1 Board of Directors Non-Executive Directors Executive Directors Chairman Chief Executive S. M. Datta & Managing Director N. K. Kshatriya Directors Directors R. Gopalakrishnan R. Elston-Green P. Hughes A. S. Ramchander A. K. Jhawar D. S. Parekh L. Freese – Alternate to P. Hughes Company Secretary & Head – Legal A. H. Mody Bankers Deutsche Bank HDFC Bank Ltd. The Hongkong & Shanghai Banking Corporation Ltd. State Bank of India Solicitors & Advocates Crawford Bayley & Co. Dhru & Co. Auditors S. R. Batliboi & Co. Registered Office Technopolis Knowledge Park Mahakali Caves Road, Andheri (East) Mumbai 400 093 Share Department Tata Share Registry Limited Unit: Castrol India Limited Army & Navy Building 148, M. G. Road, Mumbai 400 001. Castrol India Limited
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1
Board of Directors
Non-Executive Directors Executive Directors
Chairman Chief Executive
S. M. Datta & Managing Director
N. K. Kshatriya
Directors Directors
R. Gopalakrishnan R. Elston-Green
P. Hughes A. S. Ramchander
A. K. Jhawar
D. S. Parekh
L. Freese – Alternate to P. Hughes
Company Secretary & Head – LegalA. H. Mody
BankersDeutsche BankHDFC Bank Ltd.The Hongkong & Shanghai Banking Corporation Ltd.State Bank of India
Earning per Share * 10.31 11.11 12.37 8.77 10.88 16.55
Dividend per Share 8.25 8.25 16.50 ‡ 7.50 7.50 20.00
Book Value per Share * 29.12 28.15 26.35 32.08 31.89 30.20
Debt Equity Ratio 0.03:1 0.03:1 0.04:1 0.18:1 0.14:1 0.05:1
* Arrived at after considering number of Shares as at the end of the period including Bonus Shares, if any, issued in the relevant period.‡ Includes Rs. 10.00 special in 1999 and Rs. 8.25 special in 2002.
‡
‡
Directors’ Report
15
Castrol India Limited
REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31ST DECEMBER, 2004
The Directors have pleasure in presenting their Report and Statement of Accounts for the year ended
31st December, 2004.
For the year ended For the year ended
31st December, 2004 31st December, 2003
(Rupees in Crores) (Rupees in Crores)
FINANCIAL RESULTS
Gross Profit before Depreciation, Exceptional Items & Tax 227.44 218.67
As of the year ended 31st December, 2004, the Board
of Directors had 8 members comprising of 2 Executive
Directors and 6 Non-Executive Directors. The Non-
Executive Directors included 4 members who were
Independent Directors and 2 members who had been
nominated by Castrol Ltd., U.K. as provided in the
Articles of Association of the Company. The Chairman
of the Board is a Non-Executive Independent Director.
ANNEXURE B Mr. A. S. Ramchander was with effect from
1st January, 2005 appointed as a Wholetime Director of
the Company designated as Director - Automotive.
Mr. R. A. Savoor resigned with effect from
17th January, 2005 as a Director of the Company.
(b) Attendance of each Director at the Board
Meetings and the last Annual General Meeting
4 Board Meetings were held during the financial year
from 1st January, 2004 to 31st December, 2004.
The attendance of each of the Directors at the said
Board Meetings is given below:
Name of Director Cate- No. of % of totalgory of Meet- Meetings
Director- ings attendedship atten- during the
ded tenure asa Director
Mr. S. M. Datta NED 4 100
Mr. N. K. Kshatriya MD 4 100
Mr. U. DeSousa ED 2 100
(upto 5th May, 2004)
Mr. R. Elston-Green ED 4 100
Mr. R. Pisharody ED 2 100
(upto 5th May, 2004)
Mr. C. D’Mello ND 1 50
(upto 21st June, 2004)
Mr. R. Gopalakrishnan NED 4 100
Mr. A. K. Jhawar ND 2 100
(w.e.f. 21st June, 2004)
Mr. P. Hughes or his Alternate
Mr. L. Freese ND 3 75
Mr. D. S. Parekh NED 3 75
Mr. R. A. Savoor NED 4 100
NED — Non-Executive Director
MD — Managing Director
ED — Executive Director
ND — Nominee Director of Castrol Ltd., U.K.
Directors’ Report
27
Castrol India Limited
All Directors except Mr. C. D’Mello & Mr. R. Pisharody,
who were Directors of the Company on 5th May, 2004,
attended the Annual General Meeting held on the said
date.
(c) Number of other Companies or Committees the
Director is a Director/Member/Chairman of:
Name of the Director(s) Number of other Number ofCompanies Committees(excluding (other than
Private Castrol India)Companies) in which
in which Director Member(excluding Alternate/
NomineeDirector)
Mr. S. M. Datta 12 (1) 9 (2)
Mr. N. K. Kshatriya — —
Mr. R. Elston-Green — —
Mr. A. K. Jhawar 2 1
Mr. R. Gopalakrishnan 12 (3) 10 (4)
Mr. P. Hughes — —
Mr. D. S. Parekh 13 (5) 9 (6)
Mr. R. A. Savoor 5 (7) 5 (8)
Mr. L. Freese 1 —
1. Includes 3 Companies in which Chairman
2. Includes 4 Committees in which Chairman
3. Includes 1 Company in which Chairman
4. Includes 5 Committees in which Chairman
5. Includes 7 Companies in which Chairman
6. Includes 5 Committees in which Chairman
7. Includes 1 Company in which Chairman
8. Includes 1 Committee in which Chairman
(d) Number of Board Meetings held and the dates
of the Board Meeting
4 Board Meetings were held during the financial year
1st January, 2004 to 31st December, 2004. The dates
on which the said meetings were held are given below:
30th January, 2004
30th April, 2004
23rd July, 2004
21st October, 2004
3. Audit Committee
(a) Terms of Reference
i. To investigate any activity within its terms of
reference.
ii. To seek information from any employee.
iii. To obtain outside legal or other professional advice.
iv. To secure attendance of outsiders with relevant
expertise, if it considers necessary.
It may be clarified that the role of the Audit Committee
includes matters specified under Clause 49 of the
Listing Agreement entered into between the Company
and The Stock Exchange, Mumbai, on which the
Company’s shares are listed.
(b) Composition, name of members and
Chairperson
As on 31st December, 2004, the Audit Committee
comprised of 3 Non-Executive Directors viz.
Mr. D. S. Parekh, Mr. R. Gopalakrishnan and
Mr. P. Hughes with the Head-Internal Audit being a
Permanent Invitee to the Committee and the Company
Secretary being the Secretary of the Committee.
Mr. D. S. Parekh the Chairman of the Committee and
Mr. R. Gopalakrishnan, Member are Independent
Directors on the Committee whereas Mr. P. Hughes is a
Nominee Director of Castrol Ltd., U.K.
(c) Meetings and attendance during the year
4 meetings were held during the financial year
1st January, 2004 to 31st December, 2004. The
attendance of each Member of the Committee is given
below:
No. of % of total MeetingsMeetings attended during theattended tenure as a Director
Mr. D. S. Parekh 4 100
Mr. R. Gopalakrishnan 4 100
Mr. P. Hughes or his Alternate 3 75Mr. L. Freese
Directors’ Report
28
Castrol India Limited
4. Remuneration Committee
(a) Terms of Reference
The Remuneration Committee recommends
remuneration, promotions, increments etc. for the
Executive Directors to the Board for approval.
(b) Composition, names of members and
Chairperson
As on 31st December, 2004, the Committee
comprised of 3 Non-Executive Directors viz.
Mr. R. Gopalakrishnan, Mr. P. Hughes and
Mr. A. K. Jhawar. Mr. R. Gopalakrishnan is an
Independent Director whilst Mr. P. Hughes and
Mr. A. K. Jhawar are Nominee Directors of Castrol Ltd.,
U.K. Mr. R. Gopalakrishnan is the Chairman of the
Committee.
