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BALANCE SHEET

CASTROL INDIA LIMITED

Board of Directors
Non-Executive Directors Chairman S. M. Datta Executive Directors Chief Executive & Managing Director N. K. Kshatriya Directors R. Gopalakrishnan P. Hughes A. K. Jhawar D. S. Parekh R. Elston-Green Alternate to P. Hughes Company Secretary & Head Legal A. H. Mody Bankers Deutsche Bank HDFC Bank Ltd. The Hongkong & Shanghai Banking Corporation Ltd. Solicitors & Advocates Crawford Bayley & Co. Dhru & Co. Auditors S. R. Batliboi & Co. Registered Office Technopolis Knowledge Park Mahakali Caves Road, Andheri (East) Mumbai 400 093. Share Department Tata Share Registry Limited Unit: Castrol India Limited Army & Navy Building 148, M. G. Road, Mumbai 400 001. Directors A. S. Ramchander A. Ahmad A. P. Mehta

FINANCIALS

FINANCIAL HIGHLIGHTS
Year Sales Less: Excise Duty Net Sales Other Income Cost of Materials Operating and Other Expenses Interest Gross Profit (Before Depreciation and Exceptional Items) Depreciation 228.74 18.93 227.44 24.88 202.56 218.67 14.31 204.36 243.71 13.40 230.31 166.66 13.24 153.42 175.32 11.44 163.88 2005 1668.39 238.01 1430.38 20.07 847.97 370.73 3.01 2004 1528.25 218.09 1310.16 22.73 777.02 325.56 2.87 2003 1360.51 189.36 1171.15 19.14 669.72 299.33 2.57 2002 1338.95 187.15 1151.80 13.40 600.59 313.45 7.45 2001 1357.36 194.91 1162.45 13.50 693.72 308.11 7.46 2000 1237.81 179.31 1058.50 15.74 640.28 251.43 7.21 Rupees in Crores

Profit Before Taxation and Exceptional Items 209.81 (Add)/Less: Exceptional Items: Reversal of Voluntary Retirement Scheme Expenses Plant closure Write (Back)/Off of Impairment of Fixed Assets Plant closure Profit Before Taxation Current Taxation Deferred Taxation Fringe Benefit Tax Excess Income Tax Provision for earlier years written back Profit After Taxation Dividend Gross Fixed Assets Net Fixed Assets Investments Net Current Assets/(Liabilities) Net Assets Share Capital Reserves & Surplus Net Worth Loan Funds Deferred Tax Liability Earning per Share * Dividend per Share Book Value per Share * Debt Equity Ratio
*

(0.49) (0.33) 210.63 68.16 (5.56) 5.09 (3.87) 146.81 102.01 254.58 138.33 108.14 158.23 404.70 123.64 266.42 390.06 2.79 11.85 11.87 8.25 31.55 0.02:1

3.72 3.55 195.29 68.73 (0.90) 127.46 102.01 254.45 149.77 128.91 102.52 381.20 123.64 236.43 360.07 3.72 17.41 10.31 8.25 29.12 0.03:1

204.36 63.35 3.63 137.38 102.01 250.83 171.01 84.79 114.79 370.59 123.64 224.44 348.08 4.20 18.31 11.11 8.25 28.15 0.03:1

230.31 79.90 (2.51) 152.92 204.01 255.61 182.64 220.29 (57.41) 345.52 123.64 202.14 325.78 5.06 14.68 12.37 16.50 26.35 0.04:1

153.42 43.45 1.57 108.40 92.73 243.95 180.63 119.90 135.89 436.42 123.64 273.03 396.67 22.56 17.19 8.77 7.50 32.08 0.18:1

163.88 29.50 134.38 92.63 223.49 172.66 0.37 237.95 410.98 123.50 270.38 393.88 17.10 Rupees 10.88 7.50 31.89 0.14:1

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

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DIRECTORS REPORT

REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31ST DECEMBER, 2005
The Directors have pleasure in presenting their Report and Statement of Accounts for the year ended 31st December, 2005. For the year ended 31st December, 2005 (Rupees in Crores) FINANCIAL RESULTS Gross Profit before Depreciation, Exceptional Items & Tax Deducting therefrom: Depreciation (Add)/Less: Exceptional Items (i) Reversal of Voluntary Retirement Scheme expenses Plant closure (ii) Write (Back) / Off of Impairment of Fixed Assets Plant closure Provision for Tax Current [Including Wealth Tax of Rs. 0.12 Crore (2004: Rs. 0.16 Crore)] Deferred Taxation Fringe Benefit Tax Excess Income Tax provision for earlier years written back Profit after Tax Adding thereto: Balance as per last Balance Sheet brought forward Profit available for Appropriation The Appropriations are: Dividend: Interim Final Tax on Dividend: Interim Final Final Dividend 2004 Education Cess on Tax on Final Dividend 2003 Transfer to General Reserve Balance carried forward 6.94 7.37 0.50 16.00 30.69 163.51 6.46 6.87 0.13 14.00 16.70 146.17 49.46 52.55 49.46 52.55 16.70 163.51 18.71 146.17 18.93 24.88 228.74 227.44 For the year ended 31st December, 2004 (Rupees in Crores)

(0.49) (0.33)

3.72 3.55

68.16 (5.56) 5.09 (3.87) 146.81

68.73 (0.90) 127.46

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DIRECTORS REPORT

PERFORMANCE Total Sales and Other Income increased by 8.9% to Rs. 1688 crores as a result of a 1% increase in volumes and 8.1% increase in unit sales realizations over last year. The cost of our main raw material Base Oil continued to rise in 2005 averaging a 22% increase over the previous year. However, favourable forex on imported raw material & reduction in customs duty rates on Base Oils & Additives and continued focus on supply chain efficiences enabled us to restrict the annual increase of the unit cost of material to 8%. The total increase in cost of materials was Rs. 71 crores. The annual increase in operating expenses (excluding brand investment) was 8.8%. Most of this increase was due to increased freight costs as a result of hikes in diesel prices, costs associated with our road safety programme, volume growth and additional freight cost due to closure of Ballabgarh Plant in 2004. We continued to grow the investment in our brands. In 2005 Advertisement and Sales Promotion (including Sales Promotion fee) had increased by Rs. 23 crores (31.5% increase) which includes Rs. 14 crores on account of re-launch of Castrol Master Brand. Depreciation in 2005 was lower by Rs. 6 crores due to revision in the useful lives of all our Fixed Assets carried out last year. Profit Before Tax increased by 8% to Rs. 210.6 crores. Our tax rate for the current year has decreased versus last year mainly due to reduction in the basic corporate tax rate from 35% to 30% w.e.f. April 2005. However, there has been an additional tax liability of Rs. 5.1 crores w.e.f. April 2005 on account of Fringe Benefit Tax (FBT) which has been newly introduced in the Finance Act 2005. During the year, the Company has written back excess provision for taxation of the earlier years amounting to Rs. 3.9 crores as a result of crystallisation of liabilities of those years due to completion of proceedings at the appellate levels. As a result Profit After Tax increased by 15% to Rs. 146.8 crores.

CORPORATE GOVERNANCE Pursuant to Clause 49 of the Listing Agreement, a Management Discussion and Analysis Report and a Report on Corporate Governance are given as Annexures A and B respectively to this Report. A certificate from the Statutory Auditors of the Company regarding the Compliance by the Company of the conditions stipulated under clause 49 of the Listing Agreement is attached to this Report. DIRECTORS RESPONSIBILITY STATEMENT As required under Section 217 (2AA) of the Companies Act, 1956 your Directors confirm that: (i) In the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same.

(ii) The Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on 31st December, 2005 and of the profits of the Company for the year ended 31st December, 2005. (iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. (iv) The Directors have prepared the annual accounts on a going concern basis. DIVIDEND The Interim Dividend in respect of the year ended 31st December, 2005 of Rs. 4.00 per share on 12,36,40,298 Equity Shares was paid to the Shareholders of the Company whose names appeared on the Register of Members on 25th July, 2005.

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The Directors recommend a payment of final dividend of Rs. 4.25 per share on 12,36,40,298 Equity Shares. FIXED DEPOSITS There were no fixed deposits outstanding and unclaimed as on 31st December, 2005. DIRECTORS Mr. R. Elston Green resigned with effect from 19th July, 2005 as the Finance Director of the Company. Your Directors wish to place on record their gratitude for the guidance and advice received from Mr. Elston Green during his tenure as a Director of the Company. At the Board Meeting held on 19th July, 2005 Mr. A. Ahmad and Mr. A. P. Mehta were appointed with effect from the said date as Additional Directors of the Company. Consequent to the said appointments they were also appointed as Wholetime Directors of the Company designated as Director Supply Chain and Finance Director respectively. In accordance with Section 260 of the Companies Act, 1956 (the Act) they hold office upto the date of the forthcoming Annual General Meeting of the Company. Notices have been received under Section 257 of the Act along with the requisite deposits from shareholders proposing Mr. Ahmad and Mr. Mehta as candidates for the office of Director. Mr. Roger Elston Green was nominated with effect from 12th December, 2005 to the Board pursuant to Article 114 of the Articles of Association of the Company as an Alternate Director to Mr. P. Hughes in place of Mr. Leon Freese. Your Directors wish to place on record their gratitude for the guidance and advice received from Mr. Freese during his tenure as a Director of the Company. Mr. S. M. Datta & Mr. N. K. Kshatriya retire by rotation and are eligible for re-appointment. The information on the particulars of Directors seeking appointment/re-appointment as required under Clause 49 of the Listing Agreement executed with the

Bombay Stock Exchange Limited, has been given under Corporate Governance (Annexure B) of this Report. SUBSIDIARY COMPANY The Directors of Indrol Chemicals & Specialities Private Limited (Indrol) had Resolved to put the Company in Voluntary Winding up. On an application made by the Official Liquidator to the Bombay High Court, Indrol was dissolved with effect from 28th April, 2005 by an order of the Bombay High Court. CONSERVATION OF ENERGY (a) Energy conservation measures taken: Energy conservation during the financial year has accrued as a result of the following steps taken at the various factories of the Company: Patalganga: 1. Solar Hot Water Heating System for Canteen. 2. Solar street lights in plant. 3. Reduced rated capacity of the pump motors.

4. Condensate Pumps for higher recovery of condensate & reduce BCT. 5. 6. 7. 8. Replacement of old pumps by energy efficient pumps. Modification of condensate transfer lines. Capacitors across transformer. motor terminals &

Rationalization of oil transfer lines to reduce losses.

Silvassa: 1. Conversion of fuel in thermic fluid heater from LDO to HSD realizing in savings of Rs. 1.5 lakhs. Timer cut-off in Administration office Air-conditioning system generating a savings of Rs. 1.0 lakh. Switching off thermic fluid heater after 7.00 pm generating a savings of Rs. 1.0 lakh.

2.

3.

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4.

Solenoid based pneumatic air cut-off in unscrambler to avoid air loss when machine is in stopped condition. Identification and correction through air-leak audits. of air-leaks

were made to ensure that your Company did not falter on the excellent efforts made in the past and infact improved on its overall HSSE performance. 2. Your Companys ISO : 14001 environment management systems certification was also re-validated without any non-conformation. 3. Technology has made large strides in developing a Business Continuity Plan to enable your Company to continue its business critical activities even in case of unforeseen adversities rendering its site un-operational. 4. This year your Company extended its focus on Quality Assurance in design and operationalisation by extending its goal to reach for TS 16949 in the year 2006. 5. Extensive efforts have gone into product integrity whereby the team highlighted and quickly closed gaps between claims and performance. The team also has taken further steps to protect your Companys intellectual property. 6. As part of your Companys constant endeavor to go green, your Company has spent considerable amount and applied for registration to Mumbai Waste Management program to ensure that all the waste generated like used oil and solvent gets disposed off in an environmentally friendly way.

5.

Tondiarpet: 1. 2. 3. 4. Installation of condensate recovery system for the boiler. Installation of automatic power factor controller with capacitor bank. Replacement of old inefficient pumps by efficient pumps. Installation of energy efficient tubelights.

Paharpur 1. 2. 3. Electronic controller Digitek Megnatron to save electricity on compressor motor. Solar Street lights 9 nos on boundary wall side. Solar water heating system 200 LPD for canteen food heating.

(b) Additional investments and proposals, if any, being implemented for reduction of consumption of energy: None in particular. (c) Impact of measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods: The measures mentioned in (a) above have led to reduction in fuel and electricity consumption as well as improvement in the productivity as indicated therein. TECHNOLOGY ABSORPTION 1. During the year, in line with BPs policies, your Company placed great emphasis on implementing best practices on Health, Safety and Environmental management. Extensive efforts

7. Cost reduction initiatives undertaken by the R&D Center in a tough environment has been a focal activity of your Company resulting in cost savings arising to the tune of Rs. 5 crores through appropriate product re-engineering covering auto grades like CRB Turbo and RX Super plus. 8. Significant upgradation was achieved in product portfolio in the fast growing passenger car engine oil segment through technology input in launching cutting edge products like Castrol Edge which is a top of the line synthetic lubricant.

