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3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
DIRECTORS Mr. Yashovardhan Birla Chairman
Mr. Bert O’Donoghue Managing Director
Mr. Thomas P. Spencer Director
Ms. Mary B. McCormick Director
Dr. Carlisle S. Boyce Director
Mr. B.S. Iyer Director
Mr. D.J. Balaji Rao Director
Mr. Amit Mukherjee Director
Mr. B.V. Shankaranarayana Rao Director
ALTERNATE DIRECTOR Mr. Brad C. Sweet Alternate to Mr. Thomas P. Spencer
COMPANY SECRETARY Mr. K. Ramesh Chandra
AUDIT COMMITTEE Mr. B.S. Iyer Chairman
MEMBERS Mr. D.J. Balaji Rao
Mr. Amit Mukherjee
Mr. Thomas P. Spencer
Ms. Mary B. McCormick
SHAREHOLDERS’ Mr. D.J. Balaji Rao Chairman
GRIEVANCE COMMITTEE Mr. B.S. Iyer
Mr. Amit Mukherjee
Mr. Yashovardhan Birla
Mr. Bert O’Donoghue
BANKERS Bank of America
BNP Paribas
Canara Bank
Citibank N. A.
Corporation Bank
Deutsche Bank
Hongkong & Shanghai Banking Corporation Limited
ICICI Bank Limited
State Bank of India
Vijaya Bank
HDFC Bank
AUDITORS M/s. Lovelock & Lewes, Chartered Accountants
LEGAL ADVISORS J. Sagar Associates
Advocates & Solicitors
4121/B, 19 ‘A’ Main, 6th Cross
HAL II Stage Extention, Bangalore - 560 038
SHARE TRANSFER AGENTS Karvy Computershare Pvt. Ltd.
46, Avenue Ford
Street No. 1, Banjara Hills
Hyderabad - 500 034
Tel: 040-23420816 / 824
Fax: 040-23420814
WEBSITE www.3m.com/intl/in
INVESTORS QUERIES [email protected]
BOARD OF DIRECTORS
3M India Limited(formerly Birla 3M Limited)
2 innovate, grow, deliver
Registered Office
Plot No. 48-51, Electronics City
Hosur Road
Bangalore - 560 100
Tel : 080 - 28520203
Fax : 080 - 28520576
Corporate Office
Raheja Paramount
138, Residency Road
Bangalore - 560 025
Tel : 080 - 22231414
Fax : 080 - 22231450
3
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
Vision
S To be the most innovative
enterprise and the preferred
supplier
3M Performance
Initiatives
S Six Sigma
S 3M Acceleration
S Sourcing effectiveness
S eProductivity
S Indirect Cost Control
Values
S Satisfy customers with superior
quality value and service.
S Provide investors an attractive
return through sustained quality
growth.
S Respect our social and physical
environment.
S Be a company employees are
proud to be part of.
3M India Limited(formerly Birla 3M Limited)
4 innovate, grow, deliver
MESSAGE FROM THE CHAIRMAN
The year ended December 31, 2005 was indeed a momentous one for us. Our
Company witnessed excellent growth on the top & bottom line & is well ahead of the
industry average in terms of growth. I am delighted with our performance.
For Companies, scaling up is vital for longevity and prosperity. The growth it
generates feeds customer demand for stronger, more stable partners, who consistently
deliver value at competitive costs. Strong growth permits companies to build their brand
and human capital, to seize market share, to amortize costs on sales, administration
and R&D, not to mention financial stability as I always believe, 3M’s drive to scale-up
will come from it’s innovative and diverse product line and most certainly, our ability to
offer long-term value to our customers.
Our strong product base coupled with a sound business model, is fortified by a
leadership that leads by example. A leadership that rolls up its sleeves and dives into the
details, be it project reviews or scoping customer needs or for that matter motivating their
teams. I thank them for leading 3M India so well and I am confident of their ability to
lead our company to an even stronger & greater future.
Finally, I believe that such strong results are a product of a dedicated, committed
& hard-working team. I thank them for their stellar performance and I exhort them to
continue to foster their culture of excellence, while sticking to the highest ethical standards.
Defining a vision of the future, far ahead of where we stand today, is essential to
unlock the imagination and passion of people. We need to internalise each facet of this
vision, see where we are found wanting, and systematically address each shortcoming.
Once the vision becomes part of our bloodstream, growth is automatic & a certainty.
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5
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
MESSAGE FROM THE MANAGING DIRECTOR
The people at 3M India are committed to delivering solutions to our customers problems, using innovative 3M technologiesand products, growing faster than the economy we serve and delivering strong results. In 2005, they continued to transform the waywe operate, achieving several new milestones – both financial and in other key areas of operating performance.
I am delighted to report to you that your Company registered a top line growth of 45.4% over 2004, way above industryaverages. We posted another all-time high in earnings growth of 50.4%. Our results were driven primarily by a combination of solidtop-line growth and continued improvements in operational efficiency. In addition, cost-reduction projects related to our corporateinitiatives had a direct impact on our bottom line. Needless to say, the very core of our raison d’etre are our customers – workingclosely with them, creating and sustaining customer loyalty has contributed significantly to our results.
A rejuvenated culture of accountability is reinforcing the delivery of broad-based business results and all of our businessescontributed to our sales and profit growth in 2005.
We enter 2006 with strong momentum, confident in our ability to sustain double-digit earnings growth both this year andlonger-term. We’re delivering strong results by leading change and leveraging the power inherent in the 3M business model. A culture ofcustomer-inspired innovation is at the core of this business model. Our people apply multiple technologies to a broad spectrum of markets,and they continue to transform the process of innovation – from idea creation to successful product commercialization – by making betterchoices and at a faster pace. We have substantially reduced cycle time – the number of months it takes for a qualified product idea to gofrom concept to successful commercialization. That means sales start earlier and add up more quickly.
Six Sigma is 3M’s overarching initiative, and it continues to drive growth, reduce costs and increase cash flow in 3M businessesaround the world. It has become deeply embedded in every function and business. Simply put, it’s now the way we work. A key way in whichwe use Six Sigma tools is “Six Sigma with Our Customers” projects - these joint projects produce a relationship with customers thattranscends that of the traditional role of a product supplier. We come to be appreciated as a valued business partner, as well.
Achieving results ethically is a cornerstone of the 3M culture. Close to two decades of operating with honesty and integrity hasearned the company trust from customers, respect and credibility, and dedication from our employees. Our reputation is an incalcu-lable asset and a source of pride for 3Mers in India. We recognize that good reputations are much more easily lost than won, and we’refully committed to protecting our reputation for straightforward, ethical behavior.
The impressive results that your Company has delivered would not have been possible without the yeoman contribution of allemployees, channel partners and outsource partners who work day and night to execute and deliver the vision of the company. I a msure all of you will join me in complimenting them for putting in extraordinary work to achieve wonderful results.
I am exceptionally proud of the 3M employees in India and what they have achieved. Not only am I proud of the businessresults but also the way that they have displayed their humanity by contributing from their own pockets to support the PrimeMinister’s Disaster Fund at the time of the recent terrible earthquake in Northern India. Your Company had a contributionmatching scheme and the employees really stepped up. This group of employees are the equal of any group of 3M employees globally.
As we move forward, we will start to increase our investments in India to create an infrastructure to enable continuedgrowth that is well in excess of the economic growth of the country.
Finally, I would like to thank your Board of Directors. Their leadership and advice to me and our team is invaluable.
As I look to the future, I sincerely believe that our best years are ahead of us.
Bert O’Donoghue o
o
3M India Limited(formerly Birla 3M Limited)
6 innovate, grow, deliver
Your Directors have pleasure in presenting their Report and the
Audited Accounts for the year ended December 31, 2005.
Financial Results
(Rs. in lakhs)
For the year For the year
ended ended
December 31, December 31,
2005 2004
1. Net Sales including
other Income 38,306.05 25,973.74
2. Exports included in
the above 645.90 36.87
3. Total Expenditure 31,560.01 21,320.50
4. Interest 14.68 21.11
5. Profit after Interest
but before Depreciation
and Taxation (1-3-4) 6,731.36 4,632.13
6. Depreciation 673.06 528.01
7. Provision for Taxation 2,216.53 1,550.55
8. Profit after Taxation 3,841.77 2,553.57
Sales and Earnings
During the year, all business segments performed well, which
resulted in local sales growth of 45.4 % over the previous year.
Profit after Taxation grew by 50.4 %.
Dividend
In view of the on-going investment and further expansion, it is decided
to retain the earnings. Hence, no dividend is recommended.
Personnel
The Board wishes to place on record its appreciation to all
employees in the Company, for their sustained efforts and immense
contributions to the high level of performance and growth that your
Company has achieved during the year.
The Annual Report and Accounts are being sent to all shareholders of
the Company without the statement of particulars of employees Under
Section 217 (2A) of the Companies Act, 1956 read with (Particulars of
Employees) Rules, 1975. Any Shareholder interested in obtaining a
copy of the said statement may request for a copy in writing, to the
Managing Director at the Registered Office of the Company.
Directors’ Responsibility
Pursuant to Section 217 (2AA) of the Companies Act, 1956, your
Directors confirm that :
i) In the preparation of annual accounts, the applicable accounting
standards have been followed along with proper explanation
relating to material departures;
ii) We 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 for the year ended
December 31, 2005 and of the profit of the Company for that
period;
iii) We have taken proper and sufficient care for 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) We have prepared the financial statements for the year ended
December 31, 2005 on a going concern basis.
PARTICULARS OF CONSERVATION OF ENERGY,
RESEARCH AND DEVELOPMENT, TECHNOLOGY
ABSORPTION AND FOREIGN EXCHANGE EARNINGS
AND OUTGO
Report required to be made pursuant to Clause (e) of Sub-section
(1) of Section 217 of the Companies Act, 1956 read with the
Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988 and forming part of the Director’s Report is
given in Annexure B of this report.
Directors
Mr. Lee M. Kennedy resigned as Managing Director on August 31,
2005 and in his place, Mr. Bert O’Donoghue was appointed as
Managing Director. Dr. Paul Rosso resigned as Director on October
26, 2005 and in his place, Dr. Carlisle Boyce was appointed as a
Director.
The Board of Directors places on record their sincere appreciation
to Mr. Lee M. Kennedy and Dr. Paul Ross for their contribution.
Mr. B. S. Iyer and Dr. Carlisle Boyce are retiring by rotation at the
ensuing Annual General Meeting and being eligible, offer themselves
for re-election / appointment.
Auditors
M/s. Lovelock & Lewes, Chartered Accountants retire and are eligible
for re-appointment.
Acknowledgement
Your Directors wish to place on record their sincere appreciation
for the assistance and support extended by customers, bankers, and
vendors.
Your Directors also wish to place on record their sincere
appreciation for the valuable contribution, efforts and the spirit of
dedication shown by all employees.
On behalf of the Board of Directors
Bert O’Donoghue
Managing Director
Place : Bangalore B.V. Shankaranarayana Rao
Date : February 20, 2006 Director
REPORT OF THE DIRECTORS
7
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
Additional information to be furnished u/s 217 (1)(e) of the Companies (Disclosure of Particulars in the Report of Board ofDirectors) Rules, 1988.
1. Conservation of Energy
Installation of 100 nos of T5 lamps for the new converting area resulted in reduction of power consumption.
Installation of variable frequency drives in the A/C and ventilation arrangement of the Trolley condition area VFD’s willvary the speed of the Motor depending upon the requirement and at least 20% saving is expected to the connectedload of 15 KW of the motors at AHU’s.
The above measures in conservation of energy resulted in annual savings of Rs 3.6 lakhs.
2. Technology Absorption and Research & Development
1. Specific areas in which Research & • Consumer Markets – WipesDevelopment carried out by the Company • Automotive After Markets – Formulations
• Corrosion Protection Products – Epoxy Powders,• Abrasives
2. Benefits derived as a result of the • New applications developed to improve customers processabove Research & Development • Cost effective solutions to bring down the total cost of
applications and products• Patent application filed
3. Future plan of action Support product application development and localiseproducts in areas of Corrosion Protection, AutomotiveAftermarkets, Abrasives, Polymers - Plastic and Rubberprocessing
4. Expenditure on Research & Development (Rs.in Lakhs)
a) Capital Nil
b) Recurring 15.60
c) Total 15.60
d) Total Research & Development expenditureas a percentage of total turnover 0.04 %
3. Foreign Exchange Earnings or Outgo
During the year, the Foreign Exchange earnings were Rs.676.68 lakhs and Foreign Exchange Outgo was Rs. 1055.89 lakhs.
On behalf of the Board of Directors
Place : Bangalore Bert O’Donoghue B.V. Shankaranarayana RaoDate : February 20, 2006 Managing Director Director
3M India Limited(formerly Birla 3M Limited)
8 innovate, grow, deliver
c) Segment-wise or product-wise performance
INDUSTRIAL MARKETS
3M ’s Industrial business segment represents some of our original businesses, such as tape, coated and non-woven abrasives, and specialtyadhesives. As industrial brands are continuously transformed through technological innovation, this business segment also aptly represents3M innovations at work. Our Industrial market now offers the broadest line of products for markets in automotive,aerospace and automotiveafter markets. Product applications range from grinding, surface conditioning and super abrasives to packaging systems.
