Plants have
been commercialized.

- High performance coatings are being used for servicing petrochemical &
power sectors.

B. FOREIGN EXCHANGE EARNINGS AND OUTGO:

Details of expenditure in foreign exchange and earnings in foreign exchange
are given in Notes No. II (13) and II (14) respectively in Schedule 'R' of
the audited accounts of the Company.

For and on behalf of the Board

J.J. IRANI
Place: Mumbai Chairman
Date : 3rd May, 2010