P. P. Chhabria Chairman - Finolex cables · State Bank of India ... Characterised by the superior quality of polycarbonate and silver coated contacts and ... P.P. Chhabria. ——

P. P. Chhabria

Dr. H. S. Vachha

B. G. Deshmukh

Atul C. Choksey

Sanjay K. Asher

P. G. Pawar

Dr. N. A. Kalyani

S. B. (Ravi) Pandit

Pradeep R. Rathi

D. K. Chhabria

V. K. Chhabria

M. L. Jain

P. B. Parasnis

Company Secretary &Asst. Vice President (Legal) R.G. D'Silva

Bankers Central Bank of India

Bank of Baroda

BNP Paribas

Citibank N. A.

Corporation Bank

HDFC Bank Ltd.

ICICI Bank Ltd.

Standard Chartered Bank

State Bank of India

The Bank of Nova Scotia

Auditors B. K. Khare & Co.Chartered Accountants

Solicitors Crawford Bayley & Co.

Registered Office 26/27, Mumbai-Pune Road,Pimpri, Pune 411 018.

Chairman

Managing Director

Dy. Managing Director

Asst. Managing Director andChief Operating Officer

Asst. Managing Director andChief Financial Officer

8

PREPRESS

Note

Directors' ReportTo

The Members

FINANCIAL RESULTS :

2007

280.000

(4.623)

5.000

689.930

113.101

803.031

APPROPRIATIONS

100.000

214.115

36.389

300.000

152.527

803.031

Your Directors are pleased to present their 39th Annual Report and Audited Accounts for the year ended 31st March, 2007.

2006

Income 7,761.664

Profit efore nterest, epreciation and ax 1,043.285

Less : Interest 113.613

Less : Depreciation 313.164

Profit efore ax 616.508

Less : Provision for Taxation

(a) Current Tax 78.100

(b) Deferred Tax 28.720

(c) Fringe Benefit Tax 6.000

Profit After Tax 503.688

Surplus brought forward and other adjustments 568.680

1,072.368

Debenture Redemption Reserve 350.000

Proposed Dividend 183.527

Tax on Proposed Dividend 25.740

General Reserve 400.000

Surplus carried to Balance Sheet 113.101

1,072.368

10,526.253

1,382.582

147.987

264.288

970.307

B I D T

B T

9

39thAnnual Report 2006-07

(Rs. in million)

DIVIDEND

OPERATIONS

Your Directors are pleased to recommend enhancement in dividend from 60% to 70% on the equity shares. Accordingly, the dividendamount per equity share will be Rs. 1.40. The total dividend outgo (including dividend tax) will be Rs. 250.504 million. Dividend distributionas a percentage of the net profit is 36.31%.

Income for the year under review was Rs. 10,526.253 million and net profit was Rs. 689.930 million. The income was higher by 36 % andnet profit was up by 37% over the previous year. Segmentally, electrical cables contributed 69%, communication cables contributed 15%,copper rods contributed 13% and other products contributed 3% to the total sale of products. The sales-mix, which has emerged over thelast few years, is in synch with the overall business objectives of your Company.

The year under review will always be remembered for an important milestone achieved by the Company. Your Company crossed theprestigious Rs. 10 billion sales benchmark. Your Company witnessed good growth in profit for the year. The conversion of JFTC (jelly filled

10

FinolexCables Limited

telephone cable) capacity at Urse, mainly to manufacture light duty electrical cables, started yielding results during the year. Exportsrecorded a strong growth. There was no traditional JFTC business with BSNL/MTNL due to lack of tenders from these two companies.The positive effects of the system of Value Added Tax (VAT) (which was introduced in the year 2004), though non-measurable, werenoticed. A couple of important states were still missing on the VAT map at the close of the year. Also, there is no unanimity in VAT rates formany of the Company's products amongst states. As and when the remaining states adopt VAT system and all the states attain uniformityin VAT rates, business conditions will further improve for the Company.

The Company continued to pursue cost rationalization and containment measures during the year.

To leverage on high brand-equity and the existing well entrenched distribution network, the Company had decided to undertake projects tomanufacture certain new products/expand production base.

An electrical switch is meant for controlling the flow of power. The Company manufactures electrical cables which act as a conduit fortransmitting power. The electrical cables are made of wires which are terminated at and connected to an electrical switch. Thus the flow ofpower is controlled through an electrical switch. Therefore, the business of electrical switches is complementary to the electrical cablebusiness of the Company. The Company has developed and introduced two ranges of electrical switches; premium range for the nichemarket and classic range for the mass market. Characterised by the superior quality of polycarbonate and silver coated contacts andterminals used in the making of the most modern switches, 'Finoswitch' is safe, durable and is tested to last over 60,000 clicks. Theswitches are marked with a unique fluorescent strip that glows in the dark and acts as a guide. Electrical switches were launched in June2006. They have been well received by the market.

Expanding its reach to providing more products in electrical solutions, the Company launched 'Finoglow', its brand of CFLs, during August2006. Finoglow is an energy saving lamp. It can save upto 80% energy as against an incandescent lamp. Available in retrofit and non-retrofit range, CFLs are available in different colours, wattage and sizes. Finoglow CFLs have a high colour rendering index which givestrue colour lighting. The market response to CFLs has been positive.

The government is considering to ban use of GLS (incandescent) lamps to help in reducing global warming. CFLs will substitute for GLSlamps. Considering the immense growth potential, the Company is planning for substantial expansion of manufacturing capacity for CFLs.

The macro environment for power cable sector is very strong on the back of improved investment scenario in the country. Large investmentis coming in power generation, distribution, rural electrification, upgrading existing distribution networks, industrial capacity expansion,construction and the like. These factors would drive demand growth for power cables in India. In order to cater to this market segment, theCompany will manufacture insulated, underground usage power cables upto 66 KV rating. Manufacturing facility is under erection. Trialruns are expected to take place before September, 2007.

The manufacturing units for all of the above mentioned new products are set up at the Urse location where the Company has adequate landand developed infrastructure.

The main activities consuming electrical cables in bulk like building industry, automobile industry, agricultural irrigation and electricitydistribution are in growth mode. The system of VAT is in place with many states which is expected to generate accelerated business fororganised sector. The governmental thrust on development of infrastructure and power generation offer a wide scope for the business ofelectrical cables. In order to capitalise on the growing business opportunities, the Company decided to a set up a green field manufacturingfacility for light duty electrical cables and electrical switches near Roorkee in the Uttarakhand State. Estimated capital expenditure is Rs. 2billion, planned to be incurred in two stages broadly in equal proportion. The first stage of this project is under execution and the plant isscheduled for trial runs before September, 2007. The Uttarakhand manufacturing facility will enjoy fiscal incentives by way of excise dutyexemption and income tax benefit for defined periods. Besides enhancing the competitiveness of the Company, this manufacturing facilitywill help the Company to stay close and service the present and potential customers in the northern and eastern regions of the country.

The Company's initiative to launch new products continued this year also. The Company's R&D team designed and developed and themarketing team successfully launched following state-of-art cables: 1.1 KV grade XLPE insulated and heat resistant PVC jacketed flatcable for submersible pump motor application; LAN Cat-6 cable with ring type marking for export as well as domestic market; 50 ohmcoaxial cable with conductor dia 2.75 mm for mobile telephone antenna; 100 pair switchboard cable for ADSL transmission in short rangeapplication; and RG11 coaxial cable with copper clad aluminium conductor for cable TV network. The 1.1 KV flat cable has application inagricultural sector which is focused by the government for development. The Company expects market expansion to happen for newertype of communication cables due to growing broadband usage.

PROJECTS

Electrical Switches Project

Compact Fluorescent Lamps (CFLs) Project

High Voltage Power Cables Project

Uttaranchal (now called Uttarakhand) Project

NEW PRODUCTS

11


EXPORTS

FINANCE

SUPERBRAND STATUS

SIX SIGMA

SUBDIVISION OF EQUITY SHARES

FIXED DEPOSITS

EMPLOYEES

CORPORATE GOVERNANCE

The Company has its presence in the international market for some time now. The Company has been exporting electrical cables, LANcables, optic fibre cables and a variety of customised cables. During the year under review, the Company started exporting communicationcables to its customers in the developed nations. FOB value of the exports for the year was Rs. 672.532 million verses Rs. 368.402 millionfor the previous year. With the best technology products in its armoury, the Company is putting a greater thrust on exports.

In order to meet a part of the funds requirement for the Projects, the Company contracted an external commercial borrowing (ECB) inJapanese Yen equivalent to USD 30 million. Of this, the Company took disbursement of USD 20 million equivalent of Japanese Yen loanbefore 31st March, 2007. The balance amount has been drawn in the month of April 2007. The Company has hedged its exposures toJapanese Yen prudently and has effectively converted the Yen loan into a USD loan. The ECB was raised at competitive rates and isexpected to save good amount of interest cost for the Company, especially since the local interest rates are showing hardening trends. TheECB was contracted for a period of five years.

Your Company has been accorded P1+ rating, the highest rating for a Rs. 2 billion short term debt program and AA+/stable rating for a Rs.500 million for a long term non-convertible debenture program by CRISIL. The Company has already issued non-convertible debenturesand utilised the long term rating. The short term rating is being used by the Company for judicious cash flow management. For the yearunder review, the Company did well on cash flow management by striking a balance between liquidity and borrowing, while timely meetingthe requirement of funds for the Projects and business expansion. Also, the Company had been able to limit the interest cost inspite ofrising interest rates.

It is a matter of pride that the Company has been selected as the 'Superbrand' in the exclusive and elite Superbrand category. Starting withBusiness Superbrand status, the Company has moved forward and has been awarded the Consumer Superbrand as well for 2006-07.The Company is the only Indian cable company to have achieved this distinction.

During the second half of the year, the Company launched 'Six Sigma' initiative. Six Sigma is synonymous with the processes that produceonly 3.4 defects per million opportunities. Six Sigma is a complete business system that will drive the Company through a disciplinedmethodology to focus on solving greatest business challenges before it. Six Sigma strongly supports the Company's Mission, Principlesand Strategy. It is a system that will allow the Company to reduce costs, reduce defects, improve quality and reliability, lower administrativeand operational cycle times and improve overall customer satisfaction. Six Sigma involves hard work; results will be well worth the effortand investment of resources. Six Sigma is scheduled to be implemented throughout the Company. It is intended to make Six Sigma 'A wayof Life!' within the Company.

The Company had held an extraordinary general meeting of its shareholders on 8th December, 2006 seeking approval for subdivision(split) of equity shares to face value of Rs. 2 per share from face value of Rs. 10 per share. After completing required formalities, the split ofequity shares came into effect from 16th January, 2007. The need for the split was felt for increasing availability of the equity shares in themarket.

The Company had stopped accepting fixed deposits since 28thApril, 2003.As on 31st March, 2007, the unclaimed deposits were Rs. 0.116million. The reminders sent by the Company in the past to these deposit holders at their last known address were not helpful in liquidatingthe unclaimed deposits. If the deposits continue to remain unclaimed, they will be transferred to the General Revenue Account of theCentral Government on the due dates.

The Company is well aware that management of human capital poses challenge these days. The Company has been able to attract humantalent and retain it to a fair extent. The Company endeavors to ensure that its different functions are adequately manned. The Companyoperates on a dual remuneration system; a part of the remuneration is paid on assured basis whereas the balance is linked to achievementof predetermined performance criteria. The Company lays emphasis on training of its employees for improving human skill sets. Thetraining needs are identified through a defined process. The employees from different functions and positions across the organisation aregrouped together according to the training requirements and the training is given at the learning centres set up by the Company. Thisprocess has helped the Company in building team sprit amongst the employees. Industrial relations continued to be cordial during the year.

The company had 1,038 permanent employees on its roll as on 31st March, 2007.

The statement of Management Discussion andAnalysis is annexed hereto and forms a part of this Report.

12


CORPORATE SOCIAL RESPONSIBILITY

DIRECTORS' RESPONSIBILITY STATEMENT

ENERGY, TECHNOLOGYAND FOREIGN EXCHANGE

PARTICULARS OF EMPLOYEES

LISTING OF SECURITIES

DIRECTORS

The Company functions as a responsible corporate citizen. It contributes to the exchequer handsomely and duly discharges its legalobligations. The Company is conscious of the environmental issues, which are considered while deciding business matters. In fact all ofthe Company's plants are accredited with ISO 14001 (Environment Management System) certification. The Company has adopted a Codeof Conduct. The Company values honesty and integrity and works towards building an environment of trust and confidence whilefunctioning.

Besides, the Company is known for financially supporting worthy social causes. The Compay has contributed for establishment anddevelopment of Finolex Academy of Management and Technology which runs a full fledged engineering college, affiliated to MumbaiUniversity, at Ratnagiri. The Academy also offers Masters degree in Computer Applications. International Institute of InformationTechnology or I2IT as it is known, is also assisted by the Company. I2IT offers post graduate MS and MBA courses with variousspecialisations inAdvanced Information Technology.

Pursuant to Section 217(2AA) of the CompaniesAct, 1956, the Directors confirm that;

i) in the preparation of the annual accounts, the applicable accounting standards have been followed;

i ) appropriate accounting policies have been selected and applied consistently and have made judg ments and estimates that arereasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2007 and of the Profitand LossAccount for the year ended 31st March, 2007;

Information on conservation of energy, technology absorption, foreign exchange earning and outgo required to be given pursuant toSection 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors)Rules, 1988 is annexed hereto and forms part of this Report.

Information as required under the provisions of Section 217(2A) of the Companies Act, 1956 (the Act) and the rules framed thereunderforms part of this Report. However, as per the provisions of Section 219(1)(b)(iv) of the Act, the Report and Accounts are being sent to theshareholders, excluding the statement of particulars of employees under Section 217(2A) of the Act. Any shareholder desirous ofobtaining a copy of the said statement may write to the Company Secretary & Assistant Vice President (Legal) at the Registered Office ofthe Company.

The Company's equity shares are listed on the two premier stock exchanges of the country namely Bombay Stock Exchange Limited andNational Stock Exchange of India Limited, amongst other stock exchanges. The Company has issued Global Depository Receipts whichare listed on the Luxembourg Stock Exchange. The Company's non-convertible debentures are listed on wholesale debt market segmentof the National Stock Exchange of India Limited.

The Company deeply regrets the sad demise of Late Balasaheb J Rathi, an esteemed Director of the Company for a period of 22 years.Late Mr. Rathi's business acumen had immensely benefited the Company through his presence on the Board of Directors. The Companywill always remember his contribution as a Director. May his soul rest in peace!

Mr. B.G. Deshmukh, Dr. H.S. Vachha and Mr. Atul C. Choksey retire by rotation at the ensuing Annual General Meeting and are eligible forre-appointment.

Mr. S.B. (Ravi) Pandit was co-opted as an Additional Director on 1st August, 2006. He is the Chairman and Group Chief Executive Officerof M/s KPIT Cummins Infosystems Limited. Mr. Pandit is MS from MIT, USA where he specialised in Finance and Controls. He is the Ex-President of the Mahratta Chamber of Commerce, Industries andAgriculture.AFellow member of the Institute of CharteredAccountants ofIndia, he has over 25 years of experience in the fields of information technology, corporate strategy formulation and managementconsulting. He is also a senior partner in M/s Kirtane & Pandit, CharteredAccountants and a Director on the Boards of several companies.Mr. Pandit's appointment is to be confirmed by the members at the ensuing Annual General Meeting. The Board of Directors considers itnecessary to have a person of Mr. Pandit's eminence and experience as a Director, which will only benefit the Company. Accordingly, theBoard of Directors recommends his appointment as a Director of the Company.

Mr. Pradeep R. Rathi was co-opted as anAdditional Director on 10th May, 2007. He is M. S. (Chemical Engineering) MIT, USAand MBA

i e

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

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


from Columbia University, USA. For the last 30 years, he is working with Sudarshan Chemical Industries Limited, presently holds theposition of the Managing Director of th said company. He is actively involved with Indian Chemicals Manufacturers' Association and hasrepresented the Association in different capacities. He was also the Chairman of Foreign Trade Sub-Committee of Chamber ofCommerce, Industries andAgriculture. The Board of Directors feels that Mr. Pradeep R. Rathi's presence as a Director of the Company willgreatly benefit the Company.Accordingly, the Board of Directors recommends his appointment as Director of the Company.

Mr. P.B. Parasnis,Assistant Managing Director and Chief Financial Officer's earlier appointment as a Director came to an end on 22ndApril,2007. The Board of Directors has re-appointed him as a Director of the Company for a further period of five years effective from 23rd April,2007 subject to approval by the members. The members are requested to re-appoint Mr. P.B. Parasnis as a Director of the Company as perthe resolution proposed in the notice convening theAnnual General Meeting of the Company.

M/s B.K. Khare & Company, Chartered Accountants, Auditors of the Company, hold office until the conclusion of the ensuing AnnualGeneral Meeting and being eligible, offer themselves for reappointment.

Your Directors place on record their sincere gratitude towards the channel partners, dealers and customers of the Company for theircooperation to grow on business. Your Directors are thankful to other business associates of the Company for extending their unqualifiedsupport. Your Directors thankfully acknowledge the cooperation and support received from the central and state governments, statutoryauthorities, local bodies, banks and financial institutions. The employees are a crucial and an integral part of the Company's businessactivities. The Directors value their contribution towards the Company's progress and greatfully acknowledge it. An important constituentof the business is the members of the Company to whom the Directors are thankful for the trust and confidence shown.