9. During the year, your Companys Technology Centre through the use of its skill base has

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supported product development for global applications. The product performance capabilities and facilities in India have been put to use to validate diesel engine oils and motorcycle engine oils developed for marketing in AsiaPacific region. In many ways the Castrol India Technology Centre is well on its way to become one of the global research centers for BP. 10. This year the Technology Centre clearly evolved in terms of its scope to be able to develop products for the entire region and commercialization of such products developed in Castrol Indias R&D centre has happened in Iran and Saudi Arabia. 11. A budget of Rs. 10 crores has been earmarked to be spent over the next three years towards upgradation of facilities at the Technology centre. Out of this an amount of Rs. 3 crores has been spent during the year to complete the first phase of the administration block which houses 85% of the workforce in technology. This has been done in line with BP global standards. The second phase commencing in 2006 will create a well equipped conference room and a cafeteria. The objective is to make the centre very customer friendly and on par with the other global centres in UK and USA. 12. Through restructuring in the year 2005, your Company has inducted new skills and capabilities in the Technology Centre for product research and performance demonstration.

Sheet and Profit and Loss Account for the year ended 31st December, 2005. PARTICULARS OF EMPLOYEES The information required to be published under the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended is enclosed in this Report. AUDITORS The Shareholders of the Company are requested to appoint Auditors and to fix their remuneration. M/s. S. R. Batliboi & Co., Chartered Accountants, the retiring Auditors have furnished to the Company the required certificate under section 224(1B) of the Companies Act, 1956 and are therefore eligible for re-appointment as Auditors of the Company. PERSONNEL The Board wishes to place on record its sincere appreciation of the efforts put in by the Companys workers, staff and executives for achieving excellent results under difficult conditions. DISTRIBUTORS, BANKERS BUSINESS ASSOCIATES AND OTHER

The Board also wishes to thank its Distributors, Bankers and other business associates for their support during the year.

On behalf of the Board of Directors FOREIGN EXCHANGE EARNINGS AND OUTGO 1. Activities relating to Export There were no significant exports by the Company during the year.
N. K. Kshatriya Managing Director A. Ahmad Director - Supply Chain A. S. Ramchander Director - Automotive A. P. Mehta Finance Director

2. Earnings and Outgo Members are requested to refer to note Nos 16 and 17 of Schedule M forming part of the Balance

Mumbai Dated: 18th March, 2006

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ANNEXURE A
MANAGEMENT REPORT DISCUSSION & ANALYSIS

Pursuant to Clause 49 of the Listing Agreement, a Management Discussion & Analysis Report covering segment-wise performance and outlook is given below: (a) Industry structure and developments The lubricant industry is an extremely competitive market with several Indian and global players. Castrol is amongst the four leading players including three Public Sector Undertakings (PSUs). Castrol India is the leader in many of the segments that it participates in. During the last few years, the lubricants industry has seen several new trends emerging in terms of technology, channels and vehicle mix. These new trends have been elaborated further in the Market behaviour & outlook section of this report. These developments are likely to continue into the next 3-5 years and are expected to influence rapid changes in the business. The year 2005 saw steep escalation in the cost of raw materials. Sharp increase in crude oil prices resulted in the base oil refiners passing on this additional cost to the lubricants industry. Also, refineries enjoyed better margins producing diesel/petrol and hence a number of global base oil refiners shifted to diesel/ petrol production. This led to an overall shortage in the global base oil availability, thereby increasing prices further. The chart below depicts the steep increases in base oil costs during 2005.

The scenario this year is expected to be even more difficult for the industry with respect to all its key raw materials. With an international shortage of high end base oils, prices are likely to cross US$ 900/tonne during the second quarter of 2006. Further, packaging materials are also expected to cost more since the petrochemicals industry is facing similar inflationary pressures on account of higher crude oil prices. This trend of high raw material costs is likely to continue through most of 2006. Going forward, if crude oil prices remain at a high level, we could see a structural change in the input cost scenario for the lubes industry. Market behaviour and outlook The lubricant industry is broadly divided into three major sectors: Automotive, Industrial and Marine. The automotive sector is the largest, whilst the share of the industrial sector is growing. I. Automotive

The automotive lubricant sector can be segmented into the following vehicle categories: (a) Trucks, Tractors and Off Road Equipment mainly diesel engine oils. (b) Passenger cars mainly petrol engine oils. (c) Motorcycles and 3-wheelers mainly 2-stroke/ 4-stroke petrol engine oils. Market growth: The overall automotive lubricant market is estimated to have grown marginally during 2005. While there is a sharp growth in new vehicle population, the overall base grows slowly and new engine technology tends to reduce average lube consumption per vehicle. However, the specifications and quality of lubricants continue to improve, growing the value of the lubricant market. This is a favourable scenario for your Company, given our technology edge and premium position. Within the truck segment, the lubricant oil consumed by the old generation truck market continues to decline. The new generation, high technology truck market expanded in 2005 and this trend is expected to continue in 2006. The agriculture lubricants segment is also expected to grow in 2006 on the back of a strong 2005 monsoon. With the current momentum in the economy and focus on infrastructure, we expect the building and construction sector to grow.

Crude WTI: $ per barrel; Base Oil: US $ per metric tonne

Source: ICIS

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In the personal mobility segment, over six million motorcycles and one million cars/MUVs have been added to the Indian roads in 2005. This buoyant growth in the motorcycle/passenger car market is expected to continue in 2006 resulting in increased consumption of lubricants. All these present opportunities for growth in the lubricant market. Technology: It is expected that the Commercial Vehicle manufacturers will make growing demands on lubricant manufacturers to develop oils that improve the productivity of truck operators and reduce their operating costs. Also, new truck engines require superior technology lubricants. This presents a growth opportunity for your Company, with the potential of better margin realizations. Channels: Another area which has seen rapid change is the share of channels through which lubes are being sold. New private players are investing aggressively into retail petrol pumps. The workshop channel is also showing rapid growth driven mainly by the arrival of new vehicles in warranty to the market. With advancements in vehicle engine technology, the warranty stage is becoming increasingly important as car/motorcycle owners prefer to service their vehicles at OEM (Original Equipment Manufacturers) franchised workshops. Correspondingly, there is a sharp increase in the requirements of vehicle servicing capability in the market. We continue to be proactively responsive to dynamic changes in channel management. Competitive activity: Global lubricant players in India have not been able to grow their market shares materially in the retail automotive segment. Competition from PSUs is growing with their increased focus and investment in brand building and marketing activities. However, with a well planned strategy, innovative marketing and continuous investment in its brands, your Company has maintained its leadership position in the retail automotive segment. II. Non-Automotive Industrial lubricant demand is dependent on industrial production and growth trends in the economy. Industrial production growth surpassed 8% in 2005,

accelerating for the fourth consecutive year. This growth was led by rising output in some of Indias core industry sectors auto companies, primary metals, sub-assemblies, cement and textile. Planned investment in public construction projects and the accelerated growth in manufacturing related projects, especially in the area of auto manufacturing and auto components, are expected to help sustain the rapid growth in the industrial sector. Further, India has taken a leading position in the manufacture of auto ancillaries with an aim to become a preferred global destination for auto component manufacturing. We believe that this Industrial growth and by inference the industrial lubricant business will grow faster in the next three years. Within the industrial lubes market your Company is focused on margin management through customer segmentation. This successful strategy is expected to continue to deliver good results during 2006. (b) Opportunities & Threats (i) Opportunities Overall economic performance: At the macro economic level, a robust GDP growth rate, a good monsoon during the year and overall growth in the industrial sector augurs well for the lubricants business. I. Automotive

Growth in personal mobility: Growing personal disposable incomes and easy financing options are driving the sales of cars and two wheelers. The recent reduction in excise duty on small cars will provide further impetus. The business in these segments, especially cars, is driven to a large extent by the workshop channel, where superior service propositions, along with strong brands can lead to significant business gains. With the growth of 4-stroke vehicles in the motorcycle category, bike owners prefer servicing through workshops. This has resulted in a shift in lubricant demand from petrol stations to workshops. Castrol has strong brand equity and distribution advantage in these segments and growth here would have positive implications on your Companys performance.

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DIRECTORS REPORT

Original Equipment Manufacturers (OEMs): In their bid to build consumer loyalty, OEMs are seeking longterm strategic alliances with suppliers who have powerful brands, superior technology, strong distribution and good customer service. Your Company is in a leadership position to provide all of these and has a proven track record of several successful OEM alliances. During the year, your Company extended its partnership with Tata Motors and Maruti. In addition, strategic alliances and tie-ups have been executed with several leading OEMs in the building and construction sector. Changes in engine technology: Research reveals that consumers of new generation vehicles are more discerning in making lubricant purchase decisions. This provides an excellent opportunity for your Company, which enjoys strong consumer equity, superior technology and high quality products. The infrastructure boom: Road infrastructure has received a fillip in the last two years through the NorthSouth-East-West corridor and the Golden Quadrilateral projects. These projects, due to be completed during 2007, will transform the infrastructure availability as well as the road transport industry. Also, there is an increase in the sales of heavy duty trucks which are thriving on the improving road infrastructure and rapidly expanding logistics business. Infrastructure projects are expected to be large consumers of lubricants. In the current year, the off road sector is likely to grow faster due to the increased construction activity in the country. This trend will benefit your Company since it has strong alliances with construction OEMs, a well trained sales team and the ability to service customers across the country. Moreover, the continuous focus on infrastructure in the economy will have a long-term positive impact. With impressive GDP growth rates and increase in road infrastructure, the trend of higher freight movement on roads is expected to continue. This in turn would lead to higher demand for lubricants from the commercial vehicle segment.

II. Non-Automotive Outsourcing and increased investments: India is being increasingly acknowledged for its superior engineering skills and is likely to garner a material share of the offshore auto component market. The Indian auto components manufacturers have undertaken capacity expansion programmes during last year and this trend is expected to continue. This also presents a good volume growth opportunity for your Company. Environment Friendly: With the future growth in technology being directed towards emission, recycle, safety and noise, we can leverage our global strengths and expertise in these areas. With environmental awareness on the rise, the larger players will look for premium lubricants to reduce impact on environment. With high emphasis and focus on Health, Safety, Security and Environment, we are well positioned to lead the industry in these areas. (ii) Threats Automotive & Non-Automotive Base oil prices, which started moving upward in mid 2002, reached unprecedented levels during 2005. Base oil cost accounts for a major part of the cost base of your Company. With the sharp impact on the cost of goods during the second half of the year under review, your Company took price increases to protect/ grow margins. Public Sector oil companies with their in-house base oil production tend to take the inherent advantage of managing their business in an integrated manner. Your Company is disadvantaged vis-a-vis such competitors, especially when base oil margins are unusually high, such as the current scenario. Your Company will continue to focus on strengthening brand preference to cope with such situations. Aside from base oil, additive and packaging costs have also risen sharply in 2005 and are expected to further increase in 2006, thereby putting greater pressure on margins. The move towards new generation vehicle technology is resulting in longer drain intervals, affecting the volume potential of the largest category the truck segment.

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DIRECTORS REPORT

Another area of concern is the increase in fuel prices, especially diesel, which accounts for over 50% of operating costs of commercial vehicles and therefore is a key driver of transport business profitability. The pressure is particularly intense on the small fleet operators who account for over 75% of commercial vehicles on the road. They are an important consumer segment for your Company and with the increase in diesel prices they may cut down on other operating expenses like lubricants. Within the non-automotive segment, price undercutting by small regional competitors and the tendency of PSU players to absorb the high raw material cost to gain competitive advantage, may put pressure on our margins and market share. (c) Segment-wise / Product-wise performance I. Automotive Your Companys overall performance saw strong growth with top line increasing by 9%. In these difficult times of high input costs, your Company rationalized its portfolio of customers by moving away from unprofitable customers and focusing its efforts on segments that deliver high growth/high margin. (i) Masterbrand relaunch The most significant marketing activity carried out by your Company in 2005 was the relaunch of the Castrol Masterbrand. Castrol India seized the strategic opportunity to meet the challenge of the shift in the profile of consumers due to the booming personal mobility segment. Your Company took the initiative to relaunch the Castrol Masterbrand and launched a new Product Brand Architecture. All elements of the Brand including packaging, proposition and product formulation were changed and updated. The new communication has been most aptly summarized in the Brands new tagline Its more than just oil. Its Liquid Engineering. (ii) Motorcycle Oil We Speak 4T and Trizone To maintain our leadership position in the 4-stroke motorcycle oils market, your Company introduced Castrols internationally developed Trizone Technology into its lead offerings of 4-stroke engine oils Activ and Power 1. The 4-stroke oils business has delivered strong volume and value growth. Moving

ahead, our efforts will be aimed at further consolidating our market position in this segment and continuing with high double digit growth. (iii) Growth in New generation segment and BP brand The Castrol New Gen lubricants portfolio made rapid strides during 2005. Your Company renewed its partnership agreement with Indias largest Commercial Vehicle manufacturer - Tata Motors. CRB Turbo, the lead brand in this segment, was relaunched with ETP (Extreme Temperature Protection) formulation, which offers the benefit of longer engine life for Turbo charged engines. Castrol RX Super Gas - CNG engine oil endorsed by both Tata Motors and Tata Cummins was launched in Delhi and Mumbai. Castrol New Gen portfolio grew rapidly in volume and value, making it one of the fastest growing portfolios within the Castrol family. The communication around the BP brand, with the core proposition of savings was intensified around the diesel price hike period. (iv) New channel performance Your Companys partnership with Reliance and Essar Oil continues to be strong. The Castrol brand continues to be available in their fuel stations across the country. Further, Castrol is now tapping the new and evolving rural channel through the retail outlets like ITC e-Choupal and Godrej Aadhar. (v) Castrol BikeZone In the motorcycle business, our endeavor is to strengthen the relationship that Castrol has with the biker and touch other areas of bike ownership. After a successful pilot in Chennai and Bangalore, your Company plans to grow Castrol BikeZone business across the country. The initial response to the novel franchised motorcycle service offer has been enthusiastic. Castrol BikeZone continues to attract motorcycle owners due to its key proposition of Personalized and transparent service while delivering the highest standard of servicing to the bike. (vi) Sponsorships and endorsements Rahul Dravid continues to be Castrols Brand Ambassador. His appointment as captain of the Indian Cricket Team enhances our opportunity to leverage

