Castrol India Limited

1

Board of Directors

Non-Executive Directors Executive Directors

Chairman Chief Executive

S. M. Datta & Managing Director

N. K. Kshatriya

Directors Directors

R. Gopalakrishnan R. Elston-Green

P. Hughes A. S. Ramchander

A. K. Jhawar

D. S. Parekh

L. Freese – Alternate to P. Hughes

Company Secretary & Head – LegalA. H. Mody

BankersDeutsche BankHDFC Bank Ltd.The Hongkong & Shanghai Banking Corporation Ltd.State Bank of India

Solicitors & AdvocatesCrawford Bayley & Co.Dhru & Co.

AuditorsS. R. Batliboi & Co.

Registered OfficeTechnopolis Knowledge ParkMahakali Caves Road, Andheri (East)Mumbai 400 093

Share DepartmentTata Share Registry LimitedUnit: Castrol India LimitedArmy & Navy Building148, M. G. Road, Mumbai 400 001.

Castrol India Limited

FinancialsCastrol India Limited

14

FINANCIAL HIGHLIGHTS

Year 2004 2003 2002 2001 2000 1999

Rupees in Crores

Sales 1523.21 1360.51 1338.95 1357.36 1237.81 1195.55

Less Excise Duty 218.09 189.36 187.15 194.91 179.31 166.40

Net Sales 1305.12 1171.15 1151.80 1162.45 1058.50 1029.15

Other Income 22.09 19.14 13.40 13.50 15.74 18.87

Cost of Materials 777.02 669.72 600.59 693.72 640.28 527.49

Operating and Other Expenses 319.88 299.33 313.45 308.11 251.43 251.75

Interest 2.87 2.57 7.45 7.46 7.21 2.62

Gross Profit (Before Depreciation and

Exceptional Items) 227.44 218.67 243.71 166.66 175.32 266.16

Depreciation 24.88 14.31 13.40 13.24 11.44 10.08

Profit Before Taxation and Exceptional Items 202.56 204.36 230.31 153.42 163.88 256.08

Exceptional Items:

VRS Expenses – Plant closure 3.72 — — — — —

Impairment of Fixed Assets – Plant closure 3.55 — — — — —

Profit Before Taxation 195.29 204.36 230.31 153.42 163.88 256.08

Current Taxation 68.73 63.35 79.90 43.45 29.50 51.70

Deferred Taxation (0.90) 3.63 (2.51) 1.57 — —

Profit After Taxation 127.46 137.38 152.92 108.40 134.38 204.38

Dividend 102.01 102.01 204.01 ‡ 92.73 92.63 247.01

Gross Fixed Assets 254.45 250.83 255.61 243.95 223.49 211.82

Net Fixed Assets 149.77 171.01 182.64 180.63 172.66 170.98

Investments 128.91 84.79 220.29 119.90 0.37 82.98

Net Current Assets/(Liabilities) 102.52 114.79 (57.41) 135.89 237.95 125.25

Net Assets 381.20 370.59 345.52 436.42 410.98 379.21

Share Capital 123.64 123.64 123.64 123.64 123.50 123.50

Reserves & Surplus 236.43 224.44 202.14 273.03 270.38 249.52

Net Worth 360.07 348.08 325.78 396.67 393.88 373.02

Loan Funds 3.72 4.20 5.06 22.56 17.10 6.19

Deferred Tax Liability 17.41 18.31 14.68 17.19 — —

Rupees

Earning per Share * 10.31 11.11 12.37 8.77 10.88 16.55

Dividend per Share 8.25 8.25 16.50 ‡ 7.50 7.50 20.00

Book Value per Share * 29.12 28.15 26.35 32.08 31.89 30.20

Debt Equity Ratio 0.03:1 0.03:1 0.04:1 0.18:1 0.14:1 0.05:1

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

‡

‡

Directors’ Report

15


REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31ST DECEMBER, 2004

The Directors have pleasure in presenting their Report and Statement of Accounts for the year ended

31st December, 2004.

For the year ended For the year ended

31st December, 2004 31st December, 2003

(Rupees in Crores) (Rupees in Crores)

FINANCIAL RESULTS

Gross Profit before Depreciation, Exceptional Items & Tax 227.44 218.67

Deducting therefrom:

Depreciation 24.88 14.31

Exceptional Items:

(i) Voluntary Retirement Scheme expenses – Plant closure 3.72 —

(ii) Impairment of Fixed Assets – Plant closure 3.55 —

Provision for Tax 68.73 63.35

Deferred Tax (0.90) 3.63

Profit after Tax 127.46 137.38

Adding thereto:

Balance as per last Balance Sheet brought forward 18.71 13.41

Profit available for Appropriation 146.17 150.79

The Appropriations are:

Dividend:

Interim 49.46 49.46

Final 52.55 52.55

Tax on Dividend:

Interim 6.46 6.34

Final 6.87 6.73

Education Cess on Tax on Final Dividend 2003 0.13 —

Transfer to General Reserve 14.00 17.00

Balance carried forward 16.70 18.71

146.17 150.79

Directors’ Report

16


PERFORMANCE

Total Sales and Other Income increased by 12% to

Rs. 1545 crores as a result of a 5.8% increase in

volumes and a similar increase in unit sales realizations

over last year. The cost of our main raw material —

Base Oil — continued to rise in 2004 averaging a 20%

increase over previous year. However, favourable forex

on imported raw material and continued focus on supply

chain efficiencies enabled us to restrict the annual

increase of the unit cost of material to 9.6%.

The annual increase in underlying operating expenses

(excluding brand investment) was 4.1%. Most of this

increase was due to increased freight costs as a result

of volume growth, hikes in diesel prices and costs

associated with our road safety programme. We

continued to grow the investment in our brands,

increasing annual spend on Advertisement and Sales

Promotion by 17.3%. This has helped us gain market

share in our focus segments.

During 2004, we considered it prudent to review the

useful lives of all our Fixed Assets and as a result have

increased the rates of depreciation for many categories

of assets (Refer Note 3 of Schedule M — Notes on

Accounts). Accordingly, the depreciation charge for the

year increased by Rs. 10.7 crores of which an estimated

Rs. 6 crores is non-recurring. During December 2004,

your Company announced the closure of its plant at

Ballabgarh and incurred an exceptional cost of

Rs. 7.3 crores (Refer Note 4 of Schedule M – Notes

on Accounts). Together, these two items total

Rs. 18 crores and have resulted in a drop in Profit

before Tax by 4% to Rs. 195 crores. Excluding these

two exceptional items, our Profit before Tax increased

by 4% to Rs. 213 crores.

Our tax rate for the year increased versus last year

by 2% due to the introduction of education cess, a

reduction in the Silvassa tax benefit and certain

expenses considered as non-deductible.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement, a

Management Discussion and Analysis Report and a

Report on Corporate Governance are given as

Annexures ‘A’ and ‘B’ respectively to this Report.

A certificate from the Statutory Auditors of the Company

regarding the Compliance by the Company of the

conditions stipulated under Clause 49 of the Listing

Agreement is attached to this Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies

Act, 1956 your Directors confirm that:

(i) In the preparation of the annual accounts, the

applicable accounting standards have been

followed and no material departures have been

made from the same.

(ii) The Directors had selected such accounting

policies and applied them consistently and made

judgments and estimates that are reasonable

and prudent so as to give a true and fair view of

the state of affairs of the Company as on

31st December, 2004 and of the profits of the

Company for the year ended 31st December, 2004.

(iii) The Directors have taken proper and sufficient care

for the maintenance of adequate accounting

records in accordance with the provisions of the

Companies Act, 1956 for safeguarding the assets

of the Company and for preventing and detecting

fraud and other irregularities.

(iv) The Directors have prepared the annual accounts

on a going concern basis.

DIVIDEND

The Interim Dividend in respect of the year ended

31st December, 2004 of Rs. 4.00 per share on

12,36,40,298 Equity Shares was paid to the

Shareholders of the Company whose names appeared

on the Register of Members on 3rd August, 2004.

The Directors recommend a payment of final dividend of

Rs. 4.25 per share on 12,36,40,298 Equity Shares.

FIXED DEPOSITS

There were no fixed deposits outstanding and

unclaimed as on 31st December, 2004.

Directors’ Report

17


DIRECTORS

Mr. U. DeSousa & Mr. R. Pisharody resigned as

Directors of the Company with effect from close of

business hours on 5th May, 2004.

Mr. A. K. Jhawar was nominated to the Board pursuant

to Article 112 of the Articles of Association of the

Company with effect from 21st June, 2004 in place of

Mr. C. D’Mello.

Mr. R. A. Savoor resigned as a Director of the Company

with effect from 17th January, 2005, a bit ahead of his

retirement by rotation at the Annual General Meeting

(AGM). In due course, a review of the Board vacancies

and structure would be undertaken.

Your Directors wish to place on record their gratitude for

the guidance & advice received from Mr. U. DeSousa,

Mr. R. Pisharody, Mr. C. D’Mello & Mr. R. A. Savoor

during their respective tenures as Directors of the

Company.

At the Board Meeting held on 21st October, 2004

Mr. A. S. Ramchander was appointed with effect from

1st January, 2005 as an Additional Director of the

Company. Consequent to the said appointment he was

also appointed as a Wholetime Director of the Company

designated as Director – Automotive. In accordance

with Section 260 of the Companies Act, 1956 (the Act)

he holds office upto the date of the forthcoming Annual

General Meeting of the Company. Notice has been

received under Section 257 of the Act along with the

requisite deposit from a shareholder proposing

Mr. Ramchander as candidate for the office of Director.

The information on the particulars of Directors seeking

appointment/re-appointment as required under

Clause 49 of the Listing Agreement executed with the

Stock Exchange, Mumbai, has been given under

Corporate Governance (Annexure ‘B’) of this Report.

Mr. R. Gopalakrishnan retires by rotation and is eligible

for re-appointment.

SUBSIDIARY COMPANY

The Directors of Indrol Chemicals & Specialities Private

Limited (Indrol) had Resolved to put the Company in

Voluntary Winding up. Accordingly all the investments

held by Indrol have been liquidated & sold & the

proceeds distributed to your Company.

A final meeting of the members of the Company was

called by the Liquidator & the paid up capital refunded

to your Company. An application has been made to the

Official Liquidator to formally wind up the Company.

In view of the above, the Audited Statement of Accounts

of the Company as required under

Section 212 of the Companies Act, 1956 have not been

annexed.

CONSERVATION OF ENERGY

(a) Energy conservation measures taken:

Energy conservation during the financial year has

accrued as a result of the following steps taken at

the various factories of the Company:

Tondiarpet

1. Installed lower Hp pumps 5 nos. (25 Hp to

15 Hp) for the higher capacity delivery upto

1000 lpm, lower noise levels also.

2. Installation of power saving tube lights for

corridors (5 nos).

3. Consolidated all airconditioning cabling into

one panel for easy shut down everyday

(not to leave any airconditioning running

inadvertently).

4. Continued focus on condensate recovery for

boiler efficiency (extending 2003 initiative).

5. Better production scheduling in terms of more

blends per day to better utilize the boiler and

avoiding under utilization situations.

6. Maintaining awareness of all employees on

conserving power and reduced extended

working in office as well as shop floor.

Paharpur

1. Setting up of an additional capacitor bank for

pf improvement.

Directors’ Report

18


2. Soft starter for high capacity motors.

3. Putting up of 200 Energy Efficient tube lights.

Patalganga

1. Won the National Energy Conservation

Awards 2004, Certificate of Merit, in

Petrochemical Sector from Bureau of Energy

Efficiency.

2. Installed and commissioned two nos. of

Compact Pressure Powered Condensate

Pumps.

