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Dabur India Limited | A N N U A L R E P O R T | 2003-04 1

BOARD OF DIRECTORS 2

PERFORMANCE HIGHLIGHTS 4

FIVE YEAR FINANCIALS (Profit & Loss Account) 6

FIVE YEAR FINANCIALS (Balance Sheet) 8

CHAIRMAN’S MESSAGE 10

MANAGEMENT DISCUSSION AND ANALYSIS 12

CORPORATE GOVERNANCE 32

Known to the ancient Ayurveda,

Amla’s curative and preventive powers act

on a multitude of body’s systems, from

hair to heart. Many of these have been

confirmed by modern science. Like Amla,

the Dabur brand of herbal products offers

a wide gamut of health care benefits.

Amla is a key ingredient in Dabur’s

Chyawanprash, India’s most trusted brand

of Chyawanprash.

natural health

contents

a trusuted name in

natural healthcare for

over 100 years, is known

for providing a range of

efficacious and time-

tested healthcare

products based on the

principles of Ayurveda.

a premium brand and a

leader in its category, is

one of the flagship

brands and a popular

name in the natural

personal care space.

a tasty fun-filled

digestive available in

various forms - from

tablets, to traditional

Churnas and to modern

formats like centre-filled

candy - appealing to all

age groups.

a relative new member in

the family of Dabur's key

brands, provides a range

of herbal and natural

products across various

FMCG categories with a

focus on providing

quality and affordability.

country’s leading brand

of packaged fruit juices,

provides the largest

range of refreshing and

healthy fruit juices that

are 100 per cent natural

and free of preservatives.

Henna is an ancient beauty

product, known to protect hair from

oxidation and preserving its colour.

Lemon juice is an effective astringent,

helpful in controlling dandruff. With its

deep knowledge of Ayurveda, the

Vatika range has innovated a series of

premium beauty formulations

which provide an extra level

of care.

natural beauty


board of directors

Addl. GM (Finance) & Company SecretaryMr Ashok Jain

AuditorsM/s G. Basu & Co.

Chartered Accountants

Internal AuditorsPrice Waterhouse

BankersPunjab National Bank

Standard Chartered Bank

HSBC Ltd.

State Bank of India

ABN Amro Bank NV

Citibank NA

United Bank of India

HDFC Bank Ltd.

IDBI Bank Ltd.

Corporate OfficeDabur India Limited

Dabur Tower

Kaushambi Sahibabad

Ghaziabad 201 010

Uttar Pradesh India

(0120) 2778501-25

www.dabur.com

[email protected]

Registered Office8/3, Asaf Ali Road

New Delhi 110 002

India

Board as at 31 March 2004Mr V. C. Burman Chairman

Dr Anand Burman Vice Chairman

Mr Pradip Burman Director

Mr Amit Burman Director

Mr P. D. Narang Director

Mr Sunil Duggal Director

His Highness Maharaja Gaj Singh Director

Mr Ajay Bahl Director

Mr P. N. Vijay Director

Mr Stuart Edward Purdy Director

" VAT IK A was the F I R S T TO L A U N C H natural hair

shampoo in India

" H A J M O L A manufactures over 350 C R O R E

D I G E S T I V E TA B L E T S per year, nearly half the world’s

population

" D A B U R A M L A H A I R O I L is the L A R G E S T S E L L I N G

hair oil in the world

" L A L TA I L is the L A R G E S T S E L L I N G baby oil in the

country

Pepper and its cousin, Pippali,

have not only been central to the

heritage of rich Indian cuisine for

centuries, they have also played a vital

role in popularising many tasty Indian

recipes across the globe by lending them

their unique taste and aroma. Proven to

have strong digestive properties, these

herbs are integral to the Indian palate

and also form the basis of a range of

Hajmola products that combine (fun

filled) taste with digestion.

tasty digestives


performance highlights

" The Company has S U C C E S S F U L LY I M P L E M E N T E D I T S

S T R AT E G I C I N I T I AT I V E S in its first year as a demerged

organization.

" This year has seen Dabur recording its H I G H E S T E V E R

R E V E N U E F R O M N E W P R O D U C T L A U N C H E S in a

single year

The taste and health benefits of natural

fruit juices have been long known, and science

is progressively discovering more and more

about the how and why of these benefits. A

powerful complex of micronutrients, vitamins

and minerals, they protect against diseases and

provide energy and nourishment. The Real

brand offers India’s widest range of totally

natural fruit juices, 100% free of preservatives,

that are offered in most modern packaging to

preserve nature’s freshness.

fruit beverages


five year financialsP R O F I T & L O S S A C C O U N T

" I N T E R N AT I O N A L B U S I N E S S , including exports from

India, accounted for 9.6 P E R C E N T of Dabur’s

consolidated revenues this year

" A M I TA B H B A C H C H A N A N D R A N I M U K H E R J E E have

been signed as brand ambassadors for various Dabur

products

For millennia, the oil of the

coconut has occupied a prime place in

India’s llifestyle and food habits. Sarson

(mustard seed) is believed to maintain the

blackness of hair, a prized beauty trait, and

to nourish its roots. Both these trusted

ingredients, along with other herbs, are

used in Anmol products which deliver safe,

reliable and affordable benefits to millions.

herbal value


five year financialsB A L A N C E S H E E T

Segmentwise Revenue, Results and CapitalEmployed for the year ended 31st March 2004PARTICULARS IN RS . CRORE

S E G M E N T R E V E N U E

A FMCG Business 1116.49

B Others 31.49

Gross Sales/ Income from Operations 1147.98

S E G M E N T R E S U LT S [profit / loss (-) before tax]

A FMCG Business 112.20B Others 1.24Profit / (Loss) Before Tax 113.44

Provision for Tax 12.24

Profit / (Loss) After Tax 101.20

C A P I TA L E M P L OY E D

A FMCG Business 310.59D Others 5.85Total 316.44

10 C H A I R M A N ’S M E S S A G E

during 2003-04 reflects the manner in

which the management has successfully

executed these initiatives. Let me share

with you some vignettes of Dabur India

Limited’s accomplishments. Your Company’s

Consumer Care Division (CCD) contributes

to over four-fifth of Dabur’s total domestic

sales, including foods. CCD overcame

sluggish market conditions, and registered

an 11.5 per cent growth in sales from

Rs.907.5 crore in 2002-03 to Rs.1011.8

crore in 2003-04. Another major success

was the revival of Dabur’s flagship product,

Chyawanprash. New packaging and an

advertising campaign featuring a leading

Bollywood star as the brand ambassador

saw the sales of Chyawanprash grow by 8.5

per cent in 2003-04. Today, Dabur

Chyawanprash accounts for over 65 per

cent share of this segment of the market.

2003-04 also saw a successful execution of

your Company’s e-sourcing. Dabur India

procured Rs.210 crore of raw materials

through e-sourcing — or almost 50 per cent

of total raw material expenditure — and, in

the process, considerably controlled raw

material costs. There have been many such

other examples of success — all of which

have contributed to the good performance

of your Company in 2003-04.

I need to briefly outline what Dabur India

Limited proposes to do with international

business. As a conscious business strategy,

your Company has decided to enter the

international market more aggressively, by

leveraging its herbal specialist platform. The

initial step in this direction has been the

acquisition of Redrock Limited, an UAE-

based company — which has been renamed

Dabur International Limited. This

acquisition has resulted in Dabur owning

additional manufacturing facilities at the

Jebel Ali Export Processing Zone and

Sharjah. Dabur International Limited has

also taken charge of Dabur Egypt Limited

and its manufacturing facility in Cairo,

which was earlier a subsidiary of Dabur

India Limited.

Dabur International’s joint venture in

Bangladesh, which has a manufacturing

unit in Dacca, also became operational

during the course of the year. Dabur

International is also in the process of

setting up a joint-venture in Pakistan, with

a factory in Karachi. Another manufacturing

unit is expected to be set up in Nigeria.

As a result of organic and inorganic

growth, international business, including

exports from India, contributed 9.6 per cent

to your Company’s consolidated sales. I

expect that international operations and

overseas sales will account for an even

larger share of Dabur’s overall sales and

profits in the future. We will have to do all

that is needed to be an international player

and leverage our herbal specialist platforms

to create niche markets in Asia, the Middle

East, West Africa, CIS countries and cater to

the needs of the large Indian diaspora in the

UK, USA and Canada.

Doing well in 2003-04, while creditable,

is not enough. Dabur India Limited operates

in an intensely and increasingly competitive

environment. For instance, the FMCG

industry is already witnessing severe

competition in the oral care segment, with

the introduction of extremely low priced

toothpastes; and in the hair care segment,


FOR THE ECONOMY as a whole, India has

done exceptionally well in 2003-04. With

GDP growth being 5.7 per cent in the first

quarter, 8.4 per cent in the second and 10.4

per cent in the third, it is expected that the

average annual GDP growth for 2003-04

will be over 8 per cent. This is not only a

welcome increase in the growth rate after

the poor performance in 2002-03, but is

also a very impressive economic

accomplishment by global standards.

As I write this letter to you, the

weathermen are forecasting normal rainfall.

That is excellent news for the fast moving

consumer goods (FMCG) industry— for it

would imply two consecutive years of good

rains, which should significantly boost

agricultural as well rural incomes and

expenditure. It is a fact that, for the FMCG

sector as a whole, the impressive growth in

GDP and agricultural income in 2003-04

did not translate to a commensurate

growth in sales. According to marketing

experts, rural India is waiting for a second

good year in succession before significantly

ramping up consumption spends. So, if the

meteorology departments forecasts are

correct, the industry should be looking

towards a substantial growth in FMCG

demand.

Although some FMCG majors showed flat

top-line growth in 2003-04, I am pleased to

report that your Company has done well for

the year. After the de-merger, in its first

year as a pure FMCG player, Dabur India

Limited has achieved good results. The

details are given in the chapter on

Management Discussion and Analysis. Here

are some of the numbers:

" Revenue from operations increased by 9.5

per cent from Rs.1048.5 crore for 2002-03

to Rs.1148 crore for 2003-04.

" Profit before depreciation, interest and

taxes (PBDIT) has risen by 24.1 per cent

from Rs.109.6 crore in 2002-03 to

Rs.136.1 crore in 2003-04.

" Profit after tax (PAT) increased by 40.6 per

cent from Rs.72 crore in 2002-03 to

Rs.101.2 crore in 2003-04. Consequently,

earnings per share (EPS) has increased

from Rs. 2.5 in 2002-03 to Rs. 3.5 in 2003-

04.

" ROCE has increased from 27.2 per cent in

2002-03 to 34.9% in 2003-04

" RONW went up from 32.3% in 2002-03

to38.6% in 2003-04.

If you will recollect, in my letter to you in

the 2002-03 Annual Report, I had written

that your Company had undertaken the task

of recasting its FMCG strategy — which

involved new strategic initiatives,

restructuring of the brand architecture, and

operational reorganisation of the FMCG

business. In the course of this exercise, it

was decided that Dabur India Limited would

build on its reputation of being India’s most

well recognised herbal specialist company.

To do so, your Company would focus on five

key brands — Dabur, Vatika, Anmol, Hajmola

and Real — and support these by innovative

launches as well as stronger advertising and

larger marketing outlays. Moreover,

organisational changes would be

undertaken, and the distribution network

substantially streamlined and strengthened,

to derive efficiencies and synergies across

all FMCG brands.

Your Company’s creditable performance

chairman’s message

Dear Shareholders,

all players are expecting to see price wars in

shampoos. To consistently succeed in such a

milieu, your Company will have to do even

better, drive its brands, achieve greater

operational efficiencies, explore new

markets, and continuously reinvent itself. I

am sure we will do all of these and more —

and so deliver superior performance and

higher shareholder value for all of you.

The Indian economy is on a new growth

path. As disposable income increase

throughout India, and as more and more

households join the burgeoning middle

class, I am sure that the FMCG industry will

leverage this new growth impetus. And I am

certain that your Company will introduce

new products, discover new markets, derive

greater operational efficiencies and

continue to do well in the future.

Dabur is — and will always be — a great

pan-Indian brand. It is what it is thanks to

the millions of its customers, its

distributors, its suppliers, its employees and

its shareholders. I thank all of the

stakeholders for their care and loyalty. We

will be with you, always.

Yours sincerely

V. C. Burman

Chairman

12 M A N A G E M E N T D I S C U S S I O N + A N A LY S I S Dabur India Limited | A N N U A L R E P O R T | 2003-04 13

2003-04 HAS BEEN A VERY GOOD year for

the Indian economy. After a relatively poor

GDP growth of 4 per cent in 2002-03, the

first quarter of 2003-04 showed a growth

of 5.7 per cent. Excellent monsoons

contributed to an even higher growth of 8.4

per cent in the second quarter. The monsoon

effect coupled with a distinct upswing in

manufacturing and services has further

increased GDP growth to 10.4 per cent in

the third quarter. Today, it is quite clear that

India will close 2003-04 by achieving a

growth of at least 8.1 per cent. This will not

only be the highest GDP growth achieved by

the country since the advent of economic

liberalisation, but also one of the highest

growth rates in the world. Chart A compares

overall GDP and sector-wise growth rates

between 2002-03 and 2003-04.

This impressive economic growth has

translated into a 6.6 per cent growth in per

capita real income for 2003-04 against a

1.8 per cent growth in 2002-03. Based on

this growth — especially coming as it has

with excellent agriculture — one would

have predicted high growth in the fast

moving consumer goods (FMCG) markets.

While some players such as Dabur India

Limited have achieved creditable top-line

growth, the overall industry-level growth

has been lower than what might have been

expected, given the economic performance

of the country. This requires some

explanation.

There are two hypotheses making the

rounds. According to one, the impressive

growth in GDP, as well as agricultural and

rural incomes, has occurred over the last

nine months, especially after the monsoons.

management discussion+ analysis

Posited by consumer goods companies that

are struggling to achieve low single-digit

growth, this theory suggests that it takes

two consecutive years of good or normal-

to-good monsoons to trigger a sustained

growth in agricultural and rural

consumption. Thus, substantial rise in rural

FMCG spends will occur only after this

year’s monsoons, provided the rains are

adequate between June and September.

The second hypothesis is based on

substitution. According to this theory, while

improved incomes promote wider use of

FMCG products, there is also greater

diversion of incremental personal

disposable incomes to “lifestyle” products

and services, such as entertainment and

consumer durables. In such a milieu of

substitution at the top-end, rapid and

sustained growth of core FMCG markets

requires more households to enter at the

bottom end. This requires sustained growth

in personal disposable incomes across a

wide strata of society, especially those in

the lower and lower-to-middle income

groups. Once again, the story veers to the

theme of “once is not enough” — namely,

that India needs more than one year of high

GDP growth for the core FMCG industry to

generate sustained double-digit top-line

growth.

Whatever the hypothesis, the data

reported by ORG MARG certainly shows

negative growth across the basic FMCG

segments where Dabur competes. Chart B

depicts the data.

Sluggish demand in 2003-04 has led to

intense competition in the sector. In many

segments, companies have resorted to price

wars to gain market share. For instance, in

shampoos, while value growth was a

negative 3.8 per cent (see Chart B), the ORG

data shows that volumes actually grew by

5.6 per cent. Similarly, in toothpastes, while

volumes decreased by 5.2 per cent, the

market shrunk by 12.4 per cent in terms of

value. In addition to this, regional players,

too, have offered lower priced products to

further increase the price competition.

Moreover, 2003-04 also witnessed

increases across a wide spectrum of raw

material prices. Rising oil prices created an

inflationary trend in most petrochemical

products like packaging material, which is

an important element of costs in the FMCG

segment. Higher energy prices also led to

increased freight — putting pressure on

costs of sourcing raw materials and

distributing final products. Therefore, most

companies in the FMCG segment had to

operate in challenging conditions of a

shrinking market with rising costs.

Dabur India Limited’s performance in

such an environment has been very

creditable. Through its strategic initiatives

and efficient execution, your company has

not only met the market challenges, but

also has registered a strong performance in

2003-04. The highlights of Dabur’s financial

performance during the year under review

are: (all figures are compared to

corresponding figures for Dabur (FMCG)

" Revenue from operations increased by 9.5

per cent from Rs.1048.5 crore for 2002-03

to Rs.1148 crore for 2003-04.

" Operating profit (PBDIT) increased by 24.1

per cent from Rs. 109.6 crore in 2002-03

to Rs. 136.1 crore in 2003-04

" Interest outgo decreased by 42.2 per cent

from Rs.11.9 crore in 2002-03 to Rs. 6.9

crore in 2003-04.

" Profit after tax (PAT) increased by 40.6 per

cent from Rs.72.0 crore in 2002-03 to

Rs.101.2 crore in 2003-04.

" Return on capital employed (ROCE)

increased from 27.2 per cent in 2002-03

to 34.9 per cent in 2003-04

" Return on net worth (RONW) increased

from 32.3 per cent in 2002-03 to 38.6 per

cent in 2003-04

Your Company’s creditable performance in

2003-04 can be attributed to its successful

positioning as an FMCG player leveraging

the herbal specialist platform — and shows

how successfully the management has

executed the strategic initiatives that were

introduced in the second half of 2002-03.

2003-04 was the first year of operation

for Dabur India Limited as a de-merged

FMCG entity. The de-merger was intended

to make the new organisation a focused

FMCG company, and so improve efficiencies

and return on assets.

If you will recollect, the Annual Report

for 2002-03 outlined several key initiatives

to drive your Company’s FMCG businesses.

To recapitulate:

" Dabur India Limited would drive higher

growth by drawing on its core strength of

being India’s most well recognised herbal

specialist company.

" The Company would focus on five key

brands — Dabur, Vatika, Anmol, Hajmola

and Real — and would back these up by

Your company has registered a strong performancein 2003-04 through its new initiatives and efficientexecution of strategies

14 M A N A G E M E N T D I S C U S S I O N + A N A LY S I S

new and innovative product launches,

stronger advertising and larger marketing

spends.

" The distribution network would be

substantially streamlined and

strengthened.

" Organisational changes would be

undertaken to drive efficiencies and

synergies across all FMCG brands.

We believe that your Company has

successfully implemented these initiatives

in its first year as a de-merged organisation.

This is borne out by the 9.5 per cent growth

in top-line; by a 24.1 per cent increase in

PBDIT; by a 40.6 per cent increase in PAT; by

major reduction in net working capital to

negative position; and by a 7.7 percentage

points increase in return on capital

employed (ROCE).

While your Company is upbeat with its

implementation successes in 2003-04, it

recognises that Dabur India Limited

operates in a very competitive environment

— one that will get even more competitive

in the years to come. To consistently

succeed, therefore, your Company will have

to explore new opportunities, especially

international businesses, and reinvent itself

on a continuous basis.

Going forward, Dabur India Limited

intends to grow by rejuvenating old

products, launching new products and, in

the coming years, by laying far greater

emphasis on exports. From a business point

of view, therefore, it is useful to examine

your Company’s activities in terms of its

domestic and international operations.

" Domestic businesses This constitutes the

Consumer Care Division (CCD), the

Consumer Healthcare Division (CHD) and

subsidiaries including Dabur Foods

Limited

" International operations These are carried

out by the umbrella subsidiary Dabur

International Limited and Dabur Nepal

Private Limited.

While the marketing functions are different

across the divisions and subsidiaries, there

is considerable integration in operational

functions of sourcing and supply chain

management. The salient features of the

consolidated financial performance of

Dabur India Limited.

" Consolidated sales from operations

increased by 12 per cent from Rs.1187.1

crore in 2002-03 to Rs.1329.6 in 2003-04

" Consolidated PAT (after accounting for

minority interest) increased by 36.7 per

cent from Rs.77.9 crore in 2002-03 to

Rs.106.5 crore in 2003-04

DOMESTIC BUSINESS

MARKETSConsumer Care Division (CCD)With your Company’s new exclusive

focus on the FMCG space, the erstwhile

personal care products division and the

healthcare products division have been

merged to form the Consumer Care Division

(CCD) — which deals with pure FMCG

products. The division’s portfolio includes

health supplements, digestives and

confectionery, oral care, hair care, and baby

and skin Care. Chart C gives the relative

sales composition for 2003-04.

CCD is the prime driver of Dabur’s growth

and contributes 84 per cent to Dabur’s total

domestic sales including foods. It succeeded

in overcoming the prevailing sluggish

market conditions, and registered an 11.5

per cent growth in sales from Rs.907.5 crore

in 2002-03 to Rs.1011.8 crore in 2003-04.

This sales growth has been coupled by

operational efficiencies — leading to a

growth in gross margins.

HAIR CARE

With a 37 per cent share, hair care is

the largest category in the CCD’s portfolio.

You Company’s entire hair care portfolio

grew by 4.7 per cent in 2003-04. This

growth was driven primarily by growth in

hair oils, while growth in shampoos

remained stagnant. The hair care segment is

a very competitive one and fierce price

wars, especially in the shampoo category,

are imminent. Going forward, Dabur will try

to shield itself from the price wars by

leveraging its herbal niche to build on the

brand loyalty it enjoys in this segment.

In hair oils, Dabur Amla Hair Oil, which

accounts for the lion’s share of your

Company’s hair oil sales recorded a

satisfactory 5.1 per cent growth in value

terms. Even more pleasing was the

performance of Vatika Hair oil — a coconut

based oil with added herbs — which grew by

an incredible 10.1 per cent in value terms.

The growth in Vatika Hair Oil was supported

by a new “Vatika Women” advertisement

campaign.

During the year under review, your


The de-merger was intended to make the neworganisation a focused FMCG company

Dabur India Limited | A N N U A L R E P O R T | 2003-04 1716 M A N A G E M E N T D I S C U S S I O N + A N A LY S I S

ORAL CARE

Dabur is primarily a player in tooth

powders, which accounts for around 21 per

cent of the aggregate oral care segment in

India. ORG-MARG data suggests that

toothpowder sales in the aggregate have

decreased by 8.1 per cent in the year under

review. Nevertheless, sales of Dabur Lal

Dant Manjan grew by 9.6 per cent in 2003-

04. Consequently, your Company has

succeeded in increasing its market share

from 28.5 per cent in 2002-03 to 29.9 per

cent in 2003-04.

We are now witnessing intense

competition in the oral care segment,

with the introduction of extremely

low priced toothpastes — which

are expected to transform

toothpowder users into

toothpaste users. Your

Company, however,

believes that

Company also introduced Anmol Sarso

Amla Hair oil. This oil, which is a non-sticky

combination of mustard oil with amla

extract, has been launched on the economy

platform.

ORG MARG data shows that the shampoo

market contracted by 3.8 per cent in value

terms in 2003-04. Dabur has not been able

to sufficiently insulate itself from this

downturn — while Vatika Anti-Dandruff

Shampoo recorded moderate growth, sales

of Vatika Henna Cream Conditioning

Shampoo were stagnant.

During 2003-04, your Company launched

the Anmol Natural Shine Shampoo, an

economy product for value conscious

consumers. Dabur believes that growth in

shampoos will occur at the economy-end of

the market — and this new product is

strategically positioned to drive growth in

this segment. Your Company has selected

the actress Rani Mukherjee as its brand

ambassador for hair care products.

HEALTH SUPPLEMENTS

Health supplements is the second largest

segment of the CCD’s portfolio and

accounts for 23 per cent of total CCD sales.

One of the major success stories of the

year was the new momentum to Dabur’s

flagship product, Chyawanprash. Driven by

a new contemporary packaging and an

aggressive advertising campaign featuring

Amitabh Bachchan as its brand ambassador,

sales of Chyawanprash grew by 8.5 per cent

in 2003-04 over sales in 2002-03. The ORG-

MARG data shows that Dabur

Chyawanprash has increased its market

share from 62.4 per cent in 2002-03 to 65.2

per cent in 2003-04.

Glucose D registered a 9.3 per cent

growth in the year under review and,

according to ORG-MARG data, increased its

market share from 12.5 per cent in 2002-03

to 14 per cent in 2003-04. Dabur Honey,

which is the largest Indian branded honey

in the organised sector, witnessed a

phenomenal 27.4 per cent growth in 2003-

04.

The success of these products has

translated into a 10.9 per cent growth in

the sales of health supplements in 2003-04.

DIGESTIVES AND CONFECTIONERY

According to ORG-MARG data, at the

all-India level, digestives witnessed a

negative 8.3 per cent growth in 2003-04.

Despite this gloomy scenario, your Company

has succeeded in growing the sales of

digestives and confectionery by 5.1 per cent

in 2003-04.

While the sales of Hajmola candy have

actually decreased in 2003-04, growth in

this sector has come from extension of the

Hajmola brand into new formats like

Anardana — which is the first ever branded

churan (digestive powder) — and launch of

new products like Hajmola Candy Fun2,

which is a unique candy having a fruity

crust and a spicy centre filling. Another new

product called Hajmola Mast Masala, a

tasty chat masala that also helps in

digestion is being test marketed in Kolkata.

All these new products have been well

received by consumers and should drive

growth in this segment in the coming years.

The company will focus on five key brands—Dabur,Vatika, Hajmola, Real and Anmol


of any given segment. It is also important to

note that in most products, barring a few,

Dabur’s market share is below 10 per cent

and there is considerable scope of growth

by capturing market share even if the sector

witnesses a downturn.

Consumer Healthcare Division(CHD)The consumer healthcare division of

your Company includes products of the

erstwhile Ayurvedic Specialists Division and

a set of over the counter (OTC) products

based on the ayurvedic medicinal platform.

The range of products offerings, which are

based on ‘grantha-based’ formulations, can

be broadly classified into OTCs, branded

ethical and generic products that include

Asavs, and classicals. The division is

supported continuously by in-house

research. There is also a tie-up with Shri

Dhanwantry Educational Society, which

owns and manages an ayurvedic hospital,

college and pharmacy in Chandigarh, for

assistance in research and clinical trials.

Sales of this division grew by 3.3 per cent

from Rs.82.6 crore in 2002-03 to Rs. 85.3

crore in 2003-04. Although, the CHD

accounts for about 7 per cent of Dabur’s

domestic sales including foods, this division,

with its healthy margins, is an important

element of Dabur’s product portfolio.

It is difficult to substantially grow in the

market dealing with ayurvedic medicines

prescribed by vaids and practitioners

certified as BAMS (Bachelor of Ayurvedic

Medical Sciences). For one, the ayurvedic

doctor community is shrinking; for another,


India is still immature in dental hygiene.

Almost a third of the population do not use

toothpowder or pastes but rely on

substances like ash and branches of neem

trees. As incomes rise, this section will

initially move to using toothpowder, even as

a section migrates from toothpowder to

toothpastes. Therefore, Dabur ought to

retain its prime position in the tooth

powder segment and, indeed, grow the

market.

Anticipating the dynamics of the oral

care segment, Dabur has forayed into the

toothpaste market with the launch of Dabur

Red toothpaste in April 2003. This

toothpaste, containing more than seven

herbs, has successfully captured more than

1 per cent of the overall market in its very

first year. Binaca portfolio comprising

toothbrushes grew by an impressive 13 per

cent during 2003-04.

BABY AND SKIN CARE

This segment accounts for only 7 per

cent of CCD’s sales. However, during the

year under review, it recorded one of the

highest segmental growth with a 21.6 per

cent increase in sales. In the baby massage

oil category, Dabur Lal Tail maintained its

leadership position, while Gulabari

maintained its strong growth momentum

with its skincare positioning. The Vatika

brand has been extended into the skin care

segment with the introduction of Vatika

Fairness Face Pack.

KEY INITIATIVES AND OUTLOOK

Two key initiatives undertaken in 2003-

04 were the further enhancement of the

new branding exercise and launch of

several strategically positioned new

products. The first major part of the

branding exercise was the repositioning of

the product Chyawanprash. Apart from

rejuvenating Chyawanprash as a product,

the repositioning was important to

revitalise the Dabur brand — which is

identified as the flagship brand of your

Company.

Since the product caters mainly to the

middle aged and older generations it was

imperative to have a universally popular yet

mature personality endorsing the brand.

Thus, Amitabh Bachchan was selected as

brand ambassador for Chyawanprash. This,

coupled with a packaging make over, has

given Chyawanprash a new life and in turn

rejuvenated Dabur as a brand. Such

exercises will be carried forward to other

brands.

In 2003-04, your Company recorded its

highest ever revenue from new product

launches in a single year. These new

products cover a wide range of segments,

and should provide Dabur India Limited

with the platforms for future growth.

Going forward we believe that the

industry will pick up with a lag. However

certain segments, like hair care and oral

care, will witness fierce price competition,

and growth will happen primarily in low

margin areas. Your Company has

anticipated this, and initiated its strategy of

spreading products across price and market

segments — thereby hedging downturn risks

Consumer Care Division succeeded in overcomingsluggish market conditions and registered agrowth of 11.5 per cent in sales

20

there is low brand loyalty, which results in

competition from several small and regional

players.

Therefore, your Company has identified

the OTC route as the high growth area. It is

important to note that growth in this

segment will happen with an increasing

faith in ayurveda as a proven alternative

form of treatment. The challenge is to

identify the right therapeutic areas —

common ailments like cough, cold and joint

pains, women’s health care and adjuvant

therapies for lifestyle related problems are

the initial choices — to develop

formulations, undertake clinical trials to

prove efficacy, and to successfully brand

these products and strengthen the OTC

route for their sales. The OTC products will

be advertised.

FOODS BUSINESS

Dabur Foods LimitedDabur Foods Limited (DFL), a wholly

owned subsidiary of Dabur India Limited,

markets natural fruit juices, ethnic cooking

pastes, sauces and tea. 2003-04 has been a

landmark year for this company. Not only

did sales grow by 24.2 per cent from Rs.69.1

crore in 2002-03 to Rs.85.8 crore in 2003-

04, but the Company recorded a positive

PAT of Rs.1.5 crore for the first time in its

short history.

During the year, sales of DFL’s flagship

product Real juices grew by 36 per cent.

Within this portfolio the “Activ” range grew

at a faster rate. In 2003-04, two new

flavours were added to the Real portfolio —

M A N A G E M E N T D I S C U S S I O N + A N A LY S I S

Real Activ Carrot-Orange and Real

Cranberry. This now takes the number of

flavours under the Real brand to 12. DFL is

also in the process of launching Real juices

in 125 ml packs called “Real Junior”. This

product, which is being initially launched in

two flavours, is targeted at school-going

children.

In the Hommade range, coconut milk and

tomato puree did well. In order to leverage

its existing distribution network, DFL has

also started distributing Dilmah tea in India.

Dilmah, a Sri Lankan tea, is one of the

largest tea brands in the world.

A part of DFL’s growth strategy is to focus

on institutional sales. This is being adopted

for its key brand portfolios like Real,

Hommade, Lemoneez, and Capsico. DFL will

be launching large packs branded as

“Nature’s Best” to target institutional sales.

In 2004-05, DFL intends to grow through

new product offerings, sharpened

marketing strategy and more focused

advertising campaigns. Even more effort

will go into streamlining manufacturing

and procurement processes to improve

efficiencies and maintain margins in foods

— which is a very competitive, tight margin

environment.

INTERNATIONAL BUSINESS

As a conscious business strategy, your

Company has decided to enter the

international market more aggressively.

Dabur believes it is well positioned to

develop existing markets and enter newer

markets leveraging its herbal specialist

platform.

The first step in this direction was the

acquisition of Redrock Limited, an UAE-

based company through which Dabur

products were sold in the Middle East.

Acquiring Redrock has resulted in its

manufacturing facilities at the Jebel Ali

Export Processing Zone and Sharjah being

added to Dabur’s existing units in the sub-

continent. In addition, Redrock’s Middle-

Eastern rights on the brand Weikfield have

also transferred to your Company. The

acquired company has been renamed Dabur

International Limited, and is under the

charge of a new CEO — who, with a new,

dedicated team, will operate out of Dubai.

This new company has also taken charge of

Dabur Egypt Limited and its manufacturing

facility in Egypt.

Dabur International’s joint venture in

Bangladesh, called Asian Consumer Care

Private Limited, also became operational

during the course of the year. This venture,

which also has a manufacturing unit in

Dacca, launched Vatika Shampoo, Dabur

Amla Hair Oil and Vatika Hair Oil during

2003-04. Your Company expects the

Bangladesh market — with similar

preferences as in India for herbal products

— to be a growth driver in the future.

As a result of organic and inorganic

growth, international business, which

includes exports from India, contributed 9.6

per cent to your Company’s consolidated

sales. In 2004-05 it is expected that

international operations and overseas sales

will account for an even larger share of

Dabur’s overall sales and profits. Table 1

gives the relative contributions in the last


Your Company has identified the OTC route as thehigh growth area

22 Dabur India Limited | A N N U A L R E P O R T | 2003-04 23Dabur India Limited | A N N U A L R E P O R T | 2003-04M A N A G E M E N T D I S C U S S I O N + A N A LY S I S

Uttaranchal. Both new plants — at Jammu

and Uttaranchal — will meet worldwide

standards of good manufacturing practices

(GMP) and hazard analysis and critical

control plant (HACCP). Also, the existing

unit at Katni (Madhya Pradesh) will be

upgraded during 2004-05.

Your Company has always given

considerable importance to improving the

productivity of its plants and production

process. This year, the focus was on

automation and de-bottlenecking of the

production process, backed by better

maintenance. Kaizen, implementation of

stringent wastage control norms and energy

audits at various plant locations constitute

some of the other initiatives taken during

the year.

As a result of these and other ongoing

initiatives, the operating profit margins of

the Company improved from 10 per cent in

2002-03 to 10.9 per cent in 2003-04.

Moreover, the cash overheads have

remained constant over the last two to

three years in spite of a significant increase

in the turnover. As can be inferred from

Chart D, productivity — defined as sales

turnover per employee — has increased by

over 9.0 per cent from Rs.33 lakh in 2002-

03 to Rs.36 lakh in 2003-04. Wastage on

the shop floor also improved by over 19.1

per cent in 2003-04 as compared to 2002-

03.

On the quality front, Dabur implemented

a decentralised structure by assigning its

production facilities and C&FAs to four

regional laboratories — all equipped with

new equipment of the latest technology,

and each supervised by a quality assurance

two years. While sales from international

grew from Rs.106.1 crore in 2002-03 to

Rs.128 crore in 2003-04, PAT from overseas

companies decreased from Rs.12.1 crore in

2002-03 to Rs.8.3 crore in 2003-04. This is

because Dabur has made new investments

into international companies, which need to

be turned around to reap more profits.

In order to aggressively target

international markets, Dabur International

has devised a multi-pronged strategy, which

varies from geography to geography. In the

Middle-East, it proposes to build and re-

build brands and customise products for

these markets. The focus on the Middle-

East, including Egypt, will be mostly Dabur’s

personal care brands. Bangladesh will be

catered to by both personal care and

healthcare brands. Dabur International sees

considerable opportunities in the CIS

countries, where the focus will be more on

healthcare products. Pakistan will be

personal care and healthcare.

2004-05 and the future will also see

Dabur International catering to the Asian

diaspora, and later to the mainstream

population, in the US, UK and Canada. There

are over 2 million Asians living in these

countries — and represent an excellent

market for Dabur’s herbal platforms in

healthcare. The company is already

negotiating with some US retailers to set up

“ethnic counters” for Dabur’s healthcare

products.

OPERATIONS

MANUFACTURINGYour Company has taken major initiatives

to upgrade manufacturing technology.

These initiatives include setting up of new

manufacturing facilities and upgrading of

existing units. Moreover, assets have been

put to maximum use so as to enable faster

turnover.

During the year under review, Dabur India

Limited commissioned a new production

facility at Jammu for manufacturing

personal care products. This exercise, which

involved both prefabricated and civil works,

was successfully completed in a record time

of six months. In addition, the facility at

Baddi (Himachal Pradesh) was also

expanded during 2003-04. This has

increased the percentage of consumer care

products manufactured by the Company,

which were earlier being out-sourced to

contract manufacturers.

The Company is also in the process of

commissioning another production unit in

Your Company has decided to enter the internationalmarket more aggressively, by leveraging its herbalspecialist platform

TABLE 1 RELATIVE SALES AND PROFITS OF

DABUR DOMESTIC AND OVERSEAS

2003-04 2002-03

DOMESTIC

Sales 1201.5 1081.0

% of Total 90.4 91.1

PAT 101.2 67.8

% of Total 92.4 84.9

OVERSEAS

Sales 128.0 106.1

% of Total 9.6 8.9

PAT 8.3 12.1

% of Total 7.6 15.1

head. This has made the system more

efficient and transparent, and the move is

already showing positive results. During

2003-04, product failures at the unit level

have been almost nil, and the rejection rate

at the consumer level has been as low as

0.3 parts per billion.

SUPPLY CHAIN MANAGEMENTYour Company has a very diverse supply

chain, as it handles an extremely wide

array of seasonal and non-seasonal raw

materials to produce and market over 600

SKUs through approximately 2,100

stockists. Dabur’s products cover over 6

lakh retail outlets — up from 5 lakh in

2002-03.

This year, as a part of its sourcing

strategy, the Company consolidated its

sourcing base for all group companies,

including its foreign operations, so as to

benefit from economies of scale. Also, by

hedging risks in the futures market for

important raw materials, the Company was

able to insulate itself from the highly

inflationary environment during the year.

As shown in Chart E, commodity prices

have risen significantly during 2003-04.

However, this did not have any negative

impact on the raw material spend. In spite

of the overall inflationary trend in the year,

cost of raw material as a percentage of

sales has come down from 44.9 per cent for

the FMCG business in 2002-03 to 43.8 per

cent in 2003-04.

During the year under review, the

Company has benefited significantly by the

success of the e-sourcing initiative taken in

the previous year with the support of


allow the management to focus on use of

information technology, rather than

managing it. It is a forward looking

initiative to ensure fast and effective

upgrading of technology to keep up with

latest developments, which will insulate the

Company from technological obsolescence.

As a part of this exercise, the Company is

in the process of implementing Hyperion —

a centralised data warehousing system for

its two ERPs. Besides the pure IT related

benefits, the Company will also benefit

from consultation and expertise on issues of

supply chain management and


FreeMarkets, a leading e-procurement

service provider. The Company procured

Rs.210 crore worth of raw materials

through e-sourcing, which accounts for

almost 50 per cent of its total raw material

spend. This initiative has brought in greater

transparency into the sourcing process and

resulted in substantial savings. Your

Company’s performance in sourcing was

also recognised by Indian Institute of

Materials Management, which awarded the

‘Chief Procurement Officer Award for 2003’

to Dabur’s Vice President–Supply

Management.

Encouraged by the success of its e-

sourcing initiative, the Company has

decided to implement the ‘Spend Visibility’

solution provided by FreeMarkets in 2004-

05. This will significantly improve the

quality of information available at an item-

wise level, allow better visibility of sourcing

priorities, and result in the formulation of a

more efficient and cost-effective sourcing

strategy.

On the sales and distribution side, Dabur

integrated its family care products division

and health care products division as a part

of its product portfolio restructuring

exercise during 2003-04. This was done

with a view to exploit the scale benefits and

synergies that existed between the two

businesses. More specifically, by eliminating

duplication of effort and increasing the

product basket, this has resulted in stronger

distributors with a greater reach, especially

in the rural markets.

Another major initiative taken by the

Company during the year was to reduce its

stocks at the stockists’ end, which involved

analysis and reassessment of their

requirements depending on their product

portfolio. As a result, pipelines have been

reduced considerably during the year. The

Company plans to continuously improve

this in the future.

Another initiative on the sales and

distribution side was the launch of ‘Dabur

My Page’ for online connectivity with the

top 500 stockists of the Company. This

system enables the stockists to check order

status, accounts statement and inventory

online, which makes distribution more

efficient and transparent. It has also

improved communication with the stockists

and simplified the management of

receivables. The Company expects to extend

this to other suppliers in the future.

Information TechnologyInformation technology has played a key

role in improving supply chain efficiencies

at Dabur. To leverage information

technology, your Company had successfully

implemented two ERP systems — Baan and

MfgPro — in production and distribution

respectively in the previous years. As

discussed earlier, the Company has also

gained substantially by its e-sourcing

initiative.

This year, your Company decided to out-

source its IT function, for which it has

entered into a 10-year IT outsourcing-cum-

consulting contract with Accenture. A

landmark exercise in ‘business

transformation out-sourcing (BTO)’, this will

enhance business performance through

proactive use of IT. It will be done by

leveraging existing infrastructure, and will

The e-sourcing initiative has brought ingreater transparency that has resulted insubstantial savings

Dabur India Limited | A N N U A L R E P O R T | 2003-04 2726 M A N A G E M E N T D I S C U S S I O N + A N A LY S I S

throughout the year and not even a single

day’s work was lost due to strikes or

disputes.

RESEARCH & DEVELOPMENTYour Company believes that research

and development is the key to innovation

and cornerstone of success. R&D has played

an important role in the developing of new

or improved products and processes. Dabur

Red Toothpaste, Vatika Fairness Face Pack,

Anmol Hair Oil and variants of Hajmola

candies, developed in-house by Dabur, were

very successful during the year under

review.