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DIRECTORS REPORT

this in further building the Castrol brand. In 2005, actor John Abraham joined Rahul Dravid as your Companys Brand Ambassador. John Abraham is a youth icon and a passionate biker. He is a strong fit for our motorcycle oil portfolio. II. Non-Automotive In a scenario where COGS (Cost of Goods Sold) has been a primary concern, your Companys Industrial business has taken some tough decisions by taking two price increases within a short span of six months. This was done to enable recovery of the increases in input costs. Your Company consciously exited certain segments which offered very low margins. Differentiated offers were developed for customers, adding value to their processes depending upon their requirements and our strengths. We repositioned the products on this value proposition, filled up the gaps in the product range and emphasized on customer benefits in each and every application. These measures have helped us focus our efforts and resources to high growth, high margin sectors and have given us a commendable revenue growth over the previous year in our core business. Your Company also ran a customer satisfaction matrix and the outputs led us to a project to increase our efficiencies in customer management systems and services. We also standardized processes across business and geographies which helped us not only to improve customer service levels but also reduce cost to serve. Production fluids have undergone a major revolution keeping pace with changing manufacturing technology. Your Company has always been proactively innovating products with cutting edge technology and leveraging its metal working strength to build on its brand image. (d) Risks and Concerns I. Automotive Unprecedented base oil prices continue to put pressure on margins and are a major cause of concern for your Company. Whilst we have been able to take price increases and pass these on to our consumers and customers, it may be difficult to continue to do so. With many low price competitors pursuing a volume share objective, our volume growth plan may be at

some risk. With increased focus on premium segments and right pricing across all customer categories, we hope to mitigate the margin impact. II. Non-Automotive The industrial lubricant market continues to be dominated by the PSU companies with integrated base oil supplies which allows them the flexibility of aggressive pricing. Continued price undercutting by the unorganized sector poses a further risk to delivery. (e) Internal control systems and their adequacy Your Company maintains an adequate and effective internal control system commensurate with its size and complexity. We believe that these internal control systems provide, among other things, a reasonable assurance that transactions are executed with management authorization and that they are recorded in all material respects to permit preparation of financial statements in conformity with established accounting principles and that the assets of your Company are adequately safe-guarded against significant misuse or loss. An independent internal audit function is an important element of your Companys internal control system. The internal control systems are supplemented through an extensive internal audit programme and periodic review by management and audit committee. (f) Discussion on Financial Performance with respect to Operational Performance Your Company has achieved unit sales realizations and volume growth in 2005 which in turn has resulted in a healthy 9% growth in gross sales. Raw material costs increased significantly by Rs. 71 crores which negated much of the top line growth. We continue to increase the investment in our brands, but have sought to minimize increases in other overheads. Profit Before Tax (PBT) has increased by 8% and Profit After Tax (PAT) has increased by 15%. This was due to reduction in corporate tax rate, new levy of Fringe Benefit Tax and write back of excess provision of tax. With reference to working capital, the value of Inventories has risen due to the increase in raw material costs as well as higher quantity in 2005. Creditors have also increased due to higher

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DIRECTORS REPORT

Inventories. Outstanding debtors have increased due to increase in product prices. (g) Health, Safety, Security & Environment Your Company continues to lay great emphasis on Health, Safety, Security & Environment (HSSE), which is one of its core values. The road safety programme that your Company has vigorously implemented in the past few years has been further enhanced with a number of new initiatives to influence staff, contractors, customers and the public. The safety performance improved during the year with no accidents causing even third party fatalities and a reduction in the number of road accidents, injuries and spills. This demonstrates our safety culture and commitment to continuous improvement and influencing our contractors. There is a continuous focus on driving safety through communication and engagement sessions with transport contractors and their employees to reinforce our Driving Safety Standards and expectations. To encourage and reward staff and contractors, your Company held the first ever Castrol India Driver Championship. The two best drivers of Heavy Vehicles and Light Vehicles participated in the BP Regional International Driving Championship held in Johannesburg. In recognition of excellent work done in Road Safety, your Company was awarded with the BP Helios Human Energy Award and also the Prince Michael International Road Safety Award. The blending plants continue to excel in HSSE with impressive safety performance. Tondiarpet and Patalganga plants achieved eight years without a Days Away from Work Case (DAFWC), and Paharpur and Silvassa plants completed six years without a DAFWC. Silvassa plant was certified with OHSAS (Occupational Health & Safety Assessment Series) 18001. This is an International accreditation given to companies which demonstrate commitment, continuous improvement in Health & Safety standards, comply with HSSE legal requirements and have a robust Health & Safety Management System. In recognition of your Companys efforts towards environment protection and energy conservation, the

Companys Patalganga Plant was awarded the National Energy Conservation Award 2005 Certificate of Merit, in the Petrochemicals sector, for the second consecutive year. (h) Material developments in Human Resources/ Industrial Relations Carrying forward from the work done in 2004 in reorganizing our business to align with the new global lubricants strategy, we initiated a series of further organizational changes in 2005 which saw the India sales organization reorganized along channels : Business-to-Business and Business-to-Consumer rather than along regional geographies as it had been hitherto. This is a significant change in the way we manage our business and is aimed at creating a more focused organization that will be capable of harnessing the growing potential of new segments such as workshops and petrol stations. In terms of building people capability, we continue to focus on leadership development and enhancing the competencies of our staff. We relaunched our high potential staff development programme during the year in review. Special focus was also given to Diversity & Inclusion. Engagement sessions and workshops were held across the organization to create greater focus and sensitivity towards issues such as creating a diverse workforce and an inclusive work environment where everyone can succeed. Our relations with our employees continued to remain cordial during the year. The total number of people employed in the Company as on 31st December 2005 was 901.

On behalf of the Board of Directors


N. K. Kshatriya Managing Director A. Ahmad Director - Supply Chain A. S. Ramchander Director - Automotive A. P. Mehta Finance Director

Mumbai Dated: 18th March, 2006

27

DIRECTORS REPORT

ANNEXURE B
CORPORATE GOVERNANCE A. MANDATORY REQUIREMENTS 1. Companys Philosophy on Code of Governance The Companys purpose is business and to maximise long-term shareholder value by selling its goods and services. Therefore, our Corporate Governance processes are directed at ensuring that Company actions, assets and agents are directed to achieving this purpose while complying with the Code of Governance and the Companys own policies and expectations. The Companys policies reflect those adopted by the Parent Company in the UK - BP plc. and covers aspects such as ethical conduct, health, safety and the environment; control and finance; commitment to employees; and relationships. Key aspects of the Companys Governance Processes are: Clear statements of Board Processes and Board Executive linkage. Disclosure, accountability, transparency, adequate systems and procedures to monitor the state of affairs of the Company to enable the Board to effectively discharge its responsibilities to the stakeholders of the Company. Identification and management of key risks to delivery of performance of the Company. 2. Board of Directors

Mr. A. Ahmad and Mr. A. P. Mehta were appointed with effect from 19th July, 2005 as Wholetime Directors of the Company designated as DirectorSupply Chain and Finance Director respectively. Mr. R. Elston-Green was nominated with effect from 12th December, 2005 pursuant to Article 114 of the Articles of Association as an Alternate Director to Mr. P. Hughes in place of Mr. L. Freese. (b) Attendance of each Director at the Board Meetings and the last Annual General Meeting 4 Board Meetings were held during the financial year from 1st January, 2005 to 31st December, 2005. The attendance of each of the Directors at the said Board Meetings is given below:
Name of Director Category of Directorship No. of Meetings attended 4 4 4 2 2 2 3 4 % of total Meetings attended during the tenure as a Director 100 100 100 100 100 100 75 100

Mr. S. M. Datta Mr. N. K. Kshatriya Mr. A. S. Ramchander Mr. A. Ahmad (w.e.f. 19th July, 2005) Mr. A. P. Mehta (w.e.f. 19th July, 2005) Mr. R. Elston-Green (upto 19th July, 2005) Mr. R. Gopalakrishnan Mr. P. Hughes or his Alternate Mr. L. Freese/Mr. R. Elston-Green Mr. A. K. Jhawar Mr. D. S. Parekh Mr. R. A. Savoor (upto 17th January, 2005) NED Non-Executive Director MD ED ND Managing Director Executive Director

NED MD ED ED ED ED NED ND

(a) Composition As of the year ended 31st December, 2005, the Board of Directors had 9 members comprising of 4 Executive Directors and 5 Non-Executive Directors. The NonExecutive Directors included 3 members who were Independent Directors and 2 members who had been nominated by Castrol Ltd., U.K. as provided in the Articles of Association of the Company. The Chairman of the Board is a Non-Executive Independent Director. Mr. Roger Elston-Green resigned with effect from 19th July, 2005 as the Finance Director of the Company.

ND NED NED

3 3 1

75 75 100

Nominee Director of Castrol Ltd., U.K.

28

DIRECTORS REPORT

All Directors except Mr. R. Gopalakrishnan, attended the Annual General Meeting of the Company held on 19th April, 2005. (c) Number of other Companies or Committees the Director is a Director/Member/Chairman of:
Name of the Director(s) Number of other Companies (excluding Private Companies) in which Director (excluding Alternate/ Nominee Director) 12 (1) 1 1 1 12 (3) 2 12 (4) 1 Number of Committees (other than Castrol India) in which Member

3.

Audit Committee

(a) Terms of Reference i. ii. iii. To investigate any activity within its terms of reference. To seek information from any employee. To obtain outside legal or other professional advice. expertise, if it considers necessary. It may be clarified that the role of the Audit Committee includes matters specified under the Revised Clause 49 of the Listing Agreement entered into between the Company and Bombay Stock Exchange Limited on which the Companys shares are listed.

iv. To secure attendance of outsiders with relevant

Mr. S. M. Datta Mr. N. K. Kshatriya Mr. A. S. Ramchander Mr. A. Ahmad Mr. A. P. Mehta Mr. R. Gopalakrishnan Mr. P. Hughes Mr. A. K. Jhawar Mr. D. S. Parekh Mr. R. Elston-Green 1. 2. 3. 4. 5.

5 (2) 1 1 4 1 7 (5)

(b) Composition, Chairperson

name

of

members

and

As on 31st December, 2005, the Audit Committee comprised of 3 Non-Executive Directors viz. Mr. D. S. Parekh, Mr. R. Gopalakrishnan and Mr. P. Hughes with the Head-Internal Audit being a Permanent Invitee to the Committee and the Company Secretary being the Secretary of the Committee. Mr. D. S. Parekh the Chairman of the Committee and Mr. R. Gopalakrishnan, Member are Independent Directors on the Committee whereas Mr. P. Hughes is a Nominee Director of Castrol Ltd., U.K. (c) Meetings and attendance during the year 4 meetings were held during the financial year 1st January, 2005 to 31st December, 2005. The attendance of each Member of the Committee is given below:
No. of Meetings attended Mr. D. S. Parekh Mr. R. Gopalakrishnan Mr. P. Hughes or his Alternate Mr. L. Freese 3 3 4 % of total Meetings attended during the tenure as a Director 75 75 100

Includes 3 Companies in which Chairman Includes 2 Committees in which Chairman Includes 1 Company in which Chairman Includes 7 Companies in which Chairman Includes 4 Committees in which Chairman

(d) Number of Board Meetings held and the dates of the Board Meeting 4 Board Meetings were held during the financial year 1st January, 2005 to 31st December, 2005. The dates on which the said meetings were held are given below: 17th January, 2005 19th April, 2005 19th July, 2005 21st October, 2005

29

DIRECTORS REPORT

Mr. S. M. Datta was co-opted as a member of the Committee in the absence of Mr. R. Gopalakrishnan and Mr. D. S. Parekh for the meetings held on 19th April, 2005 and 19th July, 2005 to constitute a valid quorum for the said meetings. 4. Remuneration Committee

(e) Details of Remuneration paid to all Directors (for the period 1st January, 2005 to 31st December, 2005)
All Fixed Service Stock elements compoCont- option with of remu- nent & racts details, neration perfornotice if any and package mance period, whether i.e. linked sever- issued at Salary incenance a discount benefits, tives fees as well as bonuses, along the period pension, with the over which etc. performaccrued ance and over criteria which (Rs. in (Rs. in exercisLacs) Lacs) able

(a) Terms of Reference The Remuneration Committee recommends remuneration, promotions, increments etc. for the Executive Directors to the Board for approval. (b) Composition, Chairperson As Mr. on R. 31st of December, 3 2005, Mr. P. the Committee viz. and i.
Mr. N. K. Kshatriya

names

of

members

and

comprised

Non-Executive

Directors Hughes

Gopalakrishnan,

Wholetime Director(s)
219.01 101.98 26.35 37.80
Please see Note a Please see Note b

Mr. A. K. Jhawar. Mr. R. Gopalakrishnan is an Independent Director whilst Mr. P. Hughes and Mr. A. K. Jhawar are Nominee Directors of Castrol Ltd., U.K. Mr. R. Gopalakrishnan is the Chairman of the Committee. (c) Attendance during the year One Meeting was held during the year. The attendance of each Member of the Committee is given below:Name(s) of the Committee Members Mr. R. Gopalakrishnan Mr. P. Hughes Mr. A. K. Jhawar No. of Meetings attended 1 1 1 % of total Meetings attended during the tenure as a Director 100 100 100

Mr. A. S. Ramchander Mr. A. Ahmad (w.e.f. 19th July, 2005) Mr. A. P. Mehta (w.e.f. 19th July, 2005) Mr. R. Elston-Green (upto 19th July, 2005)

18.77 10.53

25.01

10.63

69.41

Notes (a) The agreement with each Wholetime Director is for a period of 5 years or the normal retirement date whichever is earlier. Further, either party to the agreement is entitled to terminate the Agreement by giving not less than six calendar months notice in writing to the other party. (b) Presently, the Company does not have a scheme for grant of stock options to its employees. However the Management staff are entitled to the Shares of BP plc. under the BP Sharematch scheme as in force.

