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1 Esab India Limited Annual Report 2003

ESAB INDIA LIMITEDAnnual Report 2003

Board of DirectorsH. P. R. Mullan Chairman

G. Hariharan Chief Operating Officer

P. Mallick

N. H. Mirza

S. Tandon

J. Templeman

S. N. Talwar Alternate to J. Templeman

Registered OfficeLloyds Centre Point, 2nd Floor,

1096-A, Appasaheb Marathe Marg,

Prabhadevi, Mumbai - 400 025

Tel: 2431 3224 Fax: 2432 9940

E-mail: [email protected]

BankersState Bank of India

State Bank of Bikaner & Jaipur

State Bank of Travancore

Bank of Baroda

SolicitorsCrawford Bayley & Company

AuditorsLovelock & Lewes

Registrars & Share Transfer AgentsComputech Sharecap Limited,

147, Mahatma Gandhi Road, Mumbai - 400 023

Tel.: 2267 1824 Fax : 2267 0380

Corporate Management


A. Banerjee Corporate Affairs Manager & Company Secretary

P. Gupta Corporate Finance Manager

Contents Page

Notice 2

Directors� Report 6

Corporate Governance 11

Auditors� Report 15

Balance Sheet 18

Profit & Loss Account 19

Schedules to Accounts 20

Cash Flow Statement 38

Auditors� Report on Consolidated Accounts 39

Consolidated Accounts 40

Accounts of Subsidiary Company 56

Esab India Limited Annual Report 20032

Notice

NOTICE is hereby given that the Seventeenth Annual GeneralMeeting of the Members of the Company will be held at theBombay House Auditorium, Bombay House, Homi Mody Street,Mumbai 400 001, on Friday, 14 May 2004, at 4.00 p.m. to transactthe following business :

ORDINARY BUSINESS :1. To consider and adopt the Balance Sheet as at 31

December 2003 and Profit and Loss Account for the yearended on that date together with the Reports of the Directorsand the Auditors thereon.

2. To appoint a Director in place of Mr. J. Templeman whoretires by rotation and, being eligible, offers himself for re-appointment.

3. To appoint auditors and to fix their remuneration.

Special Notice under Section 225(1) of the CompaniesAct, 1956 has been received from a member signifying hisintention to move the following resolution as an OrdinaryResolution.

"RESOLVED THAT Bharat S. Raut & Co. be and they arehereby appointed as auditors of the Company in place ofthe retiring auditors from the conclusion of this AnnualGeneral Meeting until the conclusion of the next AnnualGeneral Meeting, on terms (including remuneration,reimbursement of out-of-pocket expenses and applicableservice tax) to be agreed between the auditors and theBoard of Directors."

SPECIAL BUSINESS :4. To appoint Mr. S. Tandon as a Director of the Company.

5. To appoint Mr. P. Mallick as a Director of the Company.

6. To consider and, if thought fit, to pass with or withoutmodification, as an Ordinary Resolution, the following :

"RESOLVED THAT in partial modification of the resolutionpassed at the Sixteenth Annual General Meeting held on12 June 2003, and pursuant to the provisions of Sections198, 269, 309 and 310 and any other applicable provisionsof the Companies Act, 1956, consent of the Company beand it is hereby accorded to the payment of revisedremuneration to Mr. G. Hariharan, Wholetime Director, uponthe terms and conditions specified in the resolutions of theBoard of Directors passed on 27 August 2003 and 10 March2004."

7. To consider and, if thought fit, to pass with or withoutmodification, as an Ordinary Resolution, the following:

"RESOLVED THAT pursuant to the provisions of Section198, 269, 309 and 310 and any other applicable provisionsof the Companies Act, 1956, consent of the Company beand it is hereby accorded to the re-appointment of Mr. G.Hariharan as Wholetime Director (and to his receivingremuneration, benefits and amenities) for a period of fiveyears from 7 January 2004 to 6 January 2009 upon theterms and conditions specified in the resolutions of theBoard of Directors passed on 15 December 2003 and 10March 2004."

8. To consider and, if thought fit, to pass with or withoutmodification, as a Special Resolution, the following :

“RESOLVED THAT subject to the applicable provisions ofthe Securities and Exchange Board of India (Delisting ofSecurities) Guidelines, 2003, and of the Companies Act,1956 (including any modifications or amendments theretoor re-enactments thereof for the time being in force) andsubject to such approvals as may be necessary and subjectto such terms, conditions, stipulations and modificationsprescribed or imposed by such approvals by the relevantauthorities as may be agreed to by the Board of Directorsof the Company (hereinafter referred to as ‘the Board’ whichterm shall be deemed to include any committee thereof)consent of the Company be and is hereby accorded to theBoard to delist the equity shares of the Company from theCalcutta Stock Exchange.”

NOTES :

a) The explanatory statements required pursuant to Section173 of the Companies Act, 1956 in relation to Items 4 to 8above are annexed hereto.

b) A Member entitled to attend and vote at the Meeting isentitled to appoint one or more proxies to attend and voteinstead of himself on a poll only, and a proxy need not be aMember. Proxies, in order to be effective, must be receivedat the office of the Company's Registrars & Share TransferAgents, Computech Sharecap Limited, 147, MahatmaGandhi Road, Fort, Mumbai 400 023, not less than forty-eight hours before the scheduled start of the Meeting.

c) The Register of Members and Share Transfer Books of theCompany will remain closed from 5 May 2004 to 14 May2004 (both days inclusive).

d) Queries on the Accounts and operations of the Company,if any, may be sent to the Company at its Registered Office(and marked for the attention of the Corporate AffairsManager & Company Secretary) at least seven days inadvance of the Meeting.

e) Members are requested to notify any change of addressto the Company's Registrars and Share Transfer Agentsquoting the relevant Folio number in each case.

f) Members are requested to bring their copies of theCompany's Report and Accounts for the year ended 31December 2003 to the Meeting.

g) Members holding shares under identical names (in thesame order) in more than one Folio are requested to writeto the Company's Registrars & Share Transfer Agents,enclosing their share certificates, to enable consolidationof their holdings into one Folio.

h) Members holding shares in dematerialised form may pleasenote that when opening a depository account they mayhave provided their bank account details, which will beprinted on their dividend warrants. Members wishing tochange or delete these bank account details should informtheir Depository Participant directly. The Company will not


entertain any direct request from Members in thisconnection.

i) Members who hold shares in the physical form cannominate a person in respect of all the shares held by themsingly or jointly. Members who hold shares in a singlename are advised, in their own interests, to avail of thenomination facility by completing and submitting Form 2B.Blank forms will be supplied by the Company's Registrars& Share Transfer Agents on request. Members holdingshares in the dematerialised form may contact theirDepository Participant for recording the nomination inrespect of their shares.

j) The Company has transferred all unclaimed dividends inrespect of the years up to and including the financial year1994-95 to the General Revenue Account of the CentralGovernment under the provisions of Section 205A of theCompanies Act, 1956. Members who have so far notclaimed or collected their dividends in respect of such yearsmay do so from the Registrar of Companies, Maharashtra,Mumbai by submitting an application in the prescribed form.

The Company is obliged to transfer any dividends whichremain unpaid or unclaimed for a period of seven years(from the date of the transfer into the Unpaid DividendAccount) to the credit of the Investor Education andProtection Fund ("the Fund") established by the CentralGovernment. Accordingly, the Company has transferredunclaimed dividends for the financial year 1995-96 to theFund. In accordance with Section 205C of the CompaniesAct, 1956, no claim shall lie against the Company or theFund in respect of any dividends remaining unclaimed andunpaid for a period of seven years from the dates they firstbecame due for payment and no payment shall be madeby the Company or the Fund in respect of any such claims.

k) As required under clause 49(VI) of the Listing Agreement,given below are the details of Directors, (i) being appointedor re-appointed and (ii) retiring by rotation and eligible forre-appointment :

(i) Appointment / Re-appointment of Directors :

Mr. S. Tandon

Mr. S.Tandon is a Chemical Engineer having graduatedfrom I.I.T New Delhi. He did his Post Graduate Diplomain Marketing & Sales Management from Delhi University.He has 37 years’ experience in Alfa Laval (India) Limitedhaving worked in various capacities. Since January 1998he has had overall responsibility as Managing Directorof Alfa Laval (India) Limited.

He is a Director of Alfa Laval (India) Limited and SkansenEngineering & Consultancy Company Limited.

He is on the Committees of the Board of Directors ofAlfa Laval (India) Limited.

Mr. P. Mallick

Mr.P.Mallick is a graduate Electrical Engineer fromI.I.T Madras, a Chartered Engineer and Fellow of theInstitution of Electrical Engineers, London. He holdsa Diploma in Business Management from the UK. Hehas 36 years’ experience having worked withcompanies such as Crompton Greaves, Tata Exportsand Genelec. From 1988 to 2003 he was the ManagingDirector of Wartsila India Limited.

He is a Director of the following companies :

ACCOR Radhakrishna Corp Services Pvt. Ltd., BeckIndia Ltd., Blue Star Ltd., DISA India Ltd, Maersk IndiaPvt. Ltd., SBI Funds Management Pvt. Ltd., TataTelecom Ltd. and Tube Investments of India Ltd.

He is on the Committees of the Boards of Directors ofthe following companies :

Beck India Ltd., Blue Star Ltd., DISA India Ltd., Tata TelecomLtd. and Tube Investments of India Ltd.

Mr. G. Hariharan

Mr. Hariharan is a Metallurgical Engineer havinggraduated from I.I.T Mumbai. He has thirty years'experience having worked in various capacities atW.G.Forge & Allied Industries Ltd., M.N.Dastur & Co(P) Ltd., Kirloskar Consultants Ltd., and Philips IndiaLtd. before joining the Company in 1988. He wasresponsible for Sales, Marketing, and Exports and,latterly, the Welding Consumables Division before hisappointment as Wholetime Director in January 2003.

(ii) Director retiring by rotation and eligible for re-appointment :

Mr. J. Templeman

Mr. J. Templeman is a Bachelor of Arts (OxfordUniversity) and Master of Arts (Oxford University).He is an Associate Member of the Institute ofChartered Accountants in England & Wales.

He worked for 17 years with Price Waterhouse,London, in various capacities rising to Salaried Partner.He also worked for a time at Charter plc., as Directorof Investor Relations. At present he is the ChiefExecutive Officer of the Esab Group.

He is a Director of Esab Holdings Limited and EsabSeah Corporation.

By Order of the Board of Directors

A. Banerjee

Company SecretaryMumbai, 13 April 2004

Registered Office :

Lloyds Centre Point, 2nd floor,


Prabhadevi, Mumbai 400 025.


Explanatory Statement pursuant to Section 173 of theCompanies Act,1956

Item no 4

Mr. S. Tandon has been appointed an Additional Director with

effect from 12 June 2003. Pursuant to the provisions of Article

116 of the Company’s Articles of Association, read with Section

260 of the Companies Act,1956, he holds office upto the date of

this Annual General Meeting. As required by Section 257 of the

Companies Act,1956, notice has been received from a Member

signifying his intention to propose Mr. S. Tandon as a Director.

The Board recommends this resolution for acceptance by the

Members.

None of the Directors, except Mr. S. Tandon, is concerned or

interested in this resolution.

Item no 5

Mr. P. Mallick has been appointed an Additional Director with

effect from 23 October 2003. Pursuant to the provisions of Article

116 of the Company’s Articles of Association, read with Section

260 of the Companies Act,1956, he holds office upto the date of

this Annual General Meeting. As required by Section 257 of the

Companies Act,1956, notice has been received from a Member

signifying his intention to propose Mr. P. Mallick as a Director. The

Board recommends this resolution for acceptance by the

Members.

None of the Directors, except Mr. P. Mallick, is concerned or

interested in this resolution.

Item no 6

The Board of Directors at its meeting held on 27 August 2003

revised the remuneration of Mr. G. Hariharan, Wholetime Director,

for the period from 1 April 2003 until the expiry of his term on 6

January 2004, subject to the approval of the shareholders, to

include :

a) payment by the Company of club fees of one club and

reimbursement of all actual entertainment expenses at the

club reasonably incurred in or about the business of the

Company;

b) reimbursement of the costs of providing electricity at his

residence.

In addition, the Board of Directors at its meeting on 10 March

2004 confirmed the perquisites value of assets installed and

maintained at the residence of Mr. Hariharan (for the period from

7 January 2003 until 6 January 2004) in an amount of Rs.11,889,

subject to the approval of the shareholders.

Your Directors consider the aforesaid revisions in remuneration

commensurate with the duties and responsibilities of the

Wholetime Director and recommend the resolution for

acceptance. This may be treated as an abstract under Section

302 of the Companies Act, 1956.

Mr. G. Hariharan is concerned and interested in the resolution as

it relates to his remuneration.

Item no 7

The term of appointment of Mr. G. Hariharan, Wholetime Director

of the Company, expired on 6 January 2004. The Board of

Directors at its meeting held on 15 December 2003 re-appointed

Mr. G. Hariharan as Wholetime Director (and designated him

Chief Operating Officer) for a period of five years with effect

from 7 January 2004, subject to the approval of the shareholders.

The Board at its meeting on 10 March 2004 made further

adjustments to Mr. Hariharan's remuneration, subject to the

approval of the shareholders.

The remuneration payable and the perquisites to be granted to

Mr. G. Hariharan on his re-appointment, and the other main terms

of his re-appointment as Wholetime Director of the Company,

are as follows :

a) Salary of Rs. 27,000 per month in the scale of Rs. 27,000 -Rs. 75,000 per month with authority to the Board to fix hissalary within this scale.

b) Other Allowances of Rs. 63,000 per month with authority tothe Board to grant such increases as it may considerappropriate, subject to such allowances not exceedingRs. 100,000 per month.

c) Rent free furnished accommodation (or House RentAllowance of 60% of salary in lieu thereof), reimbursementof expenditure on utilities (such as electricity, water andgas) and furnishings including maintenance and repairsthereof, subject to such perquisites being approved by theChairman of the Board and the aggregate value thereof notexceeding an amount equivalent to 150% of annual salary.

d) Reimbursement of actual medical expenses incurred(including hospitalization expenses) in respect of theWholetime Director, his spouse and two dependent children.

e) Pension, Gratuity and Provident Fund as provided for underthe Rules of the relevant Schemes of the Companythereunder as may be amended from time to time.

f) The provision of a suitable car and a telephone at his residencefor official use.

Notice

ANNEXURE TO NOTICE


g) Payment by the Company of club fees of one club and

reimbursement of all actual entertainment expenses at

the club reasonably incurred in or about the business of

the Company.

h) Bonus and incentives in accordance with the policy

applicable to the Management Staff of the Company.

i) Perquisites to be evaluated as per Income Tax Rules

wherever applicable. In the absence of any such rules,

perquisites to be evaluated at actual cost.

j) If in any financial year, during his tenure, the Company

has no profits or its profits are inadequate, the Wholetime

Director shall be paid such remuneration (by way of

salary, allowances and perquisites) as shall be determined

at the discretion of the Board of Directors subject to the

applicable provisions of Schedule XIII of the Companies

Act, 1956 as may be amended from time to time or any

equivalent statutory re-enactment thereof.

k) The Wholetime Director or his spouse or any of his

relatives (as defined in Schedule 1A of the Companies

Act, 1956) shall not without the sanction of the Board of

Directors, accept any office or place of profit in the

Company or its subsidiaries, nor shall any of them accept

any dealership, distributorship or selling agency of the

Company, either directly or indirectly.

l) The Wholetime Director shall not, so long as he functions

as such, engage himself in any business or occupation,

without the sanction of the Board of Directors.

m) The Wholetime Director shall be entitled to annual leave,

sick leave and casual leave in accordance with the rules

applicable to Management Staff of the Company as may

be amended from time to time. He shall be entitled to

encashment of privilege leave standing to his credit at

the cessation of his appointment in accordance with the

rules then applicable to the Management Staff.

n) No sitting fees for attending meetings of the Board of

Directors or Committees thereof.

o) The appointment may be terminated either by the

Company or the Wholetime Director at any time by giving

three months' notice (or salary and allowances in lieu

thereof) to the other party.

The terms and conditions set out above may be treated as an

abstract under Section 302 of the Companies Act, 1956.

Mr. Hariharan is concerned and interested in this resolution as it

relates to his re-appointment. The Board recommends the

resolution for acceptance by the Members.

Item no 8

The equity shares of the Company are currently listed on the

Stock Exchange, Mumbai (BSE), the National Stock Exchange

(NSE) and the Calcutta Stock Exchange (CSE).

The shares of the Company are regularly traded on the BSE and

the NSE. Trading of the Company's equity shares have remained

negligible on the CSE for the past several years.

Under the Securities and Exchange Board of India (Delisting of

Securities) Guidelines, 2003 ('Regulations') the Company may

voluntarily delist its securities from a stock exchange, provided

that the shares of the Company continue to be listed on a stock

exchange that has nationwide trading terminals.

With a view to reducing costs, the Board of Directors at its

meeting on 10 March 2004 decided to delist the Company’s

shares from the CSE subject to Members’ approval and subject

further to receipt of the necessary regulatory approvals.

The proposed voluntary delisting should not adversely affect

investors, especially since the Company's shares have been

specified for settlement only in dematerialised form by all

investors. In addition, investors now have access to online dealing

in the Company’s shares across the country. Pursuant to the

Regulations it is now proposed to seek Members' approval by

way of a special resolution for the voluntary delisting of the

Company's equity shares as set out at Resolution No. 8.

The proposed delisting is in the interests of the Company, and the

Board recommends the resolution for acceptance by Members.

None of the directors of the Company is concerned or interested in

the resolution.

By Order of the Board of Directors

A. Banerjee

Company SecretaryMumbai, 13 April 2004

Registered Office :

Lloyds Centre Point, 2nd floor,


Prabhadevi, Mumbai 400 025


Directors� Report

Your Directors herewith present the Seventeenth Annual Reporttogether with the audited accounts of the Company for the yearended 31 December 2003.

FINANCIAL RESULTS

2003 2002Rs. ’000s Rs. ’000s

Sales and other income 1,524,815 1,414,885

Earnings before interest,tax and depreciation 92,237 (76,577)

Interest 22,441 25,921

Depreciation 55,717 42,079

Operating profit / (loss) 14,079 (144,577)

Non operating items (7,747) (1,928)

Profit / (Loss) before taxation 6,332 (146,505)

Taxation Credit 651 30,333

Profit / (Loss) for the year 6,983 (116,172)

Earnings before interest, tax and depreciation (EBITDA)registered an improvement of Rs. 168.8 million over thecorresponding figure for 2002. EBITDA for the year is statedafter providing for the following :

- Rs. 22.61 million against sundry debtors that are doubtfulof recovery (2002 : Rs. 18.36 million);

- Rs. 21.25 million against slow moving and obsoleteinventories (2002 : Rs. 3.4 million);

- Rs. 24.00 million against the increased costs of employeeretirement benefits (2002 : Rs. 21 million);

- Rs. 2.8 mill ion in respect of voluntary separationcompensation and related costs (2002 : Rs. 26.19 million).

DIVIDEND

In view of the Company’s accumulated losses, a dividend cannotbe recommended for the period under review.

