Castrol India Limited

Castrol India Limited Board of Directors Non-Executive Directors

Executive Directors

Chairman

Chief Executive & Managing Director

S. M. Datta

N. K. Kshatriya Directors

Directors

R. Gopalakrishnan

R. Elston-Green

P. Hughes

A. S. Ramchander

A. K. Jhawar D. S. Parekh L. Freese – Alternate to P. Hughes Company Secretary & Head – Legal A. H. Mody Bankers Deutsche Bank HDFC Bank Ltd. The Hongkong & Shanghai Banking Corporation Ltd. State Bank of India Solicitors & Advocates Crawford Bayley & Co. Dhru & Co. Auditors S. R. Batliboi & Co. Registered Office Technopolis Knowledge Park Mahakali Caves Road, Andheri (East) Mumbai 400 093 Share Department Tata Share Registry Limited Unit: Castrol India Limited Army & Navy Building 148, M. G. Road, Mumbai 400 001.

1

Financials Castrol India Limited

FINANCIAL HIGHLIGHTS Year

2004

2003

2002

2001

2000

1999

Rupees in Crores Sales

1523.21

Less Excise Duty Net Sales

1360.51

1338.95

1357.36

1237.81

1195.55

218.09

189.36

187.15

194.91

179.31

166.40

1305.12

1171.15

1151.80

1162.45

1058.50

1029.15

Other Income

22.09

19.14

13.40

13.50

15.74

18.87

Cost of Materials

777.02

669.72

600.59

693.72

640.28

527.49

Operating and Other Expenses

319.88

299.33

313.45

308.11

251.43

251.75

2.87

2.57

7.45

7.46

7.21

2.62

227.44

218.67

243.71

166.66

175.32

266.16

Interest Gross Profit (Before Depreciation and Exceptional Items) Depreciation

24.88

14.31

13.40

13.24

11.44

10.08

Profit Before Taxation and Exceptional Items 202.56

204.36

230.31

153.42

163.88

256.08

—

Exceptional Items: VRS Expenses – Plant closure

3.72

—

—

—

—

Impairment of Fixed Assets – Plant closure

3.55

—

—

—

—

—

195.29

204.36

230.31

153.42

163.88

256.08

Current Taxation

68.73

63.35

79.90

43.45

29.50

51.70

Deferred Taxation

(0.90)

3.63

(2.51)

1.57

—

—

108.40

134.38

204.38

Profit Before Taxation

Profit After Taxation

127.46

137.38

152.92

Dividend

102.01

102.01

204.01 ‡

92.73

92.63

Gross Fixed Assets

254.45

250.83

255.61

243.95

223.49

211.82

Net Fixed Assets

149.77

171.01

182.64

180.63

172.66

170.98

Investments

128.91

84.79

220.29

119.90

0.37

82.98

Net Current Assets/(Liabilities)

102.52

114.79

(57.41)

135.89

237.95

125.25

Net Assets

381.20

370.59

345.52

436.42

410.98

379.21

Share Capital

123.64

123.64

123.64

123.64

123.50

123.50

Reserves & Surplus

236.43

224.44

202.14

273.03

270.38

249.52

Net Worth

360.07

348.08

325.78

396.67

393.88

373.02

3.72 17.41

4.20 18.31

5.06 14.68

22.56 17.19

17.10 —

6.19 —

Loan Funds Deferred Tax Liability

247.01 ‡

Rupees Earning per Share * Dividend per Share Book Value per Share *

Debt Equity Ratio * ‡

14

10.31

11.11

12.37 16.50 ‡

8.77

10.88

16.55

8.25

8.25

7.50

7.50

29.12

28.15

26.35

32.08

31.89

30.20

0.03:1

0.03:1

0.04:1

0.18:1

0.14:1

0.05:1

Arrived at after considering number of Shares as at the end of the period including Bonus Shares, if any, issued in the relevant period. Includes Rs. 10.00 special in 1999 and Rs. 8.25 special in 2002.

20.00 ‡

Directors’ Report Castrol India Limited

REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31ST DECEMBER, 2004 The Directors have pleasure in presenting their Report and Statement of Accounts for the year ended 31st December, 2004. For the year ended For the year ended 31st December, 2004 31st December, 2003 (Rupees in Crores) (Rupees in Crores) FINANCIAL RESULTS Gross Profit before Depreciation, Exceptional Items & Tax

227.44

218.67

24.88

14.31

3.72

—

3.55

—

Provision for Tax

68.73

63.35

Deferred Tax

(0.90)

3.63

Deducting therefrom: Depreciation Exceptional Items: (i)

Voluntary Retirement Scheme expenses – Plant closure

(ii) Impairment of Fixed Assets – Plant closure

Profit after Tax

127.46

137.38

18.71

13.41

146.17

150.79

Interim

49.46

49.46

Final

52.55

52.55

Interim

6.46

6.34

Final

6.87

6.73

Education Cess on Tax on Final Dividend 2003

0.13

—

Transfer to General Reserve

14.00

17.00

Balance carried forward

16.70

18.71

146.17

150.79

Adding thereto: Balance as per last Balance Sheet brought forward Profit available for Appropriation The Appropriations are: Dividend:

Tax on Dividend:

15

Directors’ Report Castrol India Limited

PERFORMANCE Total Sales and Other Income increased by 12% to Rs. 1545 crores as a result of a 5.8% increase in volumes and a similar increase in unit sales realizations over last year. The cost of our main raw material — Base Oil — continued to rise in 2004 averaging a 20% increase over previous year. However, favourable forex on imported raw material and continued focus on supply chain efficiencies enabled us to restrict the annual increase of the unit cost of material to 9.6%. The annual increase in underlying operating expenses (excluding brand investment) was 4.1%. Most of this increase was due to increased freight costs as a result of volume growth, hikes in diesel prices and costs associated with our road safety programme. We continued to grow the investment in our brands, increasing annual spend on Advertisement and Sales Promotion by 17.3%. This has helped us gain market share in our focus segments. During 2004, we considered it prudent to review the useful lives of all our Fixed Assets and as a result have increased the rates of depreciation for many categories of assets (Refer Note 3 of Schedule M — Notes on Accounts). Accordingly, the depreciation charge for the year increased by Rs. 10.7 crores of which an estimated Rs. 6 crores is non-recurring. During December 2004, your Company announced the closure of its plant at Ballabgarh and incurred an exceptional cost of Rs. 7.3 crores (Refer Note 4 of Schedule M – Notes on Accounts). Together, these two items total Rs. 18 crores and have resulted in a drop in Profit before Tax by 4% to Rs. 195 crores. Excluding these two exceptional items, our Profit before Tax increased by 4% to Rs. 213 crores. Our tax rate for the year increased versus last year by 2% due to the introduction of education cess, a reduction in the Silvassa tax benefit and certain expenses considered as non-deductible. CORPORATE GOVERNANCE Pursuant to Clause 49 of the Listing Agreement, a Management Discussion and Analysis Report and a

16

Report on Corporate Governance are given as Annexures ‘A’ and ‘B’ respectively to this Report. A certificate from the Statutory Auditors of the Company regarding the Compliance by the Company of the conditions stipulated under Clause 49 of the Listing Agreement is attached to this Report. DIRECTORS’ RESPONSIBILITY STATEMENT As required under Section 217 (2AA) of the Companies Act, 1956 your Directors confirm that: (i)

In the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same.

(ii) The Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on 31st December, 2004 and of the profits of the Company for the year ended 31st December, 2004. (iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. (iv) The Directors have prepared the annual accounts on a going concern basis. DIVIDEND The Interim Dividend in respect of the year ended 31st December, 2004 of Rs. 4.00 per share on 12,36,40,298 Equity Shares was paid to the Shareholders of the Company whose names appeared on the Register of Members on 3rd August, 2004. The Directors recommend a payment of final dividend of Rs. 4.25 per share on 12,36,40,298 Equity Shares. FIXED DEPOSITS There were no fixed deposits outstanding and unclaimed as on 31st December, 2004.

Directors’ Report Castrol India Limited

DIRECTORS

SUBSIDIARY COMPANY

Mr. U. DeSousa & Mr. R. Pisharody resigned as Directors of the Company with effect from close of business hours on 5th May, 2004.

The Directors of Indrol Chemicals & Specialities Private Limited (Indrol) had Resolved to put the Company in Voluntary Winding up. Accordingly all the investments held by Indrol have been liquidated & sold & the proceeds distributed to your Company.

Mr. A. K. Jhawar was nominated to the Board pursuant to Article 112 of the Articles of Association of the Company with effect from 21st June, 2004 in place of Mr. C. D’Mello. Mr. R. A. Savoor resigned as a Director of the Company with effect from 17th January, 2005, a bit ahead of his retirement by rotation at the Annual General Meeting (AGM). In due course, a review of the Board vacancies and structure would be undertaken.

A final meeting of the members of the Company was called by the Liquidator & the paid up capital refunded to your Company. An application has been made to the Official Liquidator to formally wind up the Company. In view of the above, the Audited Statement of Accounts of the Company as required under Section 212 of the Companies Act, 1956 have not been annexed. CONSERVATION OF ENERGY

Your Directors wish to place on record their gratitude for the guidance & advice received from Mr. U. DeSousa, Mr. R. Pisharody, Mr. C. D’Mello & Mr. R. A. Savoor during their respective tenures as Directors of the Company.

(a) Energy conservation measures taken: Energy conservation during the financial year has accrued as a result of the following steps taken at the various factories of the Company: Tondiarpet

At the Board Meeting held on 21st October, 2004 Mr. A. S. Ramchander was appointed with effect from 1st January, 2005 as an Additional Director of the Company. Consequent to the said appointment he was also appointed as a Wholetime Director of the Company designated as Director – Automotive. In accordance with Section 260 of the Companies Act, 1956 (the Act) he holds office upto the date of the forthcoming Annual General Meeting of the Company. Notice has been received under Section 257 of the Act along with the requisite deposit from a shareholder proposing Mr. Ramchander as candidate for the office of Director. The information on the particulars of Directors seeking appointment/re-appointment as required under Clause 49 of the Listing Agreement executed with the Stock Exchange, Mumbai, has been given under Corporate Governance (Annexure ‘B’) of this Report.

1.

Installed lower Hp pumps 5 nos. (25 Hp to 15 Hp) for the higher capacity delivery upto 1000 lpm, lower noise levels also.

2.

Installation of power saving tube lights for corridors (5 nos).

3.

Consolidated all airconditioning cabling into one panel for easy shut down everyday (not to leave any airconditioning running inadvertently).

4.

Continued focus on condensate recovery for boiler efficiency (extending 2003 initiative).

5.

Better production scheduling in terms of more blends per day to better utilize the boiler and avoiding under utilization situations.

6.

Maintaining awareness of all employees on conserving power and reduced extended working in office as well as shop floor.

Paharpur Mr. R. Gopalakrishnan retires by rotation and is eligible for re-appointment.

1.

Setting up of an additional capacitor bank for pf improvement.

17

Directors’ Report Castrol India Limited

2.

Soft starter for high capacity motors.

3.

Putting up of 200 Energy Efficient tube lights.

Patalganga 1.

Won the National Energy Conservation Awards 2004, Certificate of Merit, in Petrochemical Sector from Bureau of Energy Efficiency.

2.

Installed and commissioned two nos. of Compact Pressure Powered Condensate Pumps.

2.

Your Company’s registration as a Research & Development Center with Department of Scientific & Industrial Research, Ministry of Science & Technology, Government of India, has been renewed for the next three years, until March 2007.

3.

Timers introduced in Emergency lighting system to prevent them from switching on during day time.

Your Company continued its focus on Quality Assurance in product design and operationalization.

4.

Reprogrammed palletizer and transfer conveyors from continuous mode to operate on demand.

A special Product Integrity audit team highlighted and closed gaps between product claims and performance.

5.

Cost re-engineering of various high volume product brands like CRB Plus and BP VMG resulted in cost of goods saving of the order of Rs. 5 crores per annum. Work was completed during the year for development of fuel efficient automotive gear oil formulation and its benefit mapping, in combination with fuel efficient engine oil. The combination product offer is likely to hit the market during the 1st Quarter of 2005.

4.

Fifty Nos. conventional tube lights replaced by Energy Efficient tube lights.

5.

Ten Nos. of old inefficient pumps replaced by Efficient Pumps.

6.

Modification of Induction Sealing Machines to reduce power consumption.

7.

35 KVAR Capacitor installed on output line of the transformer reduce losses.

8.

Modification of condensate return lines to the boiler house.

Silvassa

3.

Timer operated drain valve installed on the Dryer outlet instead of continuous blowing of air.

(b) Additional investments and proposals, if any, being implemented for reduction of consumption of energy: None in particular.

18

TECHNOLOGY ABSORPTION During the year, in line with BP’s policies, greater emphasis was placed on implementing best practices on Health Safety Security and Environmental (HSSE) management. Pre and post HSSE audits were conducted at Wadala by the HSSE experts in the U.K. to provide assurance that none of the HSSE elements and related operating practices at Wadala were having “red” traffic light. Apart from this, your Company’s ISO : 14001 Environment Management Systems certification was also re-validated.