3. Installed and commissioned Solar Hot Water

Systems of 1500 LPD and 2 X 300 LPD

Capacity for Canteen.

4. Fifty Nos. conventional tube lights replaced by

Energy Efficient tube lights.

5. Ten Nos. of old inefficient pumps replaced by

Efficient Pumps.

6. Modification of Induction Sealing Machines to

reduce power consumption.

7. 35 KVAR Capacitor installed on output line of

the transformer reduce losses.

8. Modification of condensate return lines to the

boiler house.

Silvassa

1. Timers introduced in Emergency lighting

system to prevent them from switching on

during day time.

2. Reprogrammed palletizer and transfer

conveyors from continuous mode to operate

on demand.

3. Timer operated drain valve installed on the

Dryer outlet instead of continuous blowing of

air.

(b) Additional investments and proposals, ifany, being implemented for reduction ofconsumption of energy:

None in particular.

(c) Impact of measures at (a) and (b) above forreduction of energy consumption andconsequent impact on the cost of production ofgoods:

The measures mentioned in (a) above have led to

savings in fuel & electricity of approximately

Rs. 10 lacs per annum.

TECHNOLOGY ABSORPTION

1. During the year, in line with BP’s policies, greater

emphasis was placed on implementing best

practices on Health Safety Security and

Environmental (HSSE) management. Pre and post

HSSE audits were conducted at Wadala by the

HSSE experts in the U.K. to provide assurance that

none of the HSSE elements and related operating

practices at Wadala were having “red” traffic light.

Apart from this, your Company’s ISO : 14001

Environment Management Systems certification

was also re-validated.

2. Your Company’s registration as a Research &

Development Center with Department of Scientific

& Industrial Research, Ministry of Science &

Technology, Government of India, has been

renewed for the next three years, until March 2007.

3. Your Company continued its focus on

Quality Assurance in product design and

operationalization.

4. A special Product Integrity audit team highlighted

and closed gaps between product claims and

performance.

5. Cost re-engineering of various high volume product

brands like CRB Plus and BP VMG resulted in cost

of goods saving of the order of Rs. 5 crores per

annum. Work was completed during the year for

development of fuel efficient automotive gear oil

formulation and its benefit mapping, in combination

with fuel efficient engine oil. The combination

product offer is likely to hit the market during the

1st Quarter of 2005.

Directors’ Report

19


6. The Technology Center at Wadala has developed a

novel technique of using radioactive engine

cylinders to measure the engine wear, on line. This

technique offers great possibilities for creating and

demonstrating the differential benefits of our

product technology, vis-à-vis competition. The

equipment is installed and operated in a German

laboratory.

7. A master plan for infrastructure development to

modernize the Technology Center has been

developed and approved. Some preliminary work

on the project was initiated during the year and the

entire master plan for reconstruction of

administrative block and laboratories will be

completed in the year 2005.

FOREIGN EXCHANGE EARNINGS AND OUTGO

1. Activities relating to Export

There were no significant exports by the Company

during the year.

2. Earnings and Outgo

Members are requested to refer to note Nos. 17 to

19 of Schedule M forming part of the Balance Sheet

and Profit and Loss Account for the year ended

31st December, 2004.

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 Company’s

workers, staff and executives for achieving excellent

results under difficult conditions.

DISTRIBUTORS, BANKERS AND OTHER BUSINESSASSOCIATES

The Board also wishes to thank its Distributors,

Bankers and other business associates for their support

during the year.

On behalf of the Board of Directors

N. K. Kshatriya R. Elston-Green A. S. Ramchander

Managing Director Finance Director Director - Automotive

MumbaiDated: 8th March, 2005

Directors’ Report

20


MANAGEMENT DISCUSSION & ANALYSIS REPORT

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 broadly divided into three major

sectors; Automotive, Industrial and Marine. The

automotive sector is the largest and the share of

industrial sector grows as the market develops.

I. Automotive

The automotive lubricant sector can be segmented as

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

equipment – mainly diesel engine oils (ii) Passenger

cars – mainly gasoline engine oils (iii) Motorcycles and

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

The Diesel Engine Oil segment dominates the

automotive lubricant market with a volume contribution

of over 70%. The two-wheeler, passenger car and

multi-utility vehicle segments have been growing in

volume and value and account for around 24% of the

market.

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

agriculture as well as the transport markets. This was

primarily driven by a good monsoon in 2003 and

resultant improvement in the overall demand for goods

and services. Your Company, which has strong brand

equity in both these segments, especially in the agri

segment, was able to capitalize on this upswing and

further strengthen its market leadership position.

Vehicle growth across all segments has been very good

during 2004 but the lubricant demand has not grown

proportionately. New engine and lubricant technology

has resulted in lower requirement and longer usage life

of the lubricants. For example, the new generation

4-stroke motorcycles consume about 15% lesser

ANNEXURE A lubricants as compared to 2-stroke motorcycles. In

addition, in the Diesel Engine Oil segment, due to

increasing fuel costs and the relative inelasticity of

freight rates, owners of older trucks are delaying the oil

drain intervals in order to reduce costs and hence be

more competitive with the newer vehicle operators.

On the positive side, your Company, with its superior

technology based product portfolio, is in a strong

position to cater to the high quality / superior

performance products demanded by discerning

consumers owning new generation vehicles.

The passenger car market received a tremendous

boost during the year under review, with almost one

million vehicle sales recorded. This has resulted in the

vehicle dealer segment (OEM Franchise Workshops)

growing much faster than the rest of the market. Castrol

with its strong partnership arrangements with most

leading vehicle manufacturers, benefited from this

trend. The workshop segment continues to be a focus

area for your Company which now has a dedicated

sales team to service this segment.

India is the second largest two-wheeler market in the

world and is experiencing a further boom with around

6 million two-wheelers getting added in 2004. The

motorcycle has become the preferred choice of the

consumer as compared to scooters. Environmental

regulations, consumer desire for fuel economy and

lifestyle enhancement have led to the explosive growth

of the 4-stroke motorcycles. The consumer behavior

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

2-stroke bikes and Castrol has started communication

and promotional programmes which suit the profile and

behavior of the bikers.

Competition from the Public Sector companies is

growing with the PSUs increasing their focus and

investment in brand building and marketing activities.

However, with a well planned strategy and innovative

marketing, your Company has maintained its leadership

position in the retail automotive segment.

Directors’ Report

21


II. Non-Automotive

The Industrial sector performed well during the year

under review on the back of rapid growth in

manufacturing related projects, especially in the area of

transport equipment manufacturers as well as auto

component manufacturers. The market grew by ~4% in

2004.

(b) Opportunities & Threats

I. Automotive

Opportunities

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

two-wheelers and passenger cars, coupled with

renewed growth in the trucks / tractor segment, provide

an excellent growth opportunity for the lubricant oil

business.

In addition, during the year under review, your

Company gained access to a new channel of

distribution i.e. petrol pumps owned by private players

like Essar and Reliance. This opens up a new business

opportunity, especially for our 2-stroke scooter oil

business. On the other hand, the growth in the

4-stroke motorcycle segment is seeing a shift in

lubricant consumption from petrol stations to retail

outlets where your Company has a significant

distribution advantage.

The lube oil business in the passenger car segment is

driven to a large extent by the workshop channel, where

superior service propositions, along with strong brands

have led to your Company making significant business

gains.

Long term partnerships with leading Original Equipment

Manufacturers (OEMs) have been the backbone of your

Company’s success and during the year under review

we forged new alliances with leading companies like

Mahindra & Mahindra and International Tractors and

further strengthened our relationships with our existing

partners like Escorts, Tata Motors and Tata Cummins.

This segment offers a further opportunity to your

Company to increase its market share.

Road infrastructure development continues to be a key

focus area for the Government. The North-South and

East-West corridor and the Golden Quadrilateral

projects are on course for completion by around 2007

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

transport industry. This in turn would lead to higher

demand for lubricants from the commercial vehicle

segment in which your Company has a leadership

position.

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

faster than historic levels due to the increased

construction activity in the country. This augurs well for

your Company’s Institutional business.

Threats

Base oil prices have been on the rise since mid 2003

and the trend continued in 2004 with prices reaching

record highs. Base oil prices correlate closely with

crude oil prices and with the uncertainty in the global

crude price situation, the increasing trend in

base oils may continue, putting greater pressure on

margins.

Additive and packaging costs have also risen sharply in

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

input costs and with prices in the market being

competitively driven, presents a threat to our

profitability.

The move towards new generation vehicle technology

is resulting in longer drain intervals, affecting the

volume potential of the largest category — the

commercial vehicle segment. This segment has also

been impacted by the increasing cost of fuel with small

fleet operators being the worst affected.

II. Non-Automotive

Opportunities

With a good monsoon during the year under review, the

Industrial sector is showing signs of revival and this

being a driver of lubricant demand augurs well for the

Industrial business.

Directors’ Report

22


There is an increasing acceptance within the industries

towards value added products and services. Your

Company with its vast international solutions and

services experience can add value to the emerging

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

your Company.

Threats

Price undercutting by small regional competitors and

the tendency of Public Sector players to absorb the high

raw material costs to gain competitive advantage, can

put pressure on our margins and market share.

(c) Segment-wise/Product-wise performance

I. Automotive

Your Company’s automotive business performance

saw a significant growth during 2004. At around 5%

volume growth, your Company grew at twice the

estimated market growth rate. Further, your Company

was able to raise the unit realization by over 6%

resulting in a net turnover growth of over 11%.

The communication of your Company’s flagship brand –

CRB Plus, was refreshed with the ‘Sukhiram–

Dukhiram’ campaign which communicated the

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

new tag line “CRB nahi daloge to mehenga padega”

explained the price premium of CRB Plus on the basis

of superior value proposition.

With the revival in the agricultural segment, your

Company actively reached out to farmers through

tractor clinics and special promotional offers. Our

partnership agreements with leading tractor

manufacturers like Mahindra & Mahindra and Escorts

enabled us to further leverage our strength in this

market.

The Castrol new gen truck engine oil range consisting of

CRB Turbo, RX Super Max and RX Super Plus showed

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

market growth, our alliance with Tata Motors – the

leading truck manufacturer in the country and intensive

marketing activity.

Your Company also launched a new range of ancillary

products viz. Brake fluids, gear oils and greases under

the umbrella of Castrol Protector Series. This has given

increased focus to these ancillary products both from

the trade and our workshop customers.

The BP lubricant brand continued to focus on marketing

and field activity in 2004. The consumer testimonial

campaign communicated through mass media was

supported by on-ground activity and an intensive

consumer contact programme targeted at increasing

trials and off-take. This focus resulted in increased

brand awareness, trials and volumes. The BP brand

ended the year with a growth of 24%.

Two-wheeler lubricant sales continued to grow at a rate

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

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

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

the brand ambassador for your Company and the

two-wheeler brands successfully leveraged this

association through a series of communication

messages and on-ground promotional activities.

Innovative marketing activity including ‘Cricket Clinics’

conducted by Rahul Dravid, have paid rich dividends in

building long enduring relationships with our

consumers.

The focus in the passenger car segment continued to

be on Partnership Programmes with large OEMs like

Maruti and Tata Motors.

The Institutional business segment grew volumes

significantly due to the setting up of a focused sales

team, new customer offers and a growing market.

Here again, our strong partnerships with key OEMs

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

business.

During 2004, a foray was made into the ‘revenue

beyond lubes’ segment with the launch of a motorcycle

service offering named ‘Castrol BikeZone’. The Castrol

Directors’ Report

23


franchised two-wheeler workshops are currently being

piloted in Chennai and Bangalore and will be taken to

other centers in India shortly.