Rs. in lakhs
31.12.05 31.12.04
Financial Highlights for the year Segment Revenue 6,456.68 4,781.80
ended December 31, 2005 Profit before Interest & Tax 1,388.86 1,003.14
Capital Employed 1,361.93 1,133.52
Highlights • Strong growth in the construction components segment where specialty
tapes are used for various applications like curtain walling, glazing and panel
attachment applications in elevators.
• Growth in metal fabrication segment where our abrasives products are used
for MS and SS fabrication applications.
• Steady and sustained growth in the AOEM and auto parts segments where
our specialty tapes and abrasives are used for various applications in the
manufacture of automobiles, motorcycles and various auto components.
Investors are cautioned that this discussion contains statements thatinvolve risks and uncertainties. Words like anticipate, believe, estimate,intend, will & expect and other similar expressions are intended toidentify such forward looking statements. The Company assumes noresponsibility to publicly amend, modify or revise any forward lookingstatements, on the basis of any subsequent developments, informationor events. Besides, the Company cannot guarantee that theseassumptions and expectations are accurate or will be realized andactual results, performance or achievements could thus differ materiallyfrom those projected in any such forward looking statements.
MANAGEMENT DISCUSSION AND
ANALYSIS
The Company has a wide spectrum of products to cater to the
requirements of Industrial, Automotive, Healthcare, Consumer &
Office Markets, etc., to name a few.
a) Industry Structure and Developments
The Company sales excluding exports grew by 46.4 % over
previous year.
The Company continues its focus on Industrial Segments, its
technological advantage of products and expertise. Your
Company sources its requirement of materials both for
manufacturing & trading from its 3M Affiliates around the
globe as the products are technologically advanced.
Major portion of the revenue comes from traded goods which
3M has technological advantage worldwide. Few of our power
brands are Scotchkote, Scotchtint, Micropore, Thinsulate,
Post-it ®, Filtrete™, Scotch®.
b) Opportunities and Threats
2005 was another encouraging year for the Indian economy.
The continued stability at home contributed to the favourable
business environment.
We believe that our ability to compete will depend on a
number of factors beyond our control which include
• currency exchange fluctuations
• the price at which our competitors offer their
products and services and
• to the extent to which our competitors respond to
the customer’s needs
We strongly believe in our Brand Equity.
9
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
AUTOMOTIVE & SPECIALTY MATERIALS MARKETS
Corrosion Protection Products offer high quality high durability coatings for the pipelines which are used for transporting crude oil /natural gas fromexploration area like oil fields to refineries.
Specialty Materials represents some of the very advanced technological products to automotive / oil & gas and industrial segmentswhich add tremendous value to our customers in auto components manufacturing industry.
Design & sell engineered products for the automotive OEM industry. Provide productivity enhancing solutions for the automotiveaftermarkets in car repair and in enhancing appearance of cars through a wide range of car care treatments and accessories
Rs. in lakhs
31.12.05 31.12.04
Financial Highlights for the year Segment Revenue 13,523.58 8,316.49
ended December 31, 2005 Profit before Interest & Tax 1,741.33 1,195.98
Capital Employed 5,839.06 4,749.38
Highlights • Oil exploration projects, auto components have progressed during the second half of the
year resulted in significant growth. Several initiatives have been implemented to improve
productivity and growth for corrosion protection products and specialty materials in the
coming years depends largely on theautomotive industry performance and implementation
of oil exploration projects.
• Recorded good growth in the automotive OEM business for both designed
and engineered products.
HEALTH CARE MARKETS
Health Care businesses provide innovative products, services and technologies that help improve people’s health and well being in theHospitals and Dental clinics. 3M India holds leading position in a broad array of market segments – in medical, surgical and dentalproducts and also provides technologies for other health care manufacturers.
Rs. in Lakhs
31.12.05 31.12.04
Financial Highlights for the year Segment Revenue 5,501.07 4,437.46
ended December 31, 2005 Profit before Interest & Tax 335.08 274.98
Capital Employed 1,280.46 1,136.99
Highlights • 3M has been working relentlessly with customers in imparting education on hospital /
dental practices and protocol development / compliance across the country.
• Over 40,000 programmes were conducted by marketing, technical and international
speaker programs in the hospital, dental and dairy industry. We worked with customers
and helped set-up local chapters of nurses clubs, infection control societies, etc., in
major cities.
• The launch of a new nanotechnology product Z350 was well received by dentists and
will lead to faster growth. Faster penetration in cleaning and disinfection products and
dressings helped growth in the medical business in 2005. The launch of orthodontic
products in 2005 will accelerate growth.
• Six sigma projects undertaken with some leading customers have helped improved
efficiency for the customers and have helped improved relationships and business for
3M with these customers.
3M India Limited(formerly Birla 3M Limited)
10 innovate, grow, deliver
TRAFFIC AND SAFETY MARKETS
Products that enhance worker, public and vehicle safety as well as Corporate image around the world make up this business segment.Major product lines include advanced reflective materials for traffic and personal safety; graphic films, hardware, software, inks andtoners for large-format identity and advertising graphics; respirators & hearing protection products for worker safety, library securitysystems & computer filter screens for eye protection.
Rs. in Lakhs
31.12.05 31.12.04
Financial Highlights for the year Segment Revenue 6,806.62 4,386.43
ended December 31, 2005 Profit before Interest & Tax 1,621.54 970.47
Capital Employed 1,363.54 1,217.65
Highlights • Expansion of the road network at the national and state levels resulted in increased
demand for the Company’s reflective sheeting products for traffic signage.
• The Company’s reflective sheeting has been approved for use in the prestigious,
Mumbai Metropolitan Regional Development Authority (MMRDA) road projects.
• The Company’s commercial graphics division supplied commercial fascia signage material
(vinyl and flexible substrate) to several large national Corporate identity re-imaging
Programs.
• During the year, the Company’s occupational health & environment safety
division bagged contracts for supply from some of the largest public and private sector
companies in the country and has strengthened its leadership position.
• The Company’s security system division supplied state of the art passport readers to
the 4 large international airports in the country thereby helping them in speedy
clearance at the immigration counters at the airports.
CONSUMER & OFFICE MARKETS, CONSTRUCTION MARKETS
Supplying an array of products that help keep homes cleaner, offices organized and buildings maintained, this business segment features some
of the world ’s best-known brands, from Scotch® to Scotch-Brite® and Post-it ®.
Rs. in Lakhs
31.12.05 31.12.04
Financial Highlights for the year Segment Revenue 5,028.84 3,732.92
ended December 31, 2005 Profit before Interest & Tax 566.35 451.13
Capital Employed 946.22 792.78
Highlights • Multi-packs (save Rs. 6/-) was launched and has received very good response.
Engaged the customers through enhanced interactions.
• Engaged the office target segment to show case the product range.
• Client – Architect meet were held in key metros to share best practices from around
the world, with the key target audience.
OTHERS
Rs. in Lakhs
31.12.05 31.12.04
Financial Highlights for the year Segment Revenue 671.40 69.86
ended December 31, 2005 Profit before Interest & Tax 101.95 (19.25)
Capital Employed - 13.71
11
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
d) Outlook
India is one of the fastest growing global economies. The
fastest growth is projected for the developing nations like
India and China, where the robust economic growth
accompanies the increase in all areas of an industry, which is
expected in the years to come, The Company’s long term
competitive position, particularly given the capital-intensive
and commodity based nature of the industry, is closely
associated with the Company’s ability to invest in projects
that provide adequate financial returns and to manage
operating expenses effectively.
Forward looking statements are based on certain
assumptions and expectations of the future events that are
subject to risks and uncertainties. Actual future results and
trends may differ materially from historical results, depending
on variety of factors.
e) Risks and concerns
Risk is an integral part of any business venture and we are no
exception to it. The risks faced by us are both internal and
external in nature. While the internal risk relates to litigations,
disputes, terms of financing, dependence on suppliers and
vendors and certain management related issues and the external
ones include risks in the nature of government policy, innovations,
significant changes in laws applicable to the Company.
The Company continuously monitors business and operations
risk through business process re-engineering and reviewing.
All key functions and divisions are independently responsible
to monitor risk associated within their respective areas of
operations such as production, treasury, insurance, legal and
other issues like health, safety and environment. The Company
is also exposed to financial risks in the form of foreign exchange
fluctuations and interest rates variations.
f) Internal control systems and their adequacy
The Company has a robust system of internal control to allow
optimal use & protection of assets, facilitate accurate and
timely compilation of financial statements and management
reports & ensure compliance with statutory laws, regulations
& Company policies. The Company also has an extensive
budgetary control mechanism whereby the Management
regularly reviews actual performance with reference to the
budgets and forecasts.
The Corporate Audit Group functionally reports to the Audit
Committee and administratively to the Managing Director.
The Audit Committee periodically reviews the audit plans,
audit observations of both internal and external audits, risk
assessment and adequacy of internal controls. The Company
has developed adequate internal control systems
commensurate to its size and nature of its business.
Reports of the Internal Auditor are submitted to the
Management and Audit Committee. The Statutory Auditors
also review their findings with the Senior Management and
the Audit Committee.
g) Developments in Human Resources / Industrial
Relations
As on 31st December 2005, 3M India had 532 full time
employees on its rolls, a net increase of 76 from the previous
year. While the new employee base has been a good mix of
professionals from all functions, the largest pool is from the
Sales and Marketing function. More than 55 years after
McKnight laid out the basic management principle for 3M, the
Company upholds the belief that it is only through empowering
and encouraging employee initiative that the Company can
achieve its accelerated growth targets.
3M continues to offer employees an environment of high
ethical standards, performance orientation, growth and
development. The Company’s well-defined performance
management system incorporates an objective process for
assessment of contribution, while also ensuring that employee
rewards are in alignment with the Company’s achievements.
To ensure that leadership development remains a key focus
area, the Company has been organizing leadership programs
for its new supervisors. “Leadership Attributes” is a salient
feature of the performance assessment system – equally
applicable to all employee levels of 3M.
2005 has been a year marked with initiatives to recognize,
reward and motivate employees. We anticipate that the pace
of these initiatives will gain further momentum in 2006.
On behalf of the Board of Directors
Bert O’Donoghue
Managing Director
Place : Bangalore B.V. Shankaranarayana Rao
Date : February 20, 2006 Director
3M India Limited(formerly Birla 3M Limited)
12 innovate, grow, deliver
REPORT ON CORPORATE GOVERNANCE
Whether Promoter, No. of outside No. of Board No. of shares
Executive, or Directorships Committees of Other held
Director Non-Executive / held * companies in which a
Independent Member #
Mr. Yashovardhan Birla (a) Non-Executive 6 2 ( 1 as Chairman) -
(Promoter) (Indian Promoter Group)
Mr. Bert O’Donoghue (b) Executive Nil Nil -
(Managing Director) (Promoter Group)
Ms. Mary McCormick Non-Executive Nil Nil -
(Promoter Group)
Mr. Thomas P. Spencer Non-Executive Nil Nil -
(Promoter Group)
Dr. Carlisle S. Boyce Non-Executive Nil Nil -
(Promoter Group)
Mr. B.S. Iyer Non-Executive & Nil Nil -
(Chairman, Audit Committee) Independent
Mr. Amit Mukherjee Non-Executive & 1 Nil -
Independent
Mr. D.J. Balaji Rao Non-Executive & 7 8 (of which, Chairman -
(Chairman - Shareholders Independent in 3 Committees)
Grievance Committee)
Mr. Brad C. Sweet ** Non-Executive Nil Nil -
(Promoter Group)
Mr. B. V. Shankaranarayana Rao Executive Nil Nil 600
(Whole-Time Director) (Promoter Group)
The tenure of each Independent Director has not exceeded the maximum of nine years. The Independent Directors satisfy the criteria
prescribed under the revised Listing Agreements.
* Excludes alternate directorship, directorship in foreign companies and private companies, which are neither a subsidiary nor a holding Company of a
public Company.
# Excludes committees other than Audit Committee, Shareholders / Investors Grievance Committee and companies other than public limited companies.
(a) Nominee of Shearson Investment and Trading Company Limited
(b) Nominee of 3M Company, USA
** Alternate Director to Mr. Thomas P. Spencer
Board of Directors
The Board of Directors of the Company, is headed by the Non-Executive Chairman and renowned industrialist, Mr. Yashovardhan Birla. The
Board of the Company comprises of proper blend of Executive, Non-Executive and the Independent Directors, with professional background
and experience in Business and Industry, Finance & Law. The details of Board composition, their other directorships / committee memberships
and shareholding in the Company, as of December 31, 2005 are appended below :
The Board of Directors is pleased to present a report on thecompliance of Corporate Governance requirements as per the ListingAgreements with the Stock Exchanges.
The revised Clause 49 of the Listing Agreements is effective from1st January 2006. However, with a view to comply with spirit of the law,the Company had already put in place a majority of the requirements andthe implementation of remaining requirements have been put in process.
The following paragraphs along with management discussion andanalysis of financial condition, results and operations of the Company,furnished in the Company’s Annual Report provide the complianceposition in regard to the revised Clause 49 and the initiatives takenby the Company towards meeting the same.
Company’s Philosophy on Corporate Governance
3M India Limited’s philosophy of Corporate Governance stems fromits belief that the Company’s business strategy and plans should beconsistent with the welfare of all its stakeholders, including thesociety at large. Good Corporate Governance practices enable aCompany to attract financial and human capital and leverage theseresources to maximize long-term shareholder value, whilepreserving the interest of all the stakeholders.