Installed and commissioned Solar Hot Water Systems of 1500 LPD and 2 X 300 LPD Capacity for Canteen.

2.

The measures mentioned in (a) above have led to savings in fuel & electricity of approximately Rs. 10 lacs per annum.

1.

3.

1.

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

Directors’ Report Castrol India Limited

6.

7.

The Technology Center at Wadala has developed a novel technique of using radioactive engine cylinders to measure the engine wear, on line. This technique offers great possibilities for creating and demonstrating the differential benefits of our product technology, vis-à-vis competition. The equipment is installed and operated in a German laboratory. A master plan for infrastructure development to modernize the Technology Center has been developed and approved. Some preliminary work on the project was initiated during the year and the entire master plan for reconstruction of administrative block and laboratories will be completed in the year 2005.

FOREIGN EXCHANGE EARNINGS AND OUTGO 1.

Activities relating to Export There were no significant exports by the Company during the year.

2.

Earnings and Outgo Members are requested to refer to note Nos. 17 to 19 of Schedule M forming part of the Balance Sheet and Profit and Loss Account for the year ended 31st December, 2004.

1956 read with Companies (Particulars of Employees) Rules, 1975 as amended is enclosed in this Report. AUDITORS The Shareholders of the Company are requested to appoint Auditors and to fix their remuneration. M/s. S. R. Batliboi & Co., Chartered Accountants, the retiring Auditors have furnished to the Company the required certificate under Section 224(1B) of the Companies Act, 1956 and are therefore eligible for re-appointment as Auditors of the Company. PERSONNEL The Board wishes to place on record its sincere appreciation of the efforts put in by the Company’s workers, staff and executives for achieving excellent results under difficult conditions. DISTRIBUTORS, BANKERS AND OTHER BUSINESS ASSOCIATES The Board also wishes to thank its Distributors, Bankers and other business associates for their support during the year.

On behalf of the Board of Directors N. K. Kshatriya

R. Elston-Green

A. S. Ramchander

Finance Director

Director - Automotive

PARTICULARS OF EMPLOYEES

Managing Director

The information required to be published under the provisions of Section 217(2A) of the Companies Act,

Mumbai Dated: 8th March, 2005

19

Directors’ Report Castrol India Limited

ANNEXURE A

lubricants as compared to 2-stroke motorcycles. In addition, in the Diesel Engine Oil segment, due to

MANAGEMENT DISCUSSION & ANALYSIS REPORT

increasing fuel costs and the relative inelasticity of

Pursuant to Clause 49 of the Listing Agreement, a

freight rates, owners of older trucks are delaying the oil

Management Discussion & Analysis Report covering

drain intervals in order to reduce costs and hence be

segment-wise performance and outlook is given below:

more competitive with the newer vehicle operators. On the positive side, your Company, with its superior

(a) Industry structure and developments

technology based product portfolio, is in a strong

The lubricant industry is broadly divided into three major

position

sectors; Automotive, Industrial and Marine. The

performance

automotive sector is the largest and the share of

consumers owning new generation vehicles.

industrial sector grows as the market develops.

to

cater

to

products

the

high

demanded

quality / superior by

discerning

The passenger car market received a tremendous boost during the year under review, with almost one

I.

Automotive

The automotive lubricant sector can be segmented as

vehicle dealer segment (OEM Franchise Workshops)

per vehicle categories: (i) Trucks, Tractors and Off Road

growing much faster than the rest of the market. Castrol

equipment – mainly diesel engine oils (ii) Passenger

with its strong partnership arrangements with most

cars – mainly gasoline engine oils (iii) Motorcycles and

leading vehicle manufacturers, benefited from this

three-wheelers – 2-stroke and 4-stroke engine oils.

trend. The workshop segment continues to be a focus

The Diesel Engine Oil segment dominates the

area for your Company which now has a dedicated

automotive lubricant market with a volume contribution

sales team to service this segment.

of over 70%. The two-wheeler, passenger car and multi-utility vehicle segments have been growing in volume and value and account for around 24% of the market.

20

million vehicle sales recorded. This has resulted in the

India is the second largest two-wheeler market in the world and is experiencing a further boom with around 6 million two-wheelers getting added in 2004. The motorcycle has become the preferred choice of the

The year 2004 started well with good off-take in the

consumer as compared to scooters. Environmental

agriculture as well as the transport markets. This was

regulations, consumer desire for fuel economy and

primarily driven by a good monsoon in 2003 and

lifestyle enhancement have led to the explosive growth

resultant improvement in the overall demand for goods

of the 4-stroke motorcycles. The consumer behavior

and services. Your Company, which has strong brand

around 4-stroke bike oils is very different from that of

equity in both these segments, especially in the agri

2-stroke bikes and Castrol has started communication

segment, was able to capitalize on this upswing and

and promotional programmes which suit the profile and

further strengthen its market leadership position.

behavior of the bikers.

Vehicle growth across all segments has been very good

Competition from the Public Sector companies is

during 2004 but the lubricant demand has not grown

growing with the PSUs increasing their focus and

proportionately. New engine and lubricant technology

investment in brand building and marketing activities.

has resulted in lower requirement and longer usage life

However, with a well planned strategy and innovative

of the lubricants. For example, the new generation

marketing, your Company has maintained its leadership

4-stroke motorcycles consume about 15% lesser

position in the retail automotive segment.

Directors’ Report Castrol India Limited

II.

Non-Automotive

Road infrastructure development continues to be a key

The Industrial sector performed well during the year

focus area for the Government. The North-South and

under review on the back of rapid growth in

East-West corridor and the Golden Quadrilateral

manufacturing related projects, especially in the area of

projects are on course for completion by around 2007

transport equipment manufacturers as well as auto

and this is likely to provide a great fillip to the road

component manufacturers. The market grew by ~4% in

transport industry. This in turn would lead to higher

2004.

demand for lubricants from the commercial vehicle segment in which your Company has a leadership

(b) Opportunities & Threats I.

Automotive

position. In the short term, the off-road sector is likely to grow

Opportunities

faster than historic levels due to the increased

The huge growth in the personal vehicles segment i.e.

construction activity in the country. This augurs well for

two-wheelers and passenger cars, coupled with

your Company’s Institutional business.

renewed growth in the trucks / tractor segment, provide an excellent growth opportunity for the lubricant oil

Threats

business.

Base oil prices have been on the rise since mid 2003

In addition, during the year under review, your

and the trend continued in 2004 with prices reaching

Company gained access to a new channel of

record highs. Base oil prices correlate closely with

distribution i.e. petrol pumps owned by private players

crude oil prices and with the uncertainty in the global

like Essar and Reliance. This opens up a new business

crude

opportunity, especially for our 2-stroke scooter oil

base oils may continue, putting greater pressure on

business. On the other hand, the growth in the

margins.

4-stroke motorcycle segment is seeing a shift in

Additive and packaging costs have also risen sharply in

lubricant consumption from petrol stations to retail

2004 and are expected to harden in 2005. This adds to

outlets where your Company has a significant

input costs and with prices in the market being

distribution advantage.

competitively

The lube oil business in the passenger car segment is

profitability.

driven to a large extent by the workshop channel, where

The move towards new generation vehicle technology

superior service propositions, along with strong brands

is resulting in longer drain intervals, affecting the

have led to your Company making significant business

volume potential of the largest category — the

gains.

commercial vehicle segment. This segment has also

Long term partnerships with leading Original Equipment

been impacted by the increasing cost of fuel with small

Manufacturers (OEMs) have been the backbone of your

fleet operators being the worst affected.

price

situation,

driven,

the

increasing

presents

a

threat

trend

to

in

our

Company’s success and during the year under review we forged new alliances with leading companies like

II.

Non-Automotive

Mahindra & Mahindra and International Tractors and

Opportunities

further strengthened our relationships with our existing

With a good monsoon during the year under review, the

partners like Escorts, Tata Motors and Tata Cummins.

Industrial sector is showing signs of revival and this

This segment offers a further opportunity to your

being a driver of lubricant demand augurs well for the

Company to increase its market share.

Industrial business.

21

Directors’ Report Castrol India Limited

There is an increasing acceptance within the industries

leading truck manufacturer in the country and intensive

towards value added products and services. Your

marketing activity.

Company with its vast international solutions and

Your Company also launched a new range of ancillary

services experience can add value to the emerging

products viz. Brake fluids, gear oils and greases under

customer base. This in turn will add to the profitability of

the umbrella of Castrol Protector Series. This has given

your Company.

increased focus to these ancillary products both from the trade and our workshop customers.

Threats

The BP lubricant brand continued to focus on marketing

Price undercutting by small regional competitors and the tendency of Public Sector players to absorb the high raw material costs to gain competitive advantage, can put pressure on our margins and market share.

supported by on-ground activity and an intensive trials and off-take. This focus resulted in increased brand awareness, trials and volumes. The BP brand

Automotive

ended the year with a growth of 24%.

Your Company’s automotive business performance

Two-wheeler lubricant sales continued to grow at a rate

saw a significant growth during 2004. At around 5%

faster than the market, driven by sales of our 4-stroke

volume growth, your Company grew at twice the

motorcycle engine oils – Activ 4T and Power 1. Rahul

estimated market growth rate. Further, your Company

Dravid, India’s cricket Vice-Captain continues to be

was able to raise the unit realization by over 6%

the brand ambassador for your Company and the

resulting in a net turnover growth of over 11%.

two-wheeler

The communication of your Company’s flagship brand –

association

CRB Plus, was refreshed with the ‘Sukhiram–

messages

Dukhiram’

the

Innovative marketing activity including ‘Cricket Clinics’

importance of using the right brand of oil for a truck. The

conducted by Rahul Dravid, have paid rich dividends in

new tag line “CRB nahi daloge to mehenga padega”

building

explained the price premium of CRB Plus on the basis

consumers.

campaign

which

communicated

of superior value proposition.

brands through and

long

successfully a

series

on-ground

enduring

of

leveraged

this

communication

promotional

relationships

activities.

with

our

The focus in the passenger car segment continued to

With the revival in the agricultural segment, your

be on Partnership Programmes with large OEMs like

Company actively reached out to farmers through

Maruti and Tata Motors.

tractor clinics and special promotional offers. Our

The Institutional business segment grew volumes

partnership

tractor

significantly due to the setting up of a focused sales

manufacturers like Mahindra & Mahindra and Escorts

team, new customer offers and a growing market.

enabled us to further leverage our strength in this

Here again, our strong partnerships with key OEMs

market.

like L&T, JCB and Hitachi, enabled us to grow our

agreements

with

leading

The Castrol new gen truck engine oil range consisting of

22

campaign communicated through mass media was consumer contact programme targeted at increasing

(c) Segment-wise/Product-wise performance I.

and field activity in 2004. The consumer testimonial

business.

CRB Turbo, RX Super Max and RX Super Plus showed

During 2004, a foray was made into the ‘revenue

a strong growth in 2004. This was mainly due to good

beyond lubes’ segment with the launch of a motorcycle

market growth, our alliance with Tata Motors – the

service offering named ‘Castrol BikeZone’. The Castrol

Directors’ Report Castrol India Limited

franchised two-wheeler workshops are currently being

Company an opportunity to leverage its market

piloted in Chennai and Bangalore and will be taken to

leadership position in the passenger car engine oil

other centers in India shortly.

segment. Your Company’s focus continues to be on the Franchised Workshop segment where it has strong

II.

Non-Automotive

partnerships with leading OEMs.

2004 was a good year for Industrial Lubricants and

Mass media coupled with innovative on-ground

Services Division with sales showing a growth of 11%

activities continue to spearhead your Company’s efforts

versus 2003. Your Company’s market share in the

in the two-wheeler segment. A new campaign called

Industrial segment increased by 1.5% during this

‘‘Bikes ki nayi bhasha’’ has been launched nationally

period. Our new Customer Relationship Management

and has been well accepted by consumers, mechanics

tool – ‘Platinum’ – has enabled us to improve our

and trade.

customer facing touch time and allows us to measure customer profitability with key accounts. This tool has been very effectively used for making strategic intervention in improving our value added customer offers. This live database has also helped us in engagement and communication within and outside the organization.

The road transport sector and freight market continue to look up on the back of a good economic performance. The favorable monsoon in 2004 is also expected to positively impact the performance in the tractor segment. Your Company has recently relaunched the Castrol

CRB

Plus

brand

sharply

focusing

the

communication on the agri and tractor segment. A new

Athena, a knowledge portal, to provide orientation

campaign aimed at farmers has been created with the

programme for new recruits, segment training modules

tagline “Mehenti itna, aap jitna”. This has touched a

and tracking learning process, was also launched.

chord with the consumers and we expect to strengthen

50% of our channel partners were accredited for

the brand’s bond with the farmers.

ISO-9001-2000 which tremendously helped to improve the operational efficiency.