On 21st June, 2004 Mr. A. K. Jhawar was appointed as
a member of the Remuneration Committee in place of
Mr. C. D’Mello.
(c) Attendance during the year
Two Meetings were held during the year the attendance
of each Member of the Committee is given below:-
Name(s) of the No. of % of total Meetings
Committee Meetings attended during the
Members attended tenure as a Director
Mr. R. Gopalakrishnan 2 100
Mr. C. D’Mello 1 100(upto 21st June, 2004)
Mr. P. Hughes. — —
Mr. A. K. Jhawar 1 100(w.e.f. 21st June, 2004)
(d) Remuneration Policy
The Directors are paid a Salary and Performance
Linked Bonus, which is calculated, based on
pre-determined parameters of Performance.
(e) Details of Remuneration paid to all Directors
(for the period 1st January, 2004 to
31st December, 2004)
All Fixed Service Stockelements compo- Cont- option withof remu- nent & racts details,neration perfor- notice if any andpackage mance period, whether
i.e. linked sever- issued atSalary incen- ance a discount
benefits, tives fees as well asbonuses, along the periodpension, with the over which
etc. perform- accruedance and over
criteria which(Rs. in (Rs. in exercis-Lacs) Lacs) able
i. Wholetime Director(s)
Mr. N. K. Kshatriya 119.47 38.45
Mr. U. DeSousa 20.88 6.36(Upto May, 2004)
Mr. R. Elston-Green 124.19 14.00
Mr. R. Pisharody 22.93 5.81(Upto May, 2004)
Notes
(a) The agreement with each Wholetime Director is for a
period of 5 years or the normal retirement date whichever
is earlier. Further, either party to the agreement is entitled
to terminate the Agreement by giving not less than six
calendar months notice in writing to the other party.
(b) Presently, the Company does not have a scheme for
grant of stock options to its employees. However the
Management staff are entitled to the Shares of BP plc.
under the BP Sharematch scheme as in force.
Please see N
ote ‘b
’
Please see N
ote ‘a’
Directors’ Report
29
Castrol India Limited
ii. Non-Wholetime Director(s)
Sitting Fees Commission(Rs.) (Rs.)
Mr. S. M. Datta 75,000 7,50,000
Mr. R. Gopalakrishnan 85,000 6,00,000
Mr. D. S. Parekh 60,000 6,00,000
Mr. R. A. Savoor 70,000 6,00,000
With effect from 1st April, 2004 the Company had
increased the sitting fees payable to the Non-Executive
Independent Directors from Rs. 5000/- to Rs. 10,000/-
for each Board/Committee Meeting attended by them.
5. Transfer & Shareholders’/Investors’ Grievance
Committee
As on 31st December, 2004, the Transfer and
Shareholders’/Investors’ Grievance Committee
comprised of Mr. S. M. Datta, Chairman,
Mr. N. K. Kshatriya, Mr. R. Elston-Green and
Mr. R. A. Savoor. The Company Secretary is the
Secretary of the Committee.
(a) Name of the : Mr. S. M. Datta
Non-Executive Director
heading the Committee
(b) Name and Designation : Mr. A. H. Mody
of Compliance Officer Company Secretary &
Head – Legal
(c) No. of Shareholders : 7 complaints were
complaints received received from Stock
during the financial Exchange/Investor
year Associations/Securities and
Exchange Board of India
(SEBI)/Department of
Company Affairs and were
reported to the Transfer and
Shareholders’/Investors’
Grievance Committee in terms
of Circular No. 1 (96-97)
dated 25.7.96 of SEBI.
(d) Number of complaints : All the Complaints have beennot solved to the resolved to the satisfaction ofsatisfaction of the Complainants except forshareholders disputed cases and sub-judice
matters which would be solvedafter the matter is dulydisposed by the Court.
(e) Number of pending : 7 transfers were pending atshare transfers the close of the financial year.at the close ofthe financial year
6A. General Body Meetings
(a) Location and time where last three AGMs
were held
Location Date Time
(i) Yashwantrao Chavan : 5.5.2004 11.00 a.m.Pratishthan AuditoriumY.B. Chawan CentreGen. Jagannath BhosleMarg, Next to SachivalayaGymkhana, Mumbai 400 021
(ii) Birla Matushri Sabhagar : 19.6.2003 3.00 p.m.19, Marine LinesMumbai 400 020
(b) Whether any Special : NoResolutions were putthrough Postal Ballotlast year
Details of voting pattern : Not Applicable
(c) Persons who conducted : Not Applicablethe Postal Ballot exercise
(d) Are polls proposed to be : No resolutionsconducted through Postal requiring postal ballotBallot this year for matters as required
under Clause 4 of theCompanies (Passing ofResolutions by PostalBallot) Rules, 2001have been placed forShareholders’approval at theMeeting.
(e) Procedure for Postal Ballot : Not Applicable
Directors’ Report
30
Castrol India Limited
6B. Notes on Directors seeking re-appointment as
required under Clause 49 of the Listing Agreement
entered into with Stock Exchange, Mumbai.
(i) Mr. R. Gopalakrishnan
Mr. Gopalakrishnan is a graduate in Physics from
Calcutta University and in Engineering from IIT,
Kharagpur. In 1967, he joined Hindustan Lever as
Management Trainee. After 20 years, he joined
Hindustan Lever’s Management Committee as
Executive Director-Exports. In 1991, he was
appointed Chairman, Unilever Arabia, based in
Jeddah to establish and manage Unilever’s
consumer products business in the GCC countries.
Upon return to India in 1995, he became Managing
Director of Brooke Bond Lipton, Unilever’s Indian
foods and beverages company. After the merger of
the Company, he was appointed Vice-Chairman of
the merged Hindustan Lever Ltd. After 31 years in
Levers he joined Tata Sons in August 1998. As on
31st December, 2004 he was a Director of the
following companies:
Rallis India Limited – Chairman
Tata Chemicals Limited – Vice Chairman
Tata Sons Limited – Director
Tata Motors Limited – Director
Tata Power Company Limited – Director
Tata Teleservices Limited – Director
Tata Teleservices(Maharashtra) Limited – Director
Tata AutoComp SystemsLimited – Director
Tata Technologies Limited – Director
Idea Cellular Limited – Director
ICI India Limited – Director
Sheba Properties Limited – Director
(ii) Mr. A. S. Ramchander
Mr. Ramchander is a Post Graduate in
Management from the Indian Institute of
Management (IIM) specializing in marketing &
finance. He has also done his graduation in
Chemical Technology (B. Tech) from Osmania
University Hyderabad.
He has over 19 years of experience in consumer &
customer marketing, business strategy & sales.
He joined Castrol India in 1994 & during the period
of 6 years that he was with Castrol India, he was
involved in the phenomenal growth of the unit from
a market share of 10% to 25% in the automotive
Lubricant business. He was Head – Brand
marketing in Castrol India when he was seconded
in the year 2000 to a senior marketing role in
Castrol Asia Pacific.
After Burmah Castrol worldwide was acquired by
BP, Mr. Ramchander moved to BP Asia Pacific
Regional Headquaters at Singapore. Since 2002
he has been the Regional Marketing Director of BP
Asia Pacific Lubes before he was appointed as a
Wholetime Director in Castrol India.
Prior to joining Castrol India, he had 9 years of
sales & marketing experience in the paints,
construction material and organic chemical
industries. During his assignment in Singapore, he
was a lecturer on marketing & channel
management in the Nanyang Technological
University in Singapore.
Mr. Ramchander is not a Director in any other
Company.
Directors’ Report
31
Castrol India Limited
7. Disclosure
(a) Disclosures on materially significant
related party transactions that may
have potential conflict with the
None
interests of Company at large.
(b) Details of non-compliance by the
company, penalties, strictures None in
imposed on the company by Stock the last
Exchange or SEBI or any statutory three
authority, on any matter related to years
capital markets, during the last
three years.