Several research initiatives during the

year were aimed at improving the quality

and appeal of the packaging of products

such as Dabur Chyawanprash and Dabur

Gripe Water. The Company also introduced

‘thermoform packaging’ for smaller packs of

products such as Lal Tail (Baby oil) and new

wrapping technology for square bottles

such as Dabur Honey.

Most of the research for new product

development for Dabur is done by the FMCG

wing of Dabur Research Foundation (DRF).

DRF has research and development facilities

of international standards for both

consumer care division (CCD) and consumer

healthcare division (CHD). The Company

expects significant benefits to accrue from

DRF in terms of quality research in the

future.

Dabur has also tied up with prestigious

ayurvedic and medical institutes such as

Dhanwantry Ayurvedic Hospital, Wardha

College, Poddar Institute and Benaras Hindu

University on matters related to research,

implementation of the Company’s strategy

as a part of this exercise.

Human Resources Dabur places great deal of confidence on

its excellent pool of human resources,

which it realises is the key to its future

growth strategy. The Company continued its

efforts to further align its HR policies,

processes and initiatives to meet the

business needs.

In line with its focus on international

operations, Dabur implemented a uniform

HR structure across all group companies

and operations. This will enable seamless

transition between domestic and overseas

positions. Also, the integration of the

personnel of the erstwhile Family Products

Division (FPD) and Health Care Products

Division (HCPD) was implemented

effectively to suit the business requirements

well within time. Major initiatives taken

during 2003-04 have been:

" Dabur implemented performance metrics

for all key positions based on two aspects

of the Balanced Scorecard approach —

Financial and Internal Business Process.

This approach clearly outlines the

expectations from each position, and will

be upgraded to include two more aspects

for key managerial positions in 2004-05.

" The Company institutionalised the

“Assessment & Development Centre”

(ADC) approach for all promotions from

staff to officer cadre and also at the senior

levels to objectively identify, develop and

promote the talent from within, and to

provide individual feedback for

development of the participating

employees. During the year, the Company

conducted four such ADCs.

" To encourage learning, your Company is

planning to set-up a learning centre,

which will be equipped with a library and

IT and web-based sources of knowledge.

The Company is also in the process of

setting up a knowledge management

portal and a leadership and capability

development cell.

" Dabur is committed to attract and nurture

fresh talent. Towards this end, your

Company recruited over 20 candidates

from leading management and

engineering institutes in the country, who

will be inducted into the Company

through the comprehensive management

training programme in 2004-05.

" In line with Dabur’s commitment to

ethical professional conduct, the

Company adopted a Code of Ethics and

Conduct, which will serve as a guideline

for our employees. In addition, to build

and strengthen a culture of transparency

and trust in the organisation, Dabur

introduced a Whistle Blower and

Protection Policy, encouraging not only

employees but also business associates to

report unethical business practices

without fear of reprisal.

As of 31 March 2004, Dabur has 1870

employees. Employee relations throughout

the year were supportive of business

performance across all the factories, with

significant improvements in the

productivity across all manufacturing units.

Industrial relations remained cordial

Dabur places great deal of confidence on itsexcellent human resources which, it realises, is thekey to its future growth

clinical trials and generating claims support

data.

ENVIRONMENTYour Company is committed to the well

being of the environment. The efforts

undertaken by Dabur India Limited in

managing and nurturing the environment

go much beyond the statutory requirements

stipulated by the central and state

governments. Substantial capital

investments have been made for effluent

treatment and air purification units in the

new plants located in Jammu and

Uttaranchal, which meet international

environmental standards.

In addition, efforts have been made to

tie-up with government and other agencies

to plant endangered species of plants and

herbs in herbal parks to prevent them from

extinction.

FINANCIALS

As you are aware, the Pharmaceutical

business of your Company was de-merged

and transferred to a new Company. This de-

merger was done with a view to provide the

two businesses—FMCG and

Pharmaceuticals—focus and resources to

pursue their own independent growth

strategies. 2003-04 was the first year of

operation of the businesses as separate

companies.

For the purpose of greater clarity and to

facilitate like-to-like comparison, we shall

analyse the financial performance of your

Company vis a vis the results of the FMCG


debt. These initiatives continued in the year

under review. Total debt of the Company

reduced to Rs.39.8 crore on 31 March 2004

compared with Rs.81.7 crore for the FMCG

business as on 31 March 2003.This has

significantly reduced interest payments

from Rs.11.9 crore in 2002-03 to Rs.6.9

crores in 2003-04 for the FMCG business—a

reduction of more than 42 per cent.

The strong top line growth coupled with

enhanced operational efficiencies has

translated into a healthy increase in profits.

Post tax profits (PAT) increased by 40.6 per

cent growth from Rs.72 crore in the FMCG

business in 2002-03 to Rs.101.2 crore in

2003-04.

A few of the salient features of the

Company’s financial performance are

highlighted below.

" Focussed improvements in supply chain

management has resulted in the company

working with negative working capital as

on 31 March 2004—the cash cycle has

reduced from 39 days in 2002-03 to minus

5 days in 2003-04

" All profitability ratios have improved.

EBIDTA margin (EBIDTA/Sales) improved

from 10.6 per cent in FMCG business and

11.1 per cent overall in 2002-03 to 12.0

per cent in 2003-04. The post tax profit

margin (PAT/Total income) increased from

6.8 per cent in FMCG business in 2002-03

to 8.8 per cent in 2003-04

" There has been a significant increase in

the Company’s return on capital employed

(ROCE), which increased from 27.2 per

cent in FMCG business in 2002-03 to 34.9

per cent in 2003-04. The Company has

been able to deliver better returns to its

shareholders in the form of higher return

on net worth (RONW), which grew from

32.3 per cent for the FMCG business and

20.8 per cent overall in 2002-03 to 38.6

per cent in 2003-04

Table 3 compares key financial ratios of

your company in 2003-04 as against

2002-03.

The de-merger has also considerably

reduced the Company’s risks associated

with financial gearing. The debt to equity

ratio—a measure of the gearing of the

Company—has reduced from 0.27 as on 31

March 2003 to 0.14 as on 31 March 2004.

The interest coverage ratio (ratio of profit


business of Dabur for 2002-03. Table 2

gives an overview of Dabur India Limited’s

financial performance in the year under

review.

Total revenue increased by 10.1 per cent

from Rs.1053.4 crore in 2002-03 to Rs.1159

crore in 2003-04. This top-line growth has

been backed by increase in efficiencies in

operations, which is reflected in a 24.1 per

cent increase in operating profit (PBDIT)

during 2003-04. Over the years, Dabur has

been taking steps to reduce its interest

outgo. These include securing low

cost debt by capitalising on

the Company’s strong

debt rating, as well as

retiring high cost

R & D has played an important role in developingof new products and processes

TABLE 2 DABUR INDIA LIMITED’SABRIDGED PROFIT & LOSS

STATEMENT FOR 2003-2004

(in Rs. Crore)

Dabur Dabur Dabur

03-04 02-03 02-03#

(FMCG) (FMCG)

Sales from operation 1148 1048.5 1232.3

Other income 11 4.9 8.3

Total Revenue 1159 1053.4 1240.6

Total Expenditure 1022.9 943.8 1105.9

Interest 6.9 11.9 17.1

Depreciation 15.7 17.7 22

PBDIT 136.1 109.6 134.7

PBIT 120.3 91.9 112.6

PBT 113.4 80 95.5

Current Tax 8.8 6.3 7.4

Deferred Tax 3.5 1.7 3

PAT 101.2 72 85.1

NOTE # Result includes both pharmaceutical and FMCG businesses

before interest and tax to interest

payments)—a measure of the Company’s

ability to pay interests through its profits—

has also improved significantly from 6.6 to

17.5 in the same period.

THREATS, RISKS ANDCONCERNSIn a year when India recorded one of its

highest GDP growth, the sluggish growth of

the FMCG sector is still a matter of concern

for us. The lack of significant expansion in

product categories, coupled with entry of

several smaller regional players, is

intensifying price competition, and

increasing pressure on margins.

There has been an upward trend in oil

prices and petroleum based products since

the latter half of 2003. This has resulted in

increased freight costs and costs of

petroleum based packaging materials. Since

freight and packaging constitute materially

significant proportions of Dabur’s costs, this


INTERNAL CONTROLS ANDTHEIR ADEQUACYDabur has a strong internal audit and

control system. PriceWaterhouse Coopers is

the internal auditor for the entire company

and its subsidiaries. The internal auditors

independently evaluate adequacy of

internal controls and concurrently audit the

majority of transactions in value

terms. The Company has an

independent Internal Audit

function staffed with qualified

and experienced people.

Independence of the audit and

compliance function is ensured

by the direct reporting of the

internal audit division to the

Audit Committee of the Board. For

the terms of reference of the Audit

Committee, refer to the section on

Corporate Governance of the Annual

Report.

CAUTIONARY STATEMENTStatements in this management

discussion and analysis describing the

Company’s objectives, projections,

estimates and expectations may be ‘forward

looking statements’ within the meaning of

applicable laws and regulations.

Actual results may differ

substantially or materially from

those expressed or implied.

Important developments

that could affect the

Company’s operations include

a downward trend

in the domestic

FMCG industry,

rise in input costs, exchange rate

fluctuations, and significant changes in

political and economic environment in

India, environment standards, tax laws,

litigation and labour relations.

trend in high oil prices is a cause of

concern.

As a market leader in the Indian Ayurveda

and herbal products market, Dabur is also

concerned about the adverse impact that

counterfeit, spurious and low quality

products can have on credibility of this

entire industry, and hence its growth. Rapid

deforestation leading to erosion of certain

species of herbs, which form our raw

material base, is another element of risk.

OPPORTUNITIES ANDOUTLOOKDabur is aware of the risks and concerns

noted above and has devised its business

strategy accordingly. By increasing its

product portfolio, leveraging its brand value

as a herbal specialist and strategically

positioning its products, the Company

believes that it will largely de-risk itself

from pricing pressures and segmental

contractions.

Your Company believes monsoons will

continue to play an important role in the

growth of the Indian economy, particularly

in volume growths in the FMCG sector. The

consumption of consumer goods has

reached an inflexion point, and the sector is

at the cusp of significant growth. We are

cautiously optimistic of our prospects in

2004-05 and believe that a good monsoon

in 2004 will go a long way in stabilising our

growth path.

Dabur has tied up with prestigious ayurvedic andmedical institutes on matters related to researchand clinical trials

TABLE 3 KEY FINANCIAL RATIOS

Dabur Dabur Dabur

03-04 02-03 02-03#

(FMCG) (FMCG)

PBDIT*/Sales** 10.9% 10.0% 10.3%

PBIT/ Sales** 10.5% 8.8% 9.1%

PBT/Total income 9.9% 7.6% 7.7%

PAT/Total income 8.8% 6.8% 6.9%

ROCE 34.9% 27.7% 19.4%

RONW 38.6% 32.2% 20.7%

NOTE * In order to get a more accurate picture of theCompany’s operational performance, PBDIT has beencalculated net of “other income’’ | ** Sales fromoperations | # Result includes both pharmaceuticaland FMCG businesses


Dabur India Limited I ANNUAL REPORT I 2003-04 41

Your Directors have pleasure in presenting the 29th Annual Report onthe business and operations of the Company together with the AuditedAccounts for the year ended 31st March, 2004.

Financial Results

(Rs. crore)

2003-04 2002-03Turnover (including other income) 1159.02 1240.59Profits before Tax 113.44 95.53Add: Provisions of earlier years written back 0.20 0.06

113.64 95.59Less – Provision for Taxation – Current 8.75 7.43

– Provision for Taxation – Deferred 3.49 3.00– Provision for taxation for earlier year 0.26 0.25

Profit after Tax 101.14 84.91Add: – Balance in Profit & Loss Account brought 66.12 44.67

Forward from the previous year– Transferred from Debenture Redemption 2.50 2.50 Reserve

Profit available for appropriation 169.76 132.08Appropriation to:General Reserve 22.50 22.50Capital Reserve 1.56 0.18Interim Dividend – Paid 17.17 14.29Final Dividend – Proposed 40.07 25.72Corporate tax on Dividend 7.34 3.28Balance carried over to Balance Sheet 81.12 66.11Total 169.76 132.08

Dividend

An interim dividend of Re.0.60 per share (i.e. 60%) was declared andpaid during the year. The Board of Directors has recommended a finaldividend of Re.1.40 per share (i.e.140%) to the members for their approval.The final dividend, if approved, will be paid to members within the periodstipulated by the Companies Act, 1956.

Operations and Business Performance

Kindly refer to Management Discussion & Analysis covered underCorporate Governance and forms part of this Annual Report.

De-merger

The Hon’ble Delhi High Court vide its order dated 17th October, 2003 hadapproved the Scheme of Arrangement for de-merger of thepharmaceutical business of the Company to a new company DaburPharma Limited. Consequently, the entire pharma business has beentransferred to the said company on 2nd December, 2003 (i.e. EffectiveDate under the Scheme) with retrospective effect from 1st April, 2003(i.e. the Appointed Date).

Corporate Governance

It has always been the Company’s endeavour to exceed and excel throughbetter Corporate Governance and fair and transparent practices, manyof which have already been in place even before they were mandated bythe law of the land. The Company believes in leveraging the resources totranslate dreams into opportunities and opportunities into realities, to

infuse people with vision that sparks dynamism and entrepreneurship,to create a system of succession which combines stability and flexibilityand continuity with change.

The Board of Directors of the Company had also evolved and adopted aCode of Conduct based on the principles of Good Corporate Governanceand best management practices being followed globally. The Code isavailable on the website of the Company.

The Compliance Report on Corporate Governance forms part of theAnnual Report. The Auditors certificate on the compliance of CorporateGovernance Code embodied in Clause 49 of the Listing Agreement isattached as Annexure 1 and forms part of this Report.

Directors

At the ensuing Annual General Meeting Mr Ajay Bahl, Mr P N Vijay, Mr.Amit Burman and Mr Pradip Burman will retire by rotation and beingeligible offer themselves for reappointment in terms of provisions ofArticles of Association of the Company.

The brief resume/details relating to directors who are to be re-appointedare furnished in the explanatory statement to the notice of the ensuingannual general meeting.

Directors’ Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the CompaniesAct, 1956, with respect to Directors’ Responsibility Statement, theDirectors confirm:

i) That in the preparation of the annual accounts, the applicableaccounting standards have been followed and no material departureshave been made from the same;

ii) That they had selected such accounting policies and applied themconsistently and made judgements and estimates that are reasonableand prudent so as to give true and fair view of the state of affairs ofthe Company at the end of the financial year and of the profit ofthe Company for that period;

iii) That they had taken proper and sufficient care for the maintenanceof adequate accounting records in accordance with the provisionsof the Companies Act, 1956 for safeguarding the assets of theCompany and for preventing and detecting fraud and otherirregularities;

iv) That they had prepared the annual accounts on a going concernbasis.

De-listing of sharesDuring the year, pursuant to the special resolution passed by way ofpostal ballot by the shareholders on 2nd August, 2003, the Company hadapplied and got the approval for de-listing of its shares from AhmedabadStock Exchange, Bangalore Stock Exchange, Delhi Stock Exchange, JaipurStock Exchange, Ludhiana Stock Exchange, Magadh Stock Exchange andU.P. Stock Exchange, as the trading volumes of Company’s share at thesestock exchanges have been negligible for many years.

The Company’s application for de-listing of its shares from Calcutta StockExchange on the same ground is pending with them and is likely to beapproved shortly.

directors' report TO THE MEMBERS OF I DABUR INDIA LTD. I

Auditors

M/s G. Basu & Company, Chartered Accountants, Statutory Auditors,M/s Bansal & Company, Branch Auditors of Alwar Division and M/s Waring& Partners, Branch Auditors of London Branch of the Company retire atthe conclusion of ensuing Annual General Meeting and being eligibleoffer themselves for reappointment as statutory auditors & branchauditors respectively.

Cost Audit

M/s Ramanath Iyer & Company, Cost Accountants were reappointed asCost Auditors to conduct cost audit of the accounts maintained by theCompany in respect of its Formulations and Cosmetics & Toiletriesproducts for the financial year 2004-05.

Consolidated Financial Statements

In compliance with the Accounting Standard 21 on Consolidated FinancialStatements, this Annual Report also includes Consolidated FinancialStatements for the financial year 2003-04. From the Consolidated Profitand Loss Account, it may be observed that the net profit after tax andafter minority interest for the year at Rs.106.52 crores is higher by Rs.15.46crores as compared to Rs.91.06 Crores in the previous year.

Internal Control System

The Company’s internal control system comprises audit and complianceby in-house Internal Audit Division supplemented by internal audit checksfrom Price Waterhouse, the Internal Auditors. The internal auditorsindependently evaluate the adequacy of internal controls andconcurrently audit the majority of the transactions in value terms.Independence of the audit and compliance is ensured by the directreporting of Internal Audit Division to the Audit Committee of the Board.

Fixed Deposits

During the year the Company has not accepted any fixed deposits fromthe public. However, as on 31st March, 2004 the Company had unclaimeddeposits of Rs.13.47 lacs due to 87 depositors. In addition to this anamount of Rs.6.20 lacs is outstanding as unclaimed towards interestaccrued and due to 551 depositors.

Subsidiaries

As required under the provisions of Section 212 of the Companies Act,1956, the audited accounts together with Directors’ Report and Auditors’Report of the subsidiary companies are appended and form part of theAnnual Report. The statement pursuant to Section 212 of the CompaniesAct, 1956 is attached as Annexure 2 and form part of this report.

Auditors' reportThe observations of Auditors in their report read with the relevant notesto accounts in Schedule P are self-explanatory and do not require furtherexplanation.

Employees Stock Option PlanDuring the year 12,95,658 options in two trenches were granted to eligibleemployees of the Company in terms of Employees Stock Option Plan(Dabur ESOP 2000). Out of the total options issued and outstanding, 200options were cancelled due to separation of employment of one employeefrom the Company. During the year, of the 3,44,180 options vested inthe employees, 3,38,180 options were exercised and the Company madethe allotment of shares on 10.10.2003.

The particulars of options issued under the said Plan as required by SEBI(Employee Stock Option Scheme and Employee Stock Purchase Scheme)Guidelines, 1999 are appended as Annexure 3 and form part of this report.

Particulars of Employees

Particulars of employees as required under Section 217(2A) of theCompanies Act, 1956 read with Companies (Particulars of Employees)Rules, 1975 as amended are given in Annexure 4 to the Directors Report.

Conservation of Energy, Technology Absorption, ForeignExchange Earnings and outgoA. Conservation of energy:

a) Energy conservation measures taken:

Such measures include -

� Commissioning of “Effimax” (Efficiency Monitoring System)on boilers to monitor and control Fuel - Steam ratio. Ratioimproved from 11.5 Kg/Ltr to 12 Kg/Ltr.

New capacitor added to control Power factor, improved from0.97 to 0.99.

� Auto On-Off system on Air Curtains to reduce powerconsumption and wear & tear.

� Reduction in demand load by 1051 KVA.

� Rescheduling of production shifts to minimize operation ofheavy loads during peak tariff hours (5pm – 10 pm). Electricitycost approximately 25% more during this period.

� Fixing natural draft chimneys in place of motor driven exhaustfans in boiling section.

� Optimised the AC compressor operation time through timercontrol.

� Lowered the height of light fixtures in packaging hall andconsequently reduced lighting load.

� Reduced water wastage and controlled extra running of borewell by installing the pump operation controller.

� Improvement in the Heat Exchanger efficiency of Honeyplant.

� Use of fuel additives to increase the burning efficiency offurnace oil.

� Increase in energy conversion efficiency of fuel in boiler byregular stack monitoring.

� Replacement of Thermodynamic type steam traps with floattype steam traps to reduce steam loss.

� Modification of water distribution layout to eliminate thewastage of overflow water.

� Installed imported dual timer auto drain valve on high-pressure air compressor to reduce the air losses.

� Replacement of 10 HP excess higher head pump with 2.0 HPsuitable capacity pump for effluent transfer from effluentstorage tank to equalisation tank of Effluent Treatment Plant

� Replacement of 10 HP excess higher discharge pump with2.0 HP suitable capacity pump for Softener Plant.

� Interlocking of conveying fan (centrifugal blower) with raw


42 DIRECTORS' REPORT


material feeding vibrator of Food Grade Plant to avoid idlerunning of fan.

� Employees Training Program were conducted for theawareness of energy conservation.

� The bio gas generated from the anaerobic digester system ofour ETP plant has been utilized for cooking in the factorycanteen thus avoiding purchase of LPG cylinders.

� Reduction of HSD Consumption has been done througheffective utilization of electricity during peak hours periods.

� Controlling the Shift-Operation of Boiler as per ProductionPlan in accordance with RPP by continuous operation of threeshifts at a stretch instead of single shift.

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

� Replacement of Dual Media Filter with Disc Filtration systemin RO Plant (Under Implementation)

� Replacement of mechanical unloading with VariableFrequency Drives for Air Compressors.

� Use of Anaerobic process to reduce the Aerator load ofEffluent Treatment Plant.

� Use of boiler for multiple consumption locations to improvethe load factor leading to better utilisation of Furnace Oil.

� Use of separate borewell to reduce the power cost fortransferring water to distant locations.

� Use of after cooler in reciprocating air compressors toincrease the efficiency of compressed air generation.

� Conversion of Tray Driers from Electric Heating to LPG.

� Installation of ES-25 (Energy saver for electric circuits).

� Condensate recovery system from areas having high steamconsumption.

� Improved steam flow meters planned for implementation ofaccurate measurement system and control of steam energy.

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

The energy conservation measures taken during the year haveresulted into yearly saving of approximately Rs.145.78 lacs andthereby lowered the cost of production by the equivalent amount.

d) Total energy consumption and energy consumption per unit ofproduction as per Form A:

- Attached herewith as Annexure 5

B. Technology Absorption:

Efforts made in technology absorption as per Form B is attachedherewith as Annexure 6.

C. Foreign Exchange earnings and outgo:

i) Activities relating to exports:

� In order to bring focus on International markets, the Companyacquired its franchise Redrock Limited (name later changed

to Dabur International Limited) and formed an export hubwith its office in Dubai;

� Smooth refranchising done in Pakistan on Shampoo fromM/s Clover to M/s Mueller & Phipps.

� In Australia we decided to exit from the mainline consumers& continue to concentrate on the ethnic channel;

� A Joint Venture set up in Bangladesh with ACI for production& the Company was operationalised in December 2003 formanufacturing and marketing of hair oils & shampoos;

� Exports restarted in Yemen after a gap of 2 years.

ii) Initiatives taken to increase exports:

� A major distribution re-structuring exercise was done in the3 critical markets- Saudi Arabia, United Arab Emirates(UAE),& Qatar and top of the line parties were appointed as ourdistributing partners. This was implemented by major de-stocking & other clean-up exercises;

� Dabur's presence is being gradually established inAfghanistan with the appointment of two distributors;

� Healthcare products like Dabur Chyawanprash, Hajmola,Greneem and Pudin Hara are in the final stages of registrationIn Sri Lanka;

� Ayurvedic medicines approximately worth USD 80,000 havebeen exported to the Ministry of Health, Mauritius fordistribution to ayurvedic clinics/hospitals across Mauritius.

iii) Development of new export markets for products and services:

� Various new products (food supplements/cosmetics/personalcare products/herbal medicines) have been applied forregistration in Russia /Ukraine/ Uzbekistan/Kazakhstan/Moldova and other CIS countries. A person taken exclusivelyfor these markets;

� Dabur has made impressive entry into war-torn Iraq market.Distributors have been appointed. Dabur Amla Hair Oil wasthe major product exported (total export worthapproximately USD 0.2 mn made to Iraq in FY 2003-04).Dabur brands being supported by promotional media suchas outdoor activities and in-shop displays;

� Dabur has been established in the ethnic channel across USAand Canada. Advertising of brands like Dabur Amla Hair Oiland Dabur Chyawanprash being done on channels like ZeeTV and Sony TV;

� Exports of Dabur products initiated to various countries likeBenin, Surinam, Korea, Latvia and Moldova.

iv) Export plans:

� Detailed feasibility done for business potential & plans toincorporate a Company in Nigeria;

� Plans to advertise Dabur Amla Hair Oil and Dabur VatikaShampoos through Radio/other available media;

� Plans to introduce the products in the ethnic sections of amajor Retail chain in Canada;

� The Company has plans to introduce its products in Sri Lankan


market through a major company having widespreaddistribution across Sri Lanka;

� Vatika shampoos to be introduced in FY 2004-05 in theMauritius market after conducting research.

Total Foreign Exchange used during 2003-04: Rs. 777.56 lacs.

Total Foreign Exchange earned during 2003-04 Rs.2953.30 lacs.

Group for interse transfer of shares

As required under Clause 3 (e) of Securities and Exchange Board of India(Substantial Acquisition of Shares and Takeovers) Regulations, 1997persons constituting Group (within the meaning as defined in theMonopolies and Restrictive Trade Practices Act, 1969) for the purpose ofavailing exemption from applicability of the provisions of Regulation 10to 12 of aforesaid SEBI Regulations, are given in the Annexure 7 attachedherewith and forms part of this Report.

Environment & Pollution ControlKindly refer to Management Discussion and Analysis covered underCorporate Governance, which forms part of this Annual Report.

Human Resource DevelopmentHuman resource is a key to future growth strategy of the Company.Realising this the company continued its efforts to further align its HRpolicies, processes and initiatives to meet the business needs.

During the year the integration of personnel of erstwhile Family ProductDivision and Health Care Product Division was implemented effectivelyto suit business requirements.

The Company implemented the performance metrics level for all keypositions and Assessment and Development Centre objectively, identify,develop and promote the talent from within the organization. Two moremodules – retiral and mediclaim management were added to Dabur

Employees Management System. A mypage concept was introduced inthe intranet which allows the employees to view online all details suchas tax computation, loans and advances, perks and leave balances.

The Company is planning to set up a learning centre to encourage learningamong its employees. Setting up of knowledge management portal andleadership and capability development cell will follow this.

To strengthen a culture of transparency and trust in the organization,the Company introduced a Whistle Blower and Protection Policy. Thiswill encourage not only employees but also business associates to reportunethical business practices without any fear.

Industrial Relations

The industrial relations in all the units and branches of the Companyremained cordial and peaceful throughout the year the Company hasnot lost a single man-day in any of our manufacturing operations.

Acknowledgements

Your Directors place on record their gratitude to the Central Government,State Governments, Financial Institutions and Company’s Bankers forthe assistance, co-operation and encouragement they extended to theCompany. For the continuing support of Investors, Dealers, BusinessAssociates and Employees at all levels for their unstinting efforts inensuring an excellent all around operational performance despite anotherwise difficult economic environment, your directors also wish toplace on records their sincere thanks and appreciation.



For and on behalf of the Board

V.C. BurmanChairman

New Delhi5th May, 2004

annexures to directors' report TO THE MEMBERS OF I DABUR INDIA LTD. I

ANNEXURE ‘1’

Auditors' Report on Corporate Governance

To,

The Members of Dabur India Limited

We have examined the compliance of conditions of corporate governanceby Dabur India Limited, for the year ended on 31st March, 2004, asstipulated in clause 49 of the Listing Agreement of the said Companywith the stock exchanges.

The compliance of conditions of corporate governance is the responsibilityof the management. Our examination is limited to procedures andimplementation thereof, adopted by the Company for ensuring thecompliance of the conditions of the Corporate Governance. It is neitheran audit nor an expression of opinion on the financial statements of theCompany.

In our opinion and to the best of our information and according to theexplanations given to us, we certify that the Company has complied

with the conditions of Corporate Governance as stipulated in the abovementioned Listing Agreement.

We state that no investor grievance is pending for a period exceedingone month against the Company as per the records maintained by theShareholders/ Investors Grievance Committee.

We further state that such compliance is neither an assurance as to thefuture viability of the Company nor the efficiency or effectiveness withwhich the management has conducted the affairs of the Company.

For G. Basu & Co.Chartered Accountants

S. LahiriPartnerMembership No. 51717



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ANNEXURE ‘3’

Disclosure regarding Employees Stock Option Plan pursuant tothe SEBI (Employees Stock Option Scheme and Employees StockPurchase Scheme) Guidelines, 1999 and forming part of theDirectors’ Report for the year ended 31st March, 2004.

For the Year Cumulative

1. Number of Options granted : 12,95,658 21,75,867

2. Pricing formula : Each option carries the rightto the holder to apply forequity shares of theCompany at par.

3. Options vested : 3,44,180 5,49,963

4. Options exercised : 3,38,180 5,32,463

5. Total number of sharesarising as a result of exerciseof option : 4,99,118 10,34,222

6. Options lapsed/Cancelled : 200 3,31,746

7. Variation in terms of options : None None

8. Money realized by exerciseof options : Rs.4,99,118/- Rs.10,34,222/-

9. Total number of optionsin force : 13,11,658 13,11,658

10. Employee-wise details of options granted during the year to:

i. Senior managerial personnel :

Mr P D Narang Group Director – Corp. Affair 344130

Mr Sunil Duggal Chief Executive Officer 339028

Mr Charanjit Mohan Executive Director–Operations 143750

Mr N Venkatakrishnan VP – Commercial 75000

Mr Jude Magima VP – CPPD 75000

Mr A Sudhakar VP – Human Resources 75000

Mr S Raghunandan VP – Sales (CCD) 75000

Mr Devender Garg VP – Marketing (CCD) 75000

Mr Rajan Varma Chief Financial Officer 62500

ii. Employees who received the options amounting to 5% or more of op-

tions granted during that year :

Mr P D Narang Group Director – Corp. Affairs 344130

Mr Sunil Duggal Chief Executive Officer 339028

Mr Charanjit Mohan Executive Director–Operations 143750

Mr N Venkatakrishnan VP – Commercial 75000

Mr Jude Magima VP – CPPD 75000

Mr A Sudhakar VP – Human Resources 75000

Mr S Raghunandan VP – Sales (CCD) 75000

Mr Devender Garg VP – Marketing (CCD) 75000

iii. Employees who received the options during the year equal to orexceeding 1% of the issued capital of the Company at the timeof grant :

None

11 Diluted earning per share (EPS) pursuant to issuance of optionsunder ESOP :

Rs.3.53

12. The Company had been using intrinsic value method of accountingESOP expenses as prescribed by SEBI (Employee Stock Option Schemeand Employee Stock Purchase Scheme) Guide Lines 1999, to accountfor stock options issued under Dabur ESOS 2000, the Company’sstock option scheme. Under this method, compensation expenses isrecorded on the basis of excess of the market price of share at thedate of grant of option over exercise price of the option.

As allowed by the above referred SEBI Guidelines the company hasdecided to continue to apply the intrinsic value method of accountingand the disclosure required as per para 12 (l) of the Guidelines aregiven herein below:-

(Rs. in lacs)

Net profit after tax, as reported in audited 10120.38accounts

Add: Stock Option compensation expenses 275.18charged in above reported profit

Deduct: Stock option compensation expenses 284.23determined under fair value method (blackscholes model)

Net profit after tax, as adjusted 10111.33

Impact on profit (i.e. profit would have been 9.05lower by)

Earning per share (Rs.) Basic Diluted

- As reported 3.54 3.53

- As adjusted 3.54 3.52

- Impact on EPS 0.003 0.003

13. Weighted average exercise Re. 1.00price (per option)

Weighted average fair value ofper option:

(per intrinsic value method) Rs.55.19

(per black scholes model) Rs.56.46

14. The fair value of each option is

estimated using the Black Scholes

model after applying the following

weighted average assumptions:-

- Risk free interest rate 5.87%

- Expected life 1 to 5 years

- Expected volatility 2.1%

- Expected Dividend 200%

- Price of underlying shares in the market Rs.56.19 at the time of option grant




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ANNEXURE ‘5’

FORM - AForm of Disclosure of particulars with respect to

Conservation of EnergyA. Power and Fuel Consumption

2003-04 2002-031. Electricity

a) Purchased

Units 16680089 24006948

Total amount (Rs) 67143585 97819056

Rate per unit 4.03 4.07

b) Own Generation:

i) Through diesel generator

Units 2247673 2742741

Unit per litre of diesel oil 3.30 3.00

Cost per unit 5.71 5.52

Total cost (Rs.) 12837238 15137449

ii) Through Steam Turbine/Generator

Units Nil Nil

Unit per litre of Fuel Oil

Cost/Unit (Rs.)

2. Coal (specify quality and where used)

Quantity (tonnes) Nil Nil

Total cost

Average rate per tonne (Rs)

3. Furnace Oil

Quantity (tonnes) 4925.94 5668.35

Total cost 64218920 72093541

Average rate per tonne (Rs) 13036.89 12718.60

4. Others/internal generation

H S D

Quantity (Kilo ltr) 262.22 302.68

Total cost 4814507 5216355.69

Average rate per Kilo ltr (Rs) 18360.91 17233.89

L D O

Quantity (Kilo ltr) 316.41 406.50

Total cost 5140676 5800615.82

Average rate per Kilo ltr (Rs) 16246.93 14269.65

B. Consumption per unit of production

The Company is engaged in production of variety of products, hencethe figures of consumption per unit of production are notascertainable.

ANNEXURE ‘6’

FORM - BForm of Disclosure of particulars with respect to

Technology Absorption

Research & Development

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

Herbal and Ayurvedic Products development, Fruit Juices and otherFoods Products, Personal Care Products, Analytical Development,Clinical Experimental Research, Product Registration and Validation,Tissue Culture & Agro-technological Research.

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

The above R&D efforts resulted into development of following newproducts:-

Glucorid KP-Anti diabetic capsule containing freeze dried ingredientsand other standardized extracts;

Hajmola Anardana -Digestive Churan delivering consumer acceptabletaste;

Nature Care Double Action-An Isabgol based product containing Sennaleaves, Ajwain and other ingredients providing relief from not onlyconstipation but also from gas;

Vatika Fairness Facepack -A product incorporating standardized herbalextract in a user friendly ready to use format;

A sarson kesh tail -incorporating Amla extracts and perfume;

Dabur Red Toothpaste- A product that leverages the ingredients used inDabur Lal Dant Manjan in a modern day paste format;

Dabur Anmol Shampoo- A low priced shampoo incorporating Amla andother extracts;

Hajmola Fun2- A center filled candy, with differentiating taste insideand out side.

3. Future plan of action:

To continue the R&D efforts through DRF in the areas listed abovewith a view to strengthen the technological base and look forproducts in new and niche areas.

4. Expenditure on R&D (2003-04)

a) Capital Nil

b) Recurring Rs.455.67 lacs

c) Total Rs.455.67 lacs

d) Total R&D expenditure as a 0.40%percentage of Total Turnover




ANNEXURE ‘7’

Group for interse transfer of shares under clause 3(e) of Securities& Exchange Board of India (Substantial Acquisition of Sharesand Takeovers) Regulations, 1997

1. A C Burman HUF2. Acee Enterprises3. Adbur Private Limited4. Amit Laboratories Private Limited5. Angel Softech Private Limited6. Baby Anushri Raheja7. Baby Diya Burman8. Barcelona Investment & Trading Company9. Burmans Finvest Limited10. Burman Resorts Private Limited11. Cavendish Hotels Private Limited12. Chowdry Associates13. Chunilal Medical Trust14. Dabur Exports Limited15. Dabur Foundation16. Dabur Invest Corp17. Dabur Investment Corporation Limited18. Dabur Securities Private Limited19. Dr Anand Burman20. Dr Anand Burman HUF21. Dr S K Burman Charitable Trust22. Eastern Enterprises23. Estate of C L Burman & Others24. Estate of Durga Prasad Makkar Trust25. Excellent (India) Private Limited26. Excellent Farms Private Limited27. F M JV Holdings Private Limited28. Flagship Trading Company29. G C Burman HUF30. Gangotri Laboratories Private Limited31. Gyan Enterprises Private Limited32. Interx Laboratories Private Limited33. KBC India Private Limited34. Malhotra Trading Company Private Limited35. Maneswari Trading Company36. Margdarshak Constructions Private Limited37. Master Adhiraj Burman38. Master Armaan & Ishaan39. Master Shrey40. Mateshwari Dham Trust41. Milky Investment & Trading Company42. Miracle Commercial Private Limited43. Moonlight Ranch Private Ltd.44. Mr Aditya Burman45. Mr Ajay Nayar46. Mr Amit Burman47. Mr Ashok Chand Burman48. Mr Bhakt Mohan49. Mr Bimal Burman50. Mr Chetan Burman


1. Efforts, in brief, madetowards technologyabsorption, adoptionand innovation

Up gradation ofmanufacturing &Packing process ofHoney at Baddi

Efficiency improvementat Steam generationBoilerEfficiency Analyser tocheck and control thesteam generationefficiency in boilerhouse. This systemworks by controlling theratio of fuel and airAuto Power Factorcorrection system atSahibabad

APFC system installed tomaintain the PowerFactor at all time.Energy ConservationTechniques initiated atlarge scale

Spray Dryer

Acoustic Horn toremove the ProductPowder deposited on thewalls during processingwith importedtechnology of AcousticWave Energy. Earlier thesame was done bymanual hammering.

Innovative PackagingConcept:Chyavanprash - Shape &Packaging change

Fun 2

Hajmola Anardana /Mast Masala

Lal Dant Paste

2. Benefits derived as a result of theabove efforts e.g. productimprovement, cost reduction,product development, importsubstitution etc.

- HACCP Certificate.- Improved Hygiene condition- Consistency in quality and improved

productivity.

- Online monitoring of BoilerEfficiency through LAN resulting inimprovement of efficiency from 11.5kgs of FO to 12 kgs of FO.

- Fuel saving of Rs 15 Lac pa (cost of120 KL of FO)

- Better pollution control.- Reduced maintenance time and

cost.

- Power Factor improved fromaverage 0.97 to 0.99.

- Result in Saving of Rs 10 Lac p.a.

- Successfully implemented atSahibabad

- Result in Saving of Rs 12 Lac pa.- Reduction in electric connected load

by 1000 KVA.- Overall Process system improvement- Product quality improved.- Better Hygiene condition.- Improved the life and reduced the

maintenance cycle.

- Different appearance / Aestheticappeal / Trend setting /Environmental friendly and betterself-life of Products.

- Improved barrier 6-7 times of MVTRof Candy.

- Trendy design and enhancedgraphics which leads to the pack tobe presented at dining table.

- Unique transparent dispenser forenhanced display in Mkt Place inOral Care category.

Technology Absorption, Adoption and Innovation

3. In case of imported technology (imported during the last 5 yearsreckoned from the begining of this financial year) followinginformation may be furnished:Not applicable

51. Mr Dhruv Rattanlal52. Mr Gaurav Burman53. Mr Kamal Talwar54. Mr Krishan Kumar Gupta55. Mr Mohit Burman56. Mr Naresh Talwar57. Mr Pradip Burman58. Mr R K Malhotra59. Mr Rajan Kumar60. Mr Rajesh Mohan61. Mr Ratan Chand Burman62. Mr Rattanlal Gobindram63. Mr Ravi Raheja64. Mr Rohan Gupta65. Mr S N Malhotra66. Mr Saket Burman67. Mr Sandeep Tandon68. Mr Shalu Tyagi69. Mr Sidharth Burman70. Mr Sri Ram Kapoor71. Mr Umesh Talwar72. Mr V P Malhotra73. Mr Vivek Chand Burman74. Mrs Asha Burman75. Mrs Bimpi76. Mrs Divya Burman77. Mrs Enakshi Kapoor78. Mrs Gargi Gupta79. Mrs Gauri Tandon80. Mrs Indira Burman81. Mrs Kumkum82. Mrs Lajja Malhotra83. Mrs Lata Talwar84. Mrs Lekha Nayar85. Mrs Meera Burman86. Mrs Minnie Burman

87. Mrs Monica Burman88. Mrs Neelam Mohan89. Mrs Pooja Burman90. Mrs Priya Tyagi91. Mrs Rashmi Gupta92. Mrs Ritu Kumar93. Mrs Sudha Burman94. Mrs Suman Malhotra95. Mrs Sumati Raheja96. Mrs Sunita97. Mrs Tanisha Mohan98. Mrs Uma Burman99. Mrs Urmil Mohan100. Mrs Veena Malhotra101. Ms Anisha Burman102. Ms Devika Burman103. Ms Sujata Burman104. P C Burman HUF105. Poonmudi106. Pradip Burman HUF107. Prayag Commercial Private Limited108. Puran Associates Private Limited109. R C Burman HUF110. Ratna Commercial Enterprises Private Limited111. Sahiwal Investment & Trading Company112. Shree Investments Limited113. Sidharth Burman HUF114. Southern Enterprises115. Trojan Developers Private Limited116. Upvan Farms and Services Private Limited117. V C Burman HUF118. Vertex Broadcasting Company Private Ltd.119. VIC Enterprises Private Limited120. Wakarusa Laboratories Private Ltd.121. Welltime Gold & Investment Private Ltd.122. Western Enterprises



� � �


We have audited the attached Balance Sheet of Dabur India Limited asat 31st March, 2004 and its Profit & Loss Account and the Cash FlowStatement for the year ended on that date attached thereto. These fi-nancial statements are the responsibility of the Company’s Management.Our responsibility is to express an opinion on these financial statementsbased on our audit.