For and on behalf of the Board of Directors

eMahratta

a

AUDITORS

ACKNOWLEDGEMENT

P.P. ChhabriaChairman

13

PuneDated : 10th May, 2007

14

Annexure to Directors' Report

COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988 :

Conservation of Energy :

TechnologyAbsorption :

Form for disclosure of particulars with respect toAbsorption, Research and Development (R&D)

A.

a) Energy Conservation measures :

i) Replacing of aluminum fans by FRP fans on all cooling towers to reduce energy consumption.

ii) Installation of new power distribution panel to take the lighting load on MSEB to improve utilization of DG.

iii) Installation of Real Time Power Factor Correction panel to improve load factor of the system for optimum utilization ofenergy.

iv) Recovery of start up / colour change PVC by use of PVC Scrap Granulator

v) Introduction of motor generator set to get conditioned and continuous quality power so as to eliminate continuous DGrunning and ensure optimum utilization of fuel.

vi) Incorporating more energy efficient shop floor lights at specific places to reduce lighting power consumption.

vii) Installation of auto level controller in water pumps to reduce both wastage of power and natural resource like water.

viii) Preventive maintenance of machines to reduce energy loss.

b) Additional investments and proposals, if any, being implemented for reduction of consumption of energy :

Various proposals / measures for reducing energy consumption are under consideration.

c) Impact of the measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost ofproduction of goods:

Impact has not been separately measured.

d) Total energy consumption and energy consumption per unit of production as per Form A in respect of industries specified in theschedule thereto: Not applicable.

B.

Efforts made in technology absorption as per Form B are as follows :

1 Specific areas in which the Company is pursuing R & D efforts :

Following new cables have been designed, developed and successfully launched in the market :

i) Lead free LAN cables.

ii) Lead free electrical wiring cables.

iii) Lead free insulation and sheathed cables and wires meeting ROHS requirement.

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

The aforesaid newly developed products have been introduced in the market and give significant benefits in terms of quality, betterperformance of the end-user application and import substitution.

3. Future plan of action:

- To develop cross-linkable HFFR cables for high temperature working.

- To develop anti rodent and termite proof cables.

- To develop low water peak optic fibres.

- To develop cost effective FTTH Cables.

- To develop ZHFR building wires.

4. Expenditure on R & D

a) Capital } The development work is carried on

b) Recurring } by the concerned departments on

c) Total } an ongoing basis. The expenses

d) Total R & D expenditure as } and the costs of assets are grouped

a percentage of total turnover } under the respective heads.


15

TechnologyAbsorption,Adaptation and Innovation :

C. Foreign Exchange Earnings and Outgo :

1. Efforts in brief, made towards technology absorption, adaptation and innovation :

a) Power Modules for heating control were indigenised for substantial savings.

b) Overall temperature control of the manufacturing process was improved by using specially designed PID controllers in-house.

c) Imported equipment PLC programs were suitably modified for minimum product damage during power interruptions for reducingin process scrap.

d) Continuous efforts are going on for further developing, improving and upgrading all types of cables.

2. Benefits derived as a result of the efforts e.g. product improvement, cost reduction, product development, import substitution etc. :

Several tangible and intangible benefits from new technology are derived such as cost reduction, productivity, development of newproducts, import substitution and better customer services. Development and manufacture of new products with enhanced featureswill extend the product range of the Company, enabling it to cater to different customer needs.

3. Imported technology (imported during the last 5 years reckoned from the beginning of the financial year) :

a) Technology Imported : Nil

b) Year of Import : Not applicable

c) Has technology been fully absorbed ? : Not applicable

d) If not fully absorbed, areas where this

has not taken place, reasons therefor,

and future plans of action : Not applicable

Exports have shown good growth in the year. The geographical spread of exports has now widened to the countries in the developedpart of the world. The Company continues to remain focused on export activity and is confident of achieving an impressive exportturnover in due course of time.

i) Earnings by way of Exports : Rs. 672.532 million

ii) Outgo by way of Imports : Rs. 1,169.770 million

For and on behalf of the Board of Directors

Pune

Dated : 10th May 2007, Chairman

P.P. Chhabria


16

Management Discussion andAnalysis

1. BUSINESS OF THE COMPANY:

1.1 Main Segments :

The Company currently operates in two main business segments, Electrical Cables and Communication Cables. The Company alsomanufactures Continuous Cast Copper Rods (CCC rods), essentially for captive consumption; however a part of the production ofCCC rods is also sold. The Company manufactures PVC Sheets for various applications like roofing, signage and interiors. TheCompany has recently added Electrical Switches and Compact Fluorescent Lamps (CFLs) to its range of products.

The Company is the leading domestic manufacturer of electrical and communication cables with a wide product range. The Companythus offers a ''Total Cable Solution''. The broad segmentation of the products manufactured by the Company is as follows :

The Company's product application range is thus for electrical usage, transmission of voice, data and images (contents) for domestic,

commercial and industrial applications to electrical products, touching every person in his daily life.

1100 V PVC insulated cables Electrification of residential, commercial and industrial

establishments, electrical panel wiring and consumer

electrical goods.

Motor winding PVC insulated Submersible pumps and electrical motors.

cables and 3 core flat cables

Automotive/battery cables Wiring harness for automobile industry and battery cables for

various applications

UPS cables For providing power from the UPS to the computer/appliancesin the networking environment.

Heavy duty, underground, Connection to the user point from main supply of power.

low voltage, power and control cables

Jelly filled telephone cables (JFTCs) Telephone line connections to exchanges and users.

Local area network (LAN) cables Indoor and outdoor networking, voice and data transmission,

broadband usage.

PE insulated telephone cables Telephone instrument connections to EPABX.

(Switchboard cables)

Coaxial cables Cable TV network solutions.

Optic fibre Principal raw material for optic fibre cables.

Optic fibre cables For use in networks requiring high speed transfer of large

bandwidth due to voice, image and data transmission.

V-SAT cables For connecting V-SAT dish to base station.

CCC rods of 8 mm diameter Raw material for manufacture of copper based cables.

Premium & classic switches, Domestic lighting, hotels, shops, offices, corridors.

sockets, regulators, etc

Retrofit & non-retrofit lamps Domestic lighting, hotels, shops, offices, corridors.

PVC corrugated sheets, foam Industrial roofing, wall cladding, signage boards, partition

sheets and rigid sheets boards, exhibition display boards and false roofing.

Group Products Covered Application

Electrical Cables

Communication Cables

Copper Rods

Electrical Switches

Compact Fluorescent

Lamps (CFLs)

PVC Sheets


17


2. REVIEW OF OPERATIONS:

3. KEY STRENGTHAREAS

3.1 Leading Manufacturer

3.2 Technical Superiority of Products

3.3 Extensive Distribution Network

� Production of metal based electrical and communication cables during the year under review was at 1,565 TCKM (thousand corekilometers) (previous year : 2,505 TCKM). Production of optic fibre cables during the year was 20,547 cable kilometers (previousyear : 21,733 cable kilometers). The sale value of electrical cables increased by 47% and the sale of communication cables waslower by 8% (due to moderate JFTC business) over the earlier year.

The Company is India's leading manufacturer of electrical and communication cables with a wide product range. This status not onlyhelps the Company in term of economies of scale, but also as a market leader, it is well positioned to reach out to new customers, bothdomestic and international.

The Company lays a lot of emphasis on maintaining superiority status in terms of quality and product features through in-houseresearch and development. The Company has defined quality assurance processes and strives for improvement in products. Thisproduct advantage is key reason why the Company has been able to carve out a niche position for itself in the market.

The Company has created a strong and dependable distribution network of channel partners and dealers, spreading across thecountry. The distribution network also includes commission agents/dealers appointed in the overseas market. The intention is toservice the customer at his doorstep. Not only has the distribution network been built, but the Company also undertakes a periodicalreview of

�

�

�

�

�

�

�

�

�

�

�

The sale of CCC rods (net of interdivisional transfers) was at Rs. 1,526.408 million.

Exports were higher at Rs. 672.532 million as against Rs. 368.402 million of the earlier year.

The income from operations (including excise duty) was higher at Rs. 11,859.227 million for the year under review as compared toRs. 8,615.224 million for the earlier year.

Profit after tax was higher at Rs. 689.930 million against Rs. 503.688 million for the earlier year.

To leverage on high brand equity and the existing well entrenched distribution network, the Company launched two electricalproducts namely electrical switches called 'Finoswitch' and CFLs called 'Finoglow' during the year.

The Company decided to set up a green field manufacturing facility for light duty electrical cables and electrical switches nearRoorkee in the State of Uttarakhand.

ECB equivalent to USD 30 million was contracted to meet a part of the funds requirement for capital expenditure.

The equity shares were subdivided into face value of Rs.2 each from the face value of Rs.10 each, effective 16th January, 2007.

The Company received recognition as a Consumer Superbrand as well for 2006-07.

Six sigma initiative was launched.

Areference may please be made to the financial statements.

it for upgradation and expansion. The domestic distribution network is well supported by branch offices and depots openedby the Company at a number of locations throughout the Country.

2007 2006

Communication Cables15%

Copper Rods13%

Others2%

Sheets1%

Electrical Cables69%

JFTCs 3%JFTCs 12%

Electrical Cables64%

Communication Cables23%

Copper Rods10%

Others2%

Sheets1%

18


3.4 Backward Integration

3.5 Unique Practices

3.6 ERP System

3.7 Superbrand Status

3.8 Six Sigma

3.9 Export potential

3.10Total Cable Solution

4. GROWTH DRIVERS

The Company manufactures CCC rods used as principal raw material for copper based electrical and communication cables. TheCompany makes its own compounds using PVC resin of different grades and formulations tailored specially for high performancecables. The Company manufactures FRP rods and draws its own fibre for fibre optic cables. These backward integration measureshelp in product differentiation and facilitate maintaining desired quality of products for superior consistent performance besidesensuring timely supply of the raw material.

The Company has pioneered many unique practices followed in the cable industry. The Company runs an enrollment scheme forelectricians who qualify for performance based incentives. The Company grants personal accident insurance cover as one of the keyincentives.

The Company has arranged for bank finance under a channel finance scheme to facilitate trade cycle of the channel partners. Thebank lends money to the channel partners on soft terms and for extended duration. The credit is strictly regulated by the Company.The channel finance scheme is in vogue for over last five years and is run without recourse to the Company.

The Company uses the best of breed technology SAP R/3 software, the most widely used ERP software in the world, to manage itsinternal processes. All the manufacturing plants, branch offices and stock-points of the Company are connected to the SAP-ERPsystem through leased data circuits 24 X 7. This provides cohesiveness and efficiency in handling of business operations. To dovetailits processes with the distributor's internal processes, the Company has extended some of the functionalities of SAP ERP to itsdistributors through a CRM application by virtue of which a distributor can place an order directly, check the order execution status,verify the credit status, etc.

The Company is the only Indian cable company to hold Superbrand status.

The Company has initiated Six Sigma exercise at the manufacturing locations and support functions like purchase, sales, finance,human resource development and administration etc. The financial benefits will accrue from time to time; however, more importantly,Six Sigma will guide the Company through a disciplined methodology to focus on solving greatest business challenges before it.

The Company's products meet the requirement of international standards and thus are capable of geographical penetration. TheCompany has its presence in the international market for sometime now. The Company has been exporting light duty electricalcables, LAN cables, optic fibre cables and a variety of customised cables. With the best technology products in its armoury, theCompany is putting a greater thrust on exports.

The Company is probably the only one of its kind in the country to offer a “Total Cable Solution”. Different types of electrical cables areproduced using copper as the core conductor. Various types of communication cables are produced using copper as well as opticfibre as the primary medium of transportation of signals. Different types of low voltage power cables are produced using aluminum orcopper as the core conductor. The Company keeps on introducing new cable varieties besides upgrading the existing cable varieties.The Company has the ability to produce customised cables.

The Company had introduced electrical products namely electrical switches and CFLs which are germane to electrical cable businessof the Company. Due to its product portfolio, the Company has the advantage of operating in multiple market segmentssimultaneously. The Company is well placed to leverage its position for a distinct competitive advantage.

The Company enjoys the leadership position on account of its committed efforts in the following main areas :

Product quality

Product improvement

Competitive pricing and cost structure

Timely supply and servicing

Expansion of existing business

Development of new products

Undertaking of new businesses

Market development, penetration and visibility

Creating customer preference

Dynamic approach to situations

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19


5. BUSINESS ENVIRONMENT :

5.1 Electrical Cables

Performance

Outlook

The segment-wise discussion on the markets which are served by the Company is as follows:

Electrical cables can be further categorised into light duty electrical cables and power & control cables.

i) Light duty electrical cables include electrical wires used extensively for lighting. The main product of this category is 1100 voltsPVC insulated wires which find application in electrification of residential, commercial and industrial establishments, electricalpanel wiring and consumer electrical goods. The building industry is expanding. The growth in construction activity is fuelled bydemand created by rising income levels and availability of finance. Due to higher personal income, people are wanting to spendmoney for betterment of living standard. Thus, the demand for white goods is also on rise. There is a favourable demographiceffect in India which is causing spending to go up. The spending within India is causing an economic upturn, which is attractingforeign investment into the country. The legal framework is undergoing a change to support growth momentum. In form andsubstance, the market place is growing deeper and wider for this variety of electrical wires.

India has emerged as a manufacturing hub for auto components. The demand for auto components is for domestic consumptionas well as exports. The domestic demand for automobiles is constantly increasing due to positive income effect. India has lowcost producer's advantage. Thus global companies have set up auto-wire harness manufacturing capacity in India. TheCompany manufactures automobile wires according to international standards such as German VDE Standards, Japanese JISStandards, etc. Thus the Company has emerged as a reliable and preferred source of automobile wires for auto-wire harnessmanufacturers.

A large population in India is still dependent for their living on agriculture. Farming continues to depend upon monsoon.Monsoon water is harvested by trapping it underground and is drawn for irrigation during non-monsoon period. The drawing ofwater happens by virtue of a submersible pump. The motor of the submersible pump is wound with the winding wire and thepump is powered through a 3 core flat cable. Both these products are manufactured by the Company for sale within the countryas well as for exports.

UPS cables are battery backup cables used for providing power from UPS to the consumption points. In a power shortageeconomy like India, UPS has become a household item.

The Company is expanding its production base of light duty electrical cables by setting up manufacturing facility near Roorkee inthe Uttarakhand State.

ii) The other category of electrical cables namely the power & control cables are also manufactured by the Company. Currently, theCompany manufactures power cables upto 3.3 KV rating. These are heavy duty, low voltage cables meant for undergroundapplication. They are used for connecting the user point to the main supply of power. The Company has decided to expand itsproduct portfolio in this category and take a larger pie in the growing market. Thus the Company is setting up a manufacturing unitfor high voltage power cables upto 66 KV rating. The high voltage power cables to be manufactured by the Company will beinsulated ones and are meant for use in underground application for intra-city electricity distribution network. These cables willmeet the requirements of international standards.

For the year under review, the electrical cables registered sales of Rs. 8,132.680 million against Rs. 5,527.748 million of theprevious year showing a growth of 47%. The growth is satisfactory; however, there exists scope for doing more business.

Since last few years, the electrical cables business has become the backbone of the Company. It accounted for 69% of total sales forthe year under review. The demand for electrical cables has been stronger than ever before. The high rate of economic growth isreflecting into accelerated growth of basic industry like construction, agriculture, electricity manufacturing and distribution. Theeconomic growth is creating opportunities for jobs as well as for earning higher levels of income. Money earned is either saved orspent. Spending is becoming a way of life especially with the younger population whose proportion in the total population is quitesizeable. Spending will keep the rate of economic growth high for times to come. There is a favourable co-relation between economicgrowth and growth in electrical cable business. The system of VAT has been embraced by many states. The Company expects thatthe difference in VAT rates amongst states will be removed and a uniform rate of VAT will be adopted for the entire nation. VAT hasreportedly benefited the state government with higher tax collection. Stricter is the compliance of VAT, better it is for the organisedsector, especially branded products. Thus the business of electrical cables is expected to grow.

The Company is the leading manufacturer of electrical cables in the country. Therefore, it acts responsibly and responsively with thecustomers. The Company emphasises on product quality. It brings improved products and new products to the customers, time andagain. It believes in customer servicing. To meet this objective, it is constantly upgrading and expanding its distribution network. TheCompany reacts dynamically to business opportunities. It endeavours to carve out niche market for its products by creating customerpreference not only domestically but in the overseas market also. The Company understands the value of its brand 'Finolex'. Itconstantly acts in furtherance of the brand value. The Company is confident of holding and furthering the lead position in business.

The Company faces two principal risks in this business. The Indian electrical cable industry is characterised by a large unorganizedsector. Besides, there are smaller, regional players creating electrical cables business to be highly competitive. The first and foremostrisk the Company faces is of competition from unorganized sector and smaller and regional players. The Company has been able to

20


deal with the competition effectively due to its superior quality and with the help of the goodwill enjoyed by it with customers. TheCompany has the advantage of economies of scale and backward integration. The Company evolves unique practices which setbenchmarks in cable business. The system of VAT is helping to curb unorganised sector. The other risk is of raw material pricemovements which can occasionally be sharp. The Company has been fair in its dealing with the customers. It takes appropriatepricing decisions for the manufactured products in line with the variations in raw material prices. However, there remains a time lagbetween movement in raw material price and adjustment of sale price. The time lag could benefit or disbenefit the Company for the lagperiod or otherwise.