Your Company will also continue to focus on creating and strengthening sustainable partnerships with OEMs

Innovative training modules titled ‘Castrol Professional

and channel owners. This will help increase penetration

Way’, were also launched for all our channel partners.

in the workshop segment and also create a barrier to

This

entry for the unorganized sector in lubricants.

equipped

them

to

understand

customer

requirements and make suitable customer offers.

After a long period of time, your Company’s products

Your Company’s effort on the initiative to reduce the

are once again being sold through the fuel forecourts of

working capital invested in the business through the

private players like Reliance and Essar. This has

project ‘Cash is here’, has paid off. There has been a

opened up a new business opportunity for your

marked reduction in the Receivables as also the stock

Company.

levels during the year under review. (d) Outlook I.

Competitive pressures will continue with more focus being laid by the PSUs on their fuel and lubricant marketing and brand building activities.

Automotive

The growth trend in the personal mobility segment

II.

Non-Automotive

is expected to continue. Passenger car manufacturers

The Indian economy has performed creditably in the

continue to launch newer, international standard

recent past and this has been reflected by the growth in

vehicles on a regular basis and this offers your

the Industrial sector as well as the performance of the

23

Directors’ Report Castrol India Limited

Industrial business of your Company. However, the

assurance

aggressive pricing strategy adopted by competition,

management authorization and that they are recorded

continues to impact margins. To counter this, your

in all material respects to permit preparation of financial

Company continues to offer innovative, value added

statements in conformity with established accounting

customer offers to targeted segments.

principles and that the assets of your Company are

In addition, Castrol is sharply focusing all its efforts on profitable customer segments and undertaking process fitness and pricing projects which are designed to improve the bottom line even under difficult trading conditions.

that

transactions

are

executed

with

adequately safe-guarded against significant misuse or loss. An independent internal audit function is an important element of your Company’s internal control system. The internal control systems are supplemented through an extensive internal audit programme and periodic review by Management and Audit Committee.

With Indian manufacturing sector positioning itself as a possible and credible outsourcing destination, we believe that the Industrial growth and by inference, the

(g) Discussion on Financial Performance with respect to Operational Performance

Industrial lubricant business, will grow faster in the next

Your Company has achieved both volume (up 6%) and

three years.

unit sales realization (up 6%) growth in 2004 which in turn has resulted in a healthy 12% growth in gross

(e) Risks and Concerns

sales. This growth is well above our estimate of the

I.

market growth. On the other hand, raw material costs

Automotive

Increasing base oil price continues to put pressure on

also increased significantly for the second consecutive

margins and is a major cause of concern for your

year, which negated much of this top line growth. We

Company. Whilst we have been able to convince our

continue to increase the investment in our brands, but

consumers and customers about the inevitability of

have sought to minimize increases in other overheads.

increasing prices in the past, it may be difficult to

Before exceptional items, the Profit Before Tax (PBT)

continue doing so. With many competitors pursuing a

increased by 4%, however after exceptional items,

volume share growth objective, our volume growth plan

headline PBT declined by 4%. This was due to a

may be at some risk.

change in estimation of useful life of assets and costs relating to our Ballabgarh plant closure. With reference

II.

Non-Automotive

The Industrial lubricant market continues to be

solely due to the increase in raw material costs.

dominated by the Public Sector companies with

Outstanding debtors has been maintained at 2003

integrated base oil supplies which allows them the

levels despite the increase in product prices. This has

flexibility of aggressive pricing. Continued price

been

undercutting by the unorganized sector poses a further

collection efficiencies.

risk to delivery.

24

to working capital, the value of inventories has risen

achieved

through

well

implemented

cash

(h) Health, Safety, Security & Environment

(f) Internal control systems and their adequacy

Your Company lays great emphasis on Health, Safety,

Your Company maintains an adequate and effective

Security and Environment (HSSE) which is one of its

internal control system commensurate with its size and

Brand Values.

complexity. We believe that these internal control

Road transport continues to be our greatest challenge

systems provide, among other things, a reasonable

and your Company has taken a number of initiatives to

Directors’ Report Castrol India Limited

propagate road safety not just amongst its own staff but

encourages and further develops functional excellence

amongst contractors and society at large. During the

within your Company. In keeping with the functional

year under review, there was a reduction in fatalities

excellence theme, there was a lot of focus on

and injuries compared to previous year. There was one

understanding functional capability and developing

third party fatality in a contractor road accident where

functional competency frameworks.

we had material influence.

During the year under review, development of

During 2004, we launched the Driving Safety Standards

leadership capability in the organization continued to be

which are being implemented from 1st January, 2005.

the key focus. A number of training initiatives directed

This should improve our road safety in 2005 and

towards

beyond.

an

programmes for First level and Senior level leaders and

aggressive programme to upgrade staff as well as

Assessment centers for development of Leadership

transport operators’ vehicles to a higher safety

Potential were undertaken during the year. Our talent

standard. Driving Safety programmes were also

continues to be recognized within the BP group and this

introduced to our contractors and over 3000 heavy duty

year too, we saw several of our Senior Managers being

truck drivers were given training in defensive driving.

seconded to assignments in other parts of the BP Group

The increased focus on safety in our Plants resulted in

worldwide.

improved safety records at all our Plants. Whilst your

Following a review of our manufacturing operations,

Company’s

it was decided to close down our Ballabgarh Plant near

Your

Company

Tondiarpet

also

and

implemented

Patalganga

Plants

people

Delhi.

A

development

voluntary

like

Leadership

successfully completed seven years without any Days

New

Away from Work Cases (DAFWCs), the Paharpur Plant

was announced in the Plant in November 2004.

retirement

scheme

completed five years without a DAFWC.

11 executives and 32 workmen opted for voluntary

In recognition of your Company’s efforts towards

retirement.

environment protection and energy conservation, the

Our relations with our employees continued to remain

Company’s Patalganga Plant was awarded the

cordial during the year. The total number of people

National Energy Conservation Award 2004 – Certificate

employed in the Company as on 31st December 2004

of Merit, in the Petrochemicals sector.

was 891.

(i) Material Developments in Human Resources/ Industrial Relations 2004 saw significant reorganization of our workforce to

On behalf of the Board of Directors N. K. Kshatriya

R. Elston-Green

A. S. Ramchander

Finance Director

Director - Automotive

align the organization to the new lubricants global

Managing Director

strategy of Market Spaces. The reorganization has

Mumbai Dated: 8th March, 2005

helped create a more focused organization and one that

25

Directors’ Report Castrol India Limited

ANNEXURE B

Mr.

A.

S.

Ramchander

was

with

effect

from

1st January, 2005 appointed as a Wholetime Director of CORPORATE GOVERNANCE

the Company designated as Director - Automotive. Mr.

A. MANDATORY REQUIREMENTS

R.

A.

Savoor

resigned

with

effect

from

17th January, 2005 as a Director of the Company. 1.

Company’s Philosophy on Code of Governance

The Company’s purpose is business and to maximise

(b) Attendance of each Director at the Board

long-term shareholder value by selling its goods and services.

Therefore,

our

Corporate

Governance

processes are directed at ensuring that Company actions, assets and agents are directed to achieving this purpose while complying with the Code of Governance and the Company’s own policies and expectations. The Company’s policies reflect those

Meetings and the last Annual General Meeting 4 Board Meetings were held during the financial year from 1st January, 2004 to 31st December, 2004. The attendance of each of the Directors at the said Board Meetings is given below: Name of Director

adopted by the Parent Company in the UK - BP plc. and covers aspects such as ethical conduct, health, safety

Category of Directorship

No. of Meetings attended

% of total Meetings attended during the tenure as a Director

NED

4

100

and the environment; control and finance; commitment to employees; and relationships. Key aspects of the Company’s Governance Processes are: •

•

•

Mr. S. M. Datta

Clear statements of Board Processes and Board

Mr. N. K. Kshatriya

MD

4

100

Executive linkage.

Mr. U. DeSousa

ED

2

100

Disclosure, accountability, transparency, adequate

(upto 5th May, 2004)

systems and procedures to monitor the state of

Mr. R. Elston-Green

ED

4

100

affairs of the Company to enable the Board to

Mr. R. Pisharody

ED

2

100

effectively discharge its responsibilities to the

(upto 5th May, 2004)

stakeholders of the Company.

Mr. C. D’Mello

ND

1

50

NED

4

100

ND

2

100

ND

3

75

Identification and management of key risks to delivery of performance of the Company.

(upto 21st June, 2004) Mr. R. Gopalakrishnan Mr. A. K. Jhawar

2.

Board of Directors

(a) Composition

Mr. P. Hughes or his Alternate

As of the year ended 31st December, 2004, the Board

Mr. L. Freese

of Directors had 8 members comprising of 2 Executive

Mr. D. S. Parekh

NED

3

75

Mr. R. A. Savoor

NED

4

100

Directors and 6 Non-Executive Directors. The NonExecutive Directors included 4 members who were

26

(w.e.f. 21st June, 2004)

Independent Directors and 2 members who had been

NED — Non-Executive Director

nominated by Castrol Ltd., U.K. as provided in the

MD

— Managing Director

Articles of Association of the Company. The Chairman

ED

— Executive Director

of the Board is a Non-Executive Independent Director.

ND

— Nominee Director of Castrol Ltd., U.K.

Directors’ Report Castrol India Limited

All Directors except Mr. C. D’Mello & Mr. R. Pisharody,

3.

who were Directors of the Company on 5th May, 2004,

(a) Terms of Reference

attended the Annual General Meeting held on the said date.

i.

Audit Committee

To investigate any activity within its terms of reference.

(c) Number of other Companies or Committees the

ii.

To seek information from any employee.

Director is a Director/Member/Chairman of:

iii.

To obtain outside legal or other professional advice.

Name of the Director(s)

iv. To secure attendance of outsiders with relevant

Number of other Companies (excluding Private Companies) in which Director (excluding Alternate/ Nominee Director)

Number of Committees (other than Castrol India) in which Member

12 (1)

9 (2)

Mr. N. K. Kshatriya

—

—

Mr. R. Elston-Green

—

—

2

1

12 (3)

10 (4)

—

—

Mr. D. S. Parekh, Mr. R. Gopalakrishnan and

Mr. D. S. Parekh

13 (5)

9 (6)

Mr. P. Hughes with the Head-Internal Audit being a

Mr. R. A. Savoor

5 (7)

5 (8)

Permanent Invitee to the Committee and the Company

1

—

Secretary being the Secretary of the Committee.

Mr. S. M. Datta

Mr. A. K. Jhawar Mr. R. Gopalakrishnan Mr. P. Hughes

Mr. L. Freese

expertise, if it considers necessary. It may be clarified that the role of the Audit Committee includes matters specified under Clause 49 of the Listing Agreement entered into between the Company and The Stock Exchange, Mumbai, on which the Company’s shares are listed. (b) Composition,

name

of

members

and

Chairperson As on 31st December, 2004, the Audit Committee comprised

of

3

Non-Executive

Directors

viz.

1.

Includes 3 Companies in which Chairman

Mr. D. S. Parekh the Chairman of the Committee and

2.

Includes 4 Committees in which Chairman

Mr. R. Gopalakrishnan, Member are Independent

3.

Includes 1 Company in which Chairman

Directors on the Committee whereas Mr. P. Hughes is a

4.

Includes 5 Committees in which Chairman

Nominee Director of Castrol Ltd., U.K.

5.

Includes 7 Companies in which Chairman

6.

Includes 5 Committees in which Chairman

7.

Includes 1 Company in which Chairman

8.

Includes 1 Committee in which Chairman

(d) Number of Board Meetings held and the dates of the Board Meeting

(c) Meetings and attendance during the year 4 meetings were held during the financial year 1st January, 2004 to 31st December, 2004. The attendance of each Member of the Committee is given below:

4 Board Meetings were held during the financial year 1st January, 2004 to 31st December, 2004. The dates on which the said meetings were held are given below:

No. of Meetings attended

% of total Meetings attended during the tenure as a Director

4

100

30th January, 2004

Mr. D. S. Parekh

30th April, 2004

Mr. R. Gopalakrishnan

4

100

23rd July, 2004

Mr. P. Hughes or his Alternate Mr. L. Freese

3

75

21st October, 2004

27

Directors’ Report Castrol India Limited

4.

(e) Details of Remuneration paid to all Directors

Remuneration Committee

(for

(a) Terms of Reference The

Remuneration

Committee

the

period

of

members

and

Chairperson As

on

31st

comprised Mr.

R.

of

December, 3

2004,

the

Non-Executive

Gopalakrishnan,

Mr.

P.

Committee

Directors

viz.

Hughes

and

Mr. A. K. Jhawar. Mr. R. Gopalakrishnan is an Independent Director whilst Mr. P. Hughes and Mr. A. K. Jhawar are Nominee Directors of Castrol Ltd., U.K. Mr. R. Gopalakrishnan is the Chairman of the Committee.