MANAGEMENT DISCUSSION AND ANALYSIS

Increased activity in the primary steel using industries wasreflected in increased demand for welding products throughoutthe year. With the Government’s continuing emphasis oninfrastructure development, the demand for welding consumablesand equipment is expected to remain strong during 2004. YourCompany has geared up its production, marketing and sales, aswell as its service functions, to cater to this demand.

Your Directors expect that the competitive threat from low pricedlocal manufacturers of welding consumables, equipment andgas cutting products will continue. In addition, average realizedprices will continue to be under pressure. However, Management

is reasonably confident that your Company should be able torealize higher prices compared to localised competition by virtueof its superior product and service quality.

The fact that Esab is now the only major international brand witha manufacturing, selling and distribution network across thebroad range of welding products in the Indian market is seen asan opportunity for your Company. As the engineering industry inIndia acquires a more global outlook, demand for your Company’sproducts is expected to improve as customers look increasinglyfor a locally available global brand to improve their internationalcompetitiveness. However, with the lowering of import duties,competition from imports is expected to increase and may leadto a reduction in average price realization, especially at the highvalue end of the product range.

During the year, your Directors brought in special expertise toexamine and develop new Standard Operating Procedures aspart of a commitment to best practices in all systems andbusiness procedures, internal and external. These have nowbeen introduced by Management throughout the Company.Internal controls at all locations have also been subjected torigorous reviews by internal and external auditors, and actionstaken where lapses were identified. This has resulted in improvedinternal audit ratings across all control units in the Company.

Turnover for the year (net of excise duties) recorded a growth ofover 7% to Rs.1,341 million. Gross of excise duty, the 14%growth in welding consumables was offset by a 10% decline insales of the Equipment Division, resulting in an overall increaseof some 8% over the previous year. The increase in turnover inthe Consumables Division was partly due to higher volumes, butthe principal increase came from better price realizations. Thiswas made possible by shifting the focus away from mass market,low price electrodes in favour of higher value types.

The focus on higher value products also helped margins : thoughsales increased by about 8%, there was a 3% reduction in thecost of materials consumed. As a percentage, the cost of materialto sales reduced from 68% to 62%. This reduction was achievedin spite of increases in most input prices, especially in mild steel,which is the Company’s major raw material, where an average5% price increase added approximately Rs.16 million to rawmaterial consumption costs. Combined with improvedproductivity, much emphasis was placed on the management ofcosts; communication and travel costs, in particular, weresignificantly reduced.

The charge to depreciation for the year was increased by Rs.5.09 million as a result of writing down the net book value ofleasehold land and of buildings at Taratala over the remainingperiod of the lease.

The payroll for unionized staff rose by 14%, which was partlycompensated by a reduction in the management payroll of 5%.The cost of the Company’s generous retirement benefits planscontinues to rise as the general level of interest rates declines


with a consequential increase in the cost of purchased annuities.Based on valuations made by the Company’s actuaries, anadditional provision of Rs. 24 million was made in the year in thisrespect.

Overall, the operational profit of the Consumables Divisionincreased almost threefold from Rs. 46 million in 2002 to Rs.132million this year. In the Equipment Division, in spite of variousmeasures, the operational loss increased by Rs. 17 million to12% of sales (previous year 6%). Your attention is drawn to Note19 of Schedule R to the Accounts, which provides details of theperformance of each of these two business segments.

There has been a significant reduction in the amount of ratesand taxes. In the previous year, a provision of Rs. 58 million hadto be created to cover disputed or pending sales taxassessments. A number of the disputed assessments have beenresolved in favour of the Company during 2003, although theoutstanding disputed amounts are significant enough to justifyretention of the entire provision made in 2002.

There is a charge of Rs. 26 million on account of prior perioditems of which Rs. 25 million relates to the Equipment Division.This amount is in respect of raw material consumption, freightcosts and other direct charges that were understated in theAccounts in 2002. Your Directors took a serious view of thislapse in accounting discipline, and disciplinary action was takenagainst two employees in this respect.

Management has continued the focus upon tight control ofinventories, although the total value of inventories has increasedby Rs. 36 million compared to the previous year. This increaseis on account of finished goods and raw material inventories,offset by a reduction in work-in-progress. A major portion of theincrease was due to higher quantities of electrodes and otherconsumable inventories that have been built-up with the increasingvolume of business. Your attention is drawn to Note 26 of ScheduleR to the Accounts, which explains the change to the Company’smethod of estimating the provision for old and obsolete rawmaterial. The new method eliminates subjectivity and is in linewith international practice.

The focus upon debtor management resulted in a reduction inthe net aggregate accounts receivable from Rs. 123 million toRs. 51 million. This helped ease the working capital situationconsiderably.

The major addition to fixed assets was a “layer-winding” machineand the equipment for making wire basket spools at the Nagpurconsumables factory. Rs.18 million was realized from the sale offixed assets, adding Rs.10 million to profits. The sale of vacantland at Khardah, West Bengal, was the major constituent of this item.

The consumables business has continued to improvethroughout 2003 and, barring unforeseen circumstances,should continue to show better results in 2004. The businessis dependent upon the overall volume of steel consumption,

particularly sheet metal, in the country. The growth in demandfrom the automobile and consumer durables sector and thegovernment’s infrastructure spending have helped its growth.The production of electrodes has increased by over 18%, andin recent months the Company’s electrode plants have beenworking to near full capacity.

The profitability of the Equipment business continues to be amatter of concern, although there has been an encouragingimprovement in performance in recent months. A thoroughreview of the product range and production processesemployed at the Equipment Division has been instituted withthe assistance of external consultants who are expected toreport their findings in May 2004.

In 2001, the Company undertook to manufacture certainvarieties of equipment that were then being made at the EsabGroup’s Thailand plant. Unfortunately, the terms agreed by thethen senior management of the Company for the re-location ofthis production facility to India have proved to be fundamentallyunattract ive to the Company. These have now beenrenegotiated.

Having regard to the history of problems in the EquipmentDivision, your Directors have decided to advance theimplementation of Accounting Standard 28, which deals withimpairment in the economic value of assets employed in abusiness. In accordance with that Standard, Rs. 10 million hasbeen written down from the Equipment Division’s fixed assets;although, in accordance with the transition rules of theStandard, the amount has not been charged through the Profitand Loss Account, but directly to reserves. Your attention isdrawn to Note 18 of Schedule R to the Accounts.

Tax for the year has reduced from a credit of Rs. 30 million in2002 to a credit of Rs. 0.65 million in the current year. In 2002,there was also a charge of Rs. 24 million for disputed taxes inrespect of preceding years. The credit for deferred tax issubstantially lower in the current year because of lower taxlosses in 2003. This is partly offset by the increase in deferredtax credits on account of higher provisions for doubtful debtsand an increase in the adjustment under Section 43B of theIncome Tax Act (Note 20 of Schedule R to the Accounts).

The operations for 2003 generated cash of Rs. 84 million,which was substantially used to reduce creditors to a moreacceptable level; although these still remain relatively high, atmore than Rs. 300 million. Operating cash flow, net of changesin working capital, was positive at Rs. 53 million, and was usedto repay borrowings.

RELATED PARTIES

Note 22 of Schedule R to the Accounts sets out the nature oftransactions with related parties. Your Company handles the salesof cutting equipment manufactured by its subsidiary, Esab Holdingand Cutting Systems Limited, Pune. Also, there are small


purchases of specialized equipment from other Esab Groupcompanies, and sales to those companies. All of thesetransactions are done at arm’s length. Overall, the Company isforeign exchange positive with earnings exceeding paymentsby Rs. 32 million (Notes 10, 11 and 12 of Schedule R to theAccounts).

Esab Welding and Cutting Systems Limited is owned 86% byyour Company with the remaining 14% held by another EsabGroup company. It makes specialized cutting equipment, whosecustomers also buy welding equipment and consumables.Consequently, there is synergy between the businesses, andManagement is contemplating action to consolidate the cuttingequipment business with the Company’s mainstream businesses.

CHARTER PLC GROUP

Esab India Limited is a part of the Charter plc Group. TheCompany’s principal shareholder, Esab Holdings Limited, anunlisted company incorporated under the laws of England andWales having its registered office at 50 Curzon Street, LondonW1J 7UW, United Kingdom, holds 37.31% of the paid-up equityshare capital of the Company as at 31 December 2003. EsabHoldings Limited is owned through various intermediarycompanies by Charter plc., the ultimate parent, a listed companyincorporated under the laws of England and Wales having itsregistered office at 52, Grosvenor Gardens, London SW1W OAU,United Kingdom. Charter plc has over 280 subsidiaries andaffiliates. Charter plc, its subsidiaries and affiliates includingCharter Overseas Holdings Limited, Weldcure Limited, EsabHoldings Limited, Exelvia Netherlands BV, Exelvia InternationalHoldings BV, Charter Consolidated plc, Cecil Holdings Limited,Exelvia India BV and Esab International Holdings BV form theCharter plc Group. This information is given pursuant to SEBI(Substantial Acquisition of Shares and Takeover) Regulations,1997, as amended to date.

FINANCE

In June 2003, your Company received a US$ 2.5 million fiveyear loan at a fixed interest rate of 4.5% pa from its majorshareholder, Esab Holdings Limited. This greatly eased theCompany’s reliance on borrowings from local banks.

The sale of a portion of excess vacant land at Khardah forRs. 16.6 million during the year eased the liquidity position furtherand, with the improved cash flow from operations, borrowingsamounting to Rs. 51 million were repaid during the year.

Relationships with the Company’s bankers remained cordialthroughout the year; although one bank has elected to withdrawfrom its lending relationship with the Company. The improvementsin liquidity and operating performance should allow your Companyto receive better banking terms and to reconstitute its bankingsyndicate during 2004.

PREMISES

In November 2003, the lease to approximately half the area thenoccupied at your Company’s offices in Prabhadevi wassurrendered. The Western Regional Sales Office, which hadoccupied that space, was relocated to significantly less expensivepremises in Andheri. During the year, the Southern Regionaloffice was relocated to new leased premises in Chennai, theNorthern Sales Office to new premises in Delhi, and a CentralIndia sales office was opened in Nagpur.

The site of the Company’s former welding consumables plant atKalwa, which is held on lease from the Maharashtra IndustrialDevelopment Corporation, is currently for sale. Your Directorsexpect that the sale of this site will be concluded during 2004.

It is your Directors’ intention to replace, and possibly to relocate,the welding consumables plant at Khardah which is over 45years old. The space currently occupied by the Equipment Factoryat Taratala may be sufficient to include a welding consumablesplant . However, the lease of the land at Taratala occupied by theEquipment Factory is due to expire in October 2005. The lessor,Kolkata Port Trust, has recently put forward lease renewal termswhich would very significantly increase the cost to the Companyof occupying these premises, and materially and adversely affectthe economics of consolidating the Khardah and Taratalaoperations at Taratala. Management is currently assessing all ofthe options available to the Company in this important matter.

SUBSIDIARY

Flotech Welding & Cutting Systems Limited changed its name toEsab Welding & Cutting Systems Limited in order to makeappropriate use of Esab’s brand name for the effective marketingof its products. The Directors’ Report and the Audited Accountsfor the year ended 31 December 2003, along with the Report ofthe Auditors and the statement required under Section 212(1)(e)of the Companies Act, 1956 for Esab Welding & Cutting SystemsLimited, are appended. In view of the general improvement in thestate of the capital goods sector, the subsidiary registered a36% increase in annual turnover to Rs. 23.8 million, and amarginal profit of Rs. 0.54 million for the year.

ENVIRONMENT AND SAFETY

The Company is committed to industrial safety and environmentprotection. The Equipment factory at Taratala and all threeconsumables manufacturing units hold ISO 14001: 1996certification.

DIRECTORS’ RESPONSIBILITY STATEMENT

To the best of their knowledge and belief, and according to theinformation and explanations obtained by them, your Directorsmake the following statement in terms of Section 217(2AA) ofthe Companies Act, 1956 :1. that in the preparation of the annual accounts for the year

ended 31 December 2003, the applicable accountingstandards have been followed;

Directors� Report


2. that the accounting policies mentioned in Note 1 of ScheduleR to the Accounts have been selected and appliedconsistently and judgements and estimates that arereasonable and prudent made so as to give a true and fairview of the state of affairs of the Company at the end of thefinancial year on 31 December 2003 and of the profit of theCompany for that year;

3. that proper and sufficient care has been taken for themaintenance of adequate accounting records inaccordance with the provisions of the Companies Act, 1956for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities;

4. that the annual accounts for the year ended 31 December2003 have been prepared on a going concern basis.

CAUTIONARY STATEMENT

Certain statements in this Directors’ Report may constitute“forward looking statements” within the meaning of applicablelaws and regulations. Actual results may differ materially fromthose either expressed or implied in this Report.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTIONAND FOREIGN EXCHANGE

The information required under Section 217(1)(e) of theCompanies Act, 1956 read with the Companies (Disclosure ofParticulars in the Report of the Board of Directors) Rules, 1988,is given in the Annexure and forms part of this Report.

DIRECTORS

Mr. T. Mitra and Mr. B. Pekkari resigned as Directors of theCompany with effect from 13 June 2003 and 23 October 2003,respectively. Your Directors place on record their sincereappreciation for the contribution made by them during their tenure.

Mr. S. Tandon and Mr. P. Mallick who have been appointed asAdditional Directors of the Company with effect from 12 June2003 and 23 October 2003, respectively, hold office up to theconclusion of the forthcoming Annual General Meeting. A noticehas been received from Members pursuant to Section 257 ofthe Companies Act, 1956 proposing their candidature for theoffice of Director.

Mr. G. Hariharan whose term of office as Wholetime Directorexpired on 6 January 2004 was re-appointed Wholetime Director,and designated Chief Operating Officer, for a period of five yearswith effect from 7 January 2004. Necessary resolutions for theShareholders’ approval of his re-appointment and remunerationare being proposed at the forthcoming Annual General Meeting.

In accordance with the provisions of Article 130 of the Company'sArticles of Association, Mr. J. Templeman retires by rotation atthe forthcoming Annual General Meeting and, being eligible, hasoffered himself for re-appointment.

AUDITORS

Lovelock & Lewes, Chartered Accountants, Mumbai retire asAuditors of the Company at the forthcoming Annual GeneralMeeting and have expressed their desire not to be re-appointed.The Directors recommend that Bharat S. Raut & Co., CharteredAccountants, Mumbai, be appointed as the Company’s auditors,to hold office until the conclusion of the next Annual GeneralMeeting. The Company has received confirmation that theirappointment will be within the limits prescribed under Section224 (1B) of the Companies Act, 1956.

AUDITORS’ REPORT

Note 18 of Schedule R to the Accounts explains that your Directorshave considered it prudent to provide for a Rs. 10 million chargefor impairment in the economic value of the assets of theEquipment Division. In accordance with the relevant AccountingStandard, this charge has not been reduced from profits, buthas been directly debited to reserves. The auditors agree withthis treatment. However, the auditors are of the opinion that theFinancial Statements do not give a true and fair view, becausethe resultant deferred tax adjustment of Rs. 3.6 million has notbeen added to profits. Your Directors are of the view that prudentaccounting requires that the credit not be added to profits whenthe related debit on which it is based has not been reduced fromprofits. It also violates the fundamental accounting rule ofmatching debits with credits. Consequently, your Directors donot agree with the auditors in this regard.

The auditors have also qualified the true and fair view displayedby the Financial Statements because the Wholetime Directorenjoyed certain perquisites worth Rs. 47,000 that are yet to beapproved by the Members. The resolution for their approval iscontained in the agenda for the Annual General Meeting notifiedfor 14 May 2004. The auditors have also qualified their opinionbecause Company has yet to recover the excess remunerationof Rs. 3.25 million drawn by the former Managing Director. Asexplained below, legal proceedings have been commenced forrecovery of this amount. In your Directors’ opinion neither ofthese two matters, in any manner, impairs the true and fair viewdepicted by the attached Financial Statements.

PERSONNEL

At the end of December 2003, the Company had 578 employeesas against 574 at the end of 2002. Your Directors are pleased toreport that industrial relations at all of the Company’s locationsremained cordial during the year.

Unfortunately, disciplinary action had to be taken during the yearagainst four employees who did not meet the high standards offinancial probity and discipline that your Company requires. As aresult, the employment contracts of two of those employeeswere terminated, and the resignations of the two other employeeswere accepted.

Owing to the poor performance of the Equipment Division, nosalary increases were awarded during the year to the senior


management staff employed in that business. Your Directors aregratified at the determination and commitment shown by theDivision to improve its performance and wish to record theirspecial thanks to these individuals for their very significant effortsin a most difficult environment.

The previous Managing Director, Mr. S.K.Bhattacharyya, whoseterm of office ended on 31 January 2003, has filed three separatelegal actions against the Company. One of these relates principallyto the alleged non-payment on account of accumulated leaveand performance bonus in respect of previous years (in whichthe Company recorded significant losses). The largest of thethree actions relates to a claim to a lifelong pension of aboutRs. 212,000 per month (against a pension of about Rs. 31,570per month which he currently receives). Your Directors, and theCompany’s legal advisers, regard these claims to be baselessand entirely without merit and will vigorously defend the Companyagainst these actions. As a result of these claims, contingentliabilities include an amount of Rs. 42 million, which the Companyhas not acknowledged as debts (Note 3 of Schedule R to theAccounts). Your Company has also instituted legal proceedingsagainst Mr. Bhattacharyya for the recovery of excessremuneration drawn by him during 2002. Your Directors, and the

company’s legal advisers, are of the opinion that the Companywould succeed in this claim.

No employee has drawn remuneration during 2003 in excess ofthe limits specified under the Companies (Particulars ofEmployees) Rules, 1975. Accordingly, particulars of employees’remuneration prescribed under Section 217 (2A) of theCompanies Act, 1956 are not attached to this Report.

ACKNOWLEDGMENTS

Your Directors wish to record their appreciation of the supportextended to the Company by its many customers, suppliers andshareholders as well as the Company’s bankers and financialinstitutions.

Your Directors also wish to place on record their appreciation ofthe efforts and contribution of the Company’s employees at alllevels and across different locations all over the country duringthe year.

For and on behalf of the Board of Directors

Homi P. R. MullanChairman

13 April 2004

Statement under Section 217(1)(e) of the Companies Act, 1956read with Companies (Disclosure of Particulars in the Report ofthe Board of Directors) Rules, 1988 and forming part of theDirectors' Report for the year ended 31 December 2003 :

CONSERVATION OF ENERGY :

Energy Conservation Measures :

- Installation of LPG evaporator in SAF heating system toreduce the consumption of LPG;

- Installation of new capacitor bank at Khardah and Nagpurfactories to avoid punitive energy charges;

- Power factor monitoring survey to optimise power factor atTaratala plant.

The energy conservation measures adopted have reducedproduction costs. Energy consumption data is not supplied, sincethe Company does not fall within the list of specified industries.

TECHNOLOGY ABSORPTION :

Research and Development was conducted into :

- Development of new customized electrodes for majorcustomers;

- Introduction of silicate as a part of process upgradation;

- Fine adjustments in the formulations of some criticalelectrodes to meet specified results;

- Eco-friendly packaging in the form of wire baskets for MIGwires;

- Indigenisation of printed circuit boards and transformersfor Power Compact project;

- Development of special current carrying component toenable import substitution and increased machine utilisation.