The communication cables comprise of state of art, new generation communication cables and traditional telephone cables.

i) The state of art communication cables are either copper based or glass based. The copper based cables include LAN cables,coaxial cables, PE insulated switchboard cables and V-SAT cables. These cables are used for last mile connectivity. LAN cablesare used in high speed networks, coaxial cables are used to provide content input to TV receiving sets, PE insulated switchboardcables are used to connect telephone instruments to an EPABX system and V-SAT cables find their application in V-SAT towers toconnect the dish to the base station.

Optic fibre cables are glass based cables and they have the maximum bandwidth and speed. They are mainly used as trunkcables in long distance networks, whether by telecom companies, multiservice organisations or other service providers.

Communication cables which carry, voice data or images is the backbone of an economic activity. The speed and bandwidthdetermine the capabilities of a communication network.

ii) Traditional telephone cables include JFTCs which are laid underground and are used for connecting land line telephones toexchanges. These are copper based cables. With introduction of mobile telephones in India and due to substitution by optic fibrecables, JFTC business has lost its value. Nevertheless, JFTC continues to remain a preferred option for last mile connectivity infixed line telephones, penetration of which in India is low. The demand for JFTCs has remained flat for last few years. In fact for theyear under review, there was no traditional JFTC business with public sector telecom companies due to lack of tender from thesecompanies. However, the Company continues to manufacture JFTCs especially with broadband features for private sectortelecom companies and to meet the export demand. The Company has the capability to make JFTCs as per customer's needs.

The communication cables segment (including optic fibre) recorded sales of Rs. 1,794.804 million for the year under review againstRs. 1,952.191 million for the earlier year. The sales were lower due to moderate JFTC business.

India is marching towards achieving the status of a developed nation. While in crusade for development, the economic activity isexpected to improve on year-on-year basis. It would mean GDP of the country would keep on growing. The growth in GDP will bringbetter living and higher income for the population. The economic development presupposes availability of a stable, sturdy anddependable communication network. The speed and bandwidth are the essence of a communication network and determine theeffectiveness thereof. The emerging economic environment augurs well for the Company's domestic business of state of art, newgeneration communication cables. On the export front, the Company's communication cables conform to international standardsand the LAN cables even are accredited with UL (Underwriters' Laboratories Inc., USA) verification status. There is good potential togrow on export business. The Company is focusing on developed countries for export market development.

The risks of competition and copper price movements similar to the electrical cables business are also applicable to the business ofcommunication cables. The global demand-supply equation of optic fibre and resultant price movement thereof; availability ofpreforms and price thereof and the investment by telecom companies/service providers into optic fibre network are the risk factors foroptic fibre cables business.

The copper rods is the feed stock for copper based electrical and communication cables. The Company manufactures its own copperrods. The base material for producing copper rods is copper cathodes; the bulk of which are procured from local manufacturers undersupply agreements. A smaller portion of the requirement of copper cathodes is imported as a risk diversification measure. Aftermeeting the inhouse requirement of copper rods, the balance production of copper rods is allocated for third party sale.

During the year under review, the CCC rods division recorded a production volume of 16,654 metric tonnes and sales of Rs.6,204.034 million, of which Rs. 4,677.626 million were inter-divisional transfers and Rs. 1,526.408 million were sales to others. Theyear under review noticed a great deal of volatility in copper prices. The monthly average LME copper price (CSP) varied between ahigh of US dollars (USD ) 8,046 per metric tonne to a low of USD 5,670 per metric tonne.

It is the Company's intention to increase the copper rod production by incrementing the captive consumption. The Company hasalready planned and will keep on planning for cable capacity expansion to aid producing more copper rods at the Usgaon plant. TheCompany is also preparing for increasing sales of copper rods to other consumers.

5.2 Communication Cables

Performance:

Outlook:

5.3 Copper Rods

Performance:

Outlook:

21


5.4 Electrical Switches and CFLs

5.5 PVC Sheets

Performance:

Outlook:

5.6 Summary

6. RISK MANAGEMENT DOCUMENT :

7. INTERNAL CONTROL SYSTEM :

The Company launched electrical switches and CFLs in the months of June 2006 and August 2006 respectively. These electricalproducts have been accepted by the market. The establishment and stabilization process for these products is continuing and theCompany expects to carve out a fair market share for these products in the near future. With the economy in general andinfrastructure & construction industry in particular booming, these electrical products enjoy good demand. There is an element ofsubstitution effect also. The Company will be able to make optimum utilisation of its inherent strengths like brand name, distributionnetwork, etc to market the new products. Since this is a related business for the cables manufactured by the Company, it expects topenetrate the market by a focus on advertising of the products.

PVC Sheets may be classified as corrugated, flat sheets and rigid sheets. Corrugated sheets are used for roofing. Flat sheets areused for partition, exhibition, false roofing, wall cladding, display board and signage. The Company also manufactures rigid sheetswhich find application in chemical industry for manufacture of tanks and other handling system for corrosive chemicals and gasses.PVC sheets are light in weight, anti-corrosive and clean. The Company manufactures them in various thicknesses, profiles andcolours. PVC sheets are meant for substituting asbestos sheet (which may be carcinogenic) and metal sheets (which are corrosive).

During the year under review, the PVC Sheets division recorded production volume at 1,570 metric tonnes as against 1,377 metrictonnes for the earlier year. The sales were Rs148.896 million, as against Rs.132.958 million, for the earlier year.

The sale of PVC sheets, though growing marginally, is not accelerating as expected due to cheaper albeit non-recommendedsubstitutes like asbestos and metal sheets being available in the domestic market. Early signs of change in market preferencenevertheless have been noticed. Overseas, PVC sheets remain a preferred option. The Company is therefore making efforts toestablish itself in the overseas markets. The establishment process is progressing at a modest pace since these markets are pricecompetitive and operate on extended credit terms. The Company has been able to compete globally on quality norms.

The Company's domestic business is closely related to the economic activity and infrastructure development. Better is the economicactivity and higher is the spending for infrastructure development, better are the growth prospects for cables and electrical productsbusinesses. Copper rod is a derivative of increase in business of copper based electrical and communication cables. Business ofPVC sheets is linked to change in preference of the customers for better quality product. The legal infrastructure like introduction andimplementation of VAT system will provide a level playing field for the Company to compete against unorganised sector. Theeconomies of scale and evolution of better and unique business practices complemented by expansion and deepening of distributionnetwork will help to compete with regional and smaller players. Expansion of product portfolio like high voltage power cables,electrical switches and CFLs will facilitate penetrating newer markets. Conformation to global standards and internationalaccreditions will help to establish in overseas market. Evaluating the emerging business environment, the Company is confident ofan appreciable growth in its performance for foreseeable future.

The Company has set in motion ambitious growth plans for the current financial year. The Company is committed to devoteresources to help in realising the set business goals.

The Company has a Risk Management Document in place. The Document defines the risk policies, lays out the risk strategies andmethodology to decide on the risk taking ability of the organisation. The Document has been created with the intention to bring in anawareness about various risks associated with the business of the Company.

The risk management process involves risk identification, risk measurement, risk prioritisation, risk monitoring, risk escalation andrisk mitigation. This Document sets out the infrastructure for risk management.

The Company has established a system of internal controls commensurate with its size and nature of business operations. Theinternal control system enables exercise of control over the transactions in the desired manner and at the desired level. The internalcontrol system comes up for review periodically and wherever required is upgraded from time to time. In addition to internal controlsystem, there exists a system of internal audit. The internal audit is conducted under the guidance and advice of theAudit Committeecomprising of independent directors. The internal audit thus plays an important role as it conducts audit of all key business areas asper a predrawn and approved audit plan. The internal audit, amongst other things, looks at internal controls, reports to the AuditCommittee non-compliances and gives suggestions for strengthening the internal controls. All audit observations, reviews andfollowup actions are reported to theAudit Committee. TheAudit Committee met six times during the year under review.

22

Financial summary for ten years

Gross Revenue ++ 4,609 4,656 5,761 6,279 6,750 5,189 5,689 6,701 8,899 12,055

Materials andmanufacturing cost(including excise duty) 2,974 3,023 3,922 4,313 4,876 3,682 4,132 5,191 6,855 9,557

Employee cost 121 158 189 230 261 251 292 254 326 355

Administration & sellingexpenses 325 290 372 424 502 493 461 520 660 750

Extra ordinary Items — — — — — — 37 -

Depreciation 132 88 150 190 222 235 263 259 313 264

Interest and financecharges 358 237 181 196 164 246 178 106 128 159

Taxation 213 240 240 201 65 35 30 63 113 280

Dividend (including taxon dividend distributionif applicable) 119 140 286 284 230 104 138 157 209 251

Share capital 180 180 343 343 343 306 306 306 306 306

Reserves 5,029 5,509 5,103 5,545 5,526 4,923 5,080 4,702 5,055 5,495

Net worth 5,209 5,689 5,446 5,888 5,869 5,229 5,386 5,008 5,361 5,801

Loan Funds 1,982 1,126 1,190 1,047 1,223 2,036 1,880 1,321 2,343 2,653

Deferred Tax (Net) — — — — 213 285 295 184 213 208

Gross Block 1,458 1,605 2,733 3,102 4,211 4,596 4,777 4,126 4,753 5,807

Net Block 826 948 1,866 2,049 2,872 3,074 3,006 2,118 2,288 3,079

Investments 1,739 1,758 1,719 2,137 2,012 2,318 3,067 2,491 2,722 2,833

Net current assets 4,605 4,109 3,051 2,749 2,421 2,144 1,488 1,904 2,907 2,750

Micellaneous Expenditure(to the extent not writtenoff or adjusted) 21 — — — — 14 — — — —

Growth in Revenue (%) (4.1) 1.0 23.8 9.0 7.5 (23.1) 9.6 17.8 32.8 35.5

PAT to Revenue (%) 10.5 13.3 12.3 11.5 9.8 4.8 5.2 4.6 5.7 5.7

Return on Net Worth (%) 9.3 10.9 13.0 12.3 11.2 4.7 5.5 6.2 9.4 11.9

Earnings per Share 5.4 6.9 4.1 4.2 3.8 1.6 1.9 2.0 3.3 4.5

Asset Turns (Revenue toTotal Assets) 0.6 0.7 0.9 0.9 0.9 0.7 0.8 1.0 1.1 1.4

Return on CapitalEmployed (%) 13.2 14.5 16.3 16.3 12.3 6.2 6.5 6.7 10.1 13.5

Debt to Equity Ratio 0.4 0.2 0.2 0.2 0.2 0.4 0.4 0.3 0.4 0.4

Dividend (incl. DividendTax) Distribution to PAT(%) 24.5 22.6 40.5 39.1 34.8 41.9 46.7 51.0 41.5 36.3

++ Comprises Income From Operations(including excise duty) and Other Income

PROFIT AND LOSSACCOUNT DATA

Profit before tax 699 860 947 926 725 282 326 371 617 970

Profit after tax 486 620 707 725 660 247 296 308 504 690

BALANCE SHEET DATA

Total Liabilities 7,191 6,815 6,636 6,935 7,305 7,550 7,561 6,513 7,917 8,662

Total Assets 7,191 6,815 6,636 6,935 7,305 7,550 7,561 6,513 7,917 8,662

KEY RATIOS

Note :

— — —

( )f f v

Rupees( or ace alue of Rs. 2/- each)

(Rs. in million)

1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06


2006-07

23

Auditors' Report

To the Members of Finolex Cables Limited.

We have audited the attached Balance Sheet of Finolex Cables Limited as at 31st March 2007, and also the Profit and Loss Account and the CashFlow Statement for the year ended on that date annexed thereto. 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.

We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

We report as follows:

1. As required by the Companies (Auditor's Report) Order, 2003, issued by the Central Government of India, in terms of Section 227(4A) of theCompaniesAct, 1956, we enclose in theAnnexure a statement on the matters specified in the paragraphs 4 and 5 of the said Order.

2. Further to our comments in theAnnexure referred to in paragraph 1 above:

a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposesof 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 ofthe books and proper returns adequate for the purposes of our audit have been received from the branches not visited by us;

c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books ofaccount;

d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with theAccounting Standards referred to in sub-section (3C) of Section 211 of the CompaniesAct, 1956;

e) On the basis of the written representations received from the Directors as on 31st March, 2007 and taken on record by the Board ofDirectors, we report that none of the Directors is disqualified as on 31st March, 2007 from being appointed as Director in terms of clause(g) of sub section (1) of Section 274 of the CompaniesAct, 1956;

f) In our opinion, and to the best of our information and according to the explanations given to us, the said accounts, read together with theCompany's Accounting Policies and the Notes thereto give the information required by the Companies Act, 1956 in the manner sorequired 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 on 31st March, 2007

ii) in the case of the Profit and LossAccount of the Profit of the Company for the year ended on that date; and

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

,

For B. K. KHARE & CO.Chartered Accountants

U. B. JoshiPlace : PuneDated : 10th May, 2007 Membership No. 44097

Partner


24

Referred to in paragraph 1 of our Report of even date:

i.

ii.

iii.

iv.

v.

vi.

vii

viii

ix.

a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b) All the assets have not been physically verified by the management during the year but there is a regular programme of verification, which inour opinion, is reasonable having regard to the size of the Company and the nature of its assets. The Company has substantially completedthe reconciliation of Physical Inventory of FixedAssets with book records.

c) During the year, Company has not disposed of any substantial/major part of fixed assets.

a) As explained to us, the inventory has been physically verified during the year by the management. In our opinion, the frequency ofverification is reasonable.

b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed bythe management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) In our opinion and according to the information and explanations given to us and on the basis of our examination of the records of inventory,the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to thebook records were not material and have been properly dealt with in the books of account.

According to the information and explanations given to us, the Company has neither granted nor taken any loans, secured or unsecured to orfrom companies, firms or other parties covered in the register maintained under Section 301 of the CompaniesAct, 1956.

In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensuratewith the size of the Company and nature of its business with regard to the purchase of inventory and fixed assets, and with regard to the sale ofgoods. During the course of our audit, no major weakness has been noticed in the internal controls.

In respect of transactions entered in the register maintained in pursuance of section 301 of the CompaniesAct 1956,

a) Based on audit procedures applied by us, to the best of our knowledge and belief and according to the information and explanations given tous, we are of the opinion that the particulars of contracts or arrangements have been entered in the register required to be maintained underSection 301.

b) According to the information and explanations given to us and excluding certain transactions of purchase of goods and material of specialnature for which alternate quotations are not available, in our opinion, the contracts or arrangements have been made at prices which areprima facie reasonable having regard to the prevailing market prices at the relevant time.

In our opinion and according to the information and explanations given to us, the Company has not accepted deposits from the public andtherefore, the provisions of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and Rules there under are notapplicable to the Company.

. In our opinion, the Company has an internal audit system commensurate with the size and the nature of its business.

.We have broadly reviewed the books of account maintained by the Company relating to the manufacture of cables, conductors and CompactFlorescent Lamps pursuant to the rules made by the Central Government for the maintenance of cost records under Section 209(1)(d) of theCompanies Act, 1956 and are of the opinion that prima facie the prescribed accounts and records have been maintained. We have not,however, made a detailed examination of the records with a view to determining whether they are accurate or complete.

a) According to the records of the Company and information and explanations given to us, the Company has been regular in depositingundisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax,Sales Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess and other statutory dues with the appropriate authorities during theyear.

b) According to the records of the Company and information and explanations given to us, dues of Income Tax, Sales Tax, Wealth Tax, ServiceTax, Customs Duty, Excise Duty and cess which have not been deposited on account of disputes and the forum where dispute is pending asunder:

Annexure to the Auditors’ Report


25

Sales Tax Act Sales Tax demand 0.333 .Y.

Sales Tax demand 0.656 .Y.

Income TaxAct, Tax .Y. Commissioner Income Tax (Appeals)

Name of the Nature of dues Amount Period to which Forum where dispute is

statute (Rs.in Million) amount relates

x.

xi.

xii.

xiii.

xiv.

xv.

xvi.

xvii.

xviii.

xix.

xx.

xxi.

pending

F 1992 -1993 Appellate Tribunal

F 1993 -1994 Deputy Commissioner (Appeals)

8.530 A 2003 - 2004

1961

The Company does not have accumulated losses as at the end of the year and the Company has not incurred cash losses during current andthe immediately preceding financial year.

Based on our audit procedures and on the basis of information and explanations given by the management, we are of the opinion that theCompany has not defaulted in the repayment of dues to financial institutions, banks and debenture holders.

According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security byway of pledge of shares, debentures and other securities.

The provisions of any Special Statute applicable to Chit Fund, Nidhi or Mutual Benefit Fund/Societies are not applicable to the Company.

(a) Based on the records examined by us and according to the information and explanations given to us, we are of the opinion that the

Company is maintaining proper record of the transactions and contracts of dealing in shares and securities and that timely entries have

been made in these records.

(b) Based on our audit procedures and to the best of our knowledge and belief and according to the information and explanation given to us,

the shares and securities have been held by the Company in its own name.

According to the information and explanations given to us, the Company has not given any guarantee for loan taken by others from banks andfinancial institutions.

To the best of our knowledge and belief and according to the information and explanation given to us, term loans availed by the Companywere, prima facie, applied by the Company during the year for the purposes for which the loans were obtained.

According to the Cash Flow Statement and records examined by us and according to the information and explanations given to us, on overallbasis, funds raised on short-term basis have, prima facie, not been used during the year for long-term investment .

The Company has not made any preferential allotment to parties and companies covered under register maintained under Section 301 of theCompaniesAct, 1956, during the year and the question of whether the price at which the shares have been issued is prejudicial to the interestof the Company does not arise.