2004

to

All Fixed Service Stock elements compoCont- option with of remu- nent & racts details, neration perfornotice if any and package mance period, whether i.e. linked sever- issued at Salary incenance a discount benefits, tives fees as well as bonuses, along the period pension, with the over which etc. performaccrued ance and over criteria which (Rs. in (Rs. in exercisLacs) Lacs) able

Executive Directors to the Board for approval. names

January,

31st December, 2004)

recommends

remuneration, promotions, increments etc. for the

(b) Composition,

1st

i.

Wholetime Director(s)

On 21st June, 2004 Mr. A. K. Jhawar was appointed as a member of the Remuneration Committee in place of

Mr. N. K. Kshatriya Mr. U. DeSousa (Upto May, 2004)

(c) Attendance during the year

20.88

6.36

124.19

14.00

22.93

5.81

Two Meetings were held during the year the attendance of each Member of the Committee is given below:-

Mr. R. Elston-Green

Name(s) of the Committee Members

Mr. R. Pisharody (Upto May, 2004)

No. of Meetings attended

% of total Meetings attended during the tenure as a Director

Mr. R. Gopalakrishnan

2

100

Mr. C. D’Mello (upto 21st June, 2004)

1

100

Mr. P. Hughes. Mr. A. K. Jhawar (w.e.f. 21st June, 2004)

—

—

1

100

Please see Note ‘b’

38.45 Please see Note ‘a’

119.47

Mr. C. D’Mello.

Notes (a) The agreement with each Wholetime Director is for a period of 5 years or the normal retirement date whichever is earlier. Further, either party to the agreement is entitled to terminate the Agreement by giving not less than six calendar months notice in writing to the other party.

(d) Remuneration Policy The Directors are paid a Salary and Performance Linked

Bonus,

which

is

calculated,

based

pre-determined parameters of Performance.

28

on

(b) Presently, the Company does not have a scheme for grant of stock options to its employees. However the Management staff are entitled to the Shares of BP plc. under the BP Sharematch scheme as in force.

Directors’ Report Castrol India Limited

ii.

Non-Wholetime Director(s) Sitting Fees (Rs.)

Commission (Rs.)

Mr. S. M. Datta

75,000

7,50,000

Mr. R. Gopalakrishnan

85,000

6,00,000

Mr. D. S. Parekh

60,000

6,00,000

Mr. R. A. Savoor

70,000

6,00,000

(d) Number of complaints : All the Complaints have been not solved to the resolved to the satisfaction of satisfaction of the Complainants except for shareholders disputed cases and sub-judice matters which would be solved after the matter is duly disposed by the Court. (e) Number of pending share transfers at the close of the financial year

: 7 transfers were pending at the close of the financial year.

With effect from 1st April, 2004 the Company had

6A. General Body Meetings

increased the sitting fees payable to the Non-Executive

(a) Location and time where last three AGMs

Independent Directors from Rs. 5000/- to Rs. 10,000/-

were held

for each Board/Committee Meeting attended by them. 5.

Location Yashwantrao Chavan Pratishthan Auditorium Y.B. Chawan Centre Gen. Jagannath Bhosle Marg, Next to Sachivalaya Gymkhana, Mumbai 400 021

: 5.5.2004

11.00 a.m.

(ii)

Birla Matushri Sabhagar 19, Marine Lines Mumbai 400 020

: 19.6.2003

3.00 p.m.

(iii) Birla Matushri Sabhagar 19, Marine Lines, Mumbai 400 020

: 5.8.2002

3.00 p.m.

(b) Whether any Special Resolutions were put through Postal Ballot last year

: No

Committee As on 31st December, 2004, the Transfer and comprised

of

Mr.

Grievance S.

M.

Datta,

Committee Chairman,

Mr. N. K. Kshatriya, Mr. R. Elston-Green and Mr. R. A. Savoor. The Company Secretary is the Secretary of the Committee. (a) Name of the : Mr. S. M. Datta Non-Executive Director heading the Committee (b) Name and Designation : Mr. A. H. Mody of Compliance Officer Company Secretary & Head – Legal (c) No. of Shareholders complaints received during the financial year

: 7 complaints were received from Stock Exchange/Investor Associations/Securities and Exchange Board of India (SEBI)/Department of Company Affairs and were reported to the Transfer and Shareholders’/Investors’ Grievance Committee in terms of Circular No. 1 (96-97) dated 25.7.96 of SEBI.

Time

(i)

Transfer & Shareholders’/Investors’ Grievance

Shareholders’/Investors’

Date

Details of voting pattern

: Not Applicable

(c) Persons who conducted the Postal Ballot exercise

: Not Applicable

(d) Are polls proposed to be conducted through Postal Ballot this year

: No resolutions requiring postal ballot for matters as required under Clause 4 of the Companies (Passing of Resolutions by Postal Ballot) Rules, 2001 have been placed for Shareholders’ approval at the Meeting.

(e) Procedure for Postal Ballot

: Not Applicable

29

Directors’ Report Castrol India Limited

6B. Notes on Directors seeking re-appointment as

Idea Cellular Limited

– Director

ICI India Limited

– Director

Sheba Properties Limited

– Director

required under Clause 49 of the Listing Agreement entered into with Stock Exchange, Mumbai. (i) Mr. R. Gopalakrishnan Mr. Gopalakrishnan is a graduate in Physics from Calcutta University and in Engineering from IIT,

(ii) Mr. A. S. Ramchander

Kharagpur. In 1967, he joined Hindustan Lever as

Mr.

Management Trainee. After 20 years, he joined

Management

Ramchander

is

Hindustan Lever’s Management Committee as

Management (IIM) specializing in marketing &

Executive Director-Exports. In 1991, he was

finance. He has also done his graduation in

appointed Chairman, Unilever Arabia, based in

Chemical Technology (B. Tech) from Osmania

Jeddah to establish and manage Unilever’s

University Hyderabad.

from

a the

Post

Graduate

in

Indian

Institute

of

consumer products business in the GCC countries. He has over 19 years of experience in consumer & Upon return to India in 1995, he became Managing

customer marketing, business strategy & sales.

Director of Brooke Bond Lipton, Unilever’s Indian

He joined Castrol India in 1994 & during the period

foods and beverages company. After the merger of

of 6 years that he was with Castrol India, he was

the Company, he was appointed Vice-Chairman of

involved in the phenomenal growth of the unit from

the merged Hindustan Lever Ltd. After 31 years in

a market share of 10% to 25% in the automotive

Levers he joined Tata Sons in August 1998. As on

Lubricant business. He was Head – Brand

31st December, 2004 he was a Director of the following companies:

marketing in Castrol India when he was seconded in the year 2000 to a senior marketing role in Castrol Asia Pacific.

Rallis India Limited

– Chairman

Tata Chemicals Limited

– Vice Chairman

Tata Sons Limited

– Director

Tata Motors Limited

– Director

Tata Power Company Limited

– Director

Tata Teleservices Limited

– Director

After Burmah Castrol worldwide was acquired by BP, Mr. Ramchander moved to BP Asia Pacific Regional Headquaters at Singapore. Since 2002 he has been the Regional Marketing Director of BP Asia Pacific Lubes before he was appointed as a Wholetime Director in Castrol India. Prior to joining Castrol India, he had 9 years of sales & marketing experience in the paints, construction Tata Teleservices (Maharashtra) Limited

material

and

organic

chemical

industries. During his assignment in Singapore, he – Director

was

a

lecturer

management

in

on the

marketing Nanyang

&

channel

Technological

University in Singapore.

Tata AutoComp Systems Limited

– Director

Tata Technologies Limited

– Director

Mr. Ramchander is not a Director in any other

30

Company.

Directors’ Report Castrol India Limited

7.

Disclosure

(a) Disclosures on materially significant related party transactions that may have potential conflict with the interests of Company at large. (b) Details of non-compliance by the company, penalties, strictures imposed on the company by Stock Exchange or SEBI or any statutory authority, on any matter related to capital markets, during the last three years. 8.

}

}

9. None

None in

General Shareholder Information

(a) AGM Date, Time and Venue

: Tuesday, 19th April, 2005, at 2.00 p.m., at Birla Matushri Sabhagar, 19 Marine Lines, Mumbai 400 020.

(b) Financial Year

: (i) January 2005 to December 2005.

the last

(ii) First Quarter 2005. Results – 3rd/4th week of April 2005.

three years

(iii) Half yearly Results 2005 – 3rd/4th week of July 2005.

Means of Communication

(a) Half-yearly report sent to each household of shareholders

: No, as the results of the Company are published in the Newspapers all over India

(b) Quarterly results Newspapers in which results are normally published in

: (i) Times of India – Mumbai, Delhi, Pune, Ahmedabad, Lucknow, Patna, Bangalore, Hyderabad & Kolkata editions in English (ii) Maharashtra Times – Mumbai edition in Marathi (iii) Navbharat Times – New Delhi edition in Hindi

Any website, where displayed

: Yes – www.castrol.co.in

Whether it also displays official news releases

: Yes

The presentations made : No to institutional investors or to the analysts (c) Whether MD&A is a part of the Annual Report or not

: Yes. Part of the Directors’ Report as Annexure ‘A’

(iv) Third Quarter 2005 Results – 3rd/4th week of October 2005. (v) Results for the year ending 31st December, 2005 – January/ February, 2006. (c) Date of Book closure

: 29th March, 2005 to 19th April, 2005 (both days inclusive).

(d) Dividend Payment date(s) : Interim – 16th August, 2004 Final – on or after 19th April, 2005. (e) Listing on Stock Exchange, Mumbai

: The Company has paid the listing fees for the period 1st April, 2004 to 31st March, 2005.

(f)

: 870

(i)

Stock Code – Physical

(ii)

Demat ISIN Number : INE 172A01019 for NSDL & CDSL

(g) Market price Data: High/Low during each month in last financial year

: Please See Annexure I of this Report.

(h) Stock Performance in comparison to Broad-based indices such as BSE Sensex, CRISIL

: Please See Annexure II of this Report.

31

Directors’ Report Castrol India Limited

(i)

Registrar and Transfer Agents

: Tata Share Registry Limited, Army and Navy Building, 148, M.G. Road, Mumbai 400 001.

(j)

Share Transfer System

: The Company Secretary has been authorized to approve the transfer of shares which is done within the time-limit stipulated by the Listing Agreement. The said transfers are then noted at the subsequent Transfer and Shareholders’/Investors’ Grievance Committee Meeting.

(k) Distribution of

No. of Shares

No. of Shareholders

% of Shareholders

7234246

58521

85.26

501 – 1000

3588383

4872

7.10

1001 – 2000

4654325

3200

4.66

2001 – 3000

2534420

1021

1.49

3001 – 4000

1732177

516

0.75

4001 – 5000

693545

152

0.22

1559225

234

0.34

1001 and above

101643977

126

0.18

Grand Total

123640298

68642

100.00

Shareholding as on 10-02-2005

Upto

500

5001 – 10000

(m) Outstanding GDRs/ : The Company has not ADRs/Warrants or any issued any GDRs/ADRs/ Convertible instruments, Warrants or any conversion date and likely Convertible instruments. impact on equity

(n) Plant Locations

: The Company’s plants are located at Patalganga, Paharpur, Silvassa, Ballabgarh, Tondiarpet & Hosakote.

(o) Address for correspondence

: i. Shareholders correspondence should be addressed to: Tata Share Registry Limited. Unit: Castrol India Limited Army and Navy Building, 148, M.G. Road, Mumbai 400 001. Tel. No. 5656 8484 Fax No. 5656 8494/ 5656 8496

ii. Shareholders holding shares in electronic mode should address all their correspondence to their respective Depository Participants.

B. NON-MANDATORY REQUIREMENTS 1.

(l)

32

Dematerialisation of Shares and liquidity

: 40.99% of the paid-up capital has been dematerialised as on 10th February, 2005 which includes 16.86% of the paid-up capital held by Castrol Ltd., U.K.

Whether Chairman of the : Board is entitled to maintain a Chairman’s office at the Company’s expense and also allowed reimbursement of expenses incurred in performance of his duties

No, but the Company reimburses expenses in relation to the performance of his duties as Chairman.

Directors’ Report Castrol India Limited

2.

Remuneration Committee : Please refer to Sr. No. 4 of this Report.

3.

Shareholder rights – : As the Company’s half The half-yearly yearly results are published declaration of financial in English newspapers performance including having a circulation all over summary of the India and in a Marathi significant events in last newspaper (having a six months should be sent circulation in Mumbai) and to each household of in a Hindi newspaper Shareholders (having a circulation in New Delhi) the same are not sent to the shareholders of the Company.

Normally, there is no second half-yearly results as the audited results are taken on record by the Board and then communicated to the shareholders through the Annual Report.