(d) Remuneration Policy The Directors are paid a Salary and Performance Linked Bonus, which is calculated, based on pre-determined parameters of Performance.

30

DIRECTORS REPORT

ii.

Non-Wholetime Director(s)
Sitting Fees (Rs.) Commission (Rs.) 10,00,000 8,00,000 8,00,000 37,260

Mr. S. M. Datta Mr. R. Gopalakrishnan Mr. D. S. Parekh Mr. R. A. Savoor

1,00,000 70,000 60,000 20,000

(d) Number of complaints : All the Complaints have been not solved to the resolved to the satisfaction of satisfaction of the Complainants except for shareholders disputed cases and sub-judice matters which would be solved after the matter is duly disposed off by the Court. (e) Number of pending : None complaints as on 31st December, 2005

6A. General Body Meetings 5. Transfer & Shareholders/Investors Grievance Committee As on 31st December, 2005, the Transfer and Shareholders/Investors comprised of Mr. Grievance S. M. Datta, Committee Chairman,
(i)

(a) Location and time where last three AGMs were held
Location Birla Matushri Sabhagar 19, Marine Lines, Mumbai 400 020 Yashwantrao Chavan Pratishthan Auditorium, Y.B. Chawan Centre Gen. Jagannath Bhosle Marg, Next to Sachivalaya Gymkhana, Mumbai 400 021 Date : 19.4.2005 Time 2.00 p.m.

Mr. N. K. Kshatriya and Mr. A. P. Mehta. The Company Secretary is the Secretary of the Committee.
(ii)

: 5.5.2004

11.00 a.m.

Mr.

R.

Elston-Green

ceased

with

effect

from

19th July, 2005 to be a member of the Committee and Mr. A. P. Mehta was appointed in his place with effect from the said date.
(a) Name of the : Mr. S. M. Datta Non-Executive Director heading the Committee (b) Name and Designation : Mr. A. H. Mody of Compliance Officer Company Secretary & Head Legal (c) No. of Shareholders complaints received during the financial year : 22 complaints were received from Stock Exchanges/Securities and Exchange Board of India (SEBI)/Department of Company Affairs/NSDL/CDSL Registrar of Companies and were reported to the Transfer and Shareholders/Investors Grievance Committee in terms of Circular No. 1 (96-97) dated 25.7.96 of SEBI.

(iii) Birla Matushri Sabhagar 19, Marine Lines Mumbai 400 020 (b) Whether any Special Resolutions were passed in the previous 3 AGMs (c) Whether any Special Resolutions was passed through Postal Ballot last year Details of voting pattern (d) Persons who conducted the Postal Ballot exercise (e) Whether any Special Resolution is proposed to be conducted through Postal Ballot. (f) Procedure for Postal Ballot

: 19.6.2003

3.00 p.m.

: Yes

: No

: Not Applicable : Not Applicable

: No

: Not Applicable

31

DIRECTORS REPORT

6B. Notes on Directors seeking re-appointment as required under Clause 49G(i) A of the Listing Agreement entered into with Stock Exchange, Mumbai. (i) Mr. S. M. Datta Mr. S. M. Datta graduated with Honours in Chemistry from the Presidency College, Calcutta and obtained a Post-graduate Degree in Science & Technology from Calcutta University. He is a Chartered Engineer, Fellow of the Institution of Engineers, Fellow of the Indian Institute of Chemical Engineers, Member, Society of Chemical Industry (London) and Honorary Fellow of All India Management Association. Mr. Datta was chairman of Hindustan Lever Ltd. (HLL) as well as of all Unilever Group Companies in India and Nepal from 1990 to 1996. He had joined HLL as a Management Trainee in 1956 after completing his University education in Chemical Engineering. He is a Past President of Associated Chambers of Commerce & Industry and the Council of EU Chambers of Commerce in India, a Past President of the Bombay Chamber of Commerce & Industry and of Indian Chemical Manufacturers Association and Past Chairman of Bombay First. Mr. Datta is a Director in the following Companies: Philips India Limited Chairman

M. Visvesvaraya Industrial Research & Development Centre Transport Corporation of India Limited Bhoruka Power Corporation Limited Ambit Corporate Finance Pte Limited Chandras Chemical Enterprises (Pvt.) Limited Rabo India Finance Private Limited

Director Director Director Director Director Director

Mr. Datta holds 5809 shares in the Company. This information is being disclosed as required under Clause IV E(v) of the Revised Clause 49 of the Listing Agreement. (ii) Mr. N. K. Kshatriya Mr. Naveen Kumar Kshatriya graduated in Mechanical Engineering from IIT Kharagpur in 1971. He started his career as a Commercial Management Trainee with Hindustan Lever Limited (HLL) and soon moved to sales and marketing functions and thereafter grew to senior positions in foods, detergents and export divisions. He left HLL in 1988 to take an overseas assignment as the CEO of the Oman based National Mineral Water Company, then an associate of Evian of France. In 1991 he rejoined Unilever as the Marketing Head of Personal Products, Unilever Arabia. In 1993, he was appointed as General Operations Manager and the Chairperson of Corporate Sales Committee. In 1998, he joined the Board of Castrol India as Director Consumer Division. In early 2000, he was posted to Hongkong as Regional Marketing Director, Castrol (Consumer) Asia Pacific. Subsequent to the worldwide acquisition of Burmah Castrol plc. by BP, he was appointed as the Marketing Director of the Asia Pacific Lubricants business unit. He has been an honorary visiting marketing faculty to INSEAD, the prestigious European Business school at Fontainbleu Paris.

IL & FS Investment Managers Limited Chairman Tata Trustee Co. Pvt. Limited EID Parry (India) Limited Zodiac Clothing Co. Limited TIL Limited Peerless General Finance & Investment Co. Limited BOC India Limited Goodlass Nerolac Paints Limited Atul Limited Chairman Chairman Director Director Director Director Director Director

32

DIRECTORS REPORT

Mr. Kshatriya is a Director of Masana Petroleum Solutions (pty) Ltd. Mr. Kshatriya holds 200 shares in the Company. (iii) Mr. A. Ahmad Mr. Adnan Ahmad is a Bachelor of Applied Science (BASC) in Chemical Engineering from the University of Ottawa, Canada. He has also obtained an MSC in Chemical Engineering from the Queens University, Canada. He is a recipient of the Chevening Scholarship from the Business School, Leeds University, UK. He joined ICI India Limited (ICI) as a Management Trainee in January, 1985 and when he left ICI he was the General Manager Supply Chain & IT. In ICI he performed various roles in the Explosive Business, Specialty Chemicals and Paint Business. He joined Castrol India in the year 2004 as Vice President Supply Chain. He is not a Director in any other Company. He does not hold any shares in the Company. (iv) Mr. A. P. Mehta Mr. Amish Mehta is a member of the Institute of Chartered Accountants of India. He joined in 1997 Ernst & Young as a Service Manager to their Business Advisory Service Group. In 1998, he joined Mobil India Private Limited as a Chief Financial Officer for the LPG segment and in 1999 was promoted as the Chief Executive Officer. From September 2001, he was a Director of Ernst & Young Private Limited and was on deputation as Chief Financial Officer to Media Labs Asia. In January 2003, he joined BP India Services Private Limited a company which is a part of the BP group of companies worldwide and was the Financial Control Manager Transcon. He is a Director of BP India Services Private Limited. He does not hold any shares in the Company.

7.

Disclosure
significant related party transactions that may have potential conflict with the interests of Company at large.

(a) Disclosures on materially

None

(b) Details of non-compliance by the company, penalties, strictures imposed on the company by Stock Exchange or SEBI or any statutory authority, on any matter related to capital markets, during the last three years. (c) Whistle Blower Policy and affirmation that no personnel has been denied access to the audit committee.

None in the last three years

Presently, the Company does not have a Whistle Blower Policy but has a policy similar to it for the entire BP Group of Companies worldwide which is called Open Talk. No Personnel of the Company has been denied access to the Audit Committee.

(d) Details of Compliance and adoption of the nonmandatory requirements of this clause.

The Company has Mandatory requirements of this clause. As regards the Non-Mandatory requirements the extent of Compliance has been stated in this report against each item.

with mandatory requirements complied with all the

33

DIRECTORS REPORT

8.

Means of Communication
: Published in the newspapers in terms of Clause 41 of the Listing agreement. : (i) Economic Times Mumbai, Delhi, Kolkata, Ahmedabad, Bangalore, Hyderabad, Chennai Pune, Chandigarh in Engilish editions. (ii) Maharashtra Times Mumbai edition in Marathi. Any website, where displayed Whether it also displays official news releases : Yes www.castrol.co.in

(a) Quarterly Results

(v) Results for the year ending 31st December, 2006 January/ February 2007. (c) Date of Book closure : 4th April, 2006 to 21st April, 2006 (both days inclusive).

(b) Newspapers in which results are normally published in

(d) Dividend Payment date(s) : Interim 10th August, 2005 Final on or after 21st April, 2006. (e) Listing on Stock Exchange : Mumbai The Company has paid the listing fees for the period 1st April, 2005 to 31st March, 2006. : 870

(f)

(i) (ii)

Stock Code Physical

Demat ISIN Number : INE 172A01019 for NSDL & CDSL : Please See Annexure I of this Report.

: Yes

The presentations made : No to institutional investors or to the analysts

(g) Market price Data: High/Low during each month in last financial year (h) Performance in comparison to Broad-based indices such as BSE Sensex, CRISIL Index etc. (i) Registrar and Transfer Agents

: Please See Annexure II of this Report.

9.

General Shareholder Information


: Friday, 21st April, 2006, at 3.00 p.m., at Birla Matushri Sabhagar, 19 Marine Lines, Mumbai 400 020. : (i) January 2006 to December 2006. (ii) First Quarter 2006. Results 2nd/3rd week of April 2006. (iii) Half yearly Results 2006 2nd/3rd week of July 2006. (iv) Third Quarter 2006. Results 2nd/3rd week of October 2006.

(a) AGM Date, Time and Venue

: Tata Share Registry Limited, Army and Navy Building, 148, M.G. Road, Mumbai 400 001. : The Company Secretary has been authorized to approve the transfer of shares which is done within the time-limit stipulated by the Listing Agreement. The said transfers are then noted at the subsequent Transfer and Shareholders/Investors Grievances Committee Meeting.

(b) Financial Year

(j)

Share Transfer System

34

DIRECTORS REPORT

(k) Distribution of
Shareholding as on 24-02-2006 Upto 500 501 1000 1001 2000 2001 3000 3001 4000 4001 5000 5001 10000 10001 and above Grand Total (l) Dematerialisation of Shares and liquidity

No. of Shares

No. of Shareholders 52473 4559 3048 976 504 174 225 126 62085

% of Shareholders 84.52 7.35 4.91 1.57 0.81 0.28 0.36 0.20 100.00

As required under sub-clause IV E ( iii) of the Revised Clause 49 of the Listing Agreement with the Bombay Stock Exchange Ltd., the Compensation Policy in relation to the Non-Executive Directors of the Company has been displayed on the Companys website referred to above.

6491857 3388019 4446701 2432958 1706,898 802323 1551187 102820355 123640298

B. NON-MANDATORY REQUIREMENTS
1. (a) Whether Chairman : No, but the Company of the Board is reimburses expenses in entitled to maintain relation to the performance a Chairmans office of his duties as Chairman. at the Companys expense and also allowed reimbursement of expenses incurred in performance of his duties (b) Independent : As on date there is Directors may have no Independent Director a time not having a term of office exceeding in the exceeding nine years aggregate a period of on the Board of the nine years on the Company. Board of the Company 2. Remuneration Committee : Please refer to Sr. No. 4 of this Report. Shareholder rights : As the Companys half The half-yearly yearly results are published declaration of financial in English newspapers performance including having a circulation all over summary of the India and in a Marathi significant events in last newspaper (having a six months should be sent circulation in Mumbai) to each household of the same are not sent to Shareholders the shareholders of the Company. Normally, there is no second half-yearly results as the audited results are taken on record by the Board and then communicated to the shareholders through the Annual Report.