II. Non-Automotive

2004 was a good year for Industrial Lubricants and

Services Division with sales showing a growth of 11%

versus 2003. Your Company’s market share in the

Industrial segment increased by 1.5% during this

period. Our new Customer Relationship Management

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

customer facing touch time and allows us to measure

customer profitability with key accounts. This tool has

been very effectively used for making strategic

intervention in improving our value added customer

offers. This live database has also helped us in

engagement and communication within and outside the

organization.

Athena, a knowledge portal, to provide orientation

programme for new recruits, segment training modules

and tracking learning process, was also launched.

50% of our channel partners were accredited for

ISO-9001-2000 which tremendously helped to improve

the operational efficiency.

Innovative training modules titled ‘Castrol Professional

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

This equipped them to understand customer

requirements and make suitable customer offers.

Your Company’s effort on the initiative to reduce the

working capital invested in the business through the

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

marked reduction in the Receivables as also the stock

levels during the year under review.

(d) Outlook

I. Automotive

The growth trend in the personal mobility segment

is expected to continue. Passenger car manufacturers

continue to launch newer, international standard

vehicles on a regular basis and this offers your

Company an opportunity to leverage its market

leadership position in the passenger car engine oil

segment. Your Company’s focus continues to be on the

Franchised Workshop segment where it has strong

partnerships with leading OEMs.

Mass media coupled with innovative on-ground

activities continue to spearhead your Company’s efforts

in the two-wheeler segment. A new campaign called

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

and has been well accepted by consumers, mechanics

and trade.

The road transport sector and freight market continue to

look up on the back of a good economic performance.

The favorable monsoon in 2004 is also expected to

positively impact the performance in the tractor

segment. Your Company has recently relaunched the

Castrol CRB Plus brand sharply focusing the

communication on the agri and tractor segment. A new

campaign aimed at farmers has been created with the

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

chord with the consumers and we expect to strengthen

the brand’s bond with the farmers.

Your Company will also continue to focus on creating

and strengthening sustainable partnerships with OEMs

and channel owners. This will help increase penetration

in the workshop segment and also create a barrier to

entry for the unorganized sector in lubricants.

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

are once again being sold through the fuel forecourts of

private players like Reliance and Essar. This has

opened up a new business opportunity for your

Company.

Competitive pressures will continue with more focus

being laid by the PSUs on their fuel and lubricant

marketing and brand building activities.

II. Non-Automotive

The Indian economy has performed creditably in the

recent past and this has been reflected by the growth in

the Industrial sector as well as the performance of the

Directors’ Report

24


Industrial business of your Company. However, the

aggressive pricing strategy adopted by competition,

continues to impact margins. To counter this, your

Company continues to offer innovative, value added

customer offers to targeted segments.

In addition, Castrol is sharply focusing all its efforts on

profitable customer segments and undertaking process

fitness and pricing projects which are designed to

improve the bottom line even under difficult trading

conditions.

With Indian manufacturing sector positioning itself as a

possible and credible outsourcing destination, we

believe that the Industrial growth and by inference, the

Industrial lubricant business, will grow faster in the next

three years.

(e) Risks and Concerns

I. Automotive

Increasing base oil price continues to put pressure on

margins and is a major cause of concern for your

Company. Whilst we have been able to convince our

consumers and customers about the inevitability of

increasing prices in the past, it may be difficult to

continue doing so. With many competitors pursuing a

volume share growth objective, our volume growth plan

may be at some risk.

II. Non-Automotive

The Industrial lubricant market continues to be

dominated by the Public Sector 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.

(f) 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 Company’s internal control

system. The internal control systems are supplemented

through an extensive internal audit programme and

periodic review by Management and Audit Committee.

(g) Discussion on Financial Performance with

respect to Operational Performance

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

unit sales realization (up 6%) growth in 2004 which in

turn has resulted in a healthy 12% growth in gross

sales. This growth is well above our estimate of the

market growth. On the other hand, raw material costs

also increased significantly for the second consecutive

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

continue to increase the investment in our brands, but

have sought to minimize increases in other overheads.

Before exceptional items, the Profit Before Tax (PBT)

increased by 4%, however after exceptional items,

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

change in estimation of useful life of assets and costs

relating to our Ballabgarh plant closure. With reference

to working capital, the value of inventories has risen

solely due to the increase in raw material costs.

Outstanding debtors has been maintained at 2003

levels despite the increase in product prices. This has

been achieved through well implemented cash

collection efficiencies.

(h) Health, Safety, Security & Environment

Your Company lays great emphasis on Health, Safety,

Security and Environment (HSSE) which is one of its

Brand Values.

Road transport continues to be our greatest challenge

and your Company has taken a number of initiatives to

Directors’ Report

25


propagate road safety not just amongst its own staff but

amongst contractors and society at large. During the

year under review, there was a reduction in fatalities

and injuries compared to previous year. There was one

third party fatality in a contractor road accident where

we had material influence.

During 2004, we launched the Driving Safety Standards

which are being implemented from 1st January, 2005.

This should improve our road safety in 2005 and

beyond. Your Company also implemented an

aggressive programme to upgrade staff as well as

transport operators’ vehicles to a higher safety

standard. Driving Safety programmes were also

introduced to our contractors and over 3000 heavy duty

truck drivers were given training in defensive driving.

The increased focus on safety in our Plants resulted in

improved safety records at all our Plants. Whilst your

Company’s Tondiarpet and Patalganga Plants

successfully completed seven years without any Days

Away from Work Cases (DAFWCs), the Paharpur Plant

completed five years without a DAFWC.

In recognition of your Company’s efforts towards

environment protection and energy conservation, the

Company’s Patalganga Plant was awarded the

National Energy Conservation Award 2004 – Certificate

of Merit, in the Petrochemicals sector.

(i) Material Developments in Human Resources/

Industrial Relations

2004 saw significant reorganization of our workforce to

align the organization to the new lubricants global

strategy of Market Spaces. The reorganization has

helped create a more focused organization and one that

encourages and further develops functional excellence

within your Company. In keeping with the functional

excellence theme, there was a lot of focus on

understanding functional capability and developing

functional competency frameworks.

During the year under review, development of

leadership capability in the organization continued to be

the key focus. A number of training initiatives directed

towards people development like Leadership

programmes for First level and Senior level leaders and

Assessment centers for development of Leadership

Potential were undertaken during the year. Our talent

continues to be recognized within the BP group and this

year too, we saw several of our Senior Managers being

seconded to assignments in other parts of the BP Group

worldwide.

Following a review of our manufacturing operations,

it was decided to close down our Ballabgarh Plant near

New Delhi. A voluntary retirement scheme

was announced in the Plant in November 2004.

11 executives and 32 workmen opted for voluntary

retirement.

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 2004

was 891.




MumbaiDated: 8th March, 2005

Directors’ Report

26


CORPORATE GOVERNANCE

A. MANDATORY REQUIREMENTS

1. Company’s Philosophy on Code of Governance

The Company’s 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 Company’s own policies and

expectations. The Company’s 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

Company’s 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

(a) Composition

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

of Directors had 8 members comprising of 2 Executive

Directors and 6 Non-Executive Directors. The Non-

Executive Directors included 4 members who were

Independent Directors and 2 members who had been

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

Articles of Association of the Company. The Chairman

of the Board is a Non-Executive Independent Director.

ANNEXURE B Mr. A. S. Ramchander was with effect from

1st January, 2005 appointed as a Wholetime Director of

the Company designated as Director - Automotive.

Mr. R. A. Savoor resigned with effect from

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

(b) Attendance of each Director at the Board

Meetings and the last Annual General Meeting

4 Board Meetings were held during the financial year

from 1st January, 2004 to 31st December, 2004.

The attendance of each of the Directors at the said

Board Meetings is given below:

Name of Director Cate- No. of % of totalgory of Meet- Meetings

Director- ings attendedship atten- during the

ded tenure asa Director

Mr. S. M. Datta NED 4 100

Mr. N. K. Kshatriya MD 4 100

Mr. U. DeSousa ED 2 100

(upto 5th May, 2004)

Mr. R. Elston-Green ED 4 100

Mr. R. Pisharody ED 2 100

(upto 5th May, 2004)

Mr. C. D’Mello ND 1 50

(upto 21st June, 2004)

Mr. R. Gopalakrishnan NED 4 100

Mr. A. K. Jhawar ND 2 100

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

Mr. P. Hughes or his Alternate

Mr. L. Freese ND 3 75

Mr. D. S. Parekh NED 3 75

Mr. R. A. Savoor NED 4 100

NED — Non-Executive Director

MD — Managing Director

ED — Executive Director

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

Directors’ Report

27


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

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

attended the Annual General Meeting held on the said

date.

(c) Number of other Companies or Committees the

Director is a Director/Member/Chairman of:

Name of the Director(s) Number of other Number ofCompanies Committees(excluding (other than

Private Castrol India)Companies) in which

in which Director Member(excluding Alternate/

NomineeDirector)

Mr. S. M. Datta 12 (1) 9 (2)

Mr. N. K. Kshatriya — —

Mr. R. Elston-Green — —

Mr. A. K. Jhawar 2 1

Mr. R. Gopalakrishnan 12 (3) 10 (4)

Mr. P. Hughes — —

Mr. D. S. Parekh 13 (5) 9 (6)

Mr. R. A. Savoor 5 (7) 5 (8)

Mr. L. Freese 1 —

1. Includes 3 Companies in which Chairman

2. Includes 4 Committees in which Chairman

3. Includes 1 Company in which Chairman


5. Includes 7 Companies in which Chairman


7. Includes 1 Company in which Chairman

8. Includes 1 Committee in which Chairman

(d) Number of Board Meetings held and the dates

of the Board Meeting

4 Board Meetings were held during the financial year

1st January, 2004 to 31st December, 2004. The dates

on which the said meetings were held are given below:

30th January, 2004

30th April, 2004

23rd July, 2004

21st October, 2004

3. Audit Committee

(a) Terms of Reference

i. To investigate any activity within its terms of

reference.

ii. To seek information from any employee.

iii. To obtain outside legal or other professional advice.

iv. To secure attendance of outsiders with relevant

expertise, if it considers necessary.

It may be clarified that the role of the Audit Committee

includes matters specified under Clause 49 of the

Listing Agreement entered into between the Company

and The Stock Exchange, Mumbai, on which the

Company’s shares are listed.

(b) Composition, name of members and

Chairperson

As on 31st December, 2004, the Audit Committee

comprised of 3 Non-Executive Directors viz.

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

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

Permanent Invitee to the Committee and the Company

Secretary being the Secretary of the Committee.

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

Mr. R. Gopalakrishnan, Member are Independent

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

Nominee Director of Castrol Ltd., U.K.

(c) Meetings and attendance during the year

4 meetings were held during the financial year

1st January, 2004 to 31st December, 2004. The

attendance of each Member of the Committee is given

below:

No. of % of total MeetingsMeetings attended during theattended tenure as a Director

Mr. D. S. Parekh 4 100

Mr. R. Gopalakrishnan 4 100

Mr. P. Hughes or his Alternate 3 75Mr. L. Freese

Directors’ Report

28


4. Remuneration Committee

(a) Terms of Reference

The Remuneration Committee recommends

remuneration, promotions, increments etc. for the

Executive Directors to the Board for approval.

(b) Composition, names of members and

Chairperson

As on 31st December, 2004, the Committee

comprised of 3 Non-Executive Directors viz.

Mr. R. Gopalakrishnan, Mr. P. Hughes and

Mr. A. K. Jhawar. Mr. R. Gopalakrishnan is an

Independent Director whilst Mr. P. Hughes and

Mr. A. K. Jhawar are Nominee Directors of Castrol Ltd.,

U.K. Mr. R. Gopalakrishnan is the Chairman of the

Committee.