We conducted our audit in accordance with auditing standards gener-ally accepted in India. These standards require that we plan and performthe audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes,examining on a test basis, evidence supporting the amounts and disclo-sures in the financial statement. An audit also includes assessing theaccounting principles used and significant estimates made by manage-ment, as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.

We have relied upon recommendations of Consultants (Note No. B-3,Schedule-P) on impairment loss/ impairability of fixed assets within themeaning of AS-28 issued by ICAI.

i. As required by the Companies (Auditors’Report) Order 2003 issuedby the Central Government in terms of Section 227 (4A) of the Com-panies Act, 1956, we enclose herewith in the annexure a statementof the matter specified therein.

ii. We hereby report that the report on the accounts of Alwar and Lon-don branches audited by the Branch Auditors were received andproperly dealt with by us while preparing our report.

iii. We have obtained all the information and explanations which to thebest of our knowledge and belief were necessary for the purpose ofaudit.

iv. In our opinion, proper books of accounts, as required by law havebeen kept by the Company so far as appears from our examinationof books of accounts.

v. The Balance Sheet and Profit and Loss Account dealt with by thisReport are in agreement with the books of accounts.

vi. Subject to Note No. B (4) in Schedule ‘P’, Balance Sheet and Profit &Loss Account have been prepared in due compliances of Account-ing Standards referred to in Sub.section (3C) of Section 211 ofCompanies Act, 1956.

vii. On the basis of written representations received from the Directorsas on 31st March, 2004 and taken on record by the Board of Direc-tors, we report that none of the directors of the Company is dis-qualified for the Office of the Director within the meaning of Sec-tion 274 (1) (g) of the Companies Act, 1956.

viii. In our opinion and according to the information and explanationsgiven to us, the said accounts subject to note No.B (4) in Schedule“P” and read with other Notes appearing in Schedule “P” give theinformation required by the Companies Act, 1956, in the manner sorequired and give a true and fair view in conformity with the ac-counting principles generally accepted in India.

a) In the case of Balance Sheet, of the State of Affairs of the com-pany as at 31st March, 2004, and,

b) In the case of Profit and Loss Account, of the Profit for the yearended on that date; and

c) In the case of cash flow statement, of the cash flows for theyear ended on that date.




auditors' report TO THE MEMBERS OF I DABUR INDIA LTD. I

1) The Company has maintained proper records showing full particu-lars including quantitative details and situation of fixed assets inrespect of all its locations except in Kalkota and Daburgram wherefixed asset register have been compiled on the basis of additionssince 1975 for want of adequate information prior to that period.

2) The fixed assets have been physically verified by the Managementat all locations at reasonable intervals. No material discrepanciesbetween book records and the physical inventories have been no-ticed on such verification.

3) During the year following demerger of Pharmaceutical division sig-nificant amount of fixed assets have been transferred from the com-pany which, however, in our opinion has not affected the goingconcern status of the Company.

4) The inventories have been physically verified at reasonable inter-vals by the Management.

5) The procedures of physical verification of inventories followed bythe management are reasonable and adequate in relation to the sizeof the company and the nature of its business.

6) On the basis of our examination of the records of inventory, we areof the opinion that the company is maintaining proper records ofinventory. The discrepancies noticed on verification between thephysical stocks and book records were not material and have beenproperly dealt with in the books of account.

7. a) The company has taken unsecured loans aggregating to Rs.6770lacs during the year from 20 companies, firms and other par-ties covered in the Register maintained under section 301 ofthe Companies Act, 1956.

b) The Company has granted one unsecured loan amounting toRs.1200 lacs to a company covered in the register maintainedunder section 301 of the Companies Act, 1956.

c) In our opinion the rate of interest and other terms and condi-tions on loans taken or granted from/ to companies, firms orother parties listed in the registers maintained under section301 of the Companies Act, 1956 are not, prima facie, prejudicialto the interest of the company.

d) Both the company as well as parties are regular in paying the

annexure to the auditors' report as referred to in para i of the said report of even date

F1

principal amounts as stipulated and have been regular in pay-ment of interest in respect of loans referred to in ‘a’ and ‘b’ above.

e) There is no overdue amount of loans taken or granted as re-ferred to in (a) and (b) above.

8. In our opinion and according to the information and explanationsgiven to us there is an adequate internal control procedure com-mensurate with the size of the company and the nature of its busi-ness for purchase of inventory and fixed assets and on the sale ofgoods. During the course of our audit no major weakness has beennoticed in the internal controls. We have not observed any failureon the part of the Company to correct major weakness in internalcontrol.

9. a) Based on audit procedures applied by us and according to theinformation and explanations provided by the management,we are of the opinion that the transactions that need to beentered into the register maintained under section 301 of Com-panies Act, 1956 have been so entered.

b) According to information and explanations given to us, the trans-actions made in pursuance of contracts or arrangements en-tered in the registers maintained under section 301 and exceed-ing the value of five lakh rupees in respect of any party duringthe year have been made at prices which are reasonable havingregard to prevailing market prices at the relevant time.

10. In our opinion and according to information and explanations givento us the company has complied with the provisions of section 58Aand 58AA of the Companies Act, 1956 and rules framed thereunder.

11. In our opinion the company has an internal audit system commen-surate with the size and nature of its business.

12. On the basis of records produced we are of the opinion that primafacie cost records and accounts prescribed by the Central Govern-ment under section 209 (1) (d) of the Companies Act, 1956 in respectof products of the company covered under the rules under said sec-tion have been maintained. However we are neither required tocarry out nor have carried out any detailed examination of suchaccounts and records.

13. a) According to information and explanations given to us the com-pany is depositing with appropriate authorities undisputed statu-tory dues including provident fund, investor education fund,employees state insurance , income tax, sales tax, wealth tax,custom duty, excise duty, cess and other statutory dues to theextent applicable to it.

b) Contingent dues on account of Sales Tax/ Income Tax/ ExciseDuty/ Entry Tax disputed by the company and not being paid,vis-à-vis forums where such disputes are pending are mentionedbelow:-


Sales Tax :-Rs. in lacs

Name of Nature of the dues Amount Period to which Forum where theStatute the amount relates dispute is pending

Sales Tax Demand on Hajmola Candy 27.78 1996-97 Sales Tax Tribunal-do- -do- 25.88 1997-98 Dy. Commissioner (Appeal) Sales Tax-do- -do- 27.05 1998-99 -do--do- -do- 70.35 1999-2000 -do--do- Sales Tax on Stock transfer 71.57 1993-94 Commissioner Commercial Tax-do- -do- 28.60 1991-92 Sales Tax Tribunal-do- Sales Tax on Export Sale 7.29 1999-00 Dy. Commissioner (Appeal) Sales Tax-do- -do- 7.65 2000-01 -do--do- Demand on LDM 22.86 1990-91, 1991-92, High Court, Cuttack

1992-93-do- -do- 1.44 1993-94 -do--do- Demand on Regd. Dealer Sale 1.08 1998-99 Sales Tax Tribunal-do- Demand on Gulabari 0.74 1999-2000 Dy. Commissioner Appeal.VAT Additional demand 21.19 1998-99 Sales Tax Tribunal

Sales Tax Sales Tax on stock transfer 0.45 1997-98 Dy. Commissioner Appeal-do- Canteen Stores Department 4.97 1988-89 High Court – UP-do- -do- 14.57 1989-90 Sales Tax Tribunal-do- -do- 31.90 2000-01 -do--do- -do- 9.86 2001-02 -do-do- Sales Tax on Stock transfer 7.20 1991-92 Sales Tax Tribunal

Entry Tax Demand on Gur 0.30 1999-2000 Dy. Commissioner AppealSales Tax Form 18A dispute 0.45 -do- -do-

-do- Non filing of Form- F 0.60 1998-99 -do-

F2 FINANCIALS



14. Based on the audit procedures and on the information and explana-tions given by the management, we are of the opinion that thecompany has not defaulted in repayment of dues to any financialinstitution, bank or debenture holder.

15. Based on our examination of the records and evaluations of therelated internal controls, we are of the opinion that proper recordshave been maintained of the transactions and contracts relating toshares, securities and other investments dealt in by the companyand timely entries have been made in the records. We also reportthat the company has held the shares, securities and other invest-ments in its own name except for those pending transfer in Compa-ny’s name.

16. The company has given guarantee for loans taken by others frombanks or financial institutions, the terms and conditions there-ofare not prima facie prejudicial to the interest of the company.

17. The term loans taken by the company have been applied for thepurpose for which they were raised.

18. No fund raised on short-term basis has been used for long-terminvestment or vice versa. However, there has been deployment of

fund out of profit of the company, which is technically regarded aslong-term source of fund for meeting need based working capitalrequirement.

19. The company has not made any preferential allotment of shares tothe parties and companies covered in the register maintained undersection 301 of the Companies Act, 1956 during the year.

20. Based upon the audit procedures performed and information andexplanations given by the management, we report that no fraud onor by the company has been noticed or reported during the courseof our audit.

21. Other clauses of the order are not applicable to the Company.




Income Tax :-Rs. in lacs


Income Tax Demand u/s 194 C and 201 (1A) 6.28 1998-99 ITAT-Delhi-do- Demand u/s 143 (3) 454.95 1999-2000 CIT (A)-III, Delhi

Excise Duty :-Rs. in lacs


Excise Duty Classification of Anmol Coconut Oil 514.60 1993-2001 Dy.Commissioner Excise.-do- Classification of Kewra Water 113.13 1998 Tribunal-Excise-do- Classification of Saunf 16.34 1998-2002 Tribunal-Excise

Ka Ark/ Clove Oil-do- Modvat on Capital goods 0.82 1996 Dy.Commissioner Excise-do- Modvat on inputs (57H) 2.42 1998 Tribunal-Excise-do- Classification of Mahchandnadi 32.38 1998-2002 Tribunal-Excise

tail/ Erand oil/ Stimulax-do- Fine on Seizure of Paclitaxel 0.50 2001 Tribunal-Excise-do- Valuation of paclitaxel 963.99 1995-2000 Commissioner – Excise-do- Modvat of Capital goods 1.00 1997 Commissioner Appeal-Excise-do- Valuation on Amla Pishti 3.54 1998 Commissioner Appeal - Excise-do- Modvat of F.O. 0.74 1997 Commissioner Appeal- Excise-do- Classification on Animal 272.18 1994-2003 Tribunal-Excise

Feed supplement-do- Post manufacturing expenses 0.30 2002-2003 Commissioner Appeals-Excise-do- Valuation of Intaxel Injection 16.80 2000-2001 Secretary (Excise & Taxation)-do- Classification of Lal Tail 258.09 1999-2003 Supreme Court-do- Classification of Pushpadi Tail 156.86 2001-2003 Commissioner Appeals-Excise-do- Classification of Lal Tail 151.40 1994-2000 Supreme Court-do- Classification of Janma Ghunti 388.96 1994-2000 Commissioner – Excise-do- Import of Honey 1.78 2000 Commissioner Appeals- Excise

F3

TO THE BOARD OF DIRECTORS OF DABUR INDIA LTD.

We have audited the attached consolidated balance sheet of Dabur IndiaLimited group, as at 31st March, 2004 and also the consolidated profitand loss account and the consolidated cash flow statement for the yearended on that date annexed thereto.

These financial statements are the responsibility of the Dabur India Ltd.’smanagement and have been prepared by the management on the basisof separate financial statements and other financial informationregarding components. Our responsibility is to express an opinion onthese financial statements based on our audit.

We conducted our audit in accordance with the auditing standardsgenerally accepted in India. These standards require that we plan andperform the audit to obtain reasonable assurance about whether thefinancial statements are prepared, in all material aspects, in accordancewith an identified financial reporting frame work and are free of materialmisstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used andsignificant estimates made by the management, as well as evaluatingthe overall financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

We have relied upon recommendation of Consultants (Note No. B (2),Schedule-P) on impairment loss/impairability of fixed assets of parentcompany with the meaning of AS-28 issued by ICAI.

We did not audit the financial statements of certain subsidiaries, whosefinancial statements reflect total assets of Rs.1341.70 lacs as at 31st

March, 2004, the total profit of Rs.431.96 lacs and cash flows (net)amounting to Rs.292.49 lacs for the year ended 31st March, 2004. Thesefinancial statements and other financial information have been auditedby other auditors whose reports have been furnished to us, and our

opinion is based solely on the report of other auditors.

We report that the consolidated financial statements have been preparedby the Dabur India Ltd.’s management in accordance with therequirements of AS-21 on consolidated financial statement issued bythe Institute of Chartered Accountants of India.

Based on our audit and on consideration of reports of other auditors onseparate financial statements and on the other financial information ofthe components, and to the best of our information and according tothe explanations given to us, we are of the opinion that subject toaccounting policy No.A (2) (a) (on non-impairment of fixed assets ofsubsidiaries unlike that of parent company) and Note No. B (3), Schedule-P, the attached consolidated financial statements give a true and fairview in conformity with the accounting principles generally accepted inIndia.

a) In the case of the consolidated balance sheet, of the state of affairsof Dabur India Ltd. as at 31st March, 2004.

b) In the case of the consolidated profit and loss account, of the profitfor the year ended on that date; and

c) In the case of the consolidated cash flow statement, of the cashflows for the year ended on that date.




auditor's report ON CONSOLIDATED FINANCIAL STATEMENTS

C1 CONSOLIDATED FINANCIALS


AS AT MARCH 31, 2004

(All amounts in Indian Rupees in lacs, except share data)

balance sheet

C2

SOURCES OF FUNDS :

Shareholders’ Funds:A) Share Capital A 2,862.49 2,857.50

B) Reserves and Surplus B 25,746.45 38,802.10

Minority interest B2 1,435.79 903.82

Loan Funds:A) Secured Loans C 8,370.69 8,300.90

B) Unsecured Loans D 4,080.75 13,125.20

Deferred Tax Liability EB 796.95 390.41Total 43,293.12 64379.93

APPLICATION OF FUNDS :Fixed Assets :(A) Gross Block F 41212.67 40,549.66

(B) Less : Depreciation 16206.32 18,846.85

(C) Net Block 25006.35 25,702,81Investments G 12,975.24 10,176.02

Deferred Tax Assets EB 57.01 34.13

Current Assets, Loans and Advances: H(A) Inventories 15,482.30 22,219.80

(B) Sundry Debtors 7,115.37 13,628.57

(C) Cash & Bank Balances 2,020.95 4,229.56

(D) Loans & Advances 9,365.51 12,125

33,984.13 52,203.30Less: Current Liabilities and Provisions: EA(A) Liabilities 21,367.03 18,168.37

(B) Provisions 8,022.48 5,950.28

29,389.51 24,118.65Net Current Assets 4,594.51 28,084.65

Miscellaneous Expenditure IA 659.90 382.32

(To the extent not written off or adjusted)

Notes to Accounts P

Total 43,293.12 64,379.93

As per our report of even date attached For Dabur India Ltd.

For G. Basu & Co. V. C. Burman ChairmanChartered AccountantsS. Lahiri P. D. Narang DirectorPartner P. N. Vijay Director

A. K. Jain Addl. GM (Fin.) & Company SecretaryNew Delhi5th May, 2004

Schedule as at 31st March, 2004 as at 31st March,2003

for the year ended

Income : JSales less returns 132,956.05 137,085.75Other Income 907.14 718.43

Total Income 133,863.19 137,804.18

Expenditure :Cost of materials K 58,146.81 57,756.71Excise duty 6,540.31 7,350.21Manufacturing expenses L 3,469.81 3,778.83Payments to and provisions for employees M 9,155.46 10,382.58Selling and administrative expenses N 39,726.00 42,065.81Financial expenses O 1,528.17 2,612.61Miscellaneous expenditure written off IB 391.88 290.68Depreciation 2,489.27 2,931.03

Total Expenditure 121,447.71 127,168.46

Balance being Net Profit 12,415.48 10,635.72Balance brought forward 7,602.53 4,564.09Provision for taxation of earlier years written back 19,95 5.64Transferred from debenture redemption reserve 250.00 250.00

20,287.96 15,455.45

Provision For Taxation Current 1,135.18 1,032.91Deferred 348.65 299.70

Provision for taxation for earlier year 31.67 38.99Interim dividend 1,717.49 1,428.77Interim dividend-minority 49.80 58.48Proposed final dividend 4,007.49 2,571.75Employees sharing of profit 0.00 2.67Corporate tax on interim dividend 220.05 0.00Corporate tax on proposed final dividend 513.46 327.90Transferred to capital reserve 155.50 17.95Transferred to general reserve 2,312.50 2,312.50Transferred to legal reserve 3.96 1.33Minority interest 812.80 630.64Balance carried over to Balance Sheet 8,979.40 6,731.86

20,287.96 15,455.45

Earning per Share ( in Rs.)Basic 3.72 3.17Diluted 3.71 3.16No. of SharesBasic 285,987,220.00 285,662,514Diluted 286,984,379.00 286,177,354Notes to Accounts P

FOR THE YEAR ENDED MARCH 31, 2004


profit and loss account


As per our report of even date attached For Dabur India Ltd.

For G. Basu & Co. V. C. Burman ChairmanChartered AccountantsS. Lahiri P. D. Narang DirectorPartner P. N. Vijay Director

A. K. Jain Addl. GM (Fin.) & Company SecretaryNew Delhi5th May, 2004

Schedule 31st March, 2004 31st March,2003for the year ended for the year ended


schedules

SCHEDULE A - SHARE CAPITALAuthorised :

500000000 Equity shares of Re.1 each 5,000.00 5,000.00[previous year 500000000 equity shares of Re. 1 )

5,000.00 5,000.00Issued and subscribed:286249052 Equity shares of Re.1 each fully called up 2,862.49 2,857.50

(previous year- 285749934 equity shares of Re. 1) 2,862.49 2,857.50

ANNEXED TO AND FORMING PART OF BALANCE SHEET AS AT 31ST MARCH 2004


C4


Notes :

1. Equity shares issued & subscribed includes following issues for consideration otherthan cash :-

A) 4548000 equity shares of Rs.10 each fully paid up were issued pursuant to thescheme of amalgamation (without payment being received in cash).

B) 18202080 equity shares of Rs.10 each fully paid up were issued as bonus sharesby way of capitalisation of free reserves to shareholders in the ratio of 4 equityshares for every share held as on 1st December, 1993.

2. Pursuant to section 94 of Companies Act 1956, equity shares of Rs. 10 were sub-dividedin equity shares of Re. 1/- each on Dec. 15, 2000 by way of issue of 10 shares againsteach share formerly held by a shareholder.

3. 499118 ( previous year 156414) equity shares of Re. 1 each were issued during the year2003-04 under "Employee Stock Option Scheme”.

4. 1320658 ( previous year 526118) equity shares of Re. 1 each are outstanding under”Employee Stock Option Scheme” as on 31st March, 2004.

SCHEDULE B - RESERVES AND SURPLUSCapital reserve 1794.05 1,547.15

Share premium account 5665.90 5,378.18

Employees housing reserve/fund 370.23 302.92

Capital redemption reserve 56.93 56.93

General reserve 7853.04 23,946.96

(net of debit against exchange fluctuation

Reserve Rs.19.52 previous year Rs.6.41 )

Legal reserve 33.00 20.08

Debenture redemption reserve 0.00 250.00

Investment allowance reserve 82.58 82.58

Investment deposit reserve 182.50 182.50

Profit and loss account 8979.41 6,731.89

Employee stock option scheme outstanding 728.81 302.91

25,746.45 38,802.10

SCHEDULE B2 - MINORITY INTERESTShare capital 249.29 161.57

Share premium 75.00 75.00

Capital reserve 126.91 0.00

General reserve 82.41 36.62

Profit & loss 902.18 630.64

1,435.79 903.82

schedules ANNEXED TO AND FORMING PART OF BALANCE SHEET AS AT 31ST MARCH 2004


0.00 500.00

as at 31.03.2004 as at 31.03.2003

SCHEDULE C - SECURED LOANSA. Debentures :

O- ( Previous year 500000)14.75% secured redeemable non -convertible debentures of Rs.100 each as fully paid up and redeemedat par during the year (previous year 1 instalments was pending)

Secured by:

A) For debentures amounting to Rs.1250 lacs (in terms of original issue)

1) By a mortgage by deposit of title deeds in respect of all company’s immovableproperties situated at 22, Site- IV, Sahibabad, Distt. Ghaziabad present and future.

2) A first charge by way of hypothecation in respect of all the company’s movableplant & machinery, spares and stores , tools and accessories including all othermovables both present and future situated at 22, Site IV, Sahibabad , Distt.Ghaziabad.

Subject to :

i) Prior charges created and/or to be created in favour of EXIM bank & IDBI for theirterm loans , company’s bankers for co-acceptance of bills for purchase of plant &machinery.

The mortgage and charges created as aforesaid shall rank pari passu with thecharges created /to be created in favour of Industrial Finance Corporation of IndiaLtd.

B) For debentures amounting to Rs.250 lacs (in terms of original issue)

1) By a mortgage by deposit of title deeds in respect of all company’s immov-able properties situated at plot no. SP-C-162 , MIA, Desula, Alwar, Rajasthanand Plot no. 7, NEPZ, Noida, Ghaziabad both present and future.

2) A first charge by way of hypothecation in respect of all the company’s movableplant & machinery, spares and stores, tools and accessories including all othermovables both present and future situated at plot no. SP-C-162, MIA, Desula,Alwar, Rajasthan and Plot no. 7, NEPZ, Noida, Ghaziabad.

Subject to :

I) Prior charges created and/or to be created in favour of company’s bankers on thestock of raw materials, semi finished goods, consumables stores and book debtsand moveables for securing borrowings for working capital assistence in the ordi-nary course of business.

B. Banks and Financial Institution

I Term loans :Housing Development Finance Corporation Limited 0.00 75.78GE Capital Services 1200.00 0.00Hongkong & Shanghi Bank Ltd Egypt 7.97 22.65Deferred Payment 178.29 209.14PICUP under trade tax loan scheme 1,339.58 1,412.29

II Short Term Loans - from Banks: 5644.85 6,081.14(Secured bank and institutional loans are covered by first charge on fixed assets,inventories, book debts - (present & future) and guarantee from HSBC New Delhi)

8,370.69 8,300.90SCHEDULE D - UNSECURED LOANSDeposits :

Directors 55.55 48.13Public 33.00 0.00Companies 1050.00 3,579.98Security deposit from dealers and others 12.83 394.29Term loan - from banks 785.65 1,212.94Book overdraft of current account with banks 527.58 3,027.68Commercial papers 0.00 1,000.00External commercial borrowing - ABN Amro Bank NV 1,616.14 3,862.18

4,080.75 13,125.20




schedules ANNEXED TO AND FORMING PART OF BALANCE SHEET AS AT 31ST MARCH 2004


SCHEDULE EB - DEFERRED TAX LIABILITES ( NET)Deferred tax liability :Depreciation 796.95 352.51Technical knowhow fees 0.00 37.90

796.95 390.41

Less: Deferred tax assets :VRS payment 3.20 6.57Other disallowances under section 43B of Income Tax Act 1961 53.81 27.56

57.01 34.13739.94 356.28

SCHEDULE EA - CURRENT LIABILITIES AND PROVISIONSa. Current liabilities :Acceptance 6,013.55 7,247.53Amount due to SSI units ( goods) 754.54 867.96Creditors for goods 3,648.72 2,895.95Creditors for expenses and other liabilities 10,651.56 6,475.22Advances from customers 156.07 447.53Interest accrued but not due on loans 17.67 120.96Deposits - others 23.81 33.60Investor education and protection fund to be credited by :- unpaid dividend 81.44 53.27- unpaid matured public deposit 13.47 19.69- interest accured on public deposit 6.20 6.66

21,367.03 18,168.37b. Provisions :For dividend (proposed) - final 4,007.49 2,571.75For corporate tax on proposed dividend- final 513.46 327.90For leave salary 295.09 217.24For housing, bonus & gratuity & other welfares 397.78 236.60For taxation 2,808.66 2,596.79

8,022.48 5,950.2829,389.51 24,118.65

C6

SCHEDULE F - FIXED ASSETSGross block Depreciation Net block

Name of Asset As on Additions Tfr to Dabur Adjustment As on As on For the year Tfr to Dabur Adjustment As on As on As on31.03.03 2003-2004 Pharma Ltd 2003-2004 31.03.04 31.03.03 2003-2004 Pharma Ltd 2003-2004 31.03.04 31.03.04 31.03.03

Freehold land 1,164.20 49.31 449.64 114.60 649.27 0.00 0.00 0.00 0.00 0.00 649.27 1,164.20Leasehold land 538.73 84.89 278.08 0.00 345.54 24.36 3.82 0.00 0.00 28.18 317.36 514.37Building,roads & culvert 11,842.23 1,118.71 1,551.32 104.27 11,305.35 3,287.93 371.92 435.25 11.76 3,212.84 8,092.51 8,554.30Plant & machinery 19,025.54 2,319.22 1,495.21 600.16 19,249.39 8,402.70 1,227.60 411.93 243.10 8,975.27 10,274.12 10,622.84Vehicles 982.04 267.03 123.93 166.21 958.93 436.12 143.30 62.05 113.97 403.40 555.53 545.92Furniture & off equipment 3,808.44 196.93 402.45 44.83 3,558.09 1,589.10 283.18 192.18 24.45 1,655.65 1,902.44 2,219.34Computers 2,300.62 176.96 99.19 32.91 2,345.48 1,420.09 257.99 85.09 8.03 1,584.96 760.52 880.53Patents 330.00 0.00 0.00 0.00 330.00 144.56 47.16 0.00 0.00 191.72 138.28 185.44Live stock 0.22 0.00 0.00 0.00 0.22 0.00 0.00 0.00 0.00 0.00 0.22 0.22Capital work in progress 2,601.47 1,177.94 2,361.68 350.08 1,067.65 0.00 0.00 0.00 0.00 0.00 1,067.65 2,601.47Goodwill 0.00 1,402.75 0.00 0.00 1,402.75 0.00 154.30 0.00 0.00 154.30 1,248.45 0.00

Total 42,593.49 6,793.74 6,761.50 1,413.06 41,212.67 15,304.86 2,489.27 1,186.50 401.31 16,206.32 25,006.35 27,288.63

Note :1. Transfer to Dabur Pharma Ltd represent value of fixed assets transferred on 01.04.2003 as per Scheme of Demerger of pharmaceutical division of the company2. Capital work in progress includes advance against capital goods Rs. 1177.94 ( [previous year Rs.2600.19)

as at 31.03.2004 as at 31.03.2003Number

schedules

SCHEDULE G - INVESTMENTSA. Quoted-other than trade

1 Alliance 95- dividend (sold during the year) (490,918.00) 0.00 200.002 ICICI - Prudential balance fund - dividend (1,879,699.00) 0.00 200.00

(sold during the year)3 Birla balance - dividend (sold during the year) (1,793,722.00) 0.00 200.004 Unit trust of india ( unit 64 scheme) (464,286.00) 0.00 65.00

(sold during the year)5 Grindlays Cash Fund-IP- Growth 547,994.13 63.78 30.22

(purchase during the year) units 44497182.51 (268,414.34)(sold during the year) units 44217602.72

6 JM Floter Fund- S T P Growth 24,233,189.80 2,472.50 0.00(purchase during the year) units 183516056.53(sold during the year ) units 159282866.73

7 Templeton Floting Rate income fund - ST 14,147,123.18 1,589.39 0.00(purchase during the year units 93441697.29(sold during the year) units 79294574.11

8 DSP ML Floating rate fund - Growth 4,177,218.29 434.00 0.00(purchase during the year) units 59560621.21(sold during the year) units 55383402.92

9 Birla Floating rate fund - S T P Growth 1,579,389.60 163.70 0.00(purchase during the year) units 20127854.83(sold during the year) units 18548465.24

10 Chola liquid fund - institutional plus-growth 2,152,599.24 276.00 0.00(purchase during the year) units 21328759.93(sold during the year ) units 19176160.70

11 Reliance liquid fund 25,469,444.43 2,843.00 0.00(purchase during the year) units 25469444.43

12 HDFC Frif STF - Growth 10,997,312.87 1,166.00 0.00(purchase during the year) units 10997312.87

13 LIC mutual fund 25,000,000.00 2,500.00 0.00(purchase during the year) units 25000000

14 Zurich mutual fund 0.00 0.00(purchase during the year) units 5332403.86(sold during the year) units 5332403.86

15 Kotak liquid IP Growth 0.00 0.00(purchase during the year) units 8728014.50(sold during the year) units 8728014.50

16 ING Vyasa liquid fund 0.00 0.00( purchase during the year) units 6715131.73( sold during the year) units 6715131.73

17 Principal Cash Mgmt fund 0.00 0.00(purchase during the year) units 49217297.06(sold during the year) units 49217297.06

18 Tata liquid fund 0.00 0.00(purchase during the year) units 24933170.48(sold during the year) units 24933170.48

19 HSBC Cash fund 0.00 0.00(purchase during the year) units 22460690.68(sold during the year) units 22460690.68

20 IL&FS Floating rate fund 0.00 0.00(purchase during the year) units 35103530.35(sold during the year) units 35103530.35





as at 31.03.2004 as at 31.03.2003

schedules

B. UnquotedI) Unquoted - trade investments

1 Sanat Products Ltd 50,000.00 105.00 105.002 Dabon International Ltd 13,500,000.00 1,350.00 1,350.003 Dabur Pharma Ltd 499,400.00 4.99 4.99

II) Unquoted - trade investments in subsidiary companies1 Dabur Oncology Plc. (111,400,000.00) 0.00 7,652.02

(transferred under de-merger scheme)III) Unquoted - other than trade investments

1 Commerce Centre CooperativeHousing Society Ltd 15.00 0.02 0.02

2 Capexil (agencies) Ltd 3.00 0.01 0.013 Dabur Employees Consumers Co-Op Stores Ltd 250.00 0.03 0.034 Dabur Employees Cooperative Credit Society Ltd 650.00 0.07 0.075 Co-Operative Stores Ltd, Super Bazar 500.00 0.05 0.056 Vertex Broadcasting Private limited (1,000.00) 0.00 0.10

(shares sold during the year)7 Green Valley Products Pvt. Ltd 65,000.00 6.50 6.508 Consortium Consumer Care Pvt Ltd (11,000.00) 0.00 1.10

(sold during the year)9 5% Special Nepal Govt. Bond 2063(sold during year) (3) 0.00 1.38

10 5% Special Nepal Govt. Bond 2064 ( sold during year) (5) 0.00 336.29

11 12.50% Maharashtra State Dev Loan 2004 (3) 0.00 3.24

12 VIII Series National Saving Certificate 0.20 0.20

13 Dabur Securities Pvt Ltd ( sold during year) (300020) 0.00 30.00

(Less :Provision for diminution ) 0.00 (10.18)

12,975.24 10,176.02

SCHEDULE H - CURRENT ASSETS, LOANS AND ADVANCESA. Current assets :

Inventories:

- Raw materials 6,339.12 7,343.39

- Packing materials, stores and spares 2,516.26 2,783.99

- Recoverable value from impaired fixed assets 197.85 208.71

- Stock in process 1,206.75 2,880.28

- Finished goods 5,222.32 9,003.43

15,482.30 22,219.80 Sundry debtors (unsecured) :

- Debts outstanding for a period exceeding six months :

Considered good 248.14 519.56

Considered doubtful 11.98 137.97

260.12 657.53

Less : Provision for doubtful debts 11.98 137.97

248.14 519.56

- Other debts (considered good) 6,867.23 13,109.01

7,115.37 13,628.57

SCHEDULE - G INVESTMENTS (Contd.)



C8

Number

schedules

Cash and bank balances :

- Cash in hand 35.03 34.00- Balance with scheduled banks In current accounts 1,658.85 3,690.69 In fixed deposit accounts 143.44 501.05 - Balance with non scheduled banks In current accounts 119.77 0.00 In fixed deposit accounts 37.52 0.00 - Postal savings bank accounts 0.95 0.95 (deposited with excise authority) - Remittance-in-transit & cheques-in-hand 25.39 2.86

2,020.95 4,229.55

24,618.62 40,077.93

b. Loans and advances (unsecured, consideredgood, unless stated otherwise)

Loans & advances to others 114.63 880.04Security deposit with various authorities(including deposit 3,555.57 4,585.88with Govt. Authorities Rs. 501.73 previous year Rs. 1107.49)Advance payment of tax 2,626.71 2,469.90Advances to suppliers 1,196.05 992.33Advances to employees 411.84 732.20Balance with excise authorities 655.40 666.83Other advances 805.31 1,798.17

9,365.51 12,125.37

Total (a+b) 33,984.13 52,203.30

SCHEDULE IA - MISCELLANEOUS EXPENDITURE(to the extent not written off or adjusted)Share issue expenses 0.00 37.81Less: Amortised during the year 0.00 37.81

0.00 0.00Technical knowhow fees 108.11 120.92Less: Amortised during the year 23.54 12.82

84.57 108.11Strategic management consultancy expenses 0.00 92.86Less: Amortised during the year 0.00 0.00 92.86 0.00

Deferred employee compensation under ESOP;Opening balance 136.91 217.26Addition during the year 715.00 96.60Less: Cancelled during the year 1.40 94.63

850.51 219.23Less: Amortised during the year 275.18 575.33 82.32 136.91

Deferred advertisement & publicity 114.66 229.31Less: Amortised during the year 114.66 0.00 114.65 114.66

Preliminary expenses 22.64 33.01Add: addition during year 39.41 0.00Less: Amortised during the year 62.05 0.00 10.37 22.64

659.90 382.32

SCHEDULE H - CURRENT ASSETS, LOANSAND ADVANCES (Contd.)

as at 31st March 2004 as at 31st March 2003





schedules

SCHEDULE J - SALES AND OTHER INCOMEA. Sales :

Domestic sales less returns 119,460.50 125,439.33Export sales 13,495.55 11,646.42

132,956.05 137,085.75B. Other income :

Export subsidy 66.21 102.12Rent realised 46.00 19.44Sale of scrap 194.12 172.61Dividend from subsidiary companies 0.00 2.75Other dividend - (other than trade investment) 83.62 0.38Royalty received 34.96 106.20Miscellaneous receipts 327.22 279.88Profit on sale of investments 50.89 (11.26)Profit on sale of fixed assets 104.12 46.31

907.14 718.43

SCHEDULE K - COST OF MATERIALSRaw materials consumed :

i) Opening stock 5,814.66 5,550.93

ii) Add : purchases 22,663.50 24,439.88

28,478.16 29,990.81

iii) Less : closing stock 5,912.78 7,343.39

22,565.38 22,647.42

Packing materials consumed :

i) Opening stock 2,317.64 1,473.55

ii) Add : purchases 10,960.41 10,653.96

13,278.05 12,127.51

iii) Less : closing stock 2,105.61 2,250.95

11,172.44 9,876.56

Purchase of finished products 21,327.60 24,725.65

Adjustment of stocks in process and finished goodsOpening stock :

Stock in process 1,348.79 2,406.57

Finished products 8,164.92 9,984.28

9,513.71 12,390.85

Closing stock :

Stock-in-process 1,212.78 2,880.30


6,432.32 11,883.77

Increase(-)/decrease in stock in process and finished goods 3,081.39 507.08

58,146.81 57,756.71

Note : Opening stock of raw materials, packing materials, stock in process and finished goodsexcludes Rs. 1781.39; Rs. 158.91.Rs. 1569.30 and Rs. 1152.07 respectively being shareof pharmaceutical division being demerged on 1st April 2003 under banner of a newcorporate entity namely Dabur Pharma Limited.

ANNEXED TO AND FORMING PART OF PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2004


C10

for the year ended for the year ended31st March 2004 31st March 2003

schedules

SCHEDULE L - MANUFACTURING ANDOPERATING EXPENSES

Power and fuel 2,176.55 2,394.80Stores & spares consumed 552.20 493.87Repairs & maintenance :— Building 180.91 142.44— Plant & machinery 48.54 246.49— Others 346.05 332.21Processing charges 165.56 169.02

3,469.81 3,778.83

SCHEDULE M - PAYMENTS TO & PROVISIONS FOR EMPLOYEESSalaries, wages and bonus 5,466.14 6,205.55Contribution to provident and other funds 910.23 1,149.58Workmen and staff welfare 2,189.42 2,581.40Directors’ remuneration 589.67 446.05

9,155.46 10,382.58SCHEDULE N - SELLING AND ADMINISTRATIVE EXPENSES

Rent 574.65 585.75Rates and taxes 96.53 153.94Insurance 209.51 229.40Sales tax 9,395.82 8,597.35Freight and forwarding charges 3,396.42 3,649.46Commission, discount and rebate 1,880.10 2,584.28Advertising and publicity 17,151.81 16,980.40Travel & conveyance 1,698.16 2,676.26Legal & professional 1,164.86 677.08Telephone , fax expenses 406.42 448.18Security expenses 115.27 117.29General expenses 2,915.21 2,961.43Directors’ fees 1.88 1.18Auditors’ remuneration 40.88 24.90Donation 108.43 183.07Contribution for scientific research expenses 455.67 1,750.00Bad debts 114.38 445.84

39,726.00 42,065.82

SCHEDULE O - FINANCIAL EXPENSESInterest Paid on :Fixed period loan 802.70 1,127.45Others 283.32 976.03Bank Charges 442.15 509.13

1,528.17 2,612.61

SCHEDULE IB - MISC. EXPENDITURE WRITTEN OFFShare issue expenses 0.00 37.81Technical knowhow fees paid 23.54 12.82Strategic management consultancy expenses 0.00 92.86Deffered employee compensation under ESOP 275.18 82.32Less: Transferred to Directors’ remuneration 83.55 191.63 60.15 22.17Deferred advertisement & publicity 114.66 114.65Preliminary expenses 62.05 10.37

391.88 290.68

ANNEXED TO AND FORMING PART OF PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2004





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SCHEDULE P - ACCOUNTING POLICIES & NOTES TO ACCOUNTS

A. ACCOUNTING POLICIESSignificant accounting policies are summarized below:

1. Principles of consolidation:

The Consolidate Financial Statement relates to Dabur India Ltd. (the parent company) and Dabur Foods Ltd,( wholly owned subsidiary companyincorporated in India), Dabur Overseas Ltd., Dabur International Limited (both wholly owned subsidiary companies incorporated in British VirginIslands and Isle of MAN respectively), Dabur Nepal Pvt Limited ( a subsidiary body corporate incorporated in Nepal, the extent of holding ofparent company being 79.96%), Pasadensa Foods Limited (a wholly owned subsidiary company incorporated in India , 100% stake where in isheld by Dabur Foods Limited ), Dabur Egypt Ltd. (a wholly owned subsidiary body corporate incorporated in Egypt, 76% & 24% of stake whereinare held by Dabur Overseas Ltd and Dabur International Limited), Asian Consumercare Pvt Ltd ( a subsidiary company incorporated in Bangladesh76% stake wherein is held by Dabur International Limited ) and WeikField Interanational (UAE) (a subsidiary body corporate incorporated inUAE, 38.41% stake where in is held by Dabur International Limited and subsidiary status thereon been achieved as discussed in note no 5 ofSchedule P)

The consolidated financial statements have been prepared on the basis of AS-21, issued by ICAI read with the following basic assumptions :

I. The financial statements of the parent company and its subsidiary companies have been combined on a line-by-line basis by addingtogether the book values of like items of assets, liabilities, income and expenses, after fully eliminating intra-group balances and intra-grouptransactions and resulting in unrealized profits or losses.

Investments of parent company in subsidiaries are eliminated against respective proportionate stake of parent company therein on therespective dates when such investments were made by way of crediting the difference of the two in terms of aggregate in capital reserveexcept for DNPL where the same is adjusted against share premium account and for Dabur International Limited and WeikField International(U.A.E) Ltd the same have been debited to goodwill .

In respect of foreign subsidiaries, rise in the value of stake of parent company in terms of reported currency upto the date of commercialproduction (i.e. the date, their assets were due for capitalization) on account of exchange fluctuation has been credited to capital reserve.Subsequent generation of reserve other than that of the nature of capital reserve including gain/ loss arising on account of translating thetransactions of the year, year-end assets and liabilities of the foreign subsidiaries for the purpose of consolidating with parent company’sassets at exchange rates ruling on year-end-date has been recognized as reserve specifically earmarked for the purpose.

II The consolidated financial statements are prepared by adopting uniform accounting policies for like transactions and other events in similarcircumstances and are presented to the extent possible, in the same manner as the parent company’s separate financial statements unlessstated otherwise.

III. Minority interest, where lying, in the net income of consolidated subsidiaries have been adjusted against the income of the group so as toarrive at net income attributable to the parent company. Minority interest consisting of equity attributable to them on the date suchinvestments were made by the parent company and movement in their equity since the date of parent subsidiary relationship has beendisclosed in the consolidated financial statement separately from liability and equity of shareholders of parent company.

