Rallis Annual Report 2005 06

RALLIS A

Enterprise

Fifty-eighth annual report 2005-2006

Annual General Meeting on Wednesday, 31st May, 2006 at 4.00 p.m. at Bombay House Auditorium, Bombay House, Homi Mody Street, Mumbai 400 001

Contents Board of Directors

3

Chairman’s Statement

4-5

Notice of Meeting

6-8

Explanatory Statement

9-13

Directors’ Report

14-20

Management Discussion and Analysis

21-27

Report on Corporate Governance

28-39

Auditors’ Report

40-43

Balance Sheet

44

Profit and Loss Account

45

Cash Flow Statement

46-47

Schedules 1 to 19

48-70

Balance Sheet Abstract

71

Statement under Section 217 (2A)

72

Financial Statistics

73-74

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

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Board of Directors

Management Team

R. Gopalakrishnan (Chairman)

Venkatrao S. Sohoni

Managing Director

Ram S. Tarneja

V. Shankar

Chief Operating Officer

Russi Jal Taraporevala

B. S. Uberoi

Executive Vice President - Corporate Affairs

V. G. Gadre

Chief Information Officer

D. C. Mansharamani

Chief - Manufacturing

Anil Mehta

Head - International Business Division

Soumen Mitra

Chief Financial Officer

K. N. Pardiwalla

Chief Internal Auditor

A. K. Shetty

Chief - Sales & Marketing

Homi R. Khusrokhan Prasad R. Menon B. D. Banerjee E. A. Kshirsagar Venkatrao S. Sohoni (Managing Director)

Registered Office Apeejay House 7th Floor 3 Dinshaw Vachha Road Churchgate Mumbai 400 020 Tel. No. 6665 2700 Fax No. 6665 2842 E-mail address: [email protected] Website: www.rallis.co.in

Company Secretary P. S. Meherhomji

Auditors S.B. Billimoria & Co.

Solicitors & Advocates Crawford Bayley & Company

Share Registrars and Transfer Agents TSR Darashaw Ltd. (Formerly Tata Share Registry Limited) Army & Navy Building 148, Mahatma Gandhi Road Mumbai 400 001. Tel. No. 6656 8484 Fax No. 6656 8494 E-mail address : [email protected] Website : www.tsrdarashaw.com

Bankers State Bank of India Union Bank of India Citibank N.A. Corporation Bank BNP Paribas Industrial Development Bank of India Limited UTI Bank Limited UCO Bank United Western Bank Limited

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

CHAIRMAN’S STATEMENT Dear Shareholders, At past shareholders’ meetings, you have requested the Board to advance the publication of the annual accounts as well as the timing of the AGM. In 2003, the AGM was held in the month of September, the next year in August, and then June for the year 2005. Your Board is pleased to hold the AGM this year in the month of May itself. This has been possible due to major improvements to the processes within the Company and to the very co-ordinated implementation of an ERP system. The role of the Finance and Information Technology departments are worthy of mention in this context. Agriculture The country is faced with a complex situation with respect to agriculture. The national GDP has been growing handsomely and consistently during recent years. However, agricultural growth has been laggard as well as inconsistent. Its share in the GDP pie of the country has been shrinking sharply. Viewed in an international context, this seems to be a recognizable, normal and almost desirable trend. Indeed this would have been good news if the population and labour force dependent on agriculture were also reducing sharply. Alas that is not the case. In 1891, the percentage of population dependent on agriculture was estimated to be 63%. After thirty years of industrialization, in 1921, the percentage actually increased to 73%. This happened most likely due to the displacement of traditional village service jobs like the luhaar (ironsmith) and chamaar (cobbler) by the emerging industrializing jobs. Nowadays, it is estimated that 58% of our population is dependent on agriculture. The staggering point is that this percentage is not far from what it was 115 years ago. With the increase of population during these 115 years, the actual numbers have quadrupled from 150 million in 1891 to about 600 million today. This is most unusual. It is clear that while for most rural households, agriculture remains the main source of income, there is emerging a Rural Non Farm Sector (RNFS) which is developing as a source of income and employment. According to a World Bank survey of sixteen Indian States (Re-energizing the Agricultural Sector : July 2004), this RNFS sector accounted for one-third of rural household incomes. Storage, transportation and processing of agricultural produce, the related trade and financial services are all promising beacons of hope for the future. Your Company is deeply involved in the distribution of crop protection chemicals and agricultural input materials like plant growth nutrients and seeds. The Rallis field demonstration and extension services work counts among the best compared to peer companies and is a bedrock of strength for your Company. As mentioned in the Directors’ Report, contrary to a general perception that India had a “good” monsoon during the Kharif of 2005 and rabi of 2006, the reality is that it was a temperamental and volatile monsoon. This caused agricultural growth during FY 05-06 to be half the target level. The crop protection industry also faced some unusual challenges. The Pesticides Industry The Kharif season initially progressed quite impressively. The industry witnessed a continuation of the growth trend of the previous year. The rabi season turned out to be quite a poor season. There was an unfavourable distribution of rainfall in key agricultural states like A.P., Karnataka and Punjab, coupled with huge excess rains thereafter. These events affected the degree of pest infestation, and damaged crops like paddy and chili. The industry was faced with excess stocks in some pockets and witnessed severe price competition during the rabi season. Rallis continued to exercise controls on credit and stocks through diligent field operations. That is why Rallis has shown an increase in domestic sales. However, second half margins were severely impacted. This is the reason for the profits being skewed to the first half of the financial year.

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The Company’s Priorities With a second year of turnaround in the business and improved profits in the face of adverse market conditions, your management feels more confident and self-assured. The core strength of the Company lies in its deep understanding of the chemistry of crop chemicals and in its width, depth and effectiveness of field contact with farmers. Having regained its key position in the domestic formulations market, the Company management is now looking for growth in two directions. First, seeds business : this provides a growing future and your Company’s marketing reach is a valuable asset for success. Second, international business : the Indian industry has international opportunities. Though the Company’s export performance this year has seen a growth of 24%, your management believes there is scope for more growth. Both seeds and international business will receive special attention as growth drivers for the future. Acknowledgement I wish to acknowledge the support received from shareholders, suppliers, commercial partners and employees during this last year. Our independent Director, Sri V N Nadkarni, stepped down from the Board in March 2006 after almost two decades of distinguished service to the Board and Company. We are most grateful to him for his wise counsel and also welcome Director E. A. Kshirsagar to our Board.

Chairman Mumbai 02 May 2006

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

RALLIS INDIA LIMITED NOTICE OF MEETING NOTICE is hereby given that the 58th Annual General Meeting of the Company will be held at Bombay House Auditorium, Bombay House, Homi Mody Street, Mumbai 400 001, on Wednesday, the 31st May, 2006 at 4.00 p.m. to transact the following business: 1.

To receive, consider and adopt the audited Profit and Loss Account for the year ended 31st March, 2006 and the Balance Sheet as at that date together with the Report of the Directors and that of the Auditors thereon.

2.

To declare a dividend on the 7.5% Cumulative Redeemable Preference Shares.

3.

To declare a dividend on Equity Shares.

4.

To appoint a Director in place of Mr. Homi R. Khusrokhan who retires by rotation and is eligible for reappointment.

5.

To appoint a Director in place of Mr. Prasad R. Menon who retires by rotation and is eligible for reappointment.

6.

To appoint Auditors and to fix their remuneration.

7.

Appointment of Mr. E. A. Kshirsagar as a Director To appoint a Director in the place of Mr. E. A. Kshirsagar who was appointed an Additional Director of the Company by the Board of Directors with effect from 24th February, 2006 and who holds office upto the date of this Annual General Meeting under Section 260 of the Companies Act, 1956 (‘the Act’) and Article 116 of the Articles of Association of the Company, but who is eligible for appointment and in respect of whom the Company has received a notice in writing under Section 257 of the Act from a shareholder proposing his candidature for the office of Director.

8.

Re-appointment of Dr. V. S. Sohoni as Managing Director To consider and, if thought fit, to pass with or without modification, the following Resolution as a Special Resolution: RESOLVED THAT pursuant to Sections 198, 269, 309, 310, 311 read with Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956 (‘the Act’) and subject to the approval of the Central Government, if applicable, the Company hereby approves of the re-appointment and terms of remuneration of Dr. Venkatrao S. Sohoni as the Managing Director of the Company with effect from 11th August, 2006 to 31st May, 2007 upon the terms and conditions as set out below and in the Explanatory Statement annexed to the Notice convening this meeting, with liberty to the Board of Directors (hereinafter referred to as ‘the Board’ which term shall be deemed to include any Committee of the Board constituted to exercise its powers, including the powers conferred by this Resolution), to alter and vary the terms and conditions of the said appointment, in such manner as may be agreed to between the Directors and Dr. Sohoni. i

Remuneration: a)

Salary: In the scale of Rs.50,000 – Rs.4,00,000 per month, with authority to the Board to fix the salary within the scale from time to time. The annual increment which will be effective 1st April 2007, will be merit-based and take into account the Company’s performance.

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b) Commission: Such remuneration by way of commission, in addition to the salary and perquisites and allowances payable, calculated with reference to the net profits of the Company in a particular financial year, as may be determined by the Board of Directors of the Company at the end of each financial year, subject to the overall ceilings stipulated in Sections 198 and 309 of the Act. The specific amount payable to the Managing Director will be based on certain performance criteria to be laid down by the Board and will be payable annually after the Annual Accounts have been approved by the Board of Directors and adopted by the Members. c)

Benefits, Perquisites and Allowances: (i) In addition to the salary, incentive remuneration, if any, and commission payable, the Managing Director shall also be entitled to perquisites and allowances like accommodation (furnished or otherwise) or house rent and maintenance allowances, in lieu thereof; together with reimbursement of expenses or allowances for utilities such as gas, electricity, water, furnishings, repairs, servants’ salaries; medical reimbursement; club fees and leave travel concession/ allowance for himself and his family; medical/ accident insurance and such other perquisites and allowances in accordance with the Rules of the Company or as may be agreed to by the Board and Dr. Sohoni; such perquisites and allowances will be subject to such overall ceiling as may be fixed by the Board from time to time. (ii) Company maintained car with driver for official and personal use. (iii) Telecommunication facilities at residence. (iv) Leave and encashment of unavailed leave as per the Rules of the Company. (v) Dr. Sohoni shall not be a member of the Provident Fund, Superannuation and Gratuity Fund during his tenure.

d) Incentive Remuneration: At the end of his tenure, if the Board judges that Dr. Sohoni has achieved a successful turnaround of profits, debtors and other parameters to be defined by the Remuneration Committee, then an end-of-service incentive remuneration of upto Rs.62.50 lacs will be payable. ii.

Minimum Remuneration: Notwithstanding anything to the contrary herein contained, where in any financial year during the currency of the tenure of Dr. Sohoni, the Company has no profits or its profits are inadequate, the Company will pay remuneration by way of salary, perquisites and allowances and incentive remuneration as specified above.

RESOLVED FURTHER THAT the Board be and is hereby authorised to take all such steps as may be necessary, proper and expedient to give effect to this Resolution. Notes: 1.

The Explanatory Statement, pursuant to Section 173 of the Companies Act, 1956 in respect of the business under Item Nos.7 and 8 above is annexed hereto. The relevant details of Directors seeking re-appointment/ appointment under Item Nos.4, 5, 7 and 8 above, pursuant to Clause 49 of the Listing Agreements entered into with the Stock Exchanges are also annexed.

2.

The Register of Members and the Share Transfer Books of the Company will be closed from Tuesday, 16th May, 2006 to Wednesday, 31st May, 2006 (both days inclusive).

3.

If dividend on preference shares and equity shares, as recommended by the Directors, is passed at the Meeting, the payment of such dividend will be made on or after 1st June, 2006 to the shareholders whose

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

names are on the Company’s Register of Members on 16th May, 2006. The dividend in respect of shares held in electronic form will be payable to the beneficial owners of the shares as on beginning of 16th May, 2006, as per details furnished by the Depositories for this purpose. In respect of preference shares, dividend will be paid to the beneficial owners of the shares as on 31st May, 2006 (record date), as per details furnished by the Depositories for this purpose. 4.

As per the provisions of the Companies Act, 1956 facility for making nomination is available for the shareholders in respect of the shares held by them. Nomination forms can be obtained from the Company’s Registrars and Transfer Agents.

5.

Pursuant to Section 205A of the Companies Act, 1956, all unclaimed/unpaid dividends upto the financial year ended 31st March, 1995 have been transferred to the General Revenue Account of the Central Government. Shareholders who have not yet encashed the dividend warrants for the said period are requested to forward their claims in prescribed Form No. II under The Companies Unpaid Dividend (Transfer to General Revenue Account of the Central Government) Rules, 1978 to – Office of the Registrar of Companies, CGO Complex, A Wing, 2nd Floor, Next to Reserve Bank Of India, CBD, BELAPUR 400 614. Shareholders are hereby informed that after the amendment of the Companies Act, 1956, w.e.f 31st October, 1998, the Company is obliged to transfer any money lying in the Unpaid Dividend Account, which remains unpaid or unclaimed for a period of seven years from the date of such transfer to the Unpaid Dividend Account, to the credit of Investor Education and Protection Fund (“the Fund”) established by the Central Government. In accordance with Section 205C of the Companies Act, 1956, no claim shall lie against the Company or Fund in respect of the amounts transferred to the Fund. Members who have not yet encashed their dividend warrant(s) for the financial year ended 31st March, 1999 and subsequent years, are requested to make their claims to the Company, without any delay. It may be noted that unpaid dividend for the financial year ended 31st March, 1999 is due for transfer to the Fund on 1st October, 2006.

6.

As an austerity measure, copies of the Annual Report will not be distributed at the Annual General Meeting. Members are requested to bring their copies to the meeting.

7.

A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE IN HIS STEAD AND A PROXY NEED NOT BE A MEMBER OF THE COMPANY. By Order of the Board of Directors P. S. MEHERHOMJI Company Secretary

Dated: 17th April, 2006 Registered Office: Apeejay House 7th Floor 3 Dinshaw Vachha Road Churchgate Mumbai 400 020

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EXPLANATORY STATEMENT PURSUANT TO SECTION 173 OF THE COMPANIES ACT, 1956 Pursuant to Section 173 of the Companies Act, 1956 (‘the Act’), the following Explanatory Statement sets out all material facts relating to the business mentioned under Item Nos. 7 and 8 of the accompanying Notice dated 17th April, 2006. Item No.7: Mr. E. A. Kshirsagar was appointed Additional Director of the Company with effect from 24th February, 2006 pursuant to Section 260 of the Act and Article 116 of the Articles of Association of the Company. As such, Mr. Kshirsagar holds office as Director upto the date of this Annual General Meeting and is eligible for appointment. Notice under Section 257 of the Act has been received from a Member indicating her intention to propose Mr. Kshirsagar for the office of Director at the forthcoming Annual General Meeting. Mr. E. A. Kshirsagar is a Fellow Member of the Institute of Chartered Accountants, India and of the Institute of Chartered Accountants, England and Wales. He was with the Management Consultancy Division of A. F. Ferguson from 1973 and was its Director-in-Charge from 1988 to 2004. His areas of specialization are Corporate Strategy & Structure, Valuation, Feasibility Studies, Disinvestments and Mergers & Acquisitions, and he has conducted several assignments in the above areas with Indian companies and multinationals and also for various Government bodies. The Board considers it desirable to continue to receive the benefit of Mr. Kshirsagar’s advice and guidance and, therefore, commends his appointment. Mr. E. A. Kshirsagar is interested and concerned in the Resolution mentioned at Item No.7. Item No.8: Dr. Venkatrao S. Sohoni’s (Dr. Sohoni) term as Managing Director of the Company expires on 10th August, 2006. The Board of Directors has, at its Meeting held on 17th April, 2006, re-appointed Dr. Sohoni as the Managing Director of the Company with effect from 11th August, 2006 upto 31st May, 2007, subject to the approval of the shareholders and the Central Government, if required. The re-appointment of Dr. Sohoni as the Managing Director is pursuant to the provisions of Article 135 of the Company’s Articles of Association and Sections 198, 269, 309, 310, 311 read with Schedule XIII and other applicable provisions, if any, of the Act. Dr. Sohoni shall not, while he continues to be the Managing Director, be subject to retirement by rotation pursuant to the provisions of Section 255 of the Act. The shareholders had, while approving the appointment of Dr. Sohoni at the Annual General Meeting held on 18th September, 2003, approved an end-of-service incentive remuneration of upto Rs.50 lakhs, payable at the end of his three year term. Since Dr. Sohoni’s term is being extended upto 31st May, 2007, no incentive remuneration will be paid at the end of the current term, which expires on 10th August, 2006. However, end-of-service incentive remuneration not exceeding Rs.62.50 lakhs will be paid at the end of his tenure, i.e. 31st May, 2007, if the Board judges that Dr. Sohoni has achieved a successful turnaround of profits, debtors and other parameters, as defined by the Remuneration Committee. Besides the terms and conditions for payment of managerial remuneration as contained in the Resolution at Item No.8, the other main terms and conditions relating to the re-appointment of Dr. Sohoni as Managing Director are given below: 1.

The terms and conditions of the said appointment may be altered and varied from time to time by the Board as it may, in its discretion, deem fit, within the maximum amount payable to managing and whole-time directors in accordance with Schedule XIII to the Act or any amendments made hereafter in this regard.

2.

Dr. Sohoni shall, subject to the supervision and control of the Board of Directors, carry out such duties as may be entrusted to him.

3.

The Agreement may be terminated by either party giving the other party six months’ notice or the Company paying six months’ remuneration in lieu thereof.

4.

If at any time Dr. Sohoni ceases to be a Director of the Company for any cause whatsoever, he shall cease to be the Managing Director. If at any time Dr. Sohoni ceases to be in the employment of the Company for any cause whatsoever, he shall cease to be a Director of the Company. If at any time Dr. Sohoni ceases to be the Managing Director of the Company for any cause whatsoever, he shall cease to be a Director of the Company.

5.

Dr. Sohoni is appointed by virtue of his employment in the Company and his appointment is subject to the provisions of Section 283(1)(l) of the Act.

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited 6.

Dr. Sohoni shall not be entitled to supplement his earnings under the Agreement with any buying or selling commission. He shall not also become interested or otherwise concerned directly or through his wife and/ or minor children in any selling agency of the Company without the prior approval of the Central Government.

7.

Dr. Sohoni shall not have the following powers: •

The power to make calls on shareholders in respect of monies unpaid on shares in the Company.

•

The power to issue debentures and

•

The power to invest the funds of the Company in shares, stocks and securities.

Pursuant to the provisions of Sections 198, 269, 309, 310 and 311 and Schedule XIII and other applicable provisions of the Act, the approval of the members in the General Meeting is required to be obtained for the appointment and the terms of remuneration of Dr. Sohoni as the Managing Director and as set out in Item No.8 of the Notice. Dr. Sohoni is concerned or interested in the Resolution mentioned at Item No.8 of the Notice. This may also be treated as an abstract of the draft Agreement between the Company and Dr. Sohoni pursuant to Section 302 of the Act. Subsequent to Dr. Sohoni’s appointment as Managing Director, the Company has seen considerable improvement in its financial performance and has returned to the dividend list. The Board is of the opinion that it is in the interest of the Company to continue to receive the benefit of his services and accordingly the Directors commend the Resolution at Item No.8 for acceptance by the Members. Additional information relevant for the approval of the remuneration payable to Dr. Venkatrao S. Sohoni, as per Notification dated 16th January, 2002 issued by the Department of Company Affairs. I.

General Information: (i)

Nature of Industry: The Company is a manufacturer, trader and exporter of pesticides, plant growth nutrients and seeds.

(ii) Date or expected date of commencement of commercial production: The Company was incorporated on 23rd August, 1948. (iii) In case of new companies, expected date of commencement of activities as per project approved by financial institutions appearing in the prospectus: Not Applicable (iv) Financial performance based on given indicators as per Audited Financial Results for the year ended 31st March, 2006 and for the year ended 31st March, 2005. Particulars

For the Year ended 31.03.2006 (Rs. in Crores)

For the Year ended 31.03.2005 (Rs. in Crores)

Turnover and other income

630.35

594.41

Net profit/ (loss) as per Profit & Loss A/c

42.52

33.50

Excess of expenditure over income in so far as such excess has not been deducted

110.05

147.02

Loss as computed under Section 309(5) read with Section 198 of the Companies Act, 1956

62.90

110.05

(v) Export performance and foreign exchange earned: a)

For the financial year ended 31st March, 2006: Rs. 153.17 Crores

b)

For the financial year ended 31st March, 2005: Rs.134.78 Crores

(vi) Foreign investments or collaborations, if any: Not Applicable

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II.

Information about the appointee: (i)

Background details: Dr. Sohoni is a B. Tech. (Hons.) from IIT Kharagpur and has a Ph.D in Information Systems from IIT Mumbai. He has over 40 years’ of diverse experience in the Corporate Sector. Dr. Sohoni has considerable experience in driving growth, building successful teams and increasing profits.