On 21st June, 2004 Mr. A. K. Jhawar was appointed as

a member of the Remuneration Committee in place of

Mr. C. D’Mello.

(c) Attendance during the year

Two Meetings were held during the year the attendance

of each Member of the Committee is given below:-

Name(s) of the No. of % of total Meetings

Committee Meetings attended during the

Members attended tenure as a Director

Mr. R. Gopalakrishnan 2 100

Mr. C. D’Mello 1 100(upto 21st June, 2004)

Mr. P. Hughes. — —

Mr. A. K. Jhawar 1 100(w.e.f. 21st June, 2004)

(d) Remuneration Policy

The Directors are paid a Salary and Performance

Linked Bonus, which is calculated, based on

pre-determined parameters of Performance.

(e) Details of Remuneration paid to all Directors

(for the period 1st January, 2004 to

31st December, 2004)

All Fixed Service Stockelements compo- Cont- option withof remu- nent & racts details,neration perfor- notice if any andpackage mance period, whether

i.e. linked sever- issued atSalary incen- ance a discount

benefits, tives fees as well asbonuses, along the periodpension, with the over which

etc. perform- accruedance and over

criteria which(Rs. in (Rs. in exercis-Lacs) Lacs) able

i. Wholetime Director(s)

Mr. N. K. Kshatriya 119.47 38.45

Mr. U. DeSousa 20.88 6.36(Upto May, 2004)

Mr. R. Elston-Green 124.19 14.00

Mr. R. Pisharody 22.93 5.81(Upto May, 2004)

Notes

(a) The agreement with each Wholetime Director is for a

period of 5 years or the normal retirement date whichever

is earlier. Further, either party to the agreement is entitled

to terminate the Agreement by giving not less than six

calendar months notice in writing to the other party.

(b) Presently, the Company does not have a scheme for

grant of stock options to its employees. However the

Management staff are entitled to the Shares of BP plc.

under the BP Sharematch scheme as in force.

Please see N

ote ‘b

’

Please see N

ote ‘a’

Directors’ Report

29


ii. Non-Wholetime Director(s)

Sitting Fees Commission(Rs.) (Rs.)

Mr. S. M. Datta 75,000 7,50,000

Mr. R. Gopalakrishnan 85,000 6,00,000

Mr. D. S. Parekh 60,000 6,00,000

Mr. R. A. Savoor 70,000 6,00,000

With effect from 1st April, 2004 the Company had

increased the sitting fees payable to the Non-Executive

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

for each Board/Committee Meeting attended by them.

5. Transfer & Shareholders’/Investors’ Grievance

Committee

As on 31st December, 2004, the Transfer and

Shareholders’/Investors’ Grievance Committee

comprised of Mr. S. M. Datta, Chairman,

Mr. N. K. Kshatriya, Mr. R. Elston-Green and

Mr. R. A. Savoor. The Company Secretary is the

Secretary of the Committee.

(a) Name of the : Mr. S. M. Datta

Non-Executive Director

heading the Committee

(b) Name and Designation : Mr. A. H. Mody

of Compliance Officer Company Secretary &

Head – Legal

(c) No. of Shareholders : 7 complaints were

complaints received received from Stock

during the financial Exchange/Investor

year Associations/Securities and

Exchange Board of India

(SEBI)/Department of

Company Affairs and were

reported to the Transfer and

Shareholders’/Investors’

Grievance Committee in terms

of Circular No. 1 (96-97)

dated 25.7.96 of SEBI.

(d) Number of complaints : All the Complaints have beennot solved to the resolved to the satisfaction ofsatisfaction of the Complainants except forshareholders disputed cases and sub-judice

matters which would be solvedafter the matter is dulydisposed by the Court.

(e) Number of pending : 7 transfers were pending atshare transfers the close of the financial year.at the close ofthe financial year

6A. General Body Meetings

(a) Location and time where last three AGMs

were held

Location Date Time

(i) Yashwantrao Chavan : 5.5.2004 11.00 a.m.Pratishthan AuditoriumY.B. Chawan CentreGen. Jagannath BhosleMarg, Next to SachivalayaGymkhana, Mumbai 400 021

(ii) Birla Matushri Sabhagar : 19.6.2003 3.00 p.m.19, Marine LinesMumbai 400 020

(iii) Birla Matushri Sabhagar : 5.8.2002 3.00 p.m.19, Marine Lines,Mumbai 400 020

(b) Whether any Special : NoResolutions were putthrough Postal Ballotlast year

Details of voting pattern : Not Applicable

(c) Persons who conducted : Not Applicablethe Postal Ballot exercise

(d) Are polls proposed to be : No resolutionsconducted through Postal requiring postal ballotBallot this year for matters as required

under Clause 4 of theCompanies (Passing ofResolutions by PostalBallot) Rules, 2001have been placed forShareholders’approval at theMeeting.

(e) Procedure for Postal Ballot : Not Applicable

Directors’ Report

30


6B. Notes on Directors seeking re-appointment as

required under Clause 49 of the Listing Agreement

entered into with Stock Exchange, Mumbai.

(i) Mr. R. Gopalakrishnan

Mr. Gopalakrishnan is a graduate in Physics from

Calcutta University and in Engineering from IIT,

Kharagpur. In 1967, he joined Hindustan Lever as

Management Trainee. After 20 years, he joined

Hindustan Lever’s Management Committee as

Executive Director-Exports. In 1991, he was

appointed Chairman, Unilever Arabia, based in

Jeddah to establish and manage Unilever’s

consumer products business in the GCC countries.

Upon return to India in 1995, he became Managing

Director of Brooke Bond Lipton, Unilever’s Indian

foods and beverages company. After the merger of

the Company, he was appointed Vice-Chairman of

the merged Hindustan Lever Ltd. After 31 years in

Levers he joined Tata Sons in August 1998. As on

31st December, 2004 he was a Director of the

following companies:

Rallis India Limited – Chairman

Tata Chemicals Limited – Vice Chairman

Tata Sons Limited – Director

Tata Motors Limited – Director

Tata Power Company Limited – Director

Tata Teleservices Limited – Director

Tata Teleservices(Maharashtra) Limited – Director

Tata AutoComp SystemsLimited – Director

Tata Technologies Limited – Director

Idea Cellular Limited – Director

ICI India Limited – Director

Sheba Properties Limited – Director

(ii) Mr. A. S. Ramchander

Mr. Ramchander is a Post Graduate in

Management from the Indian Institute of

Management (IIM) specializing in marketing &

finance. He has also done his graduation in

Chemical Technology (B. Tech) from Osmania

University Hyderabad.

He has over 19 years of experience in consumer &

customer marketing, business strategy & sales.

He joined Castrol India in 1994 & during the period

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

involved in the phenomenal growth of the unit from

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

Lubricant business. He was Head – Brand

marketing in Castrol India when he was seconded

in the year 2000 to a senior marketing role in

Castrol Asia Pacific.

After Burmah Castrol worldwide was acquired by

BP, Mr. Ramchander moved to BP Asia Pacific

Regional Headquaters at Singapore. Since 2002

he has been the Regional Marketing Director of BP

Asia Pacific Lubes before he was appointed as a

Wholetime Director in Castrol India.

Prior to joining Castrol India, he had 9 years of

sales & marketing experience in the paints,

construction material and organic chemical

industries. During his assignment in Singapore, he

was a lecturer on marketing & channel

management in the Nanyang Technological

University in Singapore.

Mr. Ramchander is not a Director in any other

Company.

Directors’ Report

31


7. Disclosure

(a) Disclosures on materially significant

related party transactions that may

have potential conflict with the

None

interests of Company at large.

(b) Details of non-compliance by the

company, penalties, strictures None in

imposed on the company by Stock the last

Exchange or SEBI or any statutory three

authority, on any matter related to years

capital markets, during the last

three years.

8. Means of Communication

(a) Half-yearly report sent : No, as the results of the

to each household of Company are published in

shareholders the Newspapers all over

India

(b) Quarterly results : (i) Times of India –Newspapers in which Mumbai, Delhi, Pune,

results are normally Ahmedabad, Lucknow,

published in Patna, Bangalore,

Hyderabad & Kolkata

editions in English

(ii) Maharashtra Times –Mumbai edition in

Marathi

(iii) Navbharat Times –New Delhi edition in

Hindi

Any website, where : Yes – www.castrol.co.in

displayed

Whether it also displays : Yes

official news releases

The presentations made : No

to institutional investors or

to the analysts

(c) Whether MD&A is a part : Yes. Part of the Directors’

of the Annual Report Report as Annexure ‘A’

or not

9. General Shareholder Information(a) AGM : Tuesday,

Date, Time and Venue 19th April, 2005,at 2.00 p.m., atBirla Matushri Sabhagar,19 Marine Lines,Mumbai 400 020.

(b) Financial Year : (i) January 2005 toDecember 2005.

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

(iii) Half yearly Results2005 – 3rd/4th weekof July 2005.

(iv) Third Quarter 2005Results – 3rd/4th weekof October 2005.

(v) Results for the yearending 31st December,2005 – January/February, 2006.

(c) Date of Book closure : 29th March, 2005 to19th April, 2005(both days inclusive).

(d) Dividend Payment date(s) : Interim – 16th August, 2004Final – on or after19th April, 2005.

(e) Listing on Stock : The Company has paid theExchange, Mumbai listing fees for the period

1st April, 2004 to31st March, 2005.

(f) (i) Stock Code – : 870Physical

(ii) Demat ISIN Number : INE 172A01019for NSDL & CDSL

(g) Market price Data: : Please See Annexure I ofHigh/Low during each this Report.month in last financialyear

(h) Stock Performance in : Please See Annexure II ofcomparison to this Report.Broad-based indicessuch as BSE Sensex,CRISIL

}}

Directors’ Report

32


(i) Registrar and Transfer : Tata Share RegistryAgents Limited,

Army and Navy Building,148, M.G. Road,Mumbai 400 001.

(j) Share Transfer System : The Company Secretaryhas been authorized toapprove the transfer ofshares which is done withinthe time-limit stipulated bythe Listing Agreement. Thesaid transfers are thennoted at the subsequentTransfer andShareholders’/Investors’Grievance CommitteeMeeting.

(k) Distribution of No. of No. of % ofShareholding as on Shares Share- Share-10-02-2005 holders holders

Upto 500 7234246 58521 85.26

501 – 1000 3588383 4872 7.10

1001 – 2000 4654325 3200 4.66

2001 – 3000 2534420 1021 1.49

3001 – 4000 1732177 516 0.75

4001 – 5000 693545 152 0.22

5001 – 10000 1559225 234 0.34

1001 and above 101643977 126 0.18

Grand Total 123640298 68642 100.00

(l) Dematerialisation of : 40.99% of the paid-upShares and liquidity capital has been

dematerialised as on10th February, 2005 whichincludes 16.86% of thepaid-up capital held byCastrol Ltd., U.K.

(m) Outstanding GDRs/ : The Company has notADRs/Warrants or any issued any GDRs/ADRs/Convertible instruments, Warrants or anyconversion date and likely Convertible instruments.impact on equity

(n) Plant Locations : The Company’s plants arelocated at Patalganga,Paharpur, Silvassa,Ballabgarh, Tondiarpet &Hosakote.

(o) Address for : i. Shareholderscorrespondence correspondence

should be addressed to:Tata Share RegistryLimited.Unit: Castrol IndiaLimitedArmy and NavyBuilding, 148,M.G. Road,Mumbai 400 001.Tel. No. 5656 8484Fax No. 5656 8494/

5656 8496

ii. Shareholders holdingshares in electronicmode should addressall theircorrespondence totheir respectiveDepository

Participants.