IV Current assets/ liabilities, income and expenses of overseas subsidiaries have been translated in reporting currency in terms of exchangerates prevailing on year-end date.

Fixed assets of the overseas subsidiaries have been accounted for in terms of the exchange rate prevailing at the point of commencementof production of relevant subsidiaries pertaining to assets appearing since that point of time and at purchase price (including cost ofinstallation) for remaining fixed assets.

2. Accounting Convention:

The accounts have been prepared in accordance with the historical cost convention.

a Fixed Assets and Depreciation:

� Fixed assets are stated at recoverable value for assets impaired as per AS 28 issued by ICAI and at cost for other assets.

� Cost includes inward freight, duties, and taxes and expenses incidental to acquisition and installation.

� In respect of the parent company, Dabur Foods Ltd , Pasadensa Foods Limited & Asian Consumer care Pvt Ltd. depreciation on fixed assetshas been provided on written down value method at rates specified in schedule XIV of the companies Act, except for Baddi, Katni, 5/1Sahibabad Unit and Corporate Office of parent company,Dabur Egypt Limited , Dabur International Limited and Weik Field Limited wherethe depreciation have been provided on straight line method at the rates specified in aforesaid Schedule.

� The parent company identifies impairable assets at the year-end in term of para-5 to 13 of AS –28 issued by ICAI for the purpose of arrivingat impairment loss thereon being the difference between the book value and recoverable value of relevant assets unlike the subsidiaries.Said Impairment loss, when crystallizes, is charged against revenue of the year.

ANNEXED TO AND FORMING PART OF ACCOUNTS FOR THE YEAR ENDED 31ST MARCH 2004


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schedules

b Investments:

Investments, being long term in nature are held at cost. Provision will be made as and when deemed necessary under AS-13 issued by ICAI.

c. Inventories:

Stocks are valued at lower of cost or net realizable value. Basis of determination of cost remain as follows:

� Raw materials, Packing materials, Stores & Spares On FIFO Basis

� Work-in-process At cost of input plus overhead upto the stage of completion.

� Finished goods At cost of input plus appropriate Overhead

d. Research and Development Expenses:

Contributions towards scientific research expenses are charged to the Profit & Loss Account in the year in which the contribution is made.

e. Retirement Benefits:

Liabilities in respect of retirement benefits to employees are provided for as follows:

� leave salary of employees of the company on the basis of actuarial valuation.

� Gratuity liability on the basis of payment advice from Life Insurance Corporation of India from whom the gratuity trusts have taken theGroup Gratuity Insurance Policy or actuarial valuation/management estimate.

� Liability for superannuation fund on the basis of the premium paid to Life Insurance Corporation of India in respect of employees coveredunder the Superannuation Fund Policy.

f. Recognition of Income and Expenses:

� Sales and purchases are accounted for on the basis of passing of title to the goods.

� Sales comprise of sale price of goods including excise duty and sales tax but exclude discount.

� Exports Sales are accounted for on the basis of date of bill of lading.

� All items of incomes and expenses have been accounted for on accrual basis.

g. Deferred Taxation:

The liability of company is estimated considering the provision of the Income Tax, 1961. Deferred tax is recognized subject to the considerationof prudence, on time differences being the difference between taxable income and accounting income that originate in one period and capableof reversal in one or more subsequent periods has been considered for Dabur India Limited. For Dabur Egypt Limited,Dabur International Ltd(Erstwhile Redrock Limited),Dabur Nepal Pvt Ltd., Dabur Overseas Limited, WeikField Limited and Asian Consumercare Pvt Ltd. the same is notmandatorily applicable. In case of Dabur Foods Limited and Pasadensa Foods Limited ,considering carry forward loss in the books of bothcompanies, no deferred tax has been recognized on the asset balances thereof due to restriction to the effect imposed under para 17, AS-22issued by ICAI

h. Contingent Liabilities:

Disputed liabilities and claims against the company including claims raised by fiscal authorities (e.g. Sales Tax, Income Tax, Excise etc.), pending inappeal, are treated among contingent liabilities and are not provided for in the accounts but are disclosed by way of note in Notes to Accounts.

i. Foreign Currency Translation:

In respect of foreign branches/offices, revenue items have been converted at average of month end exchange rates during the year. Fixed assetshave been converted at the rates prevailing on dates of purchase. Assets & Liabilities other than fixed assets are converted at the year-endexchange rate. Exchange gain or loss arising out of above is charged to Profit & Loss Account.

Receivables/payables (excluding for fixed assets) in foreign currencies are translated at the exchange rate ruling at the year end date and theresultant gain or loss, is charged to the Profit & Loss Account. As regards payables in respect of fixed assets, refer to item (b) above.

Exchange Loss / Gain arising out of transactions of revenue nature are separately disclosed in notes to accounts

Capital as well as revenue implication of exchange fluctuation, charged to revenue, are disclosed in notes to accounts.

j. Employee Stock Option Purchase (ESOP):

Aggregate of quantum of option granted under the scheme in monetary term has been shown as Employees Stock Option Scheme outstandingin Reserve and Surplus head of the Balance Sheet by way of debiting deferred Employee Compensation under ESOP as per guideline to the effectissued by SEBI.

k. Miscellaneous Expenditure:

� Technical know-how fees paid to Technical Collaborators are being amortized over a period of six years.

� Strategic Management Consultancy Expenses are being amortized over a period of five years.

� Deferred Employees Compensation under ESOP are being amortized on straight line basis over vesting period.





B: NOTES TO ACCOUNTS1. Building constructed on leasehold land included in the value of building shown in Fixed Assets Schedule :

As at 31st March 2004 As at 31st March 2003

Cost/Revalued 5375.68 7368.20

Written Down 3759.93 5786.25

2 Two firms, one being a firm of Chartered Accountants and the other a firm of Chartered Engineers entrusted for the exercise of impairment ofassets of parent company have recommended against any further impairment in due cognizance of paragraphs 5 to 13 of AS –28 issued byICAI.Considering the above facts and as concluded by the firms :-

a) None of the assets qualify for the impairment loss for the year (Previous year Rs.4894.69) which was adjusted against the profit & lossaccount /opening reserve.

b) Impairment of assets contributed to write back of deferred tax with general reserve by Rs. Nil (Previous year Rs.1800.75) being the depreciationcomponent of deferred tax liability on impaired value of assets provided earlier against general reserve.

3. Investments held are both strategic and non-strategic. There is no decline in carrying cost of non-strategic investments. Remaining investmentsbeing strategically held, no provision has been deemed necessary in this connection in view of temporary nature of decline which are poised forrecovery in near future as assessed by the management based on techno economic evaluation of the future cash flow of investee companies.

4. During the year, parent company has disposed off Dabur Finance Limited (an erstwhile Wholly owned Subsidiary Company ) and the loss ofRs.84.51 sustained thereof has been charged to profit & loss account as per para 22 of AS-21 issued by ICAI.

5. (a) Following attainment of subsidiary status by Dabur International Limited (Erstwhile Redrock Ltd. )and Weikfield International UAE withinthe meaning of Section 4 of Companies Act, 1956, their accounts from respective applicable date have been consolidated with the Parentcompany’s accounts in terms of accounting policy No.1. This added /(reduced) various heads of accounts of consolidated financial statementsas follows :

Particulars Rs.

� Statutory Reserve 8.96

� Gross Block 2042.87

� Accumulated depreciation 1068.46

� Investments 414.53

� Inventories 850.79

� Sundry Debtors 1121.06

� Cash and Bank 15.20

� Loans & advances 113.93

� Current Liabilities and provision 861.61

� Secured Loans (taken) 1165.35

(b) Pharmaceutical Division of the parent Company has been demerged under banner of a separate Corporate entity namely Dabur Pharma Ltdwith effect from 1st April 2003 pursuant to the scheme of demerger to the effect approved by the Hon’ble High Court, Delhi on 17th Oct2003 and filling of certified copy of the order with the Registrar.

Consequent upon demerger of the pharmaceutical division, the following assets ,liabilities (including share holder’s fund represented byreserve) have been transferred to Dabur Pharma Ltd.

Liabilities Rs. in Lacs Assets Rs. in LacsShareholder’s Fund Fixed Assets 5574(General Reserve) 18618 Investment 7652Secured Loans 437 Current Assets 8854Unsecured Loans 2394 Loan & Advances 631Current Liabilities & Provisions 1324 Deferred Tax/Misc Expenditure 62

Dabur Pharma Ltd is to issue 1431.25 Lacs number of equity share of Re. 1/- each at par among members of the parent company, pro-ratain consideration of transfer of assets and liabilities in favour of Dabur Pharma Ltd which is still pending.

(c ) Considering what have been said in ‘a and ‘b’ above ,figures of previous year are not comparable with those of current year to this extent.

6. Contingent Liabilities:

i. Claims not acknowledged as debts:

a) In respect of civil suits filed against the company Rs. 267.05 (Previous year 168.42)

b) In respect of claims by employees Rs.0.50 (previous year 9.48)

(All amounts in Indian Rupees thousands, except share data)

schedules

C14


c) In respect of letters of credit Rs. 3881.94 (previous year 2125.88)

ii In respect of Bank Guarantees executed Rs .1916.20 (previous year 700.73)

iii In respect of Sales Tax under appeal Rs. 399.40 (previous year 434.79)

iv In respect of excise duty disputes pending with various judicial authorities Rs.2895.83 (previous year Rs.2941.63)

v In respect of Corporate Guarantees given by the Company Rs. 13891.74 (previous year Rs.7138.88)

vi In respect of Income tax under appeal Rs.462.29 (previous year 112.68)

vii Estimated Amount of contract remaining to be executed on capital Account Rs.1660.21 net of Advance (previous year Rs.486.80)

viii In respect of Bill Discounting of Company Rs.4142.80 (Previous year Rs.179.80)

ix In respect of Dividend Tax Rs.49.16 (previous year Rs.49.16)

7. The other Notes to Accounts containing inter-alia explanatory material except for quantative particulars pertaining to foreign subsidiary ,disclosureof which is not required under respective statute ,are disclosed with the accounts of different companies under consolidation.

8A. Related party Disclosures

Related party disclosures as required under AS 18 issued by the Institute of Chartered Accountants of India are given below:

(a) Name of related party and nature of related party relationship where control exists:- Nil

(b) Name of the related party and nature of related party relationship other than those referred to in (a) above in transaction with thecompany:-

(i) Joint venture/Joint venture partners:-

Dabon International Pvt. Ltd.

Mr. Rukma Rana, Joint venture partner in Dabur Nepal Pvt. Ltd.

Green Valley Products Pvt Ltd.

(ii) Key management personnel Relatives of Key Management Personnel(whole time directors/manager)a) Pradip Burman R C Burman

Chetan Burman

b) Dr. Anand Burman A.C. Burman

c) Amit Burman Asha Burman

d) P. D. Narang —

e ) Sunil Duggal —

f) Sanjay Sharma —

(iii) Associate Entities over which key management personnel are able to exercise significant influence

1. Malhotra Trading Co.

2. Jetways Travels Pvt. Ltd.

3. Gyan Enterprises Pvt Ltd.

4. Puran Associates Pvt Ltd

5. Acee Enterprises

6. Chowdry Associates

7. Miracle Commercial Enterprises Pvt Ltd

8. Wakarusa Laboratories Pvt Ltd

9. Dabur Research Foundation

10. Adbur Pvt. Ltd.

(iv) An enterprise owned by any directors of Dabur India Ltd., (even though he may not be director in that enterprise)

a) VIC Enterprises Pvt. Ltd

b) Ratna Commercial Enterprises Pvt. Ltd

(v) An enterprise owned by major shareholders

i) Milky Investment & Trading Co .

ii) Sanat Products Ltd

iii) Sahiwal Investment & Trading Co.

(vi) Associate Entities over which key management personnel are able to exercise significant influence


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1. Dabur Ayurvedic Speciality Limited

2. Williamsons India Pvt Ltd.

8B. Transaction with related parties (Consolidated) for the period 01.4.03 to 31.03.2004

ASSOCIATES KEY MGT. RELATIVES OF KEY TOTAL OUTSTANDING PERSONNEL MGT. PERSONNEL AS ON 31.03.2004

Purchases of Goods 1,882.15 0.00 0.00 1,882.15 54.10(1,701.38) 0.00 0.00 (1,701.38) (42.21)

Sale of Goods 101.37 0.00 0.00 101.37 12.37(71.48) 0.00 0.00 (71.48) (3.88)

Receiving of Services 7,475.95 0.00 0.00 7,475.95 896.89(2,758.96) 0.00 0.00 (2,758.96) (268.19)

Repayment of Loans Recd 17,729.28 0.00 0.00 17,729.28 0.00Loans Received 16,188.40 0.00 0.00 16,188.40 600.00

(3,779.63) 0.00 0.00 (3,779.63) (2,289.00)Rent Paid 6.00 10.35 0.00 16.35 0.00

(22.70) 0.00 0.00 (22.70) (12.56)Interest Recd On Loans Given 36.62 0.00 0.00 36.62 0.00

(51.04) (0.48) 0.00 (51.52) 0.00Remuneration/Exg./Pension 0.00 517.63 127.80 645.43 0.00

0.00 (457.84) (334.88) (792.72) 0.00Repayment of Loans Given (Instl.Recd) 185.07 0.00 0.00 185.07 113.34

(50.00) (0.66) 0.00 (50.66) (353.16)Interest Paid On Loan Recd 258.34 0.00 0.00 258.34 0.00

(368.33) 0.00 0.00 (368.33) 0.00Security deposit recd. (1.44) 0.00 0.00 (1.44) 0.00Donation Given 455.67 0.00 0.00 455.67 0.00

(1750.00) 0.00 0.00 (1750.00) 0.00Royalty Received 34.96 0.00 0.00 34.96 34.96

(106.21) 0.00 0.00 (106.21) (90.65)


schedules

9. Information pursuant to AS-17 issued by ICAI :

FMCG PHARMACEUTICALS FOODS ELIMINATIONS OTHERS Total Consolidated

Current Previous Current Previous Current Previous Current Previous Current Previous Current PreviousYear Year Year Year Year Year Year Year Year Year Year Year

RevenueExternal sales 119244.0 106090.8 0.00 18379.5 8497.9 7607.3 0.00 0.00 5214.16 5008.11 132956.0 137085.7Inter-segment salesTotal revenue 119244.0 106090.8 0.00 18379.5 8497.9 7607.3 0.00 0.00 5214.16 5008.11 132956.0 137085.7ResultSegment result 12871.4 9798.6 0.00 2069.9 506.0 354.1 0.00 0.00 566.14 1025.74 13943.6 13248.3Unallocated corporate expensesOperating profit 12871.4 9798.6 0.00 2069.9 506.0 354.1 0.00 0.00 566.14 1025.74 13943.6 13248.3Interest expense 1026.6 1531.3 0.00 515.8 375.6 313.8 0.00 0.00 125.96 251.81 1528.2 2612.6(Net of Interest Income)Income Tax(Current + Deferred) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1483.8 1332.6Profit from ordinary activities 11844.8 8267.2 0.00 1554.1 130.5 40.3 0.00 0.00 440.18 773.94 10931.6 9303.0Extraordinary loss: uninsuredearthquake damage to factoryNet profit 11844.8 8267.2 0.00 1554.1 130.5 40.3 0.00 0.00 440.18 773.94 10931.6 9303.0Other InformationSegment assets 58816.0 51664.3 0.00 22711.9 6673.4 4634.0 (4538.33) (3457.39) 8387.91 10059.41 69339.0 85612.2Unallocated corporate assets 2626.7 2469.9Total assets 58816.0 51664.3 0.00 22711.9 6673.4 4634.0 (4538.33) (3457.39) 8387.91 10059.41 71965.7 88082.1Segment liabilities 29910.7 28917.0 0.00 4120.4 6056.5 4976.9 (533.27) (433.56) 4338.28 5723.50 39772.2 43304.3Unallocated corporate liabilities 2808.7 2596.8Total liabilities 29910.7 28917.0 0.00 4120.4 6056.5 4976.9 (533.27) (433.56) 4338.28 5723.50 42580.8 45901.0Capital expenditure 3812.7 3397.8 0.00 1095.2 1803.0 21.33 5615.8 4514.3Depreciation 1891.3 2029.0 0.00 431.0 263.5 174.1 0.00 0.00 334.52 296.88 2489.3 2931.0Non-cash expenses other than 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 659.9 382.3depreciation

Secondary Segment

As the company also exports, the secondary segment for the company is based on the location of customers . Out of the total sales ofRs.132956.00(137085.75) , the export sales is of Rs.13495.50 (11646.4) and domestic sale is 119460.5 (125439.3)

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statement of cash flow(All amounts in Indian Rupees in lacs, except share data)

PURSUANT TO AS-3 ISSUED BY ICAI

A. CASH FLOW FROM OPERATING ACTIVITIESNet profit before tax and extra ordinary items 12,415.48 10,635.72ADD:Depreciation 2,489.27 2,931.03Miscellenous Exp. written off 391.88 290.68Miscellenous exp. written of (included in director remun.) 83.55 60.15Interest 1,528.17 4.492.87 2,612.61 5,894.48

16,908.35 16,530.19LESS:Dividend Received 83.62 3.13Profit on sale of investment 50.89 (11.26)Profit on sale of Assets 104.12 238.63 46.31 38.17

Operating profit before working capital changes 16,669.72 16492.01Working capital changesIncrease/(decrease) in inventories (2,020.50) 1,828.53Increase/(decrease) in Debtors (4,039.20) (364.65)Increase/(decrease) in trade payables (4,503.66) (2,867.11)

Increase/(decrease) in working capital

Cash generated from operating activities (10,563.36) (1,403.23)27,233.09 17,895.25

Interest paid 1,528.17 2,551.07Tax paid 881.04 884.10Income tax refund 0.00 (261.50)Corporate tax on dividend 547.95 0.00

2,957.16 3,173.67

CASH USED(-)/(+)GENERATED FOR OPERATING ACTIVITIES (A) 24,275.92 14,721.57

B. CASH FLOW FROM INVESTING ACTIVITIESPurchase of fixed assets (6443.66) (4,514.29)Sale of fixed assets 6547.78 7,856.79Purchases of investments including investment in subsidiaries (80,339.17) (20,043.88)Sale of investments 69,938.84 12,554.04Dividend Received 83.62 3.13

CASH USED(-)/(+)GENERATED FOR INVESTING ACTIVITIES (B) (10,212.59) (4,144.20)

C. CASH FLOW FROM FINANCING ACTIVITIESProceeds from share capital & premium 4.99 1.56Repayment (-)/proceeds (+) of long term secured liabilities 660.98 (1,020.67)Repayment (-)/proceeds (+) of short term loans (344.19) (752.69)Repayment (-)/proceeds (+) from deposit (2,135.03) (738.26)Repayment (-)/proceeds (+) from other unsecured loans (4,632.15) (6,481.63)Payment of other advances 2,285.65 568.51Payment of dividend (4,666.94) (1,491.70)

Cash used (-)/+(Generated) in financing activities (C) (8,826.69) (9,914.89)

Net increase(+)/decrease(-) in cash & cash equivalents (A+B+C) 5,236.64 662.49Cash and cash equivalents opening balance (1st April 2003) 2,566.30 3,567.06Cash and cash equivalents closing balance (31st March 2004) 2,020.95 4,229.55

Note : Opening Cash & Cash Equivalenets excludes Rs. 1663.26 being share ofPharmaceutical division being demerged on 1st April 2003 under bannerof a new corporate entity namely Dabur Pharma Ltd.

Dabur India Limited I ANNUAL REPORT I 2003-04

This report has been prepared for the purpose of annexing the Annual Accounts of theCompany with the Annual Accounts of Dabur India Ltd., the holding company. Thereport is based on the performance of the Company during the period 1st April 2003 to31st March 2004. The financial year of the Company will end on 16th July 2004 as perthe Nepali Law.

FINANCIAL RESULTSThe financial results for the Company’s working are as follows:

2003-04 2002-03

Turnover including other income 28492.98 28059.14Profit after depreciation and before provisions 2153.83 2311.63Less: Provision for housing facility 107.69 115.58Less: Provision for Bonus 204.61 219.60Less: Provision for Income Tax 395.93 454.58Net Profit after Tax 1445.60 1521.87Add: Balance in Profit & Loss account broughtforward from the previous year 4846.69 3766.19Profit available for appropriation 6282.77 5266.08Appropriation:Interim Dividend 319.40 319.40Transfer to General Reserve 100.00 100.00Balance carried to Balance Sheet 5863.37 4846.68

6282.77 5266.08OPERATIONSThe turnover of the company has increased by 1.55% over the previous year. The NetProfit after tax has reduced by 5.01% over the previous year due to lower contributionmargin and loss on extraordinary expense like write-off of non-moving assets, loss onsale of Govt. Bonds and loss on apiculture operations.

During the year your company has invested Rs 10.32 crore on account of fixed assets.Out of which major amount is towards expansion of Juice Plant, Pet Project and ERPimplementation. Your company has disposed off it’s fixed assets amounting Rs 8.47crore during the year which includes 500 ML Tetrapack Juice Plant, Land of Kathmanduand non-moving assets write-off.

During the year BaaN ERP package implemented successfully in factory at Birgunj andin corporate office at Kathmandu.

EXPANSION / MODERNIZATION PROGRAMDuring the year, your company has installed a new packing line of 125 ml. for fruitjuice. The new pack is a contemporary pack and will help your company to capturelarger market share for its brand.

INVESTMENT:During the year, your Company sold its investment in 5-year 5% Government bond atdiscount. The money realised has been used into Working Capital.

DIVIDENDAn interim dividend of Rs 40.00 per equity share was declared in March 2004.

AUDIT COMMITTEE:During the year your directors have constituted an Audit Committee comprising oftwo independent non-executive directors. The composition of the Audit Committee isas under:

1. Mr. P. D. Narang, Chairman2. Mr. Charanjit Mohan, Member3. Mr. T. K. Gupta, MemberThe terms of reference of the Audit Committee include to review internal audit reportsand to ensure internal control measures suggested by internal auditors and best marketpractices are implemented in your Company.

AUDITORSM/s J. P. Khandelwal & Company, Chartered Accounts has retired from your company.M/s T. R. Upadhya & Company has been appointed as new statutory auditors to holdoffice for the financial year 2060-61 (2003-04)

ACKNOWLEDGMENTThe directors wish to place on record their appreciation for the continued support andco-operation extended by Dabur India Ltd., Shareholders, Dealers, Customers and allthe employees of the company.

They also wish to place on record their sincere appreciation for the co-operation,assistance and guidance received from various officers of the His Majesty’s Governmentof Nepal and Government of India.

We have audited the attached Balance Sheet of Dabur Nepal Private Limited, as at 31March 2004, the Profit and Loss Account and the Cash Flow Statement for the yearended on that date, annexed thereto. These financial statements are the responsibilityof the Company’s Management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted inNepal. These standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free from material misstatement.An audit includes, examination on test basis, evidence supporting the amounts anddisclosures in the financial statement. An audit also includes assessing the accountingprinciples used and significant estimates made by the management, as well as evaluatingthe overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.

a) We have obtained information and explanations, which, to the best of ourknowledge and belief, were necessary for the purpose of our audit;

b) In our opinion, the Balance Sheet, Profit and Loss Account and the Cash FlowStatement dealt with by this report are in compliance with the provisions of theCompany Act 2053 and are in agreement with the books of account maintainedby the Company;

c) In our opinion, the Company has kept proper books of account as required by lawso far as appears from the examination of the books;

d) In our opinion, and to the best of our information and according to the explanationsgiven to us, the said accounts subject to effect of adjustments relating to writeoff of fixed assets referred to in Note 2(i) of Schedule O and read together withthe notes appearing thereon, give a true and fair view in conformity with theaccounting principles generally accepted in Nepal:i. In the case of the Balance Sheet, of the state of affairs of the Company as at

31 March 2004;ii. In the case of the Profit and Loss Account, of the profit for the year ended

on that date; andiii. In the case of the Cash Flow Statement, the cash flows for the year ended on

that date.e) To the best of our information and according to the explanation given to us, the

Board of Directors or any employees of the Company have not acted contrary tolegal provision relating to accounts or caused loss or damage to the Company orcommitted misappropriation so far as appears from our examination of the books.

For and on behalf of T R Upadhya & Co.Chartered Accountants

T R Upadhyay,Senior Partner

Kathmandu14th April 2004

On behalf of the Board of Directors

A.C. BurmanChairman

Kathmandu, Nepal14th April 2004

auditors' report

(All amounts in Nepalese Rupees in lacs, except share data)

directors' report TO THE MEMBERS OF I DABUR NEPAL PRIVATE LIMITED I

TO THE MEMBERS OF I DABUR NEPAL PRIVATE LIMITED I

S1

FINANCIALS I DABUR NEPAL PRIVATE LIMITED

Schedule as at 31st March 2004 as at 31st March 2003

SOURCES OF FUNDSShare holders’ Funds A(A) Share Capital 798.52 798.52(B) Reserves & Surplus 7122.64 7921.18 6005.98 6804.50Loan Funds B(A) Secured Loans 5921.78 7952.44

(B) Unsecured Loans 77.00 5998.78 4077.00 12029.44

Total 13919.96 18833.94

APPLICATION OF FUNDSFIXED ASSETS C(A) Gross Block 12789.46 12605.14(B) Less: Depreciation 5017.20 4235.54(C) Net Block 7772.26 8369.60Investments D - 540.26Current Assets, Loans & Advances E(A) Inventories 5318.12 5936.81(B) Sundry Debtors 1722.47 2121.03(C) Cash & Bank Balances 91.78 30.03(D) Loans And Advances 2001.66 1516.34(E) Deposits And Other Receivables 4112.81 4835.98

13246.84 14440.19Less : Current Liabilities & Provisions F(A) Liabilities 5410.23 3241.81

(B) Provisions 1753.73 1279.787163.96 4521.59

Net Current Assets 6082.88 9918.60Deferred Expenses G 64.82 5.48(To the extent not written off or adjusted)Total 13919.96 18833.94

Significant Accounting Policies Oand Notes to Accounts

Schedule A to G and O forms an integral part of this Balance Sheet

As per our report of even date attached

AS AT 31ST MARCH 2004


balance sheet

For Dabur Nepal Pvt. Ltd.

A.C. Burman Chairman

R.S. Rana Managing Director

G. Kashinath Chief Executive Officer

A. Mehra Chief Financial Controller & Company Secretary




S2


for the year ended for the year endedSchedule 31st March 2004 31st March 2003

INCOMESales H 28347.35 27961.79Other Income I 145.63 28492.98 97.35 28059.14ExpenditureCost Of Materials J 20383.69 19674.81Manufacturing Expenses K 1347.59 21731.28 1371.93 21046.74Gross Profit 6761.71 7012.40

Payments & Benefits to Employees L 806.77 690.77Administrative & Selling Expenses M 1445.90 1638.93Financial Expenses N 940.17 1234.36Amortisation of Miscellaneous Expenses 16.42 23.21Depreciation 1065.95 4275.21 1076.14 4663.41Net Profit Before Extraordinary Items 2,486.49 2348.99

Loss on Sale of Fixed Assets (Net) 10.74 3.89Loss on Sale of Bonds 120.48 33.47Assets not in Use /Written Off 91.77 -Loss on Apiculture Operation 109.67 -Net Profit Before Provisions 2153.83 2311.63

Provision For Housing 107.69 115.58Provision For Bonus 204.61 219.60Net Profit Before Taxation 1841.53 1976.45

Provision For Taxation 395.93 454.58Net Profit After Tax 1445.60 1521.86

Surplus B/F From Previous Year 4846.69 3766.19Income Tax Adjustment For Previous Years 9.52 21.98Profit Available For Appropriation 6282.77 5266.08

Appropriation / Allocation

General Reserve 100.00 100.00Interim Dividend 319.40 319.40Balance Carried Over to Balance Sheet 5863.37 4846.68

6282.77 5266.08Significant Accounting Policies and ONotes to Accounts

Schedule H to N and O forms an integral part of this Profit & Loss Account.


profit and loss account(All amounts in Nepalese Rupees in lacs, except share data)

FOR THE YEAR ENDED MARCH 31, 2004

For Dabur Nepal Pvt. Ltd.

A.C. Burman Chairman

R.S. Rana Managing Director

G. Kashinath Chief Executive Officer

A. Mehra Chief Financial Controller & Company Secretary




S3


as at 31.03.2004 as at 31.03.2003

as at 31.03.2004 as at 31.03.2003 as at 31.03.2004 as at 31.03.2003

SCHEDULE A - SHAREHOLDERS‘ FUND

Share Capital

Authorised1400000 Equity Shares Of Rs.100Each (Previous Year : 1400000Equity Shares Of Rs.100 Each) 1400.00 1400.00

Issued800000 Equity Shares Of Rs. 100Each (Previous Year : 800000Equity Shares Of Rs. 100 Each) 800.00 800.00

Subscribed & Paid Up798520 Equity Shares Of Rs.100Each Fully Paid Up (Previous Year :798520 Equity Shares Of Rs.100 Each) 798.52 798.52

Reserves & Surplus

Share Premium Reserve 600.00 600.00

General Reserve 659.30 559.30Profit And Loss Account 5863.36 4846.68

7122.66 6005.98

SCHEDULE B - LOAN FUNDSecured Loans

Working Capital LoansNabil Bank Ltd. 1513.76 3034.93Standard Chartered Bank Nepal Ltd. 2996.56 2172.98Nepal Sbi Bank Ltd. 796.70 1374.05

5307.02 6581.96

Interest Accrued And Due - 98.48Trust Receipt LoansNabil Bank Ltd. 126.84 290.34Nepal Sbi Bank Ltd. 202.65 -Standard Chartered Bank Nepal Ltd. - 647.03

329.49 937.37

(all the above loans are secured by execution of registered mortgage by deposit oftitle deeds of Company’s entire land situated at Rampur Tokani Bara District and theentire immovable properties, present & future, built thereon, and hypothecation &assignment of entire current assets, present and future, ranking Pari - Passu amongstNABIL Bank Ltd., Standard Chartered Bank Nepal Ltd. And Nepal SBI Bank Ltd., subjectto the priorities That banks extending term loans shall have first charge on the fixedassets and second charge on current assets while the participating banks extendingworking capital, overdraft and cash credit shall have Pari-Passu first charge on thecurrent assets and second charge on fixed assets ; and are further secured by a corporateguarantee by the company’s parent company, Dabur India Ltd., New Delhi, India and bypersonal guarantee by a Director of the Company.)

Other Long Term Loans

Acceptances (Against Tetrapak Machine) 285.27 334.63

5921.78 7952.44Unsecured Loans

Nabil Bank Ltd. - 937.50Standard Chartered Bank Nepal Ltd. - 1937.50Nepal SBI Bank Ltd. - 1125.00Others (From a Director) 77.00 77.00

77.00 4077.00

schedules

SCHEDULE C - FIXED ASSETS

NAME OF ASSETS Rate of GROSS BLOCK DEPRECIATION NET BLOCK

Depreciation As at Additions Adjustment As at As on For ther Adjustment As at As at As at% 31.3.03 31.3.04 31.3.03 Year 31.3.04 31.3.04 31.3.03

Land - 495.18 - 170.68 324.50 - - - - 324.50 495.18Land For Housing Colony (Brj) - 163.42 - - 163.42 - - - - 163.42 163.42Building, Roads & Bridges 5 2478.83 137.12 - 2615.95 480.18 116.39 - 596.57 2019.38 1998.65Worker’s Quarter 5 129.26 48.75 - 178.01 22.06 5.45 - 27.51 150.49 107.20Furniture & Fixture 25 455.18 12.65 1.54 466.29 161.28 75.26 0.91 235.63 230.66 293.90Laboratory Equipment 25 93.74 2.93 - 96.67 45.75 12.48 - 58.23 38.44 47.99Office Equipment 25 299.85 129.35 - 429.20 124.28 69.41 - 193.69 235.51 175.57Vehicles 20 330.27 47.62 71.28 306.61 139.73 42.39 44.49 137.63 168.98 190.54Electrical Installation 15 508.10 0.00 - 508.10 229.44 41.80 - 271.24 236.86 278.66Plant & Machinery 15 7181.01 698.12 604.28 7274.85 2920.35 675.96 238.89 3357.42 3917.43 4260.66Tools & Implements 15 276.75 13.72 - 290.47 112.47 26.81 - 139.28 151.19 164.28Capital Work In Progress - 193.55 135.39 193.55 135.39 - - - - 135.39 193.55(including capital advance aggregatingto Rs. 15.75 lacs)TOTAL 12605.14 1225.63 1041.33 12789.46 4235.54 1065.95 284.29 5017.20 7772.26 8369.60

SCHEDULE B - LOAN FUND (Contd.)

SCHEDULE D - INVESTMENTS5% Special Bond 2063 - 2.205% Special Bond 2064 - 538.06

- 540.26

SCHEDULE E - CURRENT ASSETS,LOANS AND ADVANCESInventoriesAs Taken,Valued And CertifiedBy The Management)- Raw Materials 2359.24 3001.22- Packing Materials 1583.50 1483.87- Stores and Spares 309.50 233.52- Stock in Process 105.73 139.41

- Finished Goods 241.94 506.36- Material in Transit 718.21 572.43

5318.12 5936.81Sundry Debtors(Unsecured, Considered Good)- Over Six Months 26.19 152.20- Others 1696.28 1968.83

1722.47 2121.03Cash & Bank Balances- Cash In Hand 1.89 3.56- Balance With Banks 89.89 26.47

91.78 30.03Loans & Advances(Unsecured considered good unlessotherwise stated)



S4


SCHEDULE - E (Contd.)Advances Recoverable in Cash OrKind or for Values to be Recovered- Advance to Employees 176.97 263.56- Advance to Suppliers 806.05 511.20- Margin Money with Bank 26.63 30.73- Prepaid Expenses 48.30 65.57- Advance Income Tax 697.65 390.91- Other Advances 246.06 254.37

2001.66 1516.34Deposits And Other Receivables- Security Deposit 18.61 31.06- VAT Deposit 590.52 1016.77- Custom duty Drawback Receivable 1903.30 1740.60- Local Development Tax Deposit 217.25 255.24- Excise Duty Deposit - 60.00- Bonds Receivable 19.30 86.98- Custom Duty Deposit &Special Duty Deposit 1332.78 1613.42- Insurance Claim 31.05 31.91

4112.81 4835.9813246.84 14440.19

SCHEDULE F - CURRENT LIABILITIES& PROVISIONSLiabilitiesCreditors for Goods 1720.22 1404.90Acceptances 3302.08 1098.31Creditors for Exps. & other Liabilities 368.55 598.12Interest Accrued Not Due - 107.65Advance against supplies & expenses 19.38 32.83

5410.23 3241.81ProvisionsProvision for Housing 592.36 484.67Provision for Bonus & Gratuity 150.53 182.30Provision for Earned Leave Salary 11.13 9.04Provision For Taxation 999.70 603.77

1753.72 1279.787163.96 4521.59

SCHEDULE - GDomestic Sales 2401.90 2173.97Export Sales 25945.45 25787.82

28347.35 27961.79

SCHEDULE H - OTHER INCOMEInterest Received 11.28 11.43Scrap Sales 95.58 81.16Dividend Received - 4.40Rent Received 1.82 0.36Exchange Gain (Net) 36.95 -

145.63 97.35SCHEDULE I - COST OF MATERIALSCost of Materials ConsumedRaw Material :Opening Stock 3573.65 3338.28Purchase 11816.81 14653.55Less :Closing Stock 2359.24 3573.65

Raw Material consumed 13031.22 14418.18

Packing Material :Opening Stock 1483.87 1183.25Purchase 7154.00 5454.20Less : Closing Stock 1583.50 1483.87Packing Material Consumed 7054.37 5153.58

SCHEDULE - I (Contd.)Work In Process :Opening Stock 139.41 235.58Less : Closing Stock 105.73 33.68 139.41 96.17

Cost of Materials Consumed 20119.27 19667.93Cost Of Goods SoldCost Of Materials Consumed 20119.27 19667.93Adjustment Of Finished Goods Stock :Opening Stock 506.36 513.24Less : Closing Stock 241.94 506.36

264.42 6.8820383.69 19674.81

SCHEDULE J - MFG. EXPESESPower & Fuel 704.70 650.77Repair & Maintenance (Machinery) 18.26 280.74Repair & Maintenance (Building) 195.39 50.22Repair & Maintenance (Others) 224.01 76.27Consumable Stores 124.30 123.71Custom Duty (Others) 11.64 61.23Manufacturing Expenses 30.42 77.03Laboratory Expenses 1.91 8.37Cartage & Coolie 36.96 36.03Apiculture Expenses - 7.56

1347.59 1371.93

SCHEDULE K - PAYMENTS &BENEFITS TO EMPLOYEESSalaries & Allowances 443.82 296.68Wages & Workmen Welfare 232.41 232.41Staff Welfare Expenses 72.00 102.72Gratuity 6.68 18.67Directors Remmuneration 18.06 18.48Employer’s Share To P.F. 33.80 21.81

806.77 690.77SCHEDULE L - ADMIN & SELLING EXP.

Postage, Telephone & Telegram 118.52 100.82Vehicle Running Expenses 60.45 96.67Travelling Expenses 160.67 154.11Legal & Professional Charges 49.58 37.26Insurance 87.79 48.03Auditor’s Remuneration :- Statutory Audit Fee 1.40 1.40- Tax Audit Fee 0.75 2.15 0.40 1.80Selling & Distribution Expenses 258.22 326.33Advertisement 224.77 288.89Royalty 112.42 112.12Rent 134.98 142.94Printing & Stationery 29.71 21.61Guest House Expenses 2.60 7.76Books & Periodicals 8.13 22.99Entertainment Expenses 14.06 16.38Donation & Subscription 42.75 34.09General Charges 10.93 27.37Watch & Ward Expenses 37.14 34.12Business Development Expenses 71.60 43.02Other Administrative Expenses 19.43 122.62

1445.90 1638.93SCHEDULE M - FINANCIAL EXP.InterestTerm Loan 239.43 534.38Working Capital Loan 570.04 809.47 528.53 1062.91Bank Charges 130.70 171.45

940.17 1231.92SCHEDULE N - DEFERRED EXP.Opening Balance 5.48 28.69Addition during the Year 75.76 -Less: Written Off during Year 16.42 23.21

64.82 5.48

schedules ANNEXED TO AND FORMING PART OF BALANCE SHEET/PROFIT & LOSS AS AT 31ST MARCH 2004


as at 31.03.2004 as at 31.03.2003

for the year ended for the year ended31st March, 2004 31st March, 2003

for the year ended for the year ended31st March, 2004 31st March, 2003

S3S5


SCHEDULE O - SIGNIFICANT ACCOUNTING POLICIES & NOTES TO ACCOUNTS1) Significant Accounting Policies

A) BASIS OF ACCOUNTING

Financial statements are prepared under the historical cost convention, inaccordance with Accounting Standards applicable in Nepal and the requirementsof Company Act, 2053.

The Company follows the mercantile system of accounting and recognizes incomeand expenditure on accrual basis except in case of significant uncertainties relatingto income.

B) FIXED ASSETS

Fixed Assets are recorded at cost less accumulated depreciation. The Companycapitalizes all direct costs relating to the acquisition and installation of Fixed Assets.

C) DEPRECIATION

Depreciation is provided on written down value on all Fixed Assets (except land)at the rates prescribed by the Income Tax Act 2058.

D) INVESTMENTS

Long term investments are valued at cost. Current investments arevalued at lower of cost or fair value as on the date of the BalanceSheet. The Company provides for diminution in value of investments, other thantemporary in nature, in the financial statements.

E) INVENTORIES

Inventories are valued at lower of cost or net realizable value using the followingbasis for determining costs:

Raw materials, Packing materials On FIFO basisand Stores and spares

Work in process At cost includingproportionate factory overheads

Finished stock At costs including proportionatefactory overheads

Consumable stores which are considered as cost items are charged off to theprofit and loss account in the year of purchase irrespective of the value involved.

F) CASH AND CASH EQUIVALENTS

For the purpose of the cash flow statement, cash and cash equivalents comprisecash in hand and deposits held in bank in current accounts.

G) RETIREMENT BENEFITS

Retirement benefits to employees comprise payments to gratuity fund, providentfund and leave salary. All contributions to the provident fund are charged toprofit & loss account as incurred and such contributions are transferred to anapproved Retirement Fund Trust.

Liabilities in respect of retirement benefits to employees are provided for as follows:

* Liabilities in respect of staff gratuity on actuarial valuation method.* Liabilities in respect of accumulated leave salary on accrual basis.

H) BORROWING COST

Borrowing costs that are attributable to acquisition of qualifying assets arecapitalized as part of the cost of such assets. All other borrowing costs are chargedto revenue.

I) REVENUE RECOGNITION

Sales are recognized on dispatch to customers and are recorded net of ValueAdded Tax. Export sales do not attract any Value Added Taxes.