The Research and Development programme has led to areduction in production costs, the introduction of a wider productrange, improved product quality, and increased exports.

Research and Development is also proposed into theindigenisation of electronic components in the Manley MultiventVentilator.

Expenditure on Research and Development amounted toRs. 2.8 million representing some 0.18% of annual turnover.

The ventilator technology imported in 1999 has been fullyabsorbed.

FOREIGN EXCHANGE :

Export markets are USA, Japan, Singapore, Canada,Bangladesh, Sri Lanka and certain countries in Africa.

During the year, the total foreign exchange expenditure amountedto Rs. 48.13 million (including Rs. 28.27 million for the import ofraw materials, Rs. 1.86 million for the import of components,Rs. 14.9 million for the import of capital goods and Rs. 3.1 milliontowards expenditure in foreign currency).

Foreign exchange earnings in the year, represented by the FOBvalue of exports, amounted to Rs. 80.97 million



13 April 2004

ANNEXURE TO THE DIRECTORS’ REPORT

Directors� Report


The Company is committed to good corporate governance. The

Board of Directors is determined to create an inclusive culture,

which is open and transparent. Policies and procedures that are

designed to secure shareholder value are rigorously

implemented.

BOARD OF DIRECTORS

The Board of Directors currently consists of six members. Other

than the Wholetime Director, all other members of the Board are

non-executive directors, including three who are independent

directors.

Eight Board Meetings were held during the year on :

7 January 2003,

10 February 2003,

8 March 2003,

24 April 2003,

12 June 2003,

27 August 2003,

23 October 2003,

15 December 2003

Director Directorship AttendanceBoard AGM

Mr. H. P. R. Mullan Nominee, 8 YesEsab Holdings Limited

Mr. G. Hariharan Executive 6 Yes Re-appointed on 7 January 2004

Mr. P. Mallick Independent & 2 NA Appointed onNon-Executive 23 October 2003

Mr. N. H. Mirza Independent & 8 YesNon-Executive

Mr. S. Tandon Independent & 2 NA Appointed onNon-Executive 12 June 2003

Mr. J. Templeman Non-Executive 5 Yes

Mr. S. N. Talwar Non-Executive 7 No Ceased to be Alternateto Mr. B. Pekkari on 23 October 2003

Appointed as Alternateto Mr. J. Templemanon 25 October 2003

Ms. A. R. Yapp Non-Executive 3 Yes Ceased to be Alternateto Mr. J.Templeman on 23 October 2003

Mr. B. Pekkari Non-Executive – No Resigned on23 October 2003

Mr. T. Mitra Independent & 4 Yes ResignedNon-Executive on 13 June 2003

Mr. S. K. Bhattacharyya Executive 1 NA Until 31 January 2003

Other Membership of

Directorships* other Board

Committees

Mr. H. P. R. Mullan 1 Nil

Mr. G. Hariharan Nil Nil

Mr. P. Mallick 5 6 (of which 1 as Chairman)

Mr. N.H. Mirza 4 4 (of which 1 as Chairman)

Mr. S. Tandon 2 2

Mr. J. Templeman Nil Nil

Mr. S. N. Talwar 15 10 (of which 4 as Chairman)

* Excluding Alternate Directorships and Directorships of Private

Limited Companies and Foreign Companies, wherever

applicable.

AUDIT COMMITTEE

The terms of reference of the Committee cover the matters

specified under the Listing Agreements and Section 292A of the

Companies Act, 1956. The members of the Committee are:

Mr. N. H. Mirza (Chairman)

Mr. P. Mallick

Mr. S. Tandon

Mr. J. Templeman

The composition of the Audit Committee meets the stipulated

minimum number of independent directors. The Company’s

Corporate Finance Manager, its statutory auditors and its internal

auditors are permanent invitees to the Committee’s meetings.

The Company Secretary is Secretary to the Committee. The

quorum for Committee meetings is two members or one third of

the total strength of the Committee, whichever is higher.

There were five meetings of the Audit Committee held during the

year on :

6 January 2003,

7 March 2003,

24 April 2003,

8 September 2003,

23 October 2003

The number of meetings attended by each member is

as follows :

Mr. N. H. Mirza 5

Mr. P. Mallick 1 (Appointed 23 October 2003)

Mr. S. Tandon 2 (Appointed 12 June 2003)

Mr J. Templeman 3

Mr. T. Mitra 3 (Resigned 13 June 2003)

Corporate Governance


REMUNERATION COMMITTEE

The Company has not set up a Remuneration Committee (whichis not mandatory) as the Board contains only one executive

director. The remuneration of that Director is determined and

approved by the Board of Directors and is subject to the approvalof the Company in general meeting and of other applicable

regulatory and statutory authorities.

During the year under review, Mr. G. Hariharan, the WholetimeDirector, drew remuneration aggregating to some Rs.1.159 million

(excluding pension and gratuity contributions) as set out in

Schedule R Note 13 of the Accounts. He was not paid anyperformance linked incentives during the period under review.

The one year service contract of Mr. Hariharan expired on

6 January 2004. He was however re-appointed as WholetimeDirector for a further period of five years effective from

7 January 2004.

The Company does not grant stock options to any of its Directorsor employees.

The other Indian Directors, who are all non-executive, do not

draw any remuneration from the Company except sitting fees,which in respect of the year ended 31 December 2003 were

paid as follows :

Mr. P. Mallick Rs. 32,000

Mr. N. H. Mirza Rs. 96,000

Mr. T. Mitra Rs. 39,000

Mr. S. N. Talwar Rs. 40,000

Mr. S. Tandon Rs. 39,000

The Directors received no commission in the absence of profits.

The Overseas Directors (Mr. H. P. R. Mullan and Mr. J. Templeman)do not draw any remuneration from the Company.

During the year, the Company paid professional fees (including

advances) amounting to Rs. 449,689 to Crawford Bayley & Co.,Advocates and Solicitors, a firm in which Mr. S. N. Talwar is a Partner.

INVESTORS’ GRIEVANCE COMMITTEE

The Investors’ Grievance Committee (previously, the ShareTransfer cum Investors’ Grievance Committee) now functions

under the Chairmanship of Mr. S. Tandon, a non-Executive

Independent Director. The other members of the Committee areMr. N. H. Mirza, Mr. J. Templeman and Mr. P. Mallick.

Mr. A. Banerjee, Company Secretary, is the Compliance Officerof the Company.

The Directors review the position on all major investors’

grievances at meetings of the Board of Directors and the

Investors’ Grievance Committee.

During the year, the Company received 69 complaints fromshareholders. All the complaints had been resolved to the

satisfaction of the shareholders. As at 31 December 2003 there

were no pending share transfers (other than those sent underobjections or held up because of warning notices sent to the

sellers).

GENERAL BODY MEETINGS

The last three Annual General Meetings of the Company have

been held at Bombay House Auditorium, Bombay House, Mumbai

at 4.00 p.m. All the proposed resolutions, including specialresolutions, were passed by the shareholders as set out in their

respective Notices.

No resolutions were put through postal ballot, and the Company isnot considering the introduction of a postal ballot.

DISCLOSURES

There have been no transactions of a material nature whichpresent a potential conflict of interest.

There has been no non-compliance by the Company, and no

penalties or strictures have been imposed by any regulatory orstatutory authority, on any matter relating to the capital markets

during the last three years.

COMMUNICATION

The Company’s quarterly and half-yearly financial results, after

their approval by the Board of Directors, are promptly issued toall the Stock Exchanges with whom the Company has Listing

arrangements. These financial results, in the prescribed format,

are also published in leading local and national newspapers(including Business Standard and Sakal) as well as being posted

on the Company’s website, www.esabindia.com. The financial

results are also posted on the Electronic Data Information Filingand Retrieval System at www.sebiedifar.nic.in. The half-yearly

report is not sent to individual shareholders.

On occasion, presentations are made to institutional investorsand analysts, after filing of the periodic results with the Stock

Exchanges. A Management Discussion and Analysis forms part of

the Directors’ Report, which is included in the Annual Report.

GENERAL SHAREHOLDER INFORMATION

AGM : Date,Time 4.00 pm on 14 May 2004 at Bombay& Venue House Auditorium, Bombay House,

Homi Mody Street, Mumbai, 400 001

Financial Year January to December

Approval of QE 31 Mar 2004 : Last week, Apr 2004financial results HY 30 Jun 2004 : Last week, Aug 2004

QE 30 Sep 2004 : Last week, Oct 2004

YE 31 Dec 2004 : Last week, Feb 2005



AGM for YE April-May 200531 Dec 2004

Dates of Book 5 May 2004 to 14 May 2004 (both daysClosure inclusive)

Dividend payment No dividend recommended.date

Listing on Stock The Stock Exchange, MumbaiExchanges The National Stock Exchange

The Calcutta Stock Exchange

The Board of Directors at its meeting held on10 March 2004 has approved the voluntarydelisting of the Company’s shares from theCalcutta Stock Exchange, subject to theapproval of the shareholders and compliancewith the provisions of the Securities andExchange Board of India (Delisting ofSecurities Guidelines).

The listing fees for the financial year 2004-05 will be paid within the stipulated time ontheir becoming due.

Stock Code Physical

The Stock Exchange, Mumbai : 500133The National Stock Exchange : ESABINDIAThe Calcutta Stock Exchange :10015010

Demat

INE284A01012

Stock Market Price* Data & Stock Performance :

Mumbai National Calcutta ** BSE Sensex

High Low High Low High Low High Low

Rs Rs Rs Rs Rs Rs

Jan 44 38 44 38 - - 3390 3220

Feb 40 37 40 38 41 38 3322 3223

Mar 38 29 38 29 - - 3277 3049

Apr 33 29 33 29 - - 3215 2924

May 42 31 42 31 - - 3181 2943

Jun 44 39 44 38 - - 3607 3182

Jul 49 41 49 40 - - 3793 3554

Aug 49 42 49 42 - - 4245 3742

Sep 57 45 57 46 - - 4453 4134

Oct 73 53 73 53 - - 4931 4455

Nov 77 67 77 67 - - 5098 4771

Dec 79 68 79 68 79 73 5839 5132

* Share prices are rounded off to the nearest Rupee.

** Except for February 2003 and December 2003, no tradinghas taken place in the Company’s equity shares on theCalcutta Stock Exchange during the year.

Registrars and Share Computech Sharecap Limited

Transfer Agents 147, Mahatma Gandhi Road,

3rd Floor, Fort,

Mumbai – 400 023

Share Transfer System Share transfers are processed and

approved, subject to receipt of all

requisite documents. The Company

seeks to ensure that all transfers are

approved for registration within the

stipulated period. With a view to

expediting the approval process, the

Board of Directors has severally

authorized the Chairman of the Board

of Directors, the Chairman of the

Investors’ Grievance Committee and the

Company Secretary to approve the

transfer of shares.

Distribution of shareholding as on 31 December 2003

Shareholding Shareholders Number of Shares % of total

Upto 500 12,326 2,144,935 13.93

501 - 1000 886 700,401 4.55

1001 - 2000 340 516,595 3.35

2001 - 3000 132 334,957 2.18

3001 - 4000 49 176,550 1.15

4001 - 5000 52 250,270 1.63

5001 - 10000 52 384,872 2.50

10001 and above 60 10,884,440 70.71

Total 13,897 15,393,020 100.00

Shareholding pattern as on 31 December 2003

Number of Shares % of total

Esab Holdings Limited 5,743,200 37.31

Unit Trust of India 1,011,942 6.57

Mutual Funds 556,114 3.61

Banks, Financial Institutions, andInsurance Companies 1,322,565 8.59

Foreign Institutional Investors 1,200 0.01

Corporate Bodies 1,355,542 8.81

Directors and Relatives 1,440 0.01

NRIs / OCBs 39,804 0.26

Indian Public 5,361,213 34.83

15,393,020 100.00


Dematerialisation As on 31 December 2003, 56.30% ofof shares & liquidity the total paid-up equity capital was held

in dematerialised form. 37.31% of thepaid up equity capital which is held byEsab Holdings Limited, a UKincorporated company, has not beendematerialised. The Company hasentered into an Agreement with NationalSecurit ies Depository Limited andCentral Depository Services (India)Limited to offer shareholders the optionto dematerialise their shares withDepositories.

Outstanding GDRs None/ADRs

Plant Locations Plot No.13, 3rd Main Road,Industrial EstateAmbattur, Chennai 600 058

B.T. Road, Khardah, P.O. B.D. SopanNorth 24 Parganas, Kolkata 743 121

B-28, MIDC Industrial Area,Kalmeshwar, Nagpur 441 501

P-41 Taratala Road, Kolkata 700 088

Address for Corporate Affairs Manager &correspondence Company Secretary

Esab India LimitedLloyds Centre Point, 2nd Floor,1096-A, Appasaheb Marathe Marg,Prabhadevi, Mumbai – 400 025Tel : 022 2431 4569/4573/3224Fax: 022 2432 9940E-mail:[email protected]



Mumbai, 10 March 2004

Auditors� Certificate on Corporate Governance

To the Members of Esab India Limited

We have examined the compliance of the conditions of Corporate Governance by Esab India Limited for the year ended 31December 2003 as stipulated in clause 49 of the Listing Agreements of the said Company with the stock exchanges in India.

The compliance of conditions of Corporate Governance is the responsibility of the Company�s management. Our examinationwas limited to the procedures and implementation thereof, adopted by the Company for ensuring the compliance of theconditions of Corporate Governance. It is neither an audit nor an expression of an opinion on the financial statements of theCompany.

In our opinion and to the best of our information and according to the explanations given to us, the Company has compliedwith the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreements.

We state that in respect of investor grievances received during the year ended 31 December 2003, no investor grievances arepending against the Company exceeding one month as per the records maintained by the Company.

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

For Lovelock and LewesChartered Accountants

Place: Mumbai Vasant GujarathiDate: 10 March 2004 Partner



Auditors� Report

To the Members of Esab India Limited :

1. We have audited the attached Balance Sheet of Esab IndiaLimited as at 31 December 2003, the related Profit andLoss Account for the year ended on that date annexedthereto and the Cash Flow Statement for the year endedon that date, which we have signed under reference to thisreport. These financial statements are the responsibility ofthe management of the Company. Our responsibility is toexpress an opinion on these financial statements basedon our audit.

2. We conducted our audit in accordance with auditingstandards generally accepted in India. Those Standardsrequire that we plan and perform the audit to obtainreasonable assurance about whether the financialstatements are free of material misstatement. An auditincludes examining, on a test basis, evidence supportingthe 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 statementpresentation. We believe that our audit provides areasonable basis for our opinion.

3. As required by the Manufacturing and Other Companies(Auditor’s Report) Order, 1988 issued by the CentralGovernment of India in terms of sub-section (4A) of Section227 of the Companies Act, 1956 of India (the ‘Act’) and onthe basis of such checks as we considered appropriateand according to the information and explanations given tous, we set out in the Annexure a statement on the mattersspecified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to inparagraph 3 above, we report that :(a) Read together with our comments in paragraph (d)

below, we have obtained all the information andexplanations, which to the best of our knowledge andbelief were necessary for the purposes of our audit;

(b) In our opinion, proper books of account as requiredby law have been kept by the Company so far asappears from our examination of those books;

(c) The Balance Sheet, Profit and Loss Account and theCash Flow Statement dealt with by this report are inagreement with the books of account;

(d) With reference to Note 22 of Schedule R, ourverification of related party disclosures as requiredunder Accounting Standard 18 - Related PartyDisclosures has been based on the information madeavailable to us by the Company. Read together withthe comments above and subject to our remarks inparagraph (f) below, in our opinion, the Balance Sheet,Profit and Loss Account and the Cash Flow Statementdealt with by this report comply with the accountingstandards referred to in Section 211 (3C) of the Act;

(e) On the basis of written representations received fromthe directors, as on 31 December 2003, and taken onrecord by the Board of Directors, we report that nodirector of the Company is disqualified as on 31December 2003 from being appointed as a director asreferred to in Section 274 (1)(g) of the Act;

(f) In accordance with the transitional provisions ofAccounting Standard 28 - Impairment of Assets, theCompany has accounted for an impairment loss ofRs. 10.0 million relating to its Equipment business byway of an adjustment from the opening balance ofGeneral Reserve. However, the deferred tax creditof Rs. 3.588 million arising on account of impairmentloss has also been adjusted to General Reserve whichis not in accordance with Accounting Standard 22 -Accounting for Taxes on Income, which provides forrecognition of such credit to revenue reserves onlyon the first occasion that the taxes on income areaccounted by an entity in accordance with thatStandard. Consequently, profit for the year isunderstated by Rs. 3.588 million and general reserveis overstated by an equivalent amount (refer Note 18of Schedule R);

(g) The remuneration paid to the Wholetime Directorincludes Rs. 0.047 million towards perquisites whichis subject to the approval of the shareholders of theCompany (refer Note 13 of Schedule R);

(h) The balance amount of excess remuneration ofRs. 3.251 million paid to the former Managing Directorduring the year ended 31 December 2002 isrecoverable from him (refer Note 13 of Schedule R);

(i) Subject to our remarks in paragraphs (f), (g) and (h)above, in our opinion and to the best of our informationand according to the explanations given to us, theBalance Sheet, Profit and Loss Account and the CashFlow Statement together with Schedules A to Rannexed thereto, give in the prescribed manner theinformation required by the Act, and give a true andfair view in conformity with the accounting principlesgenerally accepted in India :i) in the case of the Balance Sheet, of the state of

the affairs of the Company as at 31 December2003;

ii) in the case of the Profit and Loss Account, ofthe profit for the year ended on that date; and

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

For Lovelock & LewesChartered Accountants

Place : Mumbai Vasant GujarathiDate : 10 March 2004 Partner


Annexure referred to in paragraph 3 of the Auditors’ Report of

even date to the members of Esab India Limited on the accounts

for the year ended 31 December 2003 :

1. The Company has maintained proper records to show full

particulars including quantitative details and the location of

its fixed assets. The fixed assets of the Company have

been physically verified during the year by the management.

The discrepancies noticed on such verification have been

properly dealt with in the books of account.

2. The fixed assets of the Company have not been revalued

during the year.

3. The stocks of finished goods, work-in-progress, raw

materials and stores & spare parts of the Company at all

its locations have been physically verif ied by the

management during the year. In respect of stocks lying

with third parties, these have substantially been confirmed

by them. In our opinion, the frequency of physical verification

of stocks is reasonable.

4. The procedures for physical verification of stocks followed

by the management are reasonable and adequate in relation

to the size of the Company and the nature of its business.

5. The discrepancies noticed on such verification between

the physical stocks and the book records were not material

and these have been properly dealt with in the books of

account.

6. On the basis of our examination of stock records we are of

the opinion that the valuation of stocks is fair and proper in

accordance with normally accepted accounting principles

and is on the same basis as in the preceding year.

7. The Company has taken an unsecured loan from Esab

Holdings Limited, in which a director is interested. The rate

of interest and other terms and conditions of such loan are

not prima facie prejudicial to the interests of the Company.

The Company has not taken any other loans, secured or

unsecured, from companies, firms or other parties listed in

the register maintained under Section 301 of the Act. In

terms of sub-section (6) of Section 370 of the Act, provisions

of the Section are not applicable to a company on or after

the commencement of The Companies (Amendments) Act,

1999, of India.