(ii) Past remuneration drawn (during 2005-06): Rs. 38.27 lakhs. (iii) Recognition and Awards/ Achievements: Dr. Sohoni has been recognized as Market Company President of the year, Asia Pacific Region, 2001 by Pharmacia India Pvt. Ltd. (iv) Job Profile and Suitability: Dr. Sohoni exercises substantial powers of management, subject to the superintendence, control and directions of the Board of Directors/ Chairman of the Company. He is responsible for the operations and affairs of all the Divisions of the Company. Taking into consideration his qualifications and expertise, Dr. Sohoni is best suited for the responsibilities assigned to him by the Board of Directors. (v) Remuneration proposed: Salary

In the scale of Rs.50,000/- to Rs.4,00,000/- per month. Annual increment will be merit based and effective 1st April, 2007. Salary: Rs.2,20,000/- per month with effect from 1st April, 2006.

Commission

At the discretion of the Board, based on certain performance criteria, within the stipulated limits under the Act.

Perquisites & Allowances

Perquisites and allowances like accommodation (furnished or otherwise) or house rent and maintenance allowances, in lieu thereof; together with reimbursement of expenses or allowances for utilities such as gas, electricity, water, furnishings, repairs, servants’ salaries; medical reimbursement; club fees and leave travel concession/ allowance for himself and his family; medical/ accident insurance and such other perquisites and allowances in accordance with the Rules of the Company or as may be agreed to by the Board of Directors and Dr. Sohoni; such perquisites and allowances will be subject to such overall ceiling as may be fixed by the Board of Directors from time to time.

Incentive Remuneration

An end-of-service incentive of upto Rs.62.50 lakhs will be payable to Dr. Sohoni at the end of his tenure, if the Board judges that Dr. Sohoni has achieved a successful turnaround of profits.

Minimum Remuneration in case of inadequacy of profits during any financial year.

Salary, perquisites and allowances, incentive remuneration as mentioned above, but excluding commission

(vi) Comparative remuneration profile with respect to industry, size of the Company, profile of the position and person (in case of expatriates the relevant details would be with respect to the country of his origin): The remuneration proposed is commensurate with the remuneration packages paid to similar senior level appointees in other companies. (vii) Pecuniary relationship directly or indirectly with the Company or relationship with the managerial personnel, if any: Besides the remuneration proposed, the Managing Director does not have any other pecuniary relationship with the Company and its managerial personnel. III. Other Information: (i)

Reasons for loss or inadequate profits: The Company had incurred substantial operational losses during the period 2002 to 2004, mainly due to (a) the crippling drought and low pest infestation in the country in 2002, resulting in the worst year for the domestic pesticide industry in over two decades. (b) the provisions which the Company had to make on account of supplemental payments on retirement, advances to subsidiaries and other provisions.

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited (c) the Company also had to absorb the losses of the subsidiaries, on their merger with the Company, which also contributed to the losses. (ii) Steps taken or proposed to be taken for improvement: The Company has taken the following steps for improvement in performance during the past three years: a)

Sharper focus on Big Scale Cost Reduction

b)

Improved market servicing and customer interaction

c)

Dealer rationalization and emphasis on collections

d)

Emphasis on cash management and restructuring the balance sheet

e)

Energizing all employees in the Turnaround Plan of the Company

(iii) Expected increase in productivity and profits in measurable terms: The above steps taken by the Company resulted in an improvement in the financial performance of the Company during the year 2004-05, which has continued during the year 2005-06. During 2005-06, the Company has made a Profit Before Tax of Rs. 44.54 Crores and a net profit of Rs. 42.52 Crores. The improvement is expected to continue in the current year and beyond. By Order of the Board of Directors P. S. MEHERHOMJI Company Secretary Dated: 17th April, 2006 Registered Office: Apeejay House 7th Floor 3 Dinshaw Vachha Road Churchgate Mumbai 400 020

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Details of Directors seeking appointment/re-appointment in the forthcoming Annual General Meeting (Pursuant to Clause 49 of the Listing Agreement) Name of Director

Mr. Homi R. Khusrokhan

Mr. Prasad R. Menon

Mr. E. A. Kshirsagar

Dr. Venkatrao S. Sohoni

Date of Birth

15.12.1943

23.01.1946

10.09.1941

28.05.1942

Date of Appointment

24.03.2003

24.03.2003

24.02.2006

24.03.2003

Expertise in specific functional areas

Wide experience and knowledge in modern management and accounting techniques.

Wide experience in Chemicals, Agrochemicals and Fertilizers Industries

Wide experience in Corporate Strategy & Structure, Valuation, Feasibility Studies, Disinvestments/ Mergers & Acquisitions.

Wide experience in Agrochemical and Pharmaceutical businesses. Proven record for ensuring growth, building business and rejuvenating organizations.

Qualifications

B. Com (Hons.), Chartered Accountant, M. Sc. (Econ.) from London School of Economics & Political Science

B. Tech. (Chemical), IIT (Kharagpur)

Fellow Member of the Institute of Chartered Accountants, India and of the Institute of Chartered Accountants, England and Wales.

B. Tech. (Hons.), IIT (Kharagpur), Ph.D. IIT Mumbai

No. of Shares held in the Company

Nil

Nil

Nil

Nil

PUBLIC COMPANIES 1. Tata Chemicals Ltd. — Managing Director 2. Rallis India Ltd. 3. Tata Projects Ltd. 4. Tata Services Ltd. 5. Tata Industries Ltd. 6. Chemical Terminal Trombay Ltd. 7. The Magadi Soda Company Ltd.

PUBLIC COMPANIES 1. Rallis India Ltd. 2. Ashok Leyland Ltd. 3. Batliboi Ltd. 4. HCL Infosystems Ltd. 5. JM Financial Ltd.

PUBLIC COMPANIES 1. Fulford (India) Ltd. — Chairman 2. Rallis India Ltd. — Managing Director

PRIVATE COMPANIES 1. Manipal Universal Learning Pvt. Ltd. 2. Tribune Corporate & Investment Advisory Services Pvt. Ltd.

PRIVATE COMPANIES 1. Advinus Therapeutics Pvt. Ltd.

1.

1.

List of companies in which Directorship held

PUBLIC COMPANIES 1. Tata Chemicals Ltd. 2. Rallis India Ltd.

PRIVATE COMPANIES 1. Advinus Therapeutics Pvt. Ltd. OVERSEAS COMPANIES 1. Indo Maroc Phosphore S.A., Morocco 2. Homefield International Pvt. Ltd., Mauritius. 3. Homefield U.K. Pvt. Ltd.

Chairman/Member of the Mandatory Committees of the Board of the Companies on which he is a Director

1.

Rallis India Ltd. — Audit Committee

OVERSEAS COMPANIES 1. Indo Maroc Phosphore S.A., Morocco 2. Brunner Mond Group Ltd., U.K. 1.

2.

Tata Chemicals Ltd. — Shareholders’/Investors’ Grievance Committee Tata Services Ltd. — Audit Committee

2.

3.

4. 5.

Rallis India Ltd. — Audit Committee (Chairman) Ashok Leyland Ltd. — Audit Committee (Chairman) HCL Infosystems Ltd. — Audit Committee (Chairman) — Shareholders’/ Investors’ Grievance Committee Batliboi Ltd. — Audit Committee JM Financial Ltd. — Audit Committee

2.

Rallis India Ltd. — Shareholders’/ Investors’ Grievance Committee Fulford (India) Ltd. — Audit Committee

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

DIRECTORS’ REPORT TO THE MEMBERS OF RALLIS INDIA LIMITED The Directors hereby present their Fifty-eighth Annual Report on the business and operations of the Company and the financial accounts for the year ended 31st March, 2006. FINANCIAL RESULTS Rs. Crores 2005-06 2004-05 Sales

591.35

541.09

39.00

53.32

630.35

594.41

Depreciation and Tax

69.70

64.76

Interest

(8.41)

(14.49)

(16.75)

(16.11)

Profit/ (-) Loss before Tax

44.54

34.16

Provision for Tax

(3.59)

(0.68)

Fringe Benefit Tax

(1.78)

—

3.36

—

—

0.02

42.52

33.50

8.13

(75.58)

Transfer from Share Premium

—

11.82

Transfer from Capital Redemption Reserve

—

35.00

50.65

4.74

Transfer from/(to) General Reserve

(4.25)

13.39

Proposed Preference Dividend (including arrears)

(6.60)

(7.65)

Income tax on Preference Dividend

(1.00)

(1.00)

Proposed Equity Dividend

(4.79)

(1.20)

Income tax on Equity Dividend

(0.68)

(0.15)

Balance Profit/(-) Loss carried forward to Balance Sheet

33.32

8.13

Other Income

Profit/ (-) Loss before Interest,

Depreciation

Deferred Tax Tax Provision written back Profit/ (-) Loss after Tax Balance of Profit brought forward from previous year

Appropriations

DIVIDEND The Directors are pleased to recommend a dividend of 40% on the Equity Shares of the Company (Previous year 10%). Dividend is also recommended on the 7.5%, Cumulative Redeemable Preference Shares of the Company. COMPANY PERFORMANCE The financial year ended with a net profit of Rs. 42.52 Crores, as against a net profit of Rs. 33.50 Crores in the previous year.

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OPERATIONS Pesticides The domestic pesticides business has shown a modest growth in 2005-06, during a year which saw a significant reduction in sales for the Industry. Growth in Fungicides segments remains higher than the industry average. The Company also grew in herbicides product segments, despite erosion in the wheat herbicides prices. Following the significant growth during the year 2004-05, the Domestic Institutional Business sustained a growth during the year 2005-06. This was achieved inspite of a value erosion on most of the products in the market. The Company maintained its market share in all own manufactured products, realizing a price premium over market average price. International Business achieved an export turnover of Rs.150 Crores during 2005-06, representing an increase of 24% over the previous year, inspite of degrowth of exports of pesticides from India. The growth came from new registrations and expansion into new geographies in Africa and Latin America. Alliances with global players also gave increased volumes for metconazole, hexaconazole, pendimethalin and acephate. Agro-Inputs The Company is focusing on plant growth nutrient products which help the farmers to add value and realize higher price for their produce by improving its quality. The Company’s initiative in streamlining this activity by phasing out products with low gross contribution, emphasis on branding and market development has yielded desired results. “Solubor” is well established and is one of the top brands in this segment. The Company has established an agreement with Nuziveedu Seeds Limited, the market leader in cotton seeds, for marketing of Bt cotton seed. The Company plans to provide crop management advisory services to the farmers along with quality seeds carrying biotechnology traits, so as to maximize the benefits of genetics, biotechnology and crop protection technology, which are presented as a comprehensive package. During 2005-06, the focus of the Company was to deal in select products, viz. paddy, maize and cotton, and establish a platform for growth in these crops through addition of products sourced from companies which are strong in breeding and research. Leather Chemicals Sales were affected due to shortage of raw hides and skins in the second half of 2005. During the year, sales structure was reorganized and modified review systems were implemented. Continued focus on reduction of inventories, customer outstanding and fixed costs gave positive results. Knowledge Services Business The Company completed the transfer of its Knowledge Services Business, including the Research & Development Centre at Bangalore, to Advinus Therapeutics Pvt. Ltd., during the year. Subsequent to the transfer, Rallis is conducting its own essential support activities related to agro-chem development work, namely field trials, formulation development and new product registration, out of one of its existing manufacturing locations. A new Development Centre has been established already. Research & Development The Company’s initiative of New Product Development (NPD) has identified several new products to be developed and introduced in the next 5 to 8 years. The new Development Centre continues to improve processes for manufacture of existing technical pesticides and intermediates by de-bottlenecking, improved throughput and reduced effluent load. Further work on formulation development enabled introduction of bioefficacy enhanced, user- and eco-friendly products. During the year, the CSIR funded project entitled “Development of Novel Fungicides”, under the “New Millennium Indian Technology Leadership Initiative (NMITLI)”, has shown progress by way of developing more than 200 products, from which four lead molecules have been identified for further development.

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

The Company’s R&D Centre at Bangalore was transferred to Advinus Therapeutics Pvt. Ltd. Consequently, a new Development Centre has been established. All the research and development work, including NMITLI and NPDI, is being carried out at this new location. All the regulatory studies required for obtaining the registrations are being outsourced through Advinus Therapeutics Pvt. Ltd and other government and private institutions. Taxation In accordance with the Accounting Standard AS -22 accounting for taxes on income, deferred tax asset amounting to Rs. 36.03 Crores is not recognized in view of uncertainty of its reversals in the future. INDUSTRIAL RELATIONS Harmonious industrial relations prevailed at all Units of the Company during 2005-06. The long term agreements with unions in the three major factories, viz. Patancheru, Ankleshwar and Turbhe are expiring in 2006. New Agreements will be discussed and put in place during the year. The overall manpower of the Company reduced from 1250 to 1096 during the year. As a part of the continuous efforts towards manpower rationalization, a Voluntary Separation Scheme was introduced under which 30 employees separated from the Company. DIRECTORS Mr. E. A. Kshirsagar was appointed as an Additional Director of the Company with effect from 24th February, 2006. Pursuant to Section 260 of the Companies Act, 1956 and Article 116 of the Articles of Association of the Company, Mr. Kshirsagar vacates office and is eligible for appointment. Mr. V. N. Nadkarni has stepped down from the Board at the end of March 2006. The Directors place on record their appreciation of the valuable services rendered by Mr. Nadkarni during his tenure as the Director of your Company. Dr. Venkatrao S. Sohoni’s term as Managing Director of the Company expires on 10th August, 2006. The Board has decided to renew his term upto 31st May, 2007, subject to the approval of the Shareholders at the Annual General Meeting of the Company. Members are requested to refer to Item No.8 in the Notice of the Annual General Meeting for the terms of appointment and remuneration of Dr. Sohoni. In accordance with Article 112(2) of the Articles of Association of the Company, Mr. Homi R. Khusrokhan and Mr. Prasad R. Menon retire and are eligible for re-appointment. DIRECTORS’ RESPONSIBILITY STATEMENT Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors, based on the representations received from the Operating Management, confirm that: (i)

in the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures;

(ii) they have, in the selection of the accounting policies, consulted the Statutory Auditors and have applied them consistently, and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period; (iii) they have taken proper and sufficient care, to the best of their knowledge and ability, 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) they have prepared the annual accounts on a going concern basis. CORPORATE GOVERNANCE AND INTERNAL AUDIT The Board and its various sub committees have taken steps to further strengthen the framework of Corporate Governance and Internal Audit in the Company during the year. The Audit Committee and the Board were very active in discussing

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reports of both the internal auditors and the statutory auditors and advising on and monitoring the implementation of their recommendations. The further strengthening of the Enterprise Resource Planning system SAP, in terms of improving its internal controls, functionalities and usage have led to a significant improvement in providing more timely and accurate data for accounting, operations improvement, management information and auditing. The conducting of internal audits by a single large firm of internal auditors, under the direction of the Chief Internal Auditor, for the second year in succession, has further helped in streamlining and standardizing the internal auditing processes and has resulted in many value-added recommendations, and sharing of industry best-practices. Internal audits were conducted across all major business areas, key processes and locations as per the approved risk-based internal audit plan for the year. To strengthen the internal controls in the SAP system, the recommendations arising out of a post-implementation controls review of SAP and its authorization controls have been implemented. The priority given by Management for good governance coupled with all the steps taken as above have supported the improving trend of internal controls during the year. The Ethics and Compliance Committee of the Board has overseen the implementation of business ethics in the Company with employees and business associates, under the Tata Code of Conduct, besides fulfilling its responsibility of overseeing the implementation of the Code of Conduct for Prevention of Insider Trading. Effective 1st April, 2005 the Company has effectively deployed a ‘Whistle Blower’ policy as per the provisions of the amended Clause 49 of the Listing Agreement of the Stock Exchange. Various organization-wide activities like workshops and surveys conducted during the implementation of the enterprise risk-management and internal controls certification exercises have heightened the awareness and training on risks and controls and have helped the improvement in the internal control system of the Company. A Report on Corporate Governance, as required under Clause 49 of the Listing Agreement is annexed. AUDITORS At the Annual General Meeting, members will be required to appoint Auditors for the current year and fix their remuneration. M/s. S. B. Billimoria & Co., the existing Auditors have furnished a certificate regarding their eligibility for reappointment. The Directors recommend that they be re-appointed as Auditors of the Company for the current year. COST AUDITORS Pursuant to the directives of the Central Government under the provisions of Section 233B of the Companies Act, 1956 qualified Cost Auditors have been appointed to conduct Cost Audits relating to Insecticides (Technical Grade and Formulations) and Fertilizers of the Agrochemicals Division of the Company. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO As required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Directors) Rules, 1988, the information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo is annexed. PARTICULARS OF EMPLOYEES In accordance with the provisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, the statement giving the required information of the employees covered by this section of the Act is given in the Annexure forming part of this Report. ACKNOWLEDGEMENT Your Directors acknowledge the continued co-operation and support received by the Company during the year from its employees, bankers, financial institutions and business partners. The Board would also like to acknowledge the continued support and guidance from the Tata Group. On behalf of the Board of Directors R. GOPALAKRISHNAN Chairman Mumbai, 17th April, 2006.

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

ANNEXURE TO THE DIRECTORS’ REPORT (Under Section 217(1)(e) of the Companies Act, 1956) Disclosures A.

CONSERVATION OF ENERGY a)

Energy Conservation Measures Taken: The projects rolled out under TPM (Total Productive Maintenance) initiative continued to bring in increased impetus by way of savings through usage of six sigma tool as the main driver at the hands of Black and Green belt champions. Energy management is a pillar activity at the units driven and monitored by a Corporate Pillar Champion. Increased market demand for in-house produced technical products was met by achieving improved cycle time coupled with effective integration of various support processes without substantial capital expenditure. This approach of economy of scale resulted in high plant utilization which in turn has contributed to reduction in per unit of consumption of inputs in relation to the outputs.

b)

Additional Investments and Proposals, if any, being implemented for reduction of Energy Consumption: The Company is installing a captive power plant in one of its Units, at an estimated cost of Rs.3.83 Crores, which is expected to result in reduction of per unit cost of consumption by almost 35%, resulting in a cost reduction of approximately Rs.1 Crore. Replacement of high energy consuming fittings/ appliances with modern energy efficient ones that can contribute substantially on reduction of energy consumption is an ongoing activity across all the units. Modernization of the plants was done with process improvement, capacity enhancement and automation for reducing variability in operation.

c)

Impact of the measures at (a) and (b) for reduction of Energy Consumption and consequent impact on the Cost of Production: The energy conservation measures have improved efficiency and lowered energy consumption per unit of output, thereby contributing in reducing the cost of production compared to the previous year.

d)

Total energy consumption and energy consumption per unit of production as per Form A: FORM ‘A’

DISCLOSURE OF PARTICULARS WITH REGARD TO CONSERVATION OF ENERGY a)

Power and Fuel Consumption

1.

2004-2005

Agro- Chemicals

Agro-Chemicals

Electricity a) Purchased

b)

2.

2005-2006

Unit

In lacs of kwh

2,41.58

2,60.44

Total amount

Rs. Lacs

9,62.85

10,74.85

Rate/ Unit

Rs.

3.99

4.13

15.01

13.11

Own Generation through Diesel generator Unit

In lacs of kwh

Unit per litre of Diesel oil

kwh

Cost/ Unit

Rs.

Furnace Oil Quantity

Kl

Total Amount

Rs. Lacs

Av. Rate/litre

Rs.

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3.10

3.07

10.10

6.75

3,980.30

3,491.21

5,93.96

4,12.22

14.92

11.95

3.

4.

2004-2005 Agro-Chemicals

Others/Internal Generation (Light Diesel Oil) Quantity

Kl

404.84

485.87

Total Cost

Rs. Lacs

114.82

103.52

Rate/ Unit

Rs.

28.26

21.31

(High SpeedDiesel) Quantity

Kl

139.10

105.09

Total Cost

Rs. Lacs

38.60

28.31

Rate/ Unit

Rs.

27.75

26.94

M3

17,57,176

17,21,340

156.19

139.94

8.89

8.13

Gas Quantity

b)

2005-2006 Agro- Chemicals

Cost

Rs. Lacs

Rate/m3

Rs.

Consumption per unit of production Even though demand and supply equilibrium had improved compared to that of previous year, we could sustain the energy consumption per unit of production with that of the previous year with main contribution effected by energy conservation measures, inspite of negative impact from many other factors that were beyond our control.

B.

TECHNOLOGY ABSORPTION FORM ‘B’ Research and Development (R & D) 1. Specific areas in which R & D is carried out by the Company: Chemical synthesis/ process development of new products in the areas of agrochemicals was carried out. Through ‘Design of Experiments’ (DOE), process improvement and cycle time reduction were undertaken in the manufacture of existing products. Safety, Health and Environment (SHE) issues were given special emphasis in the process development work. New formulation development work was undertaken with specific objective of preparing products with enhanced bioefficacy and increased safety to end-user. Development of eco-friendly products was given special attention. Several eco-friendly formulations are under various stages of development. Efforts continued on developing cost-effective packaging with minimal environmental impact. 2.

3.