J) STAFF HOUSING AND BONUS

Amount towards Staff Housing and Bonus have been provided as required underLabour Act and Bonus Act respectively.

K) FOREIGN CURRENCY TRANSACTIONS

Foreign currency transactions are accounted at exchange rates prevailing on thedate of the transactions. All foreign currency assets and liabilities, if any, as at theBalance Sheet date are restated at the applicable exchange rates prevailing atthat date.

All exchange differences in respect of foreign currency transactions are dealt within the Profit & Loss Account except those relating to acquisition of Fixed Assets,which are adjusted in the cost of the assets.

L) DEFERRED EXPENDITURE

License fees and other costs associated with implementing an ERP are amortizedover a period of five years.

2. Notes to AccountsA) CHANGE IN ACCOUNTING ESTIMATES

With effect from 1 April 2003, Dabur has changed the basis of valuation of staffgratuity liability to actuarial valuation from the accrual basis based on the LabourRules followed upto previous year. With this change, the staff gratuity liability asat 31 March 2004 is Rs 30.29 lacs against the liability of Rs 80.17 lacs recorded inthe books as per the basis of valuation followed up to the previous year. Theexcess provision of Rs 49.88 lacs will be continued to be reflected in the books tillthe liability as per actuarial valuation reaches such levels.

B) CONTINGENT LIABILITIES

There are contingent liabilities in respect of:

31.03.2004 31.03.20031. Unexpired Letters of Credit 2,462.49 1,721.242. Unexpired Bank Guarantees 1,817.43 137.443. Bill Discounted 379.48 287.684. Disputes regarding income tax liabilities for 1.69 1.69

addi. demand pending before Hon’ble Supreme Court5. Dividend tax in appeal 78.65 78.656. Capital commitments on account

of construction contracts net of advances 111.64 -4851.38 2,226.70

C) ACCEPTANCES

Acceptances denote liabilities for suppliers’ bills accepted/discounted.

D) ROYALTY

As per the Joint Venture Agreement, Royalty payable to Dabur India Ltd for theyear is Rs 112.42lacs (previous year Rs 112.12 lacs).

E) CUSTOM DUTY DRAWBACK RECEIVABLE

Custom duty paid on import of raw materials (incuding special taxes and localdevelopment taxes) is recoverable against export pursuant to statutory enactmentand accordingly the Company has made necessary applications to the appropriateauthorities for its refund as per the rules and waiting for final refund order.

Rs 1901.40 lacs (previous year Rs 1,740.60 lacs) is receivable against customsduty drawback including special taxes and local development taxes) from HMG/Nepal on the date of the Balance Sheet of which Rs 1105.64 lacs is outstandingfor more than a year.

F) STAFF HOUSING FUND

The Company has spent Rs 163.42(Previous year Rs 163.42 lacs) on purchase ofland for the staff housing colony and Rs 178.01 lacs (Previous year Rs 129.26lacs) on construction of worker’s quarters up to 31 March 2004 out of the totalprovision of of Rs 592.37 lacs (previous year Rs 484.67 lacs).

G) INTER COMPANY BALANCES

Debtors and loans and advances include Rs 955.39 lacs (Previous year Rs 904.95 lacs)recoverable from companies where the directors are interested. Of the above Rs 574.51lacs (Previous year Rs 395.62 lacs) are recoverable from Ms Machapuchre Herbals PvtLtd and Ms Machapuchre Enterprises. The Company considers these balances to berecoverable accordingly no provisions for non-recovery has been made.

H) NON OPERATING PLANT AND MACHINERY

Certain plant and machinery with a gross value of Rs. 165.85 lacs (written downvalue as at Rs. 47.15 lacs) are not in operation and kept separately and are intendedfor use on a need basis. To provide for the additional wear and tear for these idleplant and machineries, an accelerated rate of depreciation is charged.

I) WRITE-OFF OF ASSETS NOT IN USEFixed assets (plant and machineries) with a gross value of Rs. 429.46 lacs (writtendown value of Rs. 183.54 lacs) have been identified as obsolete and a resolutionwas passed in the meeting of the Board of Directors to write off the same coveringtwo fiscal years ending 16 July 2003 and 16 July 2004. Of the above, obsoleteplant and machinery with a gross value of Rs. 214.73 lacs (written down value ofRs. 91.77 lacs) was written off on 16 July 2003. The remaining plant and machinerywith a gross value of Rs. 214.73 lacs (writeen down value Rs. 91.77 lacs) will bewritten off in the fiscal year 2003-04.

schedules ANNEXED TO AND FORMING PART OF ACCOUNTS AS AT 31ST MARCH 2004


S6


J) OPERATIONS OF THE APICULTURE CENTREThe Company, from the current year, has converted the Apiculture Centre in Simaraas a separate profit centre. Accordingly, the net losses of Rs.109.67 lacs from theoperation of the Centre have been charged to profit and loss account against apolicy of consolidating the revenue and expenditure of the Centre into respectiveaccount heads in the earlier years. The details of the results of operation are asfollows:-Net loss from Apiculture Operations for the year Rs.37.90 lacsInventory write offs Rs.71.77 lacsTotal losses from Apiculture Operations Rs.109.67 lacsPrevious year’s figures have been regrouped / rearranged wherever necessary tofacilitate comparison. Figures are rounded off to the nearest of Rupees Lacs.

3.QUANTITATIVE DETAILS OF MAJOR PRODUCTS1.Production Unit 2003-04 2002-03Lal Dant Manjan Cases 341317 444358Binaca Tooth Powder Cases 2333 267Vatika Hair Oil Cases 333341 95437Vatika Shampoo Cases 301889 350095Amla Hair Oil Cases 204161 307098Baby Olive Oil Cases 2847 2045Special Hair Oil Cases 6792 6267Hajmola Tablet Cases 264873 246556Hajmola Candy Cases 10625 13351Real Fruit Juice Cases 1790636 1266261Glucose D Powder Cases 53749 70658Kshudhavardhak Churan MT 0 258Pachan Churan MT 328 217Chywanprash Prakshep MT 0 249DCP Mishran MT 260 138Dantmukta MT 2357 2654Taxin Resin MT 30 61Honey MT 85 674

2. Sales 2003-04 2002-03Lal Dant Manjan Cases 341859 3533.75 444107 3620.03Binanca Tooth Powder Cases 2802 24.89 0 0.00Vatika Hair Oil Cases 343752 3189.77 83309 660.71Vatika Shampoo Cases 316009 2728.30 336437 2791.36Anmol Shine Shampoo Cases 2332 48.23Amla Hair Oil Cases 205085 1884.80 310144 2788.61Special Hair Oil Cases 6286 83.81 6273 119.77Anmol Coconut Oil Cases 506 10.64 0.00 0.00Baby Olive Oil Cases 2805 44.87 2091 35.78Hajmola Tablet Cases 265067 2960.34 247288 3018.93Hajmola Candy Cases 10041 106.96 13474 146.41Real Fruit Juice Cases 1800324 7836.29 1256520 5751.86Glucose D Powder Cases 59253 668.33 65134 714.36Kshudhavardhak Churan MT 0 0.00 260 428.08Pachan Churan MT 316 392.38 226 325.58Chywanprash Prakshep MT 0 0.00 249 1395.45DCP Mishran MT 258 1227.14 138 740.96Dantmukta MT 2356 2985.18 2654 3701.17Taxin Resin MT 14 143.05 64 603.15Honey MT 179 282.05 916 1077.04

3.Closing Stock 2003-04 2002-03Lal Dant Manjan Cases 2378 17.48 2920 21.23Binaca Tooth Powder Cases 0 0.00 469 3.88Vatika Hair Oil Cases 2520 19.49 12931 99.95Baby Olive Oil Cases 42 0.58 0.00 0.00Vatika Shampoo Cases 1709 10.48 15829 101.29Anmol Shine Shampoo Cases 859 7.19 0.00 0.00Amla Hair Oil Cases 1151 10.47 2075 19.27Special Hair Oil Cases 506 5.14 0.00 0.00Hajmola Tablet Cases 1485 12.00 1679 14.84Hajmola Candy Cases 584 5.07 0.00 0.00Real Fruit Juice Cases 1910 7.70 11598 43.17Glucose D Powder Cases 732 7.01 6236 59.76Kshudhavardhak Churan MT 0.00 0.00 0.00 0.17Pachan Churan MT 12.00 11.02 0.00 0.00CPP MT 0 0.00 0 0.00

DCP Mishran MT 2 4.70 0 0.00Dantmukta MT 1 1.10 0 0.00Taxin Resin MT 16.00 121.53 0.00 2.37Honey MT 1.00 0.99 95 103.97

CASH FLOW STATEMENT FOR THEYear Ended 31st March, 2004 2003-04 2002-03A.Cash flow from operating activitiesNet Profit as per P/L Account 1,841.53 1,976.45Add :Depreciation 1,065.95 1,076.14Amortisation of MiscellaneousExpenses 16.42 23.21Interest 809.47 1,062.91Fixed Assets Written Off 91.77 -Loss on Sale of Assets 10.74 3.89Loss on Sale of Bonds 120.48 2,114.83 33.47 2,199.62Less :Dividend Received - (4.40)Interest Received (11.28) (11.43)Rent Received (1.82) (13.10) (0.36) (16.19)

Operating Profit Before WorkingCapital Changes 3,943.26 4,159.88Working Capital Changes(Increase)/Decrease in Inventories 618.69 (409.29)(Increase)/Decrease in Debtors 398.56 (155.25)(Increase)/Decrease in Loans& Advances (178.58) (189.72)(Increase)/Decrease in Deposits& Receivables 723.17 (1,002.04)(Decrease)/Increase in Liabilities 2,425.28 (366.58)(Decrease)/Increase in Provisions 78.01 126.45Increase In Working Capital 4,065.13 (1,996.43)Cash Generated From Operation 8,008.39 2,163.45Interest Paid (1,002.48) (1,001.21)Advance Tax Paid (306.74) (325.55)Income Tax Adjusted for Previous Years (9.52) -Net Cash Generated FromOperating Activities (A) 6,689.65 836.69

B. Cash Flow From Investing ActivitiesPurchase of Fixed Assets (1,032.10) (1,144.11)Deferred Revenue Expenses (75.76) -Sales of Investments 419.78 (462.27)Sale of Fixed Assets 460.98 7.62Rent Received 1.82 0.36Dividend Received - 4.40Cash Outflow From Investing Activities (225.28) (1,594.00)C. Cash Flow From Financing ActivitiesPayment of Working Capital Loans (1,373.42) 1,518.01Repayment of Term Loans to Banks (607.88) (141.60)Repayment of Unsecured Loans to Banks (4,000.00) (262.50)Defferred Financing From Supplier (49.36) (118.83)Payment of Dividend (364.23) (242.75)Tax on Dividend (19.01) (12.78)Interest Received 11.28 11.43Cash Flow Financing Activities (6,402.62) 750.98Net Increase in Cash Inflow 61.75 (6.33)Opening Cash & Bank Balances 30.03 36.36Closing Cash & Bank Balances 91.78 30.03

Schedule A to O forms an integral part of this cash flow statement.


schedules & cashflow ANNEXED TO AND FORMING PART OF ACCOUNTS AS AT 31ST MARCH 2004

(All amounts in Nepalese Rupees in lacs, except quantity)

For Dabur Nepal Pvt. Ltd.A.C. Burman ChairmanR.S. Rana Managing DirectorG. Kashinath Chief Executive OfficerA. Mehra Chief Financial Controller

& Company Secretary

For and on behalf of T R Upadhya & Co.Chartered AccountantsT R Upadhyay,Senior PartnerKathmandu14th April 2004

S7

(All amounts in USD, except share data)

The Directors present their report together with the audited accounts of the Com-pany for the year ended 31 March 2004.

Principal Activity

The Company is engaged in trading activities and acted as an investment holdingcompany.

Financial Results

The results for the year and the state of affairs of the Company as at 31 March 2004are set out in the accounts.

Dividend

The directors have not recommended any payment of final dividend in respect ofthe year ended 31 March 2004 (2003: final dividend of USD2 per share).

Directors

The Directors who held office during the year and up to the date of this report wereas follows:

Sidharth C. BurmanAnand C. BurmanAshok Chand BurmanTristan Company Limited - appointed on 6 June 2003*Seng Sze Ka Mee, Natalia - resigned on 6 June 2003Lo Yee Har, Susan - resigned on 6 June 2003 (alternate director of *)Tsang Siu Mei, Shirley - resigned on 6 June 2003 (alternate director of*)

In accordance with the Company’s Articles of Association, all Directors continuedto hold their office.

Directors’ Interest in Contracts

No contracts of significance in relation to the company’s business to which theCompany, its holding company or its subsidiaries was a party and in which a direc-tor had a material interest subsisted at the end of the year or at any time during theyear.

At no time during the year was the Company, its holding company or its subsidiar-ies a party to any arrangements to enable the Directors of the Company to acquirebenefits by means of acquisition of shares in or debentures of the Company or anyother body corporate.

Auditors

A resolution to reappoint the retiring auditors, Messrs K. L. Poon & Co., will be put atthe annual general meeting.

Subsidiaries

The audited accounts together with Directors’ Report of Dabur Egypt Limited isannexed to the accounts of the Company. Particulars as required under Section212 of the Companies Act are also appended.

ANNEXURE TO DIRECTORS’ REPORT

Statement pursuant to section 212 of the Companies Act, 1956 relating to Subsid-iary Companies

1. Name of the subsidiaries Dabur Egypt Limited2. Holding Company’s Interest 3,998 equity shares of

US$100 each fully paid up3. Extent of Holding 76%4. Net aggregate amount of

subsidiaries’ profits/(losses)not dealt within the holdingCompany’s accounts

(i) For the financial period of US$(44,493)the subsidiaries ended on31 March 2004

(ii) For the previous financial US$114,712period of the subsidiariessince they became theholding Company’ssubsidiaries

5. Net aggregate amount ofsubsidiaries’ profits/(losses)dealt within the holdingCompany’s accounts

(i) For the financial period of US$ Nilthe subsidiaries ended on31 March 2004

(ii) For the previous financial US$419,760period of the subsidiariessince they became theholding company’ssubsidiaries

Anand C. Burman, Director

23 April 2004

S8 FINANCIALS I DABUR OVERSEAS LIMITED

We have audited the accounts which have been prepared in accordance with ac-counting principles generally accepted in Hong Kong.

Respective Responsibilities of Directors and Auditors

The Companies Ordinance requires the directors to prepare accounts which give atrue and fair view. In preparing accounts which give a true and fair view it isfundamental that appropriate accounting policies are selected and applied consis-tently.

It is our responsibility to form an independent opinion, based on our audit, onthose accounts and to report our opinion to you.

Basis of Opinion

We conducted our audit in accordance with Statements of Auditing Standards is-sued by the Hong Kong Society of Accountants. An audit includes examination, ona test basis, of evidence relevant to the amounts and disclosures in the accounts. Italso includes an assessment of the significant estimates and judgments made bythe directors in the preparation of the accounts, and of whether the accountingpolicies are appropriate to the Company’s circumstances, consistently applied andadequately disclosed.

We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us with sufficientevidence to give reasonable assurance as to whether the accounts are free frommaterial misstatement. In forming our opinion, we also evaluated the overall ad-equacy of the presentation of information in the accounts. We believe that ouraudit provides a reasonable basis for our opinion.

Opinion

In our opinion, the accounts give a true and fair view of the state of the Company’saffairs at 31 March 2004 and of its results for the year ended 31 March 2004 andhave been properly prepared in accordance with the disclosure requirements of theHong Kong Companies Ordinance.

K. L. Poon & Co.Certified Public Accountants

Hong Kong

23 April 2004

directors' report TO THE MEMBERS OF I DABUR OVERSEAS LIMITED I

auditors' report TO THE MEMBERS OF I DABUR OVERSEAS LIMITED I




balance sheet

Note 2004 2003

INVESTMENT IN A SUBSIDIARY 7 399,800 399,800

Current AssetsPrepayment and other receivable 16 1,671Dividend receivable - 39,980Cash at bank 107,510 134,743

107,526 176,394Current Liabilities

Accruals 3,001 2,435

Net Current Assets 104,525 173,959

Total Assets Less Current Liabilities 504,325 573,759

Financed by:Share capital 8 500,000 500,000Reserve 4,325 73,759

504,325 573,759

Approved by the Board of Directors on 23 April 2004.On behalf of the Board

Anand C. BurmanDirector

profit & loss account

Note 2004 2003

Turnover 2 - -Other revenue 2 248 40,500

Total income 248 40,500Operating (loss)/profit before finance cost 3 (9,434) 31,380

Finance cost - -

(Loss)/profit before taxation (9,434) 31,380Taxation 5 - -

(Loss)/profits after taxation (9,434) 31,380

FOR THE YEAR ENDED 31ST MARCH 2004


S9

notes to accounts ANNEXED TO AND FORMING PART OF ANNUAL ACCOUNTS AS AT 31ST MARCH 2004


STATEMENT OF CHANGES IN EQUITY

Share Retainedcapital profits Total

Balance as at 1 April 2002 500,000 142,379 642,379

Profit for the year - 31,380 31,380

Dividend paid - (100,000) (100,000)

Balance as at 31 March 2003 500,000 73,759 573,759

Balance as at 1 April 2003 500,000 73,759 573,759

Loss for the year - (9,434) (9,434)

500,000 64,325 564,325

Dividend paid - (60,000) (60,000)

Balance as at 31 March 2004 500,000 4,325 504,325

NOTES TO THE ACCOUNTS

1. Principal Accounting Policies

The financial statements have been prepared in accordance with generallyaccepted accounting principles in Hong Kong and with accountingstandards issued by the Hong Kong Society of Accountants.

(a) Revenue Recognition

Revenue from sales of goods is recognised on the transfer of risks andrewards of ownership which generally coincides with the time when thegoods are delivered to customers and the title has passed.

Interest income is recognised on a time proportion basis by reference tothe principal amounts outstanding and the interest rates applicable.

Dividend income from investments is recognised when the shareholders’rights to receive payment have been established.

(b) Subsidiaries

A subsidiary is a company in which the company, directly or indirectly,controls more than a half of the voting power or issued share capital, orcontrols the composition of the board of directors.

The investments in subsidiaries are stated at cost less provision, forpermanent diminution in value. The results of subsidiaries are accountedfor by the company on the basis of dividends received and receivable.

Group accounts are not prepared because the Company itself, in theopinion of the directors is a wholly owned subsidiary of Dabur India Limitedas at the balance sheet date.

(c) Translation of Foreign Currencies

Transactions in foreign currencies are translated at exchange rates rulingat the transactions dates. Monetary assets and liabilities denominated inforeign currencies at the balance sheet date are translated at rates ofexchange ruling at the balance sheet date. Exchange differences arisingare included in the profit and loss account.

(d) Provisions and Contingent Liabilities

Provisions are recognised when the Company has a present legal orconstructive obligation as result of past events, it is probable that anoutflow of resources will be required to settle the obligation, and a reliableestimate of the amount can be made.

Where the Company expects a provision to be reimbursed, thereimbursement is recognised as a separate asset but only when thereimbursement is virtually certain.

2. Turnover and Revenue

Turnover comprises sales at invoiced value to customers. Total revenuesrecognised during the year are as follows:-

2004 2003

Turnover

Sales of goods - -

Other revenue

Dividend income from unlisted investments - 39,980

Interest income 248 520

248 40,500

3. Operating (Loss)/profit before finance cost

Operating (loss)/profit before finance cost isstated after crediting and chargingthe following:-

2004 2003

Turnover and other revenue as per note 2 248 40,500

Audit fee 1,026 1,026

Staff cost -

Depreciation - -

Exchange loss 12 3

Other operating expenses 8,644 8,091

Total operating expenses 9,682 9,120

(Loss)/profit from operating activities (9,434) 31,380

4. Directors' remuneration

Remuneration of directors disclosedpursuant to section 161 of the CompaniesOrdinance is as follows:-

2004 2003

As director - -

For management - -

5. Taxation

No provision for Hong Kong profits taxhas been provided as, in the opinion ofdirectors, there was no assessableprofits earned in or derived from HongKong by the Company during the yearand the Company will not subject to anyoversea profits tax.

6. Dividend2004 2003

a. Dividend attributable to the year

Final dividend proposed after the balance - 60,000sheet of USD Nil per ordinary share(2003: USD1.2)

The final dividend proposed after the balance sheet date has not beenrecognized as a liability at the balance sheet date.

b. Dividends attributable to the previous financial year, approved and paidduring the year

Final dividend in respect of the previousfinancial year, approved and paid 60,000 100,000duringthe year, of USD1.2 per share(2003: USD2)

S10 FINANCIALS I DABUR OVERSEAS LIMITED


notes to accounts ANNEXED TO AND FORMING PART OF ANNUAL ACCOUNTS AS AT 31ST MARCH 2004


7. Investment in a subsidiary

2004 2003

Unlisted shares, at cost 399,800 399,800

Details of the Company’s subsidiary as at 31 March 2004 are as follows:-

Country of Percentage Nature ofIncorporation of Holding Business

2004 2003

Dabur Egypt Limited Egypt 76% 76% Manufacturingand trading

of sundryMerchandise

The aggregate amount of the subsidiary companies’ profits/(losses) not being dealtwith or dealt with in the Company’s accounts are as follows:-

Current Prior yearyear since acquisition Total

Dealt with in the Company’sfinancial statement - 419,760 419,760

Not being dealt with in the

Company’s financial

statement ( 44,493) 114,712 70,219

S11

8. Share Capital

2004 2003

Authorised:-

200,000 ordinary shares of US$10 each 2,000,000 2,000,000

Issued and fully paid:-

50,000 ordinary shares of US$10 each 500,000 500,000

There was no movement of share capital taken place during the year.

9. Ultimate holding company

The directors consider the ultimate holding company at 31 March 2004 to beDabur India Limited.

10. These notes form an integeral part of these accounts..

� �

FINANCIALS I DABUR FOODS LIMITED

directors' report TO THE MEMBERS OF I DABUR FOODS LIMITED I

Your Directors have pleasure in presenting the 7th Annual Report on the business andoperations of the Company together with the audited statement of accounts for theyear ended 31st March, 2004.

Business Performance and Financial Results:

Your Company registered a landmark performance in 2003-04 by earning profit forthe first time in its history. The business recorded a turnover of Rs.87 crores registeringa growth of 26% and profit after tax of Rs.1.46 crores. The key highlights of performanceare:

· Real Juice strengthened market leadership position.

· Strong growth established by the food services segment.

· The line extensions of Hommade also continued to drive the growth.

Real continued to grow at an aggressive pace – outperforming the market growth andstrengthening the brands leadership position. Your brands 3 pronged strategy supportedby new advertising concept of “Taste like eating a fruit” and innovative sales promotionshas yielded good results. Real also extended it’s range of variants to 9 by introducingCranberry Juice – thereby offering its consumers by far the largest range of juices. Toappeal to kids in a meaningful manner, the brand offers School packs under its newline extension – “Real Junior”. The brand has also established a school education programunder the banner of “5-a-day” to promote good eating habits among children.

The key growth driver in the equity has been Real Activ. A new TV Advertising combinedwith corporate sampling promotion established a 66% brand growth. The brandextended its range by launching an innovative variant – “Orange Carrot”. The conceptand the product had received an enthusiastic acceptance by the consumers.

Besides the retails channel, the product is extensively distributed in the food serviceschannel, dominating this channel by making it available in the best hotels, restaurants,airlines and several institutions like business houses to Indian army. In the current year,the business established a record growth on account of the bumper tourist arrival intoIndia.

In the national beverages seminar held by Tetrapak, the brand was awarded the fastestgrowing brand in the fruit based beverages market.

The line extensions on Hommade continued to sustain the growths at 27%. Both CoconutMilk and Tomato Puree grew aggressively.

Your company continued its initiatives to reduce cost of operations and improve theoverall margins. Given the low operating margins in the food processing industry, yourcompany had decided to pursue backward integration by setting up a state of the artmulti-fruit processing plant in Siliguri, West Bengal under the name of its subsidiary –Pasadensa Foods Ltd. The project will not only improve the operating margins but alsoprovide a new line of revenue through exports of bulk Indian fruit pulp like Mango,Pineapple, and Guava.

During the year your Company had acquired 100% equity stake in M/s PasadensaFoods Limited and accordingly the said Company had become a wholly owned subsidiaryof Dabur Foods Limited in terms of section 4 of the Companies Act, 1956

Financial Results Amt. (Rs. in lacs)

Turnover 8725.15

Profit before Tax 158.52

Less: Provision for Tax- current 12.25

Profit after Tax 146.27

Loss Brought Forward (2153.09)

Balance carried over to Balance Sheet (2006.82)

Director's Responsibility Statement:

Pursuant to the requirement under section 217(2AA) of the Companies Act, 1956 withrespect to Directors’ Responsibility Statement, it is hereby confirmed:

i) that in the preparation of the annual accounts for the financial year ended 31st

March, 2004, the applicable accounting standards had been followed along withproper explanation relating to material departures;

ii) that the directors had selected such accounting policies and applied themconsistently and made judgements and estimates that were reasonable and prudentso as to give a true and fair view of the state of affairs of the Company at the endof the financial year and of the profit or loss of the Company for the year underreview;

iii) that the directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the CompaniesAct, 1956 for safeguarding the assets of the Company and for preventing anddetecting fraud and other irregularities.

iv) that the directors had prepared the accounts for the financial year ended 31st

March, 2004 on a ‘going concern’ basis.

Audit Committee:

The Audit Committee comprises of Mr. V C Burman, Mr. Amit Burman and Mr. P DNarang, all non-executive Directors with Mr. V C Burman as its chairman. The role,terms of reference and the authority and powers of the Audit Committee are inconformity with the requirements of the Companies Act, 1956.

Remuneration Committee:

The remuneration Committee comprises of Mr. Charanjit Mohan, Mr. Sunil Duggal andMr. P D Narang, all non-executive independent Directors. The role, terms of referenceand the authority and powers of the Remuneration Committee are in conformity withthe requirements of the Companies Act, 1956.

Directors:

In accordance with the provisions of the Companies Act, 1956 and the Articles ofAssociation of the Company, Mr. V C Burman and Mr. Sunil Duggal, Directors retire byrotation and being eligible offer themselves for re-appointment.

Auditors:

M/s. Jhalani & Company, Chartered Accountants, New Delhi, Statutory Auditors of theCompany will retire at the ensuing Annual General Meeting and being eligible, offerthemselves for reappointment.

Energy Conservation and Technology Absorption:

The Company has no manufacturing unit, hence the requirement relating toconservation of energy and Technology Absorption are not applicable.

Foreign Exchange Earnings and Outgoing:

In terms of exports, the brand Real has been given an opportunity to test market inWoolworth Australia. Based on the response, the Company will further evaluateexpansion into other retail chains and states in Australia. Further exports to Asiancountries is envisaged for expanding the presence of Real Juices and also evaluateoptions for other ethnic food products under the Hommade brand.

The Company had the following Foreign Exchange earnings and outgo during the year.

Outgoings by way of import of Raw materials. Rs.4370460/-

Earnings on account of exports Rs.2130750/-

Fixed Deposits:

The Company has not accepted Fixed Deposits pursuant to section 58A of the CompaniesAct, 1956.

Subsidiaries:

As required by the provisions of section 212 of the Companies Act, 1956, the auditedaccounts together with Directors Report and Auditors Report of the subsidiary Companyare appended and forms part of the Annual Report. The statement pursuant to Section212 of the Act is attached with the Annual Accounts and forms part of this report.

Particulars of Employees:

During the year under review no employee of the Company was in receipt ofremuneration exceeding the limits as laid down under section 217 (2A) of the CompaniesAct, 1956. Therefore, the information as required under section 217(2A) of the Act,read with the Companies (Particulars of Employees) Rules, 1975 is not being given.

Acknowledgement:

Your Directors would like to express their grateful appreciation for the continued supportand co-operation received from the Customers, Dealers, Bankers, Governmentauthorities and shareholders. They also wish to place on record their appreciation forthe dedication and hard work put in by the employees of the Company at all levels.


Amit Burman, DirectorP D Narang, Director

New Delhi28th April, 2004

S12


auditors' report

We have audited the attached Balance Sheet of Dabur Foods Limited as at 31st March,2004 and also the Profit and Loss Account and the Cash Flow Statement for the yearended as on that date annexed thereto. These financial statements are the responsibilityof the Company’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.

We conducted our audit in accordance with auditing standard generally accepted inIndia. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free on material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluatingthe overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.

1. As required by the Companies (Auditor’s Report) Order, 2003 issued by the CentralGovernment in terms of Section 227(4A) of the Companies Act, 1956, we give ourcomments in the annexure on the matters specified in the order to the extentapplicable to the Company.

Further to our comments in the Annexure referred to above, we report that:

2 (a) we have obtained all the information and explanations, which to the best ofour knowledge and belief were necessary for the purpose of our audit.

(b) In our opinion, proper books of accounts as required by law have been keptby the Company so far as appears from our examination of those books.

(c) The Balance Sheet and Profit and Loss Account dealt with by this report arein agreement with the books of accounts.

(d) In our opinion, the Profit & Loss Account and the Balance Sheet dealt with

by this report comply with the mandatory accounting standards, to the extentapplicable, as specified by the Institute of Chartered Accountants of Indiareferred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

(e) On the basis of written representation received from the directors as on 31st

march, 2004 and taken on record by the Board of Directors, we report thatnone of the Directors is disqualified as on 31st march, 2004 from beingappointed as a Director in terms of Clause (g) of sub-section (1) of Section274 of the Companies Act, 1956.

3. In our opinion and to the best of our information and according to the explanationsgiven to us, the accounts give the information required by Companies Act, 1956,in the manner so required and give true and fair view in conformity with theaccounting principles generally accepted in India:

(i) In the case of Balance Sheet, of the state of affairs of the Company as at 31stMarch, 2004; and

(ii) In the case of Profit and Loss account, of the profit for the year ended on that date.

(iii) In the case of Cash Flow statement, of the cash flow for the year ended on thatdate.

For Jhalani & Co.Chartered Accountants

V.K. JhalaniPartnerMembership No. 82691

New Delhi28th April 2004

TO THE MEMBERS OF I DABUR FOODS LIMITED I

ANNEXURE TO THE AUDITORS’ REPORT(As referred in paragraph 1 of our report to the members of DABUR FOODS LIMITED onthe accounts for the year ended 31st March 2004)(i) The Company has maintained proper records showing full particulars including

quantitative details and situation of fixed assets. As explained to us, the fixedassets of the company have been physically verified by the management duringthe year. We have been explained that, no material discrepancies were noticedon such verification as compared to book records.

(ii) The company has not disposed off any-substantial part of its fixed assets, whichhas any effect on its going concern during the year.

(iii) (a) We have been explained that the inventory with the company exceptlying with the outside parties has been physically verified by themanagement at the year end;

(b) In our opinion the procedures of physical verification of inventoryfollowed by the management are reasonable and adequate in relation tothe size of the company and the nature of its business;

(c) In our opinion the company is maintaining proper records of inventoryand according to the information and explanations given to us, nomaterial discrepancies were noticed on physical verification of theInventory;

(iv) As per information and explanations provided to us, during the year companyhas granted unsecured loans aggregating Rs.12, 00,00,000/- to Pasadensa FoodsLimited, a wholly owned subsidiary company, party covered in the registermaintained under Section 301 of the Companies Act, 1956. However, there wasno outstanding as on 31st March 2004, from Pasadensa Foods Ltd, on accountof unsecured loans.The company has not taken any unsecured loans during the year from partiescovered in the register maintained under Section 301 of the Companies Act,1956.

(v) According to the explanations given to us, the rate of interest and other termsand conditions of the aforesaid unsecured loans given by the company are notprima facie prejudicial to the interest of the company;

(vi) In our opinion and according to the information and explanations given to us,the payment of principle and interest thereon are also regular;

(vii) In our opinion and according to the information and explanations given to us,there are adequate internal control procedures commensurate with the size ofthe Company and the nature of its business, for the purchase of inventory andfixed assets and for the sale of goods.

(viii) As per information and explanations given to us all the transactions that needto be entered in to a register maintained under Section 301 of the CompaniesAct, 1956 are being so entered.

(ix) In our opinion and according to the information and explanations given to us

aforesaid transactions exceeding the aggregate amount of Rs. five lakh in respectof each party made during the year, have been made at prices, which as informedto us by the management are not comparable as these are of specialized nature.

(x) The Company has not accepted any deposits from the public under Section 58Aand 58AA of the Companies Act, 1956.

(xi) The internal audit is handled by internal auditors appointed by its holdingcompany and the same is commensurate with its size and nature of its business.

(xii) Since company does not carry out any manufacturing activity of its own, it isnot required to maintain cost records under Sec.209 (1) (d) of the CompaniesAct, 1956.

(xiii) The company has been regular in depositing the undisputed statutory duesincluding Provident Fund, Investor Education and Protection Fund, Employees’State Insurance, Income-tax, Sales-tax, Wealth Tax, Custom Duty, Excise Duty,cess and any other statutory dues with the appropriate authorities. There wasno undisputed amount outstanding at the year end for a period more then sixmonths from the date they become payable.

(xiv) We have been explained that there are no crystallized dues of Sales tax/Incometax/ custom/wealth tax/excise duty/cess which have not been deposited onaccount of any dispute.

(xv) We have explained that the company has not made any default in the repaymentof dues to the financial institutions and banks.

(xvi) The company has not granted any loans on the basis of security by way ofpledge of shares, debentures and other securities.

(xvii) During the year the company has not given any guarantee for loans taken byothers from bank.

(xviii) According to the information and explanations given to us the funds raised onlong term basis have not been used for short term investment and vice versa.

(xix) To the best of our information and knowledge and as per records verified by usthe company has applied its term loans for the purpose for which the loanswere obtained.

(xx) Other Clauses of the Order were not applicable to the Company for the yearunder report.

For Jhalani & Co.Chartered Accountants

V.K. JhalaniPartnerMembership No. 82691


S13




SOURCES OF FUNDS :Shareholders' Funds:A) Share Capital A 100,000.00 100,000.00 100,000.00 100,000.00Loan Funds:A) Secured Loans B 62,500.00 20,000.00B) Unsecured Loans C 183,645.70 246,359.50

246,145.70 266,359.50346,145.70 366,359.50

APPLICATION OF FUNDS :Fixed Assets:(A) Gross Block E 738.86 135.76(B) Less : Depreciation 152.08 54.03(C) Net Block 586.78 81.73

Investments F 50,520.75 20.00Current Assets, Loans and Advances: GA) Inventories 50,413.81 59,897.79B) Sundry Debtors 48,482.82 73,524.44C) Cash & Bank Balances 45,512.30 36,569.92D) Loans & Advances 10,061.24 10,038.57

154,470.17 180,030.71Less: Current Liabilities and Provisions:

DA) Liabilities 57,331.40 39,182.88B) Provisions 2,783.40 1,369.87

60,114.80 40,552.75Net Current Assets 94,355.36 139,477.96Miscellaneous Expenditure H 0.00 11,469.82(To the extent not written off or adjusted)Profit & Loss 200,682.81 215,309.99Notes to accounts O

346,145.70 366,359.50

(All amounts in Indian Rupees in thousands, except share data)

balance sheet

Schedule for the year ended for the year ended31st March2004 31st March2003

Income : ISales less returns 857,980.40 691,469.22Other income 14,535.11 788.34

Total income 872,515.51 692,257.56

Expenditure :Cost of materials J 520,793.27 412,263.43Payments to and provisions for employees K 38,456.26 29,858.39Selling and administrative expenses L 265,996.70 228,852.73Financial expenses M 19,849.23 13,301.59Miscellaneous expenditure written off N 11,469.82 11,465.33Depreciation 98.05 28.53

Total expenditure 856,663.33 695,770.00

Balance being net profit/(loss) 15,852.18 (3,512.44)Loss brought forward (215,309.99) (211,797.55)

(199,457.81) (215,309.99)Provision for taxation - Current (1,225.00) 0.00Balance carried over to Balance Sheet (200,682.81) (215,309.99)


profit and loss account FOR THE YEAR ENDED 31ST MARCH, 2004

As per our report of even date attached For Dabur Foods Ltd.For Jhalani & Co. Amit Burman DirectorChartered Accountants P.D. Narang DirectorV.K. JhalaniPartner Neeraj Aggarwal Company SecretaryNew Delhi28th April, 2004

S14


as at 31.03.2004 as at 31.03.2003SCHEDULE A - SHARE CAPITAL

Authorised :10000000 Equity Shares of RS.10 each 100,000.00 100,000.00(Previous year 10000000 equity sharesof RS.10 )

100,000.00 100,000.00Issued and Subscribed:10000000 Equity Shares of RS.10 eachFully Called up 100,000.00 100,000.00(All the shares have been held by 100,000.00 100,000.00holding company, Dabur India Limitedand its nominees).

SCHEDULE B - SECURED LOANSTerm LoanShort term loans - fromHong-Kong & Shanghai Bank,New Delhi 62,500.00 20,000.00

Secured By :By way of first charge agst.hypothecation of revolving stocks,other movable assets and presentand future book debts.

62,500.00 20,000.00


schedules ANNEXED TO AND FORMING PART OF ANNUAL ACCOUNTS AS AT 31ST MARCH 2004

as at 31.03.2004 as at 31.03.2003SCHEDULE C - UNSECURED LOANS

Loan from body corporates 105,000.00 120,000.00Security deposit from dealers and others 251.16 3,702.79Temporary loans from Canara Bank 77,500.00 120,000.00(Guaranteed by holding company,Dabur India Limited)Book overdraft with current accountwith banks 894.54 2,656.71

183,645.70 246,359.50

SCHEDULE D - CURRENT LIABILITIES AND PROVISIONSA. Current Liabilities :

Amount Due to SSI units 157.00 0.00Creditors for Goods 4,221.37 1,648.32Creditors for Expenses andother Liabilities 46,786.66 29,967.27

51,165.03 31,615.59Amount due to holdingCompany 2,646.16 0.00Advances from customers 3,331.97 7,351.13Interest accured butnot due on loans 188.24 216.17

57,331.40 39,182.89B. Provisions :

For Taxation 1,225.00 0.00For leave salary 1,218.15 1,165.79For leave travel concession 340.25 204.08

60,114.80 40,552.76

SCHEDULE E - FIXED ASSETS

NAME OF ASSETS GROSS BLOCK DEPRECIATION NET BLOCK

As on Additions Adjustment As on As on For the year Adjustment As on As on As on1-Apr-03 During the Year 31-Mar-04 1-Apr-03 During the Year 31-Mar.04 31-Mar-04 31-Mar-03

Electrical Appliances 84.81 84.81 21.50 11.46 32.96 51.85 63.31Furniture & Fixtures 20.95 20.95 11.53 1.71 13.24 7.71 9.42Computers 30.00 30.00 21.00 3.60 24.60 5.40 9.00Vehicles 0.00 603.10 603.10 0.00 81.28 81.28 521.82 0.00

TOTAL 135.76 603.10 0.00 738.86 54.03 98.05 0.00 152.08 586.78 81.73

As On 31.03.2003 263.93 18.84 147.00 135.76 126.76 28.53 101.27 54.03 81.73 122.32

as at 31.03.2004 as at 31.03.2003

SCHEDULE F - INVESTMENTS (at cost)

Long term- Govt. Securities

(National saving certificates VIII series) 20.00 20.00

(Lodged with sales tax department)

Investment in trade subsidiary

Unquoted

Pasadensa foods Ltd. 50,000.75 0.00(49,90,000 equity shares allotted

during the year)

(10,000 equity shares purchased during

the year)

Share application money pending

Allotment 500.00 0.00

(with Pasadensa Foods Ltd) 50,520.75 20.00

as at 31.03.2004 as at 31.03.2003

SCHEDULE G - CURRENT ASSETS,LOANS & ADVANCES

A. Current Assets :Stock-in-Trade :(As taken, Valued andCertified by the Management)- Raw materials with processors 1,356.58 2,812.22- Packing materials with processors 3,338.68 5,363.49- Stock in process with processors 1,785.38 27.80- Finished goods 43,933.17 51,694.28

50,413.81 59,897.79Sundry debtors (Unsecured) :- Debts outstanding for aperiod exceeding six months :Considered good 3,178.89 4,745.00Considered doubtful - 0.00

3,178.89 4,745.00Less : Provision for Doubtful Debts - 0.00

3,178.89 4,745.00- Other Debts (Considered Good) 45,303.93 48,482.82 68,779.44 73,524.44

S15


SCHEDULE H - MISC.EXPENDITURE(to the extent not written off or adjusted)

Preliminary expenses 0.00 4.48

Less: amortised duringthe year 0.00 4.48

0.00 0.00

Deferred advertisement & publicity 11469.82 22930.67

Less: amortised during the year 11469.82 11460.85

0.00 11469.82

0.00 11469.82

for the year ended for the year ended 31st March, 2004 31st March, 2003

SCHEDULE I-SALES & OTHER INCOME

A. Sales :

Domestic sales less returns 834,705.92 666,727.7

Export sales 23,274.48 24,741.45

857,980.40 691,469.22

B. Other Income :

Premium on transfer of loan 13,200.00 0.00

Miscellaneous receipts 1,335.11 788.34

14,535.11 788.34

SCHEDULE J - COST OF MATERIALS

Raw materials consumed :

I) Opening stock 2,812.22 7,521.04

II) Add : purchases 24,772.01 20,358.01

27,584.23 27,879.05

III) Less : closing stock 1,356.58 26,227.65 2,812.22 25,066.83

Packing materials consumed :I) Opening stock 5,363.49 317.36

II) Add : Purchases 5,785.09 9,313.69

11,148.58 9,631.05

III) Less : Closing stock 3,338.68 7,809.90 5,363.49 4,267.56

Purchase of finished products 472,794.05 372,317.53

Processing charges 7,958.14 6,280.43

ANNEXED TO AND FORMING PART OF ANNUAL ACCOUNTS AS AT 31ST MARCH 2004


schedules

as at 31.03.2004 as at 31.03.2003SCHEDULE G-CURRENT ASSET, LOANS

& ADVANCES (Contd.)