According to the information and explanations given to us and the records examined by us, security or charge has been created in respect ofthe debentures issued.

The Company has not raised money by any public issues during the year and hence the question of disclosure and verification of end use ofsuch money does not arise.

To the best of our knowledge and belief and according to the information and explanation given to us, no fraud on or by the Company wasnoticed or reported during the year.

For B. K. KHARE & CO.Chartered Accountants

Place : PuneDated : 10th May, 2007 Membership No. 44097

U. B. JoshiPartner


Schedule 2007 2006

Sources of Funds

Shareholders' Funds :

305.879

5,494.818

5,800.697

Loan Funds :

1,976.875

676.471

2,653.346

Deferred Tax Credit (Net) 208.449

8,662.492

Application of Funds

Fixed Assets :

5,806.540

2,727.107

3,079.433

Investments 2,833.152

Current Assets, Loans & Advances :

0.127

1,923.026

788.046

610.720

3,271.743

6,593.662

Current Liabilities and Provisions :

1,014.781

2,828.974

3,843.755

Net Current Assets 2,749.907

8,662.492

Share Capital 1 305.879

Reserves & Surplus 2 5,055.392

5,361.271

Secured Loans 3 1,361.035

Unsecured Loans 4 982.144

2,343.179

213.072

Refer Note 5 - Schedule 15

7,917.522

5

Gross Block 4,753.461

Depreciation 2,465.622

Net Block 2,287.839

6 2,722.387

7

Interest Accrued on Investments 1.873

Inventories 2,084.345

Sundry Debtors 759.138

Cash & Bank Balances 592.426

Loans & Advances 2,907.526

6,345.308

8

Liabilities 933.028

Provisions 2,504.984

3,438.012

2,907.296

7,917.522

Notes 15

Less :

Less:

Balance Sheetas at 31st March, 2007

(Rs. in million)

As per our report of even date

Membership No. 44097

For B. K. KHARE & COMPANY

U.B. Joshi

Chartered Accountants

Partner

R.G.D'SilvaCompany Secretary &

Asst. Vice President (Legal)

P. P. Chhabria

Dr. H.S. VachhaB. G. DeshmukhSanjay K. AsherP. G. Pawar

ChairmanD.K. Chhabria

V. K. Chhabria

M. L. Jain

P.B. Parasnis

Managing Director




Pune : 10th May, 2007 Pune : 10th May, 2007

26


Schedule 2007

11,859.227

1,529.016

10,330.211

196.042

10,526.253

8,027.519

355.321

749.571

159.247

264.288

9,555.946

Profit Before Tax 970.307

280.000

(4.623)

5.000

Profit After Tax 689.930

113.101

Balance Available for Appropriation 803.031

100.000

214.115

36.389

300.000

650.504

152.527

/ 4.51

689.930

/ 152,939,345

2006

Income from Operations 9 8,615.224

: Excise Duty 1,137.381

7,477.843

Other Income 10 283.821

7,761.664

Materials & Manufacturing 11 5,717.792

Personnel Expenses 12 326.342

Other Expenses 13 659.991

Finance Charges 14 127.867

Depreciation 313.164

7,145.156

616.508

: Provision for Taxation

Current Tax 78.100

Deferred Tax (Net) 28.720

Fringe Benefit Tax 6.000

503.688

: Surplus brought forward 120.395

: Debenture Redemption Reserve written back 500.000

: (Profit) / Loss of erstwhile subsidiary companies (Net) 51.715

1,072.368

Debenture Redemption Reserve 350.000



General Reserve 400.000

959.267

Surplus Carried to Balance Sheet 113.101

Earnings Per Share

Basic Diluted (face value Rs.2 each) 3.29

Profit after Tax available for equity shareholders 503.688

No. of Shares used in computing Earnings per Share (Basic Diluted) 152,939,345

Notes 15

Income:

Expenditure :

Appropriations

Less

Less

Add

Add –

Less –

(Rs. in million)

Profit and Loss Accountfor the year ended 31st March, 2007

27





U.B. Joshi


Partner



P. P. Chhabria



V. K. Chhabria

M. L. Jain

P.B. Parasnis

Managing Director





28

(Rs. in million)

Cash Flow Statement for the year ended 31st March, 2007

2007

A. Cash Flow from Operating Activities

970.307

264.288

(148.465)

(1.361)

(15.826)

58.738

157.374

1,127.681

126.654

83.573

210.227

1,337.908

(356.714)

981.194

B. Cash Flow from Investing Activities

148.465

7.450

(1,054.522)

(898.607)

C. Cash Flow from Financing Activities

850.000

(284.523)

(205.553)

(58.738)

301.186

2006

Net profit Before Tax 616.508

Adjustments for :

Depreciation (Net) 313.164

Income from Investments (195.697)

Loss / (Profit) on Sale of Fixed Assets 7.601

Loss / (Profit) on Sale of Investments (74.432)

Expenses in respect of Financing Activity :

Interest on Fixed Period Loans 42.292

92.928

Operating Profit before Working Capital Changes 709.436

Adjustments for Working Capital Changes :

Current Assets (1,296.849)

Current Liabilities 511.196

(785.653)

Cash generated from Operations (76.217)

Tax refund / (Paid) (135.454)

Net Cash Flow from Operating Activities (211.671)

Income from Investments 195.697

Inflow from / (Additions to) Investments (392.101)

Additions to Fixed Assets (490.630)

Reserves & Surplus of erstwhile subsidiaries, on merger 58.613

Extinguishment of investments in Subsidiaries, on merger 710.092

Net Cash Flow from Investing Activities 81.671

External Commercial Borrowings

Short Term Acceptances 327.345

Fixed Deposits (0.011)

Sales Tax Deferral Loan 0.463

Dividend & dividend tax paid (152.998)

Interest on Fixed Period Loans (42.292)

Net Cash Flow from Financing Activities 132.507

–

–

–

–

–


29

(Rs. in million)

Cash Flow Statement for the year ended 31st March, 2007 (Contd.)

2007

D. Increase / (Decrease) in Cash and Cash Equivalents

2006

Cash and Cash Equivalents

Opening Balance 347.047

Closing Balance 349.554

Net Increase / (Decrease) in Cash and Cash Equivalents 2.507

Notes :

1) The above Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting Standard 3 on CashFlow Statement issued by ICAI

2) Previous year figures have been regrouped wherever necessary to conform to current year's classification.

349.554

733.327

383.773





U.B. Joshi


Partner



P. P. Chhabria



V. K. Chhabria

M. L. Jain

P.B. Parasnis

Managing Director





Schedules forming part of the Balance Sheet

30

2007

Authorised

470.000

30.000

500.000

Issued & Subscribed

305.879

305.879

Capital Reserve

84.079

84.079

Share Capital Buyback Reserve

55.183

55.183

Share Premium

1,090.955

1,090.955

Debenture Redemption Reserve

100.000

100.000

200.000

200.000

General Reserve

3,612.074

300.000

3,912.074

Surplus in Profit & Loss Account 152.527

5,494.818

2006

235,000,000 Equity Shares of Rs. 2/- each 470.000(Previous year 47,000,000 EquityShares of Rs. 10/- each)

3,000,000 Unclassified Shares of Rs. 10/- each 30.000

500.000

152,939,345 Equity Shares of Rs. 2/- each fully paid. 305.879(Previous year 30,587,869 Equity Shares of Rs. 10/- each )(Of the above, 146,065,520 Equity Shares are issuedas fully paid up bonus shares by capitalisation of Reserves)(Previous year 29,213,104 Equity Shares of Rs. 10/- each) 305.879

as per last Balance Sheet 1.781

On amalgamation with erstwhile Finolex Wire Products Ltd. and 82.298Finolex Finance Ltd.

84.079


55.183

as per last Balance Sheet 1,090.955

1,090.955


Transferred from Profit & Loss Account 350.000

600.000

Transferred to Profit & Loss Account 500.000

100.000

as per last Balance Sheet 3,184.044

: Balance of erstwhile Finolex Finance Ltd.as on 1st April, 2005 23.910

: Special Reserve of erstwhile Finolex Finance Ltd. no longerrequired, transferred to General Reserve 4.120

: Transferred from Profit & Loss Account 400.000

3,612.074

113.101

5,055.392

Schedule 1 - Share Capital

Schedule 2 - Reserves & Surplus

Add :

Add :

Less :

Add

Add

Add

—

—

—

—

(Rs. in million)

During the year the Company has subdivided the Rs. 10/- share into 5 sharesof Rs. 2/- each. Consequently 30,587,869 shares of Rs.10/- each have become152,939,345 shares of Rs.2/- each w.e.f 16th January, 2007.


31


2007

Term Loans:

Long Term Loans:

500.000

850.000 —

1350.000

Short Term Loans from Banks:

212.500

414.375

626.875

1,976.875

Notes:

Particulars Redemption Tenor Repaymentcondition schedule

Security:

227.678

23.793

425.000

676.471

2006

Non-Convertible Debentures

7.60% L-Series 500.000

External Commercial Borrowings

500.000

Foreign Currency Demand Loans 682.575

Packing Credit 178.460

861.035

1,361.035

a) Debentures - L Series

b) External CommercialBorrowings At par 5 years Lumpsum on 27th March, 2012

(i) Debentures - LSeries First pari-passu charge on the immovable properties of JFTC Goa Division and premisessituated atAhmedabad.

(ii) External Commercial Borrowings First pari-passu charge on all the immovable / movable fixed properties of the Company,both present and future, save and except properties to be excluded as agreed to by thelenders. Security yet to be created.

(iii) Short Term Loans from Banks Hypothecation of inventories and book debts.

Acceptances (Short Term)- Banks 512.201

Deferred Sales Tax Loan 23.793

Short Term Foreign Currency Loans from Banks 446.150

982.144

Schedule 3 - Secured Loans

Schedule 4 - Unsecured Loans

At par 5 years Lumpsum on 11th August, 2010

(Rs. in million)


32


(Rs.

inm

illio

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8

16

.26

61

6.6

74

4,7

55

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22

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5.6

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.2007

33


2007

Non- trade Long Term (At Cost)Quoted Investments (Listed)

1.506

1,518.530

3.995

61.000

10.011

0.041

77.803

0.000

0.010

0.155

0.994

0.000

0.001

0.001

2006

Limited 1.506

y

Limited 1,518.530

y

399,500 Equity Shares of Rs. 10 each paid in IndusInd Bank Limited 3.995

(Previous year 399,500)

[

6,100,000 Equity Shares of Rs. 10 each fully paid in I2IT Pvt 61.000

Limited (Previous ear 6,100,000)

1,000,000 Equity Shares of Rs. 10 each fully paid in Plastro 4.910

Plasson Industries (India) Limited (Previous ear 489,950)

3,350 Equity Shares of Rs. 10 each fully paid in Promain 0.041

Limited (Previous ear 3,350)

967,700 Equity Shares of Rs. 10 each fully paid in SICOM 77.803


4,268 6% cumulative redeemable preference shares of 0.000

Re. 1 each in Sun Pharmaceutical Industries Limited

(Bonus Shares) (Previous ear 4,268

1,000 Equity Shares of Rs. 10 each fully paid in The Saraswat 0.010

Co-op Bank Limited (Previous ear 1,000)

4,000 Equity Shares of Rs. 10 each fully paid in Bank of Rajasthan Limited 0.177

(Previous ear 4,000)

198,750 Equity Shares of Rs.10 each fully paid in BF Utilities 0.994


5,000 Equity Shares of Rs.10 each fully paid in Bhojwani 0.000

Leasing & Finance Limited (Previous ear 5,000)

100 Equity Shares of Rs.10 each fully paid in Birla Ericsson 0.001

Optical Limited (Previous ear 100)

100 Equity Shares of Rs. 10 each fully paid in Delton 0.001

Cables Limited (Previous ear 100)

Schedule 6 - Investments

91,000 Equity Shares of Rs. 2 each fully paid in Bharat Forge

(Previous ear 91,000)

40,192,597 Equity Shares of Rs. 10 each paid in Finolex Industries

(Previous ear 40,192,597)

Aggregate Market Value of Quoted Investments

(Previous ear Rs. 2 872.680 million]

143.764

Provision for diminution in value of shares of SICOM Ltd 38.616

105.148

(Valued at lower of cost and fair value)

Rs.2,806.651 million ,

Unquoted Investments

148.865

34.213

114.652

Current Investments

Quoted Invesments

y 1,524.031

y

y

y

y

y )

y

y

y

y

y

y

1,524.031

Less : .

(Rs. in million)


34

2007

0.000

0.460

6.210

0.000

0.030

0.003

0.001

0.000

0.003

0.002

0.000

0.014

0.000

10.000

5.000

5.000

2006

5,000 Equity Shares of Rs. 10 each fully paid in Global Boards Limited 0.007


3,150 Equity Shares of Rs. 10 each fully paid in ICICI Bank Limited 0.460(Previous year 3,150)

200,000 Equity Shares of Rs. 10 each fully paid in Kirloskar Ferrous Limited

(Previous year Nil)

100,000 Equity Warrants in Kirloskar Ferrous Limited

(Previous year Nil)

Equity Shares of Rs. 10 each fully paid in M & M Financial Services Limited 0.267


100 Equity Shares of Rs. 10 each fully paid in Nicco Corporation 0.000

(Previous year 100)

2,100 Equity Shares of Rs. 10 each fully paid in RPG Cables Limited 0.030


100 Equity Shares of Rs. 10 each fully paid in Sterlite Optical Tech Limited 0.003

(Previous year 100)

100 Equity Shares of Rs. 10 each fully paid in Uniflex Cables Limited 0.001

(Previous year 100)

100 Equity Shares of Rs. 10 each fully paid in Usha Martin Infotech Limited 0.000

(Previous year 100)

100 Equity Shares of Rs. 5 each fully paid in Usha Martin Limited 0.003

(Previous year 100)

100 Equity Shares of Rs. 10 each fully paid in Vindhya Telelinks Limited 0.002

(Previous year 100)

50 Equity shares of Rs. 10 each fully paid in Wire & Wire Products Limited 0.000

(Previous year Nil)

100 Equity Shares of Rs. 10 each fully paid in ZEE Entertainment Enterprises Limited 0.014

(Previous year 100)

45 Equity Shares of Rs. 10 each fully paid in ZEE News Limited 0.000

(Previous year Nil)

Units of Rs. 10 each of ABN AMRO Fixed Term 20.099

Plan - Series 2- Quarterly Plan A - Dividend Reinvest

(Previous year 2,009,878)

1,000,000 Units of Rs. 10 each of ABN AMRO Fixed Term Plan 10.000

Series 2 - 13 Months plan - Growth (Previous year 1,000,000)

500,000 Units of Rs. 10 each of ABN AMRO Fixed Term Plan Series-1 Growth 5.000


48,900 Units of Rs. 100 each of Benchmark Split Capital Fund Class A - Growth 5.000


Units of Rs. 10 each of Birla Cash Plus Institutional Premium - Growth 15.000


Schedule 6 - Investments (Contd.)

—

—

—

—

—

0.000

—

—

—


(Rs. in million)


35


2007

20.082

10.000

10.000

50.000

10.000

10.000

7.600

1.822

20.000

20.000

12.625

2006

Units of Rs. 10 each of Birla Fixed Term Plan Qua terly 20.000

Series 2 - Growth (Previous year 2,000,000)

2,008,182 Units of Rs. 10 each of Birla Fixed Term Plan - Series 20.082

F - Growth (Previous year 2,008,182)

1,000,000 Units of Rs. 10 each of Birla Fixed Term Plan

Institutional - Series R - Growth (Previous year Nil)

Units of Rs. 10 each of Birla India Gennext 5.000

Fund - Growth (Previous year 488,998)

1,000,000 Units of Rs. 10 each of Chola Fixed Maturity Plan - 14 10.000

Months -Cumulative (Previous year 1,000,000)

y

Units of Rs. 10 each of Chola FMP-Series 3 (Quarterly Plan I)- 10.000

Growth (Previous year 1,000,000)

5,000,000 Units of Rs. 10 each of DBS Chola FMP - Series 6 - (410 Days Plan)

- Cumulative (Previous year Nil)

Units of Rs. 10 each of Deutsche Fixed Maturity Series 8- Growth 20.000


1,000,000 Units of Rs. 10 each of Deutsche Fixed Term Fund - Series 5 - 10.000


1,000,000 Units of Rs. 10 each of Deutsche Fixed Term Fund Series 9- 10.000


Units of Rs. 1000 each of DSP Merrill Lynch Liquidity Fund 88.994

Institutional - Growth (Previous year 87,222)

Merrill Lynch 10.030

y

Merrill Lynch 10.000

y

Merrill Lynch 3.000

y

57,757 Units of Rs. 10 each of DSP ML Tiger Fund -

Growth (Previous year Nil)

2,000,000 Units of Rs. 10 each of DWS Fixed Term Fund -

Series 10- Growth (Previous year Nil)

2,000,000 Units of Rs. 10 each of DWS Fixed Term Fund Series 25 -

Institutional - Growth (Previous Year Nil)

801,481 Units of Rs. 10 each of Fidelity Equity Fund - 12.625

Dividend (Previous year 801,481)

Units of Rs. 10 each of Fidelity Equity Fund - 77.224


Schedule 6 - Investments (Contd.)