On behalf of the Board of Directors N. K. Kshatriya

Managing Director

R. Elston-Green

A. S. Ramchander

Finance Director

Director - Automotive

Mumbai Dated: 8th March, 2005

33

Directors’ Report Castrol India Limited

Annexure I

Castrol India Limited

Market Price Data - High/Low during each month in the Year 2004 Month

Rate (Rs.) Highest

Lowest

January

239.25

205.30

February

221.65

207.55

March

221.75

188.65

April

199.50

181.00

May

184.00

160.05

June

172.45

159.90

July

175.05

160.25

August

172.10

155.80

September

173.45

164.30

October

166.50

162.15

November

193.90

162.75

December

236.70

180.25

Annexure II

On behalf of the Board of Directors N. K. Kshatriya

Mumbai Dated: 8th March, 2005

34

Managing Director

R. Elston-Green

A. S. Ramchander

Finance Director

Director - Automotive

Directors’ Report Castrol India Limited

AUDITORS’ CERTIFICATE To The Members of Castrol India Limited

We state that no investor grievance is pending for a

We have examined the compliance of conditions of

period exceeding one month against the Company as

Corporate Governance by Castrol India Limited, for

per the records maintained by the Share Registrars and

the year ended December 31, 2004 as stipulated in

reviewed by the Shareholders’/Investors’ Grievance

Clause 49 of the Listing Agreement of the said

Committee.

Company with the Stock Exchange.

We further state that such compliance is neither an

The compliance of conditions of Corporate Governance is

the

responsibility

examination

was

of

the

limited

to

management.

Our

procedures

and

implementation thereof, adopted by the Company for

assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the

For S.R. BATLIBOI & CO.

Company.

Chartered Accountants per Hemal Shah Partner Membership No. : 42650

In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the abovementioned Listing Agreement.

Mumbai, Dated: 8th March, 2005.

35

Directors’ Report Castrol India Limited

Shareholding Pattern as on 10th February, 2005

Sr. No.

Category

No. of shareholders

No. of shares held

% to paid-up capital

(i) Foreign Collaborator

1

87687455

70.92

(ii) Foreign Company

1

135474

0.11

24

1058110

0.86

5

1169

0.00

288

154200

0.13

(vi) Financial Institutions

12

8516051

6.89

(vii) Indian Mutual Funds

17

1386910

1.12

(viii) (a) Nationalised Banks

37

107804

0.09

(b) Other Banks

78

36323

0.03

(ix) Domestic Companies

1396

2206561

1.78

(x) Resident Individuals

66779

22344232

18.07

2

6009

0.00

68640

123640298

100.00

(iii) Foreign Institutional Investors

(iv) Overseas Bodies Corporate

(v) Non-Resident Individuals

(xi) Directors and Relatives Grand Total

36

Auditors’ Report Castrol India Limited

Auditors’ Report To the Members of Castrol India Limited 1. We have audited the attached Balance Sheet of Castrol India Limited as at 31st December, 2004 and also the Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditor’s Report) Order, 2003 (as amended) issued by the Central Government of India 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 paragraphs 4 and 5 of the said Order. 4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that: i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; ii. In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; iii. The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; iv. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; v. Based on written representation received from the directors as on 31st December, 2004, which have been taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st December, 2004 from being appointed as a director in terms of Clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; vi. In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required, and give a true and fair view in conformity with the accounting principles generally accepted in India; a. in the case of the Balance Sheet, of the state of affairs of the Company as at 31st December, 2004; b. in the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date; and c. in the case of Cash Flow Statement, of the cash flows for the year ended on that date.

For S. R. BATLIBOI & COMPANY Chartered Accountants per Hemal Shah Partner Membership No. : 42650 Mumbai January 17, 2005

37

Auditors’ Report Castrol India Limited

Annexure referred to in paragraph 3 of our report of even date Re: Castrol India Limited (i)

(ii)

(iii)

(iv)

(v)

(vi) (vii) (viii)

(ix)

38

(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. (b) All fixed assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed to us, no material discrepancies were noticed on such verification. (c) There was no substantial disposal of fixed assets during the year. (a) The management has conducted physical verification of inventory at reasonable intervals during the year. (b) The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification. (a) As informed to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. (b) As informed to us, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas. (a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Act that need to be entered into the register maintained under section 301 have been so entered. (b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time except in respect of certain transactions, where because of the unique and specialized nature of the items involved and absence of any comparable prices, we are unable to comment whether the transactions were made at prevailing market prices at the relevant time. The Company has not accepted any deposits from the public. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees’ state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues applicable to it. (b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees’ state insurance, income tax, wealth tax, service tax, sales tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

Auditors’ Report Castrol India Limited

(c) According to the records of the Company, the dues outstanding of income tax, sales tax, wealth tax, service tax, custom duty, excise duty and cess on account of any dispute, are as follows: Name of the statute Nature of dispute Central Sales Tax Act & Local Sales Tax Act

Central Excise Act, 1944

Customs Act, 1962 Service Tax under the Finance Act, 1994

Non submission of declaration forms, Disallowance of Set off claim, Classification dispute, Rate dispute, Disallowance of credit notes and rebates and Other dues. Valuation, Modvat Credit, Stock Differences, Classification, Provisional Assessments and Other Issues. Valuation Service Tax on Royalty and Service Tax on rented tanks.

Amount Period to which (Rs. in Crores) the amount relates 18.67 1987 to 2003

41.31

1990 to 2004

0.08 7.50

1998 1997 to 2004

Forum where dispute is pending Assistant Commissioner, Deputy Commissioner, Tribunal and High Court.

Deputy Commissioner, Additional Commissioner, Commissioner, Joint Commissioner, Commissioner (Appeals), CEGAT and Supreme Court. Assistant Commissioner Deputy Commissioner, Additional Commissioner and Commissioner.

(x)

The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year. (xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders. (xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. (xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditor’s Report) Order, 2003 (as amended) are not applicable to the Company. (xiv) In respect of dealing/trading in securities, in our opinion and according to the information and explanations given to us, proper records have been maintained of the transactions and contracts and timely entries have been made therein. The securities have been held by the Company in its own name. (xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions. (xvi) The Company did not have any term loans outstanding during the year. (xvii) According to the information and explanations given to us and on an overall examination of the Balance Sheet and Cash Flow Statement of the Company, we report that no funds raised on short-term basis have been used for long-term investment. (xviii) The Company has not made any preferential allotment of shares during the year to parties or companies covered in the register maintained under section 301 of the Companies Act, 1956. (xix) The Company did not have any outstanding debentures during the year. (xx) The Company has not raised any money through a public issue during the year. (xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no material fraud on or by the Company has been noticed or reported during the course of our audit. For S. R. BATLIBOI & COMPANY Chartered Accountants per Hemal Shah Partner Membership No. : 42650 Mumbai Dated: January 17, 2005

39

Balance Sheet Castrol India Limited

Balance Sheet as at 31st December, 2004

Schedule SOURCES OF FUNDS Shareholders’ Funds Share Capital Reserves and Surplus

Rupees in Crores

A B

Loan Funds Unsecured Loans

C

Deferred Tax Liability (Net)

D

2004

2003

Rupees in Crores

Rupees in Crores

123.64 236.43

TOTAL APPLICATION OF FUNDS Fixed Assets Gross Block Less: Depreciation Less: Impairment of Fixed Assets

123.64 224.44 360.07

348.08

3.72

4.20

17.41

18.31

381.20

370.59

E

Net Block Capital Work-in-progress Investments

F

Current Assets, Loans & Advances Inventories Sundry Debtors Cash & Bank Balances Other Current Assets Loans & Advances

G

Less: Current Liabilities & Provisions Current Liabilities Provisions

H

249.79 100.89 3.79

247.23 79.58 0.24

145.11 4.66

167.41 3.60 149.77 128.91

171.01 84.79

166.24 131.26 29.69 0.01 58.32

155.59 131.25 27.78 0.01 62.61

385.52

377.24

197.02 85.98

192.20 70.25

283.00

262.45

Net Current Assets

102.52

114.79

TOTAL

381.20

370.59

Notes on Accounts

M

The schedules referred to herein form an integral part of the Balance Sheet. As per our report of even date For S. R. BATLIBOI & COMPANY Chartered Accountants

S. M. DATTA

Mumbai January 17, 2005

40

N. K. KSHATRIYA

Managing Director

Executive Directors A. S. RAMCHANDER

per HEMAL SHAH Partner Membership No. : 42650

Chairman

A. H. MODY Company Secretary & Head Legal

Director

R. ELSTON-GREEN

Director

Director Director Director

R. GOPALAKRISHNAN Director D. S. PAREKH Director L. FREESE Alternate Director

Non-Executive Directors A. JHAWAR P. HUGHES R. A. SAVOOR

Profit & Loss Account Castrol India Limited

Profit and Loss Account for the year ended 31st December, 2004

Schedule INCOME Sales [Net of rebates Rs. 41.94 Crores (2003 : Rs. 38.50 Crores)] Less: Excise Duty

Rupees in Crores

2004

2003

Rupees in Crores

Rupees in Crores

1523.21 218.09

Net Sales Other Income

1360.51 189.36 1305.12 22.09

1171.15 19.14

1327.21

1190.29

777.02 319.88 2.87 24.88

669.72 299.33 2.57 14.31

1124.65

985.93

PROFIT BEFORE TAXATION AND EXCEPTIONAL ITEMS Less: Exceptional Items (Refer Note 4 of Schedule M) Voluntary Retirement Scheme Expenses – Plant closure Impairment of Fixed Assets – Plant closure

202.56

204.36

3.72 3.55

— —

PROFIT BEFORE TAXATION Taxation Current [Including Wealth Tax Rs. 0.16 Crore (2003 : Rs. 0.21 Crore)] Deferred Taxation

195.29

204.36

68.73 (0.90)

63.35 3.63

PROFIT AFTER TAXATION Add: Balance as per last Balance Sheet brought forward

127.46 18.71

137.38 13.41

PROFIT AVAILABLE FOR APPROPRIATION

146.17

150.79

49.46 6.46 52.55 6.87 0.13 14.00 16.70

49.46 6.34 52.55 6.73 — 17.00 18.71

146.17

150.79

10.31

11.11

I

Total Income EXPENDITURE Cost of Materials Operating and Other Expenses Interest Depreciation (Refer Note 3 of Schedule M)

J K L

Total Expenditure

APPROPRIATION TO: Interim Dividend Tax on Interim Dividend Proposed Final Dividend Tax on Proposed Final Dividend Education Cess on Tax on Final Dividend 2003 General Reserve Balance carried forward

Earning per share (Basic & Diluted) (Face value of Rs. 10/-) Notes on Accounts

M

The schedules referred to herein form an integral part of the Profit and Loss Account. As per our report of even date For S. R. BATLIBOI & COMPANY Chartered Accountants

S. M. DATTA

Mumbai January 17, 2005

N. K. KSHATRIYA

Managing Director

Executive Directors A. S. RAMCHANDER

per HEMAL SHAH Partner Membership No. : 42650

Chairman

A. H. MODY Company Secretary & Head Legal

Director

R. ELSTON-GREEN

Director

Director Director Director

R. GOPALAKRISHNAN Director D. S. PAREKH Director L. FREESE Alternate Director

Non-Executive Directors A. JHAWAR P. HUGHES R. A. SAVOOR

41

Schedules Castrol India Limited

Schedules forming part of the Balance Sheet as at 31st December, 2004 SCHEDULE A 2004

2003

Rupees in Crores

Rupees in Crores

124.00

124.00

123.64

123.64

123.64

123.64

SHARE CAPITAL Authorised 124,000,000 (2003 : 124,000,000) Equity Shares of Rs. 10/- each

Issued and Subscribed (Refer Notes below) 123,640,298 (2003 : 123,640,298) fully paid up Equity Shares of Rs. 10/- each

Notes: 1. Includes 87,687,455 (2003 : 87,687,455) Equity Shares of Rs. 10/- each held by Castrol Ltd., U.K., the Holding Company. (Also refer Note 7 of Schedule M). 2. Includes 116,353,318 (2003 : 116,353,318) Equity Shares allotted as fully paid up Bonus Shares by capitalisation of Share Premium/ General Reserve.