Cash and Bank Balances :

- Cash in hand at head office 31.44 53.75

and other Offices

- Balance with Scheduled Banks:

In current accounts 14,402.70 36,062.47

In cash credit account 28,959.75 -

In fixed deposit accounts 365.00 365.00

(lodged the sales tax deptt)

- Remittance-in-transit & 1,753.41 45,512.30 88.70 36,569.92 cheques-in-hand 144,408.93 169,992.15

B. Loans and Advances:

Security Deposit with various 624.47 758.82

authorities

Advances to Suppliers 7,142.83 6,627.53

Advances to Employees 1,329.15 1,833.99

Advance income tax 384.99 -

Other Advances 579.80 10,061.24 818.23 10,038.57

Total (A+B) 154,470.17 180,030.72

SCHEDULE K - PAYMENTS TO &

PROVISIONS FOR EMPLOYEES

Salaries, wages and Bonus 34,074.23 26,639.35

Contribution to provident,Superannuation,Grauity & 3,561.06 2,765.73other funds

Staff welfare 820.97 453.31

38,456.26 29,858.39

SCHEDULE L - SELLING ANDADMINS. EXPENSES

Rent 993.66 1,414.01Rates and taxes 232.41 228.79Insurance 713.08 228.60Sales Tax 89,562.70 72,194.33Freight and forwarding charges 39,689.99 35,057.59Repairs & maintenace 0.00 19.40Commission, discount and rebate 9,264.04 8,257.23Advertising and publicity 90,409.82 75,562.53Breakage/leakage claims 17,928.49 21,399.49Travel & conveyance 10,429.55 9,390.09Legal & professional 1,544.11 1,026.45Telephone , fax expenses 178.62 1,037.13General expenses 2,597.37 2,444.07Bad debts 2,176.62 403.73Auditors’ Remuneration:- Audit fee 116.00 100.00- Tax audit fees 21.60 16.00- Other matters 58.66 24.29- Reimbursement of expenses 79.98 276.24 49.00 189.29

265,996.70 228,852.73

SCHEDULE M - FINANCIAL EXPENSES

Interest paid on :Fixed period loan 17,634.45 11,989.57Others 1,239.24 512.43(net of intt. Recd Rs. 1635.74;previous year Rs.109.16) 18,873.69 12,502.00Bank charges 975.54 782.60Foreign exchange fluctuation 0.00 16.99

19,849.23 13,301.59

SCHEDULE N - MISCELLANEOUSEXPENDITURE WRITTEN OFF

Preliminary Expenses 0.00 4.48

Deferred advertisement & publicity 11,469.82 11,460.85

Total 11,469.82 11,465.33

for the year ended for the year ended 31st March, 2004 31st March, 2003

SCHEDULE J - COST OF MATERIALS(Contd.)

Adjustment of stocks :

Opening stock : Stock in process 27.80 0.00


51,722.08 56,053.16

Closing stock : Stock in process 1,785.38 27.80


45,718.55 51,722.08

Increase(-)/Decrease in stock 6,003.53 4,331.08

520,793.27 412,263.43

S16




schedules

SCHEDULE O - NOTES TO ACCOUNTS

A. ACCOUNTING POLICIES

Significant accounting policies are summarized below:

1. Accounting Convention

The financial statements are prepared under the historical cost convention inaccordance with applicable mandatory Accounting Standards and relevantprovisions of the Companies Act, 1956.

2. Investments

Long term investments are stated at cost. The income from investments isaccounted for on an accrual basis.

3. Sales

Sales are recognized net of returns when goods are supplied in accordance withterms of sale. Sales comprise of sale price of goods including sales tax. Breakageand leakage claims from customers are charges as expenses upon approval.

4. Fixed Assets and Depreciation

Fixed assets are stated at cost less depreciation. Cost includes inward freight,duties and taxes and expenses incidental to acquisition.

Depreciation on Fixed Assets has been provided on written down value method atrates specified in Schedule XIV of the Companies Act.

5. Inventories

Inventories, other than goods in transit, are valued at cost(on FIFO basis) orestimated net realizable value, whichever is lower, after providing for cost ofobsolescence and other anticipated losses, where considered necessary.

6. Deferred Entitlement on LTC :

As per the opinion of the Expert Advisory Committee of the ICAI, the Companyhas provided liability accruing on account of deferred entitlement towards LTC inthe period in which the employees concerned render their services even thoughno expenditure has been incurred on performance of journeys.

7. Foreign Currency Transactions

Transactions in foreign exchange, other than those covered by forward contracts,are accounted for at the exchange rates prevailing on the date of transactions.Assets and Liabilities, if any, remaining unsettled at the end of the year, other thanthose covered by forwards contracts, are translated at the closing rates. Realizedgains and losses on Foreign Exchange transactions are recognized in the Profitand Loss account.In respect of transactions covered by the forwards contracts, the difference betweenthe contract rate and the spot rate on the date of the transaction is charged tothe Profit and Loss account over the period of contract.

8. Retirement benefits

Liability of Gratuity to employees is determined on the basis of contribution madeto Life Insurance Corporation of India from whom the company has taken theGroup Gratuity Insurance policy.Liability for leave encashment benefit determined on the basis of Actuarial Valu-ation as on the Balance Sheet date is provided for in the accounts.Contributions to defined contribution schemes such as Provident Fund and Fam-ily Pension Fund are charged to profit & Loss Account as incurred.

9. Borrowing Cost

Borrowing cost that are attributable to acquisition of qualifying assets are capi-talized as part of the cost of such assets. All other borrowing costs are charged torevenue.

10. Miscellaneous Expenditure

The remaining Deferred Advertisement, Publicity and Sales Promotion expensesfully amortized during the current financial year, being the 5th year.

11. Taxes on income

Deferred tax amount is recognized subject to the consideration of the prudenceon the tax effect of timing difference between the taxable income and accountingincome computed for the current accounting year and reversal of earlier yeartiming difference.

Deferred Tax assets are recognized and carried forward to the extent there is areasonable certainty except arising from unabsorbed depreciation and carry

forward losses which are recognized to the extent that there is virtual certaintythat sufficient future taxable income will be available against such deferred taxassets.

B. NOTES TO ACCOUNTS

The company has provided Rs. 340.25 (previous year Rs. 204.08) as liability accruingon account of deferred entitlement towards LTC. (Refer Para 6 ofAccounting Policies).

2. Contingent Liabilities

� Bank Guarantees issued by banks on behalf of the company Rs.1205.12(previous year Rs.40.00).

� In respect of Letters of Credit Rs. 73229.86 (previous year Rs.59265.46).

3. The company has entered into an agreement with Dabur India Ltd., its holdingcompany, for exclusive rights to use trademarks Real, Hommade and Lemoneez inthe domestic market.

4. Balances of Sundry Creditors and Debtors are subject to their confirmation.

5. Particulars of consumption of Important Raw Materials

2003-2004 2002-2003

Class of Goods Qty.(In MT) Value Qty.(In MT) Value

Mango Pulp 1393.10 8214.22 668.06 12356.46

Others 18013.43 12710.37

26227.65 25066.83

6. Value of Raw and Packing materials consumed

Raw Material Packing Material

2003-2004 2002-2003 2003-2004 2002-2003Value % Value % Value % Value %

Imported 5292.05 20.18 2508.00 10.00 0.00 0.00 0.00 0.00Indigenous 20935.60 79.82 22558.83 90.00 7809.90 100.00 4267.56 100.00

Total 26227.66 100.00 25066.83 100.00 7809.90 100.00 4267.56 100.00

7. Particulars of Traded/Manufactured Goods

Classes of Fruit Juices Vegetable Others TotalGoods Pastes

Purchases Qty 17086.37 185.71(11629.92) (272.25)

Value 448678.15 10664.05 13451.86 472794.07(310230.55) (16541.29) (45546.16) (372318.00)

Opening Stock Qty 1335.83 56.14(1262.22) (135.59)

Value 41776.32 3836.00 6081.96 51694.28(41081.41) (7871.27) (7100.41) (56053.09)

Closing Stock Qty 849.96 52.76(1335.83) (56.14)

Value 35810.18 2946.60 5176.4 43933.17(41776.32) (3836.00) (6082.16) (51694.28)

Sales Qty 17572.23 189.09(11556.32) (351.70)

Value 764807.84 21874.04 71298.52 857980.40(567753.68) (31398.80) (92316.74) (691469.22)

(Previous year figures given in bracket. Fruit juices unit in Kilo Liters & VegetablePastes in M Ton)

31.03.2004 31.03.20038. CIF Value of Imports (Purchases)

Raw Materials 4370.46 2574.31

9. Earnings in Foreign ExchangeOn account of exports at FOB 2130.75 1049.97

10. Segment Reporting:The company has primarily engaged in the business of fruit juices and vegetablepastes, which are governed by the same set of risk and return and therefor theentire business is covered under one Food segment. The said treatment is inaccordance with the guiding principles enunciated in the Accounting Standard onSegment Reporting (AS 17).

S17


11. Deferred Taxation:As per Accounting Standard 22, accounting for tax on income, no provision hasbeen made for deferred taxes in view of carry forward loss as per Income Tax Act,1961, and after considering the effect of timing difference, still there was loss andhence no deferred tax assets/liabilities has been created.

12. Total outstanding dues to small scale industries have been determined to the extentsuch parties have been identified on the basis of information available with the

Company. The list of small scale industries to whom the Company owes any sumwhich is outstanding for more than 30 days as on March 31, 2004 are:Sheel Packaging Pvt. Ltd., Abhinav Printing & Packagings, New Samudra Art Centre

14. During the year the Company has received Rs. 13200 as premium on transfer ofloan to Pasadensa Foods Ltd., a wholly owned subsidiary company, which hasbeen shown under Other Income.



schedules

15. Auditors Remuneration includes

Audit Fee 116.00 100.00Tax Audit Fees 21.60 16.00Reimbursement of Expenses 58.66 24.29Other Matters 79.98 49.00

276.24 189.29

16. The company has not received any claim for interest from any supplier under the“Interest on Delayed Payments to Small Scale and Ancillary Industrial UndertakingAct, 1933”.

17. Previous year figures have been regrouped and rearranged wherever considerednecessary.

18. Additional information as required under Part IV of Schedule VI of the CompaniesAct, 1956:

I. Registration DetailsRegistration No. 83594State Code 55Balance Sheet Date 31.03.2004

II. Capital raised during the yearPublic Issue NILRight Issue NILBonus Issue NILPrivate Placement NILPromoters/Subscribers NIL

III. Position of Mobilization and Deployment of FundsTotal Liabilities 406260.50Total Assets 406260.50Sources of FundsPaid up Capital 100000Share Application Money NILReserves and Surplus NIL

Secured Loans 62500.00Unsecured Loans 183645.70Application of FundsNet Fixed Assets 586.78Investments 50520.75Net Current Assets 94355.36Misc. Expenditure 0.00Accumulated Losses 200682.81

IV. Performance of CompanyTurnover 872515.51Total Expenditure 856663.33Profit Before Tax 15852.18Profit After Tax 14627.18Earning per share in Rupee 1.46Dividend Rate NIL

V. Generic names of Principal Products/Services of Company(As per Monetary terms)Item Code No. (ITC Code) 220240Product Description Fruit JuiceItem Code No. (ITC Code) 220110Product Description Vegetable Pastes

19. Schedules A to O form an integral part of accounts.As per our report of even date attached.

13. Related party disclosure in accordance with AS 18 issued by ICAIRelated Party Transactions:

Particulars Holding Subsidiary Fellow Associate Key Total OutstandingCompany Subsidiary Management As on

Personnel 31.03.04

Purchases of Goods 5898 - 425750 - - 431648 2646Sale of Goods - - 29774 - - 29774 924Repayment of Loan Recd. - - - - - - 60000Finance (incl. Loans & equity Contributions in cash - 170500 - - - 170500 50500or kind) (of which Shares

allotted for

Rs.50000)

Interest on Financing - - - 6012 - 6012 0Remuneration Paid - - - - 1865 1865 0Interest recd on Loan - 1553 - - - 1553 0Corporate Guarantees given by Holding Company 288700 - - - - 288700 288700

Note:Names of related parties and description of relationship:Dabur India Limited = Holding CompanyDabur Nepal Pvt. Limited = Fellow SubsidiaryPasadensa Foods Limited = Subsidiary CompanyVIC Enterprises Pvt Ltd. = AssociateMr. Sanjay Sharma = Key Management Personnel

For Jhalani & Co. Amit Burman DirectorChartered Accountants P.D. Narang DirectorV.K. JhalaniPartner Neeraj Aggarwal Company Secretary


S18


CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2004

(Figures in Rs. in thousands)

Particulars 2003-04 2002-03

A. Cash flow from operating activities

Net profit from tax andExtraordinary items 15,852.18 (3,512.44)Add:Depreciation 98.05 28.53Miscellenous exp. Written off 11,469.82 11,465.33Interest 19,849.23 13,301.59

31,417.11 24,795.45

Less: Interest received - -

Operating profit before working 47,269.29 21,283.01Capital changesWorking capital changesIncrease/(decrease) in inventories (9,483.99) (8,242.32)Increase/(decrease) in debtors (21,022.46) 6,605.01Decrease/(increase) in trade payables (22,338.80) 91,250.24Increase/(decrease) in working capital (52,845.25) 89,612.93

Cash generated from operating 100,114.54 (68,329.92)ActivitiesInterest paid 19,877.16 14,767.25

19,877.16 14,767.25Cash used(-)/(+)generated forOperating activities (a) 80,237.38 (83,097.17)

B. Cash flow from investingActivitiesSale /(purchase) of investments (50,500.75) -Purchase of fixed assets (603.10) (18.84)Sale of fixed assets - 45.73

Cash used(-)/(+)generated for (51,103.85) 26.89Investing activities (b)

C. Cash flow from financingActivities

Repayment(-)/proceeds (+) of long - -Term secured liabilities

Repayment(-)/proceeds(+) from 42,500.00 (52,485.16)Short term loansInterest received - -Proceeds from deposits (3,451.63) 1,122.52Repayment(-)/proceeds(+) fromother unsecured loans (57,500.00) 142,500.00Payment of other advances 22.66 1,958.93

Cash used(-)/+(generated) in (18,428.97) 93,096.29Financing activities (c)

Net increase(+)/decrease (-)In cash and cash equivalents(A+b+c) 10,704.56 10,026.01Cash and cash equivalentsOpening balance 33,913.21 23,887.19Cash and cash equivalentsClosing balance 44,617.77 33,913.21

ANNEXURE TO DIRECTORS' REPORT

STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956RELATING TO SUBSIDIARY COMPANIES

(Figures in Rupees)

1. Name of Subsidiary Pasadensa Foods Ltd.

2. Holding Company's Interest 50,00,000 equity shares of Rs. 10each fully paid-up

3. Extent of Holding 100%

4. Subsidiary Financial year ended 31st March, 2004

5. Net aggregate amount ofSubsidiaries Profit/(Loss) notdealt within the holdingcompany's accounts :

i) For the financial year of Rs.(1620597)the subsidiaries

ii) For the previous financial Rs. 0.00year of the subidiary sincethey become the holdingcompany's subsidiary

6. Net aggregate amount ofsubsidiaries Profit/(Loss) dealtwithin the holding company'saccounts :

i) For the financial year of Rs. 15,53,425the subsidiaries

ii) For the previous financial Nilyear of the subsidiary sincethey become the holdingcompany's subsidiary

S19

balance sheet AS AT 31st MARCH, 2004

Notes Amount in AED

We have audited the accompanying financial statements of DABUR INTERNATIONALLIMITED (Previously known as Redrock Limited) for the period ended 31 March 2004.The objective of this engagement was to provide assurance that the enclosed financialstatements are prepared in accordance with the International Financial ReportingStandards for the purpose of including in the consolidated financial statements of theparent company as of that date.

Respective responsibilities of the management and the auditorsThese financial statements are the responsibility of the company’s management. Ourresponsibility is to express an opinion on these financial statements based on ouraudit.

Basis of opinionWe conducted our audit in accordance with International Standards on Auditing. Thosestandards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.

As referred to note 2(a) effective 14 September 2003, the company has re-estimatedthe useful lives of property, plant and equipment so as to having the estimates inuniformity with the estimates followed by the parent company. The difference betweenthe net book values under the originally estimated useful lives of the property, plantand equipment and the re-estimated useful lives, amounting to AED 3,054,082 as atthe date of revision has been reduced from accumulated depreciation and taken to

(All amounts in UAE AED, except share data)

directors' report

auditors' report

The directors submit their report together with the audited financial statements forthe period ended 31 March 2004, which shows the state of affairs of the company. Weapprove the financial statements and confirm that we are responsible for these includingselecting the accounting policies and making the judgments, underlying them. Weconfirm that we have made available all relevant accounting records and informationfor their compilation.

ActivityThe company carried out activities of manufacturing, import, export, warehousing anddistribution of beauty and health care products.

Results and dividendsThe net profit for the period was AED 1,290,410. The directors do not propose anydividend for the period.

DirectorsThe directors who served during the period and their respective shareholdings were asfollows:

Name No. of shares

Mr. Sidhartha Burman 200,000 (held upto 13 September 2003)Mr. Pritamdas Narang ) Appointed effective 15 September 2003Mr. Sunil Duggal ) —Mr. Charanjit Mohan ) —

Events during the periodDuring the period effective 14 September 2003, Dabur India Limited acquired the entirepaid up shares of Redrock Limited. As a result, on 11 December 2003, the name of thecompany was changed to Dabur International Limited.

Events since the end of the periodThere were no important events occurring since the period end that materially affectthe company.

AuditorA resolution to re-appoint Messrs Pannell Kerr Forster as auditor and fix theirremuneration will be put to the shareholders at the annual general meeting.

On behalf of the Board

Directors11th April 2004

capital reserve. Consequently, the property, plant and equipment and the shareholder’sfunds as at the period end have been overstated to the same extent.

OPINIONExcept that property, plant and equipment and shareholder’s funds have been overstatedby AED 3,054,082, in our opinion, the financial statements give a true and fair view ofthe financial position of DABUR INTERNATIONAL LIMITED (Previously known as RedrockLimited) as of 31 March 2004 and of the results of its operations and its cash flows forthe period then ended in accordance with International Financial Reporting Standardsand comply with the Companies Acts 1931 to 1993.EMPHASIS OF MATTERWithout qualifying our opinion, we refer to Note 2(e) which states that the accountsof the subsidiary companies are not consolidated in these financial statements as theywill be consolidated in the financial statements of the parent company.

Dubai, United Arab Emirates PANNELL KERR FORSTER11th April 2004

NON-CURRENT ASSETSProperty, plant and equipment 3 7,143,150Investments 4 4,048,384

11,191,534CURRENT ASSETSInventories 5 1,771,094Trade and other receivables 6 7,710,760Amounts due from a related party 7 535,706Cash and cash equivalents 8 118,696Other current financial assets 9 257,000

10,393,256TOTAL ASSETS 21,584,790SHAREHOLDERS’ FUNDSShare capital 10 6,000,000Retained earnings 4,168,941Capital reserve 3,054,082

13,223,023NON-CURRENT LIABILITYStaff end-of-service gratuity 11 427,903

CURRENT LIABILITIESBank borrowings 12 2,143,050Trade and other payables 13 5,594,336Amount due to related parties 7 196,478

7,933,864

TOTAL EQUITY AND LIABILITES 21,584,790

The accompanying notes form an integral part of these financial statements.

We confirm that we are responsible for these financial statements, including selectingthe accounting policies and making the judgement underlying them. We confirm thatwe have made available all relevent accounting records and information for theircompilation.

income statementPERIOD 14 SEPTEMBER 2003 TO 31 MARCH 2004REVENUE 18,837,203Cost of sales 14 (11,160,929)GROSS PROFIT 7,676,274Other operating income 15 332,774Distribution costs (3,033,798)Administrative expenses 16 (3,638,882)PROFIT FROM OPERATING ACTIVITIES 1,336,338Interest income 17 26,812Finance costs 18 (72,740)

NET PROFIT FOR THE PERIOD 1,290,410The accompanying notes form an integral part of thesefinancial statements.

S20 FINANCIALS I DABUR INTERNATIONAL LIMITED


STATEMENT OF CHANGES IN EQUITYPERIOD 14 SEPTEMBER 2003 TO 31 MARCH 2004

Share Retained Capital Proposed Totalcapital earnings reserve dividend

AED AED AED AED AEDAs at 13.9.2003 6,000,000 2,878,531 — — 8,878,531Transfer from accumulateddepreciation {Refer note 2(a)} — — 3,054,082 — 3,054,082Net profit for the period — 1,290,410 — — ,290,410

As at 31.3.2004 6,000,000 4,168,941 3,054,082 — 13,223,023

The accompanying notes form an integral part of these financial statements.

cash flow statementPERIOD FROM 14 SEPT. 2003 TO 31 MAR. 2004 Notes Amount in AED

Cash flows from operating activitiesCash generated from operations 21 3,033,069Interest received 26,812Interest paid (72,740)Net cash from operating activities(A) 2,987,141Cash flows from investing activitiesProceeds on disposal of property, plant and equipment 80,002Purchase of property, plant and equipment (136,128)Investment in a subsidiary company (729,473)Decrease in deposits (net) (50,000)Net cash used in investing activities (B) (835,599)Cash flows from financing activitiesPayments of trust receipts (net) (1,097,027)Payments of bank overdraft (net) (1,388,611)Receipts from related parties (net) 365,942Net cash used in financing activities (C) (2,119,696)Net increase in cash and cash equivalents (A+B+C) 31,846Cash and cash equivalents at beginning of period 86,850Cash and cash equivalents at end of period 8 118,696The accompanying notes form an integral part of thesefinancial statements.

NOTES TO THE FINANCIAL STATEMENTSPERIOD ENDED 31 MARCH 2004

1. Legal Status and Business Activity

a) DABUR INTERNATIONAL LIMITED is a limited liability company incorporated inthe Isle of Man. During the period, on 14 September 2003, the company becamea wholly owned subsidiary of Dabur India Ltd, which is considered by the directorsto be the ultimate parent company.

b) The company is engaged in the manufacturing, import, export, warehousing anddistribution of beauty care and health care products. The activities arecarried out under a special licence issued by Jebel Ali Free Zone Authority, UAE.

2. Significant Accounting Policies

The financial statements are prepared under the historical cost conventionand in accordance with International Financial Reporting Standards adoptedby the International Accounting Standards Board (IASB) and the requirementsof Isle of Man Company Law. The significant accounting policies adopted areas follows:

a) Depreciation of property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciationand impairment losses. The cost is depreciated using the straight line methodover their estimated useful lives as follows:

Factory building 30 years(upto previous period 14 years)

Plant, machinery and equipment 20 years (upto previous period 12 years)

Furniture, fixtures and office equip. 15 years (upto previous period 7 years)

Motor vehicles 10 years (upto previous period 4 - 12 years)

As stated in Note 1(a) above, effective 14 September 2003, the company becamea wholly owned subsidiary of Dabur India Ltd. In order to facilitate the

consolidation of these financial statements in the accounts of the parent company,the company has re-estimated the useful lives of property, plant and equipmentso as to having the estimates in uniformity with the estimates followed by theparent company. Consequently, the company has re-calculated their net bookvalues as if the revised estimated useful lives had been in place since the acquisitionof the assets. The difference between the net book values under the differentuseful lives amounting to AED 3,054,082 as at the date of revision has beenreduced from accumulated depreciation and taken to capital reserve. The impacton the income statement on account of the change in estimated useful life ofproperty, plant and equipment is insignificant.

b) Inventories

Raw materials, packing materials, finished goods and trading inventories arevalued at the lower of cost and net realizable value using the weightedaverage cost method. Cost comprises invoice value plus applicable landingcharges and in the case of finished goods and work in progress, cost comprisesmaterial cost, attributable labour cost and attributable overheads. Netrealizable value is based on estimated selling price less any estimated cost ofcompletion and disposal.

c) Staff end-of-service gratuity

Provision is made for end-of-service gratuity payable to the staff at the balancesheet date in accordance with the local labour laws.

d) Revenue

Revenue represents the net amount invoiced for manufacturing and trading goodsdelivered during the period.

e) Investments

Investments in the share capital of limited liability companies where the companyholds between 20% and 50% of the investee company and has significant influenceare treated as associates. Investments in the share capital of limited liabilitycompanies where it holds more than 50% of the investee company are treated assubsidiaries. Investments are accounted under the cost method less provision forimpairment losses and income from such investments is accounted when declared.The accounts of the subsidiary companies are not consolidated in these financialstatements as they will be consolidated in the financial statements of the ultimateparent company.

f) Foreign currency transactions

Transactions in foreign currencies are translated into UAE Dirhams at the rate ofexchange ruling on the date of the transactions.

Monetary assets and liabilities expressed in foreign currencies are translated intoUAE Dirhams at the rate of exchange ruling at the balance sheet date.

Gains or losses resulting from foreign currency transactions are taken to theincome statement.

Share capital is translated into UAE Dirhams at the fixed exchange rate of UK £ 1= UAE Dirhams 6.

g) Cash and cash equivalents

Cash and cash equivalents for the purpose of the cash flow statement comprisecash on hand, bank balances in current account, bank deposits free of encumbrancewith a maturity date of three months or less from the date of deposit and highlyliquid investments with a maturity date of three months or less from the date ofinvestment.

h) Financial instruments

Financial instruments of the company comprise trade and other receivables, cashand cash equivalents, other current financial assets, related party balances, tradeand other payables and bank borrowings.

Financial assets that do not have an active market and whose fair value cannotbe estimated reliably, are measured at amortised cost less any write-down forimpairment if they have a fixed maturity date, and at cost less any write-downfor impairment if there is no fixed maturity date.

Financial liabilities with no fixed maturity date are measured at cost and atamortised cost if they have a fixed maturity date.

Changes in values of such financial assets and financial liabilities are recognizedin the income statement.


S21

3. Property, Plant and Equipment

Factory Plant, Furniture, Totalbuilding machinery fixtures,

and off. equip.equipments & vehicle

AED AED AED AED

CostAs at 13.9.2003 4,268,890 4,249,654 1,876,611 10,395,155Additions — 54,819 81,309 136,128Disposals — — (170,000) (170,000)As at 31.3.2004 4,268,890 4,304,473 1,787,920 10,361,283Accumulated depreciationAs at 13.9.2003 2,310,103 2,208,974 1,490,490 6,009,567Depreciation for the period 78,128 106,121 189,831 374,080Adjustment relating to disposal — — (111,432) (111,432)Transfer to capital reserve (1,230,026) (1,041,588) (782,468) (3,054,082)As at 31.3.2004 1,158,205 1,273,507 786,421 3,218,133Net book valueAs at 31.3.2004 3,110,685 3,030,966 1,001,499 7,143,150As at 13.9.2003 1,958,787 2,040,680 386,121 4,385,588

*Factory buildings are constructed on leasehold land, the lease period being 15 yearswith renewable options.

31.03.20044. Investments

In associates:Dabur Egypt Limited incorporated in Egypt (24% sharein the capital of the company) 463,911Weikfield International (UAE) LLC incorporated in theUAE (38.4% share in the capital of the company) 2,855,000In subsidiaryAsian Consumercare Pvt. Ltd, incorporated in Bangladesh(76% share in the capital of the company) 729,473

4,048,384Value of the investments at the balance sheet date areAED ……. in Dabur Egypt Limited and AED 3,195,570 inWeikfield International (UAE) LLC, when valued underthe equity method.

5. InventoriesRaw materials and packing materials 1,470,594Finished goods 411,276Work in progress 26,783Trading goods 191,697Goods in transit 113,827

2,214,177Less: Provision for slow moving inventory 443,083

1,771,094

6. Trade and other receivablesTrade receivables 6,988,008Advances 450,800Prepayments 180,120Other receivables 12,000Deposits 79,832

7,710,7607. Related parties

The company enters into transactions with companiesthat fall within the definition of a related party ascontained in International Financial Reporting Standard24. The management considers such transactions to bein normal course of business and at terms whichcorrespond to those on normal arm’s length transactionswith third parties except for sales and purchases whichare at cost.

Related parties comprise the directors, the parentcompany, fellow subsidiaries, subsidiaries and associates.

31.03.2004

At the balance sheet date balances with related partieswere as follows:Included in trade and other receivables

Due from branch of the parent company 181,324Due from an associate —Included in the trade and other payablesDue to the parent company 993,336Due to a fellow subsidiary 61,380Disclosed as amounts due from a related partyDue from an associate 535,706Disclosed as amounts due to related partiesDue to an associate 6,024Due to the parent company 190,454

196,478The nature of significant related party transactions andthe amounts involved are as follows:

Sales 1,536,902Purchases at cost 5,467,622Sale of property, plant and equipment —Other income 18,630Dividend income —Other expenses recovered by parent company 168,439Directors’ remuneration and expenses 408,966Royalty 459,675

The company also receives funds from and providesfunds to related parties as and when required as workingcapital.

8. Cash and Cash EquivalentsCash on hand 118,696Bank balances in current accounts 0.00

118,6969. Other current financial assets

Margin on guarantee 257,000

10. Share CapitalAuthorized, issued and paid up:1,000,000 ordinary shares of Stg. £ 1 each convertedat Stg. £ 1 = UAE Dirhams 6 6000,000

11. Staff end-of-service gratuityOpening balance 388,651Provision for the period 65,046Paid during the period (25,794)Closing balance 427,903

12. Bank borrowingsOverdrafts 1,795,768Trust receipts 347,282

2,143,050An analysis by bank of amounts outstanding is as follows:Standard Chartered Bank 593,329ABN Amro Bank 865,697Mashreq Bank 684,024

2,143,050Bank facilities are secured against:� Letter and deed of pledge on inventories and

receivables� Assignment of leasehold property� Personal guarantee of one of the directors� Assignment of insurance policies covering

inventories and property, plant and equipment� Security interest in goods purchased under loan

against trust receipts� Promissory notes for AED 5,000,000� Cross guarantee from a related party


S22 FINANCIALS I DABUR INTERNATIONAL LIMITED


31.03.200413. Trade and other payables

Trade payables 1,022,233Accruals 4,492,521Other payables 79,582Short term loans —

5,594,336COST OF SALES14. Manufacturing

Raw material and packing materials consumed 4,055,331Labour 631,452End-of-service gratuity 6,938Rent 41,803Other direct expenses 208,172Depreciation (Note 19) 184,249

5,127,945Decrease in inventory of finished goods 605,599

(A) 5,733,544TradingInventories, beginning of the period 421,086Purchases (including direct expenses) 5,197,996Inventories, end of the period (191,697)

(B) 5,427,385(A+B) 11,160,929

15. Other operating incomeMiscellaneous income 311,312Profit on sale of property, plant and equipment (net) 21,432

332,74416. Administrative expenses

Salaries and other benefits 1,070,730Directors’ remuneration and expenses 408,966Staff end-of-service gratuity 58,108Director’s fees —Other administration and general expenses 1,911,247Depreciation on administrative assets (Note 19) 189,831

3,638,88217. Interest income

On receivables from a related party 18,630On receivables from a third party 8,182

26,81218. Finance costs

On bank overdraft and trust receipts 72,740On other loans —

72,74019. Depreciation

Allocated to cost of sales (Note 14) 184,249Allocated to administrative expenses (Note 16)

,831 374,08020. Number of employees

The number of employees at the end of the period was 61.An analysis by bank of amounts outstanding is as follows:

Standard Chartered Bank 593,329ABN Amro Bank 865,697Mashreq Bank 684,024

2,143,05021. Cash generated from operation

Net profit for the period 1,290,410Adjustments for:Depreciation of property, plant and equipment 374,079(Profit)/loss on sale of property, plant and equipment (21,432)Dividend income —Interest income (26,812)Interest expenses 72,740Operating profit before changesin operating assets and liabilities 1,688,985Decrease in inventories 1,185,666Increase in trade and other receivables (2,444,460)Increase in trade and other payables 2,563,626Increase in staff gratuity provision 39,252

3,033,069

22. TaxationAs a non-resident company, there is no charge to Isle of Man Income Tax.

23. Financial instruments: Credit, Interest rate and exchange rate risk exposures

Credit riskFinancial assets which potentially expose the company to concentrations of creditrisk comprise principally bank current and margin deposits, trade and other re-ceivables and amount due from a related party.

The company’s bank accounts are placed with high credit quality financial insti-tutions.

Trade and other receivables are stated net of the allowance for doubtful recover-ies. At the balance sheet date the company’s maximum exposure to credit riskfrom trade receivables situated outside the UAE is as follows:

AGCC 1,543,870

Indian sub-continent 1,414,867

Africa 921,228Out of the total trade receivables 44% was due from two customers .As part of the company’s credit risk management, credit is extended to customersafter properly ascertaining their credit worthiness.There are no significant concentrations of credit risk to receivables outside theindustry in which the company operates.Interest rate riskThe company’s bank overdrafts and trust receipts are at floating rates at levelswhich are generally obtained in the UAE. Interest on amounts due from relatedparties is at commercial rate of interest.Exchange rate riskThere are no significant exchange rate risks as substantially all financial assetsand financial liabilities are denominated in UAE Dirhams or US Dollars to whichthe Dirham is fixed.

24. Financial instruments: Fair valuesThe fair value of a financial instrument is the amount for which an asset could beexchanged, or a liability settled, between knowledgeable, willing parties in anarm’s length transaction. The fair values of the financial assets and financial li-abilities which are required to be carried at cost or at amortised cost approximateto their fair values.

25. Contingent liabilitiesBankers’ letters of guarantee 432,000

26. Comparative FiguresThe company became a subsidiary of Dabur India Limited and these financialstatements are prepared for the purpose of including in the interim consolidatedfinancial statements of the parent company. Therefore, the directors considerthat the comparative figures are not relevant to the financial statements.Accordingly, no comparative information has been provided in the financialstatements.


S23

The directors submit their report together with the audited financial statements forthe year ended 31st March 2004 which show the state of affairs of the company. Weapprove the financial statements and confirm that we are responsible for these includ-ing selecting the accounting policies and making the judgments underlying them. Weconfirm that we have made available all relevant records and information for theircompilation.

Activity

The company carried out activities of manufacturing and selling Cosmeticproducts.

Results and Dividends

The net loss for the year was USD 58563. No dividend is proposed for the year ended31st March’2004.

Directors

The directors who served during the year are as follows.

Name

Mr. Sidhartha Burman

Mr. Pritam Das Narang

Mr. Sarabjeet Singh

Events since the end of the year

There were no important events occurring since the year end that materially affect thecompany.


Directors

22nd April, 2004

auditors' reportTO THE PARTNERS OF DABUR EGYPT LTD.

10th OF RAMADAN CITY, EGYPT

We have audited the accompanying balance sheet of Dabur Egypt Limited, (the“Company”), as of March 31, 2004 and the related statements of income for the yearthen ended. These financial statements are the responsibility of the company’smanagement and our responsibility is to express an opinion on these financialstatements based on our audit.

We conducted our audit in accordance with International Standards On Auditing Thosestandards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatements. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide a reasonable basisfor our opinion.

The company keeps proper financial records, which include all that is required by lawand the company statute and the accompanying financial statements are in agreementherewith. The inventories were taken in accordance with accepted standards andevaluated by management. We obtained the information that we deemed necessary inthe circumstances.

In our opinion, the financial statements, referred to above, presented fairly, in all materialrespects, the financial position of the Dabur Egypt Limited as of 31st March 2004 andthe results of its operations for the period then ended in conformity with EgyptianAccounting Standards.

Fouad Rashed Mohamed

FESAA, FEST, RAA(82)

Cairo on: April 20, 2004

directors' reportTO THE MEMBERS OF DABUR EGYPT LTD.

balance sheet AS AT MARCH 31, 2004

Note 2004 2003

Non-Current Assets:Fixed Assets (net) (1) 373092 422,529Deferred & Pre-operating Expenses (Net) (2) 21515 35,739

Total Non-Current Assets (1) 394607 458,268

Current AssetsInventory (3) 222577 242726Due from affiliated parties (4) 6568 -Prepaid expenses and other debtors (5) 12780 112196Accounts receivable and notes receivable (6) 346990 558842Cash on hand and cash at bank 222 924

Total Current Assets (2) 589137 914688

Current LiabilitiesAccounts payable and accrued liabilities (7) 199036 259922Due to related parties (8) 10252 92738Provisions 20808 17691Loans – short term portion (9) 24351 27273Employees’ profit sharing - 5617Partners’ dividends - 52600Bank overdraft 384207 437751Total Current Liabilities (3) 638654 893592

Working Capital (4)=2-3 (49517) 21096

Employed Capital represented in the following (1+4) 345090 479364Owner’s EquityCapital 526000 526000Legal reserves 41243 41243Retained earnings 92375 150938Re-measurement (Loss) (332791) (286544)

Total Owner’s Equity (10) 326827 431637Long term loan (11) 18263 47727

Total Employed Capital 345090 479364

income statement FOR THE YEAR ENDED 31ST MARCH 2004

Note 2004 2003

Net Sales 1085213 1147796Cost of goods sold (599316) (636241)Selling and marketing expenses (251066) (167176)

Gross profit 234831 344379General and administrative expenses (226165) (210099)Depreciation & Amortization (20655) (19541)

Operating Profit/(Loss) (11989) 114739Financial Costs (37189) (40878)Provisions (9385) (17691)

Net Profit (Loss) for the year (58563) 56170


S24 FINANCIALS I DABUR EGYPT LIMITED


2004 2003

Net profit (loss) for the year (58563) 56170

Adjustments to reconcile net profit

to net cash flows from operating activities

Depreciation and amortization 55758 79748Decrease (Increase) in inventory (5857) (105323)Decrease (Increase) in prepaid

expenses and other assets 80827 (59607)Decrease (Increase) in

accounts and notes receivable 151976 (52101)(Decrease) Increase in accounts

payables and accrued liabilities (28024) 156442(Decrease) Increase in due to related parties (72550) 83806

Net cash flows provided (used)by operating activities (1) 123567 159135

Cash flows from investing activitiesCurrency translation difference

charged to deferred expenses - (12436)Purchase of property and equipment (41197) (18560)Proceeds from sale of property and equipment - 17056

Net cash flows (used in) investing activities (2) (41197) (13940)

Cash flows from financing activities

Payment of dividends (51980) (139844)

(Decrease) Increase in bank overdraft (6642) 87477Long term loans Increase (Decrease) (24351) (77945)Short term loans Increase (Decrease) - (16891)

Net cash flows (used) provided byfinancing activities (3) (82973) (147203)

Change in cash and cash equivalents (1+2+3) (603) (2008)

Cash and cash equivalents at beginning of year 924 3471

Adjusted opening balance from

US$ to L,E, (5.5 To 6.16) for (2003) (99) (539)

Cash and cash equivalents at end of year 222 924

STATEMENT OF RETAINED EARNINGS

Retained earnings, beginning April 1, 2003 1509385 155794

Net profit (loss) for the year (58563) 56170

Retained earnings, ending March 31, 2004 92375 211964

Legal reserve (5% from profit) - (2809)

Employee’s profit sharing (10% from profit) - (5617)

Partners’ dividends (10% from capital) - (52600)

Retained earnings at April 1, 2004 92375 150938

notes to the financial statementI. Organization

Dabur Egypt Limited “the company” is Limited Liability Company established un-der the Investment Law 230 for the year 1989 and started running its operationsas of June 12, 1996. The company was formed for the purpose of manufacturinghair care oil, vinegar, rose water, glucose and other Dabur’s branded consumerproducts.

II. Summary of Significant Accounting Policies

Significant accounting policies adopted in the preparation of the financial state-ments are as follows:

II.1 Accounting convention

The financial statements are prepared using the historical cost convention in ac-cordance with Egyptian Accounting Standards (EAS).

II.2 Revenue recognition

Revenue is recognized upon delivery of products and customer acceptance.