8. The Company has not granted any loans, secured or

unsecured, to companies, firms or other parties listed in

the register maintained under Section 301 of the Act. In

terms of sub-section (6) of Section 370 of the Act, provisions

of the Section are not applicable to a company on or after

the commencement of The Companies (Amendment) Act,

1999, of India.

9. The parties, including employees, to whom loans (or

advances in the nature of loans) have been given by the

Company are repaying the principal amounts as stipulated

and are also regular in the payment of interest, where applicable.

10. In our opinion and having regard to the explanations that

some of the items are of a special nature for which alternate

quotations are not available, there are adequate internal

control procedures commensurate with the size of the

Company and the nature of its business for purchases of

stores, raw materials including components, plant and

machinery, equipment and other assets and for the sale of

goods.

11. In our opinion, in respect of purchases of raw materials,

made in pursuance of contracts or arrangements with

parties listed in the register maintained under Section 301

of the Act (and aggregating during the year to Rs.50,000 or

more in respect of each party), no comparison of prices

could be made since the raw materials were of a highly

special nature and there were no other transactions of a

similar nature with other parties. There are no transactions

for purchase of goods and sale of goods, materials and

services made in pursuance of contracts or arrangements

entered in the register maintained under Section 301 of the Act.

12. The Company has a regular procedure for the determination

of unserviceable or damaged stores, raw materials and

finished goods and necessary adjustment for any resultant

loss has been made in the accounts.

13. The Company has not accepted any deposits from the public.

14. In our opinion, reasonable records have been maintained

by the Company for the sale and disposal of realisable

scrap. As explained to us, there are no by-products.

15. In our opinion, the Company has an internal audit system

commensurate with its size and the nature of its business.

16. The maintenance of cost records has not been prescribed

by the Central Government of India under Section 209 (1) (d)

of the Act, for the products manufactured by the Company.

17. The Company has generally been regular during the year

in depositing Provident Fund and Employees’ State

Insurance dues, with the appropriate authorities in India.

However, as regards Employees’ State Insurance dues,

pertaining to the employees of Kolkata establishments,

consequent to the amendment in the Employees’ State

Insurance Act with effect from 1 January 1997, the

Company has neither deducted nor deposited such

contributions during the year, in view of an interim stay

order granted by the Honourable Calcutta High Court.

Auditors� Report


18. There were no undisputed amounts payable in respect ofincome tax, wealth tax, sales tax, customs duty and exciseduty as at 31 December 2003, which were outstanding for

more than six months from the date they became payable.

19. During the course of our examination of the books of

account carried out in accordance with generally accepted

auditing practices in India, we have not come across any

personal expenses of employees or directors which have

been charged to the Profit and Loss Account, nor have we

been informed of any such cases by the management

other than those payable under contractual obligations

and / or accepted business practices.

20. The Company is not a sick industrial company within the

meaning of clause (o) of Section 3(1) of the Sick Industrial

Companies (Special Provisions) Act, 1985, of India.

21. In respect of the Company’s trading activities, damaged

goods have been determined and necessary adjustment

for any resultant loss has been made in the accounts.

For Lovelock & LewesChartered Accountants

Place : Mumbai Vasant GujarathiDate : 10 March 2004 Partner


Balance Sheetas at 31 December 2003

2002

Schedule Rs.’000 Rs.’000 Rs.’000

SOURCES OF FUNDS

SHAREHOLDERS’ FUNDS

Share Capital A 153,930 153,930

Reserves and Surplus B 110,590 110,590

264,520 264,520

LOAN FUNDS

Secured Loans C 69,065 237,084

Unsecured Loans D 114,835 –

183,900 237,084

DEFERRED TAX LIABILITY(Refer Note 20 of Schedule R) 60,303 67,664

508,723 569,268

APPLICATION OF FUNDS

FIXED ASSETS E

Gross Block 742,633 733,484

Less: Depreciation 320,318 261,308

Net Block 422,315 472,176

Capital Work-in-progress including Advances – 1,089

422,315 473,265

INVESTMENTS F 5,271 5,271

DEFERRED TAX ASSET (Refer Note 20 of Schedule R) 133,427 136,324

CURRENT ASSETS, LOANS AND ADVANCES

Inventories G 161,470 125,088

Sundry Debtors H 50,890 123,465

Cash and Bank Balances I 30,135 50,836

Loans and Advances J 44,364 40,547

286,859 339,936

LESS :

CURRENT LIABILITIES AND PROVISIONS

Liabilities K 393,980 444,765

Provisions L 12,581 8,746

406,561 453,511

NET CURRENT ASSETS (119,702) (113,575)

PROFIT AND LOSS ACCOUNT M 67,412 67,983

508,723 569,268

Notes to Accounts R

The Schedules referred to above form an integral part of the Balance Sheet

In terms of our report of even date

For Lovelock & Lewes For and on behalf of the Board of DirectorsChartered Accountants H. P. R. Mullan Chairman


P. Mallick DirectorVasant Gujarathi N. H. Mirza DirectorPartner S. N. Talwar Director

S. Tandon Director

A. Banerjee Company SecretaryMumbai, 10 March 2004


Profit and Loss Accountfor the year ended 31 December 2003

2002

Schedule Rs.’000 Rs.’000

INCOME

Sales (Gross) 1,524,815 1,414,885

Less: Excise Duty 183,684 164,618

Sales (Net) 1,341,131 1,250,267

Other Income N 16,526 13,351

1,357,657 1,263,618

EXPENDITURE

Materials O 826,030 848,617

Manufacturing, Selling and Administrative Expenses P 439,390 491,578

Interest Q 22,441 25,921


1,343,578 1,408,195

OPERATING PROFIT 14,079 (144,577)

Diminution in the value of investment – (1,928)

Profit on sale of land (Refer Note 29 of Schedule R) 10,832 –

Provision for liabilities no longer requiredwritten back (Refer Note 28 of Schedule R) 7,880 –

Prior period expenses (26,459) –

PROFIT / (LOSS) BEFORE TAXATION 6,332 (146,505)

Taxation (Refer Notes 20 and 23 of Schedule R) 651 30,333

PROFIT / (LOSS) AFTER TAXATION 6,983 (116,172)

Balance brought forward from previous year (116,172) –

BALANCE CARRIED TO BALANCE SHEET (109,189) (116,172)

Earnings per share : (Refer Note 21 of Schedule R)

Basic Rs. 0.45 Rs. (7.55)

Diluted Rs. 0.45 Rs. (7.55)

Notes to Accounts R

The Schedules referred to above form an integral part of the Profit and Loss Account





S. Tandon Director



2002Rs.’000 Rs.’000

A. SHARE CAPITAL

Authorised:17,000,000 Equity Shares of Rs.10 each 170,000 170,0003,000,000 Unclassified Shares of Rs.10 each 30,000 30,000

200,000 200,000Issued and Subscribed:

15,393,020 Equity Shares of Rs.10 each fully paid up(of which 999,000 shares were allotted as fully paid uppursuant to a Scheme of Amalgamation) 153,930 153,930

B. RESERVES AND SURPLUS

Amalgamation ReserveAs per last Balance Sheet 10,000 10,000

Securities Premium AccountAs per last Balance Sheet 93,190 93,190

Special Capital Incentive SubsidyAs per last Balance Sheet 2,000 2,000

Investment Allowance Reserve AccountAs per last Balance Sheet 5,400 5,400

General ReserveAs per last Balance Sheet 48,189 48,189

Impairment loss on Fixed Assets (10,000) –

Deferred Tax credit on account of impairment 3,588 –

41,777 48,189

Less : Debit Balance in Profit and Loss Account 41,777 48,189(as per contra - Schedule M) – –

110,590 110,590

C. SECURED LOANS

Term Loans from Banks 65,800 100,000

Cash Credits from Banks 3,265 23,260

Working Capital Demand Loans from Banks – 113,300

Interest Accrued and Due – 524

69,065 237,084

Notes :Term Loans are secured by the hypothecation of movable assets (excluding stocks and debtors) of the Company.Cash Credits and Working Capital Demand Loans from Banks are secured by the hypothecation of stocks and debtors.Term Loans include amounts repayable within one year of Rs. 36.8 million (previous year Rs. 34.2 million).

D. UNSECURED LOANS

Long Term LoanExternal Commercial Borrowings 114,835 –

A fixed rate term loan from Esab Holdings Limited, UK, which holds 37.31% of the equity share capital of the Company. The loan is denominated in USdollars (US $ 2.5 million) and is for a term of 5 years at a fixed interest rate of 4.5% per annum, payable half yearly. Repayment is to be made in 5 equalhalf yearly instalments beginning on 1 July 2006.

Schedules to the Accounts31 December 2003


E. FIXED ASSETS

(Refer Notes 16 to 18 and 29 of Schedule R)

Rs. ’000

Freehold Leasehold Building Plant & Furniture & Motor Total 2002

Land Land Machinery Fixtures Vehicles

GROSS BLOCK AT COST

As at 1 January 2003 40,557 18,261 135,247 510,772 12,573 16,074 733,484 735,435

Additions – – 436 24,217 311 725 25,689 21,035

Reclassification – – (10,304) 11,025 (889) 168 – –

Deductions 5,737 – 179 8,806 1,649 169 16,540 22,986

As at 31 December 2003 34,820 18,261 125,200 537,208 10,346 16,798 742,633 733,484

DEPRECIATION

As at 1 January 2003 – 7,830 29,749 213,544 4,883 5,302 261,308 232,245

Additions – 179 9,070 42,687 1,854 1,526 55,316 42,079

Reclassification – – (2,106) 2,557 (168) 118 401 –

Asset Impairment – – 1,529 7,856 368 247 10,000 –

Deductions – – 134 5,370 1,076 127 6,707 13,016

As at 31 December 2003 – 8,009 38,108 261,274 5,861 7,066 320,318 261,308

NET BLOCK

As at 31 December 2003 34,820 10,252 87,092 275,934 4,485 9,732 422,315

As at 31 December 2002 40,557 10,431 105,498 297,228 7,690 10,772 472,176

Capital Work in Progress – 1,089

including Advances

F. INVESTMENTS (UNQUOTED)

Long term investment at cost (net of provision for diminution in value),in Subsidiary Company Esab Welding & Cutting Systems Limited :1,200,000 (previous year 1,200,000) Equity Shares of Rs.10 each

fully paid up 5,271 5,271

G. INVENTORIES

Raw and Packing Materials 69,223 50,968

Work-in-Process 10,283 27,132

Finished Goods 78,549 42,794

Stores and Spare Parts 3,415 4,194

161,470 125,088

2002Rs.’000 Rs.’000



H. SUNDRY DEBTORS (UNSECURED)

Over six months -Considered Good 3,495 15,313Considered Doubtful 33,385 21,268

Others, Considered Good 47,395 108,152

84,275 144,733

Less : Provision for Doubtful Debts 33,385 21,268

50,890 123,465

I. CASH AND BANK BALANCES

Cash on hand 469 452

Cheques on hand and remittances in transit 25,419 39,945

Balances with Scheduled Banks on Current Account 3,780 10,014

Margin money with bank 467 425

30,135 50,836

J. LOANS AND ADVANCES

Secured

Vehicle Loans to employees 902 1,503

(Secured against hypothecation of vehicles)

Unsecured, considered good unless otherwise stated

Advances to Esab Welding & Cutting Systems Limited,

a Subsidiary Company 3,251 2,525

Advances recoverable in cash or in kind or for value

to be received

Considered Good 36,040 34,453

Considered Doubtful 3,994 –

40,034 34,453

Less : Provision for doubtful advances 3,994 36,040 – 34,453

Balances with Customs, Port Trust, Excise, etc. 4,171 2,066

44,364 40,547

K. CURRENT LIABILITIES

Sundry Creditors (Refer Notes 14 and 15 of Schedule R) 313,640 348,161

Customers’ Credit Balances 26,707 29,882

Other Liabilities 49,649 64,396

Unclaimed Dividends * 1,124 1,269

Interest accrued and not due 2,860 1,057

393,980 444,765

* There is no amount due and outstanding to be credited to the Investor Education and Protection Fund.

2002Rs.’000 Rs.’000



2002Rs.’000 Rs.’000


L. PROVISIONS

Provision for Income-tax less advance tax payments 12,581 8,746

12,581 8,746

M. PROFIT AND LOSS ACCOUNT

Debit Balance in Profit and Loss Account 109,189 116,172

Less : As per Contra in General Reserve (Schedule B) 41,777 48,189

67,412 67,983

N. OTHER INCOME

Scrap Sales 9,163 7,386

Less : Excise Duty 1,352 7,811 1,044 6,342

Commission 1,101 –

Miscellaneous 7,614 7,009

16,526 13,351

O. MATERIALS

Raw & Packing Materials Consumed 704,139 602,788

Purchases of Finished Goods 140,797 126,013

844,936 728,801

(Increase) / Decrease in Finished Goods & Work-in-Process

Opening Stock



69,926 189,742

Closing Stock



88,832 69,926

(18,906) 119,816

826,030 848,617


2002Rs.’000 Rs.’000

P. MANUFACTURING, SELLING AND ADMINISTRATIVE EXPENSES

Salaries, Wages and Bonus 100,070 95,208

Contributions to Provident and Other Funds 37,798 35,226

Workmen and Staff Welfare Expenses 12,249 12,798

Voluntary Separation Compensation and related payments 2,871 26,193

Consumption of Stores and Spare parts 22,111 13,974

Power and Fuel 53,843 48,642

Repairs : Buildings 4,591 5,833

Plant and Machinery 5,937 5,778

Others 6,729 7,413

Rent 16,250 15,477

Rates and Taxes 3,081 61,780

Excise Duty 7,050 (19,802)

Insurance 3,723 3,371

Provision for Doubtful Debts 22,612 21,268

Less : Writeback of provisions, no longer required – 22,612 (2,903) 18,365

Bad Debts written off 10,495 29,113

Less : Provision 10,495 – 29,113 –

Transport and Freight 25,317 18,706

Communication Costs 13,167 16,109

Travelling, Conveyance and Motor Car Expenses 28,141 37,765

Special Discounts and Commissions 5,080 6,912

Loss on sale of fixed assets (net) 338 2,039

Fixed Assets written off 2,555 4,105

Advertising 445 1,519

Sundry balances written off – 3,250

Provision for doubtful advances 3,994 –

Exchange differences (net) 1,715 2,630

Provision for warranty cost 1,000 –

Miscellaneous Expenses 58,723 68,287

439,390 491,578

Q. INTEREST

On Fixed Loans 12,263 8,814

On Other Loans 10,693 17,613

22,956 26,427

Less : Interest income including interest on income tax refund 515 506

[tax deducted at source Rs.0.06 million (previous year Rs.0.11million)]

22,441 25,921



1. Accounting Policies

a) The accounts have been prepared to comply in all material aspects with applicable accounting principles in India, the

Accounting Standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies

Act, 1956.

b) Fixed assets are stated at cost and in the case of projects include identifiable incidental and installation expenses and

interest on funds borrowed in order to bring the assets into use. An impairment loss is recognised wherever the carrying

value of the fixed assets of a cash generating unit exceeds its market value or value in use, whichever is higher.

c) Depreciation for the year is provided on the straight line method at the rates and in the manner specified in Schedule XIV of

the Companies Act, 1956, except for the cost of buildings and leasehold land at Taratala, Kolkata, which has been amortised

over the remaining lease period.

d) Inventories of raw and packing materials are valued at the lower of cost and net realisable value on a First-In-First-Out

basis. Work-in-process and finished goods are valued at the lower of cost and net realisable value. Costs are generally

calculated at standards adjusted to actuals, and in the case of manufactured inventories include cost of conversion and

other costs incurred in bringing the inventories to their present location and condition. Inventories of stores and spare parts

are valued at cost.

e) Voluntary Separation Compensation and related payments including payments made in instalments are charged to the Profit

and Loss Account during the year in which they are incurred.

f) Revenue from the sale of goods is recognised on despatch to the customer. Sales are net of trade discounts and rebates.

g) The liabilities for gratuity, pension and leave salary are assessed actuarially.

h) Foreign currency transactions are accounted at the exchange rates prevailing on the date of the relevant transaction.

Foreign currency monetary assets and liabilities are restated at rates ruling at the year end. Exchange differences relating

to the liability incurred for the purchase of fixed assets are adjusted in the cost of the assets. Other exchange differences

are dealt with in the Profit and Loss Account.

i) The excise duty in respect of closing inventory of finished goods is included as part of inventory. The amount of CENVAT

credits in respect of materials consumed for sales is deducted from the cost of materials consumed.

j) Current tax is determined on the basis of the amount of tax payable on taxable income for the year.

Deferred tax is calculated at the current statutory income tax rate and is recognised on timing differences between taxable

income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

Deferred tax assets are recognised and carried forward only to the extent that there is reasonable certainty that sufficient

future taxable income will be available against which such deferred tax assets can be realised.

k) Investments are stated at cost. Provision is made for diminution if, in the opinion of the management, the diminution is other

than temporary.

l) The accounting policies adopted for segment reporting are in line with the accounting policies of the Company.

Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the

segment. Revenue and expenses which relate to the enterprise as a whole, and not allocable to segments on a reasonable

basis, have been included under the heading “other common expenses”.

R. NOTES FORMING PART OF THE ACCOUNTS

Notes to the Accounts (Schedule R)31 December 2003


2002

Rs.’000 Rs.’000

2 Estimated amount of contracts remaining to be executedon capital account and not provided for (net of advances) 403 14,548

3. Contingent Liabilities

For disputed taxes and duties 219,354 221,410(Interest and penalty, if any, payable on contingent liability relatingto sales tax and excise duty demands are presently not ascertainable.)

Guarantee given to bank on behalf of Subsidiary Company 20,900 20,900(Facilities outstanding - Rs. 5.51 million (previous year - Rs. 6.88 million))

Claims against the Company not acknowledged as debts 42,579 –

4. Auditors’ Remuneration

Audit fees 700 800

Tax Audit and Tax Accounts 425 319

Certification 70 56

Other Professional Services 525 525

Out of pocket expenses 70 34

5. Particulars of Licensed and Installed Capacity and Actual Production

2003 2002Licensed Installed Actual Licensed Installed Actual

Unit Capacity Capacity* Production Capacity Capacity* Production

Welding Electrodes ’000 Mtrs 341,148 151,200 129,471 267,996 151,200 109,736

Continuous Electrodes/Copper Coated Wires Tonnes 7,640 6,100 5,172 4,640 6,100 4,098

Automatic SubmergedArc Electrodes Tonnes 480 – – 480 – –

MS Welding Rods(Copper Coated) Tonnes 360 200 91 360 200 47

Welding Fluxes Tonnes 7,061 2,140 896 7,061 2,140 785

Gas & Electric Welding &Cutting Equipment &Accessories Nos. 69,790 140,837 84,010 69,790 140,837 87,147

Gas Cylinder Valves Nos. 74,000 61,000 – 74,000 61,000 –

Cutting Unit & Small Tools Nos. 6,000 7,500 – 6,000 7,500 –

Medical Equipment Nos. 6,650 7,772 4,527 6,650 7,772 7,992

Industrial Voltage Regulators& Stabilizer Equipment Nos. 12,000 – – 12,000 – –

Flux Cored Wires Tonnes 2,600 – – 2,600 – –

Industrial UninterruptedPower Supply System Nos. 2,000 – – 2,000 – –

* As certified by the Management.