The Company’s philosophy on Corporate Governance is toendeavour to ensure :
- that systems and procedures which monitor compliancewith laws, rules and regulations are in place in each areaof its business
- that relevant information regarding the Company and itsoperations are disclosed, disseminated and easily availableto its stakeholders, and
- that the Board of Directors are kept fully informed of
• all material developments in the Company
• the risks in its business and its operations
Code of Conduct
The Company’s Board has laid down a code of conduct for all BoardMembers and Senior Management of the Company. The code ofconduct is available on the website of the Company,
www.3M.com/intl/in.
13
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
BOARD MEETINGS & AGM
During the year 2005, four Board Meetings were held, the dates being February 25, 2005, April 29, 2005, July 29, 2005 and October 26, 2005.
The last AGM was held on April 29, 2005.
The composition of the Board of Directors as on December 31, 2005 and details of attendance of each Director at the Board Meetings
and AGM are given below :
Director No. of Board Whether attended
Meetings attended last AGM
Mr. Yashovardhan Birla - No
Mr. Bert O’Donoghue @ 1 No
Mr. B. V. Shankaranarayana Rao 4 Yes
Ms. Mary McCormick 1 No
Mr. Thomas P. Spencer - No
Mr. B.S. Iyer 4 Yes
Mr. Amit Mukherjee 3 Yes
Mr. D.J. Balaji Rao 4 Yes
Dr. Carlisle S. Boyce # 1 No
Mr. Brad C. Sweet - No
(Alternate to Mr. Thomas P. Spencer)
@ Appointed as Managing Director, effective 1st September 2005
# Appointed as a Director on October 26, 2005
Mr. Lee M. Kennedy * 3 Yes
Dr. Paul Rosso ** - No
* Resigned on 31st August 2005
** Resigned on October 26, 2005
BOARD COMMITTEES
The Board has constituted the following Committees of Directors:
a) Audit Committee :
The Audit Committee of the Company is functioning inaccordance with the requirements of Section 292A of theCompanies Act and the Listing Agreements. There has beenno change in the composition of Audit Committee during the
year. As per the guidelines set out in the Listing Agreements,the scope delegated to the Audit Committee by the Board,inter-alia, include the mandatory functions viz., review thereport on Management Discussion and Analysis, significantRelated Party Transactions, Management Letters issued bythe Statutory Auditors, Internal Audit Reports and Internal
Control Systems, overseeing financial reporting processes,reviewing with the Management the financial statements,accounting policies and practices and discussion with InternalAuditors on any significant findings, financial and riskmanagement policies.
The functions of the Audit Committee include the following:
• Oversight of the Company’s financial reporting process
and the disclosure of its financial information to ensurethat the financial statement is correct, sufficient andcredible.
• Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removalof the Statutory Auditors and the fixation of audit fees.
• Approval of payment to Statutory Auditors for any other
services rendered by them.
• Reviewing, with the management, the annual financialstatements before submission to the Board for approval,
with particular reference to:
- Matters required to be included in the Director’sResponsibility Statement to be included in the Board’sreport in terms of clause (2AA) of Section 217 ofthe Companies Act, 1956.
- Changes, if any, in accounting policies and practicesand reasons for the same.
- Major accounting entries involving estimates based
on the exercise of judgment by Management.
- Significant adjustments made in the financialstatements arising out of audit findings.
- Compliance with listing and other legal requirementsrelating to financial statements.
- Disclosure of any related party transactions.
- Qualifications in the draft audit report.
• Reviewing, with the Management, the quarterly financialstatements before submission to the Board for approval.
• Reviewing, with the Management, performance ofStatutory and Internal Auditors, adequacy of the internalcontrol systems.
• Reviewing the adequacy of internal audit function, if any,including the structure of the internal audit depart-ment, staffing and seniority of the official heading thedepartment, reporting structure coverage and frequencyof internal audit.
• Discussion with Internal Auditors any significant findingsand follow-up there on.
• Reviewing the findings of any internal investigations by theInternal Auditors into matters where there is suspected fraudor irregularity or a failure of internal control systems ofa material nature and reporting the matter to the Board.
3M India Limited(formerly Birla 3M Limited)
14 innovate, grow, deliver
• Discussion with Statutory Auditors before the auditcommences, about the nature and scope of audit as wellas post-audit discussion to ascertain any area of concern.
• To look into the reasons for substantial defaults in thepayment to the depositors, debenture holders,shareholders (in case of non-payment of declareddividends) and creditors.
• Carrying out any other function as is mentioned in theterms of reference of the Audit Committee.
The Audit Committee is empowered, pursuant to its terms ofreference, to:
• Investigate any activity within its terms of reference andto seek any information it requires from any employee.
• Obtain legal or other independent professional adviceand to secure the attendance of outsiders with relevantexperience and expertise, when considered necessary.
The Company has systems and procedures in place to ensure thatthe Audit Committee mandatorily reviews:
• Management discussion and analysis of financial conditionand results of operations.
• Statement of significant related party transactions (asdefined by the Audit Committee), submitted byManagement.
• Management letters / letters of internal controlweaknesses issued by the Statutory Auditors.
• Internal audit reports relating to internal controlweaknesses.
• The appointment, removal and terms of remuneration ofthe Internal Auditor.
The Audit Committee is also presented with the following informationon related party transactions (whenever applicable) :
• A statement in summary form of transactions with relatedparties in the ordinary course of business.
• Details of material individual transactions with relatedparties, which are not in the normal course of business.
• Details of material individual transactions with relatedparties or others, which are not on an arm’s length basisalong with management’s justification for the same.
During the year under review, four meetings of the Audit Committeewere held, February 25, 2005, April 29, 2005, July 29, 2005 andOctober 26, 2005.
The composition of the Audit Committee as at 31st December 2005(all Non-Executive) and the attendance of the members at the Audit
Committee Meetings held during the year are as follows:
DirectorNo. of Audit Committee
meetings attended
Mr. Thomas P. Spencer -
Ms. Mary B. McCormick 1
Mr. B.S. Iyer 4
Mr. D. J. Balaji Rao 4
Mr. Amit Mukherjee 3
Mr. B.S. Iyer is the Chairman of the Audit Committee. The
Company Secretary acts as the Secretary to the Committee.
All the members of the Audit Committee are financially literate
and Mr. B. S. Iyer, Chairman, is a person with financial
expertise. He is in the Senior Management of a large reputed
Listed Company and is also its Company Secretary.
At the invitation of the Committee, the Internal Auditor, the
Managing Director, the Head of Finance, Head of Legal
Department & Statutory Auditors attend the Audit Committee
meetings, to answer and clarify the queries that are raised at
the Committee meetings.
The Company has an Internal Audit department, which carries
out independent periodic reviews. The prime objective of
such audits is to evaluate the functioning and quality of internal
controls and provides assurance of its adequacy and
effectiveness. The scope of internal audit covers a wide variety
of operational and financial matters and includes a follow-up
review of corrective actions agreed for implementation. The
adequacy of the internal control system as well as the report
of the internal audit is reviewed by the Audit Committee of
the Board of Directors. In addition, an audit by Global Internal
Audit team of 3M Group, in accordance with 3M Group charter
for internal audit, is also conducted.
There were no transactions of exceptional nature that
required the specific attention of the Audit Committee.
b) Remuneration to Directors :
The Company has currently two Executive Directors in
Mr. Bert O ’Donoghue, Managing Director and Mr. B. V.
Shankaranarayana Rao – Whole Time Director. Mr. Bert
O’Donoghue took over as Managing Director w.e.f.
1st September 2005 from Mr.Lee M. Kennedy. The terms of
appointment of the Executive Directors are fixed by the Board
and approved by the Shareholders. The Non-Executive
Directors do not draw from the Company any remuneration
other than sitting fees. The Company has not constituted a
separate Remuneration Committee. None of the Non-Executive
Directors have any pecuniary relationship with the Company.
The terms of appointment and remuneration to Mr. Bert
O’Donoghue, Managing Director and Mr. B. V.
Shankaranarayana Rao, Whole-time Director are governed
by the letters issued to the respective individuals on the basis
and within the terms approved by the Board.
The remuneration approved by the Board to the new Managing
Director is within the ambit and limits of Schedule XIII. The
Company has approached the Central Government for
approving the Managing Director appointment and the
shareholders’ approval is being sought at the ensuing Annual
General Meeting.
Brief terms of remuneration to Mr. Bert O’ Donoghue
are as under :
Term :
September 1, 2005 till August 31, 2010
Salary including allowances, incentive and perquisites :
Salary / Allowances – salary and allowances not exceeding
Rs. 10 Million per annum.
15
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
Perquisites - The value of the perquisites shall not exceed
Rs. 5 Million per annum and nature of perquisites is as given below:
a. Fully furnished company leased house. All the lease
provisions will be as per the rules and regulations of the
leased accommodation Policy of the Company.
b. Reimbursement of telephone rentals and the actual
business telephone calls. All charges for long distance
personal calls will be borne by the individual.
c. Company car with chauffer primarily for official use. The
car will be fully maintained by the Company.
Benefits / Perquisites :
Additional perquisites, not included in the overall perquisites
ceiling of Rs. 5 Million per annum
a. Children’s Education Allowance subject to a maximum
of Rs.5,000/- per child per month for two Children,
studying in or outside India will be payable.
b. Passage money for children studying outside India / family
staying abroad once in a year by economy class or once in
two years by first class from the place of their study / stay
abroad, if they are not residing with the Managing Director.
c. Leave Travel Concession : Return passage for self and family
as per the rules of the Company, once in a year, if the leave
is to be spent outside India. He will be eligible for leave
travel facility to home town for self and family twice a year.
Brief terms of remuneration to Mr. B. V.
Shankaranarayana Rao are as under :
Term :
April 1, 2004 till March 31, 2007
Salary including allowances, incentive and perquisites :
Total value of salary & perquisites not exceeding Rs. 45 lakhsper annum or Rs.3.75 lakhs per month. Within the said limits,the exact payment of remuneration shall be decided by theManaging Director and communicated to Mr. B.V.Shankaranarayana Rao from time to time.
Benefits / Perquisites :
The perquisites would be mainly in the form of furnishedhouse or House Rent Allowance in lieu of the accommodation,with such other amenities and facilities as may be requiredfrom time to time for security and upkeep, telephone atresidence, electricity, security guard, medical facilities andother facilities available to the Senior Management personnelas per rules of the Company.
Others - Payment / remittance towards retiral benefits likeProvident Fund, Superannuation, Gratuity, etc. shall beaccording to the Company’s Policy for Senior Managementand applicable statutory provisions from time to time.However, the above statutory payments shall not be includedfor computation of Managerial Remuneration to the extentthey are not in excess of the limits prescribed under theIncome Tax Act, 1961.
The perquisites for this purpose shall be valued as per IncomeTax Act, 1961, wherever applicable, and in the absence of anyprovisions in the said Act, the perquisites shall be valued atactuals.
Other terms of employment shall be on the same lines asapplicable to the Senior Executives of the Company as perPolicy of the Company.
The contract of service of Mr. B. V. Shankaranarayana Rao isterminable with a notice period of 90 days on either side.
Details of remuneration paid to Executive Directors during the year 2005:In Rupees
Period Salaries & Cost value of benefits TotalName and Designation Allowances as per Indian Income
Tax Act, 1961
Mr. Lee M. Kennedy 1st January, 2005 -(Managing Director) 31st August, 2005 62,58,626 16,06,516 78,65,142
Mr. Bert O’Donoghue 1st September 2005 -
(Managing Director) 31st December, 2005 30,00,800 11,88,885 41,89,685
Mr. B.V. Shankaranarayana Rao 1st January, 2005 -
(Whole-Time Director) 31st December, 2005 33,94,056 9,22,914 43,16,970
Presently, the Company does not have a scheme for grant of stock options either to the Executive Directors or to other employees.
Sitting Fees
Sitting fees paid to the Non-Executive Directors during the year 2005 are given below :
DirectorBoard Meeting Committee Meetings Total
(Rs.) (Rs.) (Rs.)
Mr. Yashovardhan Birla - - -
Mr. B.S. Iyer 80,000 160,000 240,000
Mr. Amit Mukherjee 60,000 120,000 180,000
Mr. D.J. Balaji Rao 80,000 160,000 240,000
Dr. Paul Rosso, Ms. Mary McCormick, Mr. Thomas P. Spencer, Dr. Carlisle Boyce and Mr.Brad C. Sweet waived payment of sitting fees.
3M India Limited(formerly Birla 3M Limited)
16 innovate, grow, deliver
SPECIFIC DISCLOSURE
Related party transactions
Disclosures on materially significant related party transactions :
• The Company sources major portion of its raw materials and
traded goods for sale from the parent Company, 3M Company,
USA and its associated business enterprises. However, the
contracts entered for the above purpose are at arms length
basis and have no potential conflict with the interest of the
Company at large.
• The details of the related party transactions are furnished in
Notes to Accounts, in accordance with the Accounting Standard
18. They are also approved by the Audit Committee.
• There were no financial or commercial transaction of material
nature with the Directors, Senior Management, their relatives
that had potential conflict with the interest of the Company at
large.
Disclosure of Accounting Treatment
• There were no deviation from the Accounting Standards as
prescribed by the Institute of Chartered Accountants of India.
Risk Management
• The Company has identified various risks and suggested
procedure to mitigate the same. The Audit Committee and the
Board have reviewed the same. When new risks are identified,
the same would be then assessed, controls designed, put in
place and enforced within a fixed timeframe, as set.