—

—

—

—

—

—

—

—

—

r —

—

—

—

—

—

—

—

—

—

—

—

—

—

Units of Rs. 10 each of Chola Fixed Maturity Plan 20.000

Series 2 - Quarterly Plan II - Cumulative (Previous ear 2,000,000)

Units of Rs. 1000 each of DSP Fixed Term Plan

Series 1B - Growth (Previous ear 10,000)

Units of Rs. 1000 each of DSP Fixed Term Plan Series

1C - Growth (Previous ear 10,000)

178,559 Units of Rs. 10 each of DSP Opportunity Fund -

Growth (Previous ear 87,683)

(Rs. in million)


36

2007

20.000

8.500

10.000

10.000

10.000

13.000

10.000

50.000

7.600

10.000

y

10.000

y

20.000

2006

1,955,990 Units of Rs. 10 each of Fidelity Special Situations Fund - Dividend

(Previous year Nil)

Units of Rs. 10 each of Franklin India Bluechip Fund Dividend 12.889


Units of Rs. 10 each of Franklin India Bluechip Fund Growth 9.430


51,389 Units of Rs. 100 each of Franklin India Prima Fund - Growth 5.000


1,000,000 Units of Rs. 100 each of Franklin India Smaller Companies Fund - Growth 10.000


1,000,000 Units of Rs. 10 each of Grindlays Fixed Maturity 22nd Plan - Dividend 10.000


1,000,000 Units of Rs. 10 each of Grindlays Fixed Maturity Plus Plan I - Plan B-Growth 10.000


Units of Rs. 10 each of HDFC Capital Builder- Dividend 11.716


113,708 Units of Rs. 10 each of HDFC Equity Fund - Growth 5.500


Units of Rs. 10 each of HDFC Fixed Maturity Plan - 3 Months - Growth 10.000

y

1,000,000 Units of Rs. 10 each of HDFC Fixed Maturity Plan - 13 Months - Growth 10.000


5,000,000 Units of Rs. 10 each of HDFC Fixed Maturity Plan 15 Months

Feb 2007 (3) - Wholesale Plan - Growth (Previous year Nil)

Units of Rs. 10 each of HDFC Multiple Yield Fund Plan 2005- Growth 20.000


135,067 Units of Rs. 10 each of HSBC Equity Fund - Growth 3.000


1,000,000 Units of Rs. 10 each of HSBC Fixed Term Series 13 - Growth 10.000


1,000,000 Units of Rs. 10 each of HSBC Fixed Term Series 4 - Growth 10.000


Units of Rs. 10 each of HSBC Fixed Term Series 3 - Growth 10.000


Units of Rs. 10 each of HSBC Fixed Term Series VII - Growth 20.000


Units of Rs. 10 each of HSBC Midcap Equity Fund - Growth 10.000


2,000,000 Units of Rs. 10 each of HSBC Fixed Term Series 23 - Growth

(Previous year Nil)

Schedule 6 - Investments (Contd.)—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—



(Rs. in million)


37

2006

Units of Rs. 10 each of ING Vysya Fixed Maturity Fund- Series IX- Growth 20.000


Units of Rs. 10 each of ING Vysya Fixed Maturity Fund Series VIII - Growth 10.000


2,000,000 Units of Rs. 10 each of ING Vysya Fixed Maturity Fund Series VII - Growth

(Previous year Nil)

2,000,000 Units of Rs. 10 each of ING VYSYA FMP-Series XXII - Growth

(Previous year Nil)

Units of Rs. 10 each of ING Vysya Midcap Equity Fund -Growth 10.000


Units of Rs. 10 each of Kotak Contra Fund - Growth 10.000


Units of Rs. 10 each of Kotak FMP Series 20 - Growth 20.000


Units of Rs. 10 each of Kotak FMP Series XV - Dividend 20.221

Dividend (Previous year 2,022,056)

2,000,000 Units of Rs. 10 each of Kotak Fixed Maturity Plan 13 Months-

Series 1 - Growth (Previous year Nil)

Units of Rs. 10 each of Kotak Fund of Funds - Growth 10.000


Units of Rs. 10 each of Kotak Lifestyle Fund - Growth 10.000


Units of Rs. 10 each of Kotak Liquid Institutional Premium - Growth 19.519


Nil

5,000,000 Units of Rs. 10 each of Lotus India FMP 15 Months Series 1- Growth

(Previous year Nil)

NB 20.072

y

3,425,332 Units of Rs. 10 each of Principal Cash Management Fund - 15.000

Liquid Institutional Premium - Growth (Previous year 1,377,524)

1,000,000 Units of Rs. 10 each of Principal Deposit Fund (FMP -4-20) 10.000

385 days plan - Growth (Previous year 1,000,000)

Units of Rs. 10 each of Principal Infrastructure & Services 10.000

Fund- Growth (Previous year 977,995)

244,499 Units of Rs. 10 each of Prudential ICICI Equity & Derivative

Fund- Optimiser - Dividend (Previous year Nil)

50.000

y

2,000,000 Units of Rs. 10 each of Prudential ICICI Fixed Maturity Plan Series

34-15 Months- Growth (Previous year Nil)

2007

20.000

20.000

20.000

50.000

40.000

10.000

2.480

20.000


—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

278,327 Units of Rs. 10 each of Kotak 30 -Dividend (Previous year )

Units of Rs. 10 each of Principal P Fixed Maturity Plan -

91 Days- Series II- Growth (Previous ear 2,000,000)

Units of Rs. 10 each of Prudential ICICI Fixed Maturity Plan -

Yearly Growth- Series XXIV - Growth (Previous ear 4,510,478)

8.806


(Rs. in million)


38

2007

20.000

10.000

22.025

20.000

50.000

11.000

0.577

50.000

2.322

5.436

1.893

14.583

7.500

2006

2,000,000 Units of Rs. 10 each of Prudential ICICI Fixed Maturity

Plan Series 37-3M-Plan A - Growth (Previous year Nil)

1,000,000 Units of Rs. 10 each of Prudential ICICI Fusion Fund - 10.000


Units of Rs. 10 each of Reliance Equity Fund - 20.000


1,995,000 Units of Rs. 10 each of Reliance Equity Fund -

Dividend (Previous year Nil)

2,000,000 Units of Rs. 10 each of Reliance Fixed Horizon Fund II

Annual Plan Series V-Institutional - Growth (Previous year Nil)

5,000,000 Units of Rs. 10 each of Reliance Fixed Horizon Fund-

Annual Plan - Growth (Previous year Nil)

Units of Rs. 10 each of Reliance Fixed Maturity Fund - 50.000

Monthly Plan XI- Series II- Growth (Previous year 5,000,000)

Units of Rs. 10 each of Reliance Growth Fund - 23.943


54,540 Units of Rs. 10 each of Reliance Growth Fund - 5.000

y

51,673 Units of Rs. 10 each of Reliance Liquidity Fund - 1.761

Growth (Previous year 170,463)

5,000,000 Units of Rs. 10 each of Reliance Monthly Interval Fund-


Units of Rs. 10 each of Reliance Vision Fund- 13.073


13,684 Units of Rs. 10 each of Reliance Vision Fund-


Units of Rs. 10 each of Sahara Infrastructure Fund - 10.000

y

Units of Rs. 10 each of SBI Magnum Bluechip 5.000

Fund - Growth (Previous year 500,000)

498,750 Units of Rs. 10 each of SBI Magnum Bluechip Fund -


53,249 Units of Rs. 10 each of SBI Magnum Sector Funds

Umbrella Contra - Growth (Previous Year )

Units of Rs. 10 each of SBI Multicap Equity Fund - 10.000

Growth (Previous year )

1,138,443 Units of Rs. 10 each of SBI Multicap Equity Fund -


613,665 Units of Rs. 10 each of Standard Chartered Classic Equity - 4.000

Growth (Previous year 347,199)


—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Growth (Previous ear 28,921)

Dividend (Previous ear 1,000,000)

—

—

—

—

—

Nil

1,000,000


(Rs. in million)


39

2007

10.000

20.000

50.000

100.000

9.389

10.000

30.000

19.450

7.400

10.000

3.200

30.000

50.000

2006

Units of Rs. 10 each of Standard Chartered Classic Equity - Growth 7.500


Units of Rs. 10 each of Standard Chartered Classic Equity - Growth 2.500


1,000,000 Units of Rs. 10 each of Standard Chartered Enterprise Equity - Dividend

(Previous year Nil)

2,000,000 Units of Rs. 10 each of Standard Chartered Fixed Maturity

Plan yearly Series 2- Growth (Previous year Nil)

5,000,000 Units of Rs. 10 each of Standard Chartered Fixed Maturity

Plan- Quarterly Series 7- Growth (Previous year Nil)

93,155 Units of Rs. 10 each of Standard Chartered Liquidity Manager Plus - Growth

(Previous year Nil)

Units of Rs. 10 each of Sundaram Capex Opportunities - Growth 10.000


959,507 Units of Rs. 10 each of Sundaram BNP Paribas Equity

Multiplier Fund - Growth (Previous year Nil)

Units of Rs. 10 each of Sundaram Fixed Term Plan - 20.000

Series 1 Feb '06 (100 days)- Growth (Previous year 2,000,000)

1,000,000 Units of Rs. 10 each of Sundaram BNP Paribas Fixed Term

Plan Series XIX-14M - Growth (Previous year Nil)

3,000,000 Units of Rs. 10 each of Sundaram BNP Paribas Fixed

Term Plan Series XVI-90 Days-Growth (Previous year Nil)

Units of Rs. 10 each of Sundaram India Leadership Fund - Dividend 14.458


2,000,000 Units of Rs. 10 each of Sundaram Rural India Fund - Dividend

(Previous year Nil)

99,848 Units of Rs. 10 each of Sundaram Select Midcap Fund - Growth 2.000


Units of Rs. 10 each of TATA Fixed Horizon Fund Series 3- 20.091

Scheme B - Dividend (Previous year 2,009,069)

1,000,000 Units of Rs. 10 each of TATA Fixed Horizon Fund Series 3- 10.000

Scheme D (13 Months) Growth (Previous year 1,000,000)

Units of Rs. 10 each of Tata Fixed Horizon Fund Series 5- 10.000

Scheme B ( 6 Months) - Growth (Previous year 1,000,000)

130,118 Units of Rs. 10 each of Tata Growth Fund - Growth 2.000


3,000,000 Units of Rs. 10 each of TATA Fixed Horizon Fund Series

6 - Scheme C - Growth (Previous year Nil)

5,000,000 Units of Rs. 10 each of Templeton Fixed Horizon Series 1

-13M Plan - Growth (Previous year Nil)


—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—


(Rs. in million)


2007

)

45.000

Rs.1,685.928 , 1,180.164

0.000

6.842

6.842

- Unquoted Investments

2006

Units of Rs. 10 each of UTI Fixed Maturity Plan QFMP 20.088

(02/06/ II) - Growth (Previous year 2,000,000

4,500,000 Units of Rs. 10 each of UTI Fixed Term Income Fund Series 2 -

Growth (Previous year NIL)

Units of Rs. 10 each of UTI Leadership Fund - 10.000Growth (Previous year 977,995)

[Aggregate Market Value of Current Quoted Investments

million (Previous Year Rs.1 347.161 million)] 1,077.774

100 Equity Shares of Rs. 10 each fully paid in East West

Travel & Trade Links Limited (Previous year 100)

R 7.971

: y 1

7.971


—

—

—

—

1 Pass through Certificate of s. 10,000,000/- each of Old Palasia

RMBS Trust Series - I Trustee - IDBI Bank Limited (Previous ear )

Immovable Property * 7.463

2,722.387

* The company has entered into agreements for sale of someflats against which it has received an advance of Rs. 2.300(Previous year - Rs. 2.300 million)

Book Value 2,601.805

Market Value 4,219.841

Book Value 113.119

Unquoted Investments

Investment in Property

7.463

2,833.152

Aggregate Value of - Quoted Investments

2,704.195

4,492.579

121.494

0.000

million

(Rs. in million)


40


41

Details of Purchase and Sale ofShares/ Units during the year No. of Shares/Units

ABN AMRO Cash Fund Institutional Plan- Growth 2,233,161

ABN AMRO Cash Fund Institutional Plus Plan - Growth 15,879,464

ABN AMRO FTP Series 2- Quarterly Plan- Dividend 1,000,000

ABN FTP Series 2 - Quarterly Plan- Growth 4,031,621

Birla Bond Plus Institutional Plan- Growth 1,507,966

Birla Cash Plus Institutional Premium Plan-Growth 117,913,839

Birla Sunlife Cash Manager Institutional Plan - Growth 17,473,005

Chola FMP Series 3 Quarterly Plan III- Growth 4,038,880

Chola Liquid Institutional Plus Fund-Growth 46,851,499

DBS Chola Short Term Floating Rate Plan- Growth 22,882,457

DSP ML Liquidity Institutional Plan-Growth 190,406

DSP ML Liquidity Plus Plan- Growth 50,000

DWS Insta Cash Plus Fund - Growth 9,813,722

DWS Money Plus Institutional Plan - Growth 4,971,181

Fidelity Short Term Income Fund InstitutionalPlan-Growth 5,000,000

HDFC FMP 3 Months June '06 (1) - Growth 1,000,000

HDFC FMP 3 Months May '06 (1) - Growth 2,000,000

HDFC FMP 6 Months June '06 IP-Growth 1,000,000

HDFC Liquid Fund Premium Plan - Growth 6,728,660

HSBC Cash Plus Institutional Plan- Growth 48,261,956

ICICI Liquid Super Institutional Plan- Growth 87,587,219

ING Vysya Liquid Institutinal Plan-Growth 876,739

J M High Liquidity Super Institutional Plan- Growth 2,776,930

Kotak FMP 3 Months Series 1- Growth 1,000,000

Kotak FMP 6 Months Series 1 - Growth 1,000,000

Kotak FMP Series 27- Growth 2,000,000

Kotak Fund of Funds - Growth 977,995

Kotak Liquid Institutional Premium Plan- Growth 85,647,166

Lotus India Liquid Fund Institutional Plan - Growth 6,133,429

Principal Cash Management Liquid InstitutionalPremium Plan-Growth 80,782,729

Reliance FHF June 2006- Growth 1,000,000

Reliance FHF May 2006- Growth 2,000,000

Reliance FHF Monthly Plan A Series 3- Growth 2,000,000

Reliance Floater Plan- Growth 892,953

Reliance Liquidity Fund - Growth 82,475,279


Details of Purchase and Sale ofShares/ Units during the year No. of Shares/ Units

Reliance Liquidity Fund- Growth 55,010,935

SBI Debt Fund 60 days- Growth 1,000,000

Standard Chartered Fixed Maturity 5thPlan- Growth 2,000,000

Standard Chartered Liquidity ManagerPlus Fund- Growth 159,901

Sundaram BNP Paribas FTP- Growth 1,000,000

Sundaram Money Fund Super InstitutionalPlan - Growth 5,282,734

Tata Liquid Super High InvestmentFund- Growth 119,515

Tata Liquidity Manager Fund- Growth 278,433

UTI Liquid Cash Plan Institutional-Growth 208,369

UTI QFMP 05/06 - Growth 6,038,960

Sahara Infrastructure Fund - Dividend 1,000,000

SBI Debt Fund Series 90 Days- Growth 2,000,000

Series


42

2006

- Fixed Deposit Accounts 450.225

590.912

Barclays Plc.

2007

0.025

183.898

Schedule 7 - Current Assets, Loans and Advances

1.873

Stores and Spares 70.172

Raw Materials 377.272

Semi finished Goods 539.245

Finished Goods 1,072.511

Packing Materials 10.696

Scrap 4.879

Goods for Trading 9.570

2,084.345

Unsecured, considered good, unless stated otherwise

Outstanding for a period exceeding six months 37.704

Considered Doubtful 8.573

Provision 8.573

37.704

Other Debts 721.434

759.138

Cash on hand 1.514Balances with Scheduled Banks in :

- Current Accounts 140.687

-

(maximum amount outstanding during

the year Rs. 425.000 million)

592.426

3,437.782

Unsecured, considered good, unless stated otherwise

Balances with Customs, Excise etc. 69.865

Advances recoverable in cash or in kind or for

value to be received 425.134

Advance Income Tax 2,412.527

2,907.526

6,345.308

(A)Current Assets

Interest Accrued on Investments 0.127

Inventories

82.164

341.708

631.299

833.160

15.291

8.719

10.685

1,923.026

Sundry Debtors

135.600

8.573

8.573

135.600

652.446

788.046

Cash & Bank Balances

1.822

183.873

610.720

3,321.919

(B)Loans & Advances

49.778

452.724

2,769.241

3,271.743

6,593.662

Less :

Balance with Bank in :

Fixed Deposit Account 425.000 -–

Schedules forming part of the Balance Sheet(Rs. in million)


2006

Sundry Creditors 349.028

[Includes due to SSI Units (Previous year Rs. 4.360 million)]

Other Liabilities 544.683

Deposits from Distributors 3.537

Deposits from Customers / Others 12.979

Interest accrued but not due 12.442

Unclaimed Fixed Deposits 0.116

Unclaimed Dividend * 10.243

933.028



Provision for Taxation 2,274.171

Provision for Leave Encashment 14.800

Provision for Gratuity 6.746

2,504.984

3,438.012

*The figure does not include any amount due and outstanding to becredited to Investor Education & Protection Fund.