B. NON-MANDATORY REQUIREMENTS

1. Whether Chairman of the : No, but the Company

Board is entitled to reimburses expenses in

maintain a Chairman’s relation to the performance

office at the Company’s of his duties as Chairman.

expense and also allowed

reimbursement of expenses

incurred in performance of

his duties

Directors’ Report

33


2. Remuneration Committee : Please refer to Sr. No. 4 of

this Report.

3. Shareholder rights – : As the Company’s half

The half-yearly yearly results are published

declaration of financial in English newspapers

performance including having a circulation all over

summary of the India and in a Marathi

significant events in last newspaper (having a

six months should be sent circulation in Mumbai) and

to each household of in a Hindi newspaper

Shareholders (having a circulation in

New Delhi) the same are

not sent to the

shareholders of the

Company.

Normally, there is no

second half-yearly results

as the audited results are

taken on record by the

Board and then

communicated to the

shareholders through the

Annual Report.




Mumbai

Dated: 8th March, 2005

Directors’ Report

34


Annexure I Castrol India Limited

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

Month Rate (Rs.)

Highest Lowest

January 239.25 205.30

February 221.65 207.55

March 221.75 188.65

April 199.50 181.00

May 184.00 160.05

June 172.45 159.90

July 175.05 160.25

August 172.10 155.80

September 173.45 164.30

October 166.50 162.15

November 193.90 162.75

December 236.70 180.25

Annexure II



Managing Director Finance Director Director - AutomotiveMumbaiDated: 8th March, 2005

Directors’ Report

35


To The Members of Castrol India Limited

We have examined the compliance of conditions of

Corporate Governance by Castrol India Limited, for

the year ended December 31, 2004 as stipulated in

Clause 49 of the Listing Agreement of the said

Company with the Stock Exchange.

The compliance of conditions of Corporate Governance

is the responsibility of the management. Our

examination was limited to procedures and

implementation thereof, adopted by the Company for

ensuring the compliance of the conditions of the

Corporate Governance. It is neither an audit nor an

expression of opinion on the financial statements of the

Company.

In our opinion and to the best of our information and

according to the explanations given to us, we certify

that the Company has complied with the conditions of

Corporate Governance as stipulated in the above-

mentioned Listing Agreement.

We state that no investor grievance is pending for a

period exceeding one month against the Company as

per the records maintained by the Share Registrars and

reviewed by the Shareholders’/Investors’ Grievance

Committee.

We further state that such compliance is neither an

assurance as to the future viability of the Company

nor the efficiency or effectiveness with which the

management has conducted the affairs of the

Company.

For S.R. BATLIBOI & CO.

Chartered Accountants

per Hemal Shah

Partner

Membership No. : 42650

Mumbai,

Dated: 8th March, 2005.

AUDITORS’ CERTIFICATE

Directors’ Report

36


Shareholding Pattern as on 10th February, 2005

Sr. No. Category No. of shareholders No. of shares held % to paid-up capital

(i) Foreign Collaborator 1 87687455 70.92

(ii) Foreign Company 1 135474 0.11

(iii) Foreign Institutional Investors 24 1058110 0.86

(iv) Overseas Bodies Corporate 5 1169 0.00

(v) Non-Resident Individuals 288 154200 0.13

(vi) Financial Institutions 12 8516051 6.89

(vii) Indian Mutual Funds 17 1386910 1.12

(viii) (a) Nationalised Banks 37 107804 0.09

(b) Other Banks 78 36323 0.03

(ix) Domestic Companies 1396 2206561 1.78

(x) Resident Individuals 66779 22344232 18.07

(xi) Directors and Relatives 2 6009 0.00

Grand Total 68640 123640298 100.00

Auditors’ Report

37


To the Members of Castrol India Limited

1. We have audited the attached Balance Sheet of Castrol India Limited as at 31st December, 2004 and alsothe Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto.These financial statements are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 (as amended) issued by the CentralGovernment of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose inthe Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:i. We have obtained all the information and explanations, which to the best of our knowledge and belief

were necessary for the purposes of our audit;ii. In our opinion, proper books of account as required by law have been kept by the Company so far as

appears from our examination of those books;iii. The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in

agreement with the books of account;iv. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this

report comply with the accounting standards referred to in sub-section (3C) of section 211 of theCompanies Act, 1956;

v. Based on written representation received from the directors as on 31st December, 2004, which havebeen taken on record by the Board of Directors, we report that none of the directors is disqualified as on31st December, 2004 from being appointed as a director in terms of Clause (g) of sub-section (1) ofsection 274 of the Companies Act, 1956;

vi. In our opinion and to the best of our information and according to the explanations given to us, thesaid accounts give the information required by the Companies Act, 1956, in the manner so required, andgive a true and fair view in conformity with the accounting principles generally accepted in India;a. in the case of the Balance Sheet, of the state of affairs of the Company as at 31st December, 2004;b. in the case of the Profit and Loss Account, of the profit of the Company for the year ended

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

For S. R. BATLIBOI & COMPANYChartered Accountants

per Hemal ShahPartnerMembership No. : 42650

MumbaiJanuary 17, 2005

Auditors’ Report

Auditors’ Report

38


(i) (a) The Company has maintained proper records showing full particulars, including quantitative detailsand situation of fixed assets.

(b) All fixed assets have not been physically verified by the management during the year but there is aregular programme of verification which, in our opinion, is reasonable having regard to the size of theCompany and the nature of its assets. As informed to us, no material discrepancies were noticed onsuch verification.

(c) There was no substantial disposal of fixed assets during the year.(ii) (a) The management has conducted physical verification of inventory at reasonable intervals during

the year.(b) The procedures of physical verification of inventory followed by the management are reasonable and

adequate in relation to the size of the Company and the nature of its business.(c) The Company is maintaining proper records of inventory and no material discrepancies were

noticed on physical verification.(iii) (a) As informed to us, the Company has not granted any loans, secured or unsecured to companies, firms

or other parties covered in the register maintained under section 301 of the Companies Act, 1956.(b) As informed to us, the Company has not taken any loans, secured or unsecured from companies, firms

or other parties covered in the register maintained under section 301 of the Companies Act, 1956.(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal

control system commensurate with the size of the Company and the nature of its business, for the purchaseof inventory and fixed assets and for the sale of goods and services. During the course of our audit, nomajor weakness has been noticed in the internal control system in respect of these areas.

(v) (a) According to the information and explanations provided by the management, we are of the opinionthat the particulars of contracts or arrangements referred to in section 301 of the Act that need to beentered into the register maintained under section 301 have been so entered.

(b) In our opinion and according to the information and explanations given to us, the transactions made inpursuance of such contracts or arrangements exceeding value of Rupees five lakhs have been enteredinto during the financial year at prices which are reasonable having regard to the prevailing marketprices at the relevant time except in respect of certain transactions, where because of the unique andspecialized nature of the items involved and absence of any comparable prices, we are unable tocomment whether the transactions were made at prevailing market prices at the relevant time.

(vi) The Company has not accepted any deposits from the public.(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of

its business.(viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules

made by the Central Government for the maintenance of cost records under section 209(1)(d) of theCompanies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and recordshave been made and maintained.

(ix) (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues includingprovident fund, investor education and protection fund, employees’ state insurance, income tax,sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory duesapplicable to it.

(b) According to the information and explanations given to us, no undisputed amounts payable in respectof provident fund, investor education and protection fund, employees’ state insurance, income tax,wealth tax, service tax, sales tax, customs duty, excise duty, cess and other undisputedstatutory dues were outstanding, at the year end, for a period of more than six months from the datethey became payable.

Annexure referred to in paragraph 3 of our report of even date

Re: Castrol India Limited

Auditors’ Report

39


(c) According to the records of the Company, the dues outstanding of income tax, sales tax, wealth tax,service tax, custom duty, excise duty and cess on account of any dispute, are as follows:

Name of the statute Nature of dispute Amount Period to which Forum where dispute is pending(Rs. in Crores) the amount relates

Central Sales Tax Non submission of declaration 18.67 1987 to 2003 Assistant Commissioner, DeputyAct & Local Sales forms, Disallowance of Set off Commissioner, Tribunal andTax Act claim, Classification dispute, High Court.

Rate dispute, Disallowance ofcredit notes and rebates andOther dues.

Central Excise Act, Valuation, Modvat Credit, Stock 41.31 1990 to 2004 Deputy Commissioner, Additional1944 Differences, Classification, Commissioner, Commissioner,

Provisional Assessments and Joint Commissioner,Other Issues. Commissioner (Appeals),

CEGAT and Supreme Court.

Customs Act, 1962 Valuation 0.08 1998 Assistant CommissionerService Tax under Service Tax on Royalty and 7.50 1997 to 2004 Deputy Commissioner, Additionalthe Finance Act, Service Tax on rented tanks. Commissioner and Commissioner.1994

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

(xi) Based on our audit procedures and as per the information and explanations given by the management,we are of the opinion that the Company has not defaulted in repayment of dues to a financial institution,bank or debenture holders.

(xii) According to the information and explanations given to us and based on the documents and recordsproduced to us, the Company has not granted loans and advances on the basis of security by way of pledgeof shares, debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, theprovisions of clause 4(xiii) of the Companies (Auditor’s Report) Order, 2003 (as amended) are notapplicable to the Company.

(xiv) In respect of dealing/trading in securities, in our opinion and according to the information and explanationsgiven to us, proper records have been maintained of the transactions and contracts and timely entries havebeen made therein. The securities have been held by the Company in its own name.

(xv) According to the information and explanations given to us, the Company has not given any guarantee forloans taken by others from bank or financial institutions.

(xvi) The Company did not have any term loans outstanding during the year.(xvii) According to the information and explanations given to us and on an overall examination of the Balance

Sheet and Cash Flow Statement of the Company, we report that no funds raised on short-term basis havebeen used for long-term investment.

(xviii)The Company has not made any preferential allotment of shares during the year to parties or companiescovered in the register maintained under section 301 of the Companies Act, 1956.

(xix) The Company did not have any outstanding debentures during the year.(xx) The Company has not raised any money through a public issue during the year.(xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the

financial statements and as per the information and explanations given by the management, we report thatno material fraud on or by the Company has been noticed or reported during the course of our audit.

For S. R. BATLIBOI & COMPANYChartered Accountants

per Hemal ShahPartnerMembership No. : 42650

MumbaiDated: January 17, 2005

40


Balance Sheet as at 31st December, 2004

2004 2003Schedule Rupees Rupees Rupees

in Crores in Crores in CroresSOURCES OF FUNDS

Shareholders’ FundsShare Capital A 123.64 123.64Reserves and Surplus B 236.43 224.44

360.07 348.08Loan Funds C

Unsecured Loans 3.72 4.20

Deferred Tax Liability (Net) D 17.41 18.31

TOTAL 381.20 370.59

APPLICATION OF FUNDS

Fixed Assets EGross Block 249.79 247.23Less: Depreciation 100.89 79.58Less: Impairment of Fixed Assets 3.79 0.24

Net Block 145.11 167.41Capital Work-in-progress 4.66 3.60

149.77 171.01

Investments F 128.91 84.79

Current Assets, Loans & Advances GInventories 166.24 155.59Sundry Debtors 131.26 131.25Cash & Bank Balances 29.69 27.78Other Current Assets 0.01 0.01

Loans & Advances 58.32 62.61

385.52 377.24

Less: Current Liabilities & Provisions HCurrent Liabilities 197.02 192.20Provisions 85.98 70.25

283.00 262.45

Net Current Assets 102.52 114.79

TOTAL 381.20 370.59

Notes on Accounts M

The schedules referred to herein form an integral part of the Balance Sheet.