Subsidiary Companies
• The Company does not have any subsidiaries.
Capital Issues
• The Company has not made any capital issues during the year
2005.
Management Discussion and Analysis
• A detailed report on Management Discussion and Analysis of
financial condition, results and operations of the Company, as
approved by the Audit Committee is annexed to the Company’s
Annual Report.
Audit Qualifications
• There were no qualifications by the Auditors in their report
for the previous financial year ended December 31, 2004.
Regulatory compliance by the Company
• The Company has complied with all the requirements of
regulatory authorities. No penalties/strictures were imposed
on the Company by Stock Exchanges or SEBI or any Statutory
Authority on any matter related to capital market during the
last three years. The Board has taken on record a compliance
report submitted by the Company’s Legal Counsel in this regard.
The Company is in the process of implementing a more
exhaustive internal system in this regard.
Code for prevention of Insider Trading practices
• The Company has established a code of conduct for Insider Trading
as required under the Prohibition of Insider Trading Rules, 2003
(‘Rules’) and Mr. K Ramesh Chandra, Company Secretary is the
Compliance Officer. Information / declaration as required under
the said Rules are obtained from the Directors / Employees.
Whistle-Blower policy
• The Company has not implemented a Whistle-Blower policy.
CEO / CFO certification
• The revised clause 49 of the Listing Agreement is with effect
from 1st January 2006 and hence the certificate from CEO/CFO
is not provided to the Shareholders in the Annual Report for
the financial year ending December 31,2005.
OTHER DISCLOSURES
Mandatory requirements
The Company has complied with all mandatory requirements.
Non-Mandatory Requirements
The Company has a Non-Executive Chairman and his expenses are
reimbursed. However, no separate Chairman office is maintained
at the Company’s expense.
The Non-Executive Directors are given adequate knowledge and
exposure on the Company’s business environment through
periodical presentations by the Company Business Heads.
c) Shareholders’ / Investors’ Grievance Committee :
The composition of the Shareholders’ Grievance Committee
as at 31st December 2005 and the attendance of the members at
the Shareholders’ Grievance Committee Meeting held during
the year are as follows:
No. of Shareholders’
Director Grievance Committee
Meetings attended
Mr. D. J. Balaji Rao 4
Mr. Yashovardhan Birla -
Mr. Lee M. Kennedy * 3
Mr. Bert O’Donoghue ** 1
Mr. B. S. Iyer 4
Mr. Amit Mukherjee 3
* Resigned as on 31st August 2005
** Appointed as member of the Committee on October 26, 2005
Mr. D. J. Balaji Rao, Non-Executive and Independent Director is the
Chairman of the Committee and Mr. K. Ramesh Chandra, Company
Secretary is the Compliance Officer of the Company.
The Shareholders’ Grievance Committee is authorised to :
1. Monitor the system of share transfer, transmission, sub
division & consolidation of share certificates and issue of
duplicate certificates.
2. Deal with all investor related issues including redressal of
complaints from shareholders relating to transfer of shares,
non-receipt of balance sheet, etc.
3. To delegate such powers to Company’s officers, as may be
necessary including powers to approve transfers,
transmissions, authenticate share certificates and to take other
actions in relation to Shareholder related matters.
17
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
The Company through its Registrar and Share Transfer Agents has
resolved most of the investor grievances / correspondence within a
period of 7 days from the date of their receipt except in cases that
are constrained by disputes or legal impediments. However, the
number of these cases are not material.
The Statistics of Shareholders Complaints received / redressed,
during the year 2005, is furnished below :
No. of the Complaints relating to Non-
receipt of dividend warrants, Redemption /
Interest warrants, Annual Reports, Share 22
certificates, endorsement stickers & others,
received during the year
No. of Shareholders complaints resolved
during the year22
No. of pending share transfers as on
December 31, 2005Nil
General Body Meeting
Location and time where last three General Body Meetings were held :
Date Meeting Location Time
29th April 2003 AGM Hotel Leela Palace
23, Kodihalli, Airport Road
Bangalore – 560 008 10.00 a.m.
22nd April 2004 AGM Hotel Leela Palace
23, Kodihalli, Airport Road
Bangalore – 560 008 10.00 a.m.
29th April 2005 AGM Hotel Leela Palace
23, Kodihalli, Airport Road
Bangalore – 560 008 10.00 a.m.
Postal Ballot
During the year 2005, there was no business, which had to be
conducted through a postal ballot. At present, the Company does not
have any resolution to be decided by the Members by Postal Ballot.
Following are the details of the special resolutions passed by the
Shareholders at the last three General Meetings :
Date of passing Subject matter
22nd April 2004 Delisting from
Delhi Stock Exchange
22nd April 2004 Re-appointment of
Mr. Lee M. Kennedy as
Managing Director
Means of communication :
Quarterly financial results, including the half year results are
published in Business Line (All India Edition) and Udayawani
(Bangalore Edition). The annual audited accounts are likewise
published. The half-yearly report is not separately sent to each
household of the shareholders. In accordance with the listing
regulations, the Company’s audited and unaudited quarterly / half
yearly / annual results are also posted in the SEBI’s website under
EDIFAR (Electronic Data Information Filing And Retrieval System).
The Company’s financial results are also displayed in the Company’s
website, www.3M.com/intl.in
The Management Discussion and Analysis report on the Company’s
activities during the year is published as part of the Company’s
Annual Report. This report has been placed to the Company’s Audit
Committee.
General Shareholder information :
April 24, 2006
The Leela Palace,
Annual General Meeting 2006 No.23, Kodihalli,
Airport Road,
Bangalore - 560 008
Time 10.00 a.m.
Financial Calendar :
a) Date of Book Closure April 17, 2006 - April 24, 2006 (Both days inclusive)
b) Dividend payment date N. A.
c) Financial Results Third / Fourth week of April 2006 - Unaudited Results for the quarter ended March 2006.
Third / Fourth week of July 2006 - Unaudited Results for April / June 2006 and half year
results for Jan - June 2006.
Third / Fourth week of October 2006 - Unaudited Results for the quarter ended September 2006.
Third / Fourth week of February 2007 - Audited Results for the year ended December 31, 2006.
d) Listing on Stock Exchanges The National Stock Exchange Limited, Mumbai (Code - 3MIndia)
Bombay Stock Exchange Limited, Mumbai (Code - 523395)
The Calcutta Stock Exchange Association, Calcutta (Code - 12027) *
* applied for voluntary delisting. Final Certificate of delisting is yet to be received.
The Company has paid annual listing fees, as prescribed, to The National Stock Exchange Limited and Bombay Stock Exchange Limited, Mumbai
for the financial year, 2005 - 2006.
3M India Limited(formerly Birla 3M Limited)
18 innovate, grow, deliver
Registrar & Share Transfer Agents :
Share registration and other investor related activities are carried out by our Registrar and Transfer Agents, M/s. Karvy Computershare
Private Limited for both Physical and Demat securities. Their address is appended below :
Karvy Computershare Private Limited
46, Avenue Ford, Street No. 1, Banjara Hills, Hyderabad - 500 034
Tel: 040-23420816 / 824 Fax: 040-23420814
E-mail : [email protected] Contact person : Mr. K. Subba Reddy
Share Transfer System :
Shares sent for transfer in physical form are registered and despatched within 15 days of receipt of the documents, if documents are found to
be in order. Shares under objection are returned within 15 days.
Monitoring of Share Transfers and other investor related matters are dealt with by the Shareholders’ Grievance Committee. The Company’s Registrars,
M/s. Karvy Computershare Private Limited process the share transfers in respect of physical securities on a fortnightly basis and the processed transfers
are approved by the authorized Executives of the Company also on a fortnightly basis.
All requests for dematerialization of shares, which are in order are processed within 15 days and the confirmation is given to the respective
depositories, i.e., National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).
Stock Performance :
BSE Sensex Vs. 3M Share Price
(Monthly Closing Price)
Crisil Index : Not applicable
Sensex 3M India
1000
900
800
700
600
500
400
300
200
100
0
1000
8000
6000
4000
2000
0
Jan 05
Feb 05
Mar 05
Apr 05
May 0
5
Jun 05
Jul 0
5
Aug 05
Sep 05
Oct 0
5
Nov 05
Dec 05
Year / Month Bombay Stock Exchange (BSE) National Stock Exchange (NSE)
(in Rs.) (in Rs.)
High Low High Low
Jan 05 597.00 510.00 590.00 512.10
Feb 05 630.00 546.20 648.00 531.00
Mar 05 568.95 485.00 551.00 483.15
Apr 05 567.00 504.20 553.00 464.10
May 05 782.80 550.00 780.00 562.00
Jun 05 724.50 592.00 776.95 608.30
Jul 05 910.00 608.20 905.00 622.80
Aug 05 849.00 778.00 840.00 782.75
Sept 05 999.00 800.00 990.00 780.05
Oct 05 888.00 696.00 890.00 681.00
Nov 05 809.00 705.20 810.00 721.00
Dec 05 939.00 769.00 925.00 761.00
Stock Price Data :
19
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
DEMATERIALISATION OF SHARES AND LIQUIDITY
22.2 % of the total equity capital was held in dematerialised form with National Securities Depository Limited (NSDL) / Central Depository Services (India)
Limited (CDSL) as on December 31, 2005. Trading in Dematerialization form was effective from June 26, 2000.
Outstanding GDRs/Warrants, Convertible Bonds, conversion date and likely impact on equity: Not applicable
Distribution of Shareholding as on December 31, 2005
Range of Shares No of Shareholders % to total Shareholders No of Shares held % age to Total Shares
1 to 500 8,227 95.26 683,803 6.07
501 to 1000 196 2.27 155,054 1.38
1001 to 2000 86 1.00 129,686 1.15
2001 to 3000 56 0.65 141,576 1.26
3001 to 4000 19 0.22 65,390 0.58
4001 to 5000 6 0.07 27,352 0.24
5001 to 10000 24 0.28 173,654 1.54
10001 and above 22 0.25 9,888,555 87.78
Total 8636 100.00 11,265,070 100.00
Shareholding Pattern as at December 31, 2005
Category No of Shares Held Percentage of
Shareholding
A Promoter’s holding
1 Promoter’s
Indian Promoters 810,900 7.20
Foreign Promoters 8,562,000 76.00
2 Persons acting in concert - -
Sub Total: 9,372,900 83.20
B Non-Promoters holding
3 Institutional Investors
a Mutual Funds and UTI 35,341 0.31
b Banks, Financial Institutions,
Insurance Companies (Central / State Govt., Institutions,
non Government Institutions) 80 0.00
c FIIs - -
Sub Total 35,421 0.31
4 Others
a Private Corporate Bodies 445,455 3.95
b Indian Public 1,349,373 11.98
c NRIs/OCBs 60,849 0.54
d Any Other
- Trusts 1,072 0.01
Sub Total 1,856,749 16.48
Total 11,265,070 100.00
Plant Locations :
Plot No. 48-51, Electronics City, Hosur Road, Bangalore – 560 100
173/2, Madivala, Bandapura, Anekal Taluk, Bangalore – 562 106
Plot No.8, Moraiya Industrial Area; Tal Sanand,
Sarkhej Bavla Highway, Ahmedabad –382 213
Offices and address for communication :
Registered Office :
Plot No. 48-51, Electronics City, Hosur Road, Bangalore - 560 100
Corporate Office :
Raheja Paramount, 138, Residency Road, Bangalore - 560 025
On behalf of the Board of Directors
Place : Bangalore Bert O’Donoghue B.V. Shankaranarayana Rao
Date : February 20, 2006 Managing Director Director
3M India Limited(formerly Birla 3M Limited)
20 innovate, grow, deliver
To the Members of 3M India Limited
We have reviewed the implementation of Corporate Governance
produced by 3M India Limited during the year ended
31st December, 2005, with the relevant records and documents
maintained by the Company, furnished to us for our review and on
the Corporate Governance as approved by the Board of Directors.
The compliance of conditions of corporate governance is the
responsibility of the management. Our examination was limited to
procedures and implementation thereof, adopted by the Company
for ensuring the compliance of the conditions of Corporate
Governance. It is neither an audit nor an expression of opinion on
the financial statement of the Company.
We further state that such compliance is neither an assurance as to
the further viability of the Company nor the efficiency or effectiveness
with which the management has conducted the affairs of the Company.
On the basis of our review and according to the information and
explanations given to us, in our opinion, the conditions of Corporate
Governance as stipulated in Clause 49 of the listing agreement(s)
which the Stock Exchange(s) have been complied with in all material
respect by the Company.
Usha A Narayanan
Partner
Membership Number 23997
For and on behalf of
Place : Bangalore Lovelock & Lewes
Date : February 20, 2006 Chartered Accountants
AUDITORS’ CERTIFICATE ON COMPLIANCE WITH THE CONDITIONS OF CORPORATE
GOVERNANCE UNDER CLAUSE 49 OF THE LISTING AGREEMENT(S)
21
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
AUDITORS’ REPORT TO THE MEMBERS OF 3M INDIA LIMITED (FORMERLY BIRLA 3M LIMITED)
1. We have audited the attached Balance Sheet of 3M India
Limited (formerly Birla 3M Limited) as at December 31, 2005,
and the related Profit and Loss Account and Cash Flow
Statement for the year ended on that date annexed thereto,
which we have signed under reference to this report. These
financial statements are the responsibility of the company’s
management. Our responsibility is to express an opinion on
these financial statements based on our audit.