SCHEDULE B Rupees in Crores

2004

2003

Rupees in Crores

Rupees in Crores

13.62

13.62

RESERVES & SURPLUS Capital Reserve General Reserve As per last Balance Sheet Add: Transferred from Profit and Loss Account

192.11

175.11

14.00

17.00 206.11

Balance in Profit and Loss Account

42

192.11

16.70

18.71

236.43

224.44

Schedules Castrol India Limited

Schedules forming part of the Balance Sheet as at 31st December, 2004 SCHEDULE C 2004

2003

Rupees in Crores

Rupees in Crores

From SICOM Ltd. (For Patalganga Plant — Repayable in next one instalment) [Repayable within one year Rs. 0.23 Crore (2003 : Rs. 0.29 Crore)]

0.23

0.52

From Government of Karnataka, Department of Industries & Commerce (For Hosakote Plant — Repayable in equal quarterly instalments) [Repayable within one year Rs. 0.19 Crore (2003 : Rs. 0.19 Crore)]

0.70

0.89

From SICOM Ltd. (For Patalganga Plant — Repayable from October 2011)

2.79

2.79

3.72

4.20

LOAN FUNDS UNSECURED LOANS Sales Tax Deferral Loan (Interest Free)

SCHEDULE D Rupees in Crores

2004

2003

Rupees in Crores

Rupees in Crores

27.09

29.89

DEFERRED TAX LIABILITY (NET) [Refer Note 1(h) of Schedule M] Deferred Tax Assets and Liabilities are attributable to the following items: Liabilities Depreciation Less: Assets Provision for Doubtful Debts

1.15

2.88

Voluntary Retirement Scheme Expenses

3.25

3.65

Accrual for expenses (Including Leave Encashment) allowable only on payment

4.48

4.22

Others

0.80

0.83 9.68

11.58

17.41

18.31

43

Schedules Castrol India Limited

Schedules forming part of the Balance Sheet as at 31st December, 2004 SCHEDULE E FIXED ASSETS

Rupees in Crores GROSS BLOCK

DEPRECIATION

Additions for the year

Freehold Land

6.79

—

—

6.79

—

—

—

—

—

6.79

6.79

Leasehold Land (1)

0.92

—

—

0.92

0.28

0.02

—

0.30

—

0.62

0.64

Buildings (2)

Deductions As at As at for the 31.12.2004 1.1.2004 year

For the On As at year Deductions 31.12.2004

NET BLOCK IMPAIRMENT LOSS ON As at As at CLOSURE 31.12.2004 31.12.2003 OF PLANTS

As at 1.1.2004

66.92

0.48

0.08

67.32

12.00

2.64

0.02

14.62

—

52.70

54.92

Plant & Machinery

145.56

7.47

3.09

149.94

58.73

16.48

2.07

73.14

3.79

73.01

86.59

Plant & Machinery Intangibles

2.45

—

—

2.45

0.44

0.69

—

1.13

—

1.32

2.01

23.37

0.91

2.50

21.78

7.50

4.72

1.01

11.21

—

10.57

15.87

1.22

—

0.63

0.59

0.63

0.33

0.47

0.49

—

0.10

0.59

247.23

8.86

6.30

249.79

79.58

24.88

3.57

100.89

3.79

145.11

167.41

251.39

13.55

17.71

247.23

72.97

14.31

7.70

79.58

0.24

Furniture, Fixtures and Office Equipments Motor Vehicles

Previous Year

Capital Work-in-progress (Including advances on Capital Account)

4.66

3.60

149.77

171.01

Refer Notes 1(b), 3 and 4 of Schedule M relating to Fixed Assets, Depreciation and Impairment. Notes : (1)

Cost includes Rs. 0.49 Crore (2003 : Rs. 0.49 Crore) for which execution of Land Lease agreement in respect of plots in Mumbai is in progress.

(2)

Comprises of cost of premises including shares of paid up value of Rs. 0.01 Crore (2003 : Rs. 0.02 Crore) in Co-operative Societies.

(3)

Land & Building, Plant & Machinery and Furniture & Fixtures at Ballabgarh and Hosakote plants and Company owned Office Premises in Mumbai are retired from active use and held for disposal. Accordingly these assets are carried at lower of cost and net realisable value. The Net Book Value of such assets as at December 31, 2004 is Rs. 14.24 Crores (2003 : Rs. 7.88 Crores).

44

Schedules Castrol India Limited

Schedules forming part of the Balance Sheet as at 31st December, 2004 SCHEDULE F 2004

2003

Rupees in Crores

Rupees in Crores

0.02

0.02

0.30

0.30

128.59

84.46

INVESTMENTS – [Refer Note 1(c) of Schedule M] LONG TERM Other than trade: Quoted: Government Securities * [Matured Face Value Rs. 0.01 Crore (2003 : Rs. 0.01 Crore)] 30,100 (2003 : 30,100) – 6.75% Tax Free Bonds (US 64) of Unit Trust of India of Rs. 100/- each [Market Value Rs. 0.31 Crore (2003 : Rs. 0.34 Crore)] CURRENT Other than trade: Unquoted: Government Treasury bills [Face Value Rs. 130.00 Crores (2003 : Rs. 86.19 Crores)] In Subsidiary Company Nil (2003 : 1,000) Equity Shares of Rs. 10/- each fully paid in Indrol Chemicals & Specialities Private Limited (Refer Note 16 of Schedule M)

*

—

0.01

128.91

84.79

Government Securities lodged with Mumbai Port Trust.

45

Schedules Castrol India Limited

Schedules forming part of the Balance Sheet as at 31st December, 2004 SCHEDULE G 2004

2003

Rupees in Crores

Rupees in Crores

Raw Materials

81.78

66.72

Finished Products

70.71

73.72

Traded Items

6.26

7.53

Packages

6.08

6.49

Stores & Consumables

1.41

1.13

166.24

155.59

3.98

5.00

2.17 125.11 3.14

2.73 123.52 8.02

134.40

139.27

CURRENT ASSETS, LOANS AND ADVANCES Inventories* [Refer Note 1(d) of Schedule M]

* Including Goods in Transit Sundry Debtors @ Secured Unsecured, considered good Exceeding six months Others Unsecured, considered doubtful (Exceeding six months)

Less: Provision for Doubtful Debts

3.14

8.02

131.26

131.25

0.05

0.04

24.57

22.44

0.01

0.01

@ Includes amount due from Companies under same management Rs. 9.78 Crores (2003 : Rs. 6.21 Crores), list of which as identified by management.

Cash and Bank Balances Cash on Hand With Scheduled banks: On Current Account [including cheques on hand Rs. 4.35 Crores (2003 : Rs. 1.47 Crores)] On Deposit Account Unclaimed Dividend Accounts

5.06

5.29

29.69

27.78

0.01

0.01

0.01

0.01

Other Current Assets Interest accrued on Investments

46

Schedules Castrol India Limited

Schedules forming part of the Balance Sheet as at 31st December, 2004 SCHEDULE G — (Contd.) 2004

2003

Rupees in Crores

Rupees in Crores

50.40 2.12

57.65 2.12

Less: Provision for doubtful advances

52.52 2.12

59.77 2.12

Balances with Customs, Port Trust and Excise Authorities

50.40 7.92

57.65 4.96

Loans and Advances (Unsecured, considered good, unless otherwise stated) Advances recoverable in cash or in kind or for value to be received (Refer Note below) Considered good Considered doubtful

58.32

62.61

385.52

377.24

Note: Amounts due from Directors of the Company Rs. 0.19 Crore (2003 : Rs. 0.21 Crore) and maximum amount due from Directors of the Company at any time during the year Rs. 0.22 Crore (2003 : Rs. 0.22 Crore).

SCHEDULE H Rupees in Crores

2004

2003

Rupees in Crores

Rupees in Crores

CURRENT LIABILITIES AND PROVISIONS Current Liabilities Sundry Creditors (Refer Note 14 of Schedule M)

189.32

184.09

Advances from Customers

1.62

1.77

Interest accrued and not due on Loans/Deposits

0.10

—

Amount retained for taxation liability of Castrol Ltd., U.K.

0.92

1.05

Investor Education and Protection Fund shall be credited by the following amount (Refer Note below) Unclaimed Dividends

5.06

5.29 197.02

192.20

Provisions Provision for Indirect Taxation

11.66

8.21

Provision for Current Taxation (Net of Advance Tax)

14.90

2.76

Proposed Final Dividend

52.55

52.55

6.87

6.73

Tax on Proposed Final Dividend

85.98

70.25

283.00

262.45

Note: There is no amount due and outstanding as at Balance Sheet date to be credited to Investor Education and Protection Fund.

47

Schedules Castrol India Limited

Schedules forming part of the Profit and Loss Account for the year ended 31st December, 2004 SCHEDULE I Rupees in Crores

2004

2003

Rupees in Crores

Rupees in Crores

OTHER INCOME Interest (Gross) From Current Investments (Non trade) On Bank Deposits On Income Tax Refund Others [Tax deducted at source Rs. 0.01 Crore (2003 : Rs. 0.09 Crore)]

Dividend from Long Term Investment (Non trade – Gross) [Tax deducted at source Rs. Nil (2003 : Rs. 0.03 Crore)] Profit on sale of Investments – Current Profit on Disposal/Write off of Fixed Assets (Net) Miscellaneous Income [Tax deducted at source Rs. 0.48 Crore (2003 : Rs. 0.05 Crore)] Debts written off in earlier years, realised Excess Provision for Doubtful Debts written back

0.02 0.06 2.87

0.01 0.42 0.72

0.75

0.71 3.70

1.86

—

0.39

3.90 1.46 8.01 0.14 4.88

6.93 — 5.48 0.51 3.97

22.09

19.14

SCHEDULE J 2004

2003

Rupees in Crores

Rupees in Crores

COST OF MATERIALS Opening Stock Raw Materials and Packages Traded Items Add: Purchases Less: Closing Stock Raw Materials and Packages Traded Items

73.21 7.53

57.43 8.65

80.74 787.99

66.08 698.70

868.73

764.78

87.86 6.26

73.21 7.53

94.12

80.74

774.61

684.04

(Increase)/Decrease in Stock of Finished Products: Opening Stock Closing Stock

73.72 70.71

57.24 73.72

Excise Duty on account of Increase/(Decrease) in Stock of Finished Products

3.01 (0.60)

(16.48) 2.16

777.02

669.72

Note: Purchases include foreign exchange difference on imports — Gain Rs. 0.57 Crore (2003 : Gain Rs. 0.55 Crore)

48

Schedules Castrol India Limited

Schedules forming part of the Profit and Loss Account for the year ended 31st December, 2004

SCHEDULE K Rupees in Crores OPERATING AND OTHER EXPENSES Salaries, Wages and Bonus [Refer Note 1(e) of Schedule M] Performance Linked Incentive to Wholetime Directors Contribution to Provident and Pension Funds [Refer Note 1(e) of Schedule M] Gratuity [Refer Note 1(e) of Schedule M] Staff Welfare Expenses Rent Rates & Taxes Power & Fuel Stores & Consumables Freight & Forwarding Charges Insurance Repairs & Maintenance – Land & Building Repairs & Maintenance – Plant & Machinery Repairs & Maintenance – Others Bad Debts Written Off Processing & Filling Charges Non-recovered Taxes Advertisement & Sales Promotion Stock Point Operating Charges Loss on Disposal/Write Off of Fixed Assets (Net) Directors’ Sitting Fees Voluntary Retirement Scheme Expenses [Refer Note 1(i) of Schedule M] Commission to Resident Non-Wholetime Indian Directors Royalty Sales Promotion Fee Travelling Expenses Miscellaneous Expenses (Refer Note 13 of Schedule M) (Net)

2004

2003

Rupees in Crores

Rupees in Crores

46.12 0.43

47.01 0.58

5.88 5.29 7.43

6.33 3.08 8.02 65.15 12.08 1.67 3.46 1.14 47.56 2.37 1.97 2.33 4.16 5.20 21.72 12.06 60.00 10.36 — 0.03 0.51 0.26 21.70 13.34 12.60 20.21

65.02 10.46 1.68 3.44 1.32 40.54 2.40 2.48 2.65 3.92 6.24 20.64 8.47 54.33 9.63 3.16 0.02 0.72 0.26 22.71 8.19 10.41 20.64

319.88

299.33

SCHEDULE L

INTEREST To Banks On Others

2004

2003

Rupees in Crores

Rupees in Crores

2.26 0.61

2.27 0.30

2.87

2.57

49

Schedules Castrol India Limited

Schedules forming part of the Balance Sheet as at 31st December, 2004 and the Profit and Loss Account for the year ended on that date. SCHEDULE M NOTES ON ACCOUNTS 1.

Accounting Policies : (a)

Basis of Preparation of Accounts : The accounts have been prepared to comply in all material aspects with applicable accounting principles in India, the Indian Accounting Standards and the relevant provisions of the Companies Act, 1956. The Financial Statements have been prepared under the historical cost convention on an accrual basis.

(b)

Fixed Assets and Depreciation : Fixed Assets are stated at cost (net of cenvat wherever applicable) less accumulated depreciation and impairment loss. Depreciation has been provided on straight line basis. All Fixed Assets are depreciated over their estimated useful lives which have been determined by management. (Also refer Note 3 of Schedule M – Notes on Accounts).

(c)

Valuation of Investments : Long term Investments are stated at cost less provision, if any, for diminution, which is other than temporary in nature. Current Investments are valued at lower of cost and net realisable value.

(d)

Valuation of Inventories : Raw Materials, Packages, Traded Items and Finished Goods are valued at lower of monthly weighted average cost and net realisable value. Cost of Finished Goods includes material & packaging cost, overheads and Excise Duty. Custom Duty on stock lying in Bonded Warehouses is included in cost. Stores and Consumables are valued at cost.

(e)

Employees’ Retirement Benefits : Annual Contribution to Gratuity Fund is based on an actuarial valuation as on the Balance Sheet date. Monthly contribution to Pension Fund is determined in accordance with Company’s Pension Scheme. Apart from this, under the Company’s Pension Scheme, certain categories of employees on retirement, are eligible for monthly differential Pension which is accounted monthly on payment basis. As per Company’s Scheme, accrued liability towards encashment of leave accumulated by workers is provided for on an actuarial basis.