S. M. DATTA Chairman N. K. KSHATRIYA Managing Director

Executive Directors

A. S. RAMCHANDER Director R. ELSTON-GREEN Director

Non-Executive Directors

A. JHAWAR Director R. GOPALAKRISHNAN DirectorP. HUGHES Director D. S. PAREKH DirectorR. A. SAVOOR Director L. FREESE Alternate Director

As per our report of even dateFor S. R. BATLIBOI & COMPANYChartered Accountants

per HEMAL SHAH A. H. MODYPartner Company SecretaryMembership No. : 42650 & Head Legal


Balance Sheet

41


2004 2003Schedule Rupees Rupees Rupees

in Crores in Crores in CroresINCOME

Sales [Net of rebates Rs. 41.94 Crores (2003 : Rs. 38.50 Crores)] 1523.21 1360.51Less: Excise Duty 218.09 189.36

Net Sales 1305.12 1171.15Other Income I 22.09 19.14

Total Income 1327.21 1190.29

EXPENDITURECost of Materials J 777.02 669.72Operating and Other Expenses K 319.88 299.33Interest L 2.87 2.57Depreciation (Refer Note 3 of Schedule M) 24.88 14.31

Total Expenditure 1124.65 985.93

PROFIT BEFORE TAXATION AND EXCEPTIONAL ITEMS 202.56 204.36Less: Exceptional Items (Refer Note 4 of Schedule M)

Voluntary Retirement Scheme Expenses – Plant closure 3.72 —Impairment of Fixed Assets – Plant closure 3.55 —

PROFIT BEFORE TAXATION 195.29 204.36Taxation

Current [Including Wealth Tax Rs. 0.16 Crore (2003 : Rs. 0.21 Crore)] 68.73 63.35Deferred Taxation (0.90) 3.63

PROFIT AFTER TAXATION 127.46 137.38Add: Balance as per last Balance Sheet brought forward 18.71 13.41

PROFIT AVAILABLE FOR APPROPRIATION 146.17 150.79

APPROPRIATION TO:Interim Dividend 49.46 49.46Tax on Interim Dividend 6.46 6.34Proposed Final Dividend 52.55 52.55Tax on Proposed Final Dividend 6.87 6.73Education Cess on Tax on Final Dividend 2003 0.13 —General Reserve 14.00 17.00Balance carried forward 16.70 18.71

146.17 150.79

Earning per share (Basic & Diluted) (Face value of Rs. 10/-) 10.31 11.11

Notes on Accounts M

The schedules referred to herein form an integral part of the Profit and Loss Account.

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


Executive Directors







Profit & Loss Account

42


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

SCHEDULE A2004 2003

Rupees Rupeesin Crores in Crores

SHARE CAPITAL

Authorised

124,000,000 (2003 : 124,000,000) Equity Shares of Rs. 10/- each 124.00 124.00

Issued and Subscribed (Refer Notes below)

123,640,298 (2003 : 123,640,298) fully paid up Equity Shares of Rs. 10/- each 123.64 123.64

123.64 123.64

Notes:

1. Includes 87,687,455 (2003 : 87,687,455) Equity Shares of Rs. 10/- each held by Castrol Ltd., U.K., the Holding Company.(Also refer Note 7 of Schedule M).

2. Includes 116,353,318 (2003 : 116,353,318) Equity Shares allotted as fully paid up Bonus Shares by capitalisation of Share Premium/General Reserve.

SCHEDULE B2004 2003

Rupees Rupees Rupeesin Crores in Crores in Crores

RESERVES & SURPLUS

Capital Reserve 13.62 13.62

General Reserve

As per last Balance Sheet 192.11 175.11

Add: Transferred from Profit and Loss Account 14.00 17.00

206.11 192.11

Balance in Profit and Loss Account 16.70 18.71

236.43 224.44

Schedules

43



SCHEDULE C2004 2003


LOAN FUNDS

UNSECURED LOANS

Sales Tax Deferral Loan (Interest Free)

From SICOM Ltd. 0.23 0.52(For Patalganga Plant — Repayable in next one instalment)[Repayable within one year Rs. 0.23 Crore (2003 : Rs. 0.29 Crore)]

From Government of Karnataka, Department of Industries & Commerce 0.70 0.89(For Hosakote Plant — Repayable in equal quarterly instalments)[Repayable within one year Rs. 0.19 Crore (2003 : Rs. 0.19 Crore)]

From SICOM Ltd. 2.79 2.79(For Patalganga Plant — Repayable from October 2011)

3.72 4.20

SCHEDULE D2004 2003


DEFERRED TAX LIABILITY (NET) [Refer Note 1(h) of Schedule M]

Deferred Tax Assets and Liabilities are attributable to the following items:

Liabilities


Less: Assets

Provision for Doubtful Debts 1.15 2.88

Voluntary Retirement Scheme Expenses 3.25 3.65

Accrual for expenses (Including Leave Encashment)allowable only on payment 4.48 4.22

Others 0.80 0.83

9.68 11.58

17.41 18.31

Schedules

44


SCHEDULE E

FIXED ASSETS Rupees in Crores

GROSS BLOCK DEPRECIATION IMPAIRMENT NET BLOCKAs at Additions Deductions As at As at For the On As at LOSS ON As at As at

1.1.2004 for the for the 31.12.2004 1.1.2004 year Deductions 31.12.2004 CLOSURE 31.12.2004 31.12.2003 year year OF PLANTS

Freehold Land 6.79 — — 6.79 — — — — — 6.79 6.79

LeaseholdLand (1) 0.92 — — 0.92 0.28 0.02 — 0.30 — 0.62 0.64

Buildings (2) 66.92 0.48 0.08 67.32 12.00 2.64 0.02 14.62 — 52.70 54.92

Plant &Machinery 145.56 7.47 3.09 149.94 58.73 16.48 2.07 73.14 3.79 73.01 86.59

Plant &MachineryIntangibles 2.45 — — 2.45 0.44 0.69 — 1.13 — 1.32 2.01

Furniture,Fixturesand OfficeEquipments 23.37 0.91 2.50 21.78 7.50 4.72 1.01 11.21 — 10.57 15.87

MotorVehicles 1.22 — 0.63 0.59 0.63 0.33 0.47 0.49 — 0.10 0.59

247.23 8.86 6.30 249.79 79.58 24.88 3.57 100.89 3.79 145.11 167.41

Previous Year 251.39 13.55 17.71 247.23 72.97 14.31 7.70 79.58 0.24

Capital Work-in-progress (Including advances on Capital Account) 4.66 3.60

149.77 171.01

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

Notes :

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

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

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


Schedules

45



SCHEDULE F2004 2003


INVESTMENTS – [Refer Note 1(c) of Schedule M]

LONG TERM

Other than trade:

Quoted:

Government Securities * [Matured Face Value Rs. 0.01 Crore (2003 : Rs. 0.01 Crore)] 0.02 0.02

30,100 (2003 : 30,100) – 6.75% Tax Free Bonds (US 64) of Unit Trust of India of Rs. 100/- each 0.30 0.30[Market Value Rs. 0.31 Crore (2003 : Rs. 0.34 Crore)]

CURRENT

Other than trade:

Unquoted:

Government Treasury bills [Face Value Rs. 130.00 Crores (2003 : Rs. 86.19 Crores)] 128.59 84.46

In Subsidiary Company

Nil (2003 : 1,000) Equity Shares of Rs. 10/- each fully paid inIndrol Chemicals & Specialities Private Limited (Refer Note 16 of Schedule M) — 0.01

128.91 84.79

* Government Securities lodged with Mumbai Port Trust.

Schedules

46



SCHEDULE G2004 2003


CURRENT ASSETS, LOANS AND ADVANCES

Inventories* [Refer Note 1(d) of Schedule M]

Raw Materials 81.78 66.72

Finished Products 70.71 73.72

Traded Items 6.26 7.53

Packages 6.08 6.49

Stores & Consumables 1.41 1.13

166.24 155.59

* Including Goods in Transit

Sundry Debtors @

Secured 3.98 5.00

Unsecured, considered good

Exceeding six months 2.17 2.73

Others 125.11 123.52

Unsecured, considered doubtful (Exceeding six months) 3.14 8.02

134.40 139.27

Less: Provision for Doubtful Debts 3.14 8.02

131.26 131.25

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

Cash and Bank Balances

Cash on Hand 0.05 0.04

With Scheduled banks:

On Current Account [including cheques on hand Rs. 4.35 Crores(2003 : Rs. 1.47 Crores)] 24.57 22.44

On Deposit Account 0.01 0.01

Unclaimed Dividend Accounts 5.06 5.29

29.69 27.78

Other Current Assets

Interest accrued on Investments 0.01 0.01

0.01 0.01

Schedules

47



SCHEDULE G — (Contd.)2004 2003


Loans and Advances

(Unsecured, considered good, unless otherwise stated)

Advances recoverable in cash or in kind or for value to be received (Refer Note below)

Considered good 50.40 57.65

Considered doubtful 2.12 2.12

52.52 59.77

Less: Provision for doubtful advances 2.12 2.12

50.40 57.65

Balances with Customs, Port Trust and Excise Authorities 7.92 4.96

58.32 62.61

385.52 377.24

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

SCHEDULE H2004 2003


CURRENT LIABILITIES AND PROVISIONS

Current Liabilities

Sundry Creditors (Refer Note 14 of Schedule M) 189.32 184.09

Advances from Customers 1.62 1.77

Interest accrued and not due on Loans/Deposits 0.10 —

Amount retained for taxation liability of Castrol Ltd., U.K. 0.92 1.05

Investor Education and Protection Fund shall be creditedby the following amount (Refer Note below)

Unclaimed Dividends 5.06 5.29

197.02 192.20Provisions

Provision for Indirect Taxation 11.66 8.21

Provision for Current Taxation (Net of Advance Tax) 14.90 2.76

Proposed Final Dividend 52.55 52.55

Tax on Proposed Final Dividend 6.87 6.73

85.98 70.25

283.00 262.45

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

Schedules

48


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

SCHEDULE I2004 2003


OTHER INCOME

Interest (Gross)

From Current Investments (Non trade) 0.02 0.01

On Bank Deposits 0.06 0.42

On Income Tax Refund 2.87 0.72

Others [Tax deducted at source Rs. 0.01 Crore(2003 : Rs. 0.09 Crore)] 0.75 0.71

3.70 1.86

Dividend from Long Term Investment (Non trade – Gross) — 0.39[Tax deducted at source Rs. Nil (2003 : Rs. 0.03 Crore)]

Profit on sale of Investments – Current 3.90 6.93

Profit on Disposal/Write off of Fixed Assets (Net) 1.46 —

Miscellaneous Income [Tax deducted at source Rs. 0.48 Crore (2003 : Rs. 0.05 Crore)] 8.01 5.48

Debts written off in earlier years, realised 0.14 0.51

Excess Provision for Doubtful Debts written back 4.88 3.97

22.09 19.14

SCHEDULE J2004 2003


COST OF MATERIALS

Opening Stock

Raw Materials and Packages 73.21 57.43


80.74 66.08

Add: Purchases 787.99 698.70

868.73 764.78Less: Closing Stock

Raw Materials and Packages 87.86 73.21


94.12 80.74

774.61 684.04(Increase)/Decrease in Stock of Finished Products:

Opening Stock 73.72 57.24

Closing Stock 70.71 73.72

3.01 (16.48)

Excise Duty on account of Increase/(Decrease) in Stock of Finished Products (0.60) 2.16

777.02 669.72

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

Schedules

49


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

SCHEDULE K2004 2003


OPERATING AND OTHER EXPENSESSalaries, Wages and Bonus [Refer Note 1(e) of Schedule M] 46.12 47.01Performance Linked Incentive to Wholetime Directors 0.43 0.58Contribution to Provident and Pension Funds[Refer Note 1(e) of Schedule M] 5.88 6.33Gratuity [Refer Note 1(e) of Schedule M] 5.29 3.08Staff Welfare Expenses 7.43 8.02