8. Means of Communication
(a) Half-yearly report sent : No, as the results of the
to each household of Company are published in
shareholders the Newspapers all over
India
(b) Quarterly results : (i) Times of India –Newspapers in which Mumbai, Delhi, Pune,
results are normally Ahmedabad, Lucknow,
published in Patna, Bangalore,
Hyderabad & Kolkata
editions in English
(ii) Maharashtra Times –Mumbai edition in
Marathi
(iii) Navbharat Times –New Delhi edition in
Hindi
Any website, where : Yes – www.castrol.co.in
displayed
Whether it also displays : Yes
official news releases
The presentations made : No
to institutional investors or
to the analysts
(c) Whether MD&A is a part : Yes. Part of the Directors’
of the Annual Report Report as Annexure ‘A’
or not
9. General Shareholder Information(a) AGM : Tuesday,
Date, Time and Venue 19th April, 2005,at 2.00 p.m., atBirla Matushri Sabhagar,19 Marine Lines,Mumbai 400 020.
(b) Financial Year : (i) January 2005 toDecember 2005.
(ii) First Quarter 2005.Results – 3rd/4th weekof April 2005.
(iii) Half yearly Results2005 – 3rd/4th weekof July 2005.
(iv) Third Quarter 2005Results – 3rd/4th weekof October 2005.
(v) Results for the yearending 31st December,2005 – January/February, 2006.
(c) Date of Book closure : 29th March, 2005 to19th April, 2005(both days inclusive).
(d) Dividend Payment date(s) : Interim – 16th August, 2004Final – on or after19th April, 2005.
(e) Listing on Stock : The Company has paid theExchange, Mumbai listing fees for the period
1st April, 2004 to31st March, 2005.
(f) (i) Stock Code – : 870Physical
(ii) Demat ISIN Number : INE 172A01019for NSDL & CDSL
(g) Market price Data: : Please See Annexure I ofHigh/Low during each this Report.month in last financialyear
(h) Stock Performance in : Please See Annexure II ofcomparison to this Report.Broad-based indicessuch as BSE Sensex,CRISIL
}}
Directors’ Report
32
Castrol India Limited
(i) Registrar and Transfer : Tata Share RegistryAgents Limited,
Army and Navy Building,148, M.G. Road,Mumbai 400 001.
(j) Share Transfer System : The Company Secretaryhas been authorized toapprove the transfer ofshares which is done withinthe time-limit stipulated bythe Listing Agreement. Thesaid transfers are thennoted at the subsequentTransfer andShareholders’/Investors’Grievance CommitteeMeeting.
(k) Distribution of No. of No. of % ofShareholding as on Shares Share- Share-10-02-2005 holders holders
Upto 500 7234246 58521 85.26
501 – 1000 3588383 4872 7.10
1001 – 2000 4654325 3200 4.66
2001 – 3000 2534420 1021 1.49
3001 – 4000 1732177 516 0.75
4001 – 5000 693545 152 0.22
5001 – 10000 1559225 234 0.34
1001 and above 101643977 126 0.18
Grand Total 123640298 68642 100.00
(l) Dematerialisation of : 40.99% of the paid-upShares and liquidity capital has been
dematerialised as on10th February, 2005 whichincludes 16.86% of thepaid-up capital held byCastrol Ltd., U.K.
(m) Outstanding GDRs/ : The Company has notADRs/Warrants or any issued any GDRs/ADRs/Convertible instruments, Warrants or anyconversion date and likely Convertible instruments.impact on equity
(n) Plant Locations : The Company’s plants arelocated at Patalganga,Paharpur, Silvassa,Ballabgarh, Tondiarpet &Hosakote.
(o) Address for : i. Shareholderscorrespondence correspondence
should be addressed to:Tata Share RegistryLimited.Unit: Castrol IndiaLimitedArmy and NavyBuilding, 148,M.G. Road,Mumbai 400 001.Tel. No. 5656 8484Fax No. 5656 8494/
5656 8496
ii. Shareholders holdingshares in electronicmode should addressall theircorrespondence totheir respectiveDepository
Participants.
B. NON-MANDATORY REQUIREMENTS
1. Whether Chairman of the : No, but the Company
Board is entitled to reimburses expenses in
maintain a Chairman’s relation to the performance
office at the Company’s of his duties as Chairman.
expense and also allowed
reimbursement of expenses
incurred in performance of
his duties
Directors’ Report
33
Castrol India Limited
2. Remuneration Committee : Please refer to Sr. No. 4 of
this Report.
3. Shareholder rights – : As the Company’s half
The half-yearly yearly results are published
declaration of financial in English newspapers
performance including having a circulation all over
summary of the India and in a Marathi
significant events in last newspaper (having a
six months should be sent circulation in Mumbai) and
to each household of in a Hindi newspaper
Shareholders (having a circulation in
New Delhi) the same are
not sent to the
shareholders of the
Company.
Normally, there is no
second half-yearly results
as the audited results are
taken on record by the
Board and then
communicated to the
shareholders through the
Annual Report.
On behalf of the Board of Directors
N. K. Kshatriya R. Elston-Green A. S. Ramchander
Managing Director Finance Director Director - Automotive
Mumbai
Dated: 8th March, 2005
Directors’ Report
34
Castrol India Limited
Annexure I Castrol India Limited
Market Price Data - High/Low during each month in the Year 2004
Month Rate (Rs.)
Highest Lowest
January 239.25 205.30
February 221.65 207.55
March 221.75 188.65
April 199.50 181.00
May 184.00 160.05
June 172.45 159.90
July 175.05 160.25
August 172.10 155.80
September 173.45 164.30
October 166.50 162.15
November 193.90 162.75
December 236.70 180.25
Annexure II
On behalf of the Board of Directors
N. K. Kshatriya R. Elston-Green A. S. Ramchander
Managing Director Finance Director Director - AutomotiveMumbaiDated: 8th March, 2005
Directors’ Report
35
Castrol India Limited
To The Members of Castrol India Limited
We have examined the compliance of conditions of
Corporate Governance by Castrol India Limited, for
the year ended December 31, 2004 as stipulated in
Clause 49 of the Listing Agreement of the said
Company with the Stock Exchange.
The compliance of conditions of Corporate Governance
is the responsibility of the management. Our
examination was limited to procedures and
implementation thereof, adopted by the Company for
ensuring the compliance of the conditions of the
Corporate Governance. It is neither an audit nor an
expression of opinion on the financial statements of the
Company.
In our opinion and to the best of our information and
according to the explanations given to us, we certify
that the Company has complied with the conditions of
Corporate Governance as stipulated in the above-
mentioned Listing Agreement.
We state that no investor grievance is pending for a
period exceeding one month against the Company as
per the records maintained by the Share Registrars and
reviewed by the Shareholders’/Investors’ Grievance
Committee.
We further state that such compliance is neither an
assurance as to the future viability of the Company
nor the efficiency or effectiveness with which the
management has conducted the affairs of the
Company.
For S.R. BATLIBOI & CO.
Chartered Accountants
per Hemal Shah
Partner
Membership No. : 42650
Mumbai,
Dated: 8th March, 2005.
AUDITORS’ CERTIFICATE
Directors’ Report
36
Castrol India Limited
Shareholding Pattern as on 10th February, 2005
Sr. No. Category No. of shareholders No. of shares held % to paid-up capital
1. We have audited the attached Balance Sheet of Castrol India Limited as at 31st December, 2004 and alsothe Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto.These financial statements are the responsibility of the Company’s management. Our responsibility is toexpress 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 Standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. As required by the Companies (Auditor’s Report) Order, 2003 (as amended) issued by the CentralGovernment of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose inthe Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:i. We have obtained all the information and explanations, which to the best of our knowledge and belief
were necessary for the purposes of our audit;ii. In our opinion, proper books of account as required by law have been kept by the Company so far as
appears from our examination of those books;iii. The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in
agreement with the books of account;iv. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this
report comply with the accounting standards referred to in sub-section (3C) of section 211 of theCompanies Act, 1956;
v. Based on written representation received from the directors as on 31st December, 2004, which havebeen taken on record by the Board of Directors, we report that none of the directors is disqualified as on31st December, 2004 from being appointed as a director in terms of Clause (g) of sub-section (1) ofsection 274 of the Companies Act, 1956;
vi. In our opinion and to the best of our information and according to the explanations given to us, thesaid accounts give the information required by the Companies Act, 1956, in the manner so required, andgive a true and fair view in conformity with the accounting principles generally accepted in India;a. in the case of the Balance Sheet, of the state of affairs of the Company as at 31st December, 2004;b. in the case of the Profit and Loss Account, of the profit of the Company for the year ended
on that date; andc. in the case of Cash Flow Statement, of the cash flows for the year ended on that date.