: 41.71% of the paid-up capital has been dematerialised as on 24th February, 2006 which includes 16.86% of the paid-up capital held by Castrol Ltd., U.K.

(m) Outstanding GDRs/ : The Company has not ADRs/Warrants or any issued any GDRs/ADRs/ Convertible instruments, Warrants or any conversion date and likely Convertible instruments. impact on equity (n) Plant Locations : The Companys plants are located at Patalganga, Paharpur, Silvassa and Tondiarpet. : i. Shareholders correspondence should be addressed to: Tata Share Registry Limited. Unit: Castrol India Limited Army and Navy Building, 148, M.G. Road, Mumbai 400 001. Tel. No. 5656 8484 Fax No. 5656 8494/ 5656 8496 ii. Shareholders holding shares in electronic mode should address all their correspondence to their respective Depository Participants.

(o) Address for correspondence

3.

35

DIRECTORS REPORT

4.

Audit Qualification

: Presently not applicable to the Company.

7.

Whistle Blower Policy

5.

Training of Board Member : Presently the Company Company may train does not have such a in Board Members in training programme. the business model of the Company as well as the risk profile of the business parameters of the Company, their responsibilities as directors, and the best ways to discharge them Mechanism for evaluating : non-executive Board Members The performance evaluation of non-executive Directors may be done by a peer group comprising the entire Board of Directors, excluding the Director being evaluated; and Peer Group evaluation should be the mechanism to determine whether to extend/continue the terms of appointment of Non-Executive Directors Presently the Company does not have such a mechanism as contemplated for evaluating the performance of Non-Executive Board Members.

: Presently the Company does not have a Whistle Blower policy but has a policy similar to it for the entire BP Group of Companies worldwide which is referred to as Open Talk

6.

On behalf of the Board of Directors


N. K. Kshatriya Managing Director A. Ahmad Director Supply Chain A. S. Ramchander Director Automotive A. P. Mehta Finance Director

Mumbai Dated: 18th March 2006

36

DIRECTORS REPORT

Annexure I

Castrol India Limited

Market Price Data - High/Low during each month in the Year 2005 Month Highest January February March April May June July August September October November December 224.90 215.50 220.40 202.50 208.10 238.30 236.25 218.55 232.40 230.45 233.50 267.90 Rate (Rs.) Lowest 191.90 197.60 188.05 186.05 186.75 199.50 210.35 207.25 208.70 199.10 206.50 230.70

Annexure II

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


Managing Director

A. S. Ramchander
Director Automotive

A. Ahmad
Director Supply Chain

A.P. Mehta
Finance Director

Mumbai Dated: 18th March 2006

37

DIRECTORS REPORT

AUDITORS CERTIFICATE To The Members of Castrol India Limited We have examined the compliance of conditions of Corporate Governance by Castrol India Limited, for the year ended December 31, 2005 as stipulated in Clause 49 of the Listing Agreement of the said Company with the Stock Exchange. The compliance of conditions of Corporate Governance is the responsibility was of the to management. procedures Our and examination limited We state that no investor grievance is pending for a period exceeding one month against the Company as per the records maintained by the Share Registrars and reviewed by the Shareholders/Investors Grievance Committee. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the abovementioned Listing Agreement.

For S.R. BATLIBOI & CO. Chartered Accountants per Hemal Shah Partner Membership No. : 42650 Mumbai, Dated: 18th March 2006.

38

DIRECTORS REPORT

Shareholding Pattern as on 24th February, 2006

Sr. No.

Category

No. of shareholders

No. of shares held

% to paid-up capital

(i) Foreign Collaborator

87687455

70.92

(ii) Foreign Company

135474

0.11

(iii) Foreign Institutional Investors

26

1108070

0.89

(iv) Overseas Bodies Corporate

1003

0.00

(v) Non-Resident Individuals

324

271663

0.22

(vi) Financial Institutions

11

9532402

7.71

(vii) Indian Mutual Funds

18

1768890

1.43

(viii) (a) Nationalised Banks (b) Other Banks

33 72

119429 134893

0.10 0.11

(ix) Domestic Companies

1276

2155747

1.74

(x) Resident Individuals

60316

20719263

16.76

(xi) Directors and Relatives Grand Total

2 62083

6009 123640298

0.01 100.00

39

AUDITORS REPORT
Auditors Report
To the Members of Castrol India Limited 1. We have audited the attached Balance Sheet of Castrol India Limited as at December 31, 2005 and also the Profit and Loss Account and the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys 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 (Auditors Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. Further to our comments in the Annexure referred to above, we report that: i. ii. 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; In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

iii. The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account; iv. In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; v. On the basis of the written representations received from the directors, as on December 31, 2005, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on December 31, 2005 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

vi. In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India; a. c. in the case of the balance sheet, of the state of affairs of the Company as at December 31, 2005; in the case of cash flow statement, of the cash flows for the year ended on that date. b. in the case of the profit and loss account, of the profit for the year ended on that date; and

For S. R. BATLIBOI & CO. Chartered Accountants per Hemal Shah Partner Membership No. : 42650 Mumbai January 13, 2006

40

AUDITORS REPORT
Annexure referred to in paragraph 3 of our report of even date Re: Castrol India Limited
(i) (a) (b) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. All fixed assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed to us, no material discrepancies were noticed on such verification. There was no substantial disposal of fixed assets during the year. The management has conducted physical verification of inventory at reasonable intervals during the year. The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification. As informed to us, the Company has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, provisions of clause 4(iii) (b), (c) and (d) of the Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the Company. As informed to us, the Company has not taken any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Accordingly, provisions of clause 4(iii) (f) and (g) of the Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the Company.

(c) (ii) (a) (b) (c) (iii) (a)

(b)

(iv)

In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas. (a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Act that need to be entered into the register maintained under section 301 have been so entered. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time except in respect of certain transactions, where because of the unique and specialized nature of the items involved and absence of any comparable prices, we are unable to comment whether the transactions were made at the prevailing market prices at the relevant time.

(v)

(b)

(vi)

The Company has not accepted any deposits from the public.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. (viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

41

AUDITORS REPORT

(ix)

(a)

(b)

(c)

The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues applicable to it. According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable. According to the records of the Company, the dues outstanding of income-tax, sales-tax, wealthtax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:
Amount Period to which (Rs. in Crores) the amount relates 60.54 1987 to 2005 Forum where dispute is pending Assistant Commissioner, Deputy Commissioner, Tribunal, High Court.

Name of the statute Nature of dispute Central Sales Tax Act & Local Sales Tax Act Non submission of declaration forms, Disallowance of Set off claim, Classification dispute, Rate dispute, Disallowance of credit notes and rebates, Other dues Valuation, Modvat Credit, Stock Differences, Classification, Provisional Assessments, Other Issues Valuation Service Tax on Royalty, Service Tax on rented tanks

Central Excise Act, 1944

66.74

1990 to 2005

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

0.08 7.50

1998 1997 to 2004

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

(x) (xi)

The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders. (xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. (xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisions of clause 4(xiii) of the Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the Company. (xiv) In respect of dealing/trading in shares, securities, debentures and other investments, in our opinion and according to the information and explanations given to us, proper records have been maintained of the transactions and contracts and timely entries have been made therein. The shares, securities, debentures and other investments have been held by the Company, in its own name. (xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions. (xvi) The Company did not have any term loans outstanding during the year. (xvii) According to the information and explanations given to us and on an overall examination of the balance sheet and cash flow statement of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

42

AUDITORS REPORT

(xviii)The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Companies Act, 1956. (xix) The Company did not have any outstanding debentures during the year. (xx) The Company has not raised any money through public issue during the year. Accordingly, the provisions of clause 4(xx) of the Companies (Auditors Report) Order, 2003 (as amended) are not applicable to the Company. (xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no material fraud on or by the Company has been noticed or reported during the course of our audit.

For S. R. BATLIBOI & CO. Chartered Accountants per Hemal Shah Partner Membership No. : 42650 Mumbai January 13, 2006

43

BALANCE SHEET
Balance Sheet as at 31st December, 2005
2005
Schedule SOURCES OF FUNDS Shareholders Funds Share Capital Reserves and Surplus Loan Funds Unsecured Loans Deferred Tax Liability (Net) TOTAL Rupees in Crores Rupees in Crores

2004
Rupees in Crores

A B C

123.64 266.42 390.06 2.79

123.64 236.43 360.07 3.72 17.41 381.20

11.85 404.70

APPLICATION OF FUNDS Fixed Assets Gross Block Less: Depreciation Less: Impairment of Fixed Assets Net Block Capital Work-In-Progress Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash & Bank Balances Other Current Assets Loans & Advances Less: Current Liabilities & Provisions Current Liabilities Provisions Net Current Assets TOTAL Notes on Accounts The schedules referred to herein form an integral part of the Balance Sheet.
As per our report of even date For S. R. BATLIBOI & CO. Chartered Accountants S. M. DATTA Executive Directors A. AHMAD A. S. RAMCHANDER Non-Executive Directors R. GOPALAKRISHNAN D. S. PAREKH

E 248.75 113.14 3.11 132.50 5.83 F G 213.90 151.64 39.85 0.01 76.60 482.00 H 239.84 83.93 323.77 158.23 404.70 M 197.02 85.98 283.00 102.52 381.20 166.24 131.26 29.69 0.01 58.32 385.52 138.33 108.14 249.79 100.89 3.79 145.11 4.66 149.77 128.91

Chairman

N. K. KSHATRIYA

Managing Director

per HEMAL SHAH Partner Membership No. : 42650 Mumbai January 13, 2006

A. H. MODY Company Secretary & Head Legal

Director Director

A. P MEHTA .

Director

Director Director

P. HUGHES

Director

44

PROFIT & LOSS ACCOUNT


Profit and Loss Account for the year ended 31st December, 2005
2005
Schedule INCOME Sales [Net of rebates Rs. 39.37 Crores (2004 : Rs. 36.89 Crores)] Less: Excise Duty Net Sales Other Income Total Income EXPENDITURE Cost of Materials Operating and Other Expenses Interest Depreciation Total Expenditure PROFIT BEFORE TAXATION AND EXCEPTIONAL ITEMS (Add)/Less: Exceptional Items Reversal of Voluntary Retirement Scheme Expenses Plant closure Write (Back)/Off of Impairment of Fixed Assets Plant closure PROFIT BEFORE TAXATION Taxation Current [Including Wealth Tax Rs. 0.12 Crore (2004 : Rs. 0.16 Crore)] Deferred Taxation Fringe Benefit Tax Excess Income Tax provision for earlier years written back PROFIT AFTER TAXATION Add: Balance as per last Balance Sheet brought forward PROFIT AVAILABLE FOR APPROPRIATION APPROPRIATION TO: Interim Dividend Tax on Interim Dividend Proposed Final Dividend Tax on Proposed Final Dividend Tax on Final Dividend 2004 Education Cess on Tax on Final Dividend 2003 General Reserve Balance carried forward I Rupees in Crores 1668.39 238.01 1430.38 20.07 1450.45 Rupees in Crores

2004
Rupees in Crores 1528.25 218.09 1310.16 22.73 1332.89

J K L

847.97 370.73 3.01 18.93 1240.64 209.81

777.02 325.56 2.87 24.88 1130.33 202.56

(0.49) (0.33) 210.63 68.16 (5.56) 5.09 (3.87) 146.81 16.70 163.51

3.72 3.55 195.29 68.73 (0.90) 127.46 18.71 146.17

49.46 6.94 52.55 7.37 0.50 16.00 30.69 163.51

49.46 6.46 52.55 6.87 0.13 14.00 16.70 146.17 10.31

Earning per share (Basic & Diluted) (Face Value of Rs. 10/-) [Refer Note 1(I) of Schedule M)] Notes on Accounts M The schedules referred to herein form an integral part of the Profit and Loss Account.
As per our report of even date For S. R. BATLIBOI & CO. Chartered Accountants S. M. DATTA Executive Directors A. AHMAD A. S. RAMCHANDER Non-Executive Directors R. GOPALAKRISHNAN D. S. PAREKH Director Director P HUGHES . Director Director A. P MEHTA . Chairman N. K. KSHATRIYA

11.87

Managing Director

Director

per HEMAL SHAH Partner Membership No. : 42650 Mumbai January 13, 2006

A. H. MODY Company Secretary & Head Legal

Director

45

SCHEDULES
Schedules forming part of the Balance Sheet as at 31st December, 2005 SCHEDULE A
2005
Rupees in Crores SHARE CAPITAL Authorised 124,000,000 (2004 : 124,000,000) Equity Shares of Rs. 10/- each 124.00 124.00

2004
Rupees in Crores

Issued and Subscribed (Refer Notes below) 123,640,298 (2004 : 123,640,298) fully paid up Equity Shares of Rs. 10/- each 123.64 123.64 123.64 123.64

Notes: 1. Includes 87,687,455 (2004 : 87,687,455) Equity Shares of Rs. 10/- each held by Castrol Ltd., U.K., the Holding Company. (Also refer Note 5 of Schedule M). 2. Includes 116,353,318 (2004 : 116,353,318) Equity Shares allotted as fully paid up Bonus Shares by capitalisation of Share Premium/ General Reserve.