65.15 65.02Rent 12.08 10.46Rates & Taxes 1.67 1.68Power & Fuel 3.46 3.44Stores & Consumables 1.14 1.32Freight & Forwarding Charges 47.56 40.54Insurance 2.37 2.40Repairs & Maintenance – Land & Building 1.97 2.48Repairs & Maintenance – Plant & Machinery 2.33 2.65Repairs & Maintenance – Others 4.16 3.92Bad Debts Written Off 5.20 6.24Processing & Filling Charges 21.72 20.64Non-recovered Taxes 12.06 8.47Advertisement & Sales Promotion 60.00 54.33Stock Point Operating Charges 10.36 9.63Loss on Disposal/Write Off of Fixed Assets (Net) — 3.16Directors’ Sitting Fees 0.03 0.02Voluntary Retirement Scheme Expenses [Refer Note 1(i) of Schedule M] 0.51 0.72Commission to Resident Non-Wholetime Indian Directors 0.26 0.26Royalty 21.70 22.71Sales Promotion Fee 13.34 8.19Travelling Expenses 12.60 10.41Miscellaneous Expenses (Refer Note 13 of Schedule M) (Net) 20.21 20.64

319.88 299.33

SCHEDULE L

2004 2003Rupees Rupees

in Crores in CroresINTEREST

To Banks 2.26 2.27On Others 0.61 0.30

2.87 2.57

Schedules

50


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

SCHEDULE M

NOTES ON ACCOUNTS

1. Accounting Policies :

(a) Basis of Preparation of Accounts :

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

(b) Fixed Assets and Depreciation :

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

(c) Valuation of Investments :

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

(d) Valuation of Inventories :

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

(e) Employees’ Retirement Benefits :

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

(f) Recognition of Income and Expenditure :

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

(g) Foreign Currency Transactions :

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

(h) Taxation :

(i) Provision for Current Income Tax is made in accordance with the Income Tax Act, 1961.

(ii) Deferred Tax is recognised, subject to the considerations of prudence, on timing differences, being the differencebetween taxable income and accounting income that originate in one period and are capable of reversal in one ormore subsequent periods.

(iii) The tax year for the Company being the year ending 31st March, the provision for taxation for the year is theaggregate of the provision made for the three months ended 31st March, 2004 and the provision based on thefigures for the remaining nine months upto 31st December, 2004, the ultimate tax liability of which will bedetermined on the basis of the figures for the period 1st April, 2004 to 31st March, 2005.

(i) Voluntary Retirement Scheme Expenses are fully written off to the Profit and Loss Account in the year in which theyaccrue.

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

Schedules

51


SCHEDULE M (Contd.)

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

Fixed Assets Revised Estimated Estimated useful Additional depreciationuseful life in years life in years – due to change in

Pre-revision estimated useful life(Schedule – XIV) Rs. in Crores

Office & Residential Buildings 25 61 1.08Computers 4 6 4.18Workshop Equipments* 4 21 2.04Furniture & Fixtures 8 16 1.95Motor Cars 4 11 0.14Office Equipments 10 21 1.32

Total 10.71

* Workshop Equipments provided against Sales Agreements will now be depreciated over the standard period of Agreement.

The written down value of these Fixed Assets as at 1.1.2004 is being depreciated over their revised remaining useful life. Thetotal impact of the revision is an increase of Rs. 10.71 Crores in depreciation for the year with a corresponding reduction in Profitbefore tax for the year & written down value of Fixed Assets as at 31.12.2004. This amount includes an estimated non-recurringamount of Rs. 6 Crores.The remaining categories of Plant & Machinery, Laboratory Equipments, Factory Buildings, Moulds, Dealer Boards, LeaseholdLand & Leasehold Improvements will continue to be depreciated at the existing rates as they represent the estimated useful lifeof these assets. (Also refer Note 1(b) of Schedule M – Notes on Accounts).

4. The Company has decided to close down its Plant located at Ballabgarh in the State of Haryana with effect from 1.1.2005, asoperations over there have become relatively cost inefficient. The Company had introduced a Voluntary Retirement Scheme(VRS) for its employees at Ballabgarh Plant. VRS charge for the year includes an amount of Rs. 3.72 Crores for BallabgarhPlant. During the year the Fixed Assets at Ballabgarh Plant have been retired from active use and are held for disposal. TheCompany has provided for an Impairment loss of Rs. 3.55 Crores (the difference between the carrying amounts and the netrealisable value estimated by the management) in respect of these Fixed Assets.

31st December, 31st December,2004 2003


5. Contingent liabilities not provided for in the accounts :(a) Counter Guarantees given to Banks 5.73 4.60(b) Excise/Sales Tax/Customs Demands made by the Authorities,

in respect of which appeals have been filed 11.50 9.27(c) Claims against the Company not acknowledged as debts

estimated at :In respect of Third Parties – Miscellaneous 5.76 2.58

(d) A suit has been filed against the Company in the Delhi High Court in connection with the erstwhile Regional Office ofthe Company. The suit is for eviction of the Company from the said premises and for claiming mesne profit/damages onthe grounds that with the increase in rent by the landlord the Delhi Rent Control Act ceased to apply to the saidpremises. The Company has taken necessary steps to defend itself. However, till the matter is finally decided thefinancial liability of the Company cannot be ascertained.

(e) The Company has received show cause notices from Excise Authorities in respect of stock differences at some of itsplants aggregating to Rs. 15.46 Crores. Based on the facts of the case and legal opinions obtained in this regard, theCompany is of the considered view that the demands are not sustainable. However, out of abundant caution, theCompany has made provisions/payments totalling to Rs. 3.82 Crores.

6. Certain disputed demand notices relating to Indirect taxes amounting to Rs. 38.20 Crores are neither have been considered ascontingent liabilities nor acknowledged as claims, based on expert legal opinions obtained in earlier years. Further, during theyear, the Company has carried out a health check on these disputed liabilities from reputed Tax Advisors, who have confirmedthe Company’s stand that the possibility of the demands materializing is remote.

7. A Shareholder of the Company had filed a Public Interest Petition in the Delhi High Court interalia challenging the allotment of3,537,862 equity shares on a Preferential basis to Castrol Ltd., U.K. The said Petition has been dismissed by the Delhi HighCourt. However, the Shareholder can go in appeal against the said Order to the Supreme Court of India.

Schedules

52


SCHEDULE M (Contd.)

8. Segment Information :The business segment has been considered as the primary segment. The Company is organised into two business segments,Automotive & Non Automotive.

The above business segments have been identified considering :

— The customers

— The differing risks and returns

— The organisation structure

— The internal financial reporting system

Segment revenue, results, assets and liabilities have been accounted for on the basis of their relationship to the operatingactivities of the segment and amounts allocated on a reasonable basis.

Rupees in Crores


Automotive Non- Un- Total Automotive Non- Un- TotalAutomotive allocated Automotive allocated

RevenueNet Sales/Income fromOperations 1111.69 193.43 — 1305.12 1001.48 169.67 — 1171.15

ResultsSegment Results 194.58 20.45 — 215.03 197.00 18.74 — 215.74

Unallocable Expenditurenet of Unallocable Income — — 9.60 9.60 — — 8.81 8.81

Exceptional Items(Refer Note 4 of Schedule M) — — 7.27 7.27 — — — —

Interest — — 2.87 2.87 — — 2.57 2.57

Profit Before Taxation — — — 195.29 — — — 204.36

Provision For Current Taxation — — — 68.73 — — — 63.35

Deferred Taxation — — — (0.90) — — — 3.63

Profit After Taxation — — — 127.46 — — — 137.38

Other InformationSegment Assets 400.35 106.01 158.28 664.64 412.08 108.72 112.24 633.04

Segment Liabilities 183.07 20.05 101.45 304.57 179.17 15.29 90.50 284.96

Capital Expenditure(Including CapitalWork-in-progress) 8.37 1.55 — 9.92 12.25 0.68 — 12.93

Depreciation(Refer Note 3 of Schedule M) 20.59 4.29 — 24.88 10.23 4.08 — 14.31

Impairment of Fixed Assets 3.00 0.55 — 3.55 0.20 0.04 — 0.24

Geographical Segment

RevenueIndia 1304.48 1170.99

Outside India 0.64 0.16

1305.12 1171.15

AssetsIndia 659.15 628.57

Outside India 5.49 4.47

664.64 633.04

Capital Expenditure(including CapitalWork-in-Progress)India 9.92 12.93

Outside India — —

9.92 12.93

9. 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.)

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53


SCHEDULE M (Contd.)

(b) Subsidiary Indrol Chemicals & Specialities Private Limited

(c) FellowSubsidiarieswith which theCompany hastransactions

(d) Associates Castrol India Ltd. Employees’ Provident FundCastrol India Ltd. Staff Pension FundCastrol India Ltd. Employees’ Gratuity Fund

(e) Key N. K. Kshatriya Managing DirectorManagement R. Elston-Green Executive DirectorPersonnel R. Pisharody Executive Director Upto 5th May, 2004

U. DeSousa Executive Director Upto 5th May, 2004A. S. Ramchander Executive Director Effective from 1st January, 2005

B. Transactions with related parties as per the books of account.Rupees in Crores


Holding Sub- Asso- Key Fellow Holding Sub- Asso- Key FellowCompanies sidiary ciates Manage- Sub- Companies sidiary ciates Manage- Sub-

ment sidiaries ment sidiariesPersonnel Personnel

Purchase of Materials/Finished Goods — — — — 69.85 — — — — 42.02

Sale of Goods — — — — 2.44 — — — — 0.83

Receiving of Services — — — — 4.28 — — — — 4.87

Rendering of Services &Deputation of Employees — — — — 17.34 0.06 — — — 10.89

Commission Income — — — — 0.99 — — — — 0.87

Contribution to Funds — — 11.11 — — — — 9.27 — —

Dividend 72.34 — — — 0.11 72.34 — — — 0.11

Dividend Received — — — — — — 0.39 — — —

Royalty 21.70 — — — — 22.71 — — — —

Amounts Payable 57.26 — — — 8.40 60.09 — — — 2.61

Amounts Receivable — — — — 9.79 0.06 — — — 6.15

Remuneration toManaging Directors — — — 1.27 — — — — 1.13 —

Remuneration toExecutive Directors — — — 1.91 — — — — 2.47 —

Loan Outstanding — — — 0.19 — 0.65 — — 0.20 —

Recovery of Loan &Interest thereon — — — 0.01 — — — — 0.01 —

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

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

BP Mauritius Ltd.BP Middle EastBP Oil International Ltd.BP Oil New ZealandBP Oil UK Ltd.BP Petrolleri A.SBP Shipping Ltd.BP Singapore - LubesBP Singapore PTE Ltd.BP Singapore Spec Ind LubesBP Southern AfricaBurmah Oil DeutschlandBurmah Oil TECH’ GMBHCastrol Australia PTY Ltd.Castrol BelgiumCastrol China Ltd.Castrol France S A

Castrol Industrial North America Inc.Castrol Industrie GMBHCastrol International Ltd.Castrol Italiana SPACastrol OffshoreCastrol PGO UKCastrol SAMECastrol South AfricaCastrol (UK) Ltd.Deutsche BP AktiengesellschaftFreight Systems Co. Ltd.Lubricants BelgiumLubricants UK CorporateLubricants UK Ltd.PT Castrol IndonesiaTata BP Solar India Ltd.

Schedules

54


SCHEDULE M (Contd.)