For S. R. BATLIBOI & COMPANYChartered Accountants
per Hemal ShahPartnerMembership No. : 42650
MumbaiJanuary 17, 2005
Auditors’ Report
Auditors’ Report
38
Castrol India Limited
(i) (a) The Company has maintained proper records showing full particulars, including quantitative detailsand situation of fixed assets.
(b) All fixed assets have not been physically verified by the management during the year but there is aregular programme of verification which, in our opinion, is reasonable having regard to the size of theCompany and the nature of its assets. As informed to us, no material discrepancies were noticed onsuch verification.
(c) There was no substantial disposal of fixed assets during the year.(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during
the year.(b) The procedures of physical verification of inventory followed by the management are reasonable and
adequate in relation to the size of the Company and the nature of its business.(c) The Company is maintaining proper records of inventory and no material discrepancies were
noticed on physical verification.(iii) (a) As informed to us, the Company has not granted any loans, secured or unsecured to companies, firms
or other parties covered in the register maintained under section 301 of the Companies Act, 1956.(b) As informed to us, the Company has not taken any loans, secured or unsecured from companies, firms
or other parties covered in the register maintained under section 301 of the Companies Act, 1956.(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal
control system commensurate with the size of the Company and the nature of its business, for the purchaseof inventory and fixed assets and for the sale of goods and services. During the course of our audit, nomajor weakness has been noticed in the internal control system in respect of these areas.
(v) (a) According to the information and explanations provided by the management, we are of the opinionthat the particulars of contracts or arrangements referred to in section 301 of the Act that need to beentered into the register maintained under section 301 have been so entered.
(b) In our opinion and according to the information and explanations given to us, the transactions made inpursuance of such contracts or arrangements exceeding value of Rupees five lakhs have been enteredinto during the financial year at prices which are reasonable having regard to the prevailing marketprices at the relevant time except in respect of certain transactions, where because of the unique andspecialized nature of the items involved and absence of any comparable prices, we are unable tocomment whether the transactions were made at prevailing market prices at the relevant time.
(vi) The Company has not accepted any deposits from the public.(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of
its business.(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules
made by the Central Government for the maintenance of cost records under section 209(1)(d) of theCompanies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and recordshave been made and maintained.
(ix) (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues includingprovident fund, investor education and protection fund, employees’ state insurance, income tax,sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory duesapplicable to it.
(b) According to the information and explanations given to us, no undisputed amounts payable in respectof provident fund, investor education and protection fund, employees’ state insurance, income tax,wealth tax, service tax, sales tax, customs duty, excise duty, cess and other undisputedstatutory dues were outstanding, at the year end, for a period of more than six months from the datethey became payable.
Annexure referred to in paragraph 3 of our report of even date
Re: Castrol India Limited
Auditors’ Report
39
Castrol India Limited
(c) According to the records of the Company, the dues outstanding of income tax, sales tax, wealth tax,service tax, custom duty, excise duty and cess on account of any dispute, are as follows:
Name of the statute Nature of dispute Amount Period to which Forum where dispute is pending(Rs. in Crores) the amount relates
Central Sales Tax Non submission of declaration 18.67 1987 to 2003 Assistant Commissioner, DeputyAct & Local Sales forms, Disallowance of Set off Commissioner, Tribunal andTax Act claim, Classification dispute, High Court.
Rate dispute, Disallowance ofcredit notes and rebates andOther dues.
Central Excise Act, Valuation, Modvat Credit, Stock 41.31 1990 to 2004 Deputy Commissioner, Additional1944 Differences, Classification, Commissioner, Commissioner,
Provisional Assessments and Joint Commissioner,Other Issues. Commissioner (Appeals),
CEGAT and Supreme Court.
Customs Act, 1962 Valuation 0.08 1998 Assistant CommissionerService Tax under Service Tax on Royalty and 7.50 1997 to 2004 Deputy Commissioner, Additionalthe Finance Act, Service Tax on rented tanks. Commissioner and Commissioner.1994
(x) The Company has no accumulated losses at the end of the financial year and it has not incurred cashlosses in the current and immediately preceding financial year.
(xi) Based on our audit procedures and as per the information and explanations given by the management,we are of the opinion that the Company has not defaulted in repayment of dues to a financial institution,bank or debenture holders.
(xii) According to the information and explanations given to us and based on the documents and recordsproduced to us, the Company has not granted loans and advances on the basis of security by way of pledgeof shares, debentures and other securities.
(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, theprovisions of clause 4(xiii) of the Companies (Auditor’s Report) Order, 2003 (as amended) are notapplicable to the Company.
(xiv) In respect of dealing/trading in securities, in our opinion and according to the information and explanationsgiven to us, proper records have been maintained of the transactions and contracts and timely entries havebeen made therein. The securities have been held by the Company in its own name.
(xv) According to the information and explanations given to us, the Company has not given any guarantee forloans taken by others from bank or financial institutions.
(xvi) The Company did not have any term loans outstanding during the year.(xvii) According to the information and explanations given to us and on an overall examination of the Balance
Sheet and Cash Flow Statement of the Company, we report that no funds raised on short-term basis havebeen used for long-term investment.
(xviii)The Company has not made any preferential allotment of shares during the year to parties or companiescovered in the register maintained under section 301 of the Companies Act, 1956.
(xix) The Company did not have any outstanding debentures during the year.(xx) The Company has not raised any money through a public issue during the year.(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the
financial statements and as per the information and explanations given by the management, we report thatno material fraud on or by the Company has been noticed or reported during the course of our audit.
For S. R. BATLIBOI & COMPANYChartered Accountants
per Hemal ShahPartnerMembership No. : 42650
MumbaiDated: January 17, 2005
40
Castrol India Limited
Balance Sheet as at 31st December, 2004
2004 2003Schedule Rupees Rupees Rupees
in Crores in Crores in CroresSOURCES OF FUNDS
Shareholders’ FundsShare Capital A 123.64 123.64Reserves and Surplus B 236.43 224.44
Net Sales 1305.12 1171.15Other Income I 22.09 19.14
Total Income 1327.21 1190.29
EXPENDITURECost of Materials J 777.02 669.72Operating and Other Expenses K 319.88 299.33Interest L 2.87 2.57Depreciation (Refer Note 3 of Schedule M) 24.88 14.31
Total Expenditure 1124.65 985.93
PROFIT BEFORE TAXATION AND EXCEPTIONAL ITEMS 202.56 204.36Less: Exceptional Items (Refer Note 4 of Schedule M)
PROFIT AFTER TAXATION 127.46 137.38Add: Balance as per last Balance Sheet brought forward 18.71 13.41
PROFIT AVAILABLE FOR APPROPRIATION 146.17 150.79
APPROPRIATION TO:Interim Dividend 49.46 49.46Tax on Interim Dividend 6.46 6.34Proposed Final Dividend 52.55 52.55Tax on Proposed Final Dividend 6.87 6.73Education Cess on Tax on Final Dividend 2003 0.13 —General Reserve 14.00 17.00Balance carried forward 16.70 18.71
146.17 150.79
Earning per share (Basic & Diluted) (Face value of Rs. 10/-) 10.31 11.11
Notes on Accounts M
The schedules referred to herein form an integral part of the Profit and Loss Account.