Benefits derived as a result of above R & D: i) Four new product registrations were obtained and three products were launched in the market and three along with alliance partners. ii) Process improvement work on two products has resulted in cost reduction in existing products as well as in waste reduction. iii) One eco-friendly dust free granular formulation was introduced during the year. iv) New type of packing was introduced during the year, resulting in savings. Future Plan of Action: The Company’s initiative of New Product Development (NPD) process had identified several new products to be developed during the next 5 to 8 years. Several products are at various stages of development. Improvement plans for existing products are also underway with an objective of cost reduction and being competitive in the market.

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

4.

Expenditure on R & D: Rs. Crores 2005-06

2004-05

Capital expenditure

0.15

0.89

Revenue expenditure

7.99

8.94

8.14

9.83

1.38%

1.82%

Total R&D expenditure as a percentage of total turnover 5.

C.

Technology Absorption, Adaptation and Innovation a)

The introduction of New Product Development (NPD) process resulted in obtaining registration for four new products, of which two products were commercialized.

b)

Process improvements in existing products resulted in better productivity, efficiency and quality.

c)

Product improvements have and will continue to result in improved productivity and cost reduction and this will result in improving the profitability of the Company.

d)

A new initiative for development of novel fungicides has been taken up through CSIR’s New Millennium Indian Technology Leadership Initiative (NMITLI). Of the 200 molecules synthesized, four lead molecules have been confirmed.

e)

There is no import of technology during the last 5 years.

FOREIGN EXCHANGE EARNINGS AND OUTGO Total Foreign Exchange used and earned Rs. Crores 2005-06

2004-05

Foreign Exchange Earned

153.17

134.78

2.

Outgo of Foreign Exchange

113.85

98.20

3.

Remittances of Dividends (Net)

0.05

-

1.

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MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENTS After gaining double digit growth in the year 2004, the global agrochemical market remained almost static during 2005. Increased planting of GM crops and drought in South American countries and Australia, as well as lack of pest and disease incidence in several markets, hampered the growth in 2005. There was also a reduction in selling prices for several key molecules. The Indian agrochemical industry experienced a market shrinkage during the year 2005-06, after two consecutive growth years in 2003-04 and 2004-05. The south west monsoon arrived late over peninsular and eastern India, but early over north western parts. The distribution of rainfall was unfavorable with excess rains in the critical markets of Andhra Pradesh, Karnataka, Punjab and Central India. Continuous rains resulted in long pest free crop scenario and inability of growers to undertake pesticides sprays against pests and diseases. Cyclonic rains in coastal Andhra Pradesh in October 2005 adversely impacted the yield of standing paddy crop and completely washed out the re sown chili crop. Acreage under Bt cotton cultivation increased in all the cotton growing areas. The minimal infestation of cotton bollworm pest, which alone contributes to about a third of total insecticides market, resulted in the volume reduction of sales of molecules introduced in the recent past and also the traditional organophosphates and synthetic pyrethroids in 2005-06. However, normal cotton acreage under hybrid, increased Bt cultivation, good cotton prices and emergence of Spodoptera as a new pest segment, resulted in higher consumption products like Neonicotinoids and Spodoptera Molecules. Good water availability in paddy belt also resulted in high disease infestation in the paddy crop and fungicides sales increased. Poor economics for the Kharif paddy crop impacted farmers’ purchasing ability in Rabi adversely, whereas extended foggy weather in winter destroyed the potato crop in UP, Bihar and West Bengal, resulting in lower consumption of late blight control molecules. The Industry faced unforeseen and unprecedented decline in the prices of some of the wheat herbicides and newer chemistry products like Acetamiprid, Imidacloprid, Lambda Cyhalothrin due to increased availability from low cost sources. In order to improve profitability, agrochemical companies are reinventing the entire supply chain and developing more cost effective ways for reaching the Indian farmers and generating demand. The drivers of growth of the Pesticides Industry in 2006-07 would be normal monsoon throughout the country and increased acreages under cotton, paddy and chillies as well as the pest incidence. Rallis’ overall performance The financial year ended with a net profit of Rs. 42.52 Crores, as against a net profit of Rs.33.50 Crores in the previous year. Segment-wise performance (1) Pesticides: a)

Domestic formulations’ business: The Company’s domestic pesticides business has shown a small growth in 2005-06 inspite of a decline in the size of the industry as a whole. Excessive rains in most parts of the country coupled with non appearance of Heliothis pest in cotton resulted in the reduced sales of heliothis controlling products, Organophosphates and Pyrethroids. The overall insecticide segments were maintained by the Company at the last year’s level by introduction of Spodoptera control molecules and an increased acceptance of Cotton Sucking Pests control products during the year. Growth in Fungicides segment remains higher than the industry average, due to strengthening of the flagship brand “Contaf” in Paddy segments through sustained brand promotional efforts. Despite price erosion in wheat herbicides market, the Company grew in herbicides product segment, through sales volume improvements of “Fateh” in North Indian wheat market, by undertaking innovative demand

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

generation campaigns. Intensive developmental work of “Tata Metri” in sugarcane was also successful in generating higher volumes of sales. In 2006-07, the Company will continue its marketing efforts to generate demand through “Dr. Vishwas” campaign, promising crop protection solutions from sowing to harvest, intensive farmer contact, farmers’ help line and call centre to improve the service level, focus group discussions for greater understanding of the farmers’ needs and expectations and innovative individual brand promotions through media. These will help significantly in brand building and service differentiation. Partnering with the distribution network through their participation in business planning, formation of retailer’s club will ensure support from the trade to increase the reach and penetration in the market place. b)

Institutional Business: After a significant growth during the year 2004-05, Domestic Institutional Business grew further during the year 2005-06. The growth was achieved inspite of value erosion on most of the products. The Company has been able to maintain a market share in all own manufactured products with a price premium. Seed Treatment Chemicals also got a boost during the year due to increased competition among the seed producers and the need for differentiating the seed quality and exploiting the opportunity of increased acreage under Bt. Cotton. Major challenge for Institutional Business is to meet competition from low cost sources and indigenous manufacturers.

c)

International Business: International Business achieved an export turnover of Rs.150 Crores during 2005-06, representing an increase of 24% over the previous year, inspite of degrowth of exports of pesticides from India. The growth came from new registrations and expansion into new geographies in Africa and Latin America. Alliances with global players also gave increased volumes for metconazole, hexaconazole, pendimethalin and acephate.

(2) Agro-Inputs: a)

Plant Growth nutrients: With an increased emphasis on export of agricultural produce, and consumers becoming quality conscious, there is a greater awareness among the farmers in growing better quality produce. Having identified this trend, the Company is focusing on sales of plant growth nutrient products which help the farmers to add value and realize higher price for their produce by improving its quality. The Company’s initiative in streamlining this activity by phasing out products with low gross contribution, emphasis on branding and market development has yielded desired results. “Solubor” is well established and is one of the top brands in this segment.

b)

Seeds: The area under Bt cotton is increasing in India. The Company has entered into an agreement with Nuziveedu Seeds Limited, the market leader in cotton seeds, for marketing of Bt cotton seed. This association will benefit the Indian cotton farmers by way of timely availability of vital input, viz. quality seeds. The Company provides crop management advisory services to the farmers along with quality seeds carrying biotechnology traits, so as to maximize the benefits of genetics, biotechnology and crop protection technology being made available as a comprehensive package. Seed is the vehicle for input/ output traits and the development of new varieties will drive future growth in agri-inputs business. During 2005-06, the focus of the Company was to deal in select products, viz. paddy, maize and cotton, and establish a platform for growth in these crops through addition of products sourced from companies which are strong in breeding and research of these crops.

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(3) Others: a)

Leather Chemicals: Sales were affected due to shortage of raw hides and skins in second half of 2005. Forestal agency, major player in our operation, faced dry production season in Zimbabwe and shipments were delayed at Durban due to transshipment bottleneck. Myrobalan exports were affected as buyers could not absorb additional costs of processing and turned to cheaper source from Turkey. During the year, sales structure was reorganized and modified review systems were implemented. Continued focus on reduction of inventories, customer outstanding and fixed costs gave positive results. The Company’s technical strength and various types of leather chemicals application on leather were successfully displayed at India International Trade Fair, Chennai in early February 2006. This has evoked excellent response from the trade.

b)

Knowledge Services Business: The Company completed the transfer of its Knowledge Services Business, including the Research & Development Centre at Bangalore, to Advinus Therapeutics Pvt. Ltd., during the year. Subsequent to the transfer, Rallis is conducting its own essential support activities related to agro-chem development work, namely field trials, formulation development and new product registration, out of one of its existing manufacturing locations. A new Development Centre has been established already.

OPPORTUNITIES AND OUTLOOK Growing acceptance of Bt cotton and better availability of Bt varieties due to more approvals from GEAC is opening up opportunities for more consumption of sucking pest insecticides and seed treatment chemicals. The Company is strongest in its portfolio of sucking pest insecticides and seed treatment of Bt cotton. Spodoptera in Bt cotton is an emerging pest segment and in order to enhance and broad base the Spodoptera control product portfolio, the Company has entered into an strategic alliance with Makhteshim Agan, Israel to market the product “Novaluron” in its own brand name from the 2006 cotton season. Due to the growing acceptance of Bt cotton varieties, the Company has also started the sourcing and marketing of Bt cotton seeds. An alliance with Nuziveedu Seed Company, a major player in hybrid and Bt cotton seed market, has been established for this purpose. Plant Growth Nutrients shall continue gaining more usage for better nutritional requirements of the Bt cotton crop and for improving the quality of agricultural produce. RISKS, CONCERNS AND THREATS Timing of Monsoon arrival and its distribution over the crop period is crucial. An erratic monsoon, such as the one witnessed by the country during 2005-06, constitutes a risk, as low or excess rainfall over any area adversely affects the agricultural scenario including the pest infestation. Carry over inventories in the distribution network, availability of low cost materials from alternative sources may put pressure on price realization. The price erosion witnessed by the Industry during 2005-06 seems to have plateaued, but some adverse effects of the same cannot be ruled out in the coming year. Commodity prices realized by the farmers determine their ability to invest in agricultural inputs and in the case of some cash crops, this is a significant variable.

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

Initiatives taken during 2005-06 Marketing and Sales: During the year under review, the Company took the following major initiatives to promote key brands and increase competitiveness in the market:


Addition of 3 Spodoptera control products, 2 fungicides for fruits and vegetables and 1 wheat herbicide.




Emphasis on increased personal contact with farmers at villages by providing mobility to sales force.




Partnering with trade channel members by involving them in business planning and sales promotions campaigns.




Increased training inputs to the field force on selling and negotiating skills.




Institutionalization of “Kshetra Ratna” award for increased emphasis on Zonal Profit Centre Concept.




Marketing of branded Bt cotton seed.

Research & Development (R&D): During the year 2005-06, the Company’s Research and Development efforts, through its New Product Development (NPD) process, enabled obtaining registrations for 4 new products. Dossiers for the registration of few more products have been submitted to the Central Insecticides Board. More than seventy five dossiers were prepared for the registration of various products overseas. During 2005-06, new products, viz. Prabhaav 5% SG, TEG and Koranda 505 EC were launched in the market along with Company’s Alliance Partners and/ or through its own R&D efforts. These new products were well received by the farming community and have contributed significantly to the turnover during 2005-06. Process improvement to increase purity and yield has resulted in cost reduction of two products. The prestigious New Millennium Indian Technology Leadership Initiative (NMITLI) project sponsored by CSIR, GOI for developing a novel fungicide based on target identification and molecular design through bio-informatics, chemoinformatics has resulted in the identification of four lead molecules, which will be taken up for further development. Renewal of registration for the manufacture of various Tracel (Multi-micronutrient mixture) formulations and formulation of completely water-soluble solid fertilizer for fertigation in floriculture and other crops were obtained. The Company’s R&D Centre at Bangalore was transferred to Advinus Therapeutics Pvt. Ltd. Consequently, the R&D effort of Rallis has been re-established at Patancheru, A.P. All the research and development work, including NMITLI and NPDI is being carried out at this location. All the regulatory studies required for obtaining the registrations are being outsourced through Advinus Therapeutics Pvt. Ltd and other government and private institutions. The “Innogate” process launched by the Company ensured continuous flow of ideas for new products and improved processes and this will be given increased momentum in future. Safety, Health & Environment (SHE): There was a considerable improvement in the Safety, Health and Environment performance of the Company, with zero reportable accidents and occupational health illness and also considerable reduction in the number of non reportable accidents. “Near miss” reporting, followed by action plan implementation for mitigation of unsafe act/ condition has contributed to accident reduction in the year. The Company is striving to achieve the status of ‘zero accident by choice’. Occupational Health and Safety (OH&S) Management System of all basic manufacturing units have been certified under OHSAS 18001:1999 specification and the certification process is underway at Akola formulation facility. This process has helped in identifying all the OH&S associated hazards and evaluating risks, followed by deriving control measures to reduce risks to acceptable levels. Keeping up the pursuit for implementation of best practices in safety and health at the working environment across the Company, Turbhe and Ankleshwar units have been added along with units at Lote and Patancheru, that were awarded 4 star and 3 star rating respectively by British Safety Council (BSC) in the previous year. All four units are in the process of ensuring sustainability of good practices so as to face BSC audit next year. Environment Management System at all locations has been certified under ISO 14001: 2004 based on the concepts of sustainable development, continual improvement and regulatory compliance, ensuring aspect-impact assessment.

24 24 CEPS 4/E:/SALES/Sanjay/Rallis AR 05-06/File Rallis Main 2006.pmd/NSS/20/4/vk28-4-skg-2-5/sbs(3-5)

Up-gradation of hardware of environment management system was done to meet the challenge of change of stipulated standards on account of statutory amendments. The Company honours global issues and contributed by way of conservation of natural resources and reduction in air emissions of concern under Montreal Protocol and Kyoto Protocol. Global Compact Principles have been adopted into our way of operations and communication to that effect has been filed. Corporate Sustainability Report (CSR) for the year 2004-05 has been prepared in conformance to Global Reporting Initiative guidelines on economic, environmental and social (triple bottom line reporting) performance of the Company and has been made accessible to the stakeholders. The Company has ensured full compliance across all the units to the Charter on Corporate Responsibility for Environmental Protection (CREP), a charter signed with the Ministry of Environment & Forest, Government of India. Our commitment to safety and health of our employees and protection of environment, within and without, brought in laurels to the Company by way of awards and accolades. Lote unit won the National Safety Award 2004 (Ministry of Labour & Employment, Government of India) and Special Commendation Certificate for Environment Management from Institute of Directors. Ankleshwar unit bagged first rank in Rotary Safety & Environment Shield Competition organized for the industrial clusters of Ankleshwar and Dahej and also third prize in the large scale industrial category for ‘Gujarat Gas Safety Award’. INTERNAL CONTROLS SYSTEMS AND ADEQUACY For the second year running, all the internal audits in the Company were conducted by a single large outsourced firm of internal auditors, under the guidance of the Chief Internal Auditor and his small group of highly experienced and qualified staff. This has led to adequate and effective audit coverage, streamlining and standardizing of the internal auditing processes including auditing through SAP, and adoption of many value-added audit recommendations and industry best-practices. Internal audits were conducted with a wide coverage across all major business areas, key processes and locations as per the approved risk-based annual audit plan. Besides internal audits, the internal audit department also guided the internal control consulting effort in many areas of the Company. To strengthen the controls in the SAP system, a post-implementation controls review of SAP and its authorization controls was conducted, and the recommendations of this review have been implemented with the help of the business process owners, the IT department and Internal Audit department. A strong controls environment, enterprise risk-management framework, strong control techniques, good information and communication systems with the help of SAP and other IT systems, and vigorous monitoring of controls by Internal Audit, Management and the Audit Committee/ Board of Directors have resulted in a mature and effective internal controls system in the Company. HUMAN RESOURCES The HR Initiatives undertaken during the year were:


Streamlining and enriching Performance Management System




Introduction of new Incentive Scheme for Manufacturing teams




Streamlining the Incentive Scheme for Sales & Marketing teams




Introduction of Reward & Recognition System under the banner of Shukriya




Transition to CTC-based compensation structure for Management Staff




Employee Engagement Survey




Remuneration Survey




Diagnostic Study by Focused Group Discussion




Work Level exercise for senior executive positions




Increased communication by Executive Committee members to all employees.




Regular Ralliround, TGIF, Factory Days




Training programmes for all functions




Preparation of HR Manual




Manpower Rationalization

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

The emphasis during the year was to define the performance parameters more accurately and monitor the same through Performance Management System. In addition, there was renewed emphasis on Training and increased Communication. The Performance Management System was effectively used for tracking, monitoring and enhancing performance, rewarding achievements and also laying down review and feedback mechanisms between employees and their superiors. Sales Training christened ‘ARJUN’, an acronym for ‘Alignment, Result-oriented, Joint Effort, User Focus and New Horizons’, continued for the entire Sales & Marketing Division. Manufacturing workforce, which comprises a majority of our total manpower, had undergone training on TPM and 6 Sigma and Management Development Programs. This has resulted in a continuous improvement through sustainable initiatives in the areas of cost and waste reduction, enhancing customer satisfaction and rates of production. The informal, monthly TGIF meetings and the in-house magazine called “Ralliround” continued to be a popular medium of communication. The Human Resource Information System, the key database for all employee records was converted to a net-based system and now all employees and departments can access the information through the net. As on 31st March, 2006, the employee strength was 1096, down from 1250 as on 1st April, 2005. Tata Business Excellence Model (TBEM): The Company’s journey towards business excellence gained momentum during the year 2005-06. Last year (2005), the Company migrated to a higher score band of 450-550 by achieving 454, an improvement over 391 in the previous year. Group Chairman Mr. Ratan Tata handed over a plaque to the Managing Director and Rallis team at Goa convention in recognition of Active Promotion of TBEM. The score indicates that the Company demonstrates effective, systematic approaches to the overall requirements of the Items, but deployment varies in some areas. There is a beginning of a factbased evaluation and improvement of key processes. Results address key customer/ stakeholder, market, and process requirements, and they demonstrate some areas of strength and/ or good performance. The Company has planned to develop more than 30 trained TBEM employees in various functions for better understanding of world class practices and their implementation. Internal assessment will be conducted in the last week of April 2006. This will help leverage the knowledge and experience of trained employees for self assessment and improvement. The Company will participate in TBEM external assessment in cycle-II starting from July 15, 2006. The Company has continued its efforts to bring about excellence in all aspects of business. The good all-round results demonstrated by the Company since the last assessment should help it achieve a higher score this year. Information Technology: The Company’s IT initiatives were directed towards further exploitation of the ‘Power of SAP’ for business. During the year, Information Technology Division implemented Product Costing, Project Systems and Investment Management modules of SAP. These modules support better control and monitoring of product cost, stage wise raw materials cost, variable cost, overheads and capital expenditure projects. During the year, the Company outsourced its SAP maintenance and service to TCS. TCS offers this service remotely from Ahmedabad. The Company’s workflow system has ensured success for the remote outsourcing. For cost effective SAP training, Information Technology Division installed e-Learning software, branded as “E-kalavya”. Rallis’ employees can, now, learn about SAP transactions in its various modules at their own pace and time. New recruits have been trained effectively and Company has derived benefits from e-Kalavya. Information Technology Division took major strides in implementation of new workflows. Workflows in the areas of employee expenses, reimbursement claims, leave and SAP help desk were implemented. Employees can now lodge reimbursement claims from anywhere, anytime. The accuracy of claim processing and transparency has improved, while cycle time for claim processing has reduced. This has increased employee satisfaction. During the year, the Company changed its Linux based email system to MS Exchange. It has implemented ‘share point services’ for improved collaboration and ‘Single Sign on’ for improved security.

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During the year, the Company launched a ‘Own your Laptop’ scheme for the employees. This scheme is a ‘win - win situation’ for the Company and employees. It has improved employee satisfaction. Employees under the scheme can now conduct business on 24X7 basis. SMS application is now extended to dealers and farmers. Dealers can now receive dispatch information as SMS, whereas farmers receive crop related information on SMS. The Company has engaged E&Y and NSEIT from time to time for auditing of its systems for security. It has developed a formal IT security policy. Community Development: The Company determines its key communities through a systematic approach and develops programs for them. It puts down the precise rationale to indicate one or more ‘Key Communities’ based on empirical studies/ surveys/ felt needs established mutually between the people and its Facilitators. Every year, all Regions/ Factories prepare their annual community development plans based on above findings and budgets are allocated for them. Through our network of zealous volunteers, as in the past, extensive Community Development activities have been carried out this year as well. Camps were conducted for blood donation, Aids awareness, health and hygiene, especially for women, vaccination and medical check-ups for children as well as adults. Programmes organized included tree plantation drives, tutorials and career guidance for SSC/ HSC students from surrounding villages, industrial visits of engineering students, services at village Marriage Community Centres, free drinking water made available for the local villagers, empowerment for women and encouragement and support given to various village Sports associations. Mentor Programmes were undertaken through the “Akanksha Foundation” for under privileged children and also the “Ankur Asmita” project through Committed Community Development Trust (CCDT), being educational support given to the school going children of women in prostitution. Other activities included visits to Homes for the disabled and senior citizens, Mother Teresa Ashrams, Tata Agricultural And Rural Training Centre for the Blind in Gujarat, etc Cautionary Statement Statements in the Management Discussion and Analysis describing the Company’s objectives, projections, estimates, expectations may be “forward- looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company’s operations include climatic conditions, economic conditions affecting demand/ supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and other incidental factors.