10. Operating Lease for assets taken on lease after 1st April, 2001.



(a) Total of future minimum lease payments

(i) Not later than one year 11.35 9.58

(ii) Later than one year and not later than five years 10.26 15.20

(iii) Later than five years — —

(b) Lease payments recognised in the Profit and Loss account 12.08 10.46

11. Information given under Clause 3(i)(a), 3(ii), 4-C, 4-D of Part II of Schedule VI to the Companies Act, 1956.

31st December, 2004 31st December, 2003Quantity Value Quantity Value

(KLs/MTs) Rupees (KLs/MTs) Rupeesin Crores in Crores

(a) Turnover (Net Sales)Class of Goods :

Lubricating Oils, Greases etc. 223583 1280.27 210459 1138.27Traded Items 621 23.16 1381 31.07

224204 1303.43 211840 1169.34

Old and used Containers 1.69 1.81

1305.12 1171.15

(b) (i) Consumption of Raw Materials, Additivesand Chemicals and Packages : *

Base Oils 195333 449.99 186597 380.22Additives and Chemicals 33735 234.52 31727 211.22Packages (Individual itemseach being less than 10% of the total) — 76.38 — 73.84

229068 760.89 218324 665.28

* Does not include adjustment for old and used Containers

31st December, 2004 31st December, 2003Value % of Value % of

Rupees Total Rupees Totalin Crores Consumption in Crores Consumption

(ii) Value of all Imported and Indigenous RawMaterials consumed during the year :

Imported :Base Oils 320.93 42.18 255.92 38.47Additives and Chemicals 53.46 7.03 50.52 7.59

Indigenous :Base Oils 129.06 16.96 124.30 18.68Additives and Chemicals 181.06 23.80 160.70 24.16Packages 76.38 10.04 73.84 11.10

760.89 100.00 665.28 100.00

Schedules

55


SCHEDULE M (Contd.)

31st December, 2004 31st December, 2003Quantity Value Quantity Value

(KLs/MTs) Rupees (KLs/MTs) Rupeesin Crores in Crores

(c) Opening and Closing Stock of Goods produced :

Manufactured Grades :

Lubricating Oils and Greases

Opening Stock 15868 73.72 13648 57.24

Closing Stock [Excludingshortages/losses – 612 KLs/MTs(2003 : 538 KLs/MTs)] 14106 70.71 15868 73.72

(d) Traded Items :

Opening Stock 436 7.53 647 8.65

Purchases 569 10.14 1170 15.14

Closing Stock 382 6.26 436 7.53

(e) Licensed and Installed Capacity :

(i) Licensed Capacity — Not applicable as per legal advice

(ii) Installed Capacity(Technically evaluated as certifiedby the Management and acceptedby Auditors) (Per Year on a singleshift basis)


(KLs/MTs) (KLs/MTs)For production of Lubricating Oils, Greases, Brake Fluids,at Patalganga, Kolkata, Chennai, Ballabgarh and Silvassa. 165764 165764

(f) Production of Lubricating Oils, Greases, etc.[Including processing done by third parties 15899 KLs/MTs (2003 : 15306 KLs/MTs)] 222433 213217

(g) (i) The relevant information regarding turnover, production, opening and closing stocks is given only in aggregate and nodetailed break-up thereof is given as the items are too numerous to be conveniently grouped.

(ii) Consumption includes adjustments for shortage/excess, etc. and the effects of reduction of inventory to realisablevalue.

(iii) Quantities of turnover, consumption, production, opening and closing stocks of additives and chemicals are made upof Kilolitres and Metric Tons, but the constituent units of measurement of the items have not been separatelyidentified and indicated.

(iv) As the Company manufactures and trades, the information required by Clause 3(ii)(a) of Schedule VI Part II to theCompanies Act, 1956 is interpreted to require total amounts to be disclosed in respect of opening stock, closing stockand purchases of traded items.



12. Directors’ emoluments :Total Remuneration (excluding sitting fees) [Refer (b) and (c) below] 3.43 3.85

Includes :(i) Salary and Allowances 1.76 2.00

(ii) Contribution to Provident and other funds 0.30 0.38

(iii) Estimated Value of perquisites * 0.68 0.63

(iv) Performance Linked Incentive to Wholetime Directors 0.43 0.58

(v) Commission to Resident Non-Wholetime Indian Directors [Refer (c) below] 0.26 0.26

* Evaluated as per Income-Tax Rules wherever applicable.

Schedules

56


SCHEDULE M (Contd.)



(a) Computation of profit in accordance withSection 309(5) of the Companies Act, 1956 :

Profit before Taxation as per Profit and Loss Account 195.29 204.36

Add: Depreciation as per Profit and Loss Account 24.88 14.31Voluntary Retirement Scheme Expenses 0.51 0.72Exceptional Items - Voluntary Retirement Scheme Expenses -Plant closure 3.72 —Exceptional Items - Impairment of Fixed Assets - Plant closure 3.55 —Directors’ Remuneration 3.43 3.85Directors’ Sitting Fees 0.03 0.02

36.12 18.90

231.41 223.26Less: Depreciation u/s 350 of the Companies Act, 1956 13.27 13.69

Profit on sale of Investments (Net) 3.90 6.93Wealth Tax 0.16 0.21Excess Provision for Doubtful Debts written back 4.88 3.97

22.21 24.80

Profit under Section 309(5) of the Companies Act, 1956 209.20 198.46

(b) Remuneration payable to Managing and Wholetime Directors@ 10% on above profits 20.92 19.85

Restricted by the Board of Directors to 3.17 3.59(c) Commission payable to resident Non-Wholetime Indian Directors

@ 1% on above profits 2.09 1.98

Restricted by the Board of Directors to 0.26 0.26



13. Miscellaneous Expenses include Auditors’ Remuneration as follows :(i) Audit Fees — Statutory # 0.25 0.25(ii) In other capacity : #

Audit Fees — Tax Accounts/Audit 0.11 0.11Other Services 0.21 0.13

(iii) Reimbursement of out of pocket expenses 0.01 0.010.58 0.50

# Excluding Service Tax

14. The Company owes to following Small Scale Industrial Undertakings sums outstanding for more than 30 days :ABCD Drums & Barrels Industries. Ole Fine Organics Royal Castor Products Pvt. Ltd.Amantech Chemicals Pvt. Ltd. Pax Enterprises Shah Packwell IndustriesCentral Oil Industries R. G. Desai Industries Suru Chemicals & Pharmaceuticals Pvt. Ltd.Himatex Corporation R. K. Metal & Plastics Pvt. Ltd. Vibha Chem Products Pvt. Ltd.Makwell Plasticizers Pvt. Ltd. Raj Lubricants (Madras) Ltd.

The information regarding Small Scale Industrial Undertakings has been determined to the extent such parties have beenidentified on the basis of information available with the Company. This has been relied upon by the auditors.

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

Schedules

57


SCHEDULE M (Contd.)

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



17. C.I.F. Value of Imports :Raw Materials 308.47 245.87Capital Goods 0.66 0.81

18. Expenditure in Foreign Currency (on accrual basis) :Travel 0.91 0.42Imports of goods for resale 8.08 9.26Others (Net of tax where applicable) 6.14 8.02Royalty (Net of tax) 18.45 19.30

19. Earnings in Foreign Exchange (on accrual basis) :Supplies to Foreign Vessels 2.09 1.00Commission & Others 0.99 1.04FOB value of goods exported 0.64 0.16

20. Details of Dividend remitted during the year, to Two (2003 – Two) non-resident shareholders are as follows :


Dividend in respect No. of Rupees Rupeesof the year ended Shares in Crores in Crores

31-12-2002 (Final) 87822929 — 37.33

31-12-2002 (Special) 87822929 — 72.45

31-12-2003 (Interim) 87822929 — 35.13

31-12-2003 (Final) 87822929 37.33 —

31-12-2004 (Interim) 87822929 35.13 —

21. Previous year’s figures have been regrouped wherever necessary.

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

Balance Sheet Abstract and Company’s General Business Profile :

I. Registration Details

Registration No. 2 1 3 5 9 State Code 1 1

Balance Sheet Date 3 1 1 2 2 0 0 4

Date Month Year

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

Public Issue Rights Issue

— —

Bonus Issue Private Placement

— —

Schedules

58


III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)

Total Liabilities Total Assets

6 6 4 2 0 9 9 6 6 4 2 0 9 9

Sources of Funds:

Paid up Capital Reserves & Surplus

1 2 3 6 4 0 3 2 3 6 4 3 7 6

Secured Loans Unsecured Loans

— 3 7 2 5 6

Deferred Tax Liability (Net)

1 7 4 0 7 0

Application of Funds:

Net Fixed Assets Investments

1 4 9 7 7 2 1 1 2 8 9 1 1 5

Net Current Assets Miscellaneous Expenditure

1 0 2 5 2 6 9 —

Accumulated Losses

—

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

Turnover Total Expenditure

1 3 0 5 1 2 3 4 1 1 3 1 9 2 3 3

Profit/(Loss) before tax Profit/(Loss) after tax

1 9 5 2 9 4 1 1 2 7 4 6 3 9

Earning per Share (Rs.) Dividend Rate %

1 0 . 3 1 8 2 . 5 0

V. Generic Names of Principal Products/Services of the Company

Item Code No. 2 7 1 0 0 0 . 6 1(ITC Code)

Product Description L U B R I C A T I N G O I L S

SCHEDULE M (Contd.)


Executive Directors




A. H. MODYCompany Secretary

& Head Legal


Schedules

59


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

2004 2003Rupees Rupees Rupees

in Crores in Crores in CroresA. CASH FLOW FROM OPERATING ACTIVITIES

Net profit before tax 195.29 204.36

Adjustments for:


Interest 2.87 2.57

Interest & Dividend Income (3.70) (2.25)

Profit on Sale of Investments (3.90) (6.93)

Unrealised foreign exchange (gain)/losses (0.57) (0.55)

(Profit)/Loss on Disposal/Write off of Fixed Assets (Net) (1.46) 3.16

Provision for Impairment of Fixed Assets 3.55 —

Operating Profit before Working Capital Changes 216.96 214.67

Adjustments for:

Sundry Debtors (0.01) (39.25)

Inventories (10.08) (30.66)

Other Loans & Advances 4.29 16.00

Sundry Creditors 8.17 5.83

Cash generated from Operations 219.33 166.59

Income Tax Paid (56.59) (61.67)

NET CASH FLOW FROM OPERATING ACTIVITIES 162.74 104.92

B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets (9.92) (12.93)

Sale of Fixed Assets 4.19 7.09

Purchase of Investments (700.88) (630.77)

Sale of Investments 660.66 773.20

Interest received 3.70 1.86

Dividend received — 0.39

NET CASH FLOW FROM INVESTING ACTIVITIES (42.25) 138.84

Cash Flow

60


Cash Flow (Contd.)

2004 2003Rupees Rupees Rupees

in Crores in Crores in Crores

C. CASH FLOW FROM FINANCING ACTIVITIES

Repayment of long term borrowings (0.48) (0.86)

Interest Paid (2.77) (2.57)

Dividend Paid (102.01) (204.01)

Dividend Tax paid (13.32) (26.14)

NET CASH FLOW FROM FINANCING ACTIVITIES (118.58) (233.58)

D. NET INCREASE/(DECREASE) IN CASH ANDCASH EQUIVALENTS (A) + (B) + (C) 1.91 10.18

CASH AND CASH EQUIVALENTS, beginning of the year 27.78 17.60

CASH AND CASH EQUIVALENTS, end of the year 29.69 27.78

Notes: (1) The above Cash Flow Statement has been prepared under the “Indirect Method” as set out in the AccountingStandard-3 on Cash Flow Statement issued by The Institute of Chartered Accountants of India.

(2) Previous year’s figures have been regrouped wherever necessary.


Executive Directors







Cash Flow

Documents

Castrol India Limited