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Asian Paint Ar 2k4-5 Cover1-4 With Spine.P65 5/26/05, 5:28 PM1

Asian Paint Ar 2k4-5 Cover1-4 With Spine.P65 5/26/05, 5:28 PM2

Asian Paints (India) Ltd.annual report 2004-2005

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Asian Paints (India) Ltd.annual report 2004-2005 33

Five year review(Rs. in millions except for per share data, number of employees and ratios)

Results for the Accounting Year 2004-2005 2003-2004 2002-2003 2001-2002 2000-2001

REVENUE ACCOUNT

Gross Sales 23,388.4 20,259.5 18,066.6 15,984.5 14,695.1Net Sales and Operating Income 19,415.1 16,966.5 15,302.5 13,613.5 12,333.5Growth Rates (%) 14.43 10.87 12.41 10.38 13.18Materials Consumed 11,154.0 9,441.5 8,023.5 7,173.6 6,611.6% to Net Sales 57.45 55.65 52.43 52.70 53.61Overheads 5,323.3 4,829.6 4,587.7 4,176.8 3,699.4% to Net sales 27.42 28.47 29.98 30.68 29.99Operating Profit 3,253.9 2,912.2 2,817.2 2,407.8 2,115.0Interest Charges 27.5 52.7 83.5 145.8 221.2Depreciation 476.1 480.1 485.2 447.9 334.9Profit Before Tax and Extraordinary item 2,750.3 2,379.4 2,248.5 1,814.1 1,558.9% to Net Sales 14.17 14.02 14.69 13.33 12.64Extraordinary item 42.3 68.1 --- --- ---Profit Before Tax and after Extraordinary item 2,708.0 2,311.3 2,248.50 1,814.10 1,558.90% to Net Sales 13.95 13.62 14.69 13.33 12.64Profit After Tax 1,738.2 1,475.8 1,433.7 1,153.3 1,063.9Prior period items (3.3) 2.1 (13.6) (10.2) (8.1)Profit After Tax and prior period items 1,734.8 1,477.9 1,420.1 1,143.1 1,055.8Return on average net worth (RONW) (%) * 31.43 29.32 32.01 27.82 27.47

CAPITAL ACCOUNTShare Capital 959.2 959.2 641.9 641.9 641.9Reserves and Surplus 4,763.0 4,356.2 4,124.3 3,463.7 3,470.1Deferred Tax Liability (Net) 305.4 486.6 581.6 611.8 ---Loan Funds 838.8 704.7 1,036.2 1,107.7 2,268.2Fixed Assets 3,195.1 3,444.3 3,662.4 3,895.0 3,804.6Investments 2,584.3 2,424.9 1,476.9 633.4 440.7Net Current Assets 1,087.0 637.5 1,244.58 1,296.7 2,134.9Debt-Equity Ratio 0.15: 1 0.13: 1 0.22:1 0.27:1 0.55:1Market Capitalisation 37,514.2 29,135.6 21,187.8 21,056.2 15,802.6

PER SHARE DATAEarnings Per Share (Rs.) 18.5 # 16.1 # 14.8 17.8 16.5Dividend (%) 95.0 $ 85.0 110.0 90.0 70.0Book Value (Rs.) 59.7 $ 55.4 74.3 64.0 64.1OTHER INFORMATIONNumber of Employees 3,627 3,430 3,400 3,258 3,197

* RONW is calculated after provision for impairment on fixed assets in 2004-2005# EPS is calculated after adjusting for Bonus issue and the reduction of capital on account of merger of Pentasia Investments Ltd. in accordance with Accounting

Standard (AS 20) - Earnings per share$ On increased capital

34

FORM A

Disclosure of particulars with respect to Conservation of Energy :