6. Particulars of Closing Stocks of Finished Goods

2002 2001

Unit Qty V alue Qty Value Qty Value

Rs.’000 Rs.’000 Rs.’000

Welding Electrodes Pcs (‘000s) 7,842 17,138 3,623 9,824 43,758 88,561

Tonnes 161 22,668 33 5,850 58 10,195

Continuous Electrodes/

Copper Coated Wires Tonnes 43 2,733 13 663 368 17,472

Welding Fluxes Tonnes 25 1,376 30 1,824 23 1,622

Gas & Electric Welding &Cutting Equipment &Accessories 28,137 20,453 38,756

Gas Cylinder Valves Nos. 479 110 426 98 426 98

Medical Equipment &Accessories 4,870 3,418 7,576

Others 1,517 664 1,471

78,549 42,794 165,751

7. Particulars of Sales

2002

Unit Qty V alue Qty Value

Rs.’000 Rs.’000

Welding Electrodes Pcs (‘000s) 304,649 663,073 304,847 590,844

Tonnes 672 182,125 528 140,731

Continuous Electrodes/

Copper Coated Wires Tonnes 5,159 241,375 4,422 198,552

Welding Fluxes Tonnes 892 50,458 745 42,244

Gas & Electric Welding &Cutting Equipment &

Accessories 318,060 328,613

Medical Equipment & Accessories 37,636 65,539

Others 32,088 48,362

1,524,815 1,414,885

Notes : i) Separate information for purchases, stock and turnover of traded items is not conveniently available; these are included in the above

figures.

ii) Quantitative data for equipment and spares is not given as it covers a large variety of items, which would not be meaningful in aggregate.Special electrodes, for which separate licenses were issued for some plants, are included with Welding Electrodes.



8. Details of Raw & Packing Materials consumed

2002

Quantity (Tonnes) V alue Rs.’000 Quantity (Tonnes) Value Rs.’000

Mild Steel 16,443 309,363 13,580 241,893

Non-Ferrous Metals 246 54,788 231 42,505

Minerals 5,021 82,215 4,713 74,888

Chemicals 2,155 82,327 1,912 77,860

Piece Parts 121,923 118,251

Others 53,523 47,391

704,139 602,788

9. Value of Imported and Indigenous Raw & Packing Materials, Components and Stores & Spare Parts consumed

Value Rs.’000 % age of Total Consumption

2003 2002 2003 2002

Raw & Packing Materials & Components

Imported 40,956 40,850 5.8 6.8

Indigenous 663,183 561,938 94.2 93.2

704,139 602,788 100.0 100.0

Stores & Spare Parts

Imported 2,483 357 11.2 2.6

Indigenous 19,628 13,617 88.8 97.4

22,111 13,974 100.0 100.0

2003 2002

Rs.’000 Rs.’000

10. C.I.F. Value of Imports

Raw Materials 28,276 28,566

Components 1,859 352

Capital Goods 14,910 6,077

45,045 34,995

11. Expenditure in Foreign Currency

Technical Know-how Fee – 881

Travelling expenses 237 851

Royalty 50 713

Interest 2,777 –

Others 96 550

3,160 2,995

12. Earnings in Foreign Exchange

FOB Value of Exports 79,818 79,995


Others 48 –

80,967 79,995



13. Managerial Remuneration

2002

Rs.’000 Rs.’000 Rs.’000 Rs.’000

A) Computation of net profit in accordance withSection 198 of the Companies Act, 1956 :

Profit / (Loss) before Tax as per Profit & Loss Account 6,332 (146,505)

Add: Directors' remuneration 1,628 6,137

Provision for Bad & Doubtful Debts/advances 26,606 18,365

Loss on Investment in Subsidiary Company – 1,928

Loss on sale of Fixed Assets (net) 338 3,817

Voluntary Separation Compensation andrelated payments 2,871 26,193


33,998 60,545

Less: Excess remuneration to Managing Directorcredited to Profit and Loss Account – 3,922


Profit on sale of land 10,832 –

Excess of expenditure over income pertaining toprevious year to the extent not adjusted 131,702 12,707

153,029 45,742

(112,699) (131,702)

In view of the net loss resulting from the computation under Section 198 of the Companies Act, 1956, no commission is

payable to the Directors.

B) Managerial remuneration :

i) Wholetime Directors

Salary 997 2,530

Contribution to Provident Fund 103 304

Perquisites 282 3,192

1,382 6,026

ii) Non wholetime Directors

Sitting fees 246 111

246 111

Notes:

a) The above remuneration includes Rs. 0.047 million reimbursed to the Wholetime Director towards perquisites, in variation of the terms andconditions of appointment, pending approval of the shareholders.

b) The above remuneration excludes provision for contribution to pension and gratuity funds, since these are based on actuarial valuations doneon an overall company basis.

c) In view of the computation pursuant to Section 198 [read with Section 309 (5)] of the Companies Act, 1956 resulting in a loss for the year 2002,the remuneration paid to the then Managing Director during the year 2002 is in excess of the limit specified under Schedule XIII of the CompaniesAct, 1956. The Company has taken legal steps to recover the balance excess remuneration of Rs. 3.251 million.



14. Sundry Creditors include :

a) Rs. 5.43 million (previous year Rs. 3.30 million) advance payment received for sale of excess vacant land at

the Khardah factory, West Bengal.

b) Rs. 1.96 million (previous year Rs. 2.87 million) payable to Esab Welding & Cutting Systems Limited, a Subsidiary

Company.

15. Sundry Creditors comprise Rs. 20.11 million (previous year Rs. 12.61 million) outstanding to Small Scale Industrial Undertakings

and Rs. 293.53 million (previous year Rs. 335.55 million) to other Creditors. Amounts due to the following Small Scale

Industrial Undertakings (on the basis of information available with the Company) are outstanding for more than 30 days :

Basanti Enterprise, Bharat Electronics & Electricals, Chemicals & Meters, Components & Equipments, Das Moulding & Engg

Works, Die Casting Corporation, Eastern Lamination Pvt. Ltd., Eastern Mechanical Industries, Electrical Micanite Corporation,

EPC Electricals Limited, Fairdeal Corporation, Ferro Curves, Hatim Dielectrics Pvt. Ltd., JBA Eng Works, Kanchan Engineering

Corporation, Laminations Core Fabricators, Progressive Rubber Works, Psco, R.K.Enterprises, Ragsons Industry, Sarada

Steel Industries, Senate Engineering Industries, Standard Engineering & Tool Maker, Sun Electrical Engineering Co., Supersmelt,

Superstar Cable Industries, Tara Spring & Engineering Co., Techno Enterprise, Welding Technocrats, Yetazu Instrumentation.

16. Based on management's expectation that the lease would be renewed, buildings constructed on leasehold land at Taratala,

Kolkata, were hitherto depreciated at the rates and in the manner prescribed in Schedule XIV of the Companies Act, 1956.

During the year, the Company has depreciated these buildings over the remaining lease period on account of uncertainties

arising in respect of the renewal of the lease. Consequently, the depreciation charge for the year is higher by Rs. 5.09 million.

17. The written down value of Fixed Assets includes Rs.25.84 million (previous year Rs. 27.86 million) in respect of assets at

Kalwa, which are not used for productive purposes and are held for disposal.

18. Asset Impairment

As a matter of prudent accounting practice, the Company, has adopted Accounting Standard 28: Impairment of Assets. An

impairment loss of Rs. 10.00 million has been recognised in relation to the Company’s Equipment Division (a cash generating

unit and a primary reportable segment) on the basis of the present value of future expected cash flows and the net book value

of assets.

As per the transitional provisions of the Accounting Standard, the impairment loss has been adjusted against the General

Reserve. The deferred tax credit of Rs. 3.59 million arising on account of the impairment loss has been credited to General

Reserve (Schedule B). Fixed assets are recognised net of the impairment loss with respect to the Equipment Division.

The Equipment Division's operations have resulted in losses in the past several years. In management’s opinion, the carrying

value of the net assets employed in the Equipment business exceeds the present value of the future estimated cash flows.

The lowering of import tariffs has further exposed the Division to competition from imports. However, the sale of equipment

remains an important part of the Company's business, complementing the sale of consumables.

The class of assets to which the impairment loss is recognised is mentioned in Schedule E. A 14% p.a. discounting rate was

used in the calculation of the impairment loss.



19. Business Segments

The Company has two business (and primary) segments, which have been identified by the type of their respective products and

services, their differing risks and returns, the Company’s orgainisation structure and internal financial reporting systems.

Consumables : Welding electrodes, Copper coated wires and Welding fluxes

Equipment : Welding machines and Cutting equipment

Rs.’000

CONSUMABLES EQUIPMENT TOTAL

2003 2002 2003 2002 2003 2002

External sales (Gross) 1,168,923 1,021,449 355,892 393,436 1,524,815 1,414,885

Segment results 131,837 45,740 (41,990) (24,728) 89,847 21,012

Less: Interest (Net) 22,441 25,921

Other common expenses 34,615 141,596

Prior period expenses 26,459 –

Total Profit / (Loss) before tax 6,332 (146,505)

Capital employed

Segment Assets 514,899 518,882 148,044 239,684 662,943 758,566

Common Assets 184,929 196,230

Total Assets 847,872 954,796

Segment Liabilities 162,582 189,469 85,947 94,829 248,529 284,298

Common Liabilities 402,235 473,961

Total Liabilities 650,764 758,259

Segment Capital Employed 352,317 329,413 62,097 144,855 414,414 474,268

Common Capital Employed (217,306) (277,731)

Total Capital Employed 197,108 196,537

Segment Capital Expenditure 24,376 13,379 435 6,525 24,811 19,904

Common Capital Expenditure 878 1,131

Total Capital Expenditure 25,689 21,035

Segment Depreciation 36,596 31,022 11,359 6,688 47,955 37,710

Common Depreciation 7,762 4,369

Total Depreciation 55,717 42,079

Segment non cash expenditure 6,942 5,678 19,914 16,933 26,856 22,611

Common non cash expenditure (5,833) 4,982

Total non cash expenditure 21,023 27,593

Prior period expenses of Rs. 26.46 million comprise Rs. 24.66 million relating to the Equipment segment and Rs. 1.80 millionrelating to the Consumables segment.



20. Deferred taxation

2002

Rs.’000 Rs.’000 Rs.’000 Rs.’000

Deferred Tax Asset -

Unabsorbed Losses * 12,422 30,170

Unabsorbed Depreciation * 63,000 59,033

Voluntary Separation Compensation and related payments(debited to Profit and Loss Account but deductible for taxover five equal annual instalments) 10,205 14,310

Provision for doubtful debts / advances 13,143 7,816

Amounts disallowed under Section 43B of the Income-tax 33,911 24,249Act, 1961

Provision for royalty 746 133,427 746 136,324

Deferred Tax Liability -

Excess of net block over written down value as per theprovisions of the Income-tax Act, 1961 (60,303) (67,664)

73,124 68,660

* In the opinion of the management, the Company will havesufficient taxable profits to recoup unabsorbed losses anddepreciation in subsequent periods.

21. Earnings per Share

2003 2002

Basic Earnings per Share Rs. 0.45 Rs. (7.55)

Diluted Earnings per Share Rs. 0.45 Rs. (7.55)

Nominal value per Share Rs. 10.00 Rs. 10.00

Earnings per share are calculated by dividing the profit / (loss)

attributable to the equity shareholders by the weighted average

number of equity shares outstanding during the year

Profit / (Loss) after taxation Rs.’000 6,983 Rs.’000 (116,172)Weighted average number of shares outstanding ’000s 15,393 ’000s 15,393



22. Related Party Disclosures

a) Parties where control exists

i) Esab Holdings Limited Principal Shareholder

Holds 37.31% of the paid up equity share capital of the Company

as at 31 December 2003. Charter Overseas Holdings Limited,

the holding company of Esab Holdings Limited, is a subsidiary of

Charter plc, the ultimate holding company.

ii) Esab Welding & Cutting Systems Limited Subsidiary Company

85.71% of whose paid up equity share capital is held by the

Company as at 31 December 2003.

iii) Charter plc Group Related parties in the Charter plc Group where common control

exists include :

Esab AB, Sweden

Esab Cutting Systems GmbH, Germany

The Esab Group Inc., USA

Esab SA Industria e Comercio, Brazil

Conarco Alambres y Soldaduras S.A., Argentina

Esab Asia/Pacific Pte Limited, Singapore

Howden Power Limited, Northern Ireland

Howden Sirocco SA, France

Burton Corblin SA, France

Ventilatoren Sirocco Howden BV, Netherlands

Turbowerke Meissen Howden GmbH, Germany

Voith Howden GmbH, Germany

Howden Power A/S, Denmark

Howden Power Spain S. L., Spain

Howden Buffalo Inc., USA

Howden Hua Engineering Co Limited, China

Howden African Holdings Limited, South Africa

Howden Food Equipment Inc., USA

HD Engineering Limited, Hong Kong

Esab Automation Limited, England & Wales

ESAB Limited, England & Wales

Murex Welding Products Limited, England & Wales

Murex Limited, England & Wales

Murex Welding Products (Ireland) Limited, England & Wales

Hancock Cutting Machines Limited, England & Wales

Brinal Limited, England & Wales

Filarc Welding Limited, England & Wales

Arcos Welding Products Limited, England & Wales

Bilston Wire Mill Limited, England & Wales

Esta Properties (UK) Limited, England & Wales

Esab Group (UK) Limited, England & Wales

Charter Overseas Holdings Limited, England & Wales

Weldcure Limited, England & Wales



Esab Holdings Limited, England & Wales

Exelvia Netherlands BV, Netherlands

Exelvia International Holdings BV, Netherlands

Charter Consolidated plc, England & Wales

Cecil Holdings Limited, England & Wales

Exelvia India BV, Netherlands

Esab International Holdings BV, Netherlands

b) Key Management Personnel

Managing Director Mr.S.K.Bhattacharyya (until 31st January, 2003)

Wholetime Director Mr.G.Hariharan (appointed on 7th January, 2003 and

reappointed on 7th January, 2004)

c) Transactions and outstanding balances with Related Parties

Rs.’000Common Key Management

Nature of Transaction Control Exists [a(i)] Subsidiary[a(ii)] Control [a(iii)] Personnel [b] Total

2003 2002 2003 2002 2003 2002 2003 2002 2003 2002

Loan taken 117,335 – 117,335 –

Interest on Loan 2,777 – 2,777 –

Purchase of goods 19,445 17,088 11,281 12,788 30,726 29,876

Sale of goods 126 82 22,111 9,857 22,237 9,939

Service Charges received 13 – 13 –

Royalty Expense – 513 – 513

Expenses recharged 190 530 190 530by subsidiary

Expenses recharged 777 746 777 746to subsidiary

Guarantees in favour 5,514 6,878 5,514 6,878of subsidiary

Remuneration 1,382 2,104 1,382 2,104

Recovery of expenses – 620 – 620

Rent paid for residential flat – 438 – 438

Sale of Assets 300 – 300 –

Outstanding payables (net) 117,045 – – 342 – 539 – – 117,045 881

Outstanding receivables(net) 1,289 – 6,556 – 3,251 3,922 11,096 3,922

The companies listed at Note 22(a) above have been identified on the basis of information available with the Company.



23. Taxation

2002

Rs.’000 Rs.’000

Tax provision for current year 225 –

Tax provision for earlier years – 24,000

Deferred Tax Credit` 876 54,333

651 30,333

24. The Company has taken various residential and office premises under operating lease or leave & licence agreements. These are

generally cancellable; have a term of between 11 months and 3 years, and have no specific obligations for renewal. Lease

payments are recognised in the statement of Profit and Loss Account under Rent in Schedule P.

25. Sales are net of quantity discounts and incentives.

26. During the year, the Company has changed its method of estimating the provision for old and obsolete inventory. The provision

is calculated either on the basis of an ageing analysis or by specifically identifying obsolete items through a technical evaluation,

whichever yields the higher amount. Owing to this change in method, profit is lower by Rs. 6.06 million with a corresponding

decrease in raw material inventory.

27. In the last quarter of 2003, the Company provided an aggregate amount of Rs. 60.00 million in respect of accelerated depreciation,

doubtful debts, write off of fixed assets, write down of inventories and additional provision towards pension.

28. Provision for liabilities no longer required written back is on account of

2003 2002

Rs.'000 Rs. ‘000

Purchases 2,265 –

Salaries, Wages and Bonus 1,494 –

Rates and Taxes 2,506 –

Transport and Freight 278 –

Miscellaneous Expenses 351 –

Deposits 986 –

7,880 –

29. Profit on sale of land of Rs.10.8 million represents profit on sale of excess vacant land situated at Khardah.



30. Additional Information as required under Part IV of Schedule VI to the Companies Act, 1956. :

Balance Sheet Abstract and Company’s General Business Profile :

I. Registration Details

Registration No. State Code

Balance Sheet Date

Date Month Year

II. Capital raised during the year (Rs ’000)

Public Issue Rights Issue

Bonus Issue Private Placement

III. Position of Mobilisation and Deployment of Funds (Rs ’000)

Total Liabilities* Total Assets*

* Includes Deferred Tax Liabilities * Net of Current Liabilities & Provisions

* Includes Deferred Tax Asset anddebit balance in Profit and Loss Account

Source of funds (Rs ’000)

Paid-up Capital Reserves & Surplus

Secured Loans Unsecured Loans

Deferred Tax Liability

Application of funds (Rs ’000)

Net Fixed Assets Investments

Net Current Assets Misc. Expenditure

Accumulated Losses Deferred Tax Assets

4 5 2 5 1 1 1

3 1 1 2 0 3

N I L N I L

N I L N I L

5 0 8 7 2 3 5 0 8 7 2 3

1 5 3 9 3 0 1 1 0 5 9 0

6 9 0 6 5 1 1 4 8 3 5

6 0 3 0 3

4 2 2 3 1 5 5 2 7 1

(-) 1 1 9 7 0 2 N I L

6 7 4 1 2 1 3 3 4 2 7



IV. Performance of Company (Rs ’000)

Turnover * Total Expenditure

* includes other income

+/- Profit/Loss Before Tax +/- Profit/Loss After Tax

Earnings per Share Dividend Rate %

V. Generic Names of Three Principal Products / Services of Company

Item Code(ITC Code)

Product Description

Item Code(ITC Code)

Product Description

Item Code(ITC Code)

Product Description

31. The previous year’s figures have been regrouped or reclassified wherever necessary.

Schedules A to R form an integral part of the Accounts.