2007

(A) Current Liabilities

543.761

Rs. 4.960 million

414.664

7.127

29.473

5.683

0.116

13.957

1,014.781

(B) Provisions

214.115

36.388

2,559.171

18.000

1.300

2,828.974

3,843.755

Schedule 8 - Current Liabilities and Provisions


43

(Rs. in million)


44

Schedules forming part of the Profit and Loss Account

2006

Sale of Products 8,439.900

Sale Others 46.251

Sale of Scrap 129.073

8,615.224

Interest earned on

- Investments 2.433

- Deposits 0.373

- Others 6.743

Dividend Received

From Long Term Investments 121.525

From Current Investments 64.622

Profit on Sale of Assets 1.592

Profit on Sale of Investments (Net)

From Current Investments 74.432

Miscellaneous Income 12.101

[Tax deducted at source

(Previous year Rs. 0.556 million)]

283.821

Raw Materials * # 5,805.221

Packing Materials 131.139

Stores & Spares 128.938

Decrease/(Increase) in stock of (578.586)

Finished, Semi-finished Goods & Scrap

Incremental /(Decremental) Excise Duty on 45.284Closing Stock of Finished Goods

5,531.996

Processing Charges 1.779

Power & Fuel 185.837

187.616

Captive Consumption for Capitalisation 1.820

5,717.792

Includes write down of raw material inventory of Optic Fibre Division of (Previous year Rs. 6.370 million)

# Includes cost of goods traded in (Previous year Rs. 10.781 million )

2007

11,659.130

30.989

169.108

11,859.227

9.463

0.459

11.959

126.157

0.427

1.547

15.826

30.204

Rs.3.757 million

196.042

Materials Consumed

7,503.200

123.330

83.280

146.770

(26.318)

7,830.262

Manufacturing Expenses (Direct)

2.212

203.078

205.290

8.033

8,027.519

* Rs. Nil

Rs.14.338 million

Schedule 9 - Income from Operations

Schedule 10 - Other Income

Schedule 11 - Materials and Manufacturing Expenses

Add/(Less):

Add/(Less)

Less:

:

(Rs. in million)


2006

Salaries, Wages, Bonus and Commission etc. 300.196

Contribution to Provident and other Funds 22.830

Workmen and Staff Welfare Expenses 1.952

Recruitment & Training Expenses 1.364

326.342

Rent, Rates and Taxes 14.927

Insurance 15.841

Repairs & Maintenance

Building 4.303

Machinery 9.016

Other Assets 8.193

Directors' Sitting Fees 0.525

Auditors' Remuneration

Audit Fees 2.050

Tax Audit Fees 0.500

Other Services 0.206

Out of Pocket Expenses 0.040

Travelling and Conveyance 28.314

Communication Expenses 12.320

Selling & Distribution Expenses

Sales Incentives 265.101

Freight Outward (Net) 88.191

Advertisement, Publicity etc. 19.634

Miscellaneous Expenses # 104.581

Provision for Doubtful Advances 23.031

Amounts Written off 6.597

Loss on Exchange Fluctuations (Net) 47.522

Loss on Sale of Assets 9.099

659.991

# Includes settlement amount of (Previous year Rs. 7.465 million) paid/payable to the raw material supplier of Optic FibreDivision pursuant to reduction in purchase obligation.

Interest :

Fixed Period Loans 42.292

Others 71.321

Bank Charges 14.254

127.867

2007

347.872

3.489

2.219

1.741

355.321

13.363

17.323

:

5.153

16.533

16.075

0.488

2.050

0.500

0.758

0.048

32.409

11.643

359.451

95.787

45.553

128.413

2.710

0.008

1.120

0.186

749.571

Rs.Nil

58.738

89.249

11.260

159.247

Schedule 12 - Personnel Expenses

Schedule 13 - Other Expenses

Schedule 14 - Finance Charges

Schedules forming part of the Profit and Loss Account

(Rs. in million)

45


46

Schedule - 15

1. Significant Accounting Policies

i) Accounting Convention:

ii) FixedAssets:

iii) Depreciation:

iv) Valuation of Investments:

v) Valuation of Inventories:

vi) Foreign Currency Transactions: (Other than acquisition of FixedAssets)

vii) Revenue Recognition:

viii) Retirement Benefits:

The financial statements are prepared under the historical cost convention, having due regard to fundamental accountingassumptions of going concern, consistency and accrual, in compliance with the accounting standards referred to in Section211(3C) of the CompaniesAct, 1956.

a) Fixed Assets are stated at cost of acquisition or construction less accumulated depreciation. Attributable finance costs andexpenses of bringing the respective assets to working condition for their intended use are capitalised.

b) IntangibleAssets: Expenses incurred by the Company on acquisition, development or enhancement of intangible resources,are recognised as intangible assets if these are identifiable, controlled by the Company and it is probable that futureeconomic benefit attributable to the asset would flow to the enterprise. Intangible assets are amortised from the date whenthey are available for use over the best estimate of their useful life.

c) Impairment: The carrying amount of cash generating units / assets are reviewed at balance sheet date to determine whetherthere is any indication of impairment. If any such indication exists, the recoverable amount is estimated as the higher of netselling price and value in use. Impairment loss is recognised whenever carrying amount exceeds the recoverable amount.

d) Borrowing costs that are directly attributable to the acquisition or production of a qualifying asset are capitalised as part of thecost of those assets. Other borrowing costs are recognised as expense in the period in which they are incurred.

Depreciation is provided on straight-line method as per the rates and in the manner prescribed in Schedule XIV to theCompaniesAct, 1956.

Investments classified as long-term investments are stated at cost. Provision for diminution, if any, in the value of long-terminvestments is made to recognise a decline other than temporary in the fair value of investments. The fair value of a long-terminvestment is ascertained with reference to its market value, investee's assets and results and the expected cash flows from theinvestment as well as the strategic importance to the company.

All the inventories are valued at lower of cost or net realisable value. Cost of Raw Materials, Packing Materials, Stores andSpares is determined at weighted average cost. Finished goods and Semi Finished goods are valued at material cost, cost ofconversion and production cess wherever applicable. Scrap generated out of manufacturing process is valued at net realisablevalue except in case of sheets and optic fibre divisions where it is accounted for on sale.

a) Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transaction. Current assetsand current liabilities are translated at the year-end rate. The difference between the rate prevailing on the date of transactionand on the date of settlement as also on translation of current assets and current liabilities at the end of the year is recognisedas income or expense as the case may be.

b) In respect of forward exchange contracts, the difference between the forward rate and the exchange rate at the inception ofthe forward contract is recognised as income or expense over the period of the contract.

c) Gains or losses on cancellation / settlement of forward exchange contract are recognised as income or expense.

d) Exchange difference, premium on forward exchange contract or gain or loss on cancellation / settlement of forward exchangecontract relating to fixed assets acquired from outside India is adjusted in the carrying amount of the respective fixed asset.

a) Sale of goods is recognised on despatches to customers and includes excise duty.

b) Dividend income is accounted for when right to receive is established.

c) Credits on account of Custom Duty and other benefits, which are due to be received with reasonable certainty, are accruedupon completion of exports.

d) Gains or losses on derivative instruments used for hedging purposes is accounted for on the date of settlement of thederivative contract.

Contributions are made to approved Superannuation and Provident Funds. Based on actuarial valuation, a provision is made forliability for accumulated Leave encashment. In respect of gratuity, the Company has adopted Cash Accumulation Scheme with

Notes forming part of the Accounts


47

Life Insurance Corporation of India and subject to the fund balance a provision is made based on actuarial valuation.

Income Tax expense comprises current tax and deferred tax charge or credit. Deferred tax for timing difference between thebook and tax profit for the year is accounted using tax rates and tax laws that have been enacted or substantively enacted at theBalance Sheet date. Deferred Tax assets arising from the timing difference are recognised to the extent that there is virtualcertainty that sufficient future taxable income will be available.

a) Provisions in respect of present obligations arising out of past events are made in the accounts when reliable estimates canbe made of the amount of the obligation.

b) Contingent liabilities are disclosed by way of note to the financial statements, after careful evaluation by the management ofthe facts and legal aspects of the matter involved.

a) Liability on account of Sales Bills discounted with Bank n (Previous year Rs.300.000 million).

b) i) Disputed demands in appeal towards excise (Previous year Rs. 461.057 million) customs(Previous year Rs. Nil) and sales tax (Previous year Rs.32.162 million).

ii) Appeal preferred by Customs Department against Appellate decision in favour of the Company, wherein should the decisionbe unfavourable to the Company, the liability is estimated to be (Previous year Rs. 21.030 million)

iii) In respect of Octroi duty a demand of (Previous year Rs.8.623 million) has been raised against theCompany. However, in this regard, the industry is collectively contesting similar demands and the matter is sub judice.

c) i) Disputed Income Tax demands and matters in appellate proceedings (excluding consequential interest/ penalty) (Previous year Rs. 209.155 million).

ii) Appeals preferred by Income Tax Department against Appellate decisions in favour of the Company, wherein, should theultimate decision be unfavourable to the Company, the liability is estimated to be (Previous year Rs.455.952 million)

Estimated amount of contracts remaining to be executed on capital account (net of advances paid), not provided for(Previous year Rs. 55.228 million).

Capital Advances grouped with capital work-in-progress include an amount of (Previous year Rs.2.291 million) forLeased Land, possession of which has been taken, subject to fulfilment of certain conditions, as per agreement with MaharashtraIndustrial Development Corporation

The break-up of deferred tax assets and liabilities into major components at the year end is as below.

(Rs. in million)

(289.824)

Impairment Loss -

(289.824)

(213.072)

Provided in accordance with the provisions of the Income Tax Act, 1961.

The small scale and ancillary undertakings to whom amounts outstanding for more than 30 days :

a) Cotmac Electronics Pvt. Ltd. b) Navbharat Industries

Suppliers/Service providers covered under the Micro, Small and Medium Enterprises Development Act- 2006 in majority cases,have not furnished the information regarding filling of necessary memorandum with appointed authority. In view of the above, theinformation under Sec.22 of Micro, Small and Medium Enterprises DevelopmentAct 2006 is not given.

Based on the review as on 1st April , 2004 the Company has accounted for the impairment loss on the assets of “Optic Fibre” cashgenerating unit forming part of Communication Cable segment. Sharp decline in the prices of optic fibre for unforeseen reasons afterthe project was undertaken and delay in commissioning of key assets due to techno-commercial issues arising between the

ix) Taxation:

x) Provisions and Contingent Liabilities:

2. Contingent Liabilities:

Rs.308.277 millio

Rs. 384.640 million Rs. 13.427million Rs.49.753 million

Rs. Nil

Rs. 8.623 million

Rs. 274.800 million

Rs. 487.225 million.

3. Rs. 534.823million

4. Rs. 2.291 million

.

5. Taxation:

Deferred Tax:

Particulars of timing difference Liabilities Assets

Net Deferred Tax Liability 208.449

Current Tax:

6.

7.

,

8.

Depreciation

(NIL)

(76.752)

Total

(76.752)

274.866 NIL

66.418

(-)

274.866 66.418



48

Company and supplier of the equipment, although issues were settled eventually, have resulted in impairment in value of the saidassets. Accordingly the impairment loss of and related deferred tax effect of has beenadjusted against the General Reserve in accordance with transitional provision of Accounting Standard 28. On review there is noindication of further increase or reversal in the impairment loss as on 31st March, 2007.

Disclosures as required byAccounting Standard 18 “Related Party Disclosures” are given below:

Associate Companies Finolex Industries Limited.

Finolex Proprietary Limited.

Corrugated Box Industries (India) Private Limited.

Plastro Plasson Industries (India) Limited.

1. Mr. P. P. Chhabria - Chairman

2. Mr. D. K. Chhabria - Managing Director

3. Mr. V. K. Chhabria - Deputy Managing Director

4. Mr. M. L. Jain - Asst. Managing Director and Chief Operating Officer

5. Mr. P. B. Parasnis - Asst. Managing Director and Chief Financial Officer

Mr. K. P. Chhabria - Brother of Mr. P.P. Chhabria, and father ofMr. D. K. Chhabria and Mr. V. K. Chhabria

Rs.650.595 million Rs.121.877 million

9. Related Party Transactions:

a) List of Related Parties:

Key Management Personnel

Relatives

b) Key management Personnel and Relatives

c) Transactions with Related Parties - Major Parties

Nature of Transactions Associate Key ManagementCompanies Personnel & Relatives

Sales, Services and Other Income

1 Sale of goods

2 Sale of other material

3 Recoveries

4 Dividend Received

Purchase of Material / Assets

1 Purchase of Raw Material

and Components

Finolex Industries Limited 8.998 —

(35.631) (—)

Others 1.406 —

(0.470) (—)


(0.860) (—)


(1.596) (—)

Others — —

(0.002) (—)


(120.578) (—)


(8.317) (—)

Others — —

(0.084) (—)

5 Reimbursement of Expenses Received


(1.629) (—)


(Rs in million)


2 Purchase of Fixed Assets

4 Reimbursement of Expenses Paid

(Rs. in million)

2007



(6.904) (—)

1.050 —

2006

(0.505) (—)

— 60.960

(—) (50.207)

Finolex Proprietory Limited 5.604 —

(5.097) (—)

Corrugated Box Industries (India) Pvt. Limited 2.100 —

(1.950) (—)

Mr. K.P. Chhabria — 0.528

(—) (0.528)


(3.828) (—)

Others 0.088 —

(0.238) (—)


(5.432) (—)

Others 2.155 —

(0.752) (—)

Corrugated Box Industries (India) Pvt. Limited 2.275 —

(3.325) (—)

Mr. K.P. Chhabria — 5.000

(—) (5.000)

Refund of Deposit

Corrugated Box Industries (India) Pvt Limited

(0.975) (—)

Foreign Exchange Forwards/ Options 921.325Interest Rate Swaps 3,184 120Currency Swaps 767.958

B. The Company has entered into derivative transactions with an objective to hedge the financial risksassociated with its business viz. foreign exchange, interest rate and commodity price risks.

C. The Company has not hedged the following foreign currency exposures :(i) Borrowings grouped under secured loans equivalent to (Previous year

Rs. 861.035 million) and under unsecured loans equivalent to(Previous year Rs. 24.980 million).

(ii) Creditors for imports equivalent to (Previous year Rs. 17.658 million)(iii) Receivables equivalent to (Previous year Rs. 104.514 million)

Expenses

1 Managerial Remuneration

2 Services

3 Rent

Amount Outstanding

1 Creditors

2 Debtors

3 Loans and Advances and Deposits

Others

10. A . Quantitative information of derivative instruments outstanding as at the Balance Sheet date:

Category

—2,461.400 .1,376.025

Rs. 626.875 millionRs. 652.678 million

Rs. 45.691 millionRs.195.630 million

Notes forming part of the AccountsNature of Transactions Associate

CompaniesKey Management

Personnel & Relatives

49


(Rs. in million)

(a) Computation of Net Profit in accordance with Sec. 198of the Companies Act, 1956.

Profit as per Profit & Loss Account (Before Tax ) 616.508

Add : Directors' Remuneration 19.607

Directors' Commission 30.950

Depreciation 313.164

364.246

980.754

Less: Depreciation u/s 350

of the Companies Act, 1956 313.164

Profit/(Loss)on Sale of Assets (Net) (7.507)

Profit/(Loss) on Sale of 74.432

380.089

600.665

Commission as decided by the Board :

Chairman, Managing Director & Deputy 30.600

Managing Director

Non-Whole-time Directors 0.350

30.950

(b) Details of payments and provisions on account of

remuneration to the Chairman, Managing

Director, Deputy Managing Director, Asst. Managing

Directors and Non whole-time Directors included in

the Profit and Loss Account :

(i) Salary 8.202

(ii) Commission to :Chairman, Managing Director 30.600and Deputy Managing DirectorNon Whole-time Directors 0.350

30.950

(iii) Contribution to Funds 2.323

(iv) Other Perquisites 9.082

Note : Contribution to Gratuity Fund is made on global valuation and hence is not precisely ascertained.

11. Managerial Remuneration

970.307

21.180

40.580

264.288

326.536

1,296.843

264.288

1.361

15.826

281.475

Profits available for Distribution 1,015.368

39.780

0.800

40.580

8.558

39.780

0.800

40.580

2.333

10.289

2007 2006

Directors' Sitting Fees 0.525

Investments (Net)

0.488


50


51

12.Capacities and Production :

Class of Goods Unit Installed Production(Net) Installed Production (Net)

Capacity 2006-07 Capacity 2005-06

TCKM 1,030.00 702.96# #

KM 48,000.00 20,547.44

TCKM 10,612.00 862.53

MT 2,100.00 1,570.05

KM 600,000.00 414,028.00* . *

KM 1,500.00

MT 60,000.00 16,653.79@ @

23,211 MT

170,762 Kms.

13,207 MT

13. Stock & Turnover :

Class of Goods Unit Opening Stock Closing Stock Turnover

Quantity Value Quantity Value Quantity # Value

TCKM 84.01 617.837 49.63 514.482 737.34 8,132.680

KM 6,262.00 79.664 1684.92 29.889 25,124.52 552.020, ,

TCKM 227.46 149.636 188.08 114.283 901.91 1,216.052, ,

MT 257.53 16.266 273.72 14.196 1,553.86 148.896

KM 74,534.23 37.932 251,375.04 110.091 237,187.19** 26.732

*** 256.439(

1,529.016

1110.442 943.251 10,330.211

Kms

$ 13,207 MT

Rs 30.514 million

31.3.2007 31.3.2006

MT 614.91 209.107 202.28 73.933 17,066.42 1526.408( ) (

1 Electrical Cables 1,030.00 758.48

2 Communication Cables

Optic Fibre Cables 48,000.00 21,733.00

Other Communication Cables 10,612.00 1,746.03

3 PVC Sheets and Accessories 2,100.00 1,376.65

4 Fibre 600,000 00 213,813.62

5 Cross Linked Polyethylene and otherCompounds ( Used for Captive Consumption)

6 Polycoated FRP Rod 1,500.00

7 Continuous Cast Copper Rods 60,000.00 18,276.79

Installed capacities are certified by the Managing Director and relied upon by the Auditors.