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RALLIS Fifty-seventh annual report 2004-2005 Rallis India Limited

REPORT ON CORPORATE GOVERNANCE 1.

2.

Company’s Philosophy on the Code of Governance. It has been a constant endeavour on the part of the Company to achieve excellence in Corporate Governance by following the principles of transparency, accountability and integrity in functioning, so as to constantly enhance value for all stakeholders and fulfil the social obligation entrusted upon the Corporate sector. The above philosophy along with the Tata Code of Conduct and Tata Code of Conduct for Prevention of Insider Trading ensures the sustenance of high ethical and moral standards which govern the conduct of the Company and its employees. The Company has also adopted a Whistle Blower Policy to provide a mechanism to enable the employees to approach the Audit Committee of the Board of Directors while reporting the instances of unethical behaviour, actual or suspected fraud or violation of the Company’s code of conduct or ethics policy, which may come to their knowledge. The Tata Business Excellence Model adopted by the Company is a means of driving excellence throughout the organisation by providing means for institutionalising accountability and thus deriving the best out of the available resources. Your Company has complied with the requirements of the Corporate Governance Code, the disclosure requirements of which are given below: Board of Directors The Company has a non-executive Chairman and the number of Independent Directors is more than one-third of the total number of Directors. The number of non-executive Directors is more than 50% of the total number of Directors. None of the Directors on the Board is a Member on more than 10 Committees and Chairman of more than 5 Committees (as specified in Clause 49 of the Listing Agreement), across all the companies in which he is a Director. The necessary disclosures regarding committee positions have been made by all the Directors. Composition and category of Directors The Board comprises of 8 Directors. The names and categories of Directors, their attendance at the Board Meetings held during the year and at the last Annual General Meeting, as also the number of Directorships and Committee positions held by them in other companies are given below:

Director

Mr. R. Gopalakrishnan (Chairman)

Category

Promoter Non-Independent Non-Executive Dr. Ram S. Tarneja Independent Non-Executive Mr. V. N. Nadkarni Independent (upto 31.03.2006) Non-Executive Mr. Russi Jal Independent Taraporevala Non-Executive Mr. Prasad R. Menon Promoter Non-Independent Non-Executive Mr. Homi R. Khusrokhan Promoter Non-Independent Non-Executive Mr. B. D. Banerjee Independent Non-Executive Mr. E.A. Kshirsagar Independent (w.e.f. 24.02.2006) Non-Executive Dr. Venkatrao S. Sohoni Non-Independent (Managing Director) Executive

No. of Board Attendance All Meetings at AGM held Directorships* attended on 30th during June, Chairman Member Total 2005-06 2005.

All Mandatory Committees Chairman Member

7

Yes

1

11

12

-

4

4

7

Yes

1

13

14

5

5

10

7

Yes

2

6

8

3

4

7

6

No

-

4

4

2

3

5

6

Yes

-

7

7

-

2

2

7

Yes

-

2

2

-

1

1

6

Yes

-

1

1

-

-

-

1

No

-

5

5

3

3

6

7

Yes

1

1

2

-

2

2

* Excludes all Private, Foreign Companies and Alternate Directorships

28 28

Total

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The Company held 7 Board Meetings during 2005-06 and the gap between two meetings did not exceed four months. The dates on which the Board Meetings were held were as follows: 13th May, 2005, 30th June, 2005, 25th July, 2005, 29th August, 2005, 20th October, 2005, 17th January, 2006 and 17th March, 2006. The information as required under Annexure IA to Clause 49 is being made available to the Board. The Company did not have any pecuniary relationship or transactions with Non-Executive Directors during the year. 3.

Code of Conduct. The Company has adopted the Tata Code of Conduct for the senior management of the Company, including the Executive Directors of the Company. Further, the Board has also laid down a code of conduct for the Non - Executive Directors of the Company. Both the Codes are posted on the website of the Company. All Board members and senior management personnel have affirmed compliance with the applicable Code of Conduct.

4.

Audit Committee. Brief description of terms of reference The terms of reference of the Audit Committee, as stipulated by the Board of Directors, in accordance with the items listed in Clause 49 II D of the Listing Agreement, are as follows: ¾

To overview the Company’s financial reporting process and disclosure of its financial information to ensure that the financial statements are correct, sufficient and credible.

¾

To review with the management the quarterly and annual financial statements before submission to the Board.

¾

To recommend to the Board the appointment, re-appointment and removal of statutory auditors, fixation of audit fees and to approve payment for any other services rendered by the statutory auditors.

¾

To review with the management, performance of the statutory and internal auditors.

¾

To review the adequacy of the internal audit function and the adequacy and efficacy of the internal control systems.

¾

To review the findings of any internal investigations by the internal auditors.

¾

To look into the reasons for substantial defaults in payments to depositors, debenture holders, shareholders and creditors.

¾

To review the functioning of the Whistle Blower mechanism.

¾

And, generally, all items listed in Clause 49 II D of the Listing Agreement.

The Audit Committee has been granted powers as prescribed under Clause 49 II C Composition, name of members and Chairman and Attendance during the year The Company has complied with the requirements of Clause 49 II A as regards the composition of the Audit Committee. The composition of the Audit Committee and the details of meetings attended by the Directors are given below: Name of the Member

Category

No. of Meetings attended during 2005-06

Mr. V. N. Nadkarni, Chairman (upto 31.03.2006)

Independent Non-Executive

7

Dr. Ram S. Tarneja, Member

Independent Non-Executive

7

Mr. Russi Jal Taraporevala, Member

Independent Non-Executive

7

Mr. Homi R. Khusrokhan, Member (Chartered Accountant)

Promoter Non-Independent Non-Executive

6

Mr. E. A. Kshirsagar, Member (w.e.f. 24.02.2006) (Chartered Accountant)

Independent Non-Executive

1

29 29

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RALLIS Fifty-seventh annual report 2004-2005 Rallis India Limited

The Audit Committee met 7 times during the year and the gap between two meetings did not exceed four months. The dates on which the Audit Committee Meetings were held were as follows: 13th May, 2005, 25th July, 2005, 16th September, 2005, 20th October, 2005, 23rd November, 2005, 17th January, 2006 and 16th March, 2006. Necessary quorum was present at the above Meetings. The Audit Committee Meetings are attended by the Chairman of the Board, the Managing Director, the Chief Operating Officer, the Chief Financial Officer, the Chief Internal Auditor, the Company Secretary and a representative of the Statutory Auditors. The Chairman of the Audit Committee, Mr. V. N. Nadkarni was present at the Annual General Meeting of the Company held on 30th June, 2005. 5.

Remuneration Committee. Brief description of terms of reference The Committee is responsible for considering and finalising the remuneration and commission of the Managing Director and recommending the commission payable to the Board of Directors for their final approval. In addition, the Committee has been given the mandate to consider and approve appointment of and the remuneration payable to Executives upto the General Manager level and also matters relating to Voluntary Retirement Schemes and Early Separation Schemes of the Company. Composition, name of members and Chairman and Attendance during the year The Composition of the Remuneration Committee and the details of the meetings attended by the Directors are given below: Name of the Member

Category

No. of Meetings attended during 2005-06

Mr. Russi Jal Taraporevala, Chairman

Independent Non-Executive

4

Mr. R. Gopalakrishnan, Member

Promoter Non-Independent Non-Executive

3

Dr. Ram S. Tarneja, Member

Independent Non-Executive

4

The Remuneration Committee met 4 times during the year, on 13th May, 2005, 25th May, 2005, 23rd November, 2005, and 16th March, 2006. Remuneration Policy The Company is a part of the Tata Group and the remuneration payable to the Managing Director is within the framework of the guidelines laid down by the Tata Group on the remuneration payable to the Managing/ Whole-time Directors of the Company. The Company links the annual variable pay of senior managers with the performance of the Company in general and their individual performance for the year, measured against Key Result Areas which are aligned to the Company’s objectives. The Company, while deciding the remuneration package of the senior management, takes into consideration the employment scenario, the remuneration package in the industry and the remuneration package of the managerial talent of other industries. Details of remuneration to all the Directors The Non-Executive Directors are paid remuneration by way of commission and sitting fees. In terms of the shareholders’ approval obtained at the Annual General Meeting held on 18th September, 2003, commission is to be paid at a rate not exceeding 1% per annum of the profits of the Company, computed in accordance with the provisions of the Companies

30 30

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Act, 1956. The distribution of commission among the Non-Executive Directors is approved by the Remuneration Committee and the Board. However, no commission was paid to the Directors during the year 2005-06, for the year ended 31st March, 2005. The Company pays sitting fees of Rs. 10,000/- per meeting to the Non- Executive Directors for attending meetings of the Board, Executive Committee of the Board and the Audit Committee and Rs. 5000/- per meeting for attending meetings of the other committees of the Board. The Company pays remuneration by way of salary, perquisites and allowances (fixed component) and commission (variable component) to the Managing Director. Salary is paid within the range approved by the shareholders. Annual increments, effective 1st April each year, are approved by the Board, as per the recommendations of the Remuneration Committee. Perquisites and allowances are subject to such overall ceiling as may be fixed by the Board from time to time. Within the prescribed ceiling, the perquisites are approved by the Remuneration Committee. Commission is calculated with reference to the net profits of the Company in a particular financial year and is determined by the Board of Directors at the end of the financial year, based on the recommendations of the Remuneration Committee, subject to the overall ceilings stipulated in the Companies Act, 1956. Specific amounts payable as commission, if any, are based on the performance criteria laid down by the Board, which broadly takes into account the profits earned by the Company for the year. However, in view of the carried forward losses of the Company, calculated as per the provisions of Section 198 of the Companies Act, 1956, no commission is payable to the Managing Director for the year 2005-06. The aggregate value of salary and perquisites paid to Dr. V. S. Sohoni, Managing Director, during the year 2005-06 is Rs.38,27,155/-, comprising of: Salary

:

Rs.21,60,000/-

Perquisites and allowances

:

Rs.16,67,155/-

Period of Agreement

:

From 11th August, 2003 upto 10th August, 2006

Notice period

:

The Agreement may be terminated by either party giving the other party six months’ notice or the Company paying six months’ remuneration in lieu thereof.

Severance fees

:

Nil

The Sitting fees paid during the financial year 2005-06 to the Non- Executive Directors for attending the Board and Committee Meetings for the year 2005-06 are as follows: Name of Director

Fees paid (Rs.)

Mr. R. Gopalakrishnan

1,10,000/-

Dr. Ram S. Tarneja

1,95,000/-

Mr. V. N. Nadkarni

1,60,000/-

Mr. Russi Jal Taraporevala

1,50,000/-

Mr. Prasad R. Menon Mr. Homi R. Khusrokhan

70,000/1,50,000/-

Mr. B. D. Banerjee

65,000/-

Mr. E. A. Kshirsagar

20,000/-

Mr. Russi Jal Taraporevala holds 100 shares in the Company. None of the other Non-Executive Directors hold any shares in the Company.

31 31

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RALLIS Fifty-seventh annual report 2004-2005 Rallis India Limited

6.

Shareholders’/ Investors’ Grievance Committee. The Shareholders’/ Investors’ Grievance Committee met twice during the year, on 13th May, 2005 and 23rd November, 2005. The composition of the Shareholders’/ Investors’ Grievance Committee and the details of the Meetings attended by the Directors are given below: Name of the Member

Category

No. of Meetings attended during 2005-06

Dr. Ram S. Tarneja, Chairman

Independent Non-Executive

2

Dr. Venkatrao S. Sohoni, Member

Non-Independent Executive

2

Name, designation and address of Compliance Officer: P. S. Meherhomji Company Secretary Apeejay House 7th Floor 3 Dinshaw Vachha Road Churchgate Mumbai 400 020

7.

Phone: (022) 6665 2712 Fax: (022) 6665 2842 Email: [email protected] The number of investor complaints/ requests/ queries received and addressed during 2005-06 was 450. There was no complaint pending as on 31st March, 2006. One transfer for 200 shares and 3 demat requests involving 132 shares were pending on 31st March, 2006. These requests were received during the last week of March 2006 and hence were pending as on 31st March, 2006, but have been subsequently processed, as certified by TSR Darashaw Limited (Registrars). Nominations Committee. The Nominations Committee was constituted at the Board Meeting held on 17th January, 2006. The Nominations Committee is responsible for making recommendations regarding the composition of the Board, identifying independent Directors to be inducted to the Board from time to time and taking steps to refresh the composition of the Board from time to time The first meeting of the Committee was held on 17th January, 2006. The composition of the Nominations Committee and the details of meetings attended by the Directors are given below: Name of the Member

Category

No. of Meetings attended during 2005-06

Mr. B. D. Banerjee, Chairman

Independent Non-Executive

1

Mr. R. Gopalakrishnan, Member

Promoter Non-Independent Non-Executive

1

Dr. Ram S. Tarneja, Member

Independent Non-Executive

1

32 32

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8.

Executive Committee of the Board. The Executive Committee of the Board was set up at the Board Meeting held on 17th January, 2006, by reconstituting the erstwhile Committee of the Board. The Executive Committee of the Board is responsible for reviewing, before presentation to the full Board, items such as Business and strategy review, long-term financial projections and cash flows, capital and revenue budgets, acquisitions, divestments and business restructuring proposals, senior management succession planning, etc. The composition of the Executive Committee of the Board is as under: Name of the Member

Category

Mr. R. Gopalakrishnan, Chairman

Promoter Non-Independent Non-Executive

Dr. Ram S. Tarneja, Member

Independent Non-Executive

Mr. Prasad R. Menon, Member

Promoter Non-Independent Non-Executive

Mr. Homi R. Khusrokhan, Member

Promoter Non-Independent Non-Executive

Dr. Venkatrao S. Sohoni, Member

Non-Independent Executive

The Chief Operating Officer and the Chief Financial Officer are the permanent invitees to the Committee. 9.

Prevention of Insider Trading. The Company has adopted the Code of Conduct for Prevention of Insider Trading, under the SEBI (Prohibition of Insider Trading) Regulations. Mr. Soumen Mitra, Chief Financial Officer has been appointed as the Compliance Officer for the implementation of and overseeing compliance with the Regulations and the Code across the Company. The Company has also adopted the Code of Corporate Disclosure Practices for ensuring timely and adequate disclosure of Price Sensitive Information, as required under the Regulations. The Managing Director is the Public Spokesperson for this purpose. The Company has constituted an Ethics and Compliance Committee of the Board, under the Code of Conduct for Prevention of Insider Trading to set forth the policies relating to and to oversee the implementation of the Code of Conduct for Prevention of Insider Trading. The composition of the Ethics and Compliance Committee and the details of the Meetings attended by the Directors are given below: Name of the Member

Category

No. of Meetings attended during 2005-06

Dr. Ram S. Tarneja, Chairman

Independent Non-Executive

2

Mr. V. N. Nadkarni, Member (upto 31.03.2006)

Independent Non-Executive

2

Dr. Venkatrao S. Sohoni, Member

Non Independent Executive

2

The Ethics and Compliance Committee met twice during the year, on 20th October, 2005 and 17th March, 2006.

33 33

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RALLIS Fifty-seventh annual report 2004-2005 Rallis India Limited

10. General Body Meetings. Location, date and time of General Meetings held during the last 3 years and special resolutions passed: Date

Location

Time

Special Resolutions

30th June, 2005

Bombay House Auditorium, Bombay House, Homi Mody Street, Mumbai 400 001.

4.00 p.m.

1. Revision in the terms of remuneration of Dr. Venkatrao S. Sohoni

26th August, 2004

Bombay House Auditorium, Bombay House, Homi Mody Street, Mumbai 400 001.

4.00 p.m.

1. Alteration of the Articles of Association of the Company

18th September, 2003

Bombay House Auditorium, Bombay House, Homi Mody Street, Mumbai 400 001.

4.00 p.m.

1. Appointment of Dr. Venkatrao S. Sohoni as Managing Director 2. Payment of commission to Directors 3. Alteration of the Articles of Association of the Company 4. Raising of additional long term resources 5. Voluntary delisting of the Company’s Securities from the Stock Exchanges at Kolkata and Chennai

All special resolutions moved at the last Annual General Meeting were passed by a show of hands by the shareholders present at the meeting and no resolutions were required to be passed by postal ballot. Postal Ballot During the year under review, the following resolution was put through by Postal Ballot: Resolution for transfer of the Knowledge Services Business of the Company: The Board appointed Ms. Shirin K. Bharucha, former Legal Advisor to the Tata Group as Scrutinizer for the Postal Ballot conducted for transfer of the Knowledge Services Business of the Company to Advinus Therapeutics Pvt. Ltd. The result of the Postal Ballot was declared on 30th June, 2005 and the resolution for the transfer of the Knowledge Services Business was passed by a majority of 99.93% of the total votes. 11. Disclosures. During the year, there were no materially significant related party transactions, i.e. transactions of the Company of material nature with its promoters, the Directors or the management, their subsidiaries or relatives, etc. that may have potential conflict with the interests of the Company at large. During the last three years, there were no instances of non-compliance by the Company and no penalty or strictures were imposed on the Company by the Stock Exchanges or SEBI or any statutory authority, on any matter related to the capital markets. The Company has adopted a Whistle Blower Policy, to provide a mechanism to the employees to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Company’s code of conduct or ethics policy. The Policy provides for adequate safeguards against victimization of employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit committee. It is affirmed that no personnel of the Company has been denied access to the Audit Committee. The Company has complied with all the mandatory requirements of Clause 49 of the Listing Agreement relating to

34 34

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Corporate Governance. Further, the Company has adopted the following non-mandatory requirements of the Clause: ¾

The Company has adopted guidelines for composition of the Board of Directors, which provides for the tenure of Independent Directors.

¾ ¾ ¾ ¾

The Company has set up the Remuneration Committee as per the provisions of Clause 49. Half yearly performance of the Company is sent to all shareholders. The financial statements of the Company are unqualified. The Company has adopted a Whistle Blower Policy, which has been widely disseminated to all employees in the Company.

12. Means of communication.

¾

The quarterly and the half yearly results, published in the proforma prescribed by the Listing Agreement, are approved and taken on record by the Board of Directors of the Company within one month of the close of the relevant quarter. The approved results are forthwith sent to all the Stock Exchanges where the Company’s shares are listed. The results are also published within 48 hours in one English language and one Marathi language newspaper having wide circulation. The results are displayed on the Company’s website, www.rallis.co.in and on the SEBI’s EDIFAR website www.sebiedifar.nic.in.

¾

The Company publishes the audited annual results within the stipulated period of three months from the close of the financial year as required by the Listing Agreement and hence the unaudited results for the last quarter of the financial year are not published.

¾

The annual audited results are also communicated to the Stock Exchanges where the Company is listed, published in the newspapers and displayed on the Company’s and SEBI’s websites.

¾

Management Discussion and Analysis Report is a part of the Annual Report.

13. General Shareholder Information.

¾

Annual General Meeting date, time and venue: 31st May, 2006 at 4.00 p.m. at Bombay House Auditorium, Bombay House, Homi Mody Street, Mumbai 400 001. As required under Clause 49 IV(G)(i), particulars of Directors seeking appointment/ re-appointment are given in the Explanatory Statement to the Notice of the Annual General Meeting to be held on 31st May, 2006.

¾ ¾ ¾ ¾

Financial Calendar

:

Year ending March 31.

Date of book closure

:

16th May, 2006 to 31st May, 2006 (both days inclusive)

Dividend payment date

:

Within 30 days of 31st May, 2006

Listing on Stock Exchanges

:

The Company’s Equity Shares are listed on the following Stock Exchanges:

The Stock Exchange, Mumbai Phiroze Jeejeebhoy Towers Dalal Street Mumbai 400 001.

National Stock Exchange of India Ltd. Exchange Plaza, 5th Floor Plot No.C/1, G Block Bandra-Kurla Complex Bandra (E), Mumbai 400 051.

The Company has paid the listing fees to these Stock Exchanges for the year 2006-07.

¾ ¾ ¾

Stock Code on the Stock Exchange, Mumbai:

500355

Stock Code on the National Stock Exchange of India Ltd.:

RALLIS EQ

Demat International Security Identification Number (ISIN) In NSDL and CDSL for Equity Shares:

INE613A01012

35 35

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RALLIS Fifty-seventh annual report 2004-2005 Rallis India Limited

Market Information Market price data: High/ low, Number and Value of shares traded during each month in the last financial year: The Stock Exchange, Mumbai Month

High (Rs.)

Low (Rs.)

No. of Shares Traded

Value of Shares Traded (Rs. Lacs)

April 2005

284.80 222.00 1,55,830

The National Stock Exchange of India Ltd. Low (Rs.)