1 3 7 6 3 6 9 1 3 7 0 0 3 7

6 3 3 2 6 9 8 3++

0 . 4 5 - - -

8 3 1 1 1 0 . 0 0

W E L D I N G E L E C T R O D E S

8 5 . 1 5

A R C M A C H I N E SW E L D I N G

C O P P E R

7 2 2 9 9 0 . 0 6

C O A T E D W I R E S

For and on behalf of the Board of DirectorsH. P. R. Mullan ChairmanG. Hariharan Chief Operating Officer

P. Mallick DirectorN. H. Mirza DirectorS. N. Talwar DirectorS. Tandon Director




2002

Rs. ’000 Rs. ’000

A. CASH FLOW FROM OPERATING ACTIVITIES :Profit / (Loss) before Tax 6,332 (146,505)

Voluntary Separation Compensation and related payments 2,871 26,193Profit on sale of Land (10,832) –Loss on Sale of Fixed Assets (Net) 338 2,039Fixed Assets written off 2,555 4,105Diminution in the value of Investment – 1,928Unrealised Exchange Differences (259) 932Depreciation 55,717 42,079Interest - net 22,441 25,921Provision for Doubtful Advances 3,994 –Provision for Doubtful Debts 22,612 18,365

Operating Profit before Working Capital Changes 105,769 (24,943)Trade and Other Receivables 41,963 (9,522)Inventories (36,382) 122,282Trade Payables (42,450) (29,629)

Cash Generated from Operations 68,900 58,188Voluntary Separation Compensation and related payments (19,083) (22,576)Direct Taxes Paid - Net 3,610 (291)

Net Cash from Operating Activities [A] 53,427 35,321

B. CASH FLOW FROM INVESTING ACTIVITIESPurchase of Fixed Assets (24,600) (15,303)Sale of Fixed Assets 17,772 3,826Advance against Sale of Fixed Assets 5,431 –Interest Received 515 506

Net Cash used in Investing Activities [B] (882) (10,971)

C. CASH FLOW FROM FINANCING ACTIVITIESProceeds from Borrowings (51,273) (7,691)Dividend Paid / Transfer to Investor Education and Protection Fund (157) (467)Interest Paid (21,816) (25,794)

Net Cash used in Financing Activities [C] (73,246) (33,952)NET DECREASE IN CASH AND CASH EQUIVALENTS [A+B+C] (20,701) (9,602)CASH AND CASH EQUIVALENTS AS AT 1st JANUARY, 2003 50,836 60,438CASH AND CASH EQUIVALENTS AS AT 31st DECEMBER, 2003 30,135 50,836

Notes :i) Cash and Cash Equivalents include:

(a) Cash and Bank balances other than those mentioned in (b) below. 26,924 43,562(b) Cash and Bank balances not available for use by the Company 3,211 7,274Cash and Bank balances not available for use by the Company include margin money, 30,135 5 0 , 8 3 6unclaimed dividends and debenture interest.

ii) The above cash flow statement has been prepared under the ‘Indirect Method’ as set out in AccountingStandard - 3 on “Cash Flow Statements” issued by the Institute of Chartered Accountants of India.

iii) Previous year’s figures have been regrouped or reclassified wherever necessary.

Cash Flow Statementfor the year ended 31 December 2003





S. Tandon Director



Auditors� Report on Consolidated Accounts

To the Directors of Esab India Limited :

1. We have audited the attached consolidated Balance Sheet

of Esab India Limited (the Company) and its subsidiary as

at 31 December 2003, the consolidated Profit and Loss

Account for the year ended on that date annexed thereto,

and the consolidated Cash Flow Statement for the year

ended on that date which we have signed under reference

to this report. These consolidated financial statements are

the responsibility of the management of the Company. Our

responsibility is to express an opinion on these financial

statements based on our audit.

2. We conducted our audit in accordance with auditing

standards generally accepted in India. Those Standards

require that we plan and perform the audit to obtain

reasonable assurance about whether the financial

statements are prepared, in all material respects, in

accordance with an identified financial reporting framework

and are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the

amounts and disclosures in the financial statements. An

audit also includes assessing the accounting principles

used and significant estimates made by management, as

well as evaluating the overall f inancial statement

presentation. We believe that our audit and the report of

the other auditor (referred to in paragraph 3 below) provide

a reasonable basis for our opinion.

3. We did not audit the financial statements of Esab Welding &

Cutting Systems Limited (formerly Flotech Welding &

Cutting Systems Limited) whose financial statements reflect

total assets of Rs. 19.548 million as at 31 December 2003

and total revenues of Rs. 21.0 million for the year ended on

that date. These financial statements have been audited by

another auditor whose unqualified report has been furnished

to us, and our opinion, insofar as it relates to the amounts

included in respect of this subsidiary, is based solely on

the report of the other auditor.

4. We report that the consolidated financial statements have

been prepared by the Company in accordance with the

requirements of Accounting Standard 21, Consolidated

Financial Statements, issued by the Institute of Chartered

Accountants of India and on the basis of the separate

audited financial statements of Esab India Limited and its

subsidiary.

5. With reference to Note 14 of Schedule R, our verification of

related party disclosures as required under Accounting

Standard 18 - Related Party Disclosures has been based

on the information made available to us by the Company.

6. In accordance with the transitional provisions of Accounting

Standard 28 - Impairment of Assets, the Company has

accounted for an impairment loss of Rs. 10.0 million relating

to its Equipment business by way of an adjustment from

the opening balance of General Reserve. However, the

deferred tax credit of Rs. 3.588 million arising on account

of impairment loss has also been adjusted to General

Reserve which is not in accordance with Accounting

Standard 22 - Accounting for Taxes on Income, which

provides for recognition of such credit to revenue reserves

only on the first occasion that the taxes on income are

accounted by an entity in accordance with that Standard.

Consequently, profit for the year is understated by Rs.

3.588 million and general reserve is overstated by an

equivalent amount (refer Note 9 of Schedule R).

7. The remuneration paid to the Wholetime Director includes

Rs. 0.047 million towards perquisites which is subject to

the approval of the shareholders of the Company.

8. The balance amount of excess remuneration of Rs.3.251

million paid to the former Managing Director during the

year ended December 31, 2002 is recoverable from him.

9. On the basis of the information and explanations given to

us, read together with our comments in paragraph (5) above

and on the consideration of the separate audit reports on

the individual audited financial statements of Esab India

Limited and its subsidiary, subject to our comments in

paragraphs (6), (7) & (8) above, in our opinion, the financial

statements give a true and fair view in conformity with

accounting principles generally accepted in India:

a. in the case of the consolidated Balance Sheet, of

the consolidated state of affairs of Esab India Limited

and its subsidiary as at 31 December 2003;

b. in the case of the consolidated Profit and Loss

Account, of the consolidated results of operations

of Esab India Limited and its subsidiary for the year

ended on that date; and

c. in the case of the consolidated Cash Flow Statement,

of the consolidated cash flows of Esab India Limited

and its subsidiary for the year ended on that date.

For Lovelock & Lewes

Chartered Accountants

Place : Mumbai Vasant Gujarathi

Date : 10 March 2004 Partner


2002

Schedule Rs.’000 Rs.’000 Rs.’000

SOURCES OF FUNDS



Reserves and Surplus B 110,590 110,590

264,520 264,520

MINORITY INTEREST C 954 877

LOAN FUNDS

Secured Loans D 74,046 242,413

Unsecured Loans E 114,835 –

188,881 242,413

DEFERRED TAX LIABILITY (Refer Note 11 of Schedule R) 60,303 67,664

514,658 575,474


FIXED ASSETS G

Gross Block 752,897 743,664

Less: Depreciation 325,908 266,474

Net Block 426,989 477,190

Capital Work-in-progress including Advances – 1,089

426,989 478,279

DEFERRED TAX ASSET (Refer Note 11 of Schedule R) 133,427 136,324


Inventories F 169,707 131,659

Sundry Debtors H 51,205 123,559

Cash and Bank Balances I 30,335 51,434

Loans and Advances J 42,073 38,843

293,320 345,495

LESS :

CURRENT LIABILITIES AND PROVISIONS

Liabilities K 396,650 446,055

Provisions L 9,382 6,553

406,032 452,608

NET CURRENT ASSETS (112,712) (107,113)

PROFIT AND LOSS ACCOUNT M 66,954 67,984

514,658 575,474

Notes to Accounts R

Consolidated Balance Sheetas at 31 December 2003

The Schedules referred to above form an integral part of the Balance Sheet





S. Tandon Director



2002

Schedule Rs.’000 Rs.’000

INCOME

Sales (Gross) 1,529,961 1,415,858

Less : Excise Duty 184,129 164,641

Sales (Net) 1,345,832 1,251,217

Other Income N 16,788 13,721

1,362,620 1,264,938

EXPENDITURE

Materials O 824,485 845,381

Manufacturing, Selling and Administrative Expenses P 444,301 496,012

Interest Q 23,100 26,690


1,348,027 1,410,605

OPERATING PROFIT 14,593 (145,667)

Profit on sale of Land (Refer Note 21 of Schedule R) 10,832 –Provision for liabilities no longer required written back (Refer Note 20 of Schedule R) 7,902 –

Prior period expenses (26,459) –

PROFIT / (LOSS) BEFORE TAXATION 6,868 (145,667)

Taxation (Refer Notes 11 & 15 of Schedule R) 651 30,333

PROFIT / (LOSS) AFTER TAXATION 7,519 (115,334)

Minority Interest (77) 156

PROFIT / (LOSS) AFTER MINORITY INTEREST 7,442 (115,178)

Balance brought forward from previous year (115,178) –

BALANCE CARRIED TO BALANCE SHEET (107,736) (115,178)

Earnings per share : (Refer Note 12 of Schedule R)

Basic Rs. 0.48 Rs. (7.48)

Diluted Rs. 0.48 Rs. (7.48)

Notes to Accounts R

Consolidated Profit and Loss Accountfor the year ended 31 December 2003

The Schedules referred to above form an integral part of the Profit and Loss Account





S. Tandon Director



2002

Rs.’000 Rs.’000

A. SHARE CAPITAL

Authorised:

17,000,000 Equity Shares of Rs. 10 each 170,000 170,000

3,000,000 Unclassified Shares of Rs. 10 each 30,000 30,000

200,000 200,000

Issued and Subscribed:15,393,020 Equity Shares of Rs.10 each fully paid up(of which, 999,000 shares were allotted as fully paid uppursuant to a Scheme of Amalgamation) 153,930 153,930

B. RESERVES AND SURPLUS

Amalgamation Reserve

As per last Balance Sheet 10,000 10,000

Securities Premium Account


Special Capital Incentive Subsidy


Investment Allowance Reserve Account


General Reserve


Impairment Loss on Fixed Assets (10,000) –

Deferred Tax credit on account of impairment 3,588 –

40,782 47,194

Less : Debit Balance in Profit and Loss Account 40,782 47,194(as per contra-Schedule M) – –

110,590 110,590

Schedules to the Consolidated Accounts31 December 2003

C. MINORITY INTEREST

As per last Balance Sheet 877 1,033

Transferred from Profit and Loss Account 77 (156)

954 877


D. SECURED LOANS

Term Loans from Banks / Institutions 65,800 100,000

Cash Credits from Banks 8,246 28,589

Working Capital Demand Loans from Banks – 113,300

Interest Accrued and Due – 524

74,046 242,413

Notes :

Term Loans are secured by the hypothecation of movable assets (excluding stocks and debtors) of Esab India Limited.Cash Credits and Working Capital Demand Loans from Banks are secured by the hypothecation of stocks and debtors in the case of Esab India Limitedand by the hypothecation of stocks, debtors and plant & machinery and the mortgage of immovable property in the case of Esab Welding & CuttingSystems Limited.

Term Loans include amounts repayable within one year of Rs. 36.8 million (previous year Rs. 34.2 million).

E. UNSECURED LOANS

Long Term Loan

External Commercial Borrowings 114,835 –

A fixed rate term loan from Esab Holdings Limited, UK, which holds 37.31% of the equity share capital of Esab India Limited. The loan is denominatedin US dollars(US $ 2.5 million) and is for a term of 5 years at a fixed interest rate of 4.5% per annum, payable half yearly. Repayment is to be madein 5 equal half yearly instalments beginning on 1 July 2006.

F. INVENTORIES

Raw and Packing Materials 73,845 54,706



Stores and Spare Parts 3,415 4,194

169,707 131,659


2002

Rs.’000 Rs.’000


Rs. ’000

Freehold Leasehold Building Plant & Furniture & Motor Total 2002

Land Land Machinery Fixtures Vehicles

GROSS BLOCK AT COST

As at 1 January 2003 40,912 18,261 139,714 515,510 13,193 16,074 743,664 745,300

Additions – – 436 24,301 311 725 25,773 21,741

Reclassification – – (10,304) 11,025 (889) 168 -– –

Deductions 5,737 -– 179 8,806 1,649 169 16,540 23,377

As at 31 December 2003 35,175 18,261 129,667 542,030 10,966 16,798 752,897 743,664

DEPRECIATION

As at 1 January 2003 – 7,830 31,738 216,290 5,314 5,302 266,474 237,335

Additions – 179 9,220 42,922 1,893 1,526 55,740 42,522

Reclassification – – (2,106) 2,557 (168) 118 401 –

Asset Impairment – – 1,529 7,856 368 247 10,000 –

Deductions – – 134 5,370 1,076 127 6,707 13,383

As at 31 December 2003 – 8,009 40,247 264,255 6,331 7,066 325,908 266,474

NET BLOCK

As at 31 December 2003 35,175 10,252 89,420 277,775 4,635 9,732 426,989

As at 31 December 2002 40,912 10,431 107,976 299,220 7,879 10,772 477,190

Capital Work in Progress – 1,089including Advances

G. FIXED ASSETS(Refer Notes 7 to 9 and 21 of Schedule R)

2002

Rs.’000 Rs.’000

H. SUNDRY DEBTORS (UNSECURED)

Over six months –


Considered Doubtful 33,919 21,802

Others, Considered Good 47,677 108,246

85,124 145,361

Less : Provision for Doubtful Debts 33,919 21,802

51,205 123,559



I. CASH AND BANK BALANCES

Cash on hand 475 458

Cheques on hand and remittances in transit 25,419 39,945

Balances with Scheduled Banks on Current Account 3,841 10,219

Margin money with banks 600 812

30,335 51,434

J. LOANS AND ADVANCES

Secured

Vehicle Loans to employees 902 1,503

(Secured against hypothecation of vehicles)

Unsecured, considered good unless otherwise stated

Advances recoverable in cash or in kind or for

value to be received


Considered Doubtful 3,994 –

40,741 35,021

Less : Provision for doubtful advances 3,994 36,747 – 35,021

Balances with Customs, Port Trust, Excise, etc. 4,424 2,319

42,073 38,843

K. CURRENT LIABILITIES

Sundry Creditors (Refer Note 6 of Schedule R) 315,941 349,135

Customers’ Credit Balances 26,721 29,903

Other Liabilities 50,004 64,691

Unclaimed Dividends * 1,124 1,269

Interest accrued and not due 2,860 1,057

396,650 446,055

* There is no amount due and outstanding to be credited to the Investor Education andProtection Fund

L. PROVISIONS

Provision for Income-tax less advance tax payments 9,382 6,553

2002

Rs.’000 Rs.’000



M. PROFIT AND LOSS ACCOUNT

Debit Balance in Profit and Loss Account 107,736 115,178

Less : As per Contra in General Reserve (Schedule B) 40,782 47,194

66,954 67,984

N. OTHER INCOME

Scrap Sales 9,163 7,386

Less : Excise Duty 1,352 7,811 1,044 6,342


Miscellaneous 7,876 7,379

16,788 13,721

O. MATERIALS

Raw & Packing Materials Consumed 719,286 599,337

Purchases of Finished Goods 124,887 126,013

844,173 725,350

(Increase) / Decrease in Finished Goods & Work-in-Process

Opening Stock



72,759 192,790

Closing Stock



92,447 72,759

(19,688) 120,031

824,485 845,381

2002

Rs.’000 Rs.’000



2002

Rs.’000 Rs.’000

P. MANUFACTURING, SELLING AND ADMINISTRATIVE EXPENSES

Salaries, Wages and Bonus 101,994 97,136

Contributions to Provident and Other Funds 37,946 35,350

Workmen and Staff Welfare Expenses 12,413 12,959

Voluntary Separation Compensation and related payments 2,871 26,193

Consumption of Stores and Spare parts 22,111 13,974

Power and Fuel 54,216 49,002

Repairs :

Buildings 4,591 5,833

Plant & Machinery 5,966 5,809

Others 6,816 7,435

Rent 16,250 15,477

Rates and Taxes 3,241 61,926

Excise Duty 7,060 (19,681)

Insurance 3,723 3,371

Provision for Doubtful Debts 22,612 21,268

Less : Write back of provisions, no longer required – 22,612 (2,903) 18,365


Less : Provision 10,495 – 29,113 –

Transport and Freight 25,366 18,784

Communication Costs 13,167 16,109

Travelling, Conveyance and Motor Car Expenses 28,937 38,466

Special Discounts and Commissions 5,080 6,912

Loss on sale of fixed assets (net) 338 2,039


Advertising 445 1,519

Sundry balances written off – 3,250

Provision for doubtful advances 3,994 –

Exchange differences (net) 1,715 2,630

Provision for warranty cost 1,000 –

Miscellaneous Expenses 59,894 69,025

444,301 496,012

Q. INTEREST

On Fixed Loans 12,263 8,814

On Other Loans 11,360 18,413

23,623 27,227

Less : Interest income including interest on income tax refund 523 537[tax deducted at source Rs. 0.06 million (previous year Rs. 0.11 million)]

23,100 26,690



R. NOTES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Consolidation

The consolidated financial statements of Esab India Limited and its subsidiary, Esab Welding & Cutting Systems Limited

have been prepared to comply in all material aspects with generally accepted accounting principles in India and applicable

Accounting Standards issued by the Institute of Chartered Accountants of India.


a) Fixed assets are stated at cost and in the case of projects include identifiable incidental and installation expenses and

interest on funds borrowed in order to bring the assets into use. An impairment loss is recognised wherever the

carrying value of the fixed assets of a cash generating unit exceeds its market value or value in use, whichever is

higher.

b) Depreciation for the year is provided on the straight line method at the rates and in the manner specified in Schedule

XIV of the Companies Act, 1956, except for the cost of buildings and leasehold land at Taratala, Kolkata, which has

been amortised over the remaining lease period.

c) Inventories of raw and packing materials are valued at the lower of cost and net realisable value on a First-In-First-

Out basis. Work-in-process and finished goods are valued at the lower of cost and net realisable value. Costs are

generally calculated at standards adjusted to actuals, and in the case of manufactured inventories include cost of

conversion and other costs incurred in bringing the inventories to their present location and condition. Inventories of

stores and spare parts are valued at cost.

d) Voluntary Separation Compensation and related payments including payments made in instalments are charged to

the Profit and Loss Account during the year in which they are incurred.

e) Revenue from the sale of goods is recognised on despatch to the customer. Sales are net of trade discounts and

rebates.

f) The liabilities for gratuity, pension and leave salary for Esab India Limited are assessed actuarially. For Esab Welding

& Cutting Systems Limited, provision for gratuity is made as per The Payment of Gratuity Act, 1972 and liability for

leave salary is calculated on the unavailed accumulated leave balance of employees on the basis of their current

salaries.

g) Foreign currency transactions are accounted at the exchange rates prevailing on the date of the relevant transaction.

Foreign currency monetary assets and liabilities are restated at rates ruling at the year end. Exchange differences

relating to the liability incurred for the purchase of fixed assets are adjusted in the cost of the assets. Other exchange

differences are dealt with in the Profit and Loss Account.

h) The excise duty in respect of closing inventory of finished goods is included as part of inventory. The amount of

CENVAT credits in respect of materials consumed for sales is deducted from the cost of materials consumed.

i) Current tax is determined on the basis of the amount of tax payable on taxable income for the year.