II.3 Foreign currencies

The Egyptian Pound has been designated as the functional currency of the com-pany. Transactions in currencies other than Egyptian Pound are translated usingthe rate of exchange prevailing at the date of the transaction. Monetary assetsand liabilities denominated in currencies other than Egyptian Pounds are con-verted using the rate of exchange prevailing at the balance sheet date; the result-ing foreign exchange gains or losses are reflected in the statement of incomecurrently.

II.4 Financial statements translation to US Dollars

- For foreign reporting purposes, at year-end, financial statements translated toUS Dollars by the rate 6.16 EGP and the last year rate is 5.5 EGP for US$.

- All resulting exchange differences classified in shareholder equity.

II.5 Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprisecash in hand, deposits held at call with banks, and bank current accounts. In thebalance sheet, bank overdrafts are included in borrowings in current liabilities.

II.6 Inventories

Inventories are valued at the lower of cost or net realizable value as of the bal-ance sheet date, Cost is determined by average cost method, Net realizable valueis estimated selling price, in the ordinary course of business, less associated costsof completion and selling expenses. Allowance is established for slow-movingitems on the basis of management’s review and assessment of inventory move-ments. The cost of finished goods and work in progress comprise of raw materials& packing.

II.7 Property and equipment

Property and equipment at net value and depreciation is calculated using thestraight-line method over the estimated useful lives. Depreciation rates used areas follows:

Buildings 4%Machinery and equipment 15%Laboratory equipment 15%Office equipment 12.5%Furniture and fixture 6%Vehicles 20%Flat 5%

I.8 Corporate taxes

As described in note 1, the company is registered under the investment Law 230for the year 1989 and, accordingly, the company is tax exempted from corporatetaxes for a period of ten years starting from production date.

II.9 Legal reserve

In accordance with Companies Law and the Company’s articles of association, a5% of annual net profit should be charged to legal reserve until accumulatedreserve arrives to 50% of capital.

II.10Comparative figures

Certain comparative figures have been reclassified to conform with the currentyear presentation.

statement of cash flow(All amounts in USD, except share data)

For the year ended 31st March, 2004

S25

III. Details for some items which appear in the financial statements

1. Fixed Assets

Land Machinery Office Furniture Cars Flat Total& bldg. & equip. equip. & fixt.

CostCost 1-4-2003 347592 315360 22670 15900 23257 4035 728814Additions 0 23789 1815 0 15593 0 41197Disposals 0 (5750) 0 0 0 0 (5750)

Cost at 347592 333399 24485 15900 38850 4035 76426131.3.2004

DepreciationAccumulated 68049 254122 13605 5799 8849 1133 35155731-3-2003Depreciation 10075 25027 2935 953 6211 161 45362Disposals Depreciation 0 (5750) 0 0 0 0 (5750)

Accumulated dep, 78124 273399 16540 6752 15060 1294 391169at 31.3.2004

Net Book Value 269468 60000 7945 9148 23790 2741 373092at 31.3.2004

Note:

The company’s management made fixed assets physical verification at 31– 03-2004 based on their resposibilities.

2. Deferred Expenses

The deferred Expenses balance included amount of US 13442 represent the re-valuation of both Dabur Overseas & Red Rock Ltd, (Dabur International LTD) loanwhich capitalized at financial statements March 31st 2003 according Interna-tional Accounting Standard No, 21.

3. Inventory

At March 31, inventory balance is comprised of:

Description 2004 2003

Raw materials 110466 93445Packing materials 70544 104886

Work in process 6000 2376

Finished goods 35567 42019

222577 242726

4. Due from affiliated parties:

The balance due from affiliated parties represents the amount due from RED ROCKLTD which changed to Dabur International LTD this balance classified into balanceappeared in their confirmation in amount of US 1641 and debit note sent toDabur International LTD in subsequent event at 7 th April 2004 and approved bythem on 15 th April 2004 in amount of US 4927 for expenses paid to them duringfiscal year ended 31- March .2004 to confirm the balance US 6568.

5. Prepaid expenses and other debtors

At March 31, prepaid expenses and other assets balance is comprised of:


Advance against employee’s profit sharing 7055 13519

Other prepaid 1212 1357

Other debtors 4513 97320

12780 112196

6. Accounts and notes receivableAt March 31, accounts and notes receivablebalance is comprised of:


Accounts receivable 53632 355147Accounts receivable (export) 2200 18962Notes receivable 295616 184733Provision for doubtful accounts (4458) -

346990 558842

7. Accounts payable and accrued liabilitiesAt March 31, accounts payable and accrued liabilitiesbalance is comprised of:


Tax payable 70328 103782Accrued expenses 13426 53145Other payables 115282 102995

199036 259922

8. Due to related parties

The company imports raw and packing materials formanufacturing through purchases from a relatedparties. Balances due to Dabur India LimitedUSD 10252.

9. Loans (short term portion)

At March 31, short term loan portion balanceis consists of:


HSBC 24351 27273

24351 27273

10. Owner’s Equity

Description Shares Legal Retained Re- NetCapital Reserve Earnings Measure- Owner’s

ment Equity

1.4.2003 526,000 41243 150938 (286544) 431637Add:

Net Profit (loss) for the Year (58563) (58563)Deduct:

5% Legal Reserve10% Employee SharePartner’s Dividend 30%

Add:Currency remeasurement (46247) (46247)

Net owner’s 526,000 41243 92375 (332791) 326827Equity 31.3.2004

11. Long Term Loan

During 1995, the Company entered into an agreement with Banque Du CaireBarclays, whereby the bank granted the Company a medium term loan in theprincipal amount of EGP 1,788,000, bearing interest at the rate of 13%. The prin-cipal amount of loan and the interest are to be repaid in ten equal semi annualinstallments commencing 24 months after the date of initial draw-down (August21, 1995) and bank facilities (overdraft) totaling EGP 850,000. The loan and theoverdraft are secured by a first legal mortgage over the Company’s assets. During1997, the Company obtained bank facilities (overdraft) amounted to EGP 150,000against checks under collections, now was closed.


S26 FINANCIALS I DABUR EGYPT LIMITED


During February 25, 2001 the Company entered into agreement with EgyptianBritish Bank which changed to HSBC Bank Egypt as follows:

Medium Term Loan (EGP 750,000)(Say seven hundred and fifty thousand EGP only)Payable over 20 equal quarterly installments commencing 31/03/2001.

Import Line (EGP 2,800,000)(Say two million and eight hundred thousand EGP only)

For sight and usance documentary credits’ and inward bills for collection.Nil cash margin.

Within which:

Overdraft (EGP 2,800,000)(Say two million and eight hundred thousand EGP only)To finance working capital requirements, also available in USD.

Interest on EGP advances will be charged at 12.75% p.a. USD advances will be chargedat 3 months LIBOR (currently reading 5.35% p,a,) plus 1.5% p.a. In addition, a 5 permille annual stamp duty will be charged to your current account.

The security requirement for above facilities are:1. Promissory Note for EGP 3,550,000.2. General security agreement relating to goods.3. Bank guarantee from HSBC New Delhi for EGP 3750000.

The balance of 31.3.2004 is comprised of:DescriptionHSBC 18263

18263

12. Contingent Assets:

The car added to fixed asset during fiscal year in amount of US 15593 destroyedin accident on Feb 2004 and insurance company estimated the loss in amount ofUS 13800 according letter received from management based on insurance com-pany inspection and the car still recorded.

13. Financial Instrument Fair Value:

The financial instruments are represented in the balance of cash on hand and at banksdebtors , creditors and loans .

- The book value of other financial instruments represents area reasonable as-sessment of their fair value.

14. Management Risk:

14.1 Interest Risk

This risk is represented in interest rate on bank over draft and loans.

14.2 Exchange Rate Risk

This risk is represented in the fluctuation exchange rate. As some of goodand services imported in foreign currency and the exchange rate maychange in away that could have negative impact on result of operation.


� �

S27

balance sheet AS AT 31st MARCH, 2004

Notes 31.03.2004Source of Fund:

Share Capital 3

Authorised Capital 100,000,000

Issued and Paid-up Capital 14,975,990

14,97,599 ordinary shares of Tk 10 each

Net Profit/(Loss) for the period (2,155,216)

12,820,774

Application of Funds:

Fixed Assets 4 4,249,128

(At cost less depreciation)

Pre-operative Expenses 5 4,731,010

Current Assets 15,540,195

Inventories 6 3,136,119

Sundry Debtors 5,270,465

Loans & Advances 7 1,249,667

Investment in FDR 5,159,317

Security Deposits 698,520

Cash in Hand 26,107

Current Liabilities 11,699,559

Liabilities for Expenses 8 1,636,518

Bank Overdraft 10,063,041

Net Current Assets 3,840,636Total 12,820,774

income statement FOR THE PERIOD ENDED 31.03.2004

Notes Amount in Taka

Income :

Sales (Net) 9 12,916,101

Less Direct Cost:

Cost of Materials 10 9,340,582

Manufacturing Expenses 11 1,440,091 10,780,673

Gross Profit 2,123,428

Less Other Overheads:

Selling & Administrative Expenses 12 4,211,987

Financial Expenses 185,088 4,397,075

Net Operating Profit (2,261,647)

Add: Other Income 13 171,527

Net Profit Before Tax (2,090,120)

Provision for Tax 14 65,096

Net Profit after Tax (2,165,216)

Transferred to Balance Sheet

Signed in terms of our seprate report of even date attached.

Ahmed Mashuque & Co. Syed Alamgir, Director

Chartered Accountants T.K. Gupta, Director

Dhaka

April 07, 2004

directors' reportTo the Members of Asian Consumer Care Pvt. Ltd.,

Your Directors have pleasure in presenting the 1st Annual Report on the business andoperations of the Company together witht he Audited Accounts for the year ended31st March, 2004.Commercial Production : The company has successfully set up its plant and startedcommercial production of Amla Hair Oils, Vatika Coconut Oils and Shampoos from 1stJanuary, 2004.Financial ResultsTurnover (including other income) 12,916,101Profit before Tax (-)2,090,120Less: Provision for Taxation 65,096Profit after Tax (-)2,155,216Dividend : On the basis of financial results basedonthe operation of 3 months only,wherein there is a loss of TK 2,155,216 the Board of Directors have decided not torecommend any dividend.Business Performance : The Sales turnover of your company for the 1st month ofoperation was TK 12,916,101.Retirements of Directors : There is no mandatory requirement for the retirment ofdirectors for the Private Limited Company and also there is no clause in theMemorandum and Articles of Association of the company. Therefore non of the directoris retiring at the ensuing General Meeting of the company.Auditors : M/s Ahmed Mashuque & Company, Chartered Accountants, StatutoryAuditors, retire at the conslusion of ensuing Annual General Meeting and being eligibleoffer themselves for re-appointment as statutory auditors.Syed Alamgir, DirectorT.K. Gupta, Director

Dhaka

April 07, 2004

auditors' reportTo the Shareholders of Asian Consumer Care (Pvt.) Ltd.We have audited the annexed financial statements of Asian Consumer Care (Pvt.) Ltd.for the period ended 31st March 2004, which comprises Balance Sheet, IncomeStatement, Cash Flow statement and Notes to the financial statements, which havebeen prepared under the historical cost concept.Respective responsibilities of the management and auditors' : The management ofthe company is responsible for the preparation of the financial statements. It is ourresponsibility to form an independent opinion based on our audit on those statementsand to report our opinion to you.Basis of Opinion : We have conducted our audit in accordance with Bangladesh Standardson Auditing (BSA). an audit includes examination on a test basis of evidence relevant tothe amounts and disclosures in the financial statements. It also includes an assessmentof the significant estimates and judgments made by the management in the preparationoffinancial statements and or whether the accounting policies are appropriate to thecompany's circumstances, consistently applied and adequately disclosed.We planned and performed our audit so as to obtain all the information and explana-tions which are considered necessary in order to provide us with sufficient evidence togive reasonable assurance that the financial statements are free from materialmisstatement, whether caused by fraud or other irregularity or error. In forming ouropinion we also evaluated the overall adequacy of the presentation of information inthe financial statements.Opinion: In our opinion;a) The financial statements give a true and fair view of the state of affairs of the

company as at 31st March 2004 and of the results of its operation and Cash Flowfor the period then ended contain all the information in the manner required bythe companies Act 1994;

b) Proper books of accounts have been kept by the Company as required by theCompanies Act 1994;

c) The financial statements are in agreement with the books of accounts maintainedby the company and examined by us.

d) The financial statements have been drawn up in conformity with the Companies Act 1994.

Dhaka Ahmed Mashuque & Co.April 07, 2004 Chartered Accountants

(All amounts in Bangla Taka, except share data)

S28 FINANCIALS I ASIAN CONSUMER CARE PRIVATE LIMITED

CASH FLOW STATEMENT FOR THE PERIOD ENDED 31ST MARCH 2004

31.03.2004

Income :

Sales (Net)

Cash Flow from Operating Activities:Net profit/(loss) after Tax (2,155,216)Add: Depreciation 189,117Cash generated from operation before (1,966,099)re-investing in working capitalIncrease/(Decrease) in-Inventories (3,136,119)Sundry Debtors (5,270,465)Loans and Advances (1,249,667)Security Deposits (698,520)Outstanding Liabilities 1,636,518Adjustment for Changes in working capital (8,718,283)

A. Net cash flow from operating activities (10,684,352)

Cash Flow From Investing Activities:FDR (5,159,317)Pre-operative Expenses (4,731,010)Acquisition of fixed assets (4,438,245)

B. Net cash flow from investing activities (14,328,572)Cash Flow from Financing Activities:Paid-up Share Capital 14,975,990Bank overdraft 10,063,041

C. Net cash flow from financing activities 25,039,031Net Increase in cash and cash equivalents (A+B+C) 26,107Add: Cash and cash equivalents at beginning of period -Cash and cash equivalents at the end of the period 26,107

Signed in terms of our report of even date.



Dhaka

April 07, 2004

NOTES TO THE FINANCIAL STATEMENTSFor the period ended 31st March, 2004

1.00 The company and its Nature of Activities:

Asian Consumer Care (Pvt.) Ltd. incorporated in Bangladesh as a privatelimited company on 16th June 2003 having its registered office at ACI Centre,245 Tejgaon I/A, Dhaka-1208 vide registration no C-49886(181)/2003. The mainobjective of the company to manufacture and market coconut oil, hair oil,shampoo and other product under the trade mark "Dabur" or other trademarkssub-licensed to it by DABUR INTERNATIONAL LTD., registered office at54-58, Athol Street, Doublas, Isle of Man, UK.

2.00 Significant Accounting Policies:

2.01 Basis of the financial Statements:

The financial statements have been prepared under accrual accountingsystem on going concern basis under historical cost concept.

2.02 Inventories:Valuation Policy:The inventories ofthe company have been valued at lower of the historic costand net realizable.

Basis of Valuation:

The inventories ofthe company have been valued under the following basis:

Sub-classification of inventories Basis of Valuation

a) Raw & Packing Materials At cost under FIFO Methodb) Finished Goods At cost under FIFO Methodc) Stores & spares Under FIFO Method

Verification of Inventories:The inventories was physically verified and valued by the management.

2.03 Depreciation:Depreciation on fixed assets of the company's own use is charged on reducingbalance method. No Depreciation has been charged for pre commercialoperation period i.e. January 01, 2004.

Rate of Depreciation:The company charges depreciation on the fixed assets varying from 10% to18%, which are as under:Plant & Machinery 18%Office Equipment 10%Computer 10%Fire Extinguisher 10%Furniture & Fixture 10%

3.00 Share Capital:Authorized Share capital 100,000,000Issued, and paid-up Capital 1,49,75,99014,97,599 ordinary shares of Taka 10/- each

4.00 Fixed Assets: 42,49,128A detail schedule of fixed assets have been enclosed herewith namely Annexure-1

5.00 Pre-operative Expenses: 47,31,010It represents the expenses incurred before commencement of commercialoperation.The break-up of the above is as under:Salary 25,66,882Office Rent 99,000Workers welfare 15,506Relocation Expenses 1,10,668Factory Rent 2,49,000Driver Salary 36,101Bank Charges 19,257Books & Periodicals 2,640General Charges 60,698Guest House Expenses 2,00,115Lease Rent 2,84,680Legal & Professional Charges 1,38,950Petrol Expenses 19,335Postage & Telephone 33,416Printing & Stationeries 32,048Rates & Taxes 15,000Staff Welfare 2,24,136Travelling Expenses 3,32,693Launch Expenses 1,15,031Guest House Expenses 1,75,874

47,31,010The amount will be written off in next year.

6.00 Inventories: 31,36,119Break up of the above amount is as under:Raw Materials 8,75,310Packing Materials 17,98,577Finished Goods 2,05,480Stock of Promotional Materials 1,08,000Scrap Items 1,50,752

31,36,119

7.00 Loans & Advance 12,49,667The break up of the above amount is as underAdvance for Raw Materials 2,15,232Prepaid Expenses 17,287Advance Income Tax 2,21,662Advance Payment of VAT 7,40,613Advance Payment of Supplementary Duty 32,981Advance to Staff 21,892

12,49,667


S29Dabur India Limited I ANNUAL REPORT I 2003-04

8.00 Liabilities for Expenses 16,36,518The above amount comprises the followingsOutstanding Liabilities 15,24,809Tax Deducted at Source 1,11,709Total 16,36,518

9.00 Sales 1,29,16,101Product wise details break up of the abo ve amount is as under:Amla Hair oil 44,23,545Honey 33,61,480Shampoo 27,45,668Vatika Coconut oil 48,66,149Total 1,53,96,842Less: VAT & SD 24,80,741Net Sales for the Period 1,29,16,101

10.00 Costof Materials 93,40,582Purchase:Honey Imported 29,85,104Raw materials 50,39,362Packing Materials 43,44,235 1,23,68,701Less: Closing Stock:Raw materials 8,75,310Packing Materials 17,96,577Finished Goods 2,05,480Scrap Items. 1,50,752 30,28,119Total Cost of Raw Materials 93,40,582

11.00 Manufacturing Expenses 14,40,091The breakup of the above amount is as under:Wages 1,20,956Factory expenses 22,975Power and Utility 1,50,000Labels Written off 84,028Insurance 3,46,770Bank charges 2,87,996Workers Welfare 2,508Rent 2,49,000Depreciation 1,75,862

14,40,091

12.00 Selling and Administrative Expenses 42,11,987The details of the above amountis as underSalary & Allowances 22,19,986Rent 99,000Bank Charges 71,999Books and Periodicals 2,380General Expenses 25,193Audit fees 50,000Conveyances 56,123Lease Rent 2,13,510Legal and Professional fees 1,19,750Petrol Expenses 23,915Postage and Telephone 6,122Printing & Stationeries 10,590Repair and Maintenance 13,876Royalty 5,76,278Staff welfare 99,441Telephone Expenses 54,193Traveling Expenses 4,01,083Unloading Expenses 1,875Vehicle Repair and Maintenance 2,252Sales and Marketing Expenses 1,51,165Depreciation 13,255

42,11,987

13.00 Other Income 1,71,527Details break up of the above amount is as under:Miscellaneous Income 12,210Interest on FDR 1,59,317

1,71,527

14.00 Provision for Tax 65,096Advance income tax at import stage for finished goods are considered as finaldischarge of income tax liability u/s 82(c) of the Income Tax Ordinance 1984,accordingly advance income tax paid on import of Honey (Finished Goods)during the period has been considered as provision for Income tax.

15.00 Generala)The figures in the financial statements represent Bangladesh currencies, whichhave been rounded off to the nearest taka.b)Forgoing notes form an integral part of the annexed Financial Statementsand accordingly are to be read in conjunction therewith.


ANNEXURE A1

HEAD OF ASSETS COST DEPRECIATION WRITTEN

Balance Adjustment Addition Total Rate Balance Adjustment Charged Total DOWNas on during as on % as on during as on VALUE

16.06.2003 the period 31.03.2004 16.06.2003 the period 31.03.2004

Plant & Machinery - - 3,908,035 3,908,035 18 - - 175,862 175,862 3,732,173Office Equipment - - 38,220 38,220 10 - - 956 956 37,265Computer - - 37,500 37,500 10 - - 938 938 36,563Fire-Extinguisher - - 13,600 13,600 10 - - 340 340 13,260Furniture & Fixture - - 440,890 440,890 10 - - 11,022 11,022 429,868

TOTAL - - 4,438,245 4,438,245 - - 189,117 189,117 4,249,128



Dhaka

April 07, 2004

FINANCIALS I ASIAN CONSUMER CARE PRIVATE LIMITEDS30


directors' report

Your Directors have pleasure in presenting the 4th Annual Report on the business andoperations of the Company together with the financial statement for the year ended31st March, 2004.

Financial Results and Operations :

Particulars Amt. (Rs. in lacs)

Turnover 3.83Loss for the year (16.20)Loss Brought Forward (.15)Balance carried over to Balance Sheet (16.35)

During the year the Company has set up a new project for processing of fruits andvegetables in Siliguri, West Bengal at a cost of Rs.21 crores and commenced thecommercial production in March 2004.

The Company proposes to produce Mango, Lichi, Guava, Pineapple and Tomato Pulpsand concentrates for exports as well to cater to domestic requirements. For its exportmarkets it plans to take the expertise of its holding Company, Dabur Foods Ltd. formarketing its products. The target markets are Middle East and Europe.

Further during the period under review, w.e.f. 28/11/2003 the Company had became WhollyOwned Subsidiary of Dabur Foods Limited. Accordingly as per the provisions of Section 3of the Companies Act, 1956, the status of the Company was changed from private topublic. The name of the Company was changed from Pasadensa Foods Private Limited toPasadensa Foods Limited w.e.f. 04/03/2004 as per the amended Certificate of Incorporationissued by the Registrar of Companies, NCT of Delhi.

Further, during the year the Authorised Share Capital of the Company was increasedfrom Rs.1,00,00,000/- (Rupees One Crore) divided into 10,00,000 (ten lac) Equity Sharesof Rs.10/- each to Rs.6,00,00,000/- (Rupees six crores) divided into 60,00,000 (sixtylacs) Equity shares of Rs.10/- each.

The paid up share capital of the Company was also increased from Rs.1,00,000/- (Rupeesone lac) to Rs.5,00,00,000/- (Rupees Five Crores) by issuing equity shares of Rs.10/-each to the holding Company, Dabur Foods Limited.

Director‘s Responsibility Statement :

Pursuant to the requirement under section 217(2AA) of the Companies Act, 1956 withrespect to Directors’ Responsibility Statement, it is hereby confirmed:

i) that in the preparation of the annual accounts for the financial year ended31st March, 2004, the applicable accounting standards had been followedalong with proper explanation relating to material departures;

ii) that the directors had selected such accounting policies and applied themconsistently and made judgements and estimates that were reasonable andprudent so as to give a true and fair view of the state of affairs of the Companyat the end of the financial year and of the profit or loss of the Company forthe year under review;

iii) that the directors had taken proper and sufficient care for the maintenanceof adequate accounting records in accordance with the provisions of theCompanies Act, 1956 for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities.

iv) That the directors had prepared the accounts for the financial year ended31st March, 2004 on a ‘going concern’ basis.

Audit Committee :The Audit Committee of the Company, constituted on 31/03/04, comprises of Mr. AmitBurman, Mr. Ashok Kr. Jain and Mr. K P Agarwal, all non-executive Directors with Mr.Amit Burman as its chairman. The role, terms of reference and the authority and powersof the Audit Committee are in conformity with the requirements of the CompaniesAct, 1956.

Directors :In accordance with the provisions of the Companies Act, 1956 and the Articles ofAssociation of the Company, Mr. Ashok Kr. Jain, Director retires by rotation and beingeligible offer himself for re-appointment.

Auditors :During the year under review M/s G. Basu & Company were appointed as StatutoryAuditors of the Company to fill the casual vacancy caused by the resignation of M/s. V.Ahuja & Company.

M/s. G. Basu & Company, Chartered Accountants, Kolkata, Statutory Auditors of theCompany will retire at the ensuing Annual General Meeting and being eligible, offerthemselves for reappointment.

Energy Conservation, Research and Development, Technology Absorption,Foreign Exchange Earnings and Outgoing :A. Conservation of Energy(a) Energy conservation measures taken -

During the year, the Company was engaged in installation of new processinglines for commencement of business and production was carried out for merelyfive days. Hence Energy conservation measures are yet to be taken;

(b) Additional investment & proposals, if any, being implemented for reduction ofconsumption of energy -This being a new unit no additional investments are required in immediate future.Suitable action will be taken for additional investment required, if any, dependingupon the gaps, if any, found after successful operation of plant for a reasonableperiod.

(c) Impact of measures at (a) and (b) above for reduction of energy consumption andconsequent impact on the cost of production of goods -Not Applicable;

(d) Total energy consumption and energy consumption per unit of production

As per Form A attached as Annexure I.

B. Technology AbsorptionEfforts made in technology absorption as per Form B attached as Annexure II.

C. Foreign exchange earnings and outgoing(a) activities relating to exports; initiatives taken to increase exports; development of

new export markets for products and services; and export plans-

During the year no export activity was undertaken by the Company. The Companyproposes to produce Mango, Lichi, Guava, Pineapple & Tomato pulps andconcentrates for exports to Middle East and Europe.

(b) total foreign exchange used and earned-

Outgoings by way of import of Plant & Machinery – Rs.10,06,10,142.65 (includingCWIP)

Fixed Deposits :The Company has not accepted Fixed Deposits pursuant to section 58A of the CompaniesAct, 1956.

Employees :During the year under review no employee of the Company was in receipt ofremuneration exceeding the limits as laid down in Section 217(2A) of the CompaniesAct, 1956. Therefore, the information as required u/s 217(2A) of the Act, read with theCompanies (particulars of Employees) Rules, 1975 is not being given.

Acknowledgement :Your Directors would like to express their grateful appreciation for the assistance andco-operation received from the Banks, Government authorities and shareholders duringthe Year under review.


Amit Burman, DirectorAshok Kr. Jain, Director


TO THE MEMBERS OF I PASADENSA FOODS LIMITED I

S31

FINANCIALS I PASADENSA FOODS LIMITED

directors' report

ANNEXURE TO DIRECTORS’ REPORTANNEXURE- I

FORM ‘A’

(Form for Disclosure of particulars with respect to conservation of Energy)

A. POWER AND FUEL CONSUMPTION:1. Electricity Current Year Previous Year

(2003-04) (2002-03)a) Purchased: Nil

Unit (Nos.) 9944Total Amount (Rs.) 53008Rate/Unit (Rs.) 5.33

b) Own Generation: Nil Nili) Through Diesel Generator:

Unit (Nos.)Unit per litre of Diesel Oil (Rs.)Cost/Unit (Rs.)

ii) Through Steam Turbine GeneratorUnit (Nos.)Unit per litre of Fuel Oil/GasCost/Unit (Rs.)

2. Coal (Specify quality and Current Year Previous Yearquantity used (Tonnes) (2003-04) (2002-03)Total RateAverage Rate

3. Furnace Oil:Quantity (Kilo Litre)Total AmountAverage Rate Nil Nil

4. Other Internal Generation: (Please give details)QuantityTotal CostRate/Unit Nil Nil

B. Consumption per unit of production: Standard Current PreviousProducts (with details) unit (if any) Year YearElectricityFurnace OilCoal (specify quality)Others (specify)

During the year the Company has set up a new project and has installed processinglines for production. The production was carried out for only 5 days towards the end ofthe year. The major part of Power and fuel consumption was for construction andinstallation work, hence consumption for production purposes was negligible andunascertainable.

ANNEXURE TO DIRECTORS‘ REPORT ANNEXURE II

FORM ‘B’(See Rule 2)

[Form for Disclosure of Particulars with respect to Technology Absorption]

Research and Development (R&D)1. Specific areas in which R & D carried : Nil

out by the company2. Benefits derived as a result of the above : N/A

R&D3. Future plan of action : To undertake R&D activities in the

area of fruit pulp processing witha view to standardise the qualityas per specifications andcustomers needs and to developnew variants of fruit/vegetablebased products.

4. Expenditure on R&D : Nila) Capitalb) Recurrngc) Totald) Total R&D expenditure as a

percentage of Total Turnover.

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION1. Efforts, in brief, made towards : During the year the Company has

technology absorption, adaptation set up new Lines for processingand innovation of fruits/ vegetables and success

fully commenced the productionof fruit pulp.

2. Benefits derived as a result of the : The Company was able toabove efforts e.g. productsuccessfully produce fruit pulp.improvement, cost reduction,product development, importsubstitution, etc.

3. In case of imported technology : N/A(imported during the last five yearsreckoned from the beginning of thefinancial year) following informationmay be furnisheda) Technology imported :b) Year of import. :c) Has technology been fully absorbed :d) If not fully absorbed, areas where this has not taken place, reasons thereforand future plans of action.


S32


auditors' report

1. We have audited the attached balance sheet of Pasadensa Foods Limited as at31st March, 2004 and the profit and loss account for the year ended on that dateannexed thereto. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financialstatements based on our audit.

2. We conducted our audit in accordance with auditing standard generally acceptedin India. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis,evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 issued by the CentralGovernment in terms of Sub Section (4A) of Section 227 of the Companies Act,1956, we enclose in the annexure a statement on the matters specified in theorder to the extent applicable to the company.

4. Further to our comments in the Annexure referred to above, we report that:

(i) We have obtained all the information and explanations, which to the best ofour knowledge and belief were necessary for the purpose of our audit;

(ii) In our opinion, proper books of accounts as required by law have been keptby the Company so far as appears from our examination of those books;

(iii) The Balance Sheet and Profit and Loss Account dealt with by this report arein agreement with the books of accounts;

(iv) In our opinion, the Profit & Loss Account and the Balance Sheet dealt withby this report comply with the mandatory accounting standards, to the extentapplicable, referred to in sub-section (3C) of Section 211 of the CompaniesAct, 1956;

(v) On the basis of written representation received from the directors as on 31st

March, 2004 and taken on record by the Board of Directors, we report thatnone of the Directors is disqualified as on 31st March, 2004 from beingappointed as a Director in terms of Clause (g) of sub-section (1) of Section274 of the Companies Act, 1956;

(vi) In our opinion and to the best of our information and according to theexplanations given to us, the said accounts give the information required byCompanies Act, 1956, in the manner so required and give true and fair viewin conformity with the accounting principles generally accepted in India:

(a) In the case of Balance Sheet, of the state of affairs of theCompany as at 31st March, 2004; and

(b) In the case of Profit and Loss account, of the loss for the yearended on that date.

For G. BASU & CO.Chartered AccountantsAnil KumarPartnerMembership No.9390


ANNEXURE TO THE AUDITORS’ REPORT(As referred in paragraph 3 of our report to the members of PASADENSA FOODS LIMITEDon the accounts for the year ended 31st March 2004)

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

b)As explained to us, all the fixed assets of the company were acquired/purchasedduring the year and the same have been physically verified by the management..We are informed that no material discrepancies were noticed on such verificationas compared to book records.

c) The company during the year has not disposed of any of its fixed assets, majoror otherwise, which has any effect on its going concern status.

ii) a) The inventory has been physically verified during the year by the management.In our opinion, the frequency of verification is reasonable.

(b) The procedures of physical verification of inventory followed by themanagement are reasonable and adequate in relation to the size of the companyand the nature of its business;

(c) The company is maintaining proper records of inventory and according to theinformation and explanations given to us, no material discrepancies were noticedon physical verification of the Inventory;

iii) a) As per information and explanations provided to us, during the year companyhas taken unsecured loan from parties referred in the register maintained undersection 301 of Companies Act, 1956 comprising (1) an unsecured loan from aCompany aggregating to Rs.12 crores with the same maximum balance but nilbalance at the close of the year; and (2) from a Director and his six relativesincluding a Hindu Undivided Family aggregating to Rs.40.42 lacs with the samemaximum balance during and at the close of the year.

The company has not granted any loan during the year to any party covered inthe register maintained under Section 301 of the Companies Act, 1956.

b) According to the explanations given to us, the rate of interest and other termsand conditions of the aforesaid unsecured loans taken by the company are notprima facie prejudicial to the interest of the company;

c) In our opinion and according to the information and explanations given to us,the repayment of principle and interest thereon are regular.

(iv) In our opinion and according to the information and explanations given to us,there are adequate internal control procedures commensurate with the size ofthe Company and the nature of its business, with respect to purchase of inventoryand fixed assets and with regard to the sale of goods.

(v) a)As per information and explanations given to us we are of the opinion that allthe transactions that need to be entered in to a register maintained under Section301 of the Companies Act, 1956 have been so entered.

b)In our opinion and according to the information and explanations given to usthere are no revenue transaction made during the year in pursuance of contractor arrangements that are entered in the register maintained under section 301 ofthe Companies Act and exceeding the value of Rs. five lakh in respect of anyparty.

(vi) The Company has not accepted any deposits from the public under Section 58Aand 58AA of the Companies Act, 1956.

(vii) Central Government has not prescribed cost records under Sec.209 (1) (d) of theCompanies Act, 1956 for the company.

(viii) a) The company has been regular in depositing the undisputed statutory duesincluding Provident Fund, Investor Education and Protection Fund, Employees’State Insurance, Income-tax, Sales-tax, Wealth Tax, Custom Duty, Excise Duty,cess and any other statutory dues applicable to it.

b) As informed to us there is no due on account of Sales tax/Income tax/ customduty/wealth tax/excise duty/cess, which has not been deposited on account anydispute.

ix) In our opinion the company has not defaulted in the repayment of dues to thefinancial institutions or banks. The company has not issued any debenture.

x) The company has not granted any loans on the basis of security by way of pledgeof shares, debentures and other securities.

xi) The company has not given any guarantee for loans taken by others from banksor financial institutions.

xii) In our opinion the term loans have been applied for the purpose for which theyare obtained.

xiii) According to the information and explanations given to us, the funds on shortterm basis have not been used for long term investment and vice versa.

xiv) According to the information and explanations given to us, the company hasmade preferential allotment of shares to parties and companies covered in theregister maintained under section 301 of the Act. In our opinion, the price atwhich the shares have been issued is not prejudicial to the interest of the company

xv) According to the information and explanations given to us, no fraud on or by thecompany has been noticed or reported during the course of our audit.

xvi) Other paras of the order are not applicable to the company.

For G. BASU & CO.Chartered AccountantsAnil KumarPartnerMembership No.9390



S33



for the year ended for the year endedSchedule 31st March 2004 31st March 2003

SOURCES OF FUNDShareholders FundShare capital A 50,500.00 100.00

LOAN FUNDSSecured Loan B 120,000.00 -Unsecured loans C 4,042.00 124,042.00 - -

TOTAL 174,542.00 100.00

APPLICATION OF FUNDS:FIXED ASSETS:Gross Block E 179,701.74 -Less: Depreciation 250.68 -Net Block 179,451.06 -

Current Assets, Loans & Advances: FSundry Debtors 360.37 -Cash & Bank Balance 20,355.90 68.34Loans & Advances 342.58 -

21,058.85 68.34-

Less: Current Liabilities and Provisions: DLiabilities 27,603.37 3.15Net Current Assets (6,544.52) 65.19

Miscellaneous Expenditure(to the extent not written off or adjusted) - 19.95

Profit & Loss 1,635.46 14.86

Notes to Accounts L

Total 174,542.00 100.00

profit & loss account FOR THE YEAR ENDED 31ST MARCH 2004

INCOME:Export Sales 350.01 -Interest Income 32.89 3.53

Total Income 382.90 3.53

EXPENDITURE:Cost of Materials G 325.50 -Payment to and provision made for Employees H 8.40 -Selling and Administrative Expenses I 597.44 7.66Financial Expenses J 321.53 -Miscellaneous expenditure written Off K 499.95 -Depreciation 250.68 -Total Expenditure 2,003.50 7.66Balance being Loss (1,620.60) (4.13)Loss brought Forward (14.86) (10.73)Balance Carried over to Balance sheet (1,635.46) (14.86)

balance sheet AS AT 31ST MARCH 2004


For Pasadensa Foods Ltd.

Amit Burman Director

Ashok Kr. Jain Director

As per our report of even date attachedFor G. Basu & Co.Chartered Accountants

Anil KumarPartner


S34


as at 31.03.2004 as at 31.03.2003as at 31.03.2004 as at 31.03.2003

SCHEDULE H - PAYMENTS TO &PROVISONS FOR EMPLOYEESSalary, Wages and Bonus 8.40 -

SCHEDULE I - SELLING ANDADMINISTRATIVE EXPENSESRent 124.95 -Electricity & Water charges 53.01 -Lodging & Boarding chgs 29.33 -Printing & Stationery 11.38 0.16Repairs & Maintenance 54.17 -Travel & Conveyance 86.35 -Telephone Expenses 62.26 -Security Service Charges 44.85 -Membership Fees 10.00 -Filing Fees 5.70 2.80Professional Expenses 63.19 -Misc. Expenses 37.25 1.55Audit Fee 15.00 597.44 3.15 7.66

SCHEDULE J - FINANCIAL EXPENSESInterest paid on:Fixed Period Loan 172.60 -Others 146.62 -Bank charges 2.31 321.53 - -

SCHEDULE K - MISCELLANEOUS EXPWRITTEN OFFPreliminary expenses, fees for increaseof share and other miscellaneousExpenses written off 499.95 -

SCHEDULE F - CURRENT ASSETS,LOANS & ADVANCESStock -in-Trade: Nil -

Sundry Debtors(Unsecured & considered good):Less than 6 months 360.37 -Cash & Bank Balance:Cash in Hand 12.35 -Balances with Scheduled Banksin Current Accounts 8,258.55 -in Fixed deposit Account(Pledged against 12,085.00 20,355.90 - -guarantee given by bank)Loans & Advances(Unsecured & considered good):Security Deposit with WBSEB 256.70 -Other advances 52.99 -Interest Receivable 32.89 342.58 - -

SCHEDULE G - COST OF MATERIALSRaw material consumedOpening - -Add: Purchase 291.50 -Less: Closing Stock - 291.50 - -

Packaging material consumedOpening - -Add: Purchase 34.00 -Less: Closing Stock - 34.00 - -

325.50 -

as at 31.03.2004 as at 31.03.2003as at 31.03.2004 as at 31.03.2003SCHEDULE A - SHARE CAPITAL

Authorised Capital6000000 (previous year 100000)Equity Shares of Rs.10/- each 60,000.00 1,000.00

Issued , Subscribed & Paid Up5000000 (previous year 10000) EquityShares of Rs 10/- fully paid up 50,000.00 100.00Share Application Money pendingallotment 500.00

50,500.00 100.00SCHEDULE B - SECURED LOANTerm Loan from GE Capital Services 120,000.00 -Secured by:First charge by way of hypothication ofmovable (save and except book debtsand other current assets) properties,

present and future, and equitablemortgage of the immovable propertiessituated at Siliguri, West Bengal.

SCHEDULE C - UNSECURED LOANS 4,042.00 -

SCHEDULE D - CURRENT LIABILITIESCreditor for Goods 325.50 -Creditor for Capital Goods 26,179.66 -Creditors for Expenses 392.88 -Tax Deducted at Source 226.31 -Amount due to Holding Co 90.75 -Intt. Accrued but not due on Loans 388.27

27,603.37 -

SCHEDULE B - SECURED LOAN (Contd.)

SCHEDULE E - FIXED ASSETS

NAME OF ASSETS GROSS BLOCK DEPRECIATION NET BLOCK

As on Additions Adjustment As on As on For the year Adjustment As on As on As on1-Apr-03 During the Year 31-Mar-04 1-Apr-03 During the Year 31-Mar-04 31-Mar-04 31-Mar-03

Freehold land - 4,931.36 - 4,931.36 - - - 4,931.36 4,931.36 -Building - 29,835.69 - 29,835.69 - 40.87 - 40.87 29,794.82 -Plant & Machinery - 109,934.97 - 109,934.97 - 209.48 - 209.48 109,725.49 -Furniture & Fixture - 24.00 - 24.00 - 0.06 - 0.06 23.94 -Computers - 48.50 - 48.50 - 0.27 - 0.27 48.23 -Capital Work-in-progress - 34,927.22 - 34,927.22 - - - - 34,927.22 -

TOTAL - 179,701.74 - 179,701.74 - 250.68 - 250.68 179,451.06 -

Note: Capital Work in Progress includes advances against capital goods Rs. 32,883.15 ( previous year NIL)



S35


L. NOTES FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31stMARCH,2004

A. ACCOUNTING POLICIESSignificant accounting policies are summarized below:

1. Accounting ConventionThe financial statements are prepared under the historical costconventionin accordance with applicable mandatory AccountingStandards and relevant provisions of the Companies Act, 1956.

2. Fixed Assets and Depreciation• Fixed assets are stated at cost less depreciation. Cost includes inward

freight, duties and taxes and expenses incidental to acquisition.• Depreciation on Fixed Assets has been provided on written down value

method at rates specified in Schedule XIV of the Companies Act.3. Recognition of Income and Expenses

• Sales and purchases are accounted for on the basis of passing of title tothe goods.