Profit and Loss Account for the year ended 31st December, 2004
S. M. DATTA Chairman N. K. KSHATRIYA Managing Director
Executive Directors
A. S. RAMCHANDER Director R. ELSTON-GREEN Director
Non-Executive Directors
A. JHAWAR Director R. GOPALAKRISHNAN DirectorP. HUGHES Director D. S. PAREKH DirectorR. A. SAVOOR Director L. FREESE Alternate Director
As per our report of even dateFor S. R. BATLIBOI & COMPANYChartered Accountants
per HEMAL SHAH A. H. MODYPartner Company SecretaryMembership No. : 42650 & Head Legal
MumbaiJanuary 17, 2005
Profit & Loss Account
42
Castrol India Limited
Schedules forming part of the Balance Sheet as at 31st December, 2004
SCHEDULE A2004 2003
Rupees Rupeesin Crores in Crores
SHARE CAPITAL
Authorised
124,000,000 (2003 : 124,000,000) Equity Shares of Rs. 10/- each 124.00 124.00
Issued and Subscribed (Refer Notes below)
123,640,298 (2003 : 123,640,298) fully paid up Equity Shares of Rs. 10/- each 123.64 123.64
123.64 123.64
Notes:
1. Includes 87,687,455 (2003 : 87,687,455) Equity Shares of Rs. 10/- each held by Castrol Ltd., U.K., the Holding Company.(Also refer Note 7 of Schedule M).
2. Includes 116,353,318 (2003 : 116,353,318) Equity Shares allotted as fully paid up Bonus Shares by capitalisation of Share Premium/General Reserve.
SCHEDULE B2004 2003
Rupees Rupees Rupeesin Crores in Crores in Crores
RESERVES & SURPLUS
Capital Reserve 13.62 13.62
General Reserve
As per last Balance Sheet 192.11 175.11
Add: Transferred from Profit and Loss Account 14.00 17.00
206.11 192.11
Balance in Profit and Loss Account 16.70 18.71
236.43 224.44
Schedules
43
Castrol India Limited
Schedules forming part of the Balance Sheet as at 31st December, 2004
SCHEDULE C2004 2003
Rupees Rupeesin Crores in Crores
LOAN FUNDS
UNSECURED LOANS
Sales Tax Deferral Loan (Interest Free)
From SICOM Ltd. 0.23 0.52(For Patalganga Plant — Repayable in next one instalment)[Repayable within one year Rs. 0.23 Crore (2003 : Rs. 0.29 Crore)]
From Government of Karnataka, Department of Industries & Commerce 0.70 0.89(For Hosakote Plant — Repayable in equal quarterly instalments)[Repayable within one year Rs. 0.19 Crore (2003 : Rs. 0.19 Crore)]
From SICOM Ltd. 2.79 2.79(For Patalganga Plant — Repayable from October 2011)
3.72 4.20
SCHEDULE D2004 2003
Rupees Rupees Rupeesin Crores in Crores in Crores
DEFERRED TAX LIABILITY (NET) [Refer Note 1(h) of Schedule M]
Deferred Tax Assets and Liabilities are attributable to the following items:
Liabilities
Depreciation 27.09 29.89
Less: Assets
Provision for Doubtful Debts 1.15 2.88
Voluntary Retirement Scheme Expenses 3.25 3.65
Accrual for expenses (Including Leave Encashment)allowable only on payment 4.48 4.22
Others 0.80 0.83
9.68 11.58
17.41 18.31
Schedules
44
Castrol India Limited
SCHEDULE E
FIXED ASSETS Rupees in Crores
GROSS BLOCK DEPRECIATION IMPAIRMENT NET BLOCKAs at Additions Deductions As at As at For the On As at LOSS ON As at As at
1.1.2004 for the for the 31.12.2004 1.1.2004 year Deductions 31.12.2004 CLOSURE 31.12.2004 31.12.2003 year year OF PLANTS
Capital Work-in-progress (Including advances on Capital Account) 4.66 3.60
149.77 171.01
Refer Notes 1(b), 3 and 4 of Schedule M relating to Fixed Assets, Depreciation and Impairment.
Notes :
(1) Cost includes Rs. 0.49 Crore (2003 : Rs. 0.49 Crore) for which execution of Land Lease agreement in respect of plots in Mumbai is in progress.
(2) Comprises of cost of premises including shares of paid up value of Rs. 0.01 Crore (2003 : Rs. 0.02 Crore) in Co-operative Societies.
(3) Land & Building, Plant & Machinery and Furniture & Fixtures at Ballabgarh and Hosakote plants and Company owned Office Premises in Mumbai are retiredfrom active use and held for disposal. Accordingly these assets are carried at lower of cost and net realisable value. The Net Book Value of such assets as atDecember 31, 2004 is Rs. 14.24 Crores (2003 : Rs. 7.88 Crores).
Schedules forming part of the Balance Sheet as at 31st December, 2004
Schedules
45
Castrol India Limited
Schedules forming part of the Balance Sheet as at 31st December, 2004
SCHEDULE F2004 2003
Rupees Rupeesin Crores in Crores
INVESTMENTS – [Refer Note 1(c) of Schedule M]
LONG TERM
Other than trade:
Quoted:
Government Securities * [Matured Face Value Rs. 0.01 Crore (2003 : Rs. 0.01 Crore)] 0.02 0.02
30,100 (2003 : 30,100) – 6.75% Tax Free Bonds (US 64) of Unit Trust of India of Rs. 100/- each 0.30 0.30[Market Value Rs. 0.31 Crore (2003 : Rs. 0.34 Crore)]
CURRENT
Other than trade:
Unquoted:
Government Treasury bills [Face Value Rs. 130.00 Crores (2003 : Rs. 86.19 Crores)] 128.59 84.46
In Subsidiary Company
Nil (2003 : 1,000) Equity Shares of Rs. 10/- each fully paid inIndrol Chemicals & Specialities Private Limited (Refer Note 16 of Schedule M) — 0.01
128.91 84.79
* Government Securities lodged with Mumbai Port Trust.
Schedules
46
Castrol India Limited
Schedules forming part of the Balance Sheet as at 31st December, 2004
SCHEDULE G2004 2003
Rupees Rupeesin Crores in Crores
CURRENT ASSETS, LOANS AND ADVANCES
Inventories* [Refer Note 1(d) of Schedule M]
Raw Materials 81.78 66.72
Finished Products 70.71 73.72
Traded Items 6.26 7.53
Packages 6.08 6.49
Stores & Consumables 1.41 1.13
166.24 155.59
* Including Goods in Transit
Sundry Debtors @
Secured 3.98 5.00
Unsecured, considered good
Exceeding six months 2.17 2.73
Others 125.11 123.52
Unsecured, considered doubtful (Exceeding six months) 3.14 8.02
134.40 139.27
Less: Provision for Doubtful Debts 3.14 8.02
131.26 131.25
@ Includes amount due from Companies under same management Rs. 9.78 Crores(2003 : Rs. 6.21 Crores), list of which as identified by management.
Cash and Bank Balances
Cash on Hand 0.05 0.04
With Scheduled banks:
On Current Account [including cheques on hand Rs. 4.35 Crores(2003 : Rs. 1.47 Crores)] 24.57 22.44
On Deposit Account 0.01 0.01
Unclaimed Dividend Accounts 5.06 5.29
29.69 27.78
Other Current Assets
Interest accrued on Investments 0.01 0.01
0.01 0.01
Schedules
47
Castrol India Limited
Schedules forming part of the Balance Sheet as at 31st December, 2004
SCHEDULE G — (Contd.)2004 2003
Rupees Rupeesin Crores in Crores
Loans and Advances
(Unsecured, considered good, unless otherwise stated)
Advances recoverable in cash or in kind or for value to be received (Refer Note below)
Considered good 50.40 57.65
Considered doubtful 2.12 2.12
52.52 59.77
Less: Provision for doubtful advances 2.12 2.12
50.40 57.65
Balances with Customs, Port Trust and Excise Authorities 7.92 4.96
58.32 62.61
385.52 377.24
Note: Amounts due from Directors of the Company Rs. 0.19 Crore (2003 : Rs. 0.21 Crore) and maximum amount due from Directors of theCompany at any time during the year Rs. 0.22 Crore (2003 : Rs. 0.22 Crore).