2. We conducted our audit in accordance with the auditing
standards generally accepted in India. Those Standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
3. As required by the Companies (Auditor’s Report) Order, 2003,
as amended by the Companies (Auditor’s Report) (Amendment)
Order, 2004, issued by the Central Government of India in
terms of sub-section (4A) of Section 227 of ‘The Companies
Act, 1956’ of India (the ‘Act’) and on the basis of such checks of
the books and records of the company as we considered
appropriate and according to the information and explanations
given to us, we give in the Annexure a statement on the matters
specified in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to in
paragraph 3 above, we report that:
(a) We have obtained all the information and explanations,
which to the best of our knowledge and belief were
necessary for the purposes of our audit;
(b) In our opinion, proper books of account as required by
law have been kept by the company so far as appears
from our examination of those books;
(c) The Balance Sheet, Profit and Loss Account and Cash
Flow Statement dealt with by this report are in agree
ment with the books of account;
(d) In our opinion, the Balance Sheet, Profit and Loss Account
and Cash Flow Statement dealt with by this report
comply with the accounting standards referred to in sub-
section (3C) of Section 211 of the Act;
(e) On the basis of written representations received from
the Directors, as on December 31, 2005 and taken on
record by the Board of Directors, none of the Directors
is disqualified as on December 31, 2005 from being
appointed as a Director in terms of clause (g) of sub-
section (1) of Section 274 of the Act;
(f) In our opinion and to the best of our information and
according to the explanations given to us, the said financial
statements together with the notes thereon and attached
thereto give in the prescribed manner the information
required by the Act and give a true and fair view in
conformity with the accounting principles generally
accepted in India:
(i) in the case of the Balance Sheet, of the state of affairs
of the company as at December 31, 2005;
(ii) in the case of the Profit and Loss Account, of the
profit for the year ended on that date; and
(iii) in the case of the Cash Flow Statement, of the cash
flows for the year ended on that date.
Usha A Narayanan
Partner
Membership Number 23997
For and on behalf of
Place : Bangalore Lovelock & Lewes
Date : February 20, 2006 Chartered Accountants
3M India Limited(formerly Birla 3M Limited)
22 innovate, grow, deliver
Referred to in paragraph 3 of the Auditors’ Report of even date to
the members of 3M India Limited (formerly Birla 3M Limited) on the
financial statements for the period ended December, 31, 2005
1. (a) The company is maintaining proper records showing full
particulars including quantitative details and situation of
fixed assets.
(b) The fixed assets are physically verified by the management
according to a phased programme designed to cover all
the items over a period of three years, which in our
opinion, is reasonable having regard to the size of the
company and the nature of its assets. Pursuant to the
programme, a portion of the fixed assets has been
physically verified by the management during the year and
no material discrepancies between the book records and
the physical inventory have been noticed.
(c) In our opinion and according to the information and
explanations given to us, a substantial part of fixed assets
has not been disposed off by the company during the year.
2. (a) The inventory including stocks with third parties has been
physically verified by the management during the year. In
respect of inventory lying with third parties, these have
substantially been confirmed by them. In our opinion, the
frequency of verification is reasonable.
(b) In our opinion, the procedures of physical verification of
inventory followed by the management are reasonable
and adequate in relation to the size of the company and
the nature of its business.
(c) On the basis of our examination of the inventory records,
in our opinion, the company is maintaining proper records
of inventory. The discrepancies noticed on physical
verification of inventory as compared to book records
were not material.
3. (a) The company has not granted any loans, secured or
unsecured, to companies, firms or other parties covered
in the register maintained under Section 301 of the Act
and therefore paragraphs iii(b), iii(c) and iii(d) of the Order,
are not applicable.
(b) The company has not taken any loans secured or unsecured,
from companies, firms or other parties covered in the register
maintained under Section 301 of the Act and therefore
paragraphs iii(f) and iii(g) of the Order, are not applicable.
4. In our opinion and according to the information and explanations
given to us, having regard to the explanation that certain items
purchased are of special nature for which suitable alternative
sources do not exist for obtaining comparative quotations, there
is an adequate internal control system commensurate with the
size of the company and the nature of its business for the purchase
of inventory, fixed assets and for the sale of goods and services.
Further, on the basis of our examination of the books and records
of the company, and according to the information and explanations
given to us, we have neither come across nor have been informed
of any continuing failure to correct major weaknesses in the
aforesaid internal control system.
ANNEXURE TO AUDITORS’ REPORT
5. (a) In our opinion and according to the information and
explanations given to us, the particulars of contracts or
arrangements referred to in Section 301 of the Act have
been entered in the register required to be maintained
under that section.
(b) In our opinion and according to the information and
explanations given to us, the transactions made in
pursuance of such contracts or arrangements and
exceeding the value of Rupees Five Lakhs in respect of any
party during the year, have been made at prices which are
reasonable having regard to the prevailing market prices
at the relevant time.
6. The company has not accepted any deposits from the public
within the meaning of Sections 58A and 58AA of the Act and
the rules framed there under.
7. In our opinion, the company has an internal audit system
commensurate with its size and nature of its business.
8. The Central Government of India has not prescribed the
maintenance of cost records under clause (d) of sub-section
(1) of Section 209 of the Act for any of the products of the
company.
9. (a) According to the information and explanations given to us
and the records of the company examined by us, in our
opinion, the company is generally regular in depositing
undisputed statutory dues including investor education
and protection fund, employees’ state insurance, income
tax, wealth tax, service tax, customs duty, excise duty and
other material statutory dues as applicable with the
appropriate authorities.
(b) According to the information and explanations given to us
and the records of the company examined by us, there are
no dues of income tax, sales tax, wealth tax, service tax,
customs duty, excise duty and cess which have not been
deposited on account of any dispute except for amount
claimed under show cause notice as detailed below:
Name of Nature of Amount Period to Forum
the Statute Dues Rs. which the where the
amount dispute is
relates pending
Customs Act, Customs 3,119,000 1993 Commissioner
1962 Duty Matter of Customs
The Employees Employees 1,940,000 1997 Deputy
State Insurance State Director
Act, 1948 Insurance
matter
10. The company has not accumulated losses as at December 31,
2005 and it has not incurred any cash losses in the financial
year ended on that date or in the immediately preceding
financial year.
23
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
11. In our opinion, and according to the information and
explanations given to us, the company has not given any
guarantee for loans taken by others from banks or financial
institutions during the year except in respect of a guarantee
given on behalf of a third party in an earlier year, for which the
company is carrying a provision of Rs.12,000,000 as the
recovery of related dues are not certain.
12. On the basis of an overall examination of the balance sheet of the
company, in our opinion and according to the information and
explanations given to us, there are no funds raised on a short-
term basis which have been used for long-term investment.
13. During the course of our examination of the books and
records of the company, carried out in accordance with the
generally accepted auditing practices in India, and according
to the information and explanations given to us, we have
neither come across any instance of fraud on or by the
company, noticed or reported during the year, nor have we
been informed of such case by the management.
14. The other clauses, xi, xii, xiii, xiv, xvi, xviii, xix and xx of
paragraph 4 of the Companies (Auditor’s Report) Order 2003,
as amended by the Companies (Auditor’s Report) (Amendment)
Order, 2004, are not applicable in the case of the company for
the current year, since in our opinion there is no matter which
arises to be reported in the aforesaid order.
Usha A Narayanan
Partner
Membership Number 23997
For and on behalf of
Place : Bangalore Lovelock & Lewes
Date : February 20, 2006 Chartered Accountants
3M India Limited(formerly Birla 3M Limited)
24 innovate, grow, deliver
Schedule As at 31.12.2005 As at 31.12.2004
Number Rs. Rs.
SOURCES OF FUNDS :
1. Shareholders’ Funds :
Share Capital 1 112,650,700 112,650,700
Reserves & Surplus 2 1,621,414,810 1,237,237,940
2. Loan Funds :
Secured Loans 3 - -
Unsecured Loans 4 - -
3. Net Deferred Tax Liability - 2,863,865
[Schedule 15, Note 17(b)]
1,734,065,510 1,352,752,505
APPLICATION OF FUNDS :
1. Fixed Assets :
Gross Block 5 701,261,487 663,325,878
Less: Depreciation 410,816,523 353,177,193
Net Block 290,444,964 310,148,685
Capital work-in-progress 2,866,538 11,122,248
2. Investments 6 - 16,000
3. Net Deferred Tax Asset 12,486,997 -
[Schedule 15, Note 17(b)]
4. Current Assets, Loans and Advances :
Inventories 7 601,544,384 402,165,570
Sundry Debtors 8 499,880,606 296,798,019
Cash and Bank Balances 9 762,014,155 618,097,308
Loans and Advances 10 338,238,422 258,197,439
2,201,677,567 1,575,258,336
Less: Current Liabilities and Provisions : 11
Current Liabilities 710,478,649 499,414,782
Provisions 62,931,907 44,377,982
773,410,556 543,792,764
Net Current Assets 1,428,267,011 1,031,465,572
1,734,065,510 1,352,752,505
Notes to accounts 15
The Schedules referred to above form an integral part of the Balance Sheet.
This is the Balance Sheet referred to in our For and on behalf of the Board
report of even date
Usha A Narayanan Bert O’ Donoghue B. V. Shankaranarayana Rao K. Ramesh Chandra
Partner Managing Director Director Company Secretary
Membership No. : 23997
For and on behalf of
Lovelock & Lewes
Chartered Accountants
Place : Bangalore
Date : February 20, 2006
BALANCE SHEET AS AT DECEMBER 31, 2005
25
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
Schedule For the year ended For the year ended
Number 31.12.2005 31.12.2004
Rs. Rs.
INCOME :
Sales 4,029,457,944 2,712,258,968
Less: Excise Duty 230,639,389 139,762,609
3,798,818,555 2,572,496,359
Other income 12 31,786,183 24,878,025
3,830,604,738 2,597,374,384
EXPENDITURE :
Finished Goods purchased (traded) 1,203,926,577 933,189,771
Manufacturing, administrative and selling expenses 13 2,062,675,464 1,278,224,302
Depreciation 67,306,310 52,800,908
(Increase) / Decrease in inventories 14 (109,133,077) (77,252,585)
3,224,775,274 2,186,962,396
Profit before Taxation 605,829,464 410,411,988
Taxation for the year
- Current Tax [Schedule 15, Note 17(a)] 222,000,000 163,500,000
- Deferred Tax [Schedule 15, Note 17(b)] (15,350,862) (8,444,775)
- Fringe Benefit Tax 15,003,456 -
Profit after Taxation 384,176,870 255,356,763
Balance in Profit & Loss Account brought forward 1,139,022,940 883,666,177
Balance Transferred to Balance Sheet 1,523,199,810 1,139,022,940
Earnings Per Share - Basic and Diluted 34.10 22.67
(Schedule 15, Note 19)
Notes to accounts 15
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2005
The Schedules referred to above form an integral part of the Profit and Loss Account.
This is the Profit and Loss Account referred to in our For and on behalf of the Board
report of even date
Usha A Narayanan Bert O’ Donoghue B. V. Shankaranarayana Rao K. Ramesh Chandra
Partner Managing Director Director Company Secretary
Membership No. : 23997
For and on behalf of
Lovelock & Lewes
Chartered Accountants
Place : Bangalore
Date : February 20, 2006
3M India Limited(formerly Birla 3M Limited)
26 innovate, grow, deliver
As at As at
31.12.2005 31.12.2004
Rs. Rs.
SCHEDULE 1:
SHARE CAPITAL
Authorised :
11,265,070 Equity Shares of Rs. 10 each 112,650,700 112,650,700
Issued, subscribed and fully paid up
11,265,070 Equity Shares of Rs. 10 each
Of the above 8,562,000 equity shares (Previous year - 8,562,000 equity
shares) are held by 3M Company, USA 112,650,700 112,650,700
112,650,700 112,650,700
SCHEDULE 2:
RESERVES AND SURPLUS
a. Capital Reserves 2,000,000 2,000,000
(State Investment Subsidy received from the Government of Karnataka)
b. Share Premium Account 94,990,000 94,990,000
c. Investment Allowance Reserve (utilised) 1,225,000 1,225,000
d. Surplus, being balance in Profit and Loss Account 1,523,199,810 1,139,022,940
1,621,414,810 1,237,237,940
SCHEDULE 3:
SECURED LOANS
Packing Credit/Cash Credit Account from banks - -
(Secured by first charge by way of hypothecation of all finished goods,
work-in-progress, raw materials, traded goods, stores,
book debts and all other movable assets)
- -
SCHEDULE 4:
UNSECURED LOANS - -
- -
SCHEDULES TO ACCOUNTS
27
3M India Lim
ited(fo
rme
rly Birla
3M
Lim
ited
)
innovate, grow, deliver
SCHEDULES TO ACCOUNTS
SCHEDULE 5
FIXED ASSETS [Schedule 15, Note 1 (B) and (C)]
GROSS BLOCK - AT COST DEPRECIATION/AMORTISATION NET BLOCK
PARTICULARS As at Additions Deletions As at Upto For the year Sales/ Upto As at As at
31.12.2004 for the year for the year 31.12.2005 31.12.2004 adjustment 31.12.2005 31.12.2005 31.12.2004
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Freehold Land 7,806,562 - - 7,806,562 - - - - 7,806,562 7,806,562
Leasehold Land 27,854,456 - - 27,854,456 - - - - 27,854,456 27,854,456
(Refer Note (a) below)
Goodwill 57,202,270 2,814,900 - 60,017,170 51,861,816 8,155,354 - 60,017,170 - 5,340,454
Factory Building 61,848,245 876,982 - 62,725,227 17,237,666 2,073,171 - 19,310,837 43,414,390 44,610,579
Leasehold Improvements 33,425,600 132,083 - 33,557,683 17,907,390 7,092,313 - 24,999,703 8,557,980 15,518,210
(Refer Note (b) below)
Plant and Machinery 274,561,049 25,322,506 - 299,883,555 126,770,931 23,020,961 - 149,791,892 150,091,663 147,790,118
Data Processing Equipments 87,543,251 10,457,660 - 98,000,911 78,052,207 10,040,772 - 88,092,979 9,907,932 9,491,044
and Software
Furniture, Fixtures and
Office Equipments 106,551,914 7,998,458 (5,701,965) 108,848,407 55,540,812 16,197,579 (5,701,965) 66,036,426 42,811,981 51,011,102
(Refer Note (b) below)
Vehicles 6,532,531 - (3,965,015) 2,567,516 5,806,371 726,160 (3,965,015) 2,567,516 - 726,160
663,325,878 47,602,589 (9,666,980) 701,261,487 353,177,193 67,306,310 (9,666,980) 410,816,523 290,444,964 310,148,685
Previous year 550,744,724 112,869,736 (288,582) 663,325,878 300,664,867 52,800,908 (288,582) 353,177,193 310,148,685 250,079,856
Note
a) Leasehold land represents amount paid to Maharashtra Industrial Development Corporation for land to be purchased on 95 years lease, for which compliance with certain conditions as
mentioned in the License Agreement and registration is pending as on date.
b) Current year depreciation includes additional depreciation of Rs. 6,942,289 on account of management reassessment of remaining estimated useful life of Leasehold Improvements and
Furniture & Fixtures.