(f)

Recognition of Income and Expenditure : Sales are recognised when goods are supplied and are recorded net of rebates and sales tax and inclusive of excise duty. Expenses are accounted for on accrual basis and provision is made for all known losses and expenses.

(g)

Foreign Currency Transactions : Foreign Currency Transactions are accounted at exchange rates on the date of transactions. Premium on forward cover contracts in respect of import of raw materials is charged to Profit and Loss Account over the period of contract. Amounts payable and receivable in foreign currency as at the Balance Sheet date, not covered by forward contracts are reinstated at the applicable exchange rates prevailing on that date. All exchange differences arising on revenue transactions, not covered by forward contracts, are charged to Profit and Loss Account.

(h)

Taxation : (i) Provision for Current Income Tax is made in accordance with the Income Tax Act, 1961. (ii) Deferred Tax is recognised, subject to the considerations of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. (iii) The tax year for the Company being the year ending 31st March, the provision for taxation for the year is the aggregate of the provision made for the three months ended 31st March, 2004 and the provision based on the figures for the remaining nine months upto 31st December, 2004, the ultimate tax liability of which will be determined on the basis of the figures for the period 1st April, 2004 to 31st March, 2005.

(i)

2.

50

Voluntary Retirement Scheme Expenses are fully written off to the Profit and Loss Account in the year in which they accrue.

Estimated amount of contracts (net of advances) remaining to be executed on capital account and not provided for Rs. 2.53 Crores (2003 : Rs. 2.37 Crores).

Schedules Castrol India Limited

SCHEDULE M (Contd.) 3.

In view of recent trends in declining useful lives of assets e.g. due to the rate of change in digital technology, the Company has considered it prudent to conduct a broad review of the remaining estimated useful lives of all its Fixed Assets. As a result the Company has reduced the estimated useful life and correspondingly increased the rate of depreciation for certain categories of assets, which are given below : (These Assets were depreciated till 2003 at rates prescribed under Schedule XIV to the Companies Act, 1956) Fixed Assets

Office & Residential Buildings Computers Workshop Equipments* Furniture & Fixtures Motor Cars Office Equipments Total

4.

5.

6.

7.

Revised Estimated useful life in years

25 4 4 8 4 10

Estimated useful life in years – Pre-revision (Schedule – XIV) 61 6 21 16 11 21

Additional depreciation due to change in estimated useful life Rs. in Crores 1.08 4.18 2.04 1.95 0.14 1.32 10.71

* Workshop Equipments provided against Sales Agreements will now be depreciated over the standard period of Agreement. The written down value of these Fixed Assets as at 1.1.2004 is being depreciated over their revised remaining useful life. The total impact of the revision is an increase of Rs. 10.71 Crores in depreciation for the year with a corresponding reduction in Profit before tax for the year & written down value of Fixed Assets as at 31.12.2004. This amount includes an estimated non-recurring amount of Rs. 6 Crores. The remaining categories of Plant & Machinery, Laboratory Equipments, Factory Buildings, Moulds, Dealer Boards, Leasehold Land & Leasehold Improvements will continue to be depreciated at the existing rates as they represent the estimated useful life of these assets. (Also refer Note 1(b) of Schedule M – Notes on Accounts). The Company has decided to close down its Plant located at Ballabgarh in the State of Haryana with effect from 1.1.2005, as operations over there have become relatively cost inefficient. The Company had introduced a Voluntary Retirement Scheme (VRS) for its employees at Ballabgarh Plant. VRS charge for the year includes an amount of Rs. 3.72 Crores for Ballabgarh Plant. During the year the Fixed Assets at Ballabgarh Plant have been retired from active use and are held for disposal. The Company has provided for an Impairment loss of Rs. 3.55 Crores (the difference between the carrying amounts and the net realisable value estimated by the management) in respect of these Fixed Assets. 31st December, 31st December, 2004 2003 Rupees Rupees in Crores in Crores Contingent liabilities not provided for in the accounts : (a) Counter Guarantees given to Banks 5.73 4.60 (b) Excise/Sales Tax/Customs Demands made by the Authorities, in respect of which appeals have been filed 11.50 9.27 (c) Claims against the Company not acknowledged as debts estimated at : In respect of Third Parties – Miscellaneous 5.76 2.58 (d) A suit has been filed against the Company in the Delhi High Court in connection with the erstwhile Regional Office of the Company. The suit is for eviction of the Company from the said premises and for claiming mesne profit/damages on the grounds that with the increase in rent by the landlord the Delhi Rent Control Act ceased to apply to the said premises. The Company has taken necessary steps to defend itself. However, till the matter is finally decided the financial liability of the Company cannot be ascertained. (e) The Company has received show cause notices from Excise Authorities in respect of stock differences at some of its plants aggregating to Rs. 15.46 Crores. Based on the facts of the case and legal opinions obtained in this regard, the Company is of the considered view that the demands are not sustainable. However, out of abundant caution, the Company has made provisions/payments totalling to Rs. 3.82 Crores. Certain disputed demand notices relating to Indirect taxes amounting to Rs. 38.20 Crores are neither have been considered as contingent liabilities nor acknowledged as claims, based on expert legal opinions obtained in earlier years. Further, during the year, the Company has carried out a health check on these disputed liabilities from reputed Tax Advisors, who have confirmed the Company’s stand that the possibility of the demands materializing is remote. A Shareholder of the Company had filed a Public Interest Petition in the Delhi High Court interalia challenging the allotment of 3,537,862 equity shares on a Preferential basis to Castrol Ltd., U.K. The said Petition has been dismissed by the Delhi High Court. However, the Shareholder can go in appeal against the said Order to the Supreme Court of India.

51

Schedules Castrol India Limited

SCHEDULE M (Contd.) 8.

Segment Information : The business segment has been considered as the primary segment. The Company is organised into two business segments, Automotive & Non Automotive. The above business segments have been identified considering : — The customers — The differing risks and returns — The organisation structure — The internal financial reporting system Segment revenue, results, assets and liabilities have been accounted for on the basis of their relationship to the operating activities of the segment and amounts allocated on a reasonable basis. Rupees in Crores 31st December, 2004

Revenue Net Sales/Income from Operations Results Segment Results Unallocable Expenditure net of Unallocable Income Exceptional Items (Refer Note 4 of Schedule M) Interest Profit Before Taxation Provision For Current Taxation Deferred Taxation Profit After Taxation Other Information Segment Assets Segment Liabilities Capital Expenditure (Including Capital Work-in-progress) Depreciation (Refer Note 3 of Schedule M) Impairment of Fixed Assets Geographical Segment Revenue India Outside India

Assets India Outside India

Capital Expenditure (including Capital Work-in-Progress) India Outside India

9.

52

Automotive

NonAutomotive

Unallocated

1111.69

193.43

—

194.58

20.45

—

31st December, 2003 Total

Automotive

NonAutomotive

Unallocated

Total

1305.12

1001.48

169.67

—

1171.15

—

215.03

197.00

18.74

—

215.74

—

9.60

9.60

—

—

8.81

8.81

— — — — — —

— — — — — —

7.27 2.87 — — — —

7.27 2.87 195.29 68.73 (0.90) 127.46

— — — — — —

— — — — — —

— 2.57 — — — —

— 2.57 204.36 63.35 3.63 137.38

400.35 183.07

106.01 20.05

158.28 101.45

664.64 304.57

412.08 179.17

108.72 15.29

112.24 90.50

633.04 284.96

8.37

1.55

—

9.92

12.25

0.68

—

12.93

20.59 3.00

4.29 0.55

— —

24.88 3.55

10.23 0.20

4.08 0.04

— —

14.31 0.24

1304.48 0.64

1170.99 0.16

1305.12

1171.15

659.15 5.49

628.57 4.47

664.64

633.04

9.92 —

12.93 —

9.92

12.93

Related Party Disclosures : A. Name of the related party and nature of relationship where control exists (a) Holding Castrol Ltd., U.K. (Holding Company of Castrol India Ltd.) Companies Burmah Castrol Holdings Ltd. (Holding Company of Castrol Ltd., U.K.) BP PLC (Holding Company of Burmah Castrol Holdings Ltd.)

Schedules Castrol India Limited

SCHEDULE M (Contd.)

B.

(b)

Subsidiary

Indrol Chemicals & Specialities Private Limited

(c)

Fellow Subsidiaries with which the Company has transactions

Air BP Lubricants Aspac Oil (Thailand) Ltd. Aspac Oil Korea BP Asia Pacific Pte Ltd. BP Chemicals (Malaysia) BP Chemicals Ltd. BP China BP Corporation NA Inc. BP Exploration (IN DJAZAIR) Ltd. BP Exploration (IN Salah) Ltd. BP Gas & Power-Head Office BP Gas Marketing Ltd. BP India Ltd. BP India Services Pvt. Ltd. BP International Holdings Oil. BP International Ltd. BP Japan KK

(d)

Associates

Castrol India Ltd. Employees’ Provident Fund Castrol India Ltd. Staff Pension Fund Castrol India Ltd. Employees’ Gratuity Fund

(e)

Key Management Personnel

N. R. R. U. A.

K. Kshatriya Elston-Green Pisharody DeSousa S. Ramchander

BP Mauritius Ltd. BP Middle East BP Oil International Ltd. BP Oil New Zealand BP Oil UK Ltd. BP Petrolleri A.S BP Shipping Ltd. BP Singapore - Lubes BP Singapore PTE Ltd. BP Singapore Spec Ind Lubes BP Southern Africa Burmah Oil Deutschland Burmah Oil TECH’ GMBH Castrol Australia PTY Ltd. Castrol Belgium Castrol China Ltd. Castrol France S A

Managing Executive Executive Executive Executive

Director Director Director Director Director

Castrol Industrial North America Inc. Castrol Industrie GMBH Castrol International Ltd. Castrol Italiana SPA Castrol Offshore Castrol PGO UK Castrol SAME Castrol South Africa Castrol (UK) Ltd. Deutsche BP Aktiengesellschaft Freight Systems Co. Ltd. Lubricants Belgium Lubricants UK Corporate Lubricants UK Ltd. PT Castrol Indonesia Tata BP Solar India Ltd.

Upto 5th May, 2004 Upto 5th May, 2004 Effective from 1st January, 2005

Transactions with related parties as per the books of account. Rupees in Crores 31st December, 2004 Subsidiary

Associates

Key Management Personnel

Fellow Subsidiaries

Holding Companies

Subsidiary

Associates

Key Management Personnel

Fellow Subsidiaries

Purchase of Materials/ Finished Goods

—

—

—

—

69.85

—

—

—

—

42.02

Sale of Goods

—

—

—

—

2.44

—

—

—

—

0.83

Receiving of Services

—

—

—

—

4.28

—

—

—

—

4.87

Rendering of Services & Deputation of Employees

—

—

—

—

17.34

0.06

—

—

—

10.89

Commission Income

—

—

—

—

0.99

—

—

—

—

0.87

Contribution to Funds

—

—

11.11

—

—

—

—

9.27

—

—

72.34

—

—

—

0.11

72.34

—

—

—

0.11

Dividend Dividend Received

C.

31st December, 2003

Holding Companies

—

—

—

—

—

—

0.39

—

—

—

Royalty

21.70

—

—

—

—

22.71

—

—

—

—

Amounts Payable

57.26

—

—

—

8.40

60.09

—

—

—

2.61

Amounts Receivable

—

—

—

—

9.79

0.06

—

—

—

6.15

Remuneration to Managing Directors

—

—

—

1.27

—

—

—

—

1.13

—

Remuneration to Executive Directors

—

—

—

1.91

—

—

—

—

2.47

—

Loan Outstanding

—

—

—

0.19

—

0.65

—

—

0.20

—

Recovery of Loan & Interest thereon

—

—

—

0.01

—

—

—

—

0.01

—

The information given above, have been reckoned on the basis of information available with the Company.

53

Schedules Castrol India Limited

SCHEDULE M (Contd.) 10.

Operating Lease for assets taken on lease after 1st April, 2001. 31st December, 31st December, 2004 2003 Rupees Rupees in Crores in Crores (a)

(b) 11.