# Equivalent tonnage (Previous year 24,636 MT)

* Includes captive consumption of (Previous year 145,072 Kms)

@ Includes captive consumption of (Previous year 16,090 MT)

5000 TCKM of Other Communication Cables Capacity is interchangeable with 332 TCKM of Electrical Cables Capacity.

1. Electrical Cables(63.91) (425.166) (84.01) (617.837) (738.40) (5,527.748)

2. Communication CablesOptic Fibre Cables

(1,684.67) (36.011) (6 262.00) (79.664) (17 155.67) (469.099)

3. Other Communication cables(223.29) (113.714) (227.46) (149.636) (1 741.86) (1 481.237)

4. PVC Sheets and Accessories(139.08) (13.641) (257.53) (16.266) (1,258.20) (132.958)

5. Fibre

(9,806.07) (4.528) (74,534.23) (37.932) (149,085.46) (1.855)

7. Others(176.210)

8. Less - Excise Duty(1,137.381)

(750.973) (1,110.442) (7,477.843)

# Includes captive consumption

** Includes captive consumption of (Previous year 145,072 Kms.)

Includes captive consumption of

*** Includes goods traded in (Previous year Rs. 25.189 million)

MT 2,500.00 – –

– –

86.377

170,762

2,500.00

——) (—)

6. Continuous Cast Copper Rod $782.00 157.913) (614.91) (209.107) (18,443.88) (826.117)

(Previous year 16,090 MT)


(Rs. in million)


14. Raw Materials Consumed:

2007

Quantity Value

(MT) (Rs. in million)

17,506 5,937.937

11,348 659.224

2,296 152.885

10 79.061

674.093

7503.200# #

Rs.14.338 million )

886.12014.517

269.133

1,169.770

16. Consumption of Raw Materials:

86.87% 6,518.394

7,503.200

17 . Consumption of Stores and Spares:

8.38% 6.976

91.62% 76.304

83.280

18. Expenditure in Foreign Currency:

2.764

3.414

11.977

11.815

vi 4.991

34.961

19. Earnings in Foreign Currency :

672.532

0.127

20. Dividends Remitted in Foreign Currency :

1

1,232,385 ,

Year ended 31/3/06

7.394

21. Segment Reporting:

2006

Quantity Value

(MT) (Rs. in million)

Copper

PVC 11,713 593.266

Polythene 3,492 200.335

Preform 10 109.015

Others 725.810

5,805.221

# Includes cost of goods traded (Previous year Rs.10.781 million

Raw Materials 1,061.840Spares & Components 22.560Capital Goods 28.810

1,113.210

Imported 848.297

Indigenous 85.39% 4,956.924

5,805.221

Imported 34.88% 44.980

Indigenous 65.12% 83.958

128.938

(i) Travelling 6.339

(ii) Interest 6.141

(iii) Settlement amount to Raw Material Supplier 4.962

(iv) Professional fees 0.405

(v) Export Sales Commission 4.293

( ) Others 1.322

23.462

FOB Value of Exports 368.402

Interest

Number of Shareholders 1

Number of Shares held 1 284,035

Year to which Dividend relates Year ended 31/3/05

Amount remitted (Net of Taxdeducted at source) Rs. in million 5.778

The Business segment has been considered as the primary segment for disclosure. The categories included in each of thereported business segment are as follows:

i) Electrical Cables(including related products) ii) Communication Cables

iii) Copper Rods iv) Others

18,938 4,176.795

14.61%

15. CIF Value of Imports:

13.13% 984.806

2007 2006

—

—

The above business segments have been identified considering:

i) The nature of the product/services ii) The related risks and returns

iii) The internal financial reporting systems.

Revenue and expenses have been accounted for based on the basis of their relationship to the operating activities of the segment.Revenues and expenses which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis have beenincluded under “Unallocable Expenses”.Assets and Liabilities which relate to the enterprise as a whole and are not allocable to segments ona reasonable basis have been included under “UnallocableAssets/Liabilities”.


52


(Rs. in million)

(Rs in million)

ExternalPrevious Year 5,751.354 1,900.691 827.438 135.741 - - 8,615.224

Inter - segment(Net of Excise) Previous Year - - 2,798.800 - - (2,798.800) -

Less : Excise DutyPrevious Year 756.254 258.491 105.238 17.398 - - 1,137.381

Total RevenuePrevious Year 4,995.100 1,642.200 3,521.000 118.343 - (2,798.800) 7,477.843

Segment ResultPrevious Year 703.200 (120.650) 46.300 (11.837) - - 617.013

Other Unallocable incomenet of expenditure Previous Year - - - - (113.108) - (113.108)

Exports 682.149 375.649

Domestic 9,648.062 7,102.194

Exports 195.630 104.514

Domestic 592.416 654.624

Assets of the Company except sundry debtors are not identified with the geographical segment as these are used interchangeably and are located in India.

Figures in respect of the previous year have been regrouped or rearranged wherever necessary to conform to current year's classification.

21. A ) Primary Segment Information for the year ended 31st March, 2007

Period Electrical Communication Copper Others Other than Elimination Total

Cables Cables Rod Segments

REVENUE

Current Year 8,268.172 1,820.579 1,529.669 240.807 - - 11,859.227

Current Year - - 4,677.626 - - (4,677.626) -

Current Year 1,090.337 198.698 214.295 25.686 - - 1,529.016

Current Year 7,177.835 1,621.881 5,993.000 215.121 - (4,677.626) 10,330.211

RESULT

Current Year 1,081.357 29.624 79.767 23.413 - - 1,214.161

Current Year - - - - 95.867 - 95.867

21.B) Secondary Segment Information (by Geographical Segment)

Particulars Year ended Year ended

Total 10,330.211 7,477.843

Debtors

Total 788.046 759.138

Note :

22.

LessCurrent Year - - - - - - 147.987

Current Year - - - - - - 970.307

LessCurrent Year - - - - - - 280.377

Current Year - - - - - - 689.930

OTHER INFORMATION

Current Year 2,513.391 2,555.959 421.249 553.693 6,461.955 - 12,506.247

Current Year 350.225 131.305 300.278 101.403 2,960.544 - 3,843.755

Current Year 710.773 23.545 0.649 134.456 13.892 - 883.315

Current Year 77.449 145.222 19.150 17.299 5.168 - 264.288

31.03.2007 31.03.2006

REVENUE (Net of Excise)

Interest ExpensesPrevious Year - - - - - - 113.613

Profit before TaxationPrevious Year - - - - - - 616.508

Provision for TaxationPrevious Year - - - - - - 112.820

Profit after TaxPrevious Year - - - - - - 503.688

Segment AssetsPrevious Year 1,770.621 2,746.684 601.064 312.361 5,924.802 - 11,355.532

Segment LiabilitiesPrevious Year 412.065 242.177 274.113 47.430 2,462.225 - 3,438.010

Capital ExpnditurePrevious Year 54.561 33.269 4.400 14.252 0.974 0.203 107.659

DepreciationPrevious Year 39.753 218.015 21.103 14.584 19.709 - 313.164


53

(Rs in million)


23. BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE

(Information pursuant to Part IV of Schedule VI to the Companies Act, 1956)

I. Registration Details

II. Capital raised during the year (Amount in Rs.thousands)

Registration No. 1 6 5 3 1

Date Month Year State Code

Balance Sheet Date 3 1 0 3 2 0 0 7 1 1

Public Issue Rights Issue

N I L N I L

Bonus Issue Private Placement

N I L N I L

Total Liabilities Total Assets

8 6 6 2 4 9 2

III. Position of Mobilisation and Deployment of Funds (Amount in Rs.thousands


8 6 6 2 4 9 2

Reserves and Surplus

5 4 9 4 8 1 8

Unsecured Loans

6 7 6 4 7 1

Investments

2 8 3 3 1 5 2

Miscellaneous Expenditure

N I L

Total Expenditure

9 5 5 5 9 4 6

Profit /Loss After Tax

6 8 9 9 3 0

Dividend Rate %

7 0

54

+/ -

+

Sources of Funds

Paid-up Capital

3 0 5 8 7 9

Secured Loans

1 9 7 6 8 7 5

Net Fixed Assets

3 0 7 9 4 3 3

Net Current Assets

2 7 4 9 9 0 7

Deferred Tax Credit (Net)

2 0 8 4 4 9

Accumulated Losses

N I L

IV. Performance of the Company (Amount in Rs. thousands)

Application of Funds

+/ -

+

Turnover

1 0 5 2 6 2 5 3

Profit /Loss Before Tax

9 7 0 3 0 7

Earnings Per Share(for face value of Rs. 2/- each)

4 . 5 1Rs.



V. Generic Names of Three Principal Products / Services of the Company(As per Monetary Terms)

Item Code No. (ITC Code) Product Description

JELLY FILLED TELEPHONE CABLES


ELECTRICAL CABLES - LIGHT DUTY


ELECTRICAL CABLES - HEAVY DUTY


OPTIC FIBRE CABLE


CO- AXIAL CABLES


LAN CABLES


PVC SHEETS


CONTINUOUS CAST COPPER RODS

8 5 4 4 4 9 1 9

8 5 4 4

8 5 4 4

7 4 0 7 . 1 0

3 9 2 0

8 5 4 4 5 9

8 5 4 4 2 0

9 0 0 1 1 0

55





U.B. Joshi


Partner



P. P. Chhabria



V. K. Chhabria

M. L. Jain

P.B. Parasnis

Managing Director





CORPORATE GOVERNANCE

1. COMPANY'S PHILOSOPHY ON CORPORATE GOVERNANCE

2. BOARD OF DIRECTORS:

2.1 Constitution of the Board:

2.2 Meetings:

:

The Company's philosophy on Corporate Governance envisages attainment of transparency, accountability and propriety in the totalfunctioning of the Company and in the conduct of its business internally and externally, including its interactions with employees,shareholders, deposit holders, creditors, consumers and institutional and other lenders.

The Company believes that its systems and actions must be dovetailed for enhancing the performance and shareholder value in the long term.

The Company has adopted certain practices to achieve good corporate governance; the salient ones being fairness and transparency indealings, accountability for performance, effective management control by the Board, constitution of Board Committees as a part of internalcontrol system, fair representation of professional, qualified, non-executive and independent Directors on Board, adequate and timelydisclosure of financial and other information and prompt discharge of statutory obligations and duties.

The composition of the Board of Directors with reference to number of Executive and Non-Executive Directors, meets therequirement of Code of Corporate Governance.

Out of Thirteen Directors, there are three promoter Executive Directors namely Mr. P.P. Chhabria, Chairman, Mr. D.K. Chhabria,Managing Director and Mr. V.K. Chhabria, Deputy Managing Director and two non-promoter Executive Directors Mr. M.L. Jain,AssistantManaging Director and Chief Operating Officer and Mr. P.B. Parasnis,Assistant Managing Director and Chief Financial Officer

There are eight independent Non-Executive Directors, namely Dr. H.S. Vachha, Mr. B.G. Deshmukh, Mr.Atul C. Choksey, Mr. Sanjay K.Asher, Mr. P.G. Pawar, Dr. N.A. Kalyani, Mr. S.B. (Ravi) Pandit (appointed w.e.f. 1 August 2006) and Mr. P.R. Rathi (appointed on 10May 2007). Mr. B.J. Rathi an independent Non-Executive Director expired during the year on 7 March 2007.

Board meetings are held at least four times during the year coinciding with the presentation of each quarterly result. During the lastFinancial Year four Board meetings were held i.e. on 2 May 2006, 28 July 2006, 18 October 2006 and 24 January 2007.

The meetings were attended as follows:

Mr. P. P. Chhabria, Mr. D.K. Chhabria, Mr. M. L. Jain, Mr. P.B. Parasnis, Mr. B.J. Rathi (expired on 7 March 2007) and Mr P G Pawarattended all the four meetings.

Mr. V. K. Chhabria, Dr. H.S. Vachha, Mr. B.G. Deshmukh and Mr. S.K.Asher attended three meetings.

Mr.Atul C. Choksey and Mr. S.B. (Ravi) Pandit (appointed w.e.f. 1 August 2006) attended two meetings and Dr. N.A. Kalyani did not attendany of the meetings.

All Directors attended the lastAnnual General Meeting held on 27 June 2006 except for Mr. B. G. Deshmukh, Mr.Atul C. Choksey, Mr. S. K.Asher and Dr. N.A. Kalyani.

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Particulars Chairman Managing Deputy Managing Assistant Managing Assistant ManagingDirector Director Director and Chief Director and Chief

Operating Officer Financial Officer

P.P.Chhabria D.K.Chhabria V.K.Chhabria M.L. Jain P.B. Parasnis

Salary and Allowances 2,400,000 2,400,000 1,320,000 1,327,000 1,111,000

Contribution to Provident 648,000 648,000 356,400 366,540 313,800

& Superannuation Fund

Other perquisites 2,399,388 2,399,330 1,319,530 1,057,903 1,112,971

Commission / Incentive 15,600,000 15,600,000 8,580,000 1,000,000 1,000,000

Total 21,047,388 21,047,330 11,575,930 3,751,443 3,537,771

1) There is no scheme of 'Employee Stock Options' during the year.

2) The above does not include contributions to group superannuation and gratuity funds as the contributions/benefits are on a group basis.

3) In all the cases, the service contract is for a period of five years from the date of appointment. Notice period / severance fees applicable are 180

2.3 Remuneration to Executive Directors:

Notes:

56


57

days for Mr. P.P. Chhabria, Mr. D.K. Chhabria and Mr. V.K. Chhabria and 90 days and 60 days in case of Mr. M.L. Jain and Mr. P.B. Parasnisrespectively.

4) Performance criteria is a value judgement made by the Remuneration Committee which considers and recommends payment of commission /incentive based on the performance of the Company and contemporary practices in Industry. The recommendations of the Committee arefurther considered by the Board and a collective decision taken without participation of interested Directors.

Name of Non-Executive Sitting Fees Commis-sion Total Shareholdings of Non-ExecutiveDirector Directors in the Company

Mr. B.J. Rathi 135,000 100,000 235,000 18,400

Dr. H.S. Vachha 60,000 100,000 160,000 --

Mr. B.G. Deshmukh 37,500 100,000 137,500 --

Mr. Atul C. Choksey 15,000 100,000 115,000 17,750

Mr. Sanjay K. Asher 127,500 100,000 227,500 12,395

Mr. P.G. Pawar 97,500 100,000 197,500 --

Dr. N.A. Kalyani -- 100,000 100,000 --

Mr. S B (Ravi) Pandit 15,000 100,000 115,000 –

Total 487,500 800,000 1,287,500 48,545

a) Sitting fees are uniform for meetings of the Board / Committee thereof and are paid to each Non-Executive Director for attending Board /Committee meetings.

b) Commission not exceeding one percent of the net profits of the Company or Rupees fifteen lacs, which ever is less and as may bedetermined by the Board each financial year is paid to non-executive Directors. Such commission has been shared equally amongst suchDirectors. The sitting fees is approved by the shareholders and payment of commission to non-executive Directors upto maximum ofRs.15 lacs from the existing limit of Rs.5 lacs has been proposed for approval by the shareholders at ensuingAnnual General Meeting.

No. of ompa Committee Positions held

Other CompaniesPublic Companies

Mr. P.P. Chhabria 03 18 02 (Chairman of two)

Dr. H.S. Vachha 04 01 05 (Chairman of three)

Mr. B.G. Deshmukh 02 02 01 (Chairman of one)

Mr. Atul C. Choksey 11 03 --

Mr. Sanjay K. Asher 12 18 05 (Chairman of three)

Mr. P.G. Pawar 06 07 02

Dr. N.A. Kalyani 05 38 01

Mr. D.K. Chhabria 01 07 --

Mr. V.K. Chhabria -- -- --

Mr. M.L. Jain -- -- --

Mr. P.B. Parasnis 02 01 02

Mr. S.B. (Ravi) Pandit 03 01 01

2.4 Remuneration to Non-Executive Directors:

2.5 The details of other Directorship and Committee membership:

c ny Directorships

Mr. P. R. Rathi 11 05 03

2.6 Information placed before the Board of Directors:

The information placed before the Board of Directors is as follows:

a) Annual operating plans and budgets, revisions and updates, if any.b) Capital budgets with revisions and updates, if any.c) Quarterly (including periodic) results of the Company and its operating divisions / business segments.


58

d) Minutes of meetings of Audit and other Committees of the Board.e) The information on recruitment and remuneration of senior officers below the Board level, including appointment or cessation of

office by Chief Financial Officer and Company Secretary.

f) Show cause, demand and prosecution notices, which are materially important.

g) Fatal or serious accidents, dangerous occurrences, any material effluent or pollution problems

h Details of any joint venture or collaboration agreement.

i Transactions that involve substantial payment towards goodwill, brand equity, or intellectual property.

j Industrial relationship issues of material nature and proposed remedial actions. All significant developments in Human Resources /Industrial Relations.

k Transactions of material nature of buying and selling of investments, or undertaking / assets, which are not in normal course ofbusiness.

l) Quarterly reports on foreign exchange exposure and the steps taken by the Management to manage the risks of adverse exchangerate movement, if material.

m) Status on compliance with all regulatory, statutory and material contractual requirements.

n) Details of delegation of authorities to executives and Powers of Attorney issued.