3M India Limited(formerly Birla 3M Limited)
28 innovate, grow, deliver
As at As at
31.12.2005 31.12.2004
Rs. Rs.
SCHEDULE 6:
INVESTMENTS (NON-TRADE UNQUOTED)
At Cost
Long Term
In Government Securities:
Indira Vikas Patra - 500
National Savings Certificate - 15,500
(Lodged with Government departments)
- 16,000
SCHEDULE 7:
INVENTORIES
(Lower of cost and net realisable value)
a) Stock in Trade
- Raw Materials 237,292,076 152,838,718
(including in-transit Rs.49,195,668 previous year Rs.20,753,228)
- Packing Materials 11,138,983 5,463,182
- Work-in-Progress 20,972,615 13,982,465
- Finished Goods 79,817,694 57,424,633
- Traded Goods 252,033,385 172,283,519
(including in-transit Rs. 73,793,501 previous year Rs.31,129,843)
b) Stores & Spares 289,631 173,053
601,544,384 402,165,570
SCHEDULE 8:
SUNDRY DEBTORS
(Secured)
Over six months: 3,712,091 2,530,181
Others 24,098,298 9,877,021
(Unsecured)
Over six months:
- considered good 5,734,301 1,043,357
- considered doubtful 70,046,986 64,276,486
Others
- considered good 466,335,916 283,347,460
569,927,592 361,074,505
Less: Provision for doubtful debts 70,046,986 64,276,486
499,880,606 296,798,019
SCHEDULES TO ACCOUNTS
29
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
As at As at
31.12.2005 31.12.2004
Rs. Rs.
SCHEDULE 9:
CASH AND BANK BALANCES
a) Cash and Cheques on hand 19,402,424 10,097,488
b) With Scheduled Banks:
- Current Accounts 137,290,046 67,678,135
- Deposit Account * 605,000,000 540,000,000
- Margin Money Account ** 321,685 321,685
* Includes Rs 10,200,000 under lien 742,611,731 607,999,820
(Previous Year - Rs. 4,680,000)
** Held against guarantees issued
762,014,155 618,097,308
SCHEDULE 10:
LOANS AND ADVANCES
(Unsecured, considered good unless otherwise stated)
Advances recoverable in cash or in kind or for value 131,977,176 103,174,649
to be received (*)
Advance payment of Income Tax 20,488,206 3,401,646
[Net of provision Rs. 776,586,723 (Previous year :
Rs. 643,586,723)]
Deposits with Government departments and others 138,057,420 131,781,095
Balances with excise and customs authorities 55,886,905 28,011,334
346,409,707 266,368,724
Less: Provision for doubtful advances 8,171,285 8,171,285
338,238,422 258,197,439
* Includes doubtful advances of Rs. 8,171,285
(Previous year. - Rs. 8,171,285)
SCHEDULES TO ACCOUNTS
3M India Limited(formerly Birla 3M Limited)
30 innovate, grow, deliver
SCHEDULES TO ACCOUNTS
As at As at
31.12.2005 31.12.2004
Rs. Rs.
SCHEDULE 11:
CURRENT LIABILITIES
AND PROVISIONS
a) Current Liabilities:
Sundry creditors for goods,
expenses and services
i) Total Outstanding dues of
small scale industrial
undertaking(s); and 2,931,260 2,293,362
{The above information has
been compiled to the extent
these could be identified as
small scale units on the basis
of the information available
with the Company
[Schedule 15 Note 12 (a)]}
ii) Total outstanding dues to
creditors other than small
scale industrial
undertaking(s) 614,084,981 617,016,241 412,456,624 414,749,986
Advance from customers/
distributors 51,788,588 41,535,524
Investor Education and
Protection fund - 864,456
Unclaimed debenture and
accrued interest thereof 2,509,324 2,509,324 3,239,186 4,103,642
Other Current Liabilities 39,164,496 39,025,630
710,478,649 499,414,782
b) Provisions:
Taxation (Fringe Benefit Tax) 15,003,456 -
Gratuity (Schedule 15, Note 13) 14,677,411 10,502,468
Leave Encashment 11,051,040 6,975,514
Sales Tax (Schedule 15, Note 18) 10,200,000 14,900,000
Other trade Payable
(Schedule 15, Note 18) 12,000,000 12,000,000
62,931,907 44,377,982
773,410,556 543,792,764
31
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
For the year For the year
ended ended
31.12.2005 31.12.2004
Rs. Rs.
SCHEDULE 12:
OTHER INCOME
Interest (Gross, tax deducted at source Rs.6,725,775, Previous year Rs.4,061,379) 30,141,040 21,867,959
Commission - 116,027
Profit on Sale of Assets 1,645,143 15,000
Foreign exchange gain - net - 2,879,039
31,786,183 24,878,025
SCHEDULE 13:
MANUFACTURING, ADMINISTRATIVE AND SELLING EXPENSES
Raw materials consumed 872,328,381 435,319,088
Stores, spares consumed and small tools written off 33,874,268 16,530,752
Packing materials consumed 49,670,885 33,335,984
Excise Duty 18,433,773 11,109,712
Power, fuel and water 28,542,287 20,387,938
Salaries, wages and bonus 340,903,378 253,000,411
Contribution to Provident and other funds 43,178,652 27,674,962
Provision for retiring gratuities (Schedule 15, Note 13) 4,174,943 4,531,904
Staff welfare expenses 68,778,561 40,253,110
Rent 52,010,751 39,670,369
Rates and taxes 17,778,657 9,494,116
Repairs
- Building 6,064,284 5,472,555
- Plant and machinery 8,086,282 5,150,253
- Others 6,974,197 5,599,129
Telephone, telex and postage 20,201,175 16,173,722
Travel and conveyance 80,740,928 63,468,909
Insurance 11,414,867 8,878,519
Legal and professional charges 8,810,578 7,254,544
Lease rentals (Schedule 15, Note 16) 33,365,573 23,398,359
Advertisement and sales promotion 139,171,661 102,403,729
Corporate Management Fees 72,592,873 44,364,262
Auditors Remuneration (Schedule 15, Note 5) 2,902,632 2,687,633
Interest to others 1,468,469 2,110,810
Bank charges 5,335,745 3,922,435
Directors’ sitting fees 660,000 525,000
Bad debts written off 7,934,145 56,934
Provision for doubtful debts 5,770,500 14,382,287
Commission on sales 22,982,879 9,164,429
Foreign exchange loss - net 1,100,701 -
Freight outward (net) 22,044,414 11,008,346
Miscellaneous expenses 75,379,025 60,894,101
2,062,675,464 1,278,224,302
SCHEDULES TO ACCOUNTS
3M India Limited(formerly Birla 3M Limited)
32 innovate, grow, deliver
For the year For the year
ended ended
31.12.2005 31.12.2004
Rs. Rs.
SCHEDULE 14:
(INCREASE)/DECREASE IN INVENTORIES
Opening Stock
Work-in-progress 13,982,465 9,212,106
Finished goods 57,424,633 35,282,223
Traded goods 172,283,519 121,943,703
243,690,617 166,438,032
Less : Closing Stock
Work-in-progress 20,972,615 13,982,465
Finished goods 79,817,694 57,424,633
Traded goods 252,033,385 172,283,519
352,823,694 243,690,617
(Increase)/Decrease in Inventories (109,133,077) (77,252,585)
SCHEDULES TO ACCOUNTS
33
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
SCHEDULE 15 :
NOTES TO ACCOUNTS
1 Statement On Significant Accounting Policies
A Basis of preparation of accounts
The accounts have been prepared to comply in all
material aspects with Generally Accepted Accounting
Principles in India, the Accounting Standards issued by
the Institute of Chartered Accountants of India and the
relevant provisions of the Companies Act, 1956.
B Fixed assets
Fixed assets are stated at original cost less accumulated
depreciation. Cost includes invoice price and wherever
applicable, freight, duties and taxes, related interest on
specific borrowings upto the date of acquisition /
installation and expenses incidental to acquisition and
installation. Operating Software is capitalised along with
fixed assets. Application softwares are amortised based
on management estimation of useful life.
C Depreciation and amortisation
Depreciation on fixed assets other than leasehold
improvements and Goodwill is provided on straight
line method at the following rates specified which are
equal to or higher than the principal rates specified in
Schedule XIV to the Companies Act, 1956:
Per Annum
Building 3.34%
Plant and Machinery 10.00%
Data Processing Equipments
and Software 20.00% to 33.33%
Office Equipment 20.00%
Furniture & Fixtures 6.67%
Vehicles 6.67%
Leasehold improvements are amortised over the period
of lease. [Schedule 5, Note (b)]
Goodwill purchased in earlier years is amortised over a
period of 5 years. Goodwill purchased subsequent to April
1, 2004 is evaluated based on impairment test annually.
D Investments
Long-term investments are stated at cost. Decline in value
of long-term investments, other than temporary, is
provided for. Current investments are stated at lower of
cost or market value.
E Inventories
Inventories are valued at lower of cost and net realisable
value except in case of stores and spares which are
valued at cost.
SCHEDULES TO ACCOUNTS
The costs are, in general, ascertained as under:
Raw Materials :
First in first out method based on actual cost
Traded goods :
First in first out method based on actual cost. Goods lying at
bonded warehouse are valued inclusive of customs duty.
Stock in transit is valued excluding customs duty.
Finished goods and Work in Progress :
Material cost on weighted average method plus labour and
appropriate overheads and wherever applicable, excise duty.
Provision for obsolescence is made wherever considered
necessary based on the age of the stocks.
F Sundry Debtors and Loans & Advances
Sundry Debtors and Loans & Advances are stated after
making adequate provision for doubtful balances.
G Retirement / Post Retirement Benefits
The Gratuity liability is funded with the Life
Insurance Corporation of India. The charge to profit
and loss account comprises of contribution to fund
and estimated amount determined by the Company
in accordance with the Payment of Gratuity Act, 1972.
The Company makes contribution to the Superannuation
Scheme administered by the Life Insurance Corporation
of India based on a specified percentage of eligible
employees salary. The Company’s obligation to the scheme
is restricted to the contributions to the scheme.
The Company makes monthly contribution as per the
applicable statute for Provident Fund and charges off the
same to the profit and loss account.
Provision is made for value of unutilised leave due to
employees at the end of the year on the basis of actuarial
valuation.
H Revenue Recognition
Sales are recognised when goods are despatched
in accordance with the terms of sale and are recorded
net of sales returns, trade discount, rebates and sales tax
collected but includes excise duty, wherever applicable.
Interest and other income is accounted for on accrual
basis except items of non recurring nature which are
accounted when received.
I Expenditure
Expenses are accounted for, on accrual basis and
provision is made for all known losses and liabilities.
Excise duty and customs duty are accrued on the
goods lying in the bonded warehouse at the year end.
Revenue expenditure on Research and Development is
3M India Limited(formerly Birla 3M Limited)
34 innovate, grow, deliver
charged against the profit of the year in which it is incurred.
Capital expenditure on research and development is shown
as an addition to fixed assets.
J Foreign Currency Translations
Transactions arising in foreign currency during the year are
converted at rates closely approximating those ruling at the
transaction date or at the forward contract rates as the case may
be. The exchange differences arising out of the translation of the
foreign currency liability incurred for acquisition of fixed assets
are adjusted to the cost of fixed assets. Current assets and
liabilities in foreign currency are converted at the year end
exchange rates and the resultant loss or gain is dealt with in the
profit and loss account. In case of forward contracts, the difference
between the forward rate and exchange rate on the date of
transaction is recognised as income/expense over the life of the
contract.
K Operating Leases
A lease is classified as an Operating Lease, if it does not
transfer substantially all the risks and rewards incident to
ownership. Lease rentals are charged to Profit and Loss
Account on accrual basis.