Deferred tax is calculated at the current statutory income tax rate and is recognised on timing differences between

taxable income and accounting income that originate in one period and are capable of reversal in one or more

subsequent periods. Deferred tax assets are recognised and carried forward only to the extent that there is reasonable

certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

j) The accounting policies adopted for segment reporting are in line with the accounting policies adopted in the consolidated

financial statements.

Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities

of the segment. Revenue and expenses which relate to the enterprise as a whole, and not allocable to segments on

a reasonable basis, have been included under the heading “other common expenses”.

Notes to the Consolidated Accounts (Schedule R)31 December 2003


2002

Rs.’000 Rs.’000

3. Estimated amount of contracts remaining to be executed

on capital account and not provided for (net of advances) 403 14,548

4. Contingent Liabilities

For disputed taxes and duties 224,933 225,867

(Interest and penalty, if any, payable on contingent liability relatingto sales tax and excise duty demands are presently not ascertainable.)

Bank Guarantees 533 1,549

Claims against the Company not acknowledged as debts 42,579 –


Audit fees 730 823

Tax Audit and Tax Accounts 425 319

Certification 70 56


Out of pocket expenses 70 34

6. Sundry Creditors include Rs. 5.43 million (previous year Rs. 3.30 million) advance payment received for sale of excess vacant

land at the Khardah factory, West Bengal.

7. Based on management’s expectation that the lease would be renewed, buildings constructed on leasehold land at Taratala,

Kolkata, were hitherto depreciated at the rates and in the manner prescribed in Schedule XIV of the Companies Act, 1956. During

the year, the Company has depreciated these buildings over the remaining lease period on account of uncertainties arising in

respect of the renewal of the lease. Consequently, the depreciation charge for the year is higher by Rs. 5.09 million.

8. The written down value of Fixed Assets includes Rs. 25.84 million (previous year Rs. 27.86 million) in respect of assets at Kalwa,

which are not used for productive purposes and are held for disposal.

9. Asset Impairment

As a matter of prudent accounting practice, the Company, has adopted Accounting Standard 28: Impairment of Assets. An

impairment loss of Rs. 10.00 million has been recognised in relation to the Company’s Equipment Division (a cash generating unit

and primary reportable segment) on the basis of the present value of future expected cash flows and the net book value of assets.

As per the transitional provisions of the Accounting Standard, the impairment loss has been adjusted against the General

Reserve. The deferred tax credit of Rs. 3.59 million arising on account of the impairment loss has been credited to General

Reserve (Schedule B). Fixed assets are recognised net of the impairment loss with respect to the Equipment Division.

The Equipment Division’s operations have resulted in losses in the past several years. In management’s opinion, the carrying

value of the net assets employed in the Equipment business exceeds the present value of the future estimated cash flows. The

lowering of import tariffs has further exposed the Division to competition from imports. However, the sale of equipment remains an

important part of the Company’s business, complementing the sale of consumables.

The class of assets to which the impairment loss is recognised is mentioned in Schedule G. A 14% p.a. discounting rate was used

in the calculation of the impairment loss.



10. Business Segments

The Company has two business (and primary) segments, which have been identified by the type of their respective products and

services, their differing risks and returns, the Company’s orgainisation structure and internal financial reporting systems.

Consumables : Welding electrodes, Copper coated wires and Welding fluxes

Equipment : Welding machines and Cutting equipment

Rs.’000

CONSUMABLES EQUIPMENT TOTAL

2003 2002 2003 2002 2003 2002

External sales (Gross) 1,168,923 1,021,449 361,038 394,409 1,529,961 1,415,858

Segment results 131,837 45,740 (40,817) (25,048) 91,020 20,692

Less: Interest (Net) 23,100 26,690

Other common expenses 34,593 139,669

Prior period expenses 26,459 –

Total Profit / (Loss) before tax 6,868 (145,667)

Capital Employed

Segment Assets 514,899 518,882 159,180 250,258 674,079 769,140

Common Assets 179,657 190,958

Total Assets 853,736 960,098

Segment Liabilities 162,582 189,469 88,617 96,119 251,199 285,588

Common Liabilities 404,017 477,097

Total Liabilities 655,216 762,685

Segment Capital Employed 352,317 329,413 70,563 154,139 422,880 483,552

Common Capital Employed (224,360) (286,139)

Total Capital Employed 198,520 197,413

Segment Capital Expenditure 24,376 13,379 519 7,231 24,895 20,610

Common Capital Expenditure 878 1,131

Total Capital Expenditure 25,773 21,741

Segment Depreciation 36,596 31,022 11,783 7,131 48,379 38,153

Common Depreciation 7,762 4,369

Total Depreciation 56,141 42,522

Segment non cash expenditure 6,942 5,678 19,914 16,933 26,856 22,611

Common non cash expenditure (5,833) 4,982

Total non cash expenditure 21,023 27,593

Prior period expenses of Rs. 26.46 million comprise Rs. 24.66 million relating to the Equipment segment and Rs. 1.80 millionrelating to the Consumables segment.



2002

Rs.’000 Rs.’000 Rs.’000 Rs.’000

11. Deferred taxation

Deferred Tax Asset -

Unabsorbed Losses * 12,422 30,170

Unabsorbed Depreciation * 63,000 59,033

Voluntary Separation Compensation and related payments(debited to Profit and Loss Account but deductible for taxover five equal annual installments) 10,205 14,310

Provision for doubtful debts/advances 13,143 7,816

Amounts disallowed under Section 43B of the Income-taxAct, 1961 33,911 24,249

Provision for royalty 746 133,427 746 136,324

Deferred Tax Liability -

Excess of net block over written down value as per

the provisions of Income-tax Act, 1961 (60,303) (67,664)

73,124 68,660

* In the opinion of the management, the Company will have

sufficient taxable profits to recoup unabsorbed losses and

depreciation in subsequent periods.

12. Earnings per Share

2003 2002




Earnings per share are calculated by dividing the profit / (loss)attributable to the equity shareholders by the weighted averagenumber of equity shares outstanding during the year.

Profit / (Loss) after Minority Interest Rs.’000 7,442 Rs.’000 (115,178)

Weighted average number of shares outstanding ’000 15,393 ’000 15,393

13. Esab India LImited and Esab Welding & Cutting Systems Limited have both adopted the same accounting policies, except in

respect of gratuity and leave salary [Refer Note 2 (f) of Schedule R].

Name of the Subsidiary : Esab Welding & Cutting Systems Limited

Country of Incorporation : India

Shareholding as at 31 December 2003 : 85.71%



14. Related Party Disclosures

a) Parties where control exists

i) Esab Holdings Limited Principal Shareholder

Holds 37.31% of the paid up equity share capital of Esab India Limited

as at 31 December 2003. Charter Overseas Holdings Limited, the

holding company of Esab Holdings Limited is a subsidiary of

Charter plc, the ultimate holding company.

ii) Charter plc Group Related parties in the Charter plc Group where common control exists

include :

Esab AB, Sweden

Esab Cutting Systems GmbH, Germany

The Esab Group Inc., USA

Esab SA Industria e Comercio, Brazil

Conarco Alambres y Soldaduras S.A., Argentina

Esab Asia/Pacific Pte Limited, Singapore

Howden Power Limited, Northern Ireland

Howden Sirocco SA, France

Burton Corblin SA, France

Ventilatoren Sirocco Howden BV, Netherlands

Turbowerke Meissen Howden GmbH, Germany

Voith Howden GmbH, Germany

Howden Power A/S, Denmark

Howden Power Spain S. L., Spain

Howden Buffalo Inc., USA

Howden Hua Engineering Co Limited, China

Howden African Holdings Limited, South Africa

Howden Food Equipment Inc., USA

HD Engineering Limited, Hong Kong

Esab Automation Limited, England & Wales

ESAB Limited, England & Wales

Murex Welding Products Limited, England & Wales

Murex Limited, England & Wales

Murex Welding Products (Ireland) Limited, England & Wales

Hancock Cutting Machines Limited, England & Wales

Brinal Limited, England & Wales

Filarc Welding Limited, England & Wales

Arcos Welding Products Limited, England & Wales

Bilston Wire Mill Limited, England & Wales

Esta Properties (UK) Limited, England & Wales

Esab Group (UK) Limited, England & Wales

Charter Overseas Holdings Limited, England & Wales

Weldcure Limited, England & Wales

Esab Holdings Limited, England & Wales

Exelvia Netherlands BV, Netherlands

Exelvia International Holdings BV, Netherlands

Charter Consolidated plc, England & Wales

Cecil Holdings Limited, England & Wales

Exelvia India BV, Netherlands

Esab International Holdings BV, Netherlands

Esab Hancock GmbH,Germany



b) Key Management Personnel

Managing Director Mr.S.K.Bhattacharyya (until 31 January 2003)

Whole-time Director Mr.G.Hariharan (appointed on 7 January 2003 and

re-appointed on 7 January 2004.)

c) Transactions and outstanding balances with Related Parties

Rs.’000

Common Control Key Management Total

Nature of Transaction Control Exists [a(i)] [a(ii) & (iii)] Personnel [b]

2003 2002 2003 2002 2003 2002 2003 2002

Loan 117,335 – 117,335 –

Interest on Loan 2,777 – 2,777 –

Purchase of goods 12,522 13,693 12,522 13,693

Sale of goods 22,111 9,857 22,111 9,857

Service charges received 13 – 13 –

Royalty Expense 5 643 5 643

Remuneration 1,382 2,104 1,382 2,104

Recovery of expenses – 620 – 620

Rent paid for residential flat – 438 – 438

Sale of Assets 300 – 300 –

Outstanding payables (net) 117,045 – – 908 117,045 908

Outstanding receivables (net) 6,049 – 3,251 3,922 9,300 3,922

The companies listed at Note 14(a) above have been identified on the basis of information available with the Company.

15. Taxation

2002

Rs.’000 Rs.’000

Tax provision for current year 225 –

Tax provision for earlier years – 24,000

Deferred Tax Credit 876 54,333

651 30,333

16. The Company has taken various residential and office premises under operating lease or leave & licence agreements. These are

generally cancellable; have a term of between 11 months and 3 years, and have no specific obligations for renewal. Lease

payments are recognised in the statement of Profit and Loss Account under Rent in Schedule P.

17. Sales are net of quantity discounts and incentives.

18. During the year, the Company has changed its method of estimating the provision for old and obsolete inventory. The provision

is calculated either on the basis of ageing analysis or by specifically identifying obsolete items through a technical evaluation,

whichever yields the higher amount. Owing to this change in method, profit is lower by Rs. 6.06 million with a corresponding

decrease in raw material inventory.



For and on behalf of the Board of DirectorsH. P. R. Mullan ChairmanG. Hariharan Chief Operating Officer

P. Mallick DirectorN. H. Mirza DirectorS. N. Talwar DirectorS. Tandon Director

A. Banerjee Company Secretary


19. In the last quarter of 2003, the Company provided an aggregate amount of Rs. 60.00 million in respect of accelerated depreciation,

doubtful debts, write off of fixed assets, write down of inventories and additional provision towards pension.

20. Provision for liabilities no longer required written back is on account of

2003 2002

Rs.’000 Rs. ‘000

Purchases 2,287 –

Salaries, Wages and Bonus 1,494 –

Rates and Taxes 2,506 –

Transport and Freight 278 –

Miscellaneous Expenses 351 –

Deposits 986 –

7,902 –

21. Profit on sale of land of Rs.10.8 million represents profit on sale of excess vacant land situated at Khardah.

22. Previous year’s figures have been regrouped or reclassified wherever necessary.




2002Rs.’000 Rs.’000

A. CASH FLOW FROM OPERATING ACTIVITIES :Profit / (Loss) before Tax 6,868 (145,667)

Voluntary Separation Compensation and related payments 2,871 26,193Profit on sale of Land (10,832) –Loss on sale of Fixed Assets (Net) 338 2,039Fixed Assets written off 2,555 4,129Unrealised Exchange Differences (259) 932Depreciation 56,141 42,522Interest - net 23,100 26,690Provision for Doubtful Advances 3,994 –Provision for Doubtful Debts 22,612 18,365

Operating Profit before Working Capital Changes 107,388 (24,797)Trade and Other Receivables 42,323 (9,107)Inventories (38,048) 124,899Trade Payables (41,071) (30,912)

Cash Generated from Operations 70,592 60,083Voluntary Separation Compensation and Related Payments (19,083) (22,576)Direct Taxes Paid - Net 2,604 (1,028)

Net Cash from Operating Activities [A] 54,113 36,479B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets (24,684) (16,008)Sale of Fixed Assets 17,772 3,826Advance against sale of Fixed Assets 5,431 –Interest Received 523 537

Net Cash used in Investing Activities [B] (958) (11,645)C. CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from Borrowings (51,621) (8,580)Dividend Paid / Transfer to Investor Educationand Protection Fund (157) (467)Interest Paid (22,476) (26,456)

Net Cash used in Financing Activities [C] (74,254) (35,503)

NET DECREASE IN CASH AND CASH EQUIVALENTS [A+B+C] (21,099) (10,669)CASH AND CASH EQUIVALENTS AS AT 1 JANUARY 2003 51,434 62,103CASH AND CASH EQUIVALENTS AS AT 31 DECEMBER 2003 30,335 51,434

Notes:i) Cash and Cash Equivalents include:

(a) Cash and Bank balances other than those mentioned in (b) below. 27,124 44,160(b) Cash and Bank balances not available for use by the Company 3,211 7,274

Cash and Bank balances not available for use by the Company include margin money, 30,335 51,434unclaimed dividends and debunture interest.

ii) The above cash flow statement has been prepared under the ‘Indirect Method’ as set out in AccountingStandard-3 on “Cash Flow Statements” issued by the Institute of Chartered Accountants of India.

iii) Previous year’s figures have been regrouped or reclassified wherever necessary.

Consolidated Cash Flow Statementfor the year ended 31 December 2003





S. Tandon Director



The following statement is provided pursuant to Section 212 of the Companies Act, 1956 relating to the Company’s Subsidiary, EsabWelding & Cutting Systems Limited (formerly, Flotech Welding & Cutting Systems Limited).

1 Financial year of the Subsidiary 31 December 2003

2 Shares of the Subsidiary held by Esab India Limitedon the above date

Number and Face Value 1,200,000 Equity Shares of Rs. 10 fully paid-up.

Extent of holding 85.71%

3 Net aggregate amount of Profit / (Loss) of the Subsidiaryso far as they concern the members of Esab India Limited

(a) not dealt with in the Accounts of Esab India Limitedfor the year ended 31 December 2003(except to the extent dealt with in (b) below)

(i) for the Subsidiary’s financial year ended31 December 2003 (Rs. ‘000s) 459

(ii) for the previous financial years of the Subsidiarysince it became a Subsidiary (Rs. ‘000s) 1,222

(b) dealt with in the Accounts of Esab India Limited forthe year ended 31 December 2003(being dividend received) :

(i) for the Subsidiary’s financial year ended31 December 2003 (Rs. ‘000s) NIL

(ii) for the previous financial years of the Subsidiarysince it became a Subsidiary (Rs. ‘000s) 2,400

F or and on behalf of the Board of Directors

H . P. R. Mullan Chairman

G. H ariharan Chief Operating Officer

P. Mallick Director

N. H . Mirza Director

S. N. Talwar Director

S. Tandon Director

A. Banerjee Company Secretary


Section 212 Statement


Your Directors herewith present their Sixteenth Annual Report

together with the audited accounts for the year ended 31

December 2003.

FINANCIAL RESULTS

2003 2002

Rs ‘000s Rs ‘000s

Profit before taxes, interestand depreciation 1619 123

Interest 659 769

Depreciation 424 443

Profit / (Loss) before and 536 (1089)

after tax

The Company’s performance improved significantly with a 35%

increase in sales and an improvement of more than Rs. 1.6

million in profit after tax. Outstanding orders at the year end

amounted to more than 25% of annual turnover: the highest

achieved in the last three years. The Company supplied the entire

range of cutting systems, and maintained its leadership in the

market for oxyfuel mechanised cutting machines. The Company’s

continuing efforts to find alternate sources for high cost

components resulted in material cost reduction.

DIVIDEND

In view of the accumulated losses, your Directors do not

recommend any dividend for the year.

DIRECTORS

Mr. Klaus Decker resigned as a Director of the Company with

effect from 7 July 2003. Your Directors place on record their

appreciation for the contribution made by Mr. Decker during his

tenure as a Director.

Mr. A. Banerjee who was appointed as an Additional Director with

effect from 24 April 2003 and who held office upto the conclusion

of the Fifteenth Annual General Meeting, was appointed at the

said Annual General Meeting. Mr. A. Banerjee retires by rotation

at the forthcoming Annual General Meeting and, being eligible,

has offered himself for re-appointment.

CHANGE OF NAME

In order to make appropriate use of the ESAB brand name in the

marketing of its products, the name of the Company has been

changed from “Flotech Welding & Cutting Systems Limited” to

“Esab Welding & Cutting Systems Limited” effective from 12

January 2004.

AUDITORS

S.N. Gogate & Company, Chartered Accountants, the retiring

auditors, being eligible, have offered themselves for re-

appointment to hold office until the conclusion of the Seventeenth

Annual General Meeting.

DIRECTORS’ RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to the

information and explanations obtained by them, your Directors

make the following statement in terms of Section 217 (2AA) of

the Companies Act, 1956.

1. that in the preparation of the annual accounts for the year

ended 31 December 2003, the applicable accounting

standards have been followed;

2. that the accounting policies as mentioned in Schedule M to

the Accounts have been selected and applied consistently

and judgements and estimates that are reasonable and

prudent made so as to give a true and fair view of the state

of affairs of the Company at the end of the financial year on

31 December 2003 and of the profit of the Company for

that year;

3. that proper and sufficient care has been taken for the

maintenance of adequate accounting records in accordance

with the provisions of the Companies Act, 1956 for

safeguarding the assets of the Company and for preventing

and detecting fraud and other irregularities;

4. that the annual accounts for the year ended 31 December

2003 have been prepared on a going concern basis.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION

AND FOREIGN EXCHANGE

Energy Conservation measures taken included improvements

in the methodology of testing products, and better monitoring of

compressor use. These measures resulted in energy savings

with resultant savings in cost. Improved operational methods

and processes are to be introduced in order to reduce energy

consumption further.

The requirement to provide energy consumption data is not

applicable.

Research and Development was conducted into product

development, technology upgradation, and the development of

testing facilities. Research and development is proposed into new

product development, and further weight and cost reductions.

Efforts to adapt technology in order to upgrade the Company’s

products are ongoing. As a result of these efforts, the “CNC”

cutting machines have been upgraded, and a number of electrical

and mechanical components of the “CNC” flame cutting machines

have been indigenised.

New products were successfully developed and produced in

Esab Welding & Cutting Systems LimitedDirectors� Report


the year. Indigenous drives and controllers were developed for

medium size CNC machines, which yielded a cost advantage of

more than 40% over the existing imported purchase price.

The technology in respect of gas cutting machines, which was

imported in 1998, has been fully absorbed.

The Company is exploring the possibility of exporting its products.

Information relating to foreign exchange earnings and

expenditure is provided at Schedule M to the Accounts of the

Company.

EMPLOYEES

None of the employees received remuneration of Rs. 200,000 or

more per month.

APPRECIATION

Your Directors record their appreciation of the support given to

your Company by the State Bank of India, Esab Hancock GmbH

and Esab India Limited.