SCHEDULE B
2005
Rupees in Crores RESERVES & SURPLUS Capital Reserve General Reserve As per last Balance Sheet Add: Transferred from Profit and Loss Account Balance in Profit and Loss Account 206.11 16.00 222.11 30.69 266.42 192.11 14.00 206.11 16.70 236.43 13.62 13.62 Rupees in Crores

2004
Rupees in Crores

46

SCHEDULES
Schedules forming part of the Balance Sheet as at 31st December, 2005 SCHEDULE C
2005
Rupees in Crores LOAN FUNDS UNSECURED LOANS Sales Tax Deferral Loan (Interest Free) From SICOM Ltd. (For Patalganga Plant) [Repayable within one year Rs. Nil (2004 : Rs. 0.23 Crore)] From Government of Karnataka, Department of Industries & Commerce (For Hosakote Plant) [Repayable within one year Rs. Nil (2004 : Rs. 0.19 Crore)] From SICOM Ltd. (For Patalganga Plant Repayable from July 2010) 0.23

2004
Rupees in Crores

0.70

2.79 2.79

2.79 3.72

SCHEDULE D
2005
Rupees in Crores DEFERRED TAX LIABILITY (NET) [Refer Note 1(j) of Schedule M] Deferred Tax Assets and Liabilities are attributable to the following items: Liabilities Depreciation Less: Assets Provision for Doubtful Debts Voluntary Retirement Scheme Expenses Accrual for expenses allowable only on payment Others 1.32 2.05 3.18 2.65 9.20 11.85 1.15 3.25 4.48 0.80 9.68 17.41 21.05 27.09 Rupees in Crores

2004
Rupees in Crores

47

SCHEDULES
Schedules forming part of the Balance Sheet as at 31st December, 2005 SCHEDULE E
FIXED ASSETS
GROSS BLOCK
As at 1.1.2005 Additions for the year Deductions As at As at for the 31.12.2005 1.1.2005 year 0.27 6.52

Rupees in Crores
DEPRECIATION
For the On As at year Deductions 31.12.2005

IMPAIRMENT LOSS

NET BLOCK
As at 31.12.2005 As at 31.12.2004

Freehold Land Leasehold Land (1) Buildings (2) Plant & Machinery Plant & Machinery Intangibles Furniture, Fixtures and Office Equipments Motor Vehicles

6.79

6.52

6.79

0.92 67.32

0.86

2.01

0.92 66.17

0.30 14.62

0.02 2.57

0.68

0.32 16.51

0.60 49.66

0.62 52.70

149.94

5.65

7.55

148.04

73.14

12.30

4.47

80.97

3.11

63.96

73.01

2.45

0.24

2.69

1.13

0.74

1.87

0.82

1.32

21.78

4.49

2.17

24.10

11.21

3.26

1.29

13.18

10.92

10.57

0.59 249.79

11.24 8.86

0.28 12.28 6.30

0.31 248.75 249.79

0.49 100.89 79.58

0.04 18.93 24.88

0.24 6.68 3.57

0.29 113.14 100.89

3.11 3.79

0.02 132.50

0.10 145.11

Previous Year

247.23

Capital Work-In-Progress (Including advances on Capital Account)

5.83
138.33

4.66
149.77

Refer Notes 1(b) & 1(c) of Schedule M relating to Fixed Assets, Depreciation and Impairment. Notes : (1) (2) (3) Cost includes Rs. 0.49 Crore (2004 : Rs. 0.49 Crore) for which execution of Land Lease agreement in respect of plots in Mumbai is in progress. Comprises of cost of premises including shares of paid up value of Rs. 0.01 Crore (2004 : Rs. 0.01 Crore) in Co-operative Societies. Freehold Land Rs. 1.34 Crores (2004 : Rs. 1.45 Crores), Building Rs. 6.13 Crores (2004 : Rs. 7.06 Crores), Plant & Machinery Rs. 2.80 Crores (2004 : Rs. 4.44 Crores) and Furniture & Fixtures Rs. 0.98 Crore (2004 : Rs. 1.29 Crores) are retired from active use and held for disposal. Accordingly these assets are carried at lower of cost and net realisable value. The Net Book Value of such assets as at 31st December, 2005 is Rs. 11.25 Crores (2004 : Rs. 14.24 Crores).

48

SCHEDULES
Schedules forming part of the Balance Sheet as at 31st December, 2005 SCHEDULE F
2005
Rupees in Crores INVESTMENTS [Refer Note 1(d) of Schedule M] LONG TERM Other than trade: Quoted: 30,100 (2004 : 30,100) 6.75% Tax Free Bonds (US 64) of Unit Trust of India of Rs. 100/- each [Market Value Rs. 0.31 Crore (2004 : Rs. 0.31 Crore)] CURRENT Other than trade: Unquoted: Government Treasury bills [Face Value Rs. 111.00 Crores (2004 : Rs. 130.00 Crores)] Purchased during the year Rs. 394.27 Crores (2004 : Rs. 628.88 Crores) Sold during the year Rs. 415.04 Crores (2004 : Rs. 584.75 Crores) Government Securities* [Matured Face Value Rs. 0.02 Crore (2004 : Rs. 0.01 Crore)] 107.82 128.59 0.30 0.30

2004
Rupees in Crores

0.02 108.14

0.02 128.91

Government Securities lodged with Mumbai Port Trust.

49

SCHEDULES
Schedules forming part of the Balance Sheet as at 31st December, 2005 SCHEDULE G
2005
Rupees in Crores CURRENT ASSETS, LOANS AND ADVANCES Inventories* [See Note 1(e) of Schedule M] Raw Materials Finished Products Traded Items Packages Stores & Consumables

2004
Rupees in Crores

104.39 98.31 4.98 4.97 1.25 213.90

81.78 70.71 6.26 6.08 1.41 166.24

* Including Goods in Transit Sundry Debtors @ Secured Unsecured, considered good Exceeding six months Others Unsecured, considered doubtful (Exceeding six months) Less: Provision for Doubtful Debts 4.79 9.38 137.47 3.91 155.55 3.91 151.64 @ Includes amount due from Companies under same management Rs. 16.90 Crores (2004 : Rs. 9.78 Crores), list of which as identified by management is given below. Aspac Lubricants (Malaysia) Sdn Bhd, Aspac Oil (Thailand) Ltd., BP Energy India Pvt. Ltd., BP Exploration (EI Djazair) IN Salah, BP Exploration (IN Salah) Ltd., BP India Services Pvt. Ltd., BP International Holdings Oil, BP International Ltd., BP LUB Shanghai SIBU, BP Marine Ltd., BP Middle East, BP Oil International Ltd., BP Oil UK Ltd., BP Singapore OTI, BP Singapore PTE Ltd., BP Singapore Spec Ind Lubes, BP Solar Espana, BP Southern Africa, BPSA Lubes, Castrol Industrial North America, Castrol International Ltd., Lubricants UK Ltd., PT Castrol Indonesia. Cash and Bank Balances Cash on Hand With Scheduled banks: On Current Account [Including cheques on hand Rs. 3.02 Crores (2004 : Rs. 4.35 Crores)] On Deposit Account Unclaimed Dividend Accounts 0.04 0.05 3.98 2.17 125.11 3.14 134.40 3.14 131.26

35.41 0.01 4.39 39.85

24.57 0.01 5.06 29.69

Other Current Assets Interest accrued on Investments 0.01 0.01 0.01 0.01

50

SCHEDULES
Schedules forming part of the Balance Sheet as at 31st December, 2005 SCHEDULE G (Contd.)
2005
Rupees in Crores Loans and Advances (Unsecured, considered good, unless otherwise stated) Advances recoverable in cash or in kind or for value to be received (Refer Note below) Considered good Considered doubtful Less: Provision for doubtful advances Balances with Customs, Port Trust and Excise Authorities

2004
Rupees in Crores

73.28 2.62 75.90 2.62 73.28 3.32 76.60 482.00

50.40 2.12 52.52 2.12 50.40 7.92 58.32 385.52

Note: Amounts due from Directors of the Company Rs. 0.62 Crore (2004 : Rs. 0.19 Crore) and maximum amount due from Directors of the Company at any time during the year Rs. 0.64 Crore (2004 : Rs. 0.22 Crore).

SCHEDULE H
2005
Rupees in Crores CURRENT LIABILITIES AND PROVISIONS Current Liabilities Sundry Creditors (Refer Note 12 of Schedule M) Advances from Customers Interest accrued and not due on Loans/Deposits Amount retained for taxation liability of Castrol Ltd., U.K. Investor Education and Protection Fund shall be credited by the following amount (Refer Note 1 below) Unclaimed Dividends Provisions Provision for Indirect Taxation (Refer Note 2 below) Provision for Current Taxation (Net of Advance Tax) Provision for Fringe Benefit Tax Proposed Final Dividend Tax on Proposed Final Dividend 232.97 1.47 0.15 0.86 189.32 1.62 0.10 0.92 Rupees in Crores

2004
Rupees in Crores

4.39 239.84 10.47 11.48 2.06 52.55 7.37 83.93 323.77

5.06 197.02 11.66 14.90 52.55 6.87 85.98 283.00

Notes: (1) (2)

There is no amount due and outstanding as at Balance Sheet date to be credited to Investor Education and Protection Fund. Movement in Provision for Indirect Taxation Rupees in Crores Excise Balance as at 1st January, 2005 Additions during the year Reversals during the year Balance as at 31st December, 2005 5.30 0.05 (1.38) 3.97 Sales Tax 6.36 1.17 (1.03) 6.50 Total 11.66 1.22 (2.41) 10.47

51

SCHEDULES
Schedules forming part of the Profit and Loss Account for the year ended 31st December, 2005 SCHEDULE I
2005
Rupees in Crores OTHER INCOME Interest (Gross) From Current Investments (Non trade) On Bank Deposits On Income Tax Refund Others [Tax Deducted at Source Rs. 0.03 Crore (2004 : Rs. 0.01 Crore)] Profit on Sale of Investments Current Profit on Disposal/Write off of Fixed Assets (Net) Miscellaneous Income [Tax Deducted at Source Rs. 0.63 Crore (2004 : Rs. 0.48 Crore)] Debts written off in earlier years, realised Excess Provision for Doubtful Debts written back Rupees in Crores

2004
Rupees in Crores

0.02 0.13 1.79 0.58 2.52 5.07 12.26 0.22 20.07

0.02 0.06 2.87 0.75 3.70 3.90 1.46 8.65 0.14 4.88 22.73

SCHEDULE J
2005
Rupees in Crores COST OF MATERIALS Opening Stock Raw Materials and Packages Traded Items Add: Purchases Less: Closing Stock Raw Materials and Packages Traded Items

2004
Rupees in Crores

87.86 6.26 94.12 890.50 984.62 109.36 4.98 114.34 870.28

73.21 7.53 80.74 787.99 868.73 87.86 6.26 94.12 774.61 73.72 70.71 3.01 (0.60) 777.02

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

70.71 98.31 (27.60) 5.29 847.97

Note: Purchases include foreign exchange difference on imports Loss Rs. 1.71 Crores (2004 : Gain Rs. 0.57 Crore)

52

SCHEDULES
Schedules forming part of the Profit and Loss Account for the year ended 31st December, 2005 SCHEDULE K
2005
Rupees in Crores OPERATING AND OTHER EXPENSES Salaries, Wages and Bonus [Refer Note 1(f) of Schedule M] Performance Linked Incentive to Wholetime Directors Contribution to Provident and Pension Funds [Refer Note 1(f) of Schedule M] Gratuity [Refer Note 1(f) of Schedule M] Staff Welfare Expenses Rent Rates & Taxes Power & Fuel Stores & Consumables Freight & Forwarding Charges Insurance Repairs & Maintenance Land & Building Repairs & Maintenance Plant & Machinery Repairs & Maintenance Others Bad Debts Written Off Provision for Doubtful Debts (Net of amounts written back Rs. 1.61 Crores) Provision for Doubtful Advances Processing & Filling Charges Non-recovered Taxes Advertisement & Sales Promotion Stock Point Operating Charges Loss on Disposal/Write Off of Fixed Assets (Net) Directors Sitting Fees Voluntary Retirement Scheme Expenses [Refer Note 1(k) of Schedule M] Commission to Resident Non-Wholetime Indian Directors Royalty Sales Promotion Fee Travelling Expenses Miscellaneous Expenses (Refer Note 11 of Schedule M) (Net) 47.82 0.76 6.88 4.62 7.21 67.29 13.36 1.84 3.75 0.92 59.61 2.19 2.33 2.36 5.84 0.89 0.78 0.50 24.02 5.80 77.55 15.48 2.07 0.03 0.95 0.26 23.40 18.87 15.53 25.11 370.73 Rupees in Crores

2004
Rupees in Crores 46.12 0.43 5.88 5.29 7.51 65.23 12.55 1.67 3.53 1.14 47.56 2.37 1.97 2.33 4.16 5.20 21.72 12.06 60.00 15.40 0.03 0.51 0.26 21.70 13.34 12.60 20.23 325.56