NOTES TO ACCOUNTS
L Taxation
Provision is made for income tax annually based on the tax
liability computed after considering tax allowances and
exemptions.
Deferred tax is recognised on timing differences between the
accounting income and the taxable income for the year and
quantified using the tax rates and laws enacted or substantively
enacted as on the balance sheet date.
Deferred tax assets are recognised and carried forward to
the extent that there is a reasonable certainity that sufficient
future taxable income will be available against which such
deferred tax assets can be realised.
M Provisions
Provisions are recognised when the Company has a present
obligation as a result of past events, it is probable that an
outflow of resources will be required to settle the obligation,
and a reliable estimate of the amount can be made. Where the
Company expects a provision to be reimbursed, the
reimbursement is recognised as a separate asset but only
when reimbursement is virtually certain.
35
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
NOTES TO ACCOUNTS
For the year For the year
ended ended
31.12.2005 31.12.2004
Rs. Rs.
2 Contingent Liabilities not provided for :
a) Guarantees:
- issued by Company’s Bankers 13,676,114 15,299,790
- issued by Company on behalf of others - 12,170,165
b) Letter of credit opened by banks for purchase of raw materials 4,349,832 2,020,579
c) Claims against the Company not acknowledged as debts:
- Customs Demands 3,119,000 3,119,000
- Excise duty matters - 24,098,782
- Pending Sales Tax matters 24,408,315 24,342,960
- Employees State Insurance claim 1,940,000 1,940,000
3 Capital expenditure commitments
(net of advances) 6,439,156 2,524,527
4 Quantitative Information in respect of goods manufactured and traded by the Company:
A. Particulars of Capacity and Production:
Licensed Installed Production
Class of Goods Unit Capacity Capacity *
Self Adhesive Labels Nos NA 40,000,000 32,591,382
(40,000,000) (28,015,522)
Epoxy Resin Kgs NA 2,300,000 1,344,313
(2,300,000) (79,104)
Paper & Paper Tapes Nos NA 15,000,000 12,421,107
(15,000,000) (11,085,849)
Paint Polishes Nos NA 1,000,000 974,940
(1,000,000) (36,532,666)
Abrasive Nos NA 50,000,000 47,032,204
(50,000,000) (36,532,666)
Note : Figures in brackets relate to the Previous year
* Installed capacity is as certified by the Management and relied upon by the Auditors without verification as this is a technical matter
3M India Limited(formerly Birla 3M Limited)
36 innovate, grow, deliver
B. Particulars of Opening and Closing Stock of Stocks in Trade *:
Class of Goods Unit Opening Stock Closing Stock
Quantity Value Quantity Value
Rs. Rs.
Manufactured
Self Adhesive Labels Nos 2,161,191 13,914,947 2,796,173 22,566,824
(1,214,421) (12,237,878) (2,161,191) (13,914,947)
Surgical & Dental Products Nos - - - -
- - - -
Epoxy Resin Kgs 42,815 6,149,535 41,224 5,969,042
- - (42,815) (6,149,535)
Paper & Paper Tapes Nos 727,993 6,271,481 1,663,565 20,468,269
(441,657) (6,290,597) (727,993) (6,271,481)
Paint Polishes Nos 90,536 3,746,701 123,643 3,730,535
(41,466) (1,871,037) (90,536) (3,746,701)
Abrasive Nos 3,792,276 12,785,824 5,678,377 22,555,796
(2,424,659) (8,765,257) (3,792,276) (12,785,824)
Others (individually less Nos - 14,556,145 - 4,527,228
than 10% of the total stock) - (6,117,454) - (14,556,145)
57,424,633 79,817,694
(35,282,223) (57,424,633)
Traded
Self Adhesive Labels Nos 13,738 32,395,831 8,266 48,068,852
(85,642) (26,338,096) (13,738) (32,395,831)
Surgical & Dental Products Nos 152,541 50,066,400 258,441 85,957,541
(132,508) (46,371,058) (152,541) (50,066,400)
Paint Polishes Nos 716,422 12,226,696 1,412,674 29,881,636
(1,632,173) (16,296,596) (716,422) (12,226,696)
Abrasive Nos 217,777 17,116,061 752,098 30,819,625
(606,950) (10,362,110) (217,777) (17,116,061)
Others (individually less Nos - 60,478,531 - 57,305,731
than 10% of the total stock) - (22,575,843) - (60,478,531)
172,283,519 252,033,385
(121,943,703) (172,283,519)
Note: Figures in brackets relate to the Previous year
* includes products which are non standard having various sizes and measurement
NOTES TO ACCOUNTS
37
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
NOTES TO ACCOUNTS
C. Particulars of Turnover* :
Class of Goods Unit Turnover
Quantity Value
Rs.
Self Adhesive Labels Nos 36,561,036 1,188,204,710
(27,446,030) (719,607,088)
Surgical & Dental Products Nos 1,246,746 511,242,076
(1,731,496) (409,916,144)
Epoxy Resin Kgs 1,345,904 207,533,284
(36,289) (4,997,076)
Paper & Paper Tapes Nos 11,485,535 256,479,764
(11,385,079) (220,813,794)
Paint Polishes Nos 12,183,498 291,913,305
(10,409,106) (220,610,849)
Abrasive Nos 50,373,632 641,923,128
(41,268,457) (500,860,878)
Others (individually less than 10% of the total Nos - 701,522,288
turnover) - (495,690,530)
3,798,818,555
(2,572,496,359)
D. Particulars of Purchase of Traded Goods* :
Class of Goods Unit Quantity Value
Rs.
Self Adhesive Labels Nos 4,599,164 213,527,807
(299,062) (163,419,334)
Surgcial & Dental Products Nos 1,352,646 282,428,414
(1,751,529) (241,710,587)
Paint Polishes Nos 11,937,917 146,531,212
(8,547,228) (124,077,539)
Abrasive Nos 5,761,850 148,336,234
(2,420,835) (92,223,999)
Others (individually less than 10% of total purchase traded goods) Nos - 413,102,910
- (311,758,312)
1,203,926,577
(933,189,771)
Note: Figures in brackets relate to the Previous year
* includes products which are non standard having various sizes and measurement
3M India Limited(formerly Birla 3M Limited)
38 innovate, grow, deliver
For the year For the year
ended ended
31.12.2005 31.12.2004
Rs. Rs.
5 Auditors Remuneration (inclusive of service tax)
- Audit fees 1,559,330 1,559,330
- Certification and other services 1,294,850 1,088,570
- Reimbursement of expenses 48,452 39,733
6 Value of imports on C.I.F basis:
(excluding Goods in transit)
- Raw Materials 758,938,525 409,392,323
- Traded Goods 831,064,747 649,406,925
- Stores and Spares 677,062 736,936
- Capital Goods 11,943,446 80,004,774
7 Expenditure in Foreign Currency :
- Travelling Expenses 16,640,192 10,753,712
- Others (net of tax) 88,948,553 14,527,854
8 Raw Materials Consumed :
Class of Goods Unit Quantity Value Quantity Value
Rs Rs
Abrasive LY 5,845 8,209,906 3,277 3,351,792
Inks GL 20,390 25,758,949 13,925 13,583,656
Tapes LM 586,306 36,079,784 130,234 27,499,928
RL 807 5,490,189 671 5,883,303
Polishers GL 1,229 5,792,771 9,088 5,292,222
Coated Abrasive RL 3,134 9,337,783 2,429 54,589,247
Epoxy Kgs 840,246 100,679,712 51,214 4,722,951
Paper Sheets EA 4,726 7,877,713 2,893 5,363,590
Coaters GL 1,079 15,725,062 1,086 17,972,696
Kgs 10,311 8,202,244 5,292 4,337,714
Films LY 10,91,508 225,486,217 567,250 99,563,728
RL 12,876 50,429,884 6,941 22,275,126
Others (individually less than 10%
of the total raw materials consumed) 303,258,167 170,883,135
872,328,381 435,319,088
NOTES TO ACCOUNTS
39
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
NOTES TO ACCOUNTS
For the year For the year
ended ended
31.12.2005 31.12.2004
Rs. Rs.
% Value % Value
9 Value of Imported and Indigenous
Raw Materials and Stores and Spares consumed :
(As certified by the Management)
Raw Materials
- Imported 92% 802,389,897 89% 385,712,879
- Indigenous 8% 69,938,484 11% 49,606,209
100% 872,328,381 100% 435,319,088
Stores & Spares
- Imported 3% 848,444 6% 1,004,531
- Indigenous 97% 33,025,824 94% 15,526,221
100% 33,874,268 100% 16,530,752
10 Earnings in Foreign Exchange :
- Export of goods calculated on FOB basis 64,589,514 3,466,216
- Freight and Insurance on exports 3,078,440 221,248
11 Research and Development Expenses : 1,560,630 1,339,859
12 a) The total outstanding dues to small scale industrial undertakings for more than 30 days as at December 31, 2005 is
Rs.1,680,531 (Previous year: Nil)
Adhesive Specialities
AF Industrial Stores
Allied System
Apeksha Tools
Armour Plast P Ltd
Asian Packaging
Bangalore Dry Ice and Gas Co
Cosmopack Industries
Image Labels P Ltd
Indus Spray
Mech Plast Industries
Pragati Printers
Superchem Industries
Note: The above is on the basis of information to the extent provided by the Suppliers to the Company, which has
been relied upon by the Auditors.
b) The Company has not made any provision for warranty considering that the Company can claim the warranty cost
from the original supplier.
c) The Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce, while granting permission for
import of capital goods on concessional import duty under the Export Promotion Capital Goods (EPCG) Scheme,
has stipulated an export obligation aggregating to Rs. 193,675,663 for the Company, to be fulfilled over a period of
8 years. During the year ended December 31, 2005, the Company has fulfilled total export obligation amounting to
Rs. 130,012,950 (Previous Year: Nil) and cumulatively total export sales of Rs. 130,012,950 (Previous year : Nil)
13 The total future liability for retiring gratuity payable in accordance with Payment of Gratuity Act, 1972 is estimated by
the Company as on December 31, 2005 at Rs. 31,040,000 (Previous year: Rs. 21,313,000). Having regard to the amount
available with the Gratuity Fund administered by the Life Insurance Corporation of India and the balance amount of
Rs. 14,677,411 (Previous year: Rs. 10,502,468) has been fully provided.
3M India Limited(formerly Birla 3M Limited)
40 innovate, grow, deliver
For the year For the year
ended ended
31.12.2005 31.12.2004
Rs. Rs.
14 a) Managerial Remuneration *
Salary and Allowances 12,653,482 10,850,484
Contribution to provident and other funds 439,314 360,024
Estimated value of benefits 3,279,001 2,986,338
16,371,797 14,196,846
b) Computation of profit in accordance with Section 198(1) read
with Section 309(5) of the Companies Act, 1956 for calculation
of Managerial Remuneration:
Profit before taxation (as per books) 605,829,464 410,411,988
Add : 1) Managerial Remuneration 16,371,797 14,196,846
2) Depreciation charged in the accounts 67,306,310 52,800,908
3) Provision for doubtful debts 5,770,500 14,382,287
4) Directors sitting fees 660,000 525,000
90,108,607 81,905,041
695,938,071 492,317,029
Less : Depreciation as per Section 350 of the Companies Act, 1956 67,306,310 52,800,908
Profit as per Section 198 of the Companies Act, 1956 628,631,761 439,516,121
10% of the above (Previous year: 10%) 62,863,176 43,951,612
Remuneration paid during the year 16,371,797 14,196,846
* Mr. Bert O’ Donoghue was appointed as Managing Director
on September 1, 2005 and the Company has applied for approval from
Central Government with respect to residential status as per
Part I (e) of Schedule XIII of The Companies Act, 1956 and the
approval is awaited. The above said appointment is subject to approval
from Shareholders in the ensuing Annual General Meeting.
NOTES TO ACCOUNTS
41
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
NOTES TO ACCOUNTS
15. Related Party Transactions
(A) Summary of the monetary value of the transactions with the related parties are as follows:
Holding Fellow Key
Company Subsidiary Management
[B(i)] Companies Personnel Total
[B(ii)] [C]
Rs. Rs. Rs. Rs.
I. Expenses:
Purchase of Materials 805,352,858 453,987,224 - 1,259,340,082
(561,583,441) (316,365,738) - (877,949,179)
Sales promotion expenses 396,481 141,532 - 538,013
(1,194,035) (652,238) - (1,846,273)
Remuneration to Directors - - 16,371,797 16,371,797
- - (14,196,846) (14,196,846)
Other Services - 72,740,050 - 72,740,050
- (44,364,262) - (44,364,262)
II. Income
Sale of Goods 49,830,450 17,314,206 - 67,144,656
- (6,984,964) - (6,984,964)
III. Purchase of Capital Goods - - - -
(67,464,858) - - (67,464,858)
IV. Balances
Advances Received 76,675,093 - - 76,675,093
(76,675,093) - - (76,675,093)
Outstanding Receivables 47,484,212 13,113,980 - 60,598,192
- (3,309,701) - (3,309,701)
Outstanding Payables 129,000,071 109,500,593 - 238,500,664
(70,511,073) (87,734,447) - (158,245,520)
Note: Figures in brackets represents Previous year.