The Audit Committee which was formed in February 1997, presently comprises of four independent non-executive Directors, namely Dr. H.S.Vachha (Chairman of the Committee), Mr. Sanjay K. Asher, Dr. N.A. Kalyani and Mr. P. R. Rathi (appointed w.e.f. 10th May, 2007) (Mr. B.J.Rathi, member andAlternate Chairman expired during the year, on 7 March 2007.)

The brief terms of reference of theAudit Committee include -

1) Review of the Company's financial reporting process and financial Statements,

2) Review of accounting and financial policies and practices,

3) Review of internal control and internal audit systems,

4) Discussion with InternalAuditors and StatutoryAuditors on any significant findings and follow-up thereon,

5) Reviewing the Company's financial and risk management policies,

6) To investigate any activity within its terms of reference,

7) To seek information from any employee,

8) To obtain outside legal or other professional advice,

9) To secure attendance of outsiders with relevant expertise, if it considers necessary,

10) Oversight of the Company's financial reporting process and the disclosure of its financial information to ensure that the financial statementis correct, sufficient and credible,

11) Recommending to the Board, the appointment, reappointment and, if required, the replacement or removal of the statutory auditor and thefixation of audit fees,

12) Approval of payment to statutory auditors for any other services rendered by the statutory auditors,

13) Reviewing, with the management, the annual financial statements before submission to the Board for approval, with particular reference to

a) Matters required to be included in the Director's Responsibility Statement to be included in the Board's report in terms of clause (2AA) ofsection 217 of the CompaniesAct, 1956,

b) Changes, if any, in accounting polices and practices and reasons for the same,

c) Major accounting entries involving estimates based on the exercise of judgment by management,

d) Significant adjustments made in the financial statements arising out of audit findings,

e) Compliance with listing and other legal requirements relating to financial statements,

f) Disclosure of any related party transactions,

g) Qualifications, if any, in the draft audit report,

14) Reviewing, with the management, the quarterly financial statements before submission to the Board for approval,

15) Reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal control systems,

16) Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of theofficial heading the department, reporting structure coverage and frequency of internal audit,

17) Discussion with internal auditors any significant findings and follow up there on,

)

)

)

)

3. AUDIT COMMITTEE:

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18) Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or afailure of internal control systems of a material nature and reporting the matter to the Board,

19) Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion toascertain any area of concern,

20) To look into the reasons for substantial defaults, if any, in the payment to the depositors, debenture holders, shareholders (in case of nonpayment of declared dividends) and creditors,

21) TheAudit Committee shall mandatorily review the following information:

a) Management discussion and analysis of financial condition and results of operations.

b) Statement of significant related party transactions (as defined by the audit committee),

c) Management letters / letters of internal control weaknesses issued by the statutory auditors,

d) Internal audit reports relating to internal control weaknesses, and

e) The appointment, removal and terms of remuneration of the Chief internal auditor.

The Committee has met six times during the financial year ended 31st March 2007, as against the minimum requirement of four meetings i.e. on 2ndMay 2006, 2nd June 2006, 28th July 2006, 25th September 2006, 18th October 2006 and 23rd January 2007. Dr. H.S. Vachha attended fiveMeetings, Mr. Sanjay K. Asher attended all the meetings and Dr. N.A. Kalyani did not attended any of the meetings. (Mr. B.J. Rathi, member andAlternate Chairman who expired during the year on 7th March 2007, had attended five meetings.) The date of the meeting of the Committee held forconsidering finalisation of accounts for the year ended 31st March 2007 was 10th May 2007.

In view of the importance given by the Company to good corporate governance and though it is a non-mandatory requirement, a RemunerationCommittee was constituted by the Board of Directors at its meeting held on 21 October 2000.

The Remuneration Committee has been set up to determine on behalf of the Board and on behalf of the shareholders with agreed terms ofreference, the Company's policy on specific remuneration packages for Executive Directors including pension rights and any compensationpayment.

The Committee comprises four independent and non-executive Directors namely Mr. B.G. Deshmukh (Chairman of the Committee), Mr.Sanjay K.Asher, Mr. P.G. Pawar. and Mr. P.R. Rathi (appointed w.e.f. 10 May 2007). (Mr. B.J. Rathi who was member andAlternate Chairmanof the Committee expired during the year on 7 March 2007).

The Committee has met on 2 May 2006 and 24 January 2007 during the financial year ended 31 March 2007. Mr. B.G. Deshmukh, Mr. B.J.Rathi and Mr. P.G. Pawar attended all the meetings and Mr. Sanjay K.Asher attended the meeting held on 2 May 2006.

The Share Transfer Cum Investors' Grievances Committee presently comprises of three Executive Directors and three independent, non-executive Directors. Mr. P.G. Pawar an independent and non-executive Director is the Chairman of the Committee. The Board has designatedMr. R.G.D'Silva, Company Secretary as the Compliance Officer.

The Committee in addition to considering share transfer matters, oversees redressal of shareholder and investors complaints / grievances andrecommends measures to improve the level of investor services.

The Committee normally meets once in a month, as required, and there were seven meetings during the year.

The total number of complaints received and replied to the satisfaction of shareholders during the year were 8 and no complaint wasoutstanding as on 31 March 2007.

There was no share transfer request pending as on 31 March 2007.

4. REMUNERATION COMMITTEE:

5. SHAREHOLDERS' COMMITTEE:

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6. GENERAL BODY MEETINGS:

Location and time for last threeAnnual General Meetings:

Year Location Date Time Whether any special resolution passed therein

2003-04 Acharya Atre Rangmandir 18th June, 2004 11.30 a.m. YesSant TukaramnagarPimpri, Pune – 411 018

2004-05 Acharya Atre Rangmandir 5th July, 2005 11.30 a.m. NoSant TukaramnagarPimpri, Pune – 411 018

2005-06 Acharya Atre Rangmandir 27th June, 2006 11.30 a.m. YesSant TukaramnagarPimpri, Pune – 411 018

59


(a) No special resolution was passed through postal ballot last year and no such resolution is proposed to be passed by postal ballot this year.

7. DISCLOSURES:

8. MEANS OF COMMUNICATIONS:

9. SHAREHOLDER INFORMATION:

10. CODE OF CONDUCT:

Declaration:

(a) Disclosure regarding materially significant related party transactions:

For details please refer Schedule 15 (Note No. 12) of Notes forming part of the Accounts.

(b) There were no instances of non-compliance or penalty, strictures imposed on the Company by Stock Exchanges or SEBI or anyStatutory Authority on any matter related to capital markets, during the last three years.

(c) The Company has complied with the mandatory requirements of corporate governance Clause 49 of the Listing Agreements with theStock Exchanges.

(d) The non-mandatory requirements have not been adopted as a formal policy except for Remuneration Committee as set out in item 4above.

The quarterly results of the Company are published in leading national newspapers viz., normally Economic Times (Mumbai and Puneeditions), Business Standard (all editions) and Sakal (Pune edition) and also displayed on the corporate website (http://www.finolex.com)along with official news releases. The corporate presentation prepared by the Company was uploaded on its website and was also informed tothe Stock Exchanges for taking the same on record.

Management provides detailed analysis of Company's operations, which forms a part of theAnnual Report.

TheAnnual report includes Financial Statements, key financial data and detailed information in the Shareholders information section.

The Board has laid down a code of conduct for all Board members and senior management of the Company. The Code of Conduct has beenhosted on the website (http://www.finolex.com) of the Company.

All Board members and senior management personnel have affirmed compliance with the Code of Conduct of the Company in the year under report

Sd/-

Place : Pune D. K. Chhabria

Date : 10th May 2007 Managing Director

60


Auditors' Certificate on Corporate Governance

To the Members of

FINOLEX CABLES LIMITED

We have examined the compliance of conditions of corporate governance by Finolex Cables Limited (the Company) for the year ended on 31March 2007 as stipulated in clause 49 of the ListingAgreement of the Company with the stock exchanges.

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

In our opinion and to the best of our information and according to the explanations given to us we certify that the Company has complied with theconditions of Corporate Governance as stipulated in the above mentioned ListingAgreements.

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

For and on behalf of



st

B. K. KHARE & CO.

Place : Pune Sd/

10th May 2007Date : U. B. JoshiPartner

Shareholder Information

Registered Office

Annual General Meeting

Financial Calendar (Tentative) :

Dates of Book Closure

Dividend Payment

Stock Exchange Listing

Finolex Cables Limited, 26/27 Mumbai - Pune Road, Pimpri, Pune 411018.

The Thirty Ninth Annual General Meeting (AGM) of the Company will be held on Friday, 29 June, 2007 at 11.30 a.m. at Acharya Atre Rangmandir,Sant Tukaramnagar, Pimpri, Pune 411 018.

(a)Annual General Meeting : 29 June 2007

(b) Results for quarter ending 30th June, 2007 : Last week of July 2007

(c) Results for quarter ending 30th September, 2007 : Last week of October 2007

(d) Results for quarter ending 31st December, 2007 : Last week of January 2008

(e) Results for quarter ending 31st March, 2008 : Last week ofApril 2008

The Company's Transfer Books will be closed from Saturday, 16 June 2007 to Friday, 29 June 2007 (both days inclusive) for purpose of AnnualGeneral Meeting and for payment of Dividend for the year ended 31 March 2007.

The Board of Directors of the Company at its meeting held on 10 May 2007 have recommended payment of Dividend @ 70 % (i.e. Rs.1.40/- pershareof Rs. 2/-) for the year ended 31st March, 2007. The payment of dividend is to be approved by the shareholders at theAGM and as on date isexempt from income - tax in the hands of the shareholders. The aforesaid Dividend, if declared at theAGM, will be paid on or before 28 July 2007 tothose members whose names appear in the Register of Members as on the date of the AGM. In respect of shares held in electronic form, thedividend will be paid on the basis of beneficial ownership as per details to be received from the Depositories i.e. National Securities DepositoryLimited (NSDL) and Central Depository Services (India) Limited (CDSL) for this purpose, the same being as of close of their respective hours ofbusiness on the date immediately preceding the aforesaid Book Closure period (ie as of 15 June, 2007).

The Company's shares are presently listed on the Stock Exchanges at Ahmedabad, Bangalore, Chennai, Cochin, Delhi, Kolkata, Mumbai and

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Pune and also on the National Stock Exchange and OTC Stock Exchange. The Company's Global Depository Receipts (GDRs) are listed on theLuxembourg Stock Exchange.

Trading Symbol Bombay Stock Exchange FINOLEX CABL144

Trading Symbol National Stock Exchange FINCABLES EQ FINCABLESAE

The monthly high and low quotations and volume of shares traded at Mumbai (BSE) and National Stock Exchanges (NSE) are as follows :

During the year, the Company has sub divided its fully paid up Equity shares of Rs. 10/- each into five Equity shares of Rs. 2/- each, w.e.f. 16thJanuary, 2007.

The Company has taken requisite steps and centralised at a single point its share registry works for shares held in physical as well as electronicform with Finolex Industries Limited, D-1/10, MIDC Chinchwad, Pune 411019 holding Share Transfer Agent Category II Registration No.INR0000001765 issued by SEBI.

Share Transfer requests received in physical form are registered within 30 days from date of receipt and Demat requests are normally confirmedwithin an average of 15 days from the date of receipt.

2005 20,253

2006 17,433

2007 21,210

Stock Code

Stock Market Data

*

Registrar and TransferAgents

Share Transfer System

Shareholder Statistics and Distribution of Shareholdings as on 31st March 2007

Statistics of shareholders- 2005- 2007

Physical Demat Segment

31st March No. of shareholders

BSE NSE

High (Rs) Low (Rs) Volume High Low Volume Shares

April 06 370.00 340.00 292,853 374.00 335.00 302,587

May 06 422.60 305.25 407,376 429.50 301.00 644,060

June 06 345.00 222.15 258,518 350.00 222.00 247,935

July 06 304.00 241.60 92,952 304.95 245.00 164,811

August 06 375.00 283.40 173,919 374.80 284.00 289,473

September 06 372.00 331.00 203,456 374.00 324.40 314,484

October 06 474.90 367.00 510,501 470.00 365.50 662,478

November 06 519.00 433.00 301,862 523.00 436.05 408,723

December 06 510.00 450.00 170,356 515.00 452.00 246,806

January 07* 549.90 95.00 3,339,227 522.25 94.70 4,110,732

February 07* 109.00 90.00 1,097,611 108.05 80.20 1,254,448

March 07* 100.00 83.00 526,765 96.00 77.50 713,777

Period Sharestraded (Nos.) (Rs) (Rs) traded (Nos.)

62


Distribution of Shareholding as on 31 March 2007

Category No. of shares Held Percentage of Shareholding

A Promoter’s holding

B Non-Promoters holding

Sub total , ,

4 OTHERS

Dematerialisation of shares

Outstanding GDRs / DRs / Warrants, etc

Plant Locations

Pimpri (ElectricalCables) Urse (Electrical&CommunicationCables) Goa

st

1 Promoters

- Indian Promoters

- Foreign Promoter

2 Persons acting in Concert

3 Institutional Investors

a Mutual Funds and UTI

b Banks, Financial Institutions, Insurance 10.94

Companies (Central / State Govt. Institutions

/ Non-Government Institutions)

c FIIs 9.96

43 933 103 28.73

a Private Corporate bodies*

b Indian Public 21.92

c NRIs / OCBs 0.54

d Any others (Please specify)

The Company's equity shares are included in the list of companies whose scrips have been mandated by SEBI for settlement only in dematerialisedform by all institutions and all investors. The Company had signed agreements with National Securities Depository Limited (NSDL) and CentralDepository Services (India) Ltd (CDSL) to offer depository services to its shareholders.As on 31 March 2007 64.47 % of the equity share capital ofthe Company has been dematerialised.

There are no outstanding GDRs /ADRs / Warrants or any convertible instruments as on 31 March 2007.

26/27, Mumbai-Pune Road Taluka Maval Plot No., L 23/9A,

Pimpri, Pune 411 018 Dist. Pune 410 506

Telephone : 27475963 (10 lines) Telephone (02114) 237026/27

Facsimile : (020) 27472239 / 27472224 Facsimile (02114) 237025

Email : [email protected] Email : [email protected] Email : [email protected]

49,298,575 32.23

NIL NIL

49 298 575 32.23

11,968,789 7.83

16,725,250

15,239,064

25,357,316 16.58

33,519,380

830,971

NIL NIL

* Includes 22,187,075 shares (14.51%) held by Associate Company - Finolex Industries Limited.

1 Verna Industrial Estate,

Verna Salcette, South Goa,

Telephone : (0832) 2782002/3/4

Facsimile (0832) 2783909

Sub total , ,

st

st

(Communication Cables)

59 707 667 39.04

152 939 345 100.00

Sub total , ,

Grand Total , ,

63


Goa Goa

Investor Correspondence

Shareholder information On-line

Nomination Facility

Sheets Division

Optic Fibre Division Lighting Division (CFL) Switches Division

(Electrical & Communication Cables) (CCC Rods)

Plot No 117/L118 Gat No 399

Verna Industrial Estate Village Urse

Verna Salcette Taluka Maval

South Goa, GOA Dist. Pune 410 506

Telephone : (0832) 2782002/3/4 Telephone : (02114) 237035/36

Facsimile : (0832) 2783909 Facsimile : (02114) 237042

Email : [email protected] Email : [email protected]

The Company's Share Department provides assistance to shareholders under the supervision of Mr. R.G D'Silva, Company Secretary & VicePresident (Legal)

Any query relating to shares and requests for transactions such as transfers, transmissions and nomination facilities, duplicate share certificates,change of address, non-receipt of dividends /Annual Report, as also regarding dematerialisation of shares may please be taken up with :

Mr R G D'Silva

Company Secretary & Asst. Vice President (Legal)

Finolex Cables Limited

26/27 Mumbai - Pune Road,

Pimpri, Pune 411 018

Telephone : (020) 27475963 Extn.279 / 230

Facsimile : (020) 27472239 / 27470260

Email : [email protected]

The Balance Sheet information is a part of the Company's World Wide Web home page http://www.finolex.com. Users can obtain information onCompany products and services, Company background, Management and financial information and other major developments.

Individual shareholders can now avail of the facility of nomination. The nominee shall be the person in whom all rights of transfer and/or amountpayable in respect of the shares shall vest in the event of the death of shareholder(s). A minor also be a nominee provided the name of theguardian is given in the Nomination Form. The facility of nomination is not available to non-individual shareholders such as bodies corporate,financial institutions, Kartas of Hindu Undivided Families and holders of Power of Attorney. In case of any assistance, please contact Mr. R.GD'Silva, Company Secretar at the Registered Office of the Company.

Plot No. S263/2,

Panjim -Belgaum Road,

Usgaon-Tisk, Ponda,

Goa - 403406

Telephone : (0832) 2344378/9

Facsimile : (0832) 2344140

Email : [email protected]

Urse Plot No.399, Village Urse, Gat No.344, village Urse,

Taluka Maval Tal-Maval, Taluka Maval

Dist Pune 410 506 Dist. Pune-410 506 District Pune 410 506

Telephone : (02114) 237003/4/5/6/7 Telephone : (02114) 237035, 237036 Telephone : (02114) 237021/2/3

Facsimile : (02114) 237009 Fascimile : (02114) 237041 Facsimile : (02114) 237006

Email : [email protected] Email : [email protected] [email protected]


can

y &

64


Documents

P. P. Chhabria Chairman - Finolex cables · State Bank of India ... Characterised by the superior quality of polycarbonate and silver coated contacts and ... P.P. Chhabria. ——