• Export sales are accounted for on the basis of date of bill of lading.• All items of incomes and expenses have been accounted for on accrual

basis.4. Borrowing Cost

Borrowing cost that are attributable to acquisition of qualifying assetsare capitalized as part of the cost of such assets. All other borrowingcosts are charged to revenue.

5. Foreign Currency TranslationLiability payable in respect of acquisition of fixed assests are translatedat the exchange rate ruling at the year end.

6. Deferred TaxationThe liability of company is estimated considering the provision of theIncome Tax Act, 1961. Deferred tax is recognized subject to the consid-eration of prudence, on time differences being the difference betweentaxable income and accounting income that originate in one periodand capable of reversal in one or more subsequent period.

7. Contingent LiabilityContingent liabilities have not been provided, however shown into thenotes to accounts.

8. Preliminary ExpensesPreliminary expenses and fees for increase of Share Capital are chargedin Profit and Loss account in the year of incurrence/commencement ofbusiness.

B. NOTES TO ACCOUNTS

1. Contingent Liabilities· Bank Guarantees issued by banks on behalf of the company

Rs.1,20,85.00 (previous year Rs.Nil).· In respect of Letters of Credit Rs. 21546.86 (previous year Rs.Nil).· Liability for capital commitment Rs. 30398.52 (previous year Rs. Nil).



2. Balances of Sundry Creditors and Debtors are subject to their confirmation.

3. Particulars of consumption of Important Raw Materials2003-2004 2002-2003

Class of Goods Qty.(In MT) Value Qty.(In MT) Value

Mango 20.75 291.50 - -291.50 - -

4. Value of Raw and Packing materials consumedRaw Material Packing Material

2003-2004 2002-2003 2003-2004 2002-2003Value % Value % Value % Value %

Imported - - - - - - - -Indigenous 291.50 100.00 - - 34.00 100.00 - -Total 291.50 100.00 - - 34.00 100.00 - -

5. Particulars of Traded /Manufactured GoodsClass of Goods Manufactured Opn. Stock Closing Stock Sale

Unit Qty. Qty. Value Qty. Value Qty. Value

Mango Pulp MT 7.768 - - - - 7.768 350.01

Total 7.768 - - - - 7.768 350.01

( Production Started in 2003-2004 only.)31.03.2004 31.03.2003

6. CIF Value of Imports (Purchases)Plant & Machinery Rs. 1,00,610.14 0.00

7. Segment ReportingThe company has primarily engaged in the business of fruit pulp, whichare governed by the same set of risk and return and therefor the entirebusiness is covered under one Food segment. The said treatment is inaccordance with the guiding principles enunciated in the Accounting Stan-dard on Segment Reporting (AS 17).

8. Sundry DebtorsBalance due from Dabur Nepal Pvt. Ltd a company in which one of theDirectors is a Directors Rs. 360.37 ( previous year NIL).

9. Deferred TaxationDeferred tax will be recognized after commercial opertion of the unit atreasonable capacity level, assuring virtual certainty of future profit torealize the deferred tax asset.

S36


10. Related Party Disclosure in accordance with AS 18 issued by ICAI:Related Party Transactions:

Particulars Holding Parent of Fellow Subsidiary Total OutstandingCompany Holding Company of Holding Company As on 31.3.04

Sale of Goods - - 350.01 350.01 350.01Repayment of Loan Recd. 120000.00 - - 120000.00 NILReceipt for share captial 50,000.00 - - 50,000.00 50,000.00

(of which Sharesallotted during the year)

Receipt as share application money 500.00 500.00 500.00Interest on Financing 1553.43 - - 1553.43 -Corporate Guarantees given byholding company - 1,60,000.00 - 1,60,000.00 1,60,000.00

Note:

Names of related parties and description of relationship:Dabur Foods Limited = Holding CompanyDabur India Limited = Parent of Holding CompanyDabur Nepal Pvt Ltd = Fellow Subsidiary of Holding Company



11. Auditors Remuneration includes· Audit Fee 15.00 3.15· Tax Audit Fees - -· Reimbursement of Expenses - -· Other Matters - -

15.00 3.15

12. The commercial production of the company was started on 27th March,2004. Accordingly depreciation on fixed the assets have been chargedfrom that date.

13. Term loan from GE Capital Services remain secured by corporateguarantee from Dabur India Ltd.

14. In view of losses suffered during the year, no provision for taxation hasbeen made.

15. Total outstanding dues to small scale industries Rs. NIL (previous year Rs.NIL)

16. Previous year figures have been regrouped and rearranged whereverconsidered necessary.

17. Additional information as required under Part IV of Schedule VI of theCompanies Act, 1956:

I. Registration DetailsRegistration No. 104539State Code 55Balance Sheet Date 31.03.2004

II. Capital raised during the year (amount in Rs. 000)Public Issue NILRight Issue NILBonus Issue NILPrivate Placement NILPromoters/Subscribers 49900.00

III. Position of Mobilization and Deployment of Funds (amount in Rs. 000)Total Liabilities 202145Total Assets 202145Sources of FundsPaid up Capital 50000Share Application Money 500Reserves and Surplus NILSecured Loans 120000Unsecured Loans 4042Application of FundsNet Fixed Assets 179451Investments Nil

Net Current Assets (6544)Misc. Expenditure NilAccumulated Losses 1635

IV. Performance of Company (amount in Rs. 000)Turnover 383Total Expenditure 2004Profit/(Loss) Before Tax (1621)Profit After Tax (1621)Earning per share in Rupee (0.32)Dividend Rate NIL

V. Generic names of Principal Products/Services of Company(As per Monetary terms)Item Code No. (ITC Code) 220240Product Description Fruit Pulp

16. Schedules A to L form an integral part of accounts.

As per our report of even date attached For Pasadensa Foods Ltd.

For G. Basu & Co. Amit Burman DirectorChartered AccountantsAnil Kumar Ashok Kr. Jain DirectorPartnerNEW DELHI28th April, 2004

S37

We have audited the accompanying balance sheet of WEIKFIELD INTERNATIONAL (U.A.E.) LIMITED - COSMETICS BRANCH (a limited liability company) -SHARJAH - UNITED ARAB EMIRATES as at 31 March 2004 and the related statements of income, changes in equity and cash flows for the year then ended. Thesefinancial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

Except as discussed in the following paragraphs, we conducted our audit in accordance with International Standards on Auditing. Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

1. The effect of change in estimated useful life of the property, plant & equipment amounting to AED. 633,753 is applied retrospectively and is credited to capital reserve,which is not in compliance with International Accounting Standards – Note 2(d).

2. The rates of depreciation applied on property, plant & equipment are not adequate to depreciate them over their useful lives – Note 2(d).

In our opinion, except as discussed in the preceding paragraphs, the financial statements referred to above present fairly, in all material respects, the financial position ofWeikfield International (U.A.E.) Limited - Cosmetics Branch (a limited liability company) - Sharjah - United Arab Emirates as at 31 March 2004 and the results ofits operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Talal Abu-Ghazaleh & Co.

Sharjah11 April 2004.

directors' report TO THE MEMBERS OF I WEIKFIELD INTERNATIONAL (UAE) LTD. COSMETICS BRANCH I

The Directors submit their report together with the audited financial statements for the year ended 31 March 2004 which show the state of affairs of the Cosmetics Branch of thecompany. We approve the financial statements and confirm that we are responsible for these including selecting the accounting policies and making the judgements, underlyingthem. We confirm that we have made available all relevant accounting records and information for their compilation.

Activity

The company carried out activities of manufacturing, import, export, warehousing and distribution of cosmetics and food products.

Results and dividends

The Sales turnover and net profit for the year, of the Cosmetic Branch of the company, was AED 13,873,053 and AED 874,766 respectively. No dividend is proposed for the year.

DirectorsThe directors who served during the period were as follows:Mr. Sidhartha BurmanMr. P.D. NarangMr. Arvind KumarMr. Sarabjeet Singh SehdevMr. Mukesh Malhotra

Events since the end of the year

There were no important events occurring since the year end that materially affect the company.

Auditor

A resolution to re-appoint Messrs Talal Abu Ghazaleh & Co. as the auditor and fix their remuneration will be put to the directors at the annual general meeting.


Director

Sharjah

1 April, 2004

auditors' report TO THE MEMBERS OF I WEIKFIELD INTERNATIONAL (UAE) LTD. COSMETICS BRANCH I

S38 FINANCIALS I WEIKFIELD INTERNATIONAL (UAE) LIMITED (COSMETICS BRANCH)


Schedule AS AT 31.03.04 AS AT 31.03.03

ASSETSNon-Current AssetsProperty, plant and equipment 2(d) & 3 2,874,022 2,528,089

Current AssetsInventories 2(f) & 4 1,825,068 1,253,722Trade and other receivables 5 3,900,212 1,944,624Due from Weikfield International (UAE) Ltd. - FoodstuffDivision - Sharjah (Related party) — 353,308Cash on hand 3,836 1,422

Total Current Assets 5,729,116 3,553,076

Total Assets 8,603,138 6,081,165

Equity and LiabilitiesPartners’ Equity :Capital reserve 6 633,753 —Accumulated profits 3,080,034 2,205,268

Total Partners’ Equity - Exhibit C 3,713,787 2,205,268

Non-Current LiabilitiesEnd of service benefits obligation 2(g) & 7 48,913 22,957

Current LiabilitiesDue to Weikfield International (UAE) Ltd. - FoodstuffDivision - Sharjah (Related party) 23,984 —Trade and other payables 8 1,858,567 766,905Post-dated cheques issued 35,000 22,000Due to a partner – Dabur International Limited 522,752 22,245Short-term borrowings 9 2,400,135 3,041,790

Total Current Liabilities 4,840,438 3,852,940

Total Equity and Liabilities 8,603,138 6,081,165

statement of income FOR THE YEAR ENDED 31ST MARCH, 2004

for the year ended for the year endedSchedule 31st March, 2004 31st March, 2003

Sales 2(h) 13,873,053 11,630,510Cost of sales 11 (8,662,251) (8,821,431)

Gross operating profit 5,210,802 2,809,079

Other operating income 18,920 9,981Sales promotion and distribution expenses (2,766,281) (1,330,827)Administrative expenses 12 (1,435,621) (681,139)Depreciation (32,318) (6,886)

Net operating profit 995,502 800,208Finance cost (120,736) (79,387)

Net Profit for the Year - Exhibit C & D 874,766 720,821

The accompanying notes constitute anintegral part of these financial statements

These financial statements have been authorised for issue on 11th April, 2004 by

Arvind Kumar DirectorSarabjeet Singh Director

Sharjah11th April, 2004


(All amounts in AED, except share data)

balance sheetExhibit A

Exhibit B

S39

STATEMENT OF CHANGES IN EQUITY EXHIBIT C

Term loan Capital Accumulatedfrom a partner Reserve profit Total

AED AED AED AED

Balance at 1 April 2002 1,000,000 — 1,484,447 2,484,447

Net profit for the year ended31 March 2003 - Exhibit A — — 720,821 720,821Repayment of term-loan (1,000,000) — — (1,000,000)

Balance at 31March 2003 - Exhibit A — — 2,205,268 2,205,268

Net profit for the year ended31 March 2004 - Exhibit A — — 874,766 874,766Write back of accumulateddepreciation – Transferred tocapital reserve — 633,753 — 633,753

Balance at 31 March 2004- Exhibit A — 633,753 3,080,034 3,713,787

NOTES TO FINANCIAL STATEMENTS

1. Status and Activities

Weikfield International (U.A.E.) Limited - Cosmetics Branch - Sharjah(hereinafter referred to as the “Company”) is a limited liability companyoperating under an annual industrial license issued from the EconomicDevelopment Department - Government of Sharjah.The domicile of the Company is in Sharjah City, Emirate of Sharjah - UnitedArab Emirate.

The main activity of the company is manufacturing of cosmetic products.

The number of employees in the company as of 31 March 2004 is 25 (31 March2003 : 22 employees).

2. Summary of Significant Accounting Policies

The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards. The significant accounting policies applied inthe preparation of the financial statements on a consistent basis are asfollows :-

a) Accounting convention

The financial statements have been prepared under the historical costconvention.

b) Presentation of financial statements

The attached financial statements include assets, liabilities and operatingresults of Weikfield International (UAE) Limited – Cosmetics Branch only.

c) Trade and settlement date accounting

The company adopts the settlement date accounting for the “regularway” purchase or sale of various categories of financial assets.Settlement date accounting requires the recognition of financial assetson the day it is transferred to the enterprise.

d) Depreciation of property, plant and equipment

Property, plant and equipment are stated at cost and depreciated usingthe straight line method at rates estimated to depreciate the assetsconcerned over their useful lives. Annual rates of depreciation used areas follows :-



31.3.2004 31.3.2003% %

Factory building 3.34 20Plant, machinery, tools and equipment 4.75 14.28Furniture, fixtures and office equipment 6.33 20Motor vehicles 9.50 20

The company changed the estimated useful life of property, plant andequipment with effect from 14 September 2003. The change has been done toalign the rates of depreciation followed by the company with its holdingcompany, Dabur India Ltd.

The change in estimated useful life of property, plant and equipment hasresulted in a decrease in accumulated depreciation by AED. 633,753 (Note 6)which has been credited to capital reserve.

e) Impairment

The carrying amounts of the Company’s assets are reviewed at each balancesheet date or whenever there is any indication of impairment. If any suchindication exists, the recoverable value of the assets is estimated. Animpairment loss is recognized where the carrying amount of an assetexceeds its recoverable value. Impairment losses are recognized in theincome statement.

f) Inventories

(i) Raw-materials: Raw materials are stated at the lower of cost or netrealizable value, cost being determined under the weighted averagemethod.

(ii)Finished products: Finished products are stated at the actual costincurred (which includes materials, labour and direct expenses) or netrealizable value whichever is lower.

g) End of service benefits obligationEnd of service benefits obligation is calculated in accordance with U.A.E.Labour Law requirements.

h) SalesSales represents the net amount invoiced for goods sold by the Companyduring the year.

i) Cash and cash equivalentsFor the purposes of preparing the Statement of Cash Flows (Exhibit D)“cash and cash equivalents” comprise of unrestricted cash on hand whichis subject to an insignificant risk of changes in value.

j) Foreign currenciesAssets and liabilities denominated in foreign currencies are expressed inArab Emirates Dirhams (AED) at rates of exchange ruling at the balancesheet date. Foreign currency transactions occurring during the year areexpressed in AED at rates of exchange prevailing on such transactiondates. All foreign currency gains and losses are credited or charged tostatement of income as they arise.

k) Financial instrumentsThe company’s financial instruments are comprised principally of tradeand other receivables, cash on hand and trade and other payables, post-dated cheques issued and short-term borrowings.

Fair value of financial instruments is arrived at by using various methodsof estimation that include determining the net realizable value, netsettlement value, market value or market value of a similar financialinstruments and estimates based on management’s judgment and pastexperience.




(All amounts in IAED, except share data)

3. Property, Plant and Equipment

a) Property, plant and equipment are stated at cost less accumulated depreciationas follows :-

Plant, mach. Furniture,Factory tools and fix. & office Motor

building equipment equipment vehicles TotalAED AED AED AED AED

Cost :At 1 April 2003 266,426 2,705,305 33,836 196,500 3,202,067Additions during the year — 17,266 — — 17,266

Balance at31 March 2004 266,426 2,722,571 33,836 196,500 3,219,333

AccumulatedDepreciation :At 1 April 2003 100,039 563,089 9,613 1,237 673,978Charged for the year- Exhibit D 29,110 243,622 4,251 28,103 305,086Written back –Note 3(b) below (103,544) (511,445) (8,681) (10,083) (633,753)

Balance at31 March 2004 25,605 295,266 5,183 19,257 345,311

Net Book Value :Balance at 31 March2004 - Exhibit A 240,821 2,427,305 28,652 177,243 2,874,022

Balance at 31 March

2003 - Exhibit A 166,387 2,142,216 24,223 195.263 2,528,089

b) The company changed the estimated useful life of the property, plant andequipment with effect from 14 September 2003. The changes were appliedwith retrospective effects from date of acquiring individual assets. This hasresulted in a decrease in accumulated depreciation by an amount of AED.633,753 which has been credited to capital reserve.

c) Factory building is constructed on leased sheds, which is renewed annually.

4. Inventories

This item consists of the following : 31.3.2004 31.3.2003

Raw-materials - Note 2(f)(i) 1,231,992 894,074

Finished products - Note 2(f)(ii) 483,516 359,648

Goods-in-transit 109,560 —

Total - Exhibit A 1,825,068 1,253,722

5. Trade and Other Receivables

a) This item consists of the following :

Trade receivables 3,711,412 1,769,994

Prepayments and other receivables - Note 5(b) 188,800 174,630

Total - Exhibit A 3,900,212 1,944,624

b) Prepayments and other receivables

This item consists of the following :

Prepaid expenses 78,278 136,386

Refundable deposits 4,000 4,000

Staff receivables 50,645 31,214

Advance to supplier 55,877 3,030

Total - Note 5(a) 188,800 174,630

6. Capital Reserve

Capital reserve amounting to AED. 633,753 (Exhibit A) represents the differencein accumulated depreciation on account of change in estimated useful life ofproperty, plant and equipment, applied retrospectively from the date ofacquiring the assets.

7. End of Service Benefits Obligation

The details of the movement in this account during the year are as follows :

31.3.2004 31.3.2003

Balance at 1 April 22,957 5,858

Current service cost 25,956 17,099

Balance at 31 March - Exhibit A 48,913 22,957

8. Trade and Other Payables


Trade payables 880,304 647,733

Accrued expenses 943,485 46,968

Provision for leave salary 34,778 25,510

Other payables — 46,694

Total - Exhibit A 1,858,567 766,905

9. Short-term Borrowings

a) This item consists of the following :

Bank overdrafts 1,286,634 2,981,163

Trust receipts 1,113,501 60,627

Total - Exhibit A 2,400,135 3,041,790

b) Security

Goods financed under trust receipts are held by the customer on behalf of thebank and the bank have a security interest in these goods.

10. Financial Instruments

a) Fair Value

The fair values of the Company’s financial assets and liabilities are not materiallydifferent from their carrying values as of the balance sheet date.

b) Credit Risk

Financial assets which potentially subject the Company to concentration ofcredit risk consist principally of current deposit with banks and trade receivables.The deposits are maintained with high credit quality banks and financialinstitution.

Concentration of credit risk with respect to trade receivables arises fromexposure to group of debtors operating in the trading businesses.

Concentration of credit risk also arises from the geographical area in whichthe debtors are located and in the Company’s case is concentrated mainly inGCC countries.

c) Interest Rate Risk

The interest on short-term borrowings is at fixed rate per annum.

11. Cost of SalesThis item consists of the following :

Year ended Year ended31.3.2004 31.3.2003

Raw-materials consumed 7,431,841 7,472,762Wages and other benefits 439,552 300,946Depreciation 272,768 423,286Rent expenses 132,983 91,931Water and electricity expenses 29,384 21,696Other direct expenses 479,591 546,676Cost of production 8,786,119 8,857,297Opening stock - Finished Products 359,648 323,782Closing stock - Finished Products (483,516) (359,648)Cost of Sales - Exhibit B 8,662,251 8,821,431

S41



12. Administrative Expenses

This item consists of the following :-Year ended Year ended

31.3.2004 31.3.2003

Staff salaries and other benefits 1,143,184 594,446

Travelling expenses 111,702 45,216

Telephone 51,855 485

Insurance expenses 26,710 10,968

Vehicle running and maintenance expenses 18,717 4,730Printing and stationery 2,193 1,544Legal and professional expenses 36,259 23,333Miscellaneous expenses 45,001 417

Total - Exhibit B 1,435,621 681,139

13. Related Party TransactionsThe company carried out transactions in the normal course of business withrelated parties. Transactions with related parties comprises principally of sales,purchases and financing transaction. The management considers such trans-actions to be in the normal course of business and at terms, which correspondto terms on normal arm’s length transactions with third parties. The aggre-gate amounts of various transactions with the partners occurred during theyear are as follows :

31.3.2004 31.3.2003

Sales to Dabur International Ltd. 5,002,315 5,881,813Purchases from Dabur International Ltd. 42,259 1,001,871Royalty to Dabur International Ltd. 261,131 168,696

14. Cash and Cash Equivalents

At 31 March 2004 and 31 March 2003 “cash and cash equivalents” included inthe Statement of Cash Flows (Exhibit D) comprise the following item :

31.3.2004 31.3.2003

Cash on hand 3,836 1,422

Total - Exhibit D 3,836 1,422


Contingent liabilities outstanding as at 31 March 2004 as declared by the bankswere AED. 38,443 towards shipping guarantees (31 March 2003 : AED. 56,779).

16. General

a) Certain prior year’s figures have been reclassified to conform to current year’spresentation.

b) The figures in these financial statements are rounded to the nearest Arab Emir-ates Dirhams (AED).

statement of cash flowFOR THE YEAR ENDED

EXHIBIT D


Cash Flows from Operating Activities

Net profit for the year - Exhibit B 874,766 720,821

Adjustments for:

Depreciation 305,086 430,172

End of service benefits 25,956 17,099

Operating Profit Before Working Capital Changes 1,205,808 1,168,092

(Increase) in inventories (571,346) (118,097)

(Increase) in trade and other receivables (1,955,588) (241,395)

Increase/(decrease) in trade and other payables 1,091,662 (391,713)

Increase/(decrease) in post-dated cheque issued 13,000 (143,439)

Net Cash (Used in)/Provided by Operating

Activities (216,464) 273,448

Cash Flows from Investing Activities

Purchase of property and equipment (17,266) (506,662)

Net Cash (Used in) Investing Activities (17,266) (506,662)

Cash Flows from Financing Activities

Increase/(decrease) in amount dueto/from Weikfield International (UAE) Ltd. - Foodstuff Division - Sharjah 377,292 (368,821)

Increase/(decrease) in due to a partner 500,507 (11,143)

(Repayment) of loan to a partner — (1,000,000)

(Decrease)/increase in short-term borrowings (641,655) 1,611,308

Net Cash Provided by Financing Activities 236,144 231,344

Net increase/(decrease) in cash andcash equivalents 2,414 (1,870)

Cash & cash equivalents at beginning of year 1,422 3,292

Cash & Cash Equivalents at end of

Year - Note 2(i) & 14 3,836 1,422

The Accompanying Notes Constitute an Integral Part of these FinancialStatements



TO THE MEMBERS OF WEIKFIELD INTERNATIONAL (UAE) LIMITED (FOODSTUFF DIVISION)

The Directors submit their report together with the audited financial statements forthe year ended 31 March 2004 which show the state of affairs of the foodstuff divisionof the company. We approve the financial statements and confirm that we are respon-sible for these including selecting the accounting policies and making the judgements,underlying them. We confirm that we have made available all relevant accountingrecords and information for their compilation.ActivityThe company carried out activities of manufacturing, import, export, warehousing anddistribution of cosmetics and food products.Results and dividendsThe Sales turnover and net profit for the year, of the Foodstuff Division of the com-pany, was AED 11,043,757 and AED 329,481 respectively. No dividend is proposed forthe year.DirectorsThe directors who served during the period were as follows:Mr. Sidhartha BurmanMr. P.D. NarangMr. Arvind KumarMr. Sarabjeet Singh SehdevMr. Mukesh MalhotraEvents since the end of the yearThere were no important events occurring since the year end that materially affect thecompany.AuditorA resolution to re-appoint Messrs Talal Abu Ghazaleh & Co. as the auditor and fix theirremuneration will be put to the directors at the annual general meeting.On behalf of the Board

DirectorSharjah11 April, 2004

auditors' reportWe have audited the accompanying balance sheet of WEIKFIELD INTERNATIONAL(U.A.E.) LIMITED - FOODSTUFF DIVISION (a limited liability company) -SHARJAH - UNITED ARAB EMIRATES as of 31 March 2004 and the relatedstatements of income, changes in equity and cash flows for the year then ended.These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements based onour audit.

Except as discussed in the following paragraphs, we conducted our audit inaccordance with International Standards on Auditing. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basis forour opinion.

1. The effect of change in estimated useful life of the property, plant &equipment amounting to AED. 1,016,157 is applied retrospectively and iscredited to capital reserve, which is not in compliance with InternationalAccounting Standards – Note 2(d).

2. The rates of depreciation applied on property, plant & equipment are notadequate to depreciate them over their useful lives – Note 2(d).

In our opinion, except as discussed in the preceding paragraphs, thefinancial statements referred to above present fairly, in all material respects,the financial position of Weikfield International (U.A.E.) Limited -Foodstuff Division (a limited liability company) - Sharjah - UnitedArab Emirates as of 31 March 2004 and the results of its operations andits cash flows for the year then ended in accordance with InternationalFinancial Reporting Standards.TALAL ABU-GHAZALEH & CO.Sharjah,11 April 2004.


balance sheet AS AT 31 MARCH 2004

EXHIBIT ANote 31.3.2004 31.3.2003

ASSETS

Non-Current AssetsProperty, plant and equipment 2(d) & 3 2,050,090 1,216,363

Current AssetsInventories 2(f) & 4 1,199,765 931,752Due from Weikfield International (UAE) Ltd. -Cosmetics Branch - Sharjah 23,984 —Trade and other receivables 5 1,886,038 2,202,870Cash on hand 982 22,896

Total Current Assets 3,110,769 3,157,518

Total Assets 5,160,859 4,373,881

Equity and LiabilitiesCapital and ReservesCapital 6 1,601,000 1,601,000Statutory reserve 7 104,651 71,703Capital reserve 8 1,016,157 —Term loan from a partner 9 — 850,000Accumulated (losses) (674,293) (890,826)

Net Equity - Exhibit C 2,047,515 1,631,877

Non-Current LiabilitiesEnd of service benefits obligation 2(g) & 10 128,616 97,010Current LiabilitiesTrade and other payables 11 1,091,719 1,182,704Post-dated cheques issued 98,100 91,550Due to a partner - Dabur International Ltd. 12,954 —Due to Weikfield International (UAE) Ltd. -Cosmetic Branch - Sharjah — 353,308Short-term borrowings 12 1,781,955 1,017,432

Total Current Liabilities 2,984,728 2,644,994

Total Equity and Liabilities 5,160,859 4,373,881

The Accompanying Notes Constitute an Integral Part of these Financial Statements

These financial statements have been authorized for issue on 11 April 2004 by :

Arvind Kumar DirectorSarabjeet Singh Director

Sharjah11th April, 2004

statement of incomeFOR YEAR ENDED 31st MARCH 2004

EXHIBIT BNote for the for the

year ended year ended31.3.2004 31.3.2003

Sales 2(h) 11,043,757 8,447,815Cost of sales 14 (9,222,723) (7,001,836)

Gross operating profit 1,821,034 1,445,979Other operating income 7,138 8,641Sales promotion and distribution expenses (621,967) (543,304)Administrative expenses 15 (693,084) (458,494)Depreciation (36,477) (55,848)

Net operating profit 476,644 396,974

Finance cost (147,163) (96,964)

Net Profit for the Year - Exhibit C & D 329,481 300,010


directors' report

S43


STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2004Exhibit C

Capital Statutory Capital Term loan Accumulated Totalreserve reserve from a partner (losses)

Balance at 1 April 2002 1,601,000 41,702 — 1,000,000 (1,080,835) 1,561,867

Net profit for the year ended 31 March 2003 - Exhibit A — — — — 300,010 300,010

Transferred to statutory reserve — 30,001 — — (30,001) —

Repayment of term-loan — — — (150,000) — (150,000)

Dividend — — — — (80,000) (80,000)

Balance at 31 March 2003 - Exhibit A 1,601,000 71,703 — 850,000 (890,826) 1,631,877Net profit for the year ended 31 March 2004 - Exhibit A — — — — 329,481 329,481Transferred to statutory reserve — 32,948 — — (32,948) —Repayment of term-loan — — — (850,000) — (850,000)Dividend — — — — (80,000) (80,000)Accumulated depreciation written back - Transferredto capital reserve — — 1,016,157 — — 1,016,157

Balance at 31 March 2004 - Exhibit A 1,601,000 104,651 1,016,157 — (674,293) 2,047,515


statement of cash flowsFOR THE YEAR ENDED 31 MARCH 2004

EXHIBIT DYear ended Year ended31.3.2004 31.3.2003

Cash flows from operating activitiesNet profit for the year - Exhibit B 329,481 300,010Adjustments for:Depreciation 201,591 276,949End of service benefits 39,537 31,569Operating Profit Before Working Capital Changes 570,609 608,528Increase in inventories (268,013) (127,259)Decrease in trade and other receivables 316,832 50,394(Decrease)/increase in trade and other payables (90,985) 169,347Increase in post-dated cheques issued 6,550 10,900Settlements of end of service benefits obligation (7,931) (9,098)Net Cash Provided by Operating Activities 527,062 702,812Cash flows from investing activitiesPurchase of property and equipment (19,161) (297,413)Net Cash (Used in) Investing Activities (19,161) (297,413)Cash flows from financing activities(Increase)/decrease in due from/to WeikfieldInternational (UAE) Ltd. - Cosmetics Branch - Sharjah (377,292) 368,821Increase/(decrease) in partner’s current account 12,954 (886,580)Increase in short-term borrowings 764,523 359,187Repayment of loan to a partner (850,000) (150,000)Dividend (80,000) (80,000)Net Cash (Used in) Financing Activities (529,815) (388,572)Net (decrease)/increase in cash and cash equivalents (21,914) 16,827Cash & cash equivalents at beginning of year 22,896 6,069Cash & Cash Equivalents at end of Year-Note 2(i) & 17 982 22,896

The Accompanying Notes Constitute an Integral Part of these FinancialStatements

notes to financial statements1. Status and Activities

Weikfield International (U.A.E.) Limited - Foodstuff Division - Sharjah(hereinafter referred to as the “Company”) is a limited liability companyoperating under an annual industrial license issued from the EconomicDevelopment Department - Government of Sharjah.

The domicile of the Company is in Sharjah City, Emirate of Sharjah - UnitedArab Emirate.

The main activity of the company is manufacturing and packing of foodstuff.

The number of employees in the company as of 31 March 2004 is 26 (31March 2003 : 23 employees).

2. Summary of Significant Accounting PoliciesThe financial statements have been prepared in accordance with InternationalFinancial Reporting Standards. The significant accounting policies appliedin the preparation of the financial statements on a consistent basis are asfollows :-

a) Accounting conventionThe financial statements have been prepared under the historical costconvention.

b) Presentation of financial statementsThe attached financial statements include assets, liabilities and operatingresults of Weikfield International (UAE) Limited – Foodstuff Division only.

c) Trade and settlement date accountingThe Company adopts the settlement date accounting for the “regularway” purchase or sale of various categories of financial assets. Settlementdate accounting requires the recognition of financial assets on the day itis transferred to the enterprise.

d) Depreciation of property, plant and equipmentProperty, plant and equipment are stated at cost and depreciated usingthe straight line method at rates estimated to depreciate the assetsconcerned over their useful lives. Annual rate of depreciation used are asfollows :

31.3.2004 31.3.2003% %

Factory building 3.34 20Plant, machinery, tools and equipment 4.75 14.28Furniture, fixtures and office equipment 6.33 20Motor vehicles 9.50 20

The company changed the estimated useful life of property, plant andequipment with effect from 14 September 2003. The change has beendone to align the rates of depreciation followed by the company with itsholding company, Dabur India Ltd.

The change in estimated useful life of property, plant and equipment hasresulted in a decrease in accumulated depreciation by an amount of AED.1,016,157 (Note 8) which has been credited to capital reserve.

S44 FINANCIALS I WEIKFIELD INTERNATIONAL (UAE) LTD. (FOODSTUFF DIVISION)



e) ImpairmentThe carrying amounts of the Company’s assets are reviewed at each balancesheet date or whenever there is any indication of impairment. If anysuch indication exists, the recoverable value of the assets is estimated.An impairment loss is recognized where the carrying amount of an assetexceeds its recoverable value. Impairment losses are recognized in the incomestatement.

f) Inventories(i) Raw-materials: Raw materials are stated at the lower of cost or net

realizable value, cost being determined under the weighted averagemethod.

(ii) Finished products: Finished products are stated at the actual cost incurred(which includes materials, labour and direct expenses) or net realizablevalue whichever is lower.

g) End of service benefits obligationEnd of service benefits obligation is calculated in accordance with U.A.E. LabourLaw requirements.

h) SalesSales represents the net amount invoiced for goods sold by the Company duringthe year.

i) Cash and cash equivalentsFor the purposes of preparing the Statement of Cash Flows (Exhibit D) “cashand cash equivalents” comprise unrestricted cash balance which is subjectto an insignificant risk of changes in value.

j) Foreign currenciesAssets and liabilities denominated in foreign currencies are expressed in ArabEmirates Dirhams (AED) at rates of exchange ruling at the balance sheetdate. Foreign currency transactions occurring during the year are expressedin AED at rates of exchange prevailing on such transaction dates. All foreigncurrency gains and losses are credited or charged to statement of income asthey arise.

k) Financial instrumentsThe Company’s financial instruments are comprised principally of trade andother receivables, cash balance, trade and other payables, post-dated chequesissued and short-term borrowings.

Fair value of financial instruments is arrived at by using various methods ofestimation that include determining the net realizable value, net settlementvalue, market value or market value of a similar financial instruments andestimates based on management’s judgment and past experience.

3. Property, Plant and Equipmenta) Property, plant and equipment are stated at cost less accumulated

depreciation as follows :-

Furniture,Factory Plant, mach., fix. and Motorbuilding tools & eqp. office eqp. vehicles Total

Cost :At 1 April 2003 186,274 2,122,188 245,260 191,500 2,745,222Additions — 11,901 7,260 — 19,161

Balance at 31 March 2004186,274 2,134,089 252,520 191,500 2,764,383

Accumulated DepreciationAt 1 April 2003 65,761 1,143,741 199,545 119,812 1,528,859Charged for the year- Exhibit D 20,353 144,761 17,549 18,928 201,591Written back – Note 3(b) (68,910) (763,699) (114,774) (68,774) (1,016,157)

Balance at 31 March 2004 17,204 524,803 102,320 69,966 714,293

Net Book Value :At 31 March 2004- Exhibit A 169,070 1,609,286 150,200 121,534 2,050,090

At 31 March 2003- Exhibit A 120,513 978,447 45,715 71,688 1,216,363

b) The company changed the estimated useful life of the property, plant andequipment with effect from 14 September 2003. The changes were applied

with retrospective effects from date of acquiring individual assets. This hasresulted in a decrease in accumulated depreciation by an amount of AED.1,016,157 which has been credited to capital reserve.

c) Factory building is constructed on leased sheds, which is renewed annually.

4. Inventories


31.3.2004 31.3.2003

Raw-materials - Note 2(f)(i) 909,821 739,910Finished products - Note 2(f)(ii) 289,944 191,842

Total - Exhibit A 1,199,765 931,752

5. Trade and Other Receivablesa) This item consists of the following :

31.3.2004 31.3.2003

Trade receivables - Note 13(b) 1,537,054 1,826,986Prepayments and other receivable - Note 5(b) 348,984 375,884

Total - Exhibit A 1,886,038 2,202,870

b) Prepayments and other receivablesThis item consists of the following :-

31.3.2004 31.3.2003

Prepaid expenses 161,791 101,798Refundable deposits 82,200 68,000Margin held with bank 7,590 7,590Staff receivables 58,669 69,380Advances to suppliers 33,884 129,116Due from Weikfield Products Co. (India) Pvt. —Ltd. – India (a related company) 4,850 —

Total - Note 5(a) 348,984 375,884

6. CapitalThe company’s capital consists of 1,601 shares of AED. 1,000 each contributedby the partners as follows :

No. of 31.3.2004 31.3.2003shares

Sheikh Abdul RahmanSalem Al Qasimi 832 832,000 832,000Dabur International Limited 615 615,000 615,000Weikfield Overseas Limited - U. K. 154 154,000 154,000Total shares 1,601

Total - Exhibit A 1,601,000 1,601,000

7. Statutory ReserveIn accordance with the Company’s Articles of Association and UAECommercial Companies Law No.(8) of 1984 (as amended), an amount equalto 10% of the net profit for the year is to be transferred to a statutoryreserve until the balance of such reserve reaches 50% of the Company’scapital. Amounts retained in the statutory reserve account are not availablefor distribution to partners.

8. Capital ReserveCapital reserve amounting to AED. 1,016,157 (Exhibit A) represents thedifference in accumulated depreciation on account of change in estimateduseful life of property, plant and equipment, applied retrospectively fromthe date of acquiring the assets.

9. Term Loan from a PartnerLoan from a partner amounting to AED. ‘Nil’ (31.3.2003 : AED. 850,000)(Exhibit A) represents the loan from the partner, Messrs Dabur InternationalLimited to subordinate the share capital of the company.


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10. End of Service Benefits Obligation

The details of the movement in this account during the year are as follows :

31.3.2004 31.3.2003

Balance at 1 April 97,010 74,539Current service cost 39,537 31,569Settlements (7,931) (9,098)

Balance at 31 March - Exhibit A 128,616 97,010

11. Trade and Other PayablesThis item consists of the following :-

31.3.2004 31.3.2003

Trade payables 536,622 859,145Accrued expenses 452,851 228,593Provision for leave salary 37,863 24,610Due to Weikfield Products Co. (India) Pvt. Ltd. -India (A related company) — 55,860Other payables 64,383 14,496

Total - Exhibit A 1,091,719 1,182,704

12. Short-term BorrowingsThis item consists of the following :

31.3.2004 31.3.2003

Bank overdraft 1,518,086 1,017,432Trust receipts 263,869 —

Total - Exhibit A 1,781,955 1,017,432

13. Financial Instrumentsa) Fair Value

The fair values of the company’s financial assets and liabilities are notmaterially different from their carrying values as of the balance sheetdate.

b) Credit RiskFinancial assets which potentially subject the company to concentrationof credit risk consist principally of current deposit with banks and tradereceivables. The deposits are maintained with high credit quality banksand financial institution.

Concentration of credit risk with respect to trade receivables arises fromexposure to group of debtors operating in the trading businesses.

Concentration of credit risk also arises from the geographical area in whichthe debtors are located and in the company’s case is concentrated mainlyin the following countries :

31.3.2004 31.3.2003

GCC countries 1,537,054 1,733,270Other countries — 93,716

Total - Note 5(a) 1,537,054 1,826,986

c) Interest Rate Risk- The interest rate on short-term borrowings is at fixed rate per annum.- No interest is charged on the amounts due to/from partners.

14. Cost of SalesThis item consists of the following :


Raw-materials consumed 7,901,117 5,764,188Wages and other benefits 557,379 354,738Depreciation 165,114 221,101Rent expenses 168,257 157,299Water and electricity expenses 79,773 62,336Other direct expenses 449,185 472,900Cost of production 9,320,825 7,032,562Opening stock - Finished products 191,842 161,116Closing stock - Finished products (289,944) (191,842)

Cost of Sales - Exhibit B 9,222,723 7,001,836

15. Administrative Expenses

This item consists of the following :Year ended Year ended31.3.2004 31.3.2003

Staff salaries and other benefits 302,359 246,128Travelling expenses 31,855 44,509Telephone, fax and postage 75,023 62,999Insurance 10,710 16,674Vehicle running & maintenance expenses 51,012 39,653Printing and stationery 10,945 10,520Rebate expenses 42,617 5,234Legal and professional fees 126,325 15,840Entertainment expenses 264 8,140Miscellaneous expenses 41,974 8,797

Total - Exhibit B 693,084 458,494

16. Related Party Transactions

The company carried out transactions in the normal course of business withrelated parties. Transactions with related parties comprises principally ofsales, purchases and financing transaction. The management considers suchtransactions to be in the normal course of business and at terms, whichcorrespond to terms on normal arm’s length transactions with third parties.The aggregate amounts of various transactions with the partners occurredduring the year are as follows :

31.3.2004 31.3.2003

Sales to Dabur International Limited 739,463 987,033Purchases from DaburInternational Limited 356,095 147,812Royalty to Weikfield ProductsCo. (India) Pvt. Ltd. 71,517 58,305

17. Cash and Cash Equivalents

At 31 March 2004 and 31 March 2003 “cash and cash equivalents” includedin the Statement of Cash Flows (Exhibit D) comprise the following item :

31.3.2004 31.3.2003

Cash on hand 982 22,896

Total - Exhibit D 982 22,896


Contingent liability outstanding as at 31 March 2004 as declared by thebank are as follows :

31.3.2004 31.3.2003

Letter of credit — 111,450Letter of guarantee 7,590 7,590

19. Litigation

Two cases have been filed against the company claiming an amount of AED.210,115 plus interest at the rate of nine percent. The company does notexpect an adverse outcome from these litigations and therefore no provisionhas been made in the books of accounts for the above mentioned amount.

20. General

a) Certain prior year’s figures have been reclassified to conform to currentyear’s presentation.

b) The figures in these financial statements are rounded to the nearestArab Emirates Dirhams (AED).


S46 FINANCIALS I WEIKFIELD INTERNATIONAL (UAE) LTD. (FOODSTUFF DIVISION)

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