SCHEDULE L
2005
Rupees in Crores INTEREST To Banks On Others 2.43 0.58 3.01

2004
Rupees in Crores 2.26 0.61 2.87

53

SCHEDULES
Schedules forming part of the Balance Sheet as at 31st December, 2005 and the Profit and Loss Account for the year ended on that date. SCHEDULE M
NOTES ON ACCOUNTS
1. Accounting Policies : (a) Basis of Preparation of Accounts : The accounts have been prepared to comply in all material aspects with applicable accounting principles in India, mandatory Accounting Standards issued by The Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956. The Financial Statements have been prepared under the historical cost convention on an accrual basis. (b) Fixed Assets and Depreciation : Fixed Assets (Including Plant & Machinery Intangibles) are stated at cost (Net of Cenvat and VAT wherever applicable) less accumulated depreciation and impairment loss. Leasehold land and Leasehold improvements are being amortised over the period of lease. Depreciation is provided pro-rata to the period of use on straight-line method based on the estimated useful lives of the assets, which have been determined by management, as stated below : FIXED ASSETS Residential and Office Building Factory Building Plant & Machinery Plant & Machinery Intangibles Moulds Furniture & Fixtures USEFUL LIVES 25 years 30 years 10 years to 21 years 4 years 4 years 8 years FIXED ASSETS Office Equipments Computers Vehicles Workshop Equipments* Dealer Boards USEFUL LIVES 10 years 4 years 4 years 4 years 3 years

* Workshop Equipments provided against Sales Agreements are depreciated over the standard period of Agreement. Assets individually costing less than Rs. 5,000/- are fully depreciated in the year of acquisition. (c) Impairment of Assets : (i) The carrying amounts of assets are reviewed at each Balance Sheet date for indicators of impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. (ii) After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life. (iii) A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment. Valuation of Investments : Long term Investments are stated at cost less provision, if any, for diminution, which is other than temporary in nature. Current Investments are valued at lower of cost and net realisable value. Valuation of Inventories : Raw Materials, Packages, Traded Items and Finished Goods are valued at lower of monthly weighted average cost and net realisable value. Cost of Finished Goods includes material & packaging cost, overheads and Excise Duty. Custom Duty on stock lying in Bonded Warehouses is included in cost. Stores and Consumables are valued at cost. Employees Retirement Benefits : Retirement benefits in the form of Provident Fund are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due. Annual Contribution to Gratuity Fund is based on an actuarial valuation as on the Balance Sheet date. Monthly contribution to Pension Fund is determined in accordance with Companys Pension Scheme. Apart from this, under the Companys Pension Scheme, certain categories of employees on retirement, are eligible for monthly differential Pension which is accounted monthly on payment basis. As per Companys scheme, accrued liability towards encashment of leave accumulated by workers is provided for on an actuarial basis.

(d)

(e)

(f)

54

SCHEDULES
SCHEDULE M (Contd.)
(g) Recognition of Income and Expenditure : Sales are recognised when goods are supplied and are recorded net of rebates and Sales Tax/VAT and inclusive of Excise Duty. Expenses are accounted for on accrual basis and provision is made for all known losses and expenses. Foreign Currency transactions : Foreign Currency transactions are accounted at exchange rates on the date of transactions. Premium on forward cover contracts in respect of import of raw materials is charged to Profit and Loss Account over the period of contract. Amounts payable and receivable in foreign currency as at the Balance Sheet date, not covered by forward contracts, are reinstated at the applicable exchange rates prevailing on that date. All exchange differences arising on revenue transactions, not covered by forward contracts, are charged to Profit and Loss Account. Provision : A provision is recognised when an enterprise has a present 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 a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management 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 management estimates. Taxation : (i) Provision for Current Income Tax is made in accordance with the Income Tax Act, 1961. (ii) Deferred Tax is recognised, subject to the considerations of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. (iii) The tax year for the Company being the year ending 31st March, the provision for taxation for the year is the aggregate of the provision made for the three months ended 31st March, 2005 and the provision based on the figures for the remaining nine months upto 31st December, 2005, the ultimate tax liability of which will be determined on the basis of the figures for the period 1st April, 2005 to 31st March, 2006. Voluntary Retirement Scheme Expenses are fully written off to the Profit and Loss Account in the year in which they accrue. Earning Per Share : Basic earning per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares). For the purpose of calculating diluted earning per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

(h)

(i)

(j)

(k) (l)

2.

3.

Estimated amount of contracts (net of advances) remaining to be executed on capital account and not provided for Rs. 2.73 Crores (2004 : Rs. 2.53 Crores). 31st December, 31st December, 2005 2004 Rupees Rupees in Crores in Crores Contingent Liabilities not provided for in the accounts : (a) Counter Guarantees given to Banks 5.76 5.73 (b) Excise/Sales Tax/Customs Demands made by the Authorities, in respect of which appeals have been filed 12.98 11.50 (c) Claims against the Company not acknowledged as debts estimated at : In respect of Third Parties Miscellaneous 3.63 5.76 (d) The Company has received show cause notices from Excise Authorities in respect of stock differences at some of its plants aggregating to Rs. 18.30 Crores (2004 : Rs. 15.46 Crores). Recently the Company received two orders from the Commissioner dropping demands aggregating Rs. 9.31 Crores in respect of Patalganga Plant. The Commissioner has upheld the Companys contention that the stock differences have been almost fully reconciled/explained. The pending demands on account of stock differences aggregate to Rs. 8.99 Crores. Considering that a favourable order has been received setting out a ratio that minor differences are condonable, the demands at other plants are also likely to be eventually dropped. The Company has also obtained legal opinions which concur with this view. However, as a matter of abundant caution, the Company has made provision/payments totalling Rs. 3.82 Crores. Certain disputed demand notices relating to Indirect Taxes amounting to Rs. 101.49 Crores (2004 : Rs. 38.20 Crores) have neither been considered as contingent liabilities nor acknowledged as claims, based on expert legal opinions obtained/internal

4.

55

SCHEDULES
SCHEDULE M (Contd.)
assessment. Further, the Company has been consistent in adopting the policy of assessing risks as set out in their health check report from reputed Tax Advisors. The Company is of the view that the possibility of the demands materialising is remote. 5. A Shareholder of the Company had filed a Public Interest Petition in the Delhi High Court interalia challenging the allotment of 3,537,862 equity shares on Preferential basis to Castrol Ltd., U.K. The said Petition has been dismissed by the Delhi High Court on 11th January 2005. However, the Shareholder has gone to appeal by way of a Special Leave Petition to the Supreme Court of India. The Appeal has been admitted but no interim relief has been granted. Segment Information : The business segment has been considered as the primary segment. The Company is organised into two business segments, Automotive & Non-Automotive. The above business segments have been identified considering : The customers The differing risks and returns The organisation structure The internal financial reporting system Segment revenue, results, assets and liabilities have been accounted for on the basis of their relationship to the operating activities of the segment and amounts allocated on a reasonable basis. Rupees in Crores 31st December, 2005
Automotive NonAutomotive Unallocated Total Automotive

6.

31st December, 2004


NonAutomotive Unallocated Total

Revenue Net Sales/Income from Operations Results Segment Results Unallocable Expenditure net of Unallocable Income Write (Back)/Off of Exceptional Items: Plant Closure Expenses Interest Profit Before Taxation Provision For Current Taxation Deferred Taxation Fringe Benefit Tax Excess Income Tax provision for earlier years written back Profit After Taxation Other Information Segment Assets Segment Liabilities Capital Expenditure (Including Capital Work-In-Progress) Depreciation Write (Back)/Off of Impairment of Fixed Assets Plant Closure Geographical Segment Revenue India Outside India

1205.90 184.51 475.26 219.68

224.48 33.62 105.53 25.62

5.31 (0.82) 3.01 147.67 93.10

1430.38 218.13 5.31 (0.82) 3.01 210.63 68.16 (5.56) 5.09 (3.87) 146.81 728.46 338.40

1111.69 193.94 400.35 183.07

198.47 20.45 106.01 20.05

8.96 7.27 2.87 158.28 101.45

1310.16 214.39 8.96 7.27 2.87 195.29 68.73 (0.90) 127.46 664.64 304.57

11.19 16.00 (0.28)

1.22 2.93 (0.05)

12.41 18.93 (0.33)

8.37 20.59 3.00

1.55 4.29 0.55

9.92 24.88 3.55

1429.53 0.85 1430.38

1309.52 0.64 1310.16

Assets India Outside India

716.21 12.25 728.46

659.15 5.49 664.64

Capital Expenditure (Including Capital Work-In-Progress) India Outside India

12.41 12.41

9.92 9.92

56

SCHEDULES
SCHEDULE M (Contd.)
7. Related Party Disclosures : A. Name of the related party and nature of relationship where control exists : (a) Holding Castrol Ltd., U.K. (Holding Company of Castrol India Ltd.) Companies Burmah Castrol Holdings Ltd. (Holding Company of Castrol Ltd., U.K.) BP PLC (Holding Company of Burmah Castrol Holdings Ltd.) (b) (c) Subsidiary Fellow Subsidiaries with which the Company has transactions Indrol Chemicals & Specialities Private Limited Air BP Lubricants Sales office Aspac Lubricants (Malaysia) Sdn Bhd Aspac Oil (Thailand) Ltd. Aspac Oil Korea BP (Zhongshan) LPG Ltd. BP Asia Pacific Pte Ltd. BP Belgium NV BP Chemicals (Malaysia) BP Corporation NA Inc. BP Energy India Pvt. Ltd. BP Exploration (EI Djazair) IN Salah BP Exploration (IN Salah) Ltd. BP Gas Marketing Ltd. BP India Ltd. BP India Services Pvt. Ltd. BP International Holdings Oil BP International Ltd. BP Japan KK BP LUB Shanghai SIBU BP Marine Ltd. BP Mauritius Ltd. BP Middle East BP Oil Head Office BP Oil International Ltd. BP Oil UK Ltd. BP Petrolleri A.S. BP Plc BP Sharjah Oil Co. BP Shipping Ltd. BP Singapore BP Singapore - Lubes BP Singapore - Lubricants BP Singapore OTI BP Singapore PTE Ltd. BP Singapore Spec Ind Lubes BP Solar Espana BP Southern Africa BP Southern Africa (Pty.) Ltd. BPI Gas & Power - Head Office BPSA Lubes Burmah Oil Deutschland Burmah Oil TECH GMBH Castrol (UK) - SIBU Castrol (UK) Ltd. Castrol Australia PTY Ltd. Castrol China Ltd. Castrol France S A Castrol Industrial North America Castrol Industrie GMBH Castrol International Ltd. Castrol Italiana SPA Castrol Offshore Castrol PGO UK Castrol South Africa Deutsche BP Aktiengesellschaft Innovene Europe Ltd. Innovene Sales Lubricants Belgium Lubricants UK Corporate Lubricants UK Ltd. Premier Lube M ILS Premier Lubes Aspac Ltd. Premier Lubricants (S) Pte. Ltd. PT Castrol Indonesia Tata BP Solar India Ltd. The Burmah Oil GMBH

(d)

Associates

(e)

Key Management Personnel

Castrol India Ltd. Employees Provident Fund Castrol India Ltd. Staff Pension Fund Castrol India Ltd. Employees Gratuity Fund N. K. Kshatriya Managing Director R. Elston-Green Executive Director R. Pisharody Executive Director U. DeSousa Executive Director A. S. Ramchander Executive Director A. P. Mehta Executive Director A. Ahmad Executive Director

Upto 19th July, 2005 Upto 5th May, 2004 Upto 5th May, 2004 Effective from 1st January, 2005 Effective from 19th July, 2005 Effective from 19th July, 2005 Rupees in Crores 31st December, 2004

B.

Transactions with related parties as per the books of account. 31st December, 2005
Holding Companies Subsidiary Associates Key Management Personnel 2.19 2.23 0.61 0.04 Fellow Subsidiaries 65.03 2.04 5.47 29.91 1.67 0.11 7.32 17.32 Holding Companies

Subsidiary

Associates

Key Management Personnel 1.27 1.91 0.19 0.01

Fellow Subsidiaries 69.85 2.44 4.28 17.34 0.99 0.11 8.40 9.79

Purchase of Materials/Finished Goods Sale of Goods Receiving of Services Rendering of Services & Deputation of Employees Commission Income Contribution to Funds Dividend Royalty Amounts Payable Amounts Receivable Remuneration to Managing Director Remuneration to Executive Directors Loan Outstanding Recovery of Loan & Interest thereon

72.34 23.40 58.72

11.43

72.34 21.70 57.26

11.11

C.