SCHEDULE H2004 2003
Rupees Rupees Rupeesin Crores in Crores in Crores
CURRENT LIABILITIES AND PROVISIONS
Current Liabilities
Sundry Creditors (Refer Note 14 of Schedule M) 189.32 184.09
Advances from Customers 1.62 1.77
Interest accrued and not due on Loans/Deposits 0.10 —
Amount retained for taxation liability of Castrol Ltd., U.K. 0.92 1.05
Investor Education and Protection Fund shall be creditedby the following amount (Refer Note below)
Unclaimed Dividends 5.06 5.29
197.02 192.20Provisions
Provision for Indirect Taxation 11.66 8.21
Provision for Current Taxation (Net of Advance Tax) 14.90 2.76
Proposed Final Dividend 52.55 52.55
Tax on Proposed Final Dividend 6.87 6.73
85.98 70.25
283.00 262.45
Note: There is no amount due and outstanding as at Balance Sheet date to be credited to Investor Education and Protection Fund.
Schedules
48
Castrol India Limited
Schedules forming part of the Profit and Loss Account for the year ended 31st December, 2004
Dividend from Long Term Investment (Non trade – Gross) — 0.39[Tax deducted at source Rs. Nil (2003 : Rs. 0.03 Crore)]
Profit on sale of Investments – Current 3.90 6.93
Profit on Disposal/Write off of Fixed Assets (Net) 1.46 —
Miscellaneous Income [Tax deducted at source Rs. 0.48 Crore (2003 : Rs. 0.05 Crore)] 8.01 5.48
Debts written off in earlier years, realised 0.14 0.51
Excess Provision for Doubtful Debts written back 4.88 3.97
22.09 19.14
SCHEDULE J2004 2003
Rupees Rupeesin Crores in Crores
COST OF MATERIALS
Opening Stock
Raw Materials and Packages 73.21 57.43
Traded Items 7.53 8.65
80.74 66.08
Add: Purchases 787.99 698.70
868.73 764.78Less: Closing Stock
Raw Materials and Packages 87.86 73.21
Traded Items 6.26 7.53
94.12 80.74
774.61 684.04(Increase)/Decrease in Stock of Finished Products:
Opening Stock 73.72 57.24
Closing Stock 70.71 73.72
3.01 (16.48)
Excise Duty on account of Increase/(Decrease) in Stock of Finished Products (0.60) 2.16
777.02 669.72
Note: Purchases include foreign exchange difference on imports — Gain Rs. 0.57 Crore (2003 : Gain Rs. 0.55 Crore)
Schedules
49
Castrol India Limited
Schedules forming part of the Profit and Loss Account for the year ended 31st December, 2004
SCHEDULE K2004 2003
Rupees Rupees Rupeesin Crores in Crores in Crores
OPERATING AND OTHER EXPENSESSalaries, Wages and Bonus [Refer Note 1(e) of Schedule M] 46.12 47.01Performance Linked Incentive to Wholetime Directors 0.43 0.58Contribution to Provident and Pension Funds[Refer Note 1(e) of Schedule M] 5.88 6.33Gratuity [Refer Note 1(e) of Schedule M] 5.29 3.08Staff Welfare Expenses 7.43 8.02
65.15 65.02Rent 12.08 10.46Rates & Taxes 1.67 1.68Power & Fuel 3.46 3.44Stores & Consumables 1.14 1.32Freight & Forwarding Charges 47.56 40.54Insurance 2.37 2.40Repairs & Maintenance – Land & Building 1.97 2.48Repairs & Maintenance – Plant & Machinery 2.33 2.65Repairs & Maintenance – Others 4.16 3.92Bad Debts Written Off 5.20 6.24Processing & Filling Charges 21.72 20.64Non-recovered Taxes 12.06 8.47Advertisement & Sales Promotion 60.00 54.33Stock Point Operating Charges 10.36 9.63Loss on Disposal/Write Off of Fixed Assets (Net) — 3.16Directors’ Sitting Fees 0.03 0.02Voluntary Retirement Scheme Expenses [Refer Note 1(i) of Schedule M] 0.51 0.72Commission to Resident Non-Wholetime Indian Directors 0.26 0.26Royalty 21.70 22.71Sales Promotion Fee 13.34 8.19Travelling Expenses 12.60 10.41Miscellaneous Expenses (Refer Note 13 of Schedule M) (Net) 20.21 20.64
319.88 299.33
SCHEDULE L
2004 2003Rupees Rupees
in Crores in CroresINTEREST
To Banks 2.26 2.27On Others 0.61 0.30
2.87 2.57
Schedules
50
Castrol India Limited
Schedules forming part of the Balance Sheet as at 31st December, 2004and the Profit and Loss Account for the year ended on that date.
SCHEDULE M
NOTES ON ACCOUNTS
1. Accounting Policies :
(a) Basis of Preparation of Accounts :
The accounts have been prepared to comply in all material aspects with applicable accounting principles in India, theIndian Accounting Standards and the relevant provisions of the Companies Act, 1956. The Financial Statements havebeen prepared under the historical cost convention on an accrual basis.
(b) Fixed Assets and Depreciation :
Fixed Assets are stated at cost (net of cenvat wherever applicable) less accumulated depreciation and impairment loss.Depreciation has been provided on straight line basis.All Fixed Assets are depreciated over their estimated useful lives which have been determined by management. (Alsorefer Note 3 of Schedule M – Notes on Accounts).
(c) Valuation of Investments :
Long term Investments are stated at cost less provision, if any, for diminution, which is other than temporary in nature.Current Investments are valued at lower of cost and net realisable value.
(d) Valuation of Inventories :
Raw Materials, Packages, Traded Items and Finished Goods are valued at lower of monthly weighted average cost andnet realisable value. Cost of Finished Goods includes material & packaging cost, overheads and Excise Duty. CustomDuty on stock lying in Bonded Warehouses is included in cost. Stores and Consumables are valued at cost.
(e) Employees’ Retirement Benefits :
Annual Contribution to Gratuity Fund is based on an actuarial valuation as on the Balance Sheet date. Monthlycontribution to Pension Fund is determined in accordance with Company’s Pension Scheme. Apart from this, under theCompany’s Pension Scheme, certain categories of employees on retirement, are eligible for monthly differentialPension which is accounted monthly on payment basis. As per Company’s Scheme, accrued liability towardsencashment of leave accumulated by workers is provided for on an actuarial basis.
(f) Recognition of Income and Expenditure :
Sales are recognised when goods are supplied and are recorded net of rebates and sales tax and inclusive of exciseduty. Expenses are accounted for on accrual basis and provision is made for all known losses and expenses.
(g) Foreign Currency Transactions :
Foreign Currency Transactions are accounted at exchange rates on the date of transactions. Premium on forward covercontracts in respect of import of raw materials is charged to Profit and Loss Account over the period of contract.Amounts payable and receivable in foreign currency as at the Balance Sheet date, not covered by forward contracts arereinstated at the applicable exchange rates prevailing on that date. All exchange differences arising on revenuetransactions, not covered by forward contracts, are charged to Profit and Loss Account.
(h) Taxation :
(i) Provision for Current Income Tax is made in accordance with the Income Tax Act, 1961.
(ii) Deferred Tax is recognised, subject to the considerations of prudence, on timing differences, being the differencebetween taxable income and accounting income that originate in one period and are capable of reversal in one ormore subsequent periods.
(iii) The tax year for the Company being the year ending 31st March, the provision for taxation for the year is theaggregate of the provision made for the three months ended 31st March, 2004 and the provision based on thefigures for the remaining nine months upto 31st December, 2004, the ultimate tax liability of which will bedetermined on the basis of the figures for the period 1st April, 2004 to 31st March, 2005.
(i) Voluntary Retirement Scheme Expenses are fully written off to the Profit and Loss Account in the year in which theyaccrue.
2. Estimated amount of contracts (net of advances) remaining to be executed on capital account and not provided forRs. 2.53 Crores (2003 : Rs. 2.37 Crores).