2004-05 2003-04

A. Power and fuel consumption :1. Electricity :

a) Purchased :Units (‘000 KWH) 22,836 23,600Total Amount (Rs. in million) 101 105Rate/Unit (Rs.) 4.42 4.45

b) Own Generation :Through Diesel Generator -Units (‘000 KWH) 1,929 2,148Units per ltr. of diesel oil 2.90 3.26Cost/unit (Rs.) 8.17 6.57Natural Gas ----Units (‘000 KWH) 7,040 5,556Units per cubic nm. 3.25 3.35Cost/Unit (Rs.) 3.12 2.65

2. Coal :(Steam coal used inBoiler to generate steamfor the process)*Quantity (in MTs) 15,210 16,252Total cost (Rs. in million) 40 31Average Rate/MT (Rs.) 2,648 1,886* includes Leco/Raw Ligniteexpressed in equivalenttons of coal

3. Furnace Oil :Quantity (in MTs) 1,720 1,688Total Amount (Rs. in million) 38 31Average Rate/Kg. (Rs.) 21.87 18.45

4. Natural Gas :Quantity (in cubic nm.) 3,045 3,005Total Amount (Rs. in million) 28 28Average Rate/cubic nm. (Rs.) 9.13 9.25

B. Consumption per unit of production :

FORM BDisclosure of Particulars with Respect to Technology Absorption :Research and Development (R&D)

1. Specific area in which R&D is carried out by the Company:i) Development of new products and processes related

to surface coatings and intermediates.

ii) Continuous improvement in quality and cost of existingproducts.

iii) Upgradation of products and processes to improveenvironmental and safety concerns.

iv) Identification of alternate raw materials and vendorsenabling quality improvement, cost benefits, supplychain flexibility and crisis management.

v) Development of analytical test methods,characterisation techniques and application essentialfor product development, benchmarking, processcontrol and customer services.

2. Benefits derived as a result of the above R&D:i) Development of new products such as special effect

finish - Royale play, Utsav range of stainers for waterbased paints and polyester wood finishes.

ii) Professional acrylic distemper designed for specificcustomer segment.

iii) A premium product, AP melamyne gold clear in thecategory of acid cure system developed and launchedin Mumbai market. Similarly a fast drying PU coatingdeveloped and launched in selected markets.

iv) Exterior paint with superior features and highdurability under the name Apex Ultima developed andlaunched.

v) Water borne retro-reflective road marking paintcommercialised under the brand ‘Apcotrak WBR’.

vi) Epoxy tank lining suitable for usage in contact withpotable water and for wet heat resistance up to 150degree celsius developed for refineries.

vii) Self leveling epoxy floor coating for automotive andchemical industries commercialized.

viii) Development of products like metallic and pearlescentfinish in latex glaze, economy emulsion paint and wallputty for overseas subsidiaries. Thermal insulatingcoating, vintage exterior finish and self leveling epoxyfloor coating have been launched in few countries.

ix) Technological assistance provided to Licencees.

Annexure to Directors’ Report

04-05 03-04 04-05 03-04 04-05 03-04 04-05 03-04

Paints,EnamelsandVarnishes(includingSyntheticResins forcaptive use) 89 100 41 43 36 40 ---- ----

PhthalicAnhydride 36 40 ---- ---- 68 71 ---- ----

Pentae-rythritol 916 997 1.16 0.02 ---- ---- 3 4

Electricity Furnace Oil Natural Gas Coal(KWH/Ton/KL) (Ton/KL) (Ton/KL) (Ton)


Technology absorption, adaptation and innovation:

All developments were done indigenously.

For and on behalf of the Board

Mumbai Ashwin C. Choksi11th May, 2005 Chairman

3. Future plan of action:Company will continue efforts towards development of newproducts/product systems for domestic and internationalmarkets meeting the requirements of customer needs, society,and continuously improve quality, cost, availability andenvironment.