On behalf of the Board of Directors

For ESAB WELDING & CUTTING SYSTEMS LIMITED

H. P. R. MullanMumbai, 9 March 2004 Chairman

Esab Welding & Cutting Systems LimitedDirectors� Report


To the Members of Esab Welding & Cuttting Systems Limited

(formerly, Flotech Welding & Cutting Systems Limited) :

We have audited the attached Balance Sheet of Esab

Welding & Cutting Systems Limited (formerly, Flotech Welding &

Cutting Systems Limited) as at 31 December 2003 and the Profit

and Loss Account of the Company for the year ended on that

date annexed thereto, both of which we have signed under

reference to this report. These financial statements are the

responsibility of the Company’s management. Our responsibility

is to express an opinion on these financial statements based on

our audit.

We conducted our audit in accordance with auditing standards

generally accepted in India. Those standards require that we

plan and perform the audit to obtain reasonable assurance about

whether the financial statements are free of material

misstatement. An audit includes examining, on a test basis,

evidence supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the accounting

principles used and significant estimates made by management,

as well as evaluating the overall financial statement presentation.

We believe that our audit provides a reasonable basis for our

opinion.

1. As required by the Manufacturing and Other Companies

(Auditor’s Report) Order, 1988, issued by the Company

Law Board in terms of Section 227 (4A) of the

Companies Act, 1956, we include in the Annexure a

statement on the matters specified in paragraphs 4 and 5

of the said Order.

2. Further to our comments in the Annexure referred to in

paragraph 1 above, we report that :

a. we have obtained all the information and explanations,

which to the best of our knowledge and belief were

necessary for the purpose of our audit;

b. in our opinion, proper books of account as required

by law have been kept by the Company so far as

appears from our examination of the books;

c. the Balance Sheet and Profit and Loss Account dealt

with by this report are in agreement with the books of

account;

d. in our opinion the Balance Sheet and the Profit and

Loss Account dealt with by this report are in

compliance with the mandatory Accounting Standards

referred to in sub-section (3C) of Section 211 of the

Companies Act, 1956, to the extent applicable;

e. as per the information and explanations given to us,

none of the directors of the Company is disqualified

from being appointed as a director under clause (g)

of sub-section (1) of Section 274 of the Companies

Act, 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 the notes thereon, give

the information required by the Companies Act, 1956,

in the manner so required and give a true and fair

view :

i) in the case of the Balance Sheet of the state of

affairs of the Company as at 31 December 2003;

and

ii) in the case of the Profit and Loss Account, of

the Profit of the Company for the year ended on

that date.

S. N. GOGATE & CO.

Place : Mumbai S. N. GOGATEDated : 9 March 2004 Chartered Accountants

Esab Welding & Cutting Systems LimitedAuditors� Report


The Annexure to the Auditors’ Report (referred to in paragraph 1

of our report of even date on the accounts for the year ended

31 December 2003 of Esab Welding & Cutting Systems Limited

(formerly, Flotech Welding & Cutting Systems Limited)).

Further we report that :

INTERNAL CONTROLS

1. There are adequate internal control procedures

commensurate with the size of the Company and the nature

of its business for the purchase of stores, raw materials,

components, plant and machinery, equipment, other assets

and for the sale of goods.

2. The Company has a reasonable system of authorisation

at proper levels and an adequate system of internal control

and job allocation of man hours commensurate with the

size of the Company and the nature of its business related

to service assignments.

3. In our opinion the Company has an internal audit system

commensurate with the size and nature of its business.

FIXED ASSETS

4. The Company has maintained proper records showing full

particulars including quantitative details and the location of

Fixed Assets. All the assets have been physically verified

by the management during the year. As informed to us, no

material discrepancies were noticed on such verification

as compared to the records.

5. None of the Fixed Assets has been revalued during the

year.

INVENTORIES

6. The stocks of finished goods, spare parts and raw materials

have been physically verified by the management at

reasonable intervals. In our opinion, the frequency of

verification is reasonable.

7. In our opinion the procedures for physical verification of

stocks followed by the management is reasonable and

adequate in relation to the size of the Company and the

nature of its business.

8. Discrepancies noticed during the physical verification of

stocks as compared to the book records have been

properly dealt with in the books of account.

9. In our opinion the valuation of stocks is fair and proper in

accordance with normally accepted accounting principles

and is on the same basis as in earlier years.

10. As explained to us, the Company has a regular procedure

for the determination of unserviceable or damaged stores,

raw materials and finished goods. Adequate provision has

been made in the accounts for the loss arising on the items

so determined.

11. There were no sales of scrap or by-products during the

year.

12. The Central Government has not prescribed the

maintenance of cost records under Section 209 (1) (d) of

the Companies Act, 1956 for any of the products of the

Company.

SERVICE ACTIVITIES

13. The Company’s service activities involve the use of

technical manpower only and hence the question of having

a system of recording receipts, issues and consumption

of raw materials and issues of stores does not arise.

LOANS AND ADVANCES

14. The Company has not taken any loans, secured or

unsecured, from companies, firms or other parties listed in

the Register maintained under Section 301 of the

Companies Act,1956 and/or from companies under the

same management as defined under sub-section (1B) of

Section 370 of the Companies Act, 1956.

15. The Company has not given any loans to any companies

or other parties listed in the registers maintained under

Sections 301 and 370 (1C) of the Companies Act, 1956.

16. The Company has not given any loans and/or advances in

the nature of loans.

RELATED PARTIES

17. There have been purchases of materials and sales of goods

made in pursuance of contracts or arrangements which

would be required to be entered in the register maintained

under Section 301 of the Companies Act, 1956 and

aggregating during the year to Rs. 50,000 or more in respect

of each party. No comparison with the prevailing market

prices was possible due to the specialised nature of such

transactions.

FIXED DEPOSITS

18. The Company has not accepted any deposits from the

public attracting the provisions of Section 58A of the

Companies Act, 1956, and the rules framed thereunder.



STAFF WELFARE

19. According to the records of the Company, the Company

has been regular in depositing the dues under the

Employees’ Provident Fund and Miscellaneous Provisions

Act, 1952 and the Employees’ State Insurance Schemes

with the appropriate authorities.

20. During the course of our examination of the books of

account, we have not come across any personal expenses

which have been charged to the Profit and Loss Account

other than those payable under contractual obligations or

in accordance with generally accepted business practices.

TAXATION

21. There are no undisputed amounts payable in respect of

Income Tax, Wealth Tax, Sales Tax, Customs Duty and

Excise Duty which remained outstanding as at 31 December

2003 for a period of more than six months from the date

they became payable.

SICK INDUSTRIAL COMPANY

22. The Company is not a Sick Industrial Company within the

meaning of Section 3(1)(o) of the Sick Industrial Companies

(Special Provisions) Act, 1985 (SICA). The accumulated

losses of the Company have resulted in erosion of more

than fifty per cent of its net worth; but, the Company is a

registered Small Scale Industrial Undertaking and hence

the provisions of SICA do not apply.

S. N. GOGATE & CO.

Place : Mumbai S. N. GOGATEDated : 9 March 2004 Chartered Accountants



2002

Schedule Rs. ‘000 Rs. ’000 Rs. ’000

SOURCES OF FUNDS



14,000 14,000

LOAN FUNDS

Secured Loans B 4,981 5,329

18,981 19,329


FIXED ASSETS C

Gross Block 10,264 10,180

Less : Depreciation 5,590 5,166

Net Block 4,674 5,014


Inventories D 8,237 6,571

Sundry Debtors E 2,277 2,961

Cash & Bank Balances F 200 598

Loans & Advances G 4,160 3,015

14,874 13,145

LESS :

CURRENT LIABILITIES AND PROVISIONS H 7,883 6,682

7,883 6,682

NET CURRENT ASSETS 6,991 6,463

PROFIT AND LOSS ACCOUNT

Net Loss as per Profit and Loss Account 7,316 7,852

18,981 19,329

Notes to Accounts M

The Schedules referred to above form an integral part of the Balance Sheet.


S. N. GOGATE & CO.

Esab Welding & Cutting Systems LimitedBalance Sheetas at 31 December 2003



A. Banerjee Director

S. N. GOGATE

Chartered Accountants S. Gajbare Company Secretary



2002

Schedule Rs. ’000 Rs. ’000

INCOME

Sales (Gross) 23,839 17,474

Less : Excise Duty 3,123 2,217

Sales (Net) 20,716 15,257

Other Income I 284 409

21,000 15,666

EXPENDITURE

Material Cost J 14,470 11,109

Manufacturing, Selling & Administrative Expenses K 4,911 4,434

Interest L 659 769

Depreciation 424 443

20,464 16,755

PROFIT / (LOSS) BEFORE AND AFTER TAXATION 536 (1,089)

Add : Balance brought forward from the previous year (7,852) (6,763)

NET LOSS CARRIED TO BALANCE SHEET (7,316) (7,852)

Notes to Accounts M

The Schedules referred to above form an integral part of the Profit and Loss Account.


S. N. GOGATE & CO.

Esab Welding & Cutting Systems LimitedProfit and Loss Accountfor the year ended 31 December 2003




S. N. GOGATE




2002Rs. ‘000 Rs.’000

A. SHARE CAPITAL

Authorised :

1,400,000 Equity Shares of Rs. 10/- each 14,000 14,000

Issued, Subscribed and Paid-up

1,400,000 Equity Shares of Rs. 10/- each fully subscribed and paid-up.(1,200,000 Equity Shares are held by Esab India Limited and200,000 Equity Shares are held by Esab Hancock, GmbH, Germany) 14,000 14,000

B. SECURED LOANS

From State Bank of India

Cash Credit secured by hypothecation of stocks, debtors andplant & machinery and mortgage of immovable property 4,981 5,329

C. FIXED ASSETSRs.’000

Land Builidng Plant & Furniture & Total 2002Machinery Fixtures

GROSS BLOCK AT COST

As at 1 January 2003 355 4,467 4,738 620 10,180 9,865

Additions – – 84 – 84 706

Deductions – – – – – 391

As at 31 December 2003 355 4,467 4,822 620 10,264 10,180

DEPRECIATION

As at 1 January 2003 – 1,989 2,746 431 5,166 5,090

Additions – 150 235 39 424 443

Deductions – – – – – 367

As at 31 December 2003 – 2,139 2,981 470 5,590 5,166

NET BLOCK

As at 31 December 2003 355 2,328 1,841 150 4,674

As at 31 December 2002 355 2,478 1,992 189 5,014

Esab Welding & Cutting Systems LimitedSchedules to the Accounts31 December 2003

D. INVENTORIES

Materials & Components 4,622 3,738

Work In Process 3,615 2,833

8,237 6,571


2002

Rs. ‘000 Rs. ‘000

E. SUNDRY DEBTORS (UNSECURED)

Over six months -

Considered good 33 –

Considered doubtful 534 534

567 534

Others, Considered good 2,244 2,961

2,811 3,495

Less : Provision for Doubtful Debts 534 534

2,277 2,961

F. CASH AND BANK BALANCES

Cash on hand 6 6

Balance with Scheduled Banks :

In fixed deposits as margin money 133 387

Current Accounts 61 205

200 598

G. LOANS AND ADVANCES

(Unsecured, considered good)

Advances recoverable in cash or in kind or for value to be received 708 569

Advance Tax including Tax Deducted at Source 3,199 2,193

Deposits 253 253

4,160 3,015

H. CURRENT LIABILITIES AND PROVISIONS

Sundry Creditors (Refer Note 10 of Schedule M) 7,514 6,366

Customers’ credit balances 14 21

Government dues 275 215

Other Liabilities 80 80

7,883 6,682

I. OTHER INCOME

Miscellaneous Receipts 262 370

Liabilities no longer required written back 22 39

284 409



2002

Rs. ’000 Rs. ’000

J. MATERIAL COST

Materials Consumed 15,252 10,894

(Decrease) / Increase in Work-in-Process

Opening Stock 2,833 3,048

Less: Closing Stock 3,615 2,833

(782) 215

14,470 11,109

K. MANUFACTURING, SELLING AND ADMINISTRATIVE EXPENSES

Salaries and Wages 1,924 1,928

Contribution to Provident and other funds 148 124

Staff Welfare 164 161

Power & Fuel 373 360

Repairs & Maintenance

Plant & Machinery 29 31

Others 87 22

Rates, Taxes & Insurance 160 146

Excise Duty 10 121

Travelling, Conveyance & Vehicle Expenses 796 701

Professional Fees 310 115

Bank Charges 149 100

Postage, Telegram and Telephone 223 205

Fixed Assets written off – 24

Transport & Octroi Charges 49 78

Other Expenses 489 318

4,911 4,434

L. INTEREST

For Working Capital facility 667 800

Less : Bank Interest income 8 31

[Tax Deducted at Source Rs. 1(Rs. ‘000) (Previous Year Rs.Nil)]

659 769



M. NOTES FORMING PART OF THE ACCOUNTS


The accounts are prepared on the historical cost convention and materially comply with the mandatory Accounting Standards

referred to in Section 211 (3C) of the Companies Act, 1956. The significant accounting policies followed by the Company are as

follows:

a. Sales are inclusive of Excise Duty and net of discount.

b. Depreciation has been provided on the basis of the straight line method at the rates specified in Schedule XIV of the

Companies Act, 1956.

c. Inventories of raw materials and components are valued at the lower of cost and net realisable value on a First-In-First-Out

basis. Work-in-Process is valued at the lower of cost and net realisable value. In case of Work-in-Process appropriate

overheads are added to cost. Finished goods are valued at the lower of cost and net realisable value. Cost comprises cost

of purchases, cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

CENVAT and sales tax rebates are deducted from purchases to determine the cost on an 'exclusive basis'.

d. Provision for Gratuity is computed and full liability is provided as per The Payment of Gratuity Act, 1972.

e. Current tax is determined on the basis of the amount of tax payable on the taxable income for the year. Deferred tax is

calculated at the current statutory income tax rate and is recognised on the timing differences between taxable income and

accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax

assets are recognised and carried forward only to the extent that there is reasonable certainty that sufficient future taxable

income will be available against which such deferred tax assets can be realised.

f. Foreign currency transactions are accounted at the exchange rate prevailing on the date of the transaction. Foreign

currency monetary assets and liabilities are restated at rates ruling at the year end. Other exchange differences are dealt

with in the Profit and Loss Account.

2003 2002

Rs. '000 Rs. '000

2. Contingent Liabilities Not Provided For

Bank Guarantees 533 1,549

For disputed sales tax matters 2 2

For disputed excise duty matters 187 187

For disputed service tax matters 54 54

For disputed income tax liability 5,336 4,214

(Interest and penalty, if any, payable on contingent liabilities relating to sales tax, excise duty,

service tax and income tax demands are presently not ascertainable)


Audit fees 30 23


78 42



4. Capacity, Production, Stock and Value

Licensed Installed Sales

Capacity Capacity Production Quantity V alue

Number Number Number Number Rs. ‘000

Cross Carriage Cutting Machines :-

Large 9 9 12,531

(4) (4) (5,570)

Small 830 830 233 233 3,951

(830) (830) (34) (34) (1,427)

Spares NA NA NA – 7,357

(NA) (NA) (NA) (NA) (10,477)

830 830 242 242 23,839

Previous Year (830) (830) (38) (38) (17,474)

There were no opening or closing stocks under any category.

5. Components Consumed

2003 2002

Rs. '000 Rs. '000

Components 15,252 10,894

15,252 10,894

6. Value Of Imports Calculated On C.I.F Basis

Components 7,174 3,725

7,174 3,725

7. Value Of Imported and Indigenous Materials And Components Consumed

Value Rs. '000 % age of T otal Consumption

2003 2002 2003 2002

Imported 9,375 7,384 61.0 68.0

Indigenous 5,877 3,510 39.0 32.0

15,252 10,894 100.0 100.0



8. There was no expenditure, and no earnings, in foreign currency.

9. The net difference in foreign exchange debited to Profit and Loss Account is Rs. 0.19 million. (Previous year Rs. 0.06 million)

10. Sundry Creditors comprise Rs. 0.54 million (previous year Rs. 0.90 million) outstanding to Small Scale Industrial Undertakings and

Rs. 6.97 million (previous year Rs. 5.47 million) to other creditors. Amounts due to the following Small Scale Industrial Undertakings

(on the basis of information available with the Company) are outstanding for more than 30 days:

Dynatronic Systems, Hydroteck Engineering Company, Mahamaya Metal Products Private Limited, Polyfab Foams (India) Private

Limited, Vikas Hydro Tools.

11. The Company has computed the amount of deferred taxation as per the mandatory Accounting Standard 22 - "Accounting for

Taxes on Income" issued by The Institute of Chartered Accountants of India. On the grounds of prudence, the Company has not

accounted for cumulative net deferred tax asset of Rs. 2.33 million as at 31 December 2003.

12. Earnings Per Share

2003 2002




Earnings per share are calculated by dividing the profit / (loss)

attributable to the equity shareholders by the weighted average

number of equity shares outstanding during the year

Profit / (Loss) after taxation Rs. ‘000 536 Rs. ‘000 (1,089)

Weighted average number of shares outstanding ’000s 14,000 ‘000s 14,000



13. Additional Information as required under Part IV of Schedule VI to the Companies Act, 1956. :

Balance Sheet Abstract and Company’s General Business Profile :

I. Registration Details

Registration No. State Code

Balance Sheet Date

Date Month Year

II. Capital raised during the year (Rs ’000)

Public Issue Rights Issue

Bonus Issue Private Placement

III. Position of Mobilisation and Deployment of Funds (Rs ’000)

Total Liabilities* Total Assets*

* Includes Deferred Tax Liabilities * Net of Current Liabilities & Provisions

* Includes Deferred Tax Asset anddebit balance in Profit and Loss Account

Source of funds (Rs ’000)

Paid-up Capital Reserves & Surplus

Secured Loans Unsecured Loans

Application of funds (Rs ’000)

Net Fixed Assets Investments

Net Current Assets Misc. Expenditure

Accumulated Losses

4 7 2 0 9 1 1

3 1 1 2 0 3

N I L N I L

N I L N I L

1 8 9 8 1 1 8 9 8 1

1 4 0 0 0

4 9 8 1

4 6 7 4

6 9 9 1 N I L

7 3 1 6

N I L

N I L

N I L



IV. Performance of Company (Rs ’000)

Turnover * Total Expenditure

* includes other / extra ordinary

income

+/- Profit / Loss Before Tax +/- Profit / Loss After Tax

Earnings per Share Dividend Rate %

V. Generic Names of Three Principal Products / Services of Company

Item Code(ITC Code)

Product Description

Item Code(ITC Code)

Product Description

Item Code(ITC Code)

Product Description

31. The previous year’s figures have been regrouped or reclassified wherever necessary.



S. N. GOGATE & CO.

2 1 0 0 0 2 0 4 6 4

5 3 6 ++

0 . 3 8 - - -

8 4 6 8 . 0 0

C U T T I N G E Q U I P M E N T

5 3 6




S. N. GOGATE





2 0 0 3

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Annual Report ESAB INDIA LIMITEDesabindia.com/ESAB A. R. 2004 (All).pdfMr. S.Tandon is a Chemical Engineer having graduated from I.I.T New Delhi. He did his Post Graduate Diploma in

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