Schedules
51
Castrol India Limited
SCHEDULE M (Contd.)
3. In view of recent trends in declining useful lives of assets e.g. due to the rate of change in digital technology, the Company hasconsidered it prudent to conduct a broad review of the remaining estimated useful lives of all its Fixed Assets. As a result theCompany has reduced the estimated useful life and correspondingly increased the rate of depreciation for certain categories ofassets, which are given below : (These Assets were depreciated till 2003 at rates prescribed under Schedule XIV to theCompanies Act, 1956)
Fixed Assets Revised Estimated Estimated useful Additional depreciationuseful life in years life in years – due to change in
Pre-revision estimated useful life(Schedule – XIV) Rs. in Crores
* Workshop Equipments provided against Sales Agreements will now be depreciated over the standard period of Agreement.
The written down value of these Fixed Assets as at 1.1.2004 is being depreciated over their revised remaining useful life. Thetotal impact of the revision is an increase of Rs. 10.71 Crores in depreciation for the year with a corresponding reduction in Profitbefore tax for the year & written down value of Fixed Assets as at 31.12.2004. This amount includes an estimated non-recurringamount of Rs. 6 Crores.The remaining categories of Plant & Machinery, Laboratory Equipments, Factory Buildings, Moulds, Dealer Boards, LeaseholdLand & Leasehold Improvements will continue to be depreciated at the existing rates as they represent the estimated useful lifeof these assets. (Also refer Note 1(b) of Schedule M – Notes on Accounts).
4. The Company has decided to close down its Plant located at Ballabgarh in the State of Haryana with effect from 1.1.2005, asoperations over there have become relatively cost inefficient. The Company had introduced a Voluntary Retirement Scheme(VRS) for its employees at Ballabgarh Plant. VRS charge for the year includes an amount of Rs. 3.72 Crores for BallabgarhPlant. During the year the Fixed Assets at Ballabgarh Plant have been retired from active use and are held for disposal. TheCompany has provided for an Impairment loss of Rs. 3.55 Crores (the difference between the carrying amounts and the netrealisable value estimated by the management) in respect of these Fixed Assets.
31st December, 31st December,2004 2003
Rupees Rupeesin Crores in Crores
5. Contingent liabilities not provided for in the accounts :(a) Counter Guarantees given to Banks 5.73 4.60(b) Excise/Sales Tax/Customs Demands made by the Authorities,
in respect of which appeals have been filed 11.50 9.27(c) Claims against the Company not acknowledged as debts
estimated at :In respect of Third Parties – Miscellaneous 5.76 2.58
(d) A suit has been filed against the Company in the Delhi High Court in connection with the erstwhile Regional Office ofthe Company. The suit is for eviction of the Company from the said premises and for claiming mesne profit/damages onthe grounds that with the increase in rent by the landlord the Delhi Rent Control Act ceased to apply to the saidpremises. The Company has taken necessary steps to defend itself. However, till the matter is finally decided thefinancial liability of the Company cannot be ascertained.
(e) The Company has received show cause notices from Excise Authorities in respect of stock differences at some of itsplants aggregating to Rs. 15.46 Crores. Based on the facts of the case and legal opinions obtained in this regard, theCompany is of the considered view that the demands are not sustainable. However, out of abundant caution, theCompany has made provisions/payments totalling to Rs. 3.82 Crores.
6. Certain disputed demand notices relating to Indirect taxes amounting to Rs. 38.20 Crores are neither have been considered ascontingent liabilities nor acknowledged as claims, based on expert legal opinions obtained in earlier years. Further, during theyear, the Company has carried out a health check on these disputed liabilities from reputed Tax Advisors, who have confirmedthe Company’s stand that the possibility of the demands materializing is remote.
7. A Shareholder of the Company had filed a Public Interest Petition in the Delhi High Court interalia challenging the allotment of3,537,862 equity shares on a Preferential basis to Castrol Ltd., U.K. The said Petition has been dismissed by the Delhi HighCourt. However, the Shareholder can go in appeal against the said Order to the Supreme Court of India.
Schedules
52
Castrol India Limited
SCHEDULE M (Contd.)
8. Segment Information :The business segment has been considered as the primary segment. The Company is organised into two business segments,Automotive & Non Automotive.
The above business segments have been identified considering :
— The customers
— The differing risks and returns
— The organisation structure
— The internal financial reporting system
Segment revenue, results, assets and liabilities have been accounted for on the basis of their relationship to the operatingactivities of the segment and amounts allocated on a reasonable basis.
C. The information given above, have been reckoned on the basis of information available with the Company.
Air BP LubricantsAspac Oil (Thailand) Ltd.Aspac Oil KoreaBP Asia Pacific Pte Ltd.BP Chemicals (Malaysia)BP Chemicals Ltd.BP ChinaBP Corporation NA Inc.BP Exploration (IN DJAZAIR) Ltd.BP Exploration (IN Salah) Ltd.BP Gas & Power-Head OfficeBP Gas Marketing Ltd.BP India Ltd.BP India Services Pvt. Ltd.BP International Holdings Oil.BP International Ltd.BP Japan KK
BP Mauritius Ltd.BP Middle EastBP Oil International Ltd.BP Oil New ZealandBP Oil UK Ltd.BP Petrolleri A.SBP Shipping Ltd.BP Singapore - LubesBP Singapore PTE Ltd.BP Singapore Spec Ind LubesBP Southern AfricaBurmah Oil DeutschlandBurmah Oil TECH’ GMBHCastrol Australia PTY Ltd.Castrol BelgiumCastrol China Ltd.Castrol France S A
Castrol Industrial North America Inc.Castrol Industrie GMBHCastrol International Ltd.Castrol Italiana SPACastrol OffshoreCastrol PGO UKCastrol SAMECastrol South AfricaCastrol (UK) Ltd.Deutsche BP AktiengesellschaftFreight Systems Co. Ltd.Lubricants BelgiumLubricants UK CorporateLubricants UK Ltd.PT Castrol IndonesiaTata BP Solar India Ltd.
Schedules
54
Castrol India Limited
SCHEDULE M (Contd.)
10. Operating Lease for assets taken on lease after 1st April, 2001.
31st December, 31st December,2004 2003
Rupees Rupeesin Crores in Crores
(a) Total of future minimum lease payments
(i) Not later than one year 11.35 9.58
(ii) Later than one year and not later than five years 10.26 15.20
(iii) Later than five years — —
(b) Lease payments recognised in the Profit and Loss account 12.08 10.46
11. Information given under Clause 3(i)(a), 3(ii), 4-C, 4-D of Part II of Schedule VI to the Companies Act, 1956.
31st December, 2004 31st December, 2003Quantity Value Quantity Value
(KLs/MTs) Rupees (KLs/MTs) Rupeesin Crores in Crores
(b) (i) Consumption of Raw Materials, Additivesand Chemicals and Packages : *
Base Oils 195333 449.99 186597 380.22Additives and Chemicals 33735 234.52 31727 211.22Packages (Individual itemseach being less than 10% of the total) — 76.38 — 73.84
229068 760.89 218324 665.28
* Does not include adjustment for old and used Containers
31st December, 2004 31st December, 2003Value % of Value % of
Rupees Total Rupees Totalin Crores Consumption in Crores Consumption
(ii) Value of all Imported and Indigenous RawMaterials consumed during the year :
(i) Licensed Capacity — Not applicable as per legal advice
(ii) Installed Capacity(Technically evaluated as certifiedby the Management and acceptedby Auditors) (Per Year on a singleshift basis)
31st December, 31st December,2004 2003
(KLs/MTs) (KLs/MTs)For production of Lubricating Oils, Greases, Brake Fluids,at Patalganga, Kolkata, Chennai, Ballabgarh and Silvassa. 165764 165764
(f) Production of Lubricating Oils, Greases, etc.[Including processing done by third parties 15899 KLs/MTs (2003 : 15306 KLs/MTs)] 222433 213217
(g) (i) The relevant information regarding turnover, production, opening and closing stocks is given only in aggregate and nodetailed break-up thereof is given as the items are too numerous to be conveniently grouped.