With the entry and direct presence in several internationalmarkets the major focus in exports currently is to service theneeds of the subsidiaries. Hence the exports are primarily to theoverseas subsidiaries and not to distributors and customers. Themain exported materials are raw materials, resins and tintingcolorants. About 20% of exports also include engineering suppliesand marketing material. Going forward, the export growths willbe primarily driven by tinting colorants, where with the focus onimproving the retail presence through introduction of retail tintingsystems, demand for tinting colorants will grow.

Foreign exchange earnings and outgo:

4. Expenditure on R & D during the year is as follows:

(Rs. in Millions)

2004-05 2003-04a) Capital 17.33 3.56b) Recurring 96.36 75.89

113.69 79.45Total R & D expenditure as apercentage of turnover 0.59% 0.47%

There is no plan to supply material in the near future to any newexport markets from India. All the new markets would be servicedfrom the overseas subsidiary closest to the market.

Details of expenditure in foreign currency have been givenseparately under Note B-12 in Schedule ‘M’ - Notes to accounts.

36

Information as per Section 217(2A) read with the Companies (Particulars of Employees) Rules, 1975 and forming part of theDirectors’ Report dated 11th May, 2005 for the year ended 31st March, 2005.

Name Age Designation/ Remuneration Qualifications Date of Expe- Last Employment HeldNature of Duties Rs. commencement of rience Name of the Company, Designation

employment No. ofyears

(a) Particulars of employees employed throughout the financial year and who are in receipt of remuneration of not less than Rs. 2,400,000/- in terms of Section 217(2A)(i):Shri K. B. S. Anand 49 Vice President - Sales & Marketing 4,994,195 B.Tech., P.G.D.M. 01.06.1979 25 ----Shri Ashwin C. Choksi 63 Chairman 9,857,179 M.Com. 01.01.1965 40 ----Shri Manish M. Choksi 38 Vice President - Strategic Planning & IT 2,921,363 B.Chem, Engg., MBA 17.09.1992 14 E.I.Du.Pont De Nemours, Summer InternShri Ashwin S. Dani 63 Vice Chairman & Managing Director 10,045,335 B.Sc.(Hons.), B.Sc.(Tech.),M.S. 01.10.1968 37 Interchemical Corpn., Development ChemistShri Jalaj Dani 35 Vice President - International 2,939,943 B.S., S.M. 18.01.1999 12 Gujarat Organics Ltd., Managing DirectorShri Vikram Jaisinghani 42 GM - Manufacturing 2,844,821 B.E., M.F.M. 01.09.1999 19 GE Lighting Ltd., General Manager -

Materials & SourcingShri I. K. Jaiswal 46 Regional Vice President 3,870,261 B.Tech., P.G.D.M. 03.05.1982 23 ----Shri S. S. Kini 50 Vice President - Supply Chain 5,348,164 B.Tech., P.G.D.M. 01.06.1979 25 ----Shri Gokul Manjeshwar 50 Financial Controller 3,318,253 M.Com., M.M.S. 15.01.1985 26 Price Waterhouse & Co., Assistant ManagerShri Jayesh Merchant 47 Vice President - Corporate Finance & 3,827,137 B.Com., A.C.A, A.C.S., L.L.B. 01.11.2002 21 UTV Software Communications,

Company Secretary Director - FinanceShri P. M. Murty 54 President - Decoratives (India) 6,430,205 B.Sc.(Hons.), P.G.D.M. 03.05.1971 33 ----Shri Vivek Patwardhan 53 Vice President - Human Resources 3,247,393 B.Sc. (Hons.), M.L.W. 01.03.1984 31 Herbertson Ltd., Personnel ManagerShri V. S. Ram @ 54 Chief Executive - Asian PPG Industries Ltd. 6,424,446 B.Tech., P.G.D.M. 20.05.1974 30 ----Shri J. N. Shahani 58 Vice President - Industrial, Penta & Phthalic 5,376,501 B.Chem., Engg. 01.02.1974 34 Resins & Plastics Pvt. Ltd., Plant SupervisorShri Vivek Subramanian 41 General Manager - Retail Sales 2,623,799 B.Tech.(Mech.),P.G.D.M. 11.05.1987 18 ----Shri Amit Syngle 38 General Manager - Marketing 2,583,061 B.E., M.B.A. 01.06.1990 15 Sea Services, Marketing InchargeShri Abhay A. Vakil 54 Managing Director 9,935,262 B.Sc.,B.S. 05.08.1974 30 ----