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

57

SCHEDULES
SCHEDULE M (Contd.)
8. Operating Lease for assets taken on lease after 1st April, 2001.* 31st December, 31st December, 2005 2004 Rupees Rupees in Crores in Crores (a) Total (i) (ii) (iii) of future minimum lease payments Not later than one year Later than one year and not later than five years Later than five years 7.43 7.19 0.20 12.97 11.35 10.26 12.10

(b)

Lease payments recognised in the Profit and Loss account

*Office Premises, Residential Flats, Motor Cars and Equipments are obtained on operating lease. The lease terms range from One year to Six years and are renewable at the option of the Company. 9. Information given under Clause 3(i)(a), 3(ii), 4-C, 4-D of Part II of Schedule VI to the Companies Act, 1956. 31st December, 2005 Quantity Value (KLs/MTs) Rupees in Crores (a) Turnover (Net Sales) Class of Goods : Lubricating Oils, Greases, etc. Traded Items 31st December, 2004 Quantity Value (KLs/MTs) Rupees in Crores

225724 747 226471

1403.45 24.84 1428.29 2.09 1430.38

223583 621 224204

1285.31 23.16 1308.47 1.69 1310.16

Old and used Containers

(b)

(i)

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

201521 35704 237225

516.92 258.24 83.87 859.03

195333 33735 229068

449.99 234.52 76.38 760.89

* Does not include adjustment for old and used Containers 31st December, 2005 Value % of Rupees Total in Crores Consumption (ii) Value of all Imported and Indigenous Raw Materials consumed during the year : Imported : Base Oils Additives and Chemicals Indigenous : Base Oils Additives and Chemicals Packages 343.87 61.94 173.05 196.29 83.88 859.03 40.04 7.21 20.14 22.85 9.76 100.00 320.93 53.46 129.06 181.06 76.38 760.89 42.17 7.03 16.96 23.80 10.04 100.00 31st December, 2004 Value % of Rupees Total in Crores Consumption

58

SCHEDULES
SCHEDULE M (Contd.)
31st December, 2005 Quantity Value (KLs/MTs) Rupees in Crores (c) Opening and Closing Stock of Goods produced : Manufactured Grades : Lubricating Oils and Greases Opening Stock Closing Stock [Excluding shortages/losses 490 KLs/MTs (2004 : 612 KLs/MTs)] Traded Items : Opening Stock Purchases Closing Stock 31st December, 2004 Quantity Value (KLs/MTs) Rupees in Crores

14106

70.71

15868

73.72

17999 382 708 343

98.31 6.26 9.96 4.98

14106 436 569 382

70.71 7.53 10.14 6.26

(d)

(e)

Licensed and Installed Capacity : (i) Licensed Capacity Not applicable as per legal advice (ii) Installed Capacity (Technically evaluated as certified by the Management and accepted by Auditors) (Per Year on a single shift basis) 31st December, 31st December, 2005 2004 (KLs/MTs) (KLs/MTs) For production of Lubricating Oils, Greases, Brake Fluids at Patalganga, Kolkata, Chennai, Silvassa. Production figure for 2004 also includes for Ballabgarh.

146764 230109

165764 222433

(f) (g)

Production of Lubricating Oils, Greases, etc. [Including processing done by third parties 20479 KLs/MTs (2004 : 15899 KLs/MTs)] (i)

The relevant information regarding turnover, production, opening and closing stocks is given only in aggregate and no detailed break-up thereof is given as the items are too numerous to be conveniently grouped. (ii) Consumption includes adjustments for shortage/excess, etc. and the effects of reduction of inventory to realisable value. (iii) Quantities of turnover, consumption, production, opening and closing stocks of additives and chemicals are made up of Kilolitres and Metric Tons, but the constituent units of measurement of the items have not been separately identified and indicated. (iv) As the Company manufactures and trades, the information required by Clause 3(ii)(a) of Schedule VI Part II to the Companies Act, 1956 is interpreted to require total amounts to be disclosed in respect of opening stock, closing stock and purchases of traded items. 31st December, 31st December, 2005 2004 Rupees Rupees in Crores in Crores

10.

Directors Emoluments : Total Remuneration (excluding sitting fees) [Refer (b) and (c) below] Includes : (i) Salary and Allowances (ii) Contribution to Provident and other funds (iii) Estimated Value of perquisites * (iv) Performance Linked Incentive to Wholetime Directors (v) Commission to Resident Non-Wholetime Indian Directors [Refer (c) below] * Evaluated as per Income-Tax Rules wherever applicable.

4.67 2.42 0.54 0.69 0.76 0.26

3.43 1.76 0.30 0.68 0.43 0.26

59

SCHEDULES
SCHEDULE M (Contd.)
31st December, 31st December, 2005 2004 Rupees Rupees Rupees in Crores in Crores in Crores (a) Computation of Profit in accordance with Section 309(5) of the Companies Act, 1956 : Profit before Taxation as per Profit and Loss Account Add: Depreciation as per Profit and Loss Account Voluntary Retirement Scheme Expenses Provision for Doubtful Debts (Net on amounts written back) Provision for Doubtful Advances (Reversal)/Charge of Voluntary Retirement Scheme Expenses Plant Closure Write (Back)/Off of Impairment of Fixed Assets Plant Closure Directors Remuneration Directors Sitting Fees

210.63 18.93 0.95 0.78 0.50 (0.49) (0.33) 4.67 0.03 25.04 235.67

195.29 24.88 0.51 3.72 3.55 3.43 0.03 36.12 231.41 13.27 3.90 0.16 4.88 22.21 209.20

Less: Depreciation u/s 350 of the Companies Act, 1956 Profit on sale of Investments (Net) Wealth Tax Excess Provision for Doubtful Debts written back Profit under Section 309(5) of the Companies Act, 1956 (b) Remuneration payable to Managing and Wholetime Directors @ 10% on above profits Restricted by the Board of Directors to Commission payable to resident Non-Wholetime Indian Directors @ 1% on above profits Restricted by the Board of Directors to

12.07 5.07 0.12 17.26 218.41

21.84 4.41 2.18 0.26

20.92 3.17 2.09 0.26

(c)

31st December, 31st December, 2005 2004 Rupees Rupees in Crores in Crores 11. Miscellaneous Expenses include Auditors Remuneration as follows : (i) Audit Fees Statutory # (ii) In other capacity : # Audit Fees Tax Accounts/Audit Other Services (iii) Reimbursement of out of pocket expenses 0.30 0.13 0.16 0.01 0.60 0.25 0.11 0.21 0.01 0.58

# Excluding Service Tax 12. The Company owes to following Small Scale Industrial Undertakings sums outstanding for more than 30 days : ABCD Drums & Barrels Industries Makwell Plasticizers Pvt. Ltd. Royal Castor Products Pvt. Ltd. Amantech Chemicals Pvt. Ltd. Ole Fine Organics Suru Chemicals & Pharmaceuticals Pvt. Ltd. Central Oil Industries Pax Enterprises Tarapur Grease Industries Pvt. Ltd. Crescent International R. G. Desai Industries Vibha Chem Products Pvt. Ltd. Himatax Corporation R. G. Desai & Sons Jinal Plastics Pvt. Ltd. Raj Lubricants (Madras) Ltd. The information regarding Small Scale Industrial Undertakings has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors. 13. Research and Development expenses amounting to Rs. 8.44 Crores (2004 : Rs. 7.50 Crores) are included under relevant heads of expense.

60

SCHEDULES
SCHEDULE M (Contd.)
14. The Directors of Indrol Chemicals & Specialities Private Limited (Indrol), a wholly owned Subsidiary Company, had resolved to put the Company in Voluntary Winding up. On an application made by the Official Liquidator to the Bombay High Court, Indrol was dissolved with effect from 28th April, 2005 by an order of the Bombay High Court. 31st December, 31st December, 2005 2004 Rupees Rupees in Crores in Crores 15. C.I.F. Value of Imports : Raw Materials Capital Goods Expenditure in Foreign Currency (on accrual basis) : Travel Imports of goods for resale Others (Net of tax where applicable) Royalty (Net of tax) Earnings in Foreign Exchange (on accrual basis) : Supplies to Foreign Vessels Commission and Others FOB value of goods exported 354.19 1.04 308.47 0.66

16.

0.93 8.96 2.76 19.89

0.91 8.08 6.14 18.45

17.

6.93 1.67 0.85

2.09 0.99 0.64

18.

Details of Dividend remitted during the year, to Two (2004 Two) non-resident shareholders are as follows : 31st December, 31st December, 2005 2004 Dividend in respect No. of Rupees Rupees of the year ended Shares in Crores in Crores 31-12-2003 31-12-2004 31-12-2004 31-12-2005 (Final) (Interim) (Final) (Interim) 87822929 87822929 87822929 87822929 37.33 35.13 37.33 35.13

19.

Previous years figures have been regrouped wherever necessary.

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

S. M. DATTA Executive Directors A. AHMAD A. S. RAMCHANDER Non-Executive Directors R. GOPALAKRISHNAN D. S. PAREKH

Chairman

N. K. KSHATRIYA

Managing Director

per HEMAL SHAH Partner Membership No. : 42650 Mumbai January 13, 2006

A. H. MODY Company Secretary & Head Legal

Director Director

A. P MEHTA .

Director

Director Director

P HUGHES .

Director

61

BALANCE SHEET ABSTRACT AND COMPANYS GENERAL BUSINESS PROFILE


Additional Information as required under Part IV of Schedule VI to the Companies Act, 1956.
Balance Sheet Abstract and Companys General Business Profile : I. Registration Details Registration No. 2 1 3 5 9 3 1 1 2 2 0 0 Date Month Year Capital raised during the year (Amount in Rs. Thousands) Public Issue Bonus Issue III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) 7 Total Liabilities 2 8 4 7 4 7 7 Total Assets 2 8 4 7 4 7 Private Placement Balance Sheet Date 5

State Code

II.

Rights Issue

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

Reserves & Surplus 2 6 6 4 2 9 Unsecured Loans 2 7 9

Deferred Tax Liability (Net) 1 1 8 5 0 Application of Funds: Net Fixed Assets 1 3 8 3 3 Net Current Assets 1 5 8 2 3 Accumulated Losses IV. Performance of the Company (Amount in Rs. Thousands) Turnover 1 4 3 0 3 7 9 0 Profit/(Loss) before tax 2 1 0 6 2 2 Earning per Share (Rs.) 1 1 . 8 V. 1 7

0 Investments 0 8 1 4

2 3

4 2

Miscellaneous Expenditure

Total Expenditure 2 3 9 8 2

9 7 0

Profit/(Loss) after tax 1 4 6 8 0 3 Dividend Rate % 8 2 . 5

Generic Names of Principal Products/Services of the Company Item Code No. (ITC Code) Product Description L 2 U 7 B 1 R 0 I 0 C 0 A . T 6 I 1 N G O I L S

S. M. DATTA Executive Directors A. AHMAD A. S. RAMCHANDER Non-Executive Directors R. GOPALAKRISHNAN D. S. PAREKH

Chairman

N. K. KSHATRIYA

Managing Director

A. H. MODY Company Secretary & Head Legal Mumbai January 13, 2006

Director Director

A. P MEHTA .

Director

Director Director

P. HUGHES

Director

62

CASH FLOW
Cash Flow Statement for the year ended 31st December, 2005
2005
Rupees in Crores A. CASH FLOW FROM OPERATING ACTIVITIES Net profit before tax Adjustments for: Depreciation Interest Interest & Dividend Income Profit on Sale of Investments Unrealised foreign exchange (gain)/losses (Profit)/Loss on Disposal/Write Off of Fixed Assets (Net) (Utilisation)/Provision for Impairment of Fixed Assets Operating Profit before Working Capital Changes Adjustments for: Sundry Debtors Inventories Other Loans & Advances Sundry Creditors Cash generated from Operations Income Tax Paid Fringe Benefit Tax Paid NET CASH FLOW FROM OPERATING ACTIVITIES B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets Sale of Fixed Assets Purchase of Investments Sale of Investments Interest received NET CASH FLOW FROM INVESTING ACTIVITIES (12.41) 3.53 (394.27) 420.11 2.52 19.48 (9.92) 4.19 (700.88) 660.66 3.70 (42.25) (20.38) (49.37) (18.28) 41.58 181.63 (67.71) (3.03) 110.89 (0.01) (10.08) 4.29 8.17 219.33 (56.59) 162.74 18.93 3.01 (2.52) (5.07) 1.71 2.07 (0.68) 228.08 24.88 2.87 (3.70) (3.90) (0.57) (1.46) 3.55 216.96 210.63 195.29 Rupees in Crores

2004
Rupees in Crores

63

CASH FLOW
Cash Flow (Contd.)
2005
Rupees in Crores C. CASH FLOW FROM FINANCING ACTIVITIES Repayment of long term borrowings Interest Paid Dividend Paid Dividend Tax paid NET CASH FLOW FROM FINANCING ACTIVITIES (0.93) (2.96) (102.01) (14.31) (120.21) (0.48) (2.77) (102.01) (13.32) (118.58) Rupees in Crores

2004
Rupees in Crores

D.

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (A) + (B) + (C) CASH AND CASH EQUIVALENTS, beginning of the year CASH AND CASH EQUIVALENTS, end of the year

10.16 29.69 39.85

1.91 27.78 29.69

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

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

S. M. DATTA Executive Directors A. AHMAD A. S. RAMCHANDER Non-Executive Directors R. GOPALAKRISHNAN D. S. PAREKH

Chairman

N. K. KSHATRIYA

Managing Director

per HEMAL SHAH Partner Membership No. : 42650 Mumbai January 13, 2006

A. H. MODY Company Secretary & Head Legal

Director Director

A. P MEHTA .

Director

Director Director

P. HUGHES

Director

64