Total of future minimum lease payments (i)

Not later than one year

11.35

9.58

(ii)

Later than one year and not later than five years

10.26

15.20

(iii)

Later than five years

—

—

12.08

10.46

Lease payments recognised in the Profit and Loss account

Information given under Clause 3(i)(a), 3(ii), 4-C, 4-D of Part II of Schedule VI to the Companies Act, 1956. 31st December, 2004 Quantity Value (KLs/MTs) Rupees in Crores (a)

Turnover (Net Sales) Class of Goods : Lubricating Oils, Greases etc. Traded Items

223583 621

1280.27 23.16

210459 1381

1138.27 31.07

224204

1303.43

211840

1169.34

Old and used Containers

(b)

(i)

Consumption of Raw Materials, Additives and Chemicals and Packages : * Base Oils Additives and Chemicals Packages (Individual items each being less than 10% of the total)

31st December, 2003 Quantity Value (KLs/MTs) Rupees in Crores

195333 33735

1.69

1.81

1305.12

1171.15

449.99 234.52

186597 31727

380.22 211.22

—

76.38

—

73.84

229068

760.89

218324

665.28

* Does not include adjustment for old and used Containers 31st December, 2004 Value % of Rupees Total in Crores Consumption (ii)

54

31st December, 2003 Value % of Rupees Total in Crores Consumption

Value of all Imported and Indigenous Raw Materials consumed during the year : Imported : Base Oils Additives and Chemicals

320.93 53.46

42.18 7.03

255.92 50.52

38.47 7.59

Indigenous : Base Oils Additives and Chemicals Packages

129.06 181.06 76.38

16.96 23.80 10.04

124.30 160.70 73.84

18.68 24.16 11.10

760.89

100.00

665.28

100.00

Schedules Castrol India Limited

SCHEDULE M (Contd.) 31st December, 2004 Quantity Value (KLs/MTs) Rupees in Crores (c)

(d)

(e)

Opening and Closing Stock of Goods produced : Manufactured Grades : Lubricating Oils and Greases Opening Stock Closing Stock [Excluding shortages/losses – 612 KLs/MTs (2003 : 538 KLs/MTs)] Traded Items : Opening Stock Purchases Closing Stock

31st December, 2003 Quantity Value (KLs/MTs) Rupees in Crores

15868

73.72

13648

57.24

14106

70.71

15868

73.72

436 569 382

7.53 10.14 6.26

647 1170 436

8.65 15.14 7.53

Licensed and Installed Capacity : (i) Licensed Capacity — Not applicable as per legal advice (ii) Installed Capacity (Technically evaluated as certified by the Management and accepted by Auditors) (Per Year on a single shift basis) 31st December, 31st December, 2004 2003 (KLs/MTs) (KLs/MTs)

(f) (g)

12.

For production of Lubricating Oils, Greases, Brake Fluids, at Patalganga, Kolkata, Chennai, Ballabgarh and Silvassa.

165764

165764

Production of Lubricating Oils, Greases, etc. [Including processing done by third parties 15899 KLs/MTs (2003 : 15306 KLs/MTs)]

222433

213217

(i)

The relevant information regarding turnover, production, opening and closing stocks is given only in aggregate and no detailed break-up thereof is given as the items are too numerous to be conveniently grouped. (ii) Consumption includes adjustments for shortage/excess, etc. and the effects of reduction of inventory to realisable value. (iii) Quantities of turnover, consumption, production, opening and closing stocks of additives and chemicals are made up of Kilolitres and Metric Tons, but the constituent units of measurement of the items have not been separately identified and indicated. (iv) As the Company manufactures and trades, the information required by Clause 3(ii)(a) of Schedule VI Part II to the Companies Act, 1956 is interpreted to require total amounts to be disclosed in respect of opening stock, closing stock and purchases of traded items. 31st December, 31st December, 2004 2003 Rupees Rupees in Crores in Crores Directors’ emoluments : Total Remuneration (excluding sitting fees) [Refer (b) and (c) below] 3.43 3.85 Includes : (i) Salary and Allowances (ii) Contribution to Provident and other funds (iii) Estimated Value of perquisites * (iv) Performance Linked Incentive to Wholetime Directors (v) Commission to Resident Non-Wholetime Indian Directors [Refer (c) below]

1.76 0.30 0.68 0.43 0.26

2.00 0.38 0.63 0.58 0.26

* Evaluated as per Income-Tax Rules wherever applicable.

55

Schedules Castrol India Limited

SCHEDULE M (Contd.) 31st December, 31st December, 2004 2003 Rupees Rupees Rupees in Crores in Crores in Crores (a)

Computation of profit in accordance with Section 309(5) of the Companies Act, 1956 : Profit before Taxation as per Profit and Loss Account Add: Depreciation as per Profit and Loss Account Voluntary Retirement Scheme Expenses Exceptional Items - Voluntary Retirement Scheme Expenses Plant closure Exceptional Items - Impairment of Fixed Assets - Plant closure Directors’ Remuneration Directors’ Sitting Fees

195.29 24.88 0.51 3.72 3.55 3.43 0.03 36.12 231.41

Less: Depreciation u/s 350 of the Companies Act, 1956 Profit on sale of Investments (Net) Wealth Tax Excess Provision for Doubtful Debts written back Profit under Section 309(5) of the Companies Act, 1956 (b)

(c)

Remuneration payable to Managing and Wholetime Directors @ 10% on above profits Restricted by the Board of Directors to Commission payable to resident Non-Wholetime Indian Directors @ 1% on above profits Restricted by the Board of Directors to

204.36 14.31 0.72 — — 3.85 0.02 18.90

22.21

223.26 13.69 6.93 0.21 3.97 24.80

209.20

198.46

20.92 3.17

19.85 3.59

2.09 0.26

1.98 0.26

13.27 3.90 0.16 4.88

31st December, 31st December, 2004 2003 Rupees Rupees in Crores in Crores 13.

Miscellaneous Expenses include Auditors’ Remuneration as follows : (i) Audit Fees — Statutory # (ii) In other capacity : # Audit Fees — Tax Accounts/Audit Other Services (iii) Reimbursement of out of pocket expenses

0.25

0.25

0.11 0.21 0.01 0.58

0.11 0.13 0.01 0.50

# Excluding Service Tax 14.

The Company owes to following Small Scale Industrial Undertakings sums outstanding for more than 30 days : ABCD Drums & Barrels Industries. Ole Fine Organics Royal Castor Products Pvt. Ltd. Amantech Chemicals Pvt. Ltd. Pax Enterprises Shah Packwell Industries Central Oil Industries R. G. Desai Industries Suru Chemicals & Pharmaceuticals Pvt. Ltd. Himatex Corporation R. K. Metal & Plastics Pvt. Ltd. Vibha Chem Products Pvt. Ltd. Makwell Plasticizers Pvt. Ltd. Raj Lubricants (Madras) Ltd. The information regarding Small Scale Industrial Undertakings has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

15.

Research and Development expenses amounting to Rs. 7.50 Crores (2003 : Rs. 6.01 Crores) are included under relevant heads of expense.

56

Schedules Castrol India Limited

SCHEDULE M (Contd.) 16.

The Directors of Indrol Chemicals & Specialties Private Limited, a wholly owned Subsidiary Company, had Resolved to put the Company in voluntary winding up. A final meeting of the Members of the Company was called by the Liquidator and the paid up capital refunded to the Parent Company. An application has been made to the Official Liquidator to formally wind up the Company. 31st December, 31st December, 2004 2003 Rupees Rupees in Crores in Crores

17.

C.I.F. Value of Imports : Raw Materials Capital Goods

18.

19.

20.

Expenditure in Foreign Currency (on accrual basis) : Travel Imports of goods for resale Others (Net of tax where applicable) Royalty (Net of tax) Earnings in Foreign Exchange (on accrual basis) : Supplies to Foreign Vessels Commission & Others FOB value of goods exported

308.47 0.66

245.87 0.81

0.91 8.08 6.14 18.45

0.42 9.26 8.02 19.30

2.09 0.99 0.64

1.00 1.04 0.16

Details of Dividend remitted during the year, to Two (2003 – Two) non-resident shareholders are as follows : 31st December, 31st December, 2004 2003 Dividend in respect No. of Rupees Rupees of the year ended Shares in Crores in Crores 31-12-2002 31-12-2002 31-12-2003 31-12-2003 31-12-2004

(Final) (Special) (Interim) (Final) (Interim)

87822929 87822929 87822929 87822929 87822929

— — — 37.33 35.13

21.

Previous year’s figures have been regrouped wherever necessary.

22.

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

37.33 72.45 35.13 — —

Balance Sheet Abstract and Company’s General Business Profile : I.

Registration Details Registration No. Balance Sheet Date

3

1

Date

II.

2

1

1

2

Month

3

5

9

2

0

State Code 0

1

1

4

Year

Capital raised during the year (Amount in Rs. Thousands) Public Issue

Rights Issue —

Bonus Issue

— Private Placement

—

—

57

Schedules Castrol India Limited

SCHEDULE M (Contd.) III.

Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities 6 4 2 0

9

9

Sources of Funds: Paid up Capital 1 2 3 6 4

0

3

6

6

Secured Loans — Deferred Tax Liability (Net) 1 7 4 0 7

Total Assets 6 4 2 0

9

9

Reserves & Surplus 2 3 6 4 3 7

6

Unsecured Loans 3 7 2

5

6

Investments 2 8 9 1

1

5

0

Application of Funds: Net Fixed Assets 1 4 9 7 7

2

1

Net Current Assets 1 0 2 5 2

6

9

1

Miscellaneous Expenditure —

Accumulated Losses — IV.

Performance of the Company (Amount in Rs. Thousands) 1

V.

3

Turnover 0 5 1

2

3

4

Profit/(Loss) before tax 1 9 5 2 9 4

1

Earning per Share (Rs.) 1 0 . 3

1

1

Total Expenditure 1 3 1 9 2

3

3

Profit/(Loss) after tax 1 2 7 4 6 3

9

Dividend Rate % 8 2 .

5

0

L

S

Generic Names of Principal Products/Services of the Company Item Code No. (ITC Code) Product Description

L

2

7

1

0

0

0

.

6

1

U

B

R

I

C

A

T

I

N

S. M. DATTA

Chairman

G

O

I

N. K. KSHATRIYA

Managing Director

Executive Directors A. S. RAMCHANDER A. H. MODY Company Secretary & Head Legal Mumbai January 17, 2005

58

Director

R. ELSTON-GREEN

Director

Director Director Director

R. GOPALAKRISHNAN Director D. S. PAREKH Director L. FREESE Alternate Director

Non-Executive Directors A. JHAWAR P. HUGHES R. A. SAVOOR

Cash Flow Castrol India Limited

Cash Flow Statement for the year ended 31st December, 2004

Rupees in Crores A.

2004

2003

Rupees in Crores

Rupees in Crores

CASH FLOW FROM OPERATING ACTIVITIES Net profit before tax

195.29

204.36

24.88

14.31

2.87

2.57

Interest & Dividend Income

(3.70)

(2.25)

Profit on Sale of Investments

(3.90)

(6.93)

Unrealised foreign exchange (gain)/losses

(0.57)

(0.55)

(Profit)/Loss on Disposal/Write off of Fixed Assets (Net)

(1.46)

3.16

Adjustments for: Depreciation Interest

Provision for Impairment of Fixed Assets Operating Profit before Working Capital Changes

3.55

—

216.96

214.67

(0.01)

(39.25)

(10.08)

(30.66)

Adjustments for: Sundry Debtors Inventories Other Loans & Advances Sundry Creditors

4.29 8.17

5.83

Cash generated from Operations

219.33

166.59

Income Tax Paid

(56.59)

(61.67)

NET CASH FLOW FROM OPERATING ACTIVITIES B.

16.00

162.74

104.92

CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets Sale of Fixed Assets Purchase of Investments Sale of Investments Interest received Dividend received NET CASH FLOW FROM INVESTING ACTIVITIES

(9.92)

(12.93)

4.19

7.09

(700.88)

(630.77)

660.66

773.20

3.70

1.86

—

0.39 (42.25)

138.84

59

Cash Flow Castrol India Limited

Cash Flow (Contd.) Rupees in Crores C.

2003 Rupees in Crores

CASH FLOW FROM FINANCING ACTIVITIES Repayment of long term borrowings

(0.48)

(0.86)

Interest Paid

(2.77)

(2.57)

(102.01)

(204.01)

(13.32)

(26.14)

Dividend Paid Dividend Tax paid NET CASH FLOW FROM FINANCING ACTIVITIES D.

2004 Rupees in Crores

(118.58)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (A) + (B) + (C)

(233.58)

1.91

10.18

CASH AND CASH EQUIVALENTS, beginning of the year

27.78

17.60

CASH AND CASH EQUIVALENTS, end of the year

29.69

27.78

Notes: (1) The above Cash Flow Statement has been prepared under the “Indirect Method” as set out in the Accounting Standard-3 on Cash Flow Statement issued by The Institute of Chartered Accountants of India. (2) Previous year’s figures have been regrouped wherever necessary.

As per our report of even date For S. R. BATLIBOI & COMPANY Chartered Accountants

S. M. DATTA

Mumbai January 17, 2005

60

N. K. KSHATRIYA

Managing Director

Executive Directors A. S. RAMCHANDER

per HEMAL SHAH Partner Membership No. : 42650

Chairman

A. H. MODY Company Secretary & Head Legal

Director

R. ELSTON-GREEN

Director

Director Director Director

R. GOPALAKRISHNAN Director D. S. PAREKH Director L. FREESE Alternate Director

Non-Executive Directors A. JHAWAR P. HUGHES R. A. SAVOOR