(ii) Consumption includes adjustments for shortage/excess, etc. and the effects of reduction of inventory to realisablevalue.
(iii) Quantities of turnover, consumption, production, opening and closing stocks of additives and chemicals are made upof Kilolitres and Metric Tons, but the constituent units of measurement of the items have not been separatelyidentified and indicated.
(iv) As the Company manufactures and trades, the information required by Clause 3(ii)(a) of Schedule VI Part II to theCompanies Act, 1956 is interpreted to require total amounts to be disclosed in respect of opening stock, closing stockand purchases of traded items.
(iii) Reimbursement of out of pocket expenses 0.01 0.010.58 0.50
# Excluding Service Tax
14. The Company owes to following Small Scale Industrial Undertakings sums outstanding for more than 30 days :ABCD Drums & Barrels Industries. Ole Fine Organics Royal Castor Products Pvt. Ltd.Amantech Chemicals Pvt. Ltd. Pax Enterprises Shah Packwell IndustriesCentral Oil Industries R. G. Desai Industries Suru Chemicals & Pharmaceuticals Pvt. Ltd.Himatex Corporation R. K. Metal & Plastics Pvt. Ltd. Vibha Chem Products Pvt. Ltd.Makwell Plasticizers Pvt. Ltd. Raj Lubricants (Madras) Ltd.
The information regarding Small Scale Industrial Undertakings has been determined to the extent such parties have beenidentified on the basis of information available with the Company. This has been relied upon by the auditors.
15. Research and Development expenses amounting to Rs. 7.50 Crores (2003 : Rs. 6.01 Crores) are included under relevant headsof expense.
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Castrol India Limited
SCHEDULE M (Contd.)
16. The Directors of Indrol Chemicals & Specialties Private Limited, a wholly owned Subsidiary Company, had Resolved to put theCompany in voluntary winding up. A final meeting of the Members of the Company was called by the Liquidator and the paid upcapital refunded to the Parent Company. An application has been made to the Official Liquidator to formally wind up theCompany.
31st December, 31st December,2004 2003
Rupees Rupeesin Crores in Crores
17. C.I.F. Value of Imports :Raw Materials 308.47 245.87Capital Goods 0.66 0.81
18. Expenditure in Foreign Currency (on accrual basis) :Travel 0.91 0.42Imports of goods for resale 8.08 9.26Others (Net of tax where applicable) 6.14 8.02Royalty (Net of tax) 18.45 19.30
19. Earnings in Foreign Exchange (on accrual basis) :Supplies to Foreign Vessels 2.09 1.00Commission & Others 0.99 1.04FOB value of goods exported 0.64 0.16
20. Details of Dividend remitted during the year, to Two (2003 – Two) non-resident shareholders are as follows :
31st December, 31st December,2004 2003
Dividend in respect No. of Rupees Rupeesof the year ended Shares in Crores in Crores
31-12-2002 (Final) 87822929 — 37.33
31-12-2002 (Special) 87822929 — 72.45
31-12-2003 (Interim) 87822929 — 35.13
31-12-2003 (Final) 87822929 37.33 —
31-12-2004 (Interim) 87822929 35.13 —
21. Previous year’s figures have been regrouped wherever necessary.
22. 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. 2 1 3 5 9 State Code 1 1
Balance Sheet Date 3 1 1 2 2 0 0 4
Date Month Year
II. Capital raised during the year (Amount in Rs. Thousands)
Public Issue Rights Issue
— —
Bonus Issue Private Placement
— —
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Castrol India Limited
III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)
Total Liabilities Total Assets
6 6 4 2 0 9 9 6 6 4 2 0 9 9
Sources of Funds:
Paid up Capital Reserves & Surplus
1 2 3 6 4 0 3 2 3 6 4 3 7 6
Secured Loans Unsecured Loans
— 3 7 2 5 6
Deferred Tax Liability (Net)
1 7 4 0 7 0
Application of Funds:
Net Fixed Assets Investments
1 4 9 7 7 2 1 1 2 8 9 1 1 5
Net Current Assets Miscellaneous Expenditure
1 0 2 5 2 6 9 —
Accumulated Losses
—
IV. Performance of the Company (Amount in Rs. Thousands)
Turnover Total Expenditure
1 3 0 5 1 2 3 4 1 1 3 1 9 2 3 3
Profit/(Loss) before tax Profit/(Loss) after tax
1 9 5 2 9 4 1 1 2 7 4 6 3 9
Earning per Share (Rs.) Dividend Rate %
1 0 . 3 1 8 2 . 5 0
V. Generic Names of Principal Products/Services of the Company
Item Code No. 2 7 1 0 0 0 . 6 1(ITC Code)
Product Description L U B R I C A T I N G O I L S
SCHEDULE M (Contd.)
S. M. DATTA Chairman N. K. KSHATRIYA Managing Director
Executive Directors
A. S. RAMCHANDER Director R. ELSTON-GREEN Director
Non-Executive Directors
A. JHAWAR Director R. GOPALAKRISHNAN DirectorP. HUGHES Director D. S. PAREKH DirectorR. A. SAVOOR Director L. FREESE Alternate Director
A. H. MODYCompany Secretary
& Head Legal
MumbaiJanuary 17, 2005
Schedules
59
Castrol India Limited
Cash Flow Statement for the year ended 31st December, 2004
2004 2003Rupees Rupees Rupees
in Crores in Crores in CroresA. CASH FLOW FROM OPERATING ACTIVITIES
(Profit)/Loss on Disposal/Write off of Fixed Assets (Net) (1.46) 3.16
Provision for Impairment of Fixed Assets 3.55 —
Operating Profit before Working Capital Changes 216.96 214.67
Adjustments for:
Sundry Debtors (0.01) (39.25)
Inventories (10.08) (30.66)
Other Loans & Advances 4.29 16.00
Sundry Creditors 8.17 5.83
Cash generated from Operations 219.33 166.59
Income Tax Paid (56.59) (61.67)
NET CASH FLOW FROM OPERATING ACTIVITIES 162.74 104.92
B. CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Fixed Assets (9.92) (12.93)
Sale of Fixed Assets 4.19 7.09
Purchase of Investments (700.88) (630.77)
Sale of Investments 660.66 773.20
Interest received 3.70 1.86
Dividend received — 0.39
NET CASH FLOW FROM INVESTING ACTIVITIES (42.25) 138.84
Cash Flow
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Castrol India Limited
Cash Flow (Contd.)
2004 2003Rupees Rupees Rupees
in Crores in Crores in Crores
C. CASH FLOW FROM FINANCING ACTIVITIES
Repayment of long term borrowings (0.48) (0.86)
Interest Paid (2.77) (2.57)
Dividend Paid (102.01) (204.01)
Dividend Tax paid (13.32) (26.14)
NET CASH FLOW FROM FINANCING ACTIVITIES (118.58) (233.58)
D. NET INCREASE/(DECREASE) IN CASH ANDCASH EQUIVALENTS (A) + (B) + (C) 1.91 10.18
CASH AND CASH EQUIVALENTS, beginning of the year 27.78 17.60
CASH AND CASH EQUIVALENTS, end of the year 29.69 27.78
Notes: (1) The above Cash Flow Statement has been prepared under the “Indirect Method” as set out in the AccountingStandard-3 on Cash Flow Statement issued by The Institute of Chartered Accountants of India.
(2) Previous year’s figures have been regrouped wherever necessary.
S. M. DATTA Chairman N. K. KSHATRIYA Managing Director
Executive Directors
A. S. RAMCHANDER Director R. ELSTON-GREEN Director
Non-Executive Directors
A. JHAWAR Director R. GOPALAKRISHNAN DirectorP. HUGHES Director D. S. PAREKH DirectorR. A. SAVOOR Director L. FREESE Alternate Director
As per our report of even dateFor S. R. BATLIBOI & COMPANYChartered Accountants
per HEMAL SHAH A. H. MODYPartner Company SecretaryMembership No. : 42650 & Head Legal