(b) Particulars of employees employed for the part of the year who were in receipt of remuneration at the rate of not less than Rs. 200,000/- p.m. in terms of Section 217(2A)(ii):

Shri Rajiv Kumar Garodia 31 Marketing Manager 318,272 B.E., P.G.D.M. 06.06.1996 7 ----Shri Nikhil Mathur 37 Finance & Strategic Planning Manager 218,658 B.Com., CA, P.G.D.B.M. 02.06.1993 11 M/s. Ray & Ray, Chartered AccountantsShri A. V. S. Murthy 67 Vice President - Accounts & Taxation 2,520,283 B.Com.(Hons.), A.I.C.W.A. 15.04.2002 46 Apar Pvt Ltd., Cost & Budget ManagerShri Girish Pradhan 39 Materials Executive 216,827 B.Com., P.G.D.M 03.03.1987 17 ----Shri P. Rambabu 37 General Manager - Systems 200,168 B.E., P.G.D.M. 01.06.1990 14 ----Shri Mahendra Rawat 45 Manager - Product Development 237,436 M.Sc. 20.07.1996 17 Devidayal (Sales) Pvt.Ltd.- Research ChemistShri Mayur Toshniwal 36 Purchase Manager 205,744 B.Tech.(Mech.),P.G.D.M. 04.06.1992 11 ----

Notes:1. Nature of employment whether contractual or otherwise:

a. The employment of Shri Ashwin C. Choksi, Shri Ashwin S. Dani and Shri Abhay A. Vakil is contractual for five years and terminable by six months notice on either side.b. The employment of the remaining persons is contractual and the terms and conditions are subject to the rules and regulations of the Company as in force from time to time.

2. Relatives of Directors.a. Names of Directors:

Shri Ashwin C. Choksi, Chairman is related to Shri Mahendra C. Choksi, Director of the Company.Shri Ashwin S. Dani,Vice- Chairman & Managing Director is related to Shri Hasit A. Dani, Director of the Company.Shri Abhay A. Vakil, Managing Director is related to Shri Amar A. Vakil, Director of the Company.

b. Names of employees:Shri Jalaj A. Dani is related to Shri Ashwin S. Dani, Vice- Chairman & Managing Director and Shri Hasit A. Dani, DirectorShri Malav Dani is related to Shri Ashwin S. Dani, Vice- Chairman & Managing Director and Shri Hasit A. Dani, DirectorShri Manish M. Choksi is related to Shri Mahendra C. Choksi, DirectorMs. Nehal A. Vakil is related to Shri Abhay A. Vakil, Managing DirectorMs. Amrita A. Vakil is related to Shri Amar A. Vakil, DirectorShri Rupen Choksi is related to Shri Ashwin C. Choksi, Chairman.

The remuneration of Ms. Nehal A. Vakil, Ms. Amrita A. Vakil and Shri Rupen Choksi was less than the limit prescribed in terms of Section 217(2A) for the year. No remuneration has beenpaid to Shri Malav Dani, pending statutory approvals.

3. Remuneration includes, salary, dearness allowance, performance incentive, arrears paid, commission, house rent allowance, leave encashment, conveyance allowance, Company’s contribu-tion to provident fund and superannuation fund, medical and leave travel allowance etc., as well as monetary value of perquisites as per Income Tax Rules. It excludes provision for accruedleave salary and the Company’s contribution to Gratuity Fund as the same is a lumpsum amount based on actuarial valuation.

For and on behalf of the Board

Mumbai Ashwin C. Choksi11th May, 2005 Chairman


@ Employee seconded to joint venture company