3M India Limited(formerly Birla 3M Limited)
42 innovate, grow, deliver
(B) Names of related parties and description of the relationship:
(i). Parties where control exists
Holding Company 3M Company, St Paul, USA
(ii). Fellow Subsidiary Companies: 3M Singapore Pte Ltd
3M Australia Pty Ltd
3M Do Brazil Ltd
3M Belgium N.V.S.A.
3M China
3M Colombia
3M UK Plc-Bedford
3M France
3M Sante
3M Hongkong Ltd
3M Deutschland GmbH
3M Italia Spa
3M Indonesia Kbyt
3M Korea Ltd
3M Malayasia Sdn Berhad
3M Filterate B V
3M Ecc Europa B V
3M New Zealand Ltd
3M Spain
3M Philippines Inc
3M Thailand Ltd
Sumitomo 3M Ltd
3M Taiwan Ltd
3M Sweden
3M Argentina S.A.C.I.F.I.
3M Canada
3M South Africa
3M Lanka Pvt Ltd
3M Espe Dental Ag
Pouyet SA, 3M Telecommunications
3M Mexico SA De CV
3M Sanvetec
3M Sanayi De
3M Unitek
3M Ait Ltd
3M Gulf
3M Electro & Communication India Private Limited
NOTES TO ACCOUNTS
43
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
(C) Key Management Personnel
Directors of the Company during the year Mr. Yashovardhan Birla
Mr. Bert O’ Donoghue
Mr. Thomas P. Spencer
Ms. Mary B. McCormick
Dr. Carlisle S. Boyce
Mr. B.S.Iyer
Mr. D. J. Balaji Rao
Mr. Amit Mukherjee
Mr. B.V. Shankaranarayana Rao
Mr. Lee M. Kennedy
Dr. Paul Rosso
Mr. Brad C. Sweet
Note:
i. None of the relatives of the Directors of the Company have any interest in any companies, firms, body corporate with
which transactions have been entered into during the year.
ii. The above information has been determined to the extent such parties have been identified on the basis of information
provided by the Company, which has been relied upon by the Auditors.
16 Assets taken on lease
Assets aggregating to Rs. 122,252,920 (Previous year: Rs.85,595,929) have been acquired on operating lease. The
Company has entered into operating lease arrangement for factory premises and amenities in respect of Corrosion
Protection Product Plant at Ahmedabad which have a non cancellable period of 5 years with a rent escalation of 15% per
annum and with a renewal option after the lease term. The agreements provide for premature termination by lessee,
after the non cancellable period through notice period of 6 months.
The obligation for future rentals in respect of such assets and factory premises under non cancellable operating leases
are as follows:
For the year For the year
ended ended
31.12.2005 31.12.2004
Rs. Rs.
Minimum lease payments during the year charged to profit and loss account 33,365,573 23,398,359
Minimum lease payments not later than one year 28,692,459 21,188,823
Minimum lease payments later than one year but not later than five years 38,058,933 27,831,791
17 Taxation
a) The tax year for the Company being March 31, the provision for taxation for the year is the aggregate of the
provision made for the 3 months ending March 31, 2005 and the provision based on the figures for the remaining 9
months upto December 31, 2005. The ultimate tax liability will be determined on the basis of the figures for the
period April 1, 2005 to March 31, 2006.
NOTES TO ACCOUNTS
3M India Limited(formerly Birla 3M Limited)
44 innovate, grow, deliver
b) Net Deferred Tax Asset/(Liability) as on December 31, 2005 amounting to Rs.12,486,997 [Previous year : Rs. (2,863,865)]
has been arrived at as follows:
For the year For the year
ended ended
31.12.2005 31.12.2004
Rs. Rs.
i Deferred Tax Assets arising from:
Expenses charged in financial statement but allowable as deduction in
future years under the Income Tax Act, 1961 towards provision for
doubtful debts, gratuity, disallowance under Section 43B, leave wages, etc. 36,923,354 33,017,081
ii Deferred Tax Liabilities arising from:
Difference between carrying amount of fixed assets in the financial
statements and for Income Tax purpose (24,436,357) (35,880,946)
Net Deferred Tax Asset/(liability) taken to Balance Sheet 12,486,997 (2,863,865)
Net Deferred Tax(Credit)/Debit for the year (15,350,862) (8,444,775)
The tax impact for the above purpose has been arrived by applying a tax rate of 33.66% (Previous year : 36.5925%) being the prevailing tax
rate for Indian Companies under Income Tax Act, 1961.
18 In accordance with Accounting Standard -29 on Provisions, Contingent Liabilities and Contingent Assets, issued by the
Institute of Chartered Accountants of India, certain classes of liabilities have been identified as provision and accordingly
regrouped separately as under:
Sl No Particulars As at Additions Reversals As at
December 31, 2004 December 31, 2005
1 Sales Tax 14,900,000 - 4,700,000 10,200,000
2 Other Trade Payables 12,000,000 - - 12,000,000
26,900,000 - 4,700,000 22,200,000
The Company sets up and maintains provisions for other trade payables when a reasonable estimate can be made. These
provisions are made based on estimates made by the Management that are reviewed periodically and involve quick settlements not
exceeding a period of two-three years in most cases.
19 Earnings Per Share (EPS)
For the year For the year
ended ended
31.12.2005 31.12.2004
Profit after Taxation 384,176,870 255,356,763
Basic/Weighted average number of Equity Shares of Rs 10 each 11,265,070 11,265,070
Basic and Diluted Earnings Per Share 34.10 22.67
NOTES TO ACCOUNTS
45
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
For the year ended For the year ended
31.12.2005 31.12.2004
Rs Rs
20 Segment Report :
Segment Revenue (Net Sale / Income)
a Industrial Markets 645,668,408 478,180,349
b Automotive and Specialty Materials Markets 1,352,357,766 831,648,971
c Health Care Markets 550,106,610 443,745,779
d Traffic and Safety Markets 680,662,184 438,642,841
e Consumer and Office, Construction Markets 502,883,587 373,293,455
f Others * 67,140,000 6,984,964
Total Segment Revenue 3,798,818,555 2,572,496,359
Less: Inter segment revenue - -
Net Sales / Income from Operations 3,798,818,555 2,572,496,359
Segment Results (Profit before interest and tax)
a Industrial Markets 138,886,252 100,313,775
b Automotive and Specialty Materials Markets 174,133,156 119,598,366
c Health Care Markets 33,508,486 27,497,638
d Traffic and Safety Markets 162,153,566 97,046,965
e Consumer and Office, Construction Markets 56,635,288 45,112,698
f Others 10,195,000 (1,924,669)
Total Segment Results 575,511,748 387,644,773
Less: Interest expense 1,468,469 2,110,810
Add: Other un-allocable income net off unallocable expenditure 31,786,185 24,878,025
Total Profit Before Taxation 605,829,464 410,411,988
Capital Employed (Segment Assets-Segment Liabilities)
a Industrial Markets 136,193,421 113,351,384
b Automotive and Specialty Materials Markets 583,905,751 474,937,845
c Health Care Markets 128,046,171 113,699,426
d Traffic and Safety Markets 136,353,510 121,765,001
e Consumer and Office, Construction Markets 94,621,722 79,277,694
f Others - 1,370,856
Total Capital Employed in Segments 1,079,120,575 904,402,206
Add: Unallocable corporate assets less corporate liabilities 654,944,935 445,486,434
Total Capital Employed by the Company 1,734,065,510 1,349,888,640
* includes;
Domestic Sales/ Income 2,550,486 3,297,500
Export Sales 64,589,514 3,687,464
Segments have been identified in line with the Accounting Standard on Segment Reporting (AS-17), taking into account the organisation
structure as well as the differential risks and returns of these segments.
Segment revenue, results and capital employed figures include the respective amounts identifiable to each of the segments and also
amounts allocated on a reasonable basis. Other unallocable expenditure includes expenses incurred on common services provided to
the segments which are not directly identifiable to the individual segments as well as expenses incurred at a corporate level which relate
to the Company as a whole.
The Company operates mainly to the needs of domestic market and export turnover is not significant in context of total turnover.
Accordingly, there are no reportable geographical segments.
21 The Company has changed its name from Birla 3M Limited to 3M India Limited with effect from December 18, 2002 and
has obtained a fresh certificate of incorporation for the changed name from Registrar of Companies.
22 Previous year’s figures have been regrouped / reclassified wherever necessary to conform to current year classification.
FOR AND ON BEHALF OF THE BOARD
Place : Bangalore Bert O’ Donoghue B. V. Shankaranarayana Rao K. Ramesh Chandra
Date : February 20, 2006 Managing Director Director Company Secretary
NOTES TO ACCOUNTS
3M India Limited(formerly Birla 3M Limited)
46 innovate, grow, deliver
CASH FLOW STATEMENT FOR THE PERIOD ENDED DECEMBER 31, 2005
For the year ended For the year ended
31.12.2005 31.12.2004
Rs. Rs.
CASH FLOW FROM OPERATING ACTIVITIES
Profit Before Taxation 605,829,464 410,411,988
Adjusted for
Depreciation 67,306,310 52,800,908
Provision for doubtful debts 5,770,500 14,382,287
Foreign Exchange Loss/(Gain) 238,858 (494,725)
(Profit) / Loss on sale of Fixed Assets - Net (1,645,143) (15,000)
Investments 16,000 -
Interest received (30,141,040) (21,867,959)
Interest paid 1,468,469 2,110,810
Operating Profit Before Working Capital Changes 648,843,419 457,328,308
Adjusted for
(Increase)/ Decrease in Inventories (199,378,814) (162,435,442)
(Increase)/ Decrease in Debtors (208,853,087) (20,183,411)
(Increase)/ Decrease in Loans and Advances (60,494,248) (27,413,425)
Increase/ (Decrease) in Current Liabilities and Provisions 214,375,477 141,813,442
Cash Generated From Operations 394,492,747 389,109,472
Interest Paid (1,468,469) (2,110,810)
Direct Taxes paid (239,086,560) (174,205,925)
Interest Received 27,680,865 18,799,377
NET CASH FLOW FROM OPERATING ACTIVITIES 181,618,583 231,592,115
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Fixed Assets (39,346,879) (113,057,033)
Sale of Fixed Assets 1,645,143 15,000
NET CASH USED IN INVESTING ACTIVITIES (37,701,736) (113,042,033)
CASH FLOW FROM FINANCING ACTIVITIES - -
NET CASH USED IN FINANCING ACTIVITIES
NET (DECREASE) /INCREASE IN CASH AND CASH EQUIVALENTS 143,916,847 118,550,082
CASH AND CASH EQUIVALENTS
Opening Balance
Cash and Cheques on hand 10,097,488 14,352,024
With Scheduled Bank
- in Current Accounts 67,678,135 44,600,451
- in Deposit Account 540,000,000 440,000,000
- in Margin Money Account 321,685 594,751
TOTAL 618,097,308 499,547,226
Closing Balance
Cash and Cheques on hand 19,402,424 10,097,488
With Scheduled Bank
- in Current Accounts (Net of effects of exchange rate differences) 137,290,046 67,678,135
- in Deposit Account 605,000,000 540,000,000
- in Margin Money Account 321,685 321,685
TOTAL 762,014,155 618,097,308
Notes: 1 Figures in brackets represents outflow.
2 The Cash Flow Statement has been prepared in accordance with the requirement of Accounting Standard 3
“Cash Flow Statement” issued by Institute of Chartered Accountants of India.
3 Previous year’s figures have been regrouped wherever necessary.
This is the Cash Flow Statement referred to in our For and on behalf of the Board
report of even date
Usha A Narayanan Bert O’ Donoghue B. V. Shankaranarayana Rao K. Ramesh Chandra
Partner Managing Director Director Company Secretary
Membership No. : 23997
For and on behalf of
Lovelock & Lewes
Chartered Accountants
Place : Bangalore
Date : February 20, 2006
47
3M India Limited(formerly Birla 3M Limited)
innovate, grow, deliver
Information pursuant to Part IV of Schedule VI to the Companies Act, 1956
BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE
I. Registration Details
Registration No. 13543 State Code 08
Balance Sheet Date 31 12 2005
Date Month Year
II. Capital raised during the year (Amount in Rs. Thousands)
Public Issue Rights Issue
NIL NIL
Bonus Issue Private Placement
NIL NIL
III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)
Total Liabilities 1734066 Total Assets * 1734066
Sources of Funds
Paid-up Capital 112651 Reserves & Surplus 1621415
Secured Loans 0 Unsecured Loans 0
Application of Funds
Net Fixed Assets ** 293312 Investments 0
Net Current Assets 1428267
Net Deffered Tax Assets 12487
* Net of current liabilities and provisions
** Includes capital work-in-progress
IV. Performance of Company (Amount in Rs. Thousands)
Turnover 3830605 Total Expenditure 3224775
Profit / (Loss) Before Tax 605829 Profit / (Loss) After Tax 384177
Earning per Share (in Rs.) 34.10 Dividend Rate (%) 0
V. Generic Names of Three Principal Products / Services of Company(as per monetary terms)
Item Code. No. (ITC Code) 68052090
Product Description COATED ABRASIVES
Item Code. No. (ITC Code) 48239090
Product Description MASKING TAPES
Item Code. No. (ITC Code) 39199090
Product Description PRESSURE SENSITIVE TAPES
Signature to Schedules 1 to 15
FOR AND ON BEHALF OF THE BOARD
Place : Bangalore Bert O’ Donoghue B. V. Shankaranarayana Rao K. Ramesh Chandra
Date : February 20, 2006 Managing Director Director Company Secretary