No. of Shares Traded

Value of Shares Traded (Rs. Lacs)

No. of Trades

404.38

2,295 298.00 222.00

1,58,420

406.96

2,400

May 2005

297.00 234.00 4,32,607 1,157.24

6,880 311.00 234.00

6,34,031

1,680.45

14,455

June 2005

302.00 248.00 2,52,947

3,619 304.00 248.00

2,53,826

709.11

4,602

July 2005

385.00 249.00 8,01,828 2,536.54

7,857 391.75 250.65 15,01,966

4,883.87

16,068

August 2005

373.00 318.00 4,52,113 1,547.67

2,452 378.00 315.00

2,84,235

965.71

4,575

September 2005

390.00 315.00 6,89,374 2,542.00

1,641 387.95 298.70

1,59,578

577.97

2,467

October 2005

385.00 275.00 4,12,391 1,397.97

6,080 385.00 280.00

5,12,268

1,746.18

13,147

November 2005

404.00 346.25 2,75,005 1,061.35

4,463 404.40 345.00

2,85,196

1,098.59

7,225

December 2005

455.00 370.00 6,92,235 2,761.17

6,928 450.00 370.05

4,35,895

1,769.61

9,830

January 2006

445.00 340.00 2,81,349 1,066.53

4,132 445.00 339.00

2,23,264

870.83

5,838

February 2006

351.50 306.00

91,720

307.85

1,355 367.00 314.00

60,220

202.56

1,851

March 2006

357.50 298.00 2,44,951

802.44

3,562 365.00 285.50

5,58,503

1,833.45

5,186

708.88

No. of Trades

High (Rs.)

12000

450 400

10000 350 8000

300 250

6000 200 4000

150 100

2000 50 0

0 Apr-05

May-05

Jun-05

Jul-05

Aug-05

Sep-05

BSE Exchange

Oct-05

Nov-05

Dec-05

Jan-06

Rallis Share Price

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Feb-06

Mar-06

Registrar and Transfer Agents:

TSR DARASHAW LTD. (Formerly Tata Share Registry Limited) Army & Navy Building, 148, Mahatma Gandhi Road, Mumbai 400 001 Tel. No.: 022-6656 8484 Fax No.: 022-6656 8494 E-mail : [email protected] Website : www.tsrdarashaw.com Business Hours: 10.00 a.m. to 3.30 p.m. (Monday to Friday)

For the convenience of shareholders based in the following cities, transfer documents and letters will also be accepted at the following Branch Offices of TSR Darashaw Ltd.: TSR Darashaw Ltd., (Formerly Tata Share Registry Ltd.) 503, Barton Centre, (5th Floor), 84, Mahatma Gandhi Road, Bangalore 560 001. Tel.: 080-2532 0321 Fax: 080-2558 0019 Email: [email protected]

TSR Darashaw Ltd., (Formerly Tata Share Registry Ltd.) Tata Centre, 1st Floor, 43, Chowringhee Road, Kolkata 700 071. Tel.: 033-2288 3087 Fax: 033-2288 3062 Email: [email protected]

TSR Darashaw Ltd., (Formerly Tata Share Registry Ltd.) 2/42, Sant Vihar, Ansari Road, Daryaganj, New Delhi 110 002. Tel.: 011-2327 1805 Fax: 011-2327 1802 Email : [email protected]

TSR Darashaw Ltd., (Formerly Tata Share Registry Ltd.) Bungalow No.1, “E” Road, Northern Town, Bistupur, Jamshedpur 831 001. Tel.:0657-242 6616 Fax:0657-242 6937 Email: [email protected]

¾

Share Transfer System: Documents for transfer of shares in physical form can be lodged with TSR Darashaw Limited at the registered address or at any of the above mentioned branch offices. The transfers are normally processed within 10-12 days from the date of receipt, if the documents are complete in all respects.

¾

Distribution of shareholding as on 31st March, 2006: Holding of Nominal Value: Rs.10/Sr.No

Range

Holding

Amount (Rs.)

% to Capital

No. of Holders

% to Total Holders

1 to 500

6,93,200

69,32,000

5.78

7,245

92.02

2.

501 to 1000

2,50,360

25,03,600

2.09

323

4.10

3.

1001 to 2000

2,02,190

20,21,900

1.69

136

1.73

4.

2001 to 3000

1,30,153

13,01,530

1.09

51

0.65

5.

3001 to 4000

50,551

5,05,510

0.42

14

0.18

6.

4001 to 5000

1,50,682

15,06,820

1.26

32

0.41

7.

5001 to 10000

2,37,442

23,74,420

1.98

33

0.42

8.

Greater than 10000

1,02,70,015

10,27,00,150

85.69

39

0.49

TOTAL

1,19,84,593

11,98,45,930

100.00

7,873

100.00

1.

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RALLIS Fifty-seventh annual report 2004-2005 Rallis India Limited

¾

Shareholding pattern as on 31st March, 2006: Sr.No.

Category of Shareholders

Total Holdings

Percentage

1.

Tata Companies

54,47,387

45.45

2.

Government And Other Public Financial Institutions

3,66,771

3.06

3.

Foreign Institutional Investors and Foreign Companies

5,16,899

4.32

4.

Non Resident Individuals

42,265

0.35

5.

Other Bodies Corporate and Trust

13,43,569

11.21

6.

Nationalised Banks and Mutual Funds

24,48,166

20.43

7.

Directors and their relatives

100

0.00

8.

Foreign Banks and other Banks

9.

Individuals TOTAL

350

0.00

18,19,086

15.18

1,19,84,593

100.00

¾

Dematerialisation of shares and liquidity: The Company has signed tripartite Agreements (with TSR Darashaw Ltd.) with both National Securities Depository Ltd. and Central Depository Services (India) Ltd. More than 93% of the Equity Shares of the Company are now dematerialised.

¾

Plant locations: Agrochemicals factories (i)

15A, MIDC, Turbhe, Thane-Belapur Road, New Mumbai 400 703, Maharashtra.

(ii) GIDC Estate, Plot No.3301, Ankleshwar 393 002, Dist. Bharuch, Gujarat. (iii) GIDC Estate, Plot No.2808, Ankleshwar 393 002, Dist. Bharuch, Gujarat. (iv) GIDC Estate, Plot No.3000, Ankleshwar 393 002, Dist. Bharuch, Gujarat. (v) C 5/6, MIDC Industrial Area, Phase III, Shivani, Akola 444 104, Maharashtra. (vi) Plot No.D-26, Lote Parsuram, MIDC, Near Hotel Vakratunda, Taluka Khed, Dist. Ratnagiri 415 722, Maharashtra. (vii) IDA, Phase II, Patancheru, Medak Dist., Andhra Pradesh. Fine Chemical factory A-14/A Sipcot Industrial Complex, Cuddalore 607 005, Tamilnadu.

¾

Investor correspondence address:

Rallis India Ltd. Secretarial & Legal Division Apeejay House 7th Floor 3 Dinshaw Vachha Road Churchgate Mumbai 400 020 OR TSR Darashaw Ltd. (formerly Tata Share Registry Ltd.) Army & Navy Building, 148, M. G. Road, Mumbai 400 001.

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To, The Members of Rallis India Limited.

Declaration by the Managing Director under Clause 49 of the Listing Agreement ————————————————————-----------I, V. S. Sohoni, Managing Director of Rallis India Limited declare that to the best of my knowledge and belief, all the members of the Board of Directors and senior management personnel have affirmed compliance with the Code of Conduct for the year ended 31st March, 2006. V. S. Sohoni Managing Director Mumbai, 17th April, 2006

CERTIFICATE TO THE MEMBERS OF RALLIS INDIA LIMITED We have examined the compliance of conditions of Corporate Governance by Rallis India Limited, for the year ended 31st March, 2006, as stipulated in Clause 49 of the Listing Agreement of the said Company with stock exchanges. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination has been limited to a review of the procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance as stipulated in the said Clause. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us and the representations made by the Directors and the management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in Clause 49 of the above mentioned Listing Agreement. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company. For S. B. BILLIMORIA & CO. Chartered Accountants

Mumbai, 17th April, 2006

P.R. Ramesh Partner Membership No. 70928

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RALLIS Fifty-seventh annual report 2004-2005 Rallis India Limited

AUDITORS’ REPORT TO THE MEMBERS OF RALLIS INDIA LIMITED 1.

We have audited the attached Balance Sheet of RALLIS INDIA LIMITED as at 31st March, 2006, the Profit and Loss Account of the Company for the year ended on that date and the Cash Flow Statement for the year ended on that date, both 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, (the Order) issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order, to the extent applicable to the Company.

4.

On the basis of the written representations from the directors as on 31st March, 2006 as taken on record by the Board of Directors, and according to the information and explanations given to us, we report that none of the directors is disqualified as on 31st March, 2006 from being appointed as a director in terms of Section 274(1)(g) of the Companies Act, 1956.

5.

Further to our comments in the Annexure referred to in paragraph 3 above, we report as follows: a)

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;

b)

in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

c)

the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

d)

in our opinion, the Balance Sheet, the Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956;

e)

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: (i)

in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2006;

(ii) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and (iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. For S. B. BILLIMORIA & CO. Chartered Accountants

Mumbai, 17th April, 2006

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P. R. RAMESH Partner Membership No: 70928

ANNEXURE TO THE AUDITORS’ REPORT (Referred to in paragraph 3 of our report of even date) 1.

(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of most of its fixed assets. (b) Most of the fixed assets were physically verified by the management in accordance with a programme of verification, which in our opinion, provides physical verification of all fixed assets at reasonable intervals. According to the information and explanations given to us no material discrepancies were noticed on such verification. (c) The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company.

2.

(a) As explained to us, inventories, excluding materials in transit and materials lying with third parties, were physically verified by the management at all locations at reasonable intervals. (b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.

3.

According to information and explanation given to us, Company has not taken or granted any secured or unsecured loan from or to companies, firms or other parties covered by the register maintained under section 301 of the Companies Act, 1956. Therefore, the provisions of clauses (iii) (a) to (iii) (g) of the Order are not applicable to the Company.

4.

In our opinion and according to the information and explanations given to us, there are adequate internal control systems 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 the audit we have not observed any major weaknesses in such internal control systems.

5.

In respect of contracts or arrangements entered in the register maintained in pursuance of section 301 of the Companies Act, 1956, to the best of our knowledge and belief and according to the information and explanations given to us: (a) the particulars of contracts or arrangements referred to in section 301 have been entered in the register maintained under that section. (b) where transactions made in pursuance of such contracts or arrangements are in excess of Rs. 5 lacs in respect of any party, the transactions have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time, where such market rates are available.

6.

In our opinion and according to the information and explanations given to us, the Company has not accepted any new deposits from the public within the purview of Sections 58A and 58AA of the Companies Act, 1956 read with the Companies (Acceptance of Deposits) Rules, 1975. According to the information and explanations given to us, the deposits unpaid as at the year end are in the nature of unclaimed deposits.

7.

In our opinion, the internal audit function carried out during the year by a firm of Chartered Accountants appointed by the management has been commensurate with the size of the Company and the nature of its business.

8.

We have broadly reviewed the books of account maintained by the Company in respect of the fertilisers and insecticides business of the Company pursuant to the Order made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956. We are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of the records with a view to determining whether they are accurate or complete. To the best of our knowledge and according to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records for any other product of the Company.

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RALLIS Fifty-seventh annual report 2004-2005 Rallis India Limited

9.

Statutory and other dues: (a) In our opinion and according to the information and explanation given to us, the Company has generally been regular in depositing undisputed statutory dues relating to Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Service Tax, Customs Duty, Excise duty, Wealth Tax, Investors Education and Protection Fund, Cess and other material statutory dues. (b) According to the information and explanations given to us, no material undisputed amounts payable in respect of income tax, sales tax, wealth tax, service tax, customs duty, excise duty and cess were in arrears, as at 31st March, 2006 for a period of more than six months from the date they became payable. (c) According to the information and explanation given to us; (i)

there were no disputed dues as regards wealth tax and cess; and

(ii) details of disputed amounts of income tax, sales tax, service tax, customs duty, and excise duty which have not been deposited as at the year end, are given below: Name of the Statute

Nature of the dues

Income Tax Laws

Income tax (including interest)

Sales Tax Laws

Sales Tax (including interest and penalty)

Amount (Rs. in lacs)

Period to which the amount relates

Forum where pending

541.07

1993-94, 1994-95, 1996-97, 1998-99, 2000-01, 2001-02

Income Tax Appellate Tribunal

549.14

1996-97, 2002-03

Commissioner of Income Tax (Appeals)

1989-90

High Court

1.18 27.35

Central Excise Laws

Service Tax

1998-99, 1999-00, Joint Commissioner 2000-01 and 2001-02 (Appeals)

345.52

1990-91, 1998-99, 1999-00, 2000-01 and 2001-02

188.44

1983-84, 1992-93, Deputy Commissioner 1994-95, 1995-96, 1996-97, 1997-98, 1998-99, 1999-00, 2000-01, 2001-02, 2002-03 and 2003-04

122.77

1993-94,1996-97, 1998-99, 1999-00 and 2001-02

Assistant Commissioner

366.88

1992-93, 1996-97, 1997-98, 1998-99, 1999-00, 2000-01, 2001-02 and 2002-03

Tribunal

15.89

1990-91, 1997-98 and 1998-99

Commercial Tax Officer

26.92

2001 to 2003

Tribunal

2001-02

Assistant Commissioner

1.26

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Additional Commissioner

Name of the Statute

Nature of the dues

Customs Act

Custom Duty

Central Excise Laws

Excise duty (including Interest and Penalty)

Amount (Rs. in lacs) 144.10

Period to which the amount relates

Forum where pending

1990-91

High Court

81.54

1988 to 1993, 1998 Commissioner to 2000, 2002-03, 2004-05 and 2005-06

62.80

1999-2001

Joint Commissioner

11.29

1999, 2002-03 and 2004-05,

Deputy Commissioner

1986-87, 1990-91, 1994 to 2001 and 2002-05

Tribunal

1,748.05

10. The Company does not have any accumulated losses as at the year end. The Company has not incurred cash losses during the financial year covered by our audit and in immediately precceding year. 11. According to the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions and banks. 12. In our opinion and according to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of clause 4(xii) of the Order are not applicable to the Company. 13. In our opinion and according to the information and explanations given to us, the Company is not a chit fund, nidhi or a mutual benefit society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company. 14. In our opinion and according to the information and explanations given to us, the Company is not a dealer or trader in shares, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the Order are not applicable to the Company. 15. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions. 16. To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were, prima facie, applied by the Company for the purposes for which the loans were obtained, other than temporary deployment pending application. 17. According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, funds raised on short term basis have, prima facie, not been used during the year for long term investment. 18. According to the information and explanations given to us, the Company has not made preferential allotment of shares during the period covered by our audit. 19. According to the information and explanations given to us, there are no amounts outstanding in respect of secured debentures as at the year end. Therefore, the provisions of clause 4(xix) of the Order are not applicable to the Company. 20. During the period covered by our audit, the Company has not raised any money by public issue. 21. To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the year. For S. B. BILLIMORIA & CO. Chartered Accountants

Mumbai, 17th April, 2006

P. R. RAMESH Partner Membership No: 70928

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

BALANCE SHEET AS AT 31ST MARCH, 2006 Rs. lacs Schedule No. SOURCES OF FUNDS SHAREHOLDERS’ FUNDS Capital Reserves and Surplus

As at 31st March, 2006

1 2

As at 31st March, 2005

9,998.48 7,562.53

9,998.48 4,617.81 17,561.01

LOAN FUNDS Secured Loans Unsecured Loans

3 4

3,238.92 8,325.98

TOTAL APPLICATION OF FUNDS FIXED ASSETS Gross Block Less: Depreciation Net Block Capital Work-in-Progress at cost, including capital advances INVESTMENTS DEFERRED TAX ASSETS (Refer Note No.13 in Schedule 19) CURRENT ASSETS, LOANS AND ADVANCES Interest Accrued on Investments Inventories Sundry Debtors Cash and Bank Balances Loans and Advances

LESS: CURRENT LIABILITIES AND PROVISIONS Current Liabilities Provisions

5,606.91 8,246.19 11,564.90

13,853.10

29,125.91

28,469.39

27,938.84 11,799.94 5

6

7 8 9 10

11 12

28,298.54 11,216.05 16,138.90

17,082.49

388.98

1,103.18

16,527.88 4,948.42 336.00

18,185.67 45.75 -

9.66 14,332.10 8,673.35 1,400.75 4,889.07

12,038.63 8,739.77 1,339.09 4,861.27

29,304.93

26,978.76

19,566.99 2,967.89

14,923.04 2,824.15

22,534.88 NET CURRENT ASSETS MISCELLANEOUS EXPENDITURE (to the extent not written off or adjusted)

13

TOTAL Notes to the Accounts

14,616.29

17,747.19 6,770.05

9,231.57

543.56

1,006.40

29,125.91

28,469.39

19

Schedules referred to above form an integral part of the Balance Sheet and should be read in conjunction therewith. In terms of our Report of even date. For S. B. BILLIMORIA & CO. R. GOPALAKRISHNAN Chairman Chartered Accountants RAM S. TARNEJA RUSSI JAL TARAPOREVALA P. R. RAMESH HOMI R. KHUSROKHAN Directors VENKATRAO S. SOHONI Managing Director Partner B. D. BANERJEE E. A. KSHIRSAGAR Mumbai, 17th April, 2006. P. S. MEHERHOMJI Company Secretary

}

44 44

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PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006 Rs. lacs Schedule No. INCOME Sales Other Income

EXPENDITURE Materials Consumed Operating Expenses Interest Charges (net) Depreciation

For the year ended 31st March, 2006

14 15

16 17 18

Less: Expenses Transferred to Fixed Asset

PROFIT BEFORE TAXATION Provision for Taxation - For the year - For prior years no longer required - Deferred Tax Assets - Fringe Benefits Tax

For the year ended 31st March, 2005

59,135.10 3,899.68

54,109.20 5,331.95

63,034.78

59,441.15

37,024.91 19,060.38 841.43 1,675.45

33,420.24 19,566.65 1,448.56 1,611.19

58,602.17 20.89

56,046.64 21.82

58,581.28

56,024.82

4,453.50

3,416.33

(359.14) 336.00 (178.00)

PROFIT AFTER TAXATION Profit and Loss Appropriation Account Balance brought forward from previous year Transfer from Share premium Transfer from Capital Redemption Reserve

(68.38) 1.55 (201.14)

(66.83)

4,252.36

3,349.50

812.66 -

APPROPRIATIONS Transfer to/(from) : Proposed Preference Dividend Tax on Proposed Preference Dividend Proposed Equity Dividend Tax on Proposed Equity Dividend General Reserve Balance carried to Balance Sheet

Basic and Diluted Earnings per share in Rs.(Refer Note No.21 in Schedule 19) Notes to the Accounts 19

-

(7,557.80) 1,182.23 3,500.00

4,682.23

5,065.02

473.93

660.00 99.88 479.38 68.38 425.24 3,332.14

764.59 99.92 119.85 15.66 (1,338.75) 812.66

5,065.02

473.93

29.21

21.72

Schedules referred to above form an integral part of the Profit and Loss Account and should be read in conjunction therewith.

In terms of our Report of even date. For S. B. BILLIMORIA & CO. Chartered Accountants RAM S. TARNEJA RUSSI JAL TARAPOREVALA P. R. RAMESH HOMI R. KHUSROKHAN Partner B. D. BANERJEE E. A. KSHIRSAGAR Mumbai, 17th April, 2006.

R. GOPALAKRISHNAN

}

Directors

Chairman

VENKATRAO S. SOHONI Managing Director

P. S. MEHERHOMJI

Company Secretary

45 45

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2006 Rs. lacs For the year ended 31st March, 2006 A.

For the year ended 31st March, 2005

CASH FLOW FROM OPERATING ACTIVITIES : Net Profit before Taxation

4,453.50

3,416.33

Adjustment for : Income from Investments

(17.32)

(25.30)

Deferred Revenue Expenditure

296.77

300.29

Depreciation

1,675.45

1,611.19

Interest (net)

841.43

1,448.56

18.15

18.15

Supplemental Payments - Provision excess

(27.33)

(26.44)

Voluntary Retirement Compensation - Amortised

293.50

298.84

(1,351.14)

(135.78)

(129.81)

(746.80)

-

40.64

Pension under Voluntary Retirement Scheme - Amortised

(Profit)/Loss on Sale of Assets (net) (includes assets w/off ) (Profit)/Loss on Sale of Investments (net) Provision for Diminution in value of Investments

Operating Profit before working capital changes

1,599.70

2,783.35

6,053.20

6,199.68

Adjustments for : Trade and other Receivables Inventories Trade Payables

705.97

9,771.05

(2,293.47)

(1,605.59)

4,513.40

CASH GENERATED FROM OPERATIONS Direct Taxes paid (Net of refund received) Pension under Voluntary Retirement Scheme Voluntary Retirement Compensation

10,867.71

(1,204.48)

(115.04)

(18.10)

(25.43)

(145.59)

(1,368.17)

4,668.03

(72.59)

7,610.93

(213.06) 10,654.65

CASH FLOW FROM INVESTING ACTIVITIES : Purchase of Fixed Assets Sale of Fixed Assets Purchase of Investments Sale of Investments

(1,619.45)

(2,970.98)

2,952.94

974.14

(7,478.04)

(3.85)

2,705.18

972.73

96.03

122.99

Interest/Dividend received NET CASH USED IN INVESTING ACTIVITIES (B)

46 46

(3,497.43)

8,979.10

NET CASH FROM OPERATING ACTIVITIES (A) B.

2,925.90

Ceps 3\D:\Sales\Sanjay\Rallis AR 05-06\Rallis Accounts 05-06.pmd — VK20-4/26-4/28-4/SBS(3-5)

(3,343.34)

(904.97)

Rs. lacs For the year ended 31st March, 2006 C.

For the year ended 31st March, 2005

CASH FLOW FROM FINANCING ACTIVITIES : Long Term Repaid

(1,628.09)

(7,859.70)

494.25

2,713.24

(1,154.36)

(5,857.21)

(909.25)

(1,688.54)

(1,008.48)

-

-

(17.18)

Long Term Borrowed (Repayment)of / Proceeds from Short Term Borrowings (net) Interest paid Dividend and taxes theron paid Prepayment Premium/Preference Shares issue expenses NET CASH (USED IN)/FROM FINANCING ACTIVITIES (C)

(4,205.93)

(12,709.39)

61.66

(2,959.71)

OPENING CASH AND CASH EQUIVALENTS AS AT 31ST MARCH, 2005

1,339.09

4,298.80

CLOSING CASH AND CASH EQUIVALENTS AS AT 31ST MARCH, 2006

1,400.75

1,339.09

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

NOTES TO THE CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2006 (1) The Cash Flow Statement has been prepared under the ‘Indirect Method’ as set out in the Accounting Standard - 3 on Cash Flow Statements issued by the Institute of Chartered Accountants of India. (2) Repayment of Borrowings includes foreign exchange translation gain/(loss) of (Rs. 48.50) lacs (Previous Year Rs. 70.57 lacs). (3) Previous year’s figures have been regrouped, wherever necessary. In terms of our Report of even date. For S. B. BILLIMORIA & CO.

R. GOPALAKRISHNAN

Chartered Accountants

RAM S. TARNEJA RUSSI JAL TARAPOREVALA

P. R. RAMESH Partner

HOMI R. KHUSROKHAN B. D. BANERJEE E. A. KSHIRSAGAR

}

Directors

Mumbai, 17th April, 2006.

Chairman

VENKATRAO S. SOHONI Managing Director

P. S. MEHERHOMJI

Company Secretary

47 47

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

SCHEDULES 1 TO 19 FORMING PART OF THE ACCOUNTS Rs. lacs As at 31st March, 2006

As at 31st March, 2005

Schedule 1. SHARE CAPITAL :Authorised : 50,000,000 Equity Shares of Rs.10/- each 150,000,000 Cumulative Redeemable Preference Shares of Rs.10/- each

5,000.00 15,000.00

5,000.00 15,000.00

20,000.00

20,000.00

Issued and Subscribed : 11,984,593 Equity Shares of Rs.10/- each

1,198.46

1,198.46

0.02

0.02

Add: Amount paid-up on forfeited shares

88,000,000 7.5% Cumulative Redeemable Preference Shares of Rs.10/- each

1,198.48

1,198.48

8,800.00

8,800.00

9,998.48

9,998.48

Notes: 1) Of the above Equity Shares, 2,604,140 shares of Rs.10/- each were allotted as fully paid-up pursuant to contracts without payment being received in cash and 1,144,700 shares of Rs.10/- each were issued as fully paid up Bonus Shares by capitalisation from General Reserve. 2) 88,000,000 7.5% Cumulative Redeemable Preference Shares of Rs.10/- each, of an aggregate value of Rs.880,000,000/- were allotted on a “Private Placement” basis on 3rd February, 2004. The Preference shares are redeemable at the end of 66 months from the date of allotment. Schedule 2. RESERVES AND SURPLUS :Rs.lacs As at Additions Deductions As at 31st March, 31st March, 2005 2006 Capital Reserve Capital Redemption Reserve Share Premium Debenture Redemption Reserve Capital Subsidy Investment Allowance Reserve Reserve under Sec.45IC of the RBI Act, 1934 General Reserve Less Debit Balance in Profit & Loss Account

Profit & Loss Account

! # *

Additions

Deductions

As at 31st March, 2005

1,680.93 63.58 17.80

-

-

1,680.93 63.58 17.80

1,838.39 3,500.00 1,199.41 625.00 63.58 17.80

-

157.46 ! 3,500.00 # 1,199.41 * 625.00 ! -

1,680.93 63.58 17.80

10.39 2,032.45

425.24

-

10.39 2,457.69

10.39 2,588.74

782.46

1,338.75 #

10.39 2,032.45

-

-

-

-

(2,588.74)

2588.74

-

-

3,805.15

425.24

-

4,230.39

7,254.57

3,371.20

6,820.62

3,805.15

812.66

3,332.14

812.66

4,617.81

7,562.53

4,617.81

Transferred to General Reserve. Transferred to Profit and Loss Account. Comprise of Rs. 17.18 lacs premium on prepayment of Non-Convertible Debentures and Rs. 1,182.23 lacs transferred to Profit and Loss Account.

48 48

As at 31st March, 2004

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Rs. lacs As at As at 31st March, 31st March, 2006 2005 Schedule 3. SECURED LOANS :(Refer Note No. 7 in Schedule 19) Loans from Banks : Term Loans Bank overdrafts and temporary loans Loans from Others

-

1,500.00

2,901.28

4,055.64

337.64

51.27

3,238.92

5,606.91

7,500.00

7,500.00

138.55

85.00

687.43

661.19

8,325.98

8,246.19

(Note : Amount repayable within one year in respect of loans other than bank overdrafts Rs.1,300.74 lacs; Previous Year Rs.1,900.70 lacs) Schedule 4. UNSECURED LOANS :Loans (Other than short term) : From Banks From Others SICOM Loan under Sales Tax Deferral Scheme (Note : Amount repayable within one year Rs. 7,507.55 lacs ; Previous Year Rs. 7.55 lacs)

Schedule 5. FIXED ASSETS : (Refer Note No.4, 7 and 8 in Schedule 19) Rs.lacs Gross Block (at cost) As at 31st March 2005 Intangible Assets Software Goodwill Others Freehold Land Leasehold Land Buildings Plant and Machinery Furniture, Fixtures and Office Equipments Vehicles

Depreciation/Amortisation

Additions Deductions

As at 31st March 2006

As at 31st March 2005

Net Block

For the Deductions As at year during the 31st March year 2006

As at 31st March 2006

As at 31st March 2005

682.07 163.63

-

-

682.07 163.63

168.03 163.63

136.41 -

-

304.44 163.63

377.63 -

514.04 -

665.60 637.40 6,901.92 18,194.01

217.27 1,605.64

17.77 897.32 1,616.44

647.83 637.40 6,221.87 18,183.21

61.42 1,656.88 8,745.18

6.37 183.87 1,262.61

247.78 754.22

67.79 1,592.97 9,253.57

647.83 569.61 4,628.90 8,929.64

665.60 575.98 5,245.04 9,448.83

771.67 282.24

40.70 470.04

140.56 21.26

671.81 731.02

329.62 91.29

33.50 52.69

78.88 10.68

284.24 133.30

387.57 597.72

442.05 190.95

Total

28,298.54

2,333.65

2,693.35

27,938.84

11,216.05

1,675.45

1,091.56

11,799.94

16,138.90

17,082.49

Previous Year

27,249.84

2,460.55

1,411.85

28,298.54

10,177.95

1,611.19

573.09

11,216.05

17,082.49

Notes: 1.

Cost of buildings include cost of 50 shares (Previous year 55 shares) of Rs. 50/- each fully paid and cost of 5 shares (Previous Year 10 Shares) of Rs. 100/each fully paid in respect of ownership flats in 7 (Previous Year 8) Co-operative Societies.

2.

Vehicles include assets taken under hire purchase agreements costing Rs. 511.52 lacs (Previous Year Rs.70.40 lacs) and having written down value aggregating Rs. 471.81 lacs (Previous Year Rs. 64.80 lacs).

3.

Buildings include assets purchased pending ownership registration with the appropriate authority.

49 49

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited Schedule 6. INVESTMENTS :(Cost less Provision for diminution in value) Rs.lacs Nos.

LONG TERM (I) Trade Investments (Quoted - fully paid) : (see footnote 1) Tata Chemicals Ltd. - Equity Shares (sold during the year)

46,326

Nominal As at As at Value 31st March, 31st March, Rs. 2006 2005

10

A

-

11.22

-

11.22

(Unquoted-Fully paid) : Aich Aar Chemicals Pvt. Ltd. - Equity Shares

124,002

10

9.31

9.31

50,000

10

5.00

5.00

Indian Potash Ltd. - Equity Shares (Includes 18,000 Bonus Shares received during the year) 54,000

10

0.90

0.90

6

1,000

-

0.06

Bharuch Enviro Infrastructure Ltd. - Equity Shares

33,250

10

3.33

3.33

Bharuch Eco-Acqua Infrastructure Ltd. - Equity Shares (fully paid during the year)

51,450

10

5.14

3.85

Bharuch Eco-Acqua Infrastructure Ltd. - Equity Shares (acquired during the year)

16,529

10

1.65

-

113

100

-

0.11

113,835

10

11.38

11.38

10,822

10

1.08

1.08

7,000,000

10

700.00

-

57,460

1,000

574.60

-

1,312.39

35.02

1.17

Biotech Consortium India Ltd. - Equity Shares

Bengal Chamber of Commerce & Industry - 6.5% Debentures (Valued at Rs.1 during the year)

Sipcot Industries Common Utilities Ltd. - Equity Shares (Valued at Rs.1 during the year) Bharuch Eco-Acqua Infrastructure Ltd. - Equity Shares Patancheru Enviro-Tech Ltd.-Equity Shares Advinus Therapeutics Pvt. Ltd. - Equity Shares (acquired during the year) 4.25% Advinus Therapeutics Pvt. Ltd. - Non Convertible Debentures (acquired during the year)

B (Unquoted-Partly paid): Bharuch Eco-Acqua Infrastructure Ltd. - Equity Shares (Rs. 2.00 paid up)

58,415

10

1.17

Bharuch Eco-Acqua Infrastructure Ltd. - Equity Shares (Rs. 6.34 paid up)

118,550

10

50 50

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7.52

7.52

C

8.69

8.69

A+B+C

1,321.08

54.93

Schedule 6. INVESTMENTS :- (Contd.) Nominal Value Rs.

7,226

10

-

0.11

400 10,000 504 34 96

10 10 10 10 10

-

0.01 -

560

60

-

-

-

0.12

53.32 -

53.32 -

2,100,000

146.30

146.30

E

199.62

199.62

D+E

199.62

199.74

0.25 3,200.00 436.39

-

F

3,636.64

-

A+B+C+D+E+F

5,157.34

254.67

208.92

208.92

4,948.42

45.75

4,948.42 -

34.41 11.34

4,948.42

45.75

(II) Non-Trade Investments (Quoted-Fully paid) : (see footnote 1) Spartek Ceramics India Ltd. -Equity Shares (Valued at Rs.1 during the year) Nagarjuna Finance Ltd. - Equity Shares (Valued at Rs.1 during the year) Pharmaceuticals Products of India Ltd. - Equity Shares (Rs.1) Ispat Alloys Ltd. - Equity Shares (Valued at Rs.1 during the year) J.K.Cement Ltd. - Equity Shares (Rs.1) Uniscans & Sonics Ltd. - Equity Shares (Rs.1) 14% Spartek Ceramics India Ltd. - Redeemable Partly Convertible Debentures (Rs.1)

D (Unquoted-Fully paid) : Amba Trading Company Ltd. - Equity Shares Associated Inds. (Assam) Ltd. - Equity Shares (Rs.1) Caps Rallis (Private) Ltd. (Nominal value of Zim. $ 2 each) Equity Shares

CURRENT INVESTMENTS (Refer Note No. 24 in Schedule 19) Units of Mutual Funds : (see footnote 2) Tata Floating Rate Short Term Plan Tata Horizon Mutal Funds Tata Floater Fund

Total

Rs.lacs As at As at 31st March, 31st March, 2006 2005

Nos.

130,000 30,000

2,451 32,000,000 4,363,871

Less : Provision for diminution in value Grand Total Aggregate Book Value of Investments : Unquoted - At cost less Provision for diminution in value Quoted - At cost less Provision for diminution in value

10 10

10 10 10

Footnotes : 1. Market value of quoted investments Rs. 0.66 lacs (Previous Year Rs. 71.04 lacs). 2. Net assets value of units of mutual funds Rs. 3,651.88 lacs (Previous Year Rs. Nil).

51 51

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

Rs. lacs As at 31st March, 2006 Schedule 7. INVENTORIES :(Refer Note Nos. 6, 7(b), 17(a) and 17(b) in schedule 19) (Valued at lower of the cost or net realisable value) Stores and Spare Parts Stock-in-trade : Raw Materials and Packing Materials (including in transit of Rs. 741.67 lacs ; Previous Year Rs. 850.77 lacs) Work-in-Progress Finished Goods (including in transit of Rs. Nil ; Previous Year Rs. 23.78 lacs) Schedule 8. SUNDRY DEBTORS :(Considered good, unless otherwise stated) (Refer Note Nos. 6 and 7(b) in schedule 19) (a) Debts outstanding for a period exceeding six months : Secured Unsecured Unsecured - considered doubtful

132.64 1,694.40 5,677.15

(b) Other Debts: Secured Unsecured

359.01 6,487.30

Gross Debtors Less: Provision for doubtful debts

Schedule 9. CASH AND BANK BALANCES :Cash and Cheques in Hand Balances with Scheduled Banks : On Current Accounts On Fixed Deposit Accounts On Fixed Deposit as Margin Money against Bank Guarantees

1197.38 34.99 77.13

As at 31st March, 2005

124.29

133.58

3,638.95

4,235.89

862.06 9,706.80

514.90 7,154.26

14,332.10

12,038.63

7,504.19

80.41 3,156.04 5,167.80

8,404.25

6,846.31

160.67 5,342.65

5,503.32

14,350.50 5,677.15

13,907.57 5,167.80

8,673.35

8,739.77

91.25

14.05

1,309.50

1207.28 32.07 85.69

1,400.75 Schedule 10. LOANS AND ADVANCES :(Unsecured, considered good unless otherwise stated) (Refer Note Nos. 6 and 7(b) in schedule 19) Advances recoverable in cash or in kind or for value to be received Advances/Deposits considered doubtful Less: Provision for doubtful advances/deposits Balances with Customs, Port Trust and Central Excise Advance Income Tax (net of provision) Advance Fringe Benefit Tax (net of provision) Schedule 11. CURRENT LIABILITIES :Acceptances Sundry Creditors Dues to Small Scale Industrial Undertakings (Refer Note No. 5 in schedule 19) Other Creditors

52 52

1,339.09

3,042.78 4,035.53 4,035.53

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1,325.04

3,850.00 4,031.98 4,031.98

1,056.44 782.35 7.50

888.76 122.51 -

4,889.07

4,861.27

2,058.50

1,416.10

281.16

266.96

13,701.55

10,080.13

Rs.lacs As at 31st March, 2006 Schedule 11. CURRENT LIABILITIES :- (contd.) Liability towards Investor Education and Protection Fund : Unpaid Dividends Unpaid Interest on Debentures Fixed Deposits Interest on Fixed Deposits

12.65 2.51 1.03 -

As at 31st March, 2005

14.52 4.21 3.37 1.26

Customers’ Security deposits, Credit balances and Advance against supplies and services to be rendered Interest accrued but not due on loans Other Liabilities

Schedule 12. PROVISIONS :Equity Dividend Tax on Equity Dividend Preference Dividend Tax on Preference Dividend Provision for Leave Encashment Provision for Pension under Voluntary Retirement Schemes Provision for Supplemental Payments on Retirement

Schedule 13. MISCELLANEOUS EXPENDITURE :(to the extent not written off or adjusted) Pension under Voluntary Retirement Schemes Voluntary Retirement Compensation Deferred Revenue Expenditure : Consultancy Land Development Deferred Supplemental Payments

16.19

23.36

3,287.37 22.42 199.80

2,923.00 1.87 211.62

19,566.99

14,923.04

479.38 67.23 660.00 92.57 160.47 20.72 1,487.52

119.85 15.66 764.59 99.92 270.47 38.81 1,514.85

2,967.89

2,824.15

18.15 383.01

36.31 530.92

54.60 87.80

260.94 2.63 175.60

543.56

1,006.40

Schedule 14. SALES :(Refer Note Nos.12, 17(a) and 17(b) in schedule 19) For the year ended 31st March, 2006 Unit

Quantity

Pesticides

Tonnes

18,670

Plant Growth Nutrients

Kl. Ltr Tonnes

9,094 3,154

Seeds Tanning Materials

Kl. Ltr Tonnes Tonnes

1,414 750

Less: Excise Duty

Amount

} }

For the year ended 31st March, 2005 Quantity 13,567

62,912.44 9,358 6,950 1,333.71 463.95 565.17

44 1,260 1,042

Amount

} }

57,496.52

1,467.47 494.45 891.98

65,275.27 6,140.17

60,350,42 6,241.22

59,135.10

54,109.20

53 53

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

Rs.lacs For the year ended 31st March, 2006 Schedule 15. OTHER INCOME :From Operations Technical Services Excise and Duty Drawback Claims Scrap and Sundry Sales Commission Cash Discount Sundry Income Surrender of Rights Others Profit/(Loss) on Sale of Investment (net) (Net of Security Transaction Tax of Rs. Nil lacs ; Previous year Rs. 0.64 lacs) Profit/(Loss) on Sale of Fixed Assets (net) Rent Income from Long Term Investments : Dividend from Trade Investments Interest from Trade Investments Dividend from Other Investments

Schedule 16. MATERIALS CONSUMED :(Refer Note Nos. 16, 17(a), 17(b) and 20 in schedule 19) Stocks at the beginning of the year : Raw Materials (see footnote 2) Finished Goods Work-in-Progress

For the year ended 31st March, 2005

90.00 260.50 808.92 124.44 175.57 920.41 -

702.36 339.17 499.48 400.44 179.97 1,338.77 886.29

2,379.84

4,346.48

129.81

746.80

1,351.14 21.57

191.43 21.94

3.66 9.66 4.00

11.89 13.41 17.32

25.30

1,519.84

985.47

3,899.68

5,331.95

4,235.89 7,154.26 514.90

3,424.64 6,174.31 705.80 11,905.05

Add: Purchases : Raw Materials (see footnote 2) Finished Goods

28,684.66 10,643.01

10,304.75 27,280.44 7,740.10

39,327.67 Less: Stocks at the end of the year : Raw Materials (see footnote 2) Finished Goods Work-in-Progress

3,638.95 9,706.80 862.06

Footnotes : 1. Consumption of Raw materials - Rs.29,281.60 lacs (Previous Year Rs. 26,469.19 lacs). 2. Amounts shown against Raw materials include figures of Packing materials

54 54

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35,020.54 4,235.89 7,154.26 514.90

14,207.81

11,905.05

37,024.91

33,420.24

Rs.lacs

Schedule 17. OPERATING EXPENSES :(Refer Note No. 9 and 12 in schedule 19) Personnel Cost : Salaries, wages, commission, bonus etc. Voluntary Retirement Compensation Amortised Gratuity Staff Provident and Superannuation Funds Staff Welfare Freight, Handling and Packing Processing Travelling Power and Fuel Brand Equity Contribution Repairs : Repairs to machinery Repairs to buildings Other repairs

For the year ended 31st March, 2006

For the year ended 31st March, 2005

3,708.85 311.65 288.64 316.01 540.00

3,696.81 316.99 288.90 372.33 605.98 5,165.15 1,836.85 660.78 551.56 2,213.90 80.23

182.45 57.05 223.22

Stores and Spares Consumed Rates and Taxes Cash Discount Commission Insurance Rent Bank Charges Directors’ Fees Deferred Expenses written-off Bad Debts Provision for Doubtful Debts/Advances Selling expenses Legal and Professional expenses Other Expenses

Schedule 18. INTEREST CHARGE :Interest expenses : Debentures Loans for fixed term Other interest

5,281.01 1,823.11 518.49 585.67 2,092.76 75.43 278.04 107.96 240.49

462.72 297.76 177.76 891.08 243.73 128.38 551.04 667.22 9.20 296.77 816.48 765.67 407.28 2,836.82

626.49 307.61 232.04 1,254.68 177.14 112.42 659.83 499.77 3.35 300.29 42.99 584.05 1,095.93 514.74 2,778.85

19,060.38

19,566.65

357.87 571.93

20.86 868.59 656.80 929.80

Less Interest income : Other interest (Amount is gross of TDS of Rs. 15.52 lacs ; Previous Year Rs. 14.78 lacs)

88.37

1,546.25 97.69

88.37

97.69

841.43

1,448.56

55 55

Ceps 3\D:\Sales\Sanjay\Rallis AR 05-06\Rallis Accounts 05-06.pmd — VK20-4/26-4/28-4/SBS(3-5)

RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

Schedule 19. NOTES TO THE ACCOUNTS: 1.

Significant Accounting Policies: (a) Basis of Accounting The financial statements are prepared under the historical cost convention, on accrual basis, in accordance with the requirements of the Companies Act, 1956, and comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the said Act. (b) Fixed Assets and Depreciation (i)

Fixed assets are stated at the cost of acquisition less accumulated depreciation and impairment losses, if any.

(ii) Depreciation has been calculated on all the assets on the straight line method at the rates and in the manner specified in Schedule XIV of the Companies Act, 1956. Assets costing less than Rs.5,000 are fully depreciated in the year of purchase. (iii) The premium paid, being the cost of leasehold land, is amortised over the lease period. (iv) Interest and other financing costs relating to borrowed funds attributable to the construction or acquisition of fixed assets have been capitalised to the extent they relate to the period upto which the asset was ready to be put to use. (c) Investments Long term investments are valued at the cost, less provision for permanent diminution in value, if any. Current investments are valued at the lower of the cost and market price. (d) Inventory • Stores and spare parts are valued at the lower of the cost or net realisable value. • Raw materials are valued at the lower of the cost or net realisable value. • Work in progress is valued at the lower of the cost or net realisable value. • Finished stocks are valued at the lower of the cost or net realisable value except for by-products which are valued at the net realisable value. Cost is determined as follows:-

• • • •

Stores and spare parts - Moving Average Price Raw materials - Moving Average Price Work in Progress – Aggregate of raw material and production overheads upto the stage of completion Finished goods : • Manufactured – Aggregate of material cost, production overheads and excise duty cost thereon • Traded – Moving Average Price

(e) Sales Sales are accounted for on despatch of goods to the customers which coincides with the transfer of risk and rewards and are net of sales returns. (f) Foreign Currency Transactions Foreign currency transactions are recorded at the exchange rate prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are stated at the exchange rates prevailing at the yearend. The loss/gain on such translation is accounted for in the Profit and Loss Account. Premium on forward exchange contract is amortised over the period of the contract. Exchange difference in such contracts are recognised in the Profit and Loss Account. Profit or loss arising on cancellation or renewal of such contract are also recoginsed as income or expense for the period. The difference in translation of monetary assets and liabilities and realised gains and losses on foreign exchange transactions other than those relating to fixed assets are recognised in the Profit and Loss Account . Exchange differences (including arising out of forward exchange contracts) in respect of liabilities incurred to acquire fixed assets from outside India are adjusted to the carrying amount of such fixed assets.

56 56 — CEPS 4\E:\SALES\SANJAY\RALLIS AR 05-06\RALLIS NOTES 2006.PMD — skg-20-4/NSS/24/4/vk26-4/28-4/sbs(3-5)/NSS/3/5

(g) Intangible Assets a) Expenditure on Research & Development Expenditure on research or on the research phase of an internal project, other than on tangible assets, is recognised as an expense when it is incurred. Intangible asset arising from development or on the development phase of an internal project is recognised, if and only if all of the following are demonstrated in respect of the resultant intangible asset :(a) the technical feasibility of completion for use or sale; (b) the intention to use or sell; (c) the ability to use or sell; (d) the generation of probable future economic benefits; (e) the availability of adequate technical, financial and other resources to complete the development and (f ) the ability to measure the attributable expenditure reliably during the development. Tangible assets used for research and development are capitalised. b) Other Intangible Assets Other Intangible assets are recognised if :the assets are identifiable, non-monetary assets; the asset are resources controlled by the Company as a result of past events; the assets are held for use in the production or supply of goods or services, for rental to others or for administrative purposes; the cost of such assets can be reasonably measured and future economic benefits are expected to flow to the Company from these assets. Intangible assets are depreciated over the estimated useful lives of these assets. The useful life of an intangible asset is reviewed at each balance sheet date. (h) Retirement Benefits Annual contributions for Provident and Superannuation Funds (based on a percentage of salary) and Gratuity Fund (based on an actuarial valuation as at the year end) are charged to Profit & Loss Account. Provisions for encashment of unavailed leave standing to the credit of the employees as at the year end and supplemental payments payable on retirement of certain eligible employees, determined on an actuarial valuation based on the year end, has been made. (i)

Deferred Revenue Expenditure (i)

The cost of Voluntary Retirement Schemes is amortised over a period of five years.

(ii) Professional and consultancy expenses incurred towards restructuring of business, land development expenses incurred upto 31st March, 2003 are deferred over a period of five years from the year in which they were incurred. Expenditure incurred on effluent treatment charges upto 31st March, 2003, is deferred over a period of three years from the year in which they were incurred. Expenditure incurred from 1st April, 2003 in these heads are charged to Profit and Loss Account in the year they are incurred. (j)

Taxes on Income Current tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax is recognised 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. Where there is an unabsorbed depreciation or carry forward loss, deferred tax assets are recognised only if there is virtual certainty of realisation of such assets. Other deferred tax assets are recognised only to the extent there is reasonable certainty of realisation in future.

(k) Segment Reporting The accounting policies adopted for segment reporting are in line with the accounting policy of the Company. Segment Revenue, Segment Expenses, Segment Assets and Segment Liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue, Expenses, Assets and

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

Liabilities which relate to the enterprise as a whole and are not allocable to segments on reasonable bases, have been included under “Unallocated Revenue/Expenses/Assets /Liabilities”. Accounting of inter-segment revenue is based on the standard transfer price as decided at the beginning of the year. (l)

Impairment of assets The carrying values of assets of the cash-generating units at each balance sheet date are reviewed for impairment. If any indication of such impairment exists, the recoverable amount of those assets are estimated and impairment loss is recognised, if the carrying amount of those assets exceeds their recoverable amount. The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the estimated future cash flows to their present value based on appropriate discount factor.

(m) Provisions & Contingencies A provision is recognised when the Company has a present legal or constructive obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Contingent liabilities are not recognised. (n) Derivatives The fair value of derivative contracts is not ascertained as these instruments are not held for trade. Income accruing during the period by way of interest on such instruments is set off against corresponding interest costs of the underlying or booked as other income where the underlying does not bear interest cost. The gain or loss arising from translation of foreign currency exposure irrespective of underlying principal, as at the end of the period, is recognised as part of income or loss for the period. 2.

Contingent liabilities: -

(a) Demand contested by the Company # Sale tax Excise duty Customs duty Service tax Property cases Labour cases Other cases Number of cases where amount is not quantifiable 27 Nos ; (Previous Year 32 Nos)

Rs. Lacs As at 31st March, 2006

As at 31st March, 2005

1,415.25 1,936.52 144.10 28.54 208.84 89.73 517.34

1,534.39 1,370.56 144.10 14.53 137.64 71.80 712.78

(b) Bills discounted # 3,491.27 3,325.75 (c) Uncalled partly paid shares held as Investments 9.01 10.30 (d) Guarantees aggregating to Rs. 860.06 lacs (Previous Year Rs. 658.52 lacs) have been issued by banks at the request of the Company in favour of third parties. # (e) First Loss default guarantee amounting to Rs. 6,741.71 lacs (Previous Year Rs. 360.00 lacs ) has been given in respect of purchase of receivables by IDBI Bank, Citibank and UTI Bank. # # 3.

The Company does not expect any liability to devolve in respect of these exposures and therefore no provision has been made in respect thereof.

Estimated amount of contracts remaining to be executed on capital account Rs. 344.97 lacs (Previous Year Rs. 221.28 lacs) (net of advances paid Rs. 83.13 lacs ; Previous Year Rs. 25.28 lacs).

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4.

Fixed assets include Rs.1,251.30 lacs (Previous Year Rs. 1,401.78 lacs) representing the book value of assets held for disposal. In the opinion of the Management, these assets have a value on realisation not lower than the book value. This opinion has been relied upon by the Auditors.

5.

The names of the small scale industrial undertakings to whom the Company owes amounts outstanding for more than 30 days are : A & B Seals, Ace Polybond Pvt Ltd., Agarwal Containers Ltd., Agarwal Packaging Pvt. Ltd., Ashapura Chinaclay Co, Bhanu Packaging, Bharat Products Ltd., Bombay Ammonia & Chemical Company, Chamunda Engg. Works, Chemofarbe Industries, Crystal Ice Factory, Eno Pack Seals (India), G. R. Enterprises, Hyderabad Ammonia & Chemicals Pvt. Ltd., Impact Metals Ltd., Jitendra Paper Industries, Madhuban Drums & Barrels , Maruti Containers, Maharashtra Metal Works Pvt. Ltd., Mullackal Polymers, Paramount Graphics, Plasticon Industries, Prerna Ammonia & Chemicals Pvt. Ltd., Raj Print-N-Stick, Shree Bharati Pulp & Paper, Shree Gajanan Paper Cone Industries, Sai Packages, Standard Surfactants, Tropical Agro System Pvt. Ltd., Tytan Organics Pvt. Ltd., Verma Gases India Pvt. Ltd. and Western India Chemicals. The above information and that given in Schedule 11 – “Current Liabilities” 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.

6.

The charge in favour of the Company’s bankers by way of hypothecation of stocks, book debts and receivables, is entered to guarantees executed by bankers in the normal course of business.

7.

Secured Loans :(a) There were no secured term loans from banks as at the year end (Previous Year Rs. 1500.00 lacs secured by way of subservient charge on the Company’s movable fixed assets). (b) Bank overdrafts and temporary loans have been secured by a first charge by way of hypothecation of stocks, book debts and receivables . (c) Loans from others on account of purchase of vehicles have been secured by way of hypothecation of vehicles.

8.

Details in respect of non cancelable operating leases as at 31st March ’06 are as follows : Rs. lacs 31.03.2006

31.03.2005

2,024.64

2024.64

Within 1 year

310.63

310.63

Over 1 year but less than 5 years

560.73

871.37

-

-

310.63

411.81

Total Leased Assets Future Lease Rentals

More than 5 years Amount charged to Profit & Loss Account

The Company has acquired certain assets under finance lease for an aggregate fair value of Rs.511.52 lacs (Previous Year Rs.70.40 lacs). The total minimum lease payments (MLP) in respect thereof and present value of future lease payments, discounted at the interest rates implicit in the lease are ; Rs. lacs 31.03.2006

31.03.2005

MLP

MLP

Principal

Interest

Total

Principal

Interest

Total

Within 1 year

164.45

19.67

184.12

23.69

2.80

26.49

Over 1 year but less than 5 years

173.11

8.23

181.34

27.58

1.12

28.70

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

9.

Other Expenses include : Rs. lacs Auditors’ Remuneration (i) Audit fees (Service Tax Rs. 5.75 lacs ; Previous Year Rs. 4.79 lacs) (ii) Tax Audit (Service Tax Rs.1.22 lacs ; Previous Year Rs.1.33 lacs) (iii) Fees for company law matters (Service Tax Rs.0.03 lacs; Previous Year Rs. 0.03 lacs) (iv) Fees for other services (Service Tax Rs. 4.24 lacs; Previous Year Rs. 3.18 lacs) (v) Reimbursement of out-of-pocket expenses

2005-06 46.98 10.00

2004-05 46.98 13.00

0.25 41.40 1.37

0.25 31.25 1.57

Service tax which is being claimed for set-off as input credit, has not been included above. 10. The Company has incurred the following expenses on research and development in Government recognised laboratories owned by the Company : Rs. lacs 2005-06 15.37 799.31 814.68

On tangible fixed assets On items which have been expensed during the year * Total

2004-05 89.18 894.28 983.46

* Includes amount of Rs. 528.85 lacs paid to external research agency 11. (a) Computation of Net Profit in accordance with Section 198 of the Companies Act, 1956 : Rs. lacs 2005-06 Profit for the year before taxation Add Provision for doubtful debts and advances Provision for diminution in the value of investments Managerial remuneration

2004-05

4,453.50 816.48 47.47

3,416.33 584.05 40.64 31.38

863.95 5,317.45

Less: Brought forward loss from previous years Capital profit on sale of fixed assets Doubtful debts and advances set off against Provisions Net Profit/(Loss) under Sec.198 of the Companies Act, 1956

11,004.90 396.97 205.65

11,607.52

656.07 4,072.40

14,701.76 310.37 65.17

(6,290.07)

15,077.30 (11,004.90)

(b) Directors’ remuneration : Rs. lacs 2005-06 Salary Contribution to Provident & Superannuation fund Other benefits in cash and kind *

28.76 9.51

2004-05 22.37 5.66

38.27 28.03 9.20 3.35 47.47 31.38 * Excludes contribution to Gratuity Fund since the same is ascertained for the company as a whole on actuarial valuation. Directors’ fees

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12. Sundry income includes net exchange gain of Rs. Nil lacs (Previous Year Rs. 369.23 lacs) and Other Expenses includes net exchange loss of Rs.143.28 lacs (Previous Year Rs. Nil lacs) 13. Deferred tax assets and liabilities : Rs. lacs As at 31st March, 2006

As at 31st March, 2005

3,269.29

3,096.65

-

400.25

1.06

169.66

3,270.35

3,666.56

2,886.42

3,518.75

47.93

147.81

2,934.35

3,666.56

336.00

-

Deferred Tax Assets On provision against debts and advances On unabsorbed depreciation On other items Total Deferred Tax Liabilities On fiscal allowance on fixed assets On deferred expenditure Total Net Deferred tax Asset Recoginsed

The Company also has deferred tax assets aggregating Rs. 3,603.14 lacs (Previous Year Rs. 5,482.15 lacs) on account of carried forward business losses and unabsorbed depreciation which have not been recognised on grounds of prudence. 14. Segment Information : a.

Primary Segment Information Particulars

Business Segments

Eliminations

Consolidated

Pesticides

Others

Total

58,801.73

2,448.69

61,250.42

54,267.83

3,734.47

58,002.30

-

-

-

-

-

-

-

-

58,801.73

2,448.69

-

61,250.42

54,267.83

3,734.47

-

58,002.30

REVENUE Total External Revenue

Total Inter-segment Revenue

Segment Revenue

Unallocable Revenue

1,784.36 1,438.85

Total Revenue (A)

63,034.78 59,441.15

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

Particulars

RESULT Segment Result (B)

Business Segments

Eliminations

Consolidated

Pesticides

Others

Total

7,210.76 7,884.27

490.44 (54.06)

7,701.20 7,830.21 (2,406.27) (2,965.32) 5,294.93 4,864.89 (929.80) (1,546.25) 88.37 97.69 (201.14) (66.83)

Unallocable Expenses (net of unallocable income) Operating Profit/(Loss) Interest Expense Interest Income Taxation Profit/(Loss) after taxation

4,252.36 3,349.50

OTHER INFORMATION ASSETS Segment Assets (C)

37,536.09 35,186.38

2,194.53 4,861.41

Unallocated Assets Total Assets excluding investments

39,730.62 40,047.79 6,102.19 5,116.64 45,832.81 45,164.43

LIABILITIES Segment Liabilities (D)

17,781.38 12,019.84

1,230.88 1,087.27

Unallocated Liabilities Total Current Liabilities

19,012.26 13,107.11 554.73 1,815.93 19,566.99 14,923.04

CAPITAL EXPENDITURE Total Cost incurred during the year to acquire Segment assets (E)

1,530.33 2,555.75

7.33 68.65

Unallocated Capital Expenditure Total Cost incurred during the year to acquire assets

1,537.66 2,624.40 81.79 346.58 1,619.45 2,970.98

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Particulars

DEPRECIATION Segment Depreciation (F)

Business Segments

Eliminations

Consolidated

Pesticides

Others

Total

1,341.53 1,137.71

5.56 135.31

1,347.09 1,273.02 328.36 338.17

Unallocated Depreciation Total Depreciation

1,675.45 1,611.19

NON CASH EXPENSES Segment Non Cash expenses other than Depreciation/ Amortisation (G)

-

-

608.42 657.92 608.42 657.92

Unallocable Non Cash expenses Total Non Cash expenses

Figures in italics relate to the previous year. Note : The Company has disclosed Business Segment as the primary segment. Segments have been identified taking into account the nature of products, differing risks and returns, the organisational structure and internal reporting system. The Company’s operations predominantly relate to Manufacture and Trading of Pesticides . Other business segments comprise of Plant Growth Nutrients, Fine Chemicals and Seeds. (b) Secondary Segment Information:Particulars (i) REVENUE Total External Revenue

India

Outside India

Consolidated Total

45,933.36 44,524.38

15,317.06 13,477.92

61,250.42 58,002.30 1,784.36 1,438.85 63,034.78 59,441.15

37,601.83 38,641.35

2,128.79 1,406.44

39,730.62 40,047.79 6,102.19 5,116.64 45,832.81 45,164.43

Unallocable Revenue Total Revenue (ii) ASSETS Segment Assets Unallocated Assets Total Assets excluding investments

Figures in italics relate to the previous year.

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

(iii) All the tangible and intangible fixed assets of the Company are situated in India and hence for the total cost incurred during the year, geographical segment-wise is not applicable.

Note : Rs. lacs 2005-06

2004-05

4,948.42

45.75

Deferred Tax Assets

336.00

-

Miscellaneous Expenditure

543.56

1,006.40

5,827.98

1,052.15

Secured Loans

3,238.92

5,606.91

Unsecured Loans

8,325.98

8,246.19

Provisions

2,967.89

2,824.15

14,532.79

16,677.25

(1) Total Unallocable Assets exclude: Investments

(2) Total Unallocable Liabilities exclude:

15. Related Party Disclosures: Disclosure as required by Accounting Standard 18 (AS – 18) “Related Party Disclosures” issued by The Institute of Chartered Accountants of India is as follows: (a) Names of the related parties and description of relationship: (i)

Promoters and other shareholders:

Tata Tea Limited Tata Sons Limited Tata Chemicals Limited Tata Investment Corporation Limited Ewart Investments Limited Niskalp Investments & Trading Co. Limited (upto 30th December, 2005)

(ii) Other related parties: Associates

Akola Chemicals Limited * Amba Trading & Manufacturing Co. Limited

(iii) Key Management Personnel:

Dr.V.S. Sohoni – Managing Director

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(b) Details of Transactions : Nature of Transactions

Rs. lacs Associates

Tata Sons/ Shareholders

Key Management Personnel

Total

126.42

247.13 81.71

-

247.13 208.13

17.56

1,223.47 570.80

-

1,223.47 588.36

Sales of Investments

-

118.32 -

-

118.32 -

Rendering of Services

-

1.33

-

1.33

43.87

82.00

-

125.87

-

108.41 86.33

-

108.41 86.33

2.40

3.01 3.19

-

3.01 5.59

Dividend Proposed (Equity)

-

217.90 54.82

-

217.90 54.82

Dividend Proposed (Preference)

-

277.50 321.47

-

277.50 321.47

Remuneration paid

-

-

38.27 28.03

38.27 28.03

97.10

193.13 154.54

-

193.13 251.64

120.04

147.01 252.82

-

147.01 372.86

Purchase of Goods

Sales of Goods

Receiving of Services

Other Expenses

Dividend Income

Debit Balance Outstanding as on 31.3.2006 -

Other Receivables

Credit Balance Outstanding as on 31.3.2006 -

Other Payables

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RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

Transactions included in (b) above which are in excess of 10% of the total related party transactions of the same type are given below : Nature of Transactions

Associates *

Promoters/Shareholders

Akola Chemicals Ltd.

Tata Chemicals Ltd.

Tata Tea Ltd.

Tata Sons Ltd.

-

247.13

-

-

Purchase of Goods

126.41

81.71

-

-

-

1,223.47

-

-

-

518.87

-

-

-

-

-

118.32

-

-

-

-

-

-

-

-

-

1.33

-

-

Sales of Goods Sales of Investments Rendering of Services Receiving of Services

-

-

-

-

43.87

-

-

82.00

-

-

-

108.41

-

-

-

86.13

Other Expenses Dividend Income

-

3.01

-

-

2.40

2.55

0.64

-

Dividend Proposed (Equity) Dividend Proposed (Preference)

-

45.06

117.55

36.03

-

11.27

29.39

9.01

-

187.50 217.21

90.00 104.26

-

Figures in italics relate to the previous year. * Ceases to be an associate effective from 15th March, 2005. 16.

Quantitative and value analysis of Materials consumed :Units

Active Ingredient for pesticides

2005-06 Quantity

Value Rs. lacs

Quantity

Value Rs. lacs

3,674

7,007.64

3,227

7,029.48

107

468.33

-

-

43,422

18,681.73

38,952

16,446.98

1,457

358.85

1,616

406.59

*

2,765.05

*

2,586.14

Tonnes KL

Other Chemicals

2004-05

Tonnes KL

Others

29,281.60 * Comprise dissimilar items which cannot be practically aggregated

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26,469.19

17. (a) Licensed/installed capacities, production and stocks of goods manufactured :Units

a. Pesticides Solids

Tonnes

22,825

Liquids Solids

15,143

1,217

3,582.81 1,978.95

KL

17,600

8,662

1,023

Tonnes

22,825

13,364

1,016

KL

17,600

8,731

1,310

Tonnes

N.A.

728

440

Tonnes

N.A.

570

391

Liquids b. Plant Growth Nutrients

Installed Production Opening Stocks Capacity Quantity Quantity Value Rs. lacs

Total

}

Closing Stocks Quantity Value Rs. lacs 2,226

4,754.65

963

2,041.43

1,217

3,582.81

1,023

1,978.95

82.06

454

114.56

164.00

440

82.06

5,115.80

5,643.82

6,910.64

5,279.80

5,643.82

Notes : (a) Licensed Capacity – Delicensed vide Gazette Notification No. S.O.477 (E) dated 25.07.91. (b) Figures in italics are in respect of the previous year. (c) Production figures are net of free issues, free replacements made against breakage, time expiry stocks, sample issues and captive consumption. (d) N.A. = Not Applicable. (b) Purchase & stock of goods traded :Units

a. Pesticides

b. Plant Growth Nutrients

c. Seeds d. Tanning Materials Total

Purchases Quantity Value Rs. lacs

Opening Stocks Quantity Value Rs. lacs

Closing Stocks Quantity Value Rs. lacs

Tonnes

4,782

7,521.35

38

462.59

284

679.88

KL

473

2,150.93

99

501.96

199

1,813.22

Tonnes

442

2,290.01

-

-

38

462.59

KL

336

3,928.19

103

158.96

99

501.96

Tonnes

2,181

348.05

1,382

189.72

1,123

150.23

6.19

KL

(32)

-

32

Tonnes

5,345

598.29

2,466

KL

-

-

76

32

6.19

Tonnes

590

188.10

1,775

222.33

952

92.69

Tonnes

811

184.09

2,224

237.29

1,775

222.33

Tonnes

692

434.58

193

127.65

135

60.14

Tonnes

1,053

739.52

182

193.91

193

}

304.35

-

-

1,382

189.72

127.65

10,643.01

1,510.44

2,796.16

7,740.10

894.51

1,510.44

Notes : (a) Figures in italics are in respect of the previous year. (b) Purchases are net of free issues, free replacements made against breakage, time expired stocks and sample issues.

67 67 — CEPS 4\E:\SALES\SANJAY\RALLIS AR 05-06\RALLIS NOTES 2006.PMD — skg-20-4/NSS/24/4/vk26-4/28-4/sbs(3-5)/NSS/3/5

RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

18. Value of imports on C.I.F basis :Rs. lacs 2005-06

2004-05

10,155.14

8,494.80

-

-

Capital Goods

265.66

110.07

Trading goods

570.79

777.50

10,991.59

9,382.37

Raw materials Components, stores and spare parts

19. Expenditure in foreign currency :Rs. lacs 2005-06

2004-05

Royalty

-

10.94

Interest

50.00

167.06

-

1.41

Professional & Consultancy Charges Other Matters

343.20

258.46

393.20

437.87

20. Value of Imported and Indigenous Materials consumed :2005-06 a.

Rs. lacs

%

Rs. lacs

%

Imported (Including Customs Duty)

11,763.00

40%

9,699.24

37%

Indigenous

17,518.60

60%

16,769.95

63%

29,281.60

100%

26,469.19

100%

-

-

-

-

Raw Material

Total b.

2004-05

Spare Parts & Components Imported (Including Customs Duty) Indigenous

297.76

100%

307.61

100%

Total

297.76

100%

307.61

100%

2005-06 Rs.lacs

2004-05 Rs. lacs

4,252.36

3,349.50

752.57

746.19

3,499.79

2,603.31

11,984,593

11,984,593

21. Earnings Per Share

i)

Net Profit After Tax Less :- Preference dividend including tax thereon Profit attributable to Equity Shareholders

ii)

Weighted average No. of Equity Shares for Basic/ Diluted EPS (Nos)

iii)

Nominal value of Equity Per Share (in Rs.)

iv)

Basic/Diluted Earning Per share (in Rs.)

68 68 — CEPS 4\E:\SALES\SANJAY\RALLIS AR 05-06\RALLIS NOTES 2006.PMD — skg-20-4/NSS/24/4/vk26-4/28-4/sbs(3-5)/NSS/3/5

10

10

29.21

21.72

22. Earnings in foreign exchange :Rs. lacs 2005-06

2004-05

14,771.26

11,952.93

30.06

160.30

Commission

119.34

121.85

Freight, insurance and other matters

396.40

356.55

Export of goods on FOB basis Technical Services

Surrender of Rights

-

886.29

15,317.06

13,477.92

23 The Company has transferred its Knowledge Services Business, which includes the Research and Development Center at Bangalore, as a going concern to Advinus Therapeutics Pvt. Ltd. with effect from 1st May, 2005, for a consideration of Rs. 26 crores through a Business and Assets Transfer Agreement dated 8th August, 2005 and a Conveyance Deed dated 30th September, 2005. Profit from the above sale is included in Profit/(Loss) on Sale of Fixed Assets under Other Income. 24. Statement of purchases & sales of units of mutual funds :Rs. lacs Particulars of Investments

No of Units

Cost

Tata Short Term Bond Fund - Growth Plan

4,136,128

500.00

Prudential ICICI Liquid Plan Investment Plus - Growth

2,977,555

500.00

Tata Floating Rate Short Term Investment Plus - Growth

9,480,627

999.74

Tata Floater Fund - Growth

5,641,129

564.11

25. Derivatives :In order to minimise financing costs and to manage interest rate exposure, the Compnay has entered into derivative contracts. The category-wise quantitative data of derivative instruments that were outstanding as at the balance sheet date is given below : i.

ii.

Interest rate swap •

The Company has entered into 1 contract whereby its interest basis on borrowings of aggregating Rs. 7,500 lacs has been converted from fixed to variable rate.

•

The Company has also entered into a swap contract to receive interest on differential on conversion of Preference Capital Rupee exposure into a foreign currency exposure through a currency swap.

Currency swaps •

The Company has entered into 3 Swap contracts converting the underlying exposure in Rupees into Foreign Currency- Principal amount Rs.16,300 lacs (including Preference Capital referred to above). The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below:

a.

Amounts receivable in foreign currency on account of the following: •

Export of goods and services Rs. 1,653.07 lacs (US$ 1.88 million; AU$ 1.66 million and € 0.54 million); and

•

Sale of rights Rs. 314.78 lacs (US$ 0.71 million).

69 69 — CEPS 4\E:\SALES\SANJAY\RALLIS AR 05-06\RALLIS NOTES 2006.PMD — skg-20-4/NSS/24/4/vk26-4/28-4/sbs(3-5)/NSS/3/5

RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

b.

Amounts payable in foreign currency on account of the following: •

Buyers’ credit – Rs. 636.29 lacs (US$ 1.43 million)

•

Import of goods and services – Rs. 966.57 lacs (US$ 1.68 million; AU$ 0.22 million and J¥ 38.72 million);

•

Customer advances – Rs. 239.76 lacs (US$ 0.54 million);

•

Taxes – Rs. 47.43 lacs (AU$ 0.15 million); and

•

Derivatives – Rs. 16,184.92 lacs (CHF 25.72 million and J¥ 1,856.46 million). The above disclosures have been made consequent to an announcement by the Institute of Chartered Accountants of India in December, 2005, which is applicable to financial periods ending on or after 31st March, 2006. Therefore, figures for the previous year have not been disclosed.

26. Remittances in foreign currencies on account of dividends :Year to which they relate

2005-06

2004-05

2004-05

-

1

-

5,00,000

-

5.00

-

Number of non-resident shareholders Number of shares of Rs. 10/- each Amount remitted (Rs. lacs)

27. Previous year’s figures have been regrouped / restated to conform with this year’s groupings, where necessary. Signature to Schedules 1 to 19

RAM S. TARNEJA RUSSI JAL TARAPOREVALA HOMI R. KHUSROKHAN Directors B. D. BANERJEE E. A. KSHIRSAGAR

}

R.GOPALAKRISHNAN

Chairman

VENKATRAO S. SOHONI Managing Director P.S.MEHERHOMJI

Mumbai, 17th April, 2006

70 70 — CEPS 4\E:\SALES\SANJAY\RALLIS AR 05-06\RALLIS NOTES 2006.PMD — skg-20-4/NSS/24/4/vk26-4/28-4/sbs(3-5)/NSS/3/5

Company Secretary

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

Registration Details Registration No.

1 4 0 8 3

Balance Sheet Date II.

3 1 Date

0 3 Month

State Code

1

1

2 0 0 6 Year

Capital Raised during the Year (Amount in Rs. Thousands) Public Issue

Rights Issue

N I L

N I L

Bonus Issue

Private Placement N I L

N I L

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities (including Current Liabilities) 5 1 6 6 0 7 9

Total Assets 5 1 6 6 0 7 9

Sources of Funds Paid-up Capital

Reserves & Surplus

9 9 9 8 4 8

7 5 6 2 5 3

Secured Loans

Unsecured Loans

3 2 3 8 9 2

8 3 2 5 9 8

Application of Funds Net Fixed Assets

Investments

1 6 5 2 7 8 8

4 9 4 8 4 2

Net Current Assets

Misc. Expenditure

6 7 7 0 0 5

5 4 3 5 6

Accumulated Losses N I L IV. Performance of Company (Amount in Rs. Thousands) Turnover

Total Expenditure

6 3 0 3 4 7 8 + ✓

5 8 5 8 1 2 8

Profit Before Tax

+ -

4 4 5 3 5 0

✓

Earnings per Share Rs.

4 2 5 2 3 6 Dividend Rate %

2 9 . 2 1 V.

Profit After Tax

0 4 0

Generic Names of Three Principal Products / Services of Company (as per monetary terms) Item Code No. (ITC Code) 3 8 0 8 2 0 - 0 9

H E X A C O N A Z O L E

3 8 0 8 1 0 - 2 9

A C E P H A T E

3 8 0 8 2 0 - 9 0

M E T C O N A Z O L E

71 71 — CEPS 4\E:\SALES\SANJAY\RALLIS AR 05-06\RALLIS NOTES 2006.PMD — skg-20-4/NSS/24/4/vk26-4/28-4/sbs(3-5)/NSS/3/5

RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

RALLIS INDIA LIMITED ANNEXURE TO THE DIRECTORS’ REPORT INFORMATION AS PER SECTION 217(2A) READ WITH THE COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975 AND FORMING PART OF THE DIRECTORS’ REPORT FOR THE YEAR ENDED 31ST MARCH, 2006 Sr. Name No.

Designation/ Nature of duties

Gross Remuneration received Rs.

Net QualificaRemun- tions eration received Rs.

Experience (Years)

Date of Age commence- (Years) ment of employment

Particulars of last employment/ employer and position held

1

2

3

4

5

7

8

10

A.

Employed throughout the year and in receipt of remuneration aggregating not less than Rs.24,00,000/- for the year ended 31st March, 2006.

1

Dr V S Sohoni

B.

Employed for part of the year in respect of remuneration aggregating not less than Rs.2,00,000/- per month.

1

Mr. V Shankar

2

Managing Director

Chief Operating Officer

Mr.Dilip N Gokhle General Manager Commercial Notes :

6

3,827,155 2,037,505 B-Tech (Hons) 42 Ph.d

11-Aug-03

9

64

Pharmacia India P Ltd. President & Managing Director

1,042,899 289,600

B.Com (Hons), 26 FCA, AICWA, ACS, L.L.B

1-Dec-05

49

Tata Chemicals Ltd Chief Operating Officer,Phosphates

453,410

Msc (Chemistry)

1-Sep-98

51

ICI India Ltd Marketing Manager

372,610

29

1

Gross remuneration received includes salary, allowances, leave travel expenses, medical benefits in accordance with Company’s rules. Company’s contribution to provident and superannuation funds, monetary value of the perquisites calculated in accordance with the Income Tax Act, 1961 and the Rules made thereunder but excludes contribution to Gratuity Fund on the basis of actuarial valuation as separate figures are not available & amount paid on VRS\ESS.

2

Net remuneration is gross remuneration less taxes,contribution to provident and superannuation funds and value of perquisites

3

The employees have adequate experience to discharge responsibilities assigned to him.

4

None of the employee are relative of the Directors of the Company.

5

The nature of employment is contractual. On behalf of the Board of Directors

Mumbai, 17th April, 2006

72 72 — CEPS 4\E:\SALES\SANJAY\RALLIS AR 05-06\RALLIS NOTES 2006.PMD — skg-20-4/NSS/24/4/vk26-4/28-4/sbs(3-5)/NSS/3/5

R . GOPALAKRISHNAN Chairman

RALLIS INDIA LIMITED FINANCIAL STATISTICS Rs. lacs

Year-end Financial Position

Net Fixed Assets Deferred Tax Assets Investments

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

16,528

18,186

17,665

15,608

16,079

17,440

18,395

16,617

13,726

12,991

336

-

-

-

-

-

-

-

-

-

4,948

46

309

2,663

2,383

3,165

3,213

3,173

1,163

1,266

Total

21,812

18,231

17,973

18,270

18,462

20,605

21,608

19,790

14,889

14,257

Current Assets

29,305

26,979

38,055

54,402

63,606

58,569

58,226

53,517

36,964

35,566

Current Liabilities

22,535

17,747

20,374

33,265

35,742

25,043

27,377

31,927

15,533

19,337

Net Current Assets

6,770

9,232

17,681

21,137

27,864

33,526

30,849

21,590

21,431

16,229

28,582

27,463

35,654

39,408

46,326

54,131

52,457

41,380

36,320

30,486

- Preference

8,800

8,800

8,800

-

-

1,800

2,000

2,000

3,500

3,500

- Equity

1,198

1,198

1,198

1,198

1,198

1,198

1,198

1,198

1,198

1,198

Total

9,998

9,998

9,998

1,198

1,198

2,998

3,198

3,198

4,698

4,698

Reserves

7,563

4,618

7,255

6,707

12,338

9,726

12,526

11,110

9,705

8,600

TOTAL CAPITAL EMPLOYED Capital

Less: Debit Balance in Profit & Loss A/c.

-

-

4,969

2,155

-

-

-

-

-

-

544

1,006

1,551

1,653

1,223

1,153

1,193

900

598

611

17,017

13,610

10,733

4,098

12,314

11,571

14,531

13,408

13,805

12,687

- Short term

8,326

5,607

16,236

30,513

28,239

25,923

25,093

16,938

12,425

11,140

- Long term

3,239

8,246

8,686

4,797

5,773

16,637

12,833

11,034

10,090

6,659

Less: Miscellaneous Expenditure Net Worth Borrowings

Total

11,565

13,853

24,921

35,310

34,012

42,560

37,926

27,972

22,515

17,799

TOTAL SOURCES

28,582

27,463

35,654

39,408

46,326

54,131

52,457

41,380

36,320

30,486

65,275

60,350

54,587

88,508

103,768

108,890

143,251

125,619

120,612

116,259

Other Income

3,900

5,332

11,753

3,921

16,884

3,504

2,592

1,802

1,105

1,207

Total Income

69,175

65,682

66,340

92,429

120,652

112,394

145,843

127,421

121,717

117,466

37,025

33,420

30,202

67,112

78,054

79,412

110,950

93,748

92,058

90,100

Personnel cost

5,165

5,281

5,631

5,654

4,988

5,054

5,122

4,729

4,386

4,293

Excise duty

6,140

6,241

5,667

3,919

5,185

6,073

4,657

5,097

3,972

4,261

841

1,449

3,956

4,152

4,222

6,258

5,518

4,912

4,140

4,449

1,675

1,611

1,703

1,522

1,415

1,564

1,365

1,225

1,097

848

Summary of Operations Sales (including Excise)

Expenses Materials consumed

Interest Depreciation Other expenses

13,874

14,264

16,562

17,784

20,442

15,807

15,726

14,494

13,341

11,017

Total

64,721

62,266

63,721

100,142

114,307

114,168

143,338

124,205

118,994

114,968

73 73 — CEPS 4\E:\SALES\SANJAY\RALLIS AR 05-06\RALLIS NOTES 2006.PMD — skg-20-4/NSS/24/4/vk26-4/28-4/sbs(3-5)/NSS/3/5

RALLIS Fifty-eighth annual report 2005-2006 Rallis India Limited

Rs. lacs

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

4,453

3,416

2,619

201

67

64

(7,714)

6,345

(1,774)

2,505

3,216

2,723

2,498

(342)

(1,349)

(512)

47

475

420

218

4,252

3,350

2,555

(7,372)

7,694

(1,262)

2,458

2,741

2,303

2,280

Profit before tax and prior year adjustment Tax Profit after tax before prior year adjustment Prior year’s adjustment

-

-

-

355

1,820

1,296

-

-

-

-

4,252

3,350

2,555

(7,727)

5,874

(2,558)

2,458

2,741

2,303

2,280

Current Assets : Liabilities

1.3

1.5

1.9

1.6

1.8

2.3

2.1

1.7

2.4

1.8

Debt : Equity

0.7

1.0

2.3

8.6

2.8

3.7

2.6

2.1

1.6

1.4

Profit after tax

IMPORTANT RATIOS

PBT/Turnover %

6.8

5.6

4.8

(8.7)

6.1

(1.6)

1.7

2.6

2.3

2.1

18.5

17.7

18.4

(9.0)

22.8

8.3

15.3

19.6

18.9

22.8

Dividend (per share)

4.0

1.0

-

-

10.0

-

6.0

6.0

5.0

4.5

Earnings (per share)

29

22

20

(64)

47

(23)

18

18

19

19

Net Worth (per share)

69

40

16

34

103

82

105

95

86

77

Return (PBIT) on Capital Employed %

Previous year figures have been regrouped, wherever necessary.

74 74 — CEPS 4\E:\SALES\SANJAY\RALLIS AR 05-06\RALLIS NOTES 2006.PMD — skg-20-4/NSS/24/4/vk26-4/28-4/sbs(3-5)/NSS/3/5

RALLIS INDIA LIMITED Registered Office APEEJAY HOUSE 7TH FLOOR 3 DINSHAW VACHHA ROAD CHURCHGATE MUMBAI 400 020

Attendance Slip

I hereby record my presence at the FIFTY-EIGHTH ANNUAL GENERAL MEETING of the Company at Bombay House Auditorium, Bombay House, 24, Homi Mody Street, Mumbai 400 001, on Wednesday, 31st May, 2006 at 4.00 p.m.

SIGNATURE OF THE ATTENDING MEMBER/PROXY

NOTES : 1. Shareholder/Proxyholder wishing to attend the meeting must bring this Attendance Slip to the meeting and hand it over at the entrance duly signed. 2. Shareholder/Proxyholder desiring to attend the meeting should bring his/her copy of the Annual Report for reference at the meeting.

RALLIS INDIA LIMITED Registered Office APEEJAY HOUSE 7TH FLOOR 3 DINSHAW VACHHA ROAD CHURCHGATE MUMBAI 400 020

Proxy I/We ...................................................................................................................................................................................................................................................

of............................................................. in the district of ...................................................................................................................................................... being a Member/Members of the abovenamed Company, hereby appoint ................................................................................................................. .....................................................................................................of .....................................................................................................................in the district of .....................................................................or failing him .............................................................................................of............................in the district of ............................................................................................. as my/our Proxy to attend and vote for me/us and on my/our behalf at the Fifty-Eighth Annual General Meeting of the Company, to be held on Wednesday, the 31st May, 2006 at 4.00 p.m. or at any adjournment thereof. Signed this .................................................................................................................. day of ................................................................................................. 2006. Reference Folio No.: DP ID/BEN ID

Signature

No. of Shares held

✄

This form is to be used thinks fit.

* in favour of * against

Affix 30 Paise Revenue Stamp

the resolution. Unless otherwise instructed, the Proxy will vote as he

* Strike out whichever is not desired. NOTE : The Proxy must be returned so as to reach the Registered Office of the Company, at Apeejay House, 7th Floor, 3, Dinshaw Vachha Road, Churchgate, Mumbai 400 020, not less then FORTY-EIGHT HOURS before the time for holding the aforesaid meeting.

RALLIS Fifty-seventh annual report 2005-2006

Rallis India Limited Performance Summary PROFIT AFTER TAX (Rs. in crores)

OPERATING REVENUE (SALES AND OTHER INCOME)(Rs. in crores) 1110

59

1067 924

26

585

657

43

34

692

-26

2000-01

2001-02

2002-03

2003-04

2004-05

-77

2005-06 2000-01

2001-02

GROSS BLOCK (Rs. in crores)

2002-03

2003-04

2005-06

NET WORTH (Rs. in crores)

283

170

279

272

136

258

123

116

247

2004-05

107

251

41

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

SOURCES OF INCOME & OTHER CREDITS (2005-06) Rs. 695 crores

2000-01

2001-02

2002-03

2003-04

INCOME DISTRIBUTION (2005-06) Rs. 695 crores

Personnel Cost 7.43%

Sales 93.91%

2004-05

2005-06

Freight, etc. 2.64% Other Operating Expenses 17.06%

Deferred Taxation for Current Year 0.48%

Depreciation 2.41% Interest 1.21%

Other Income 5.61%

2

Materials Consumed 53.26%

PAT 6.12%

Duties and Taxes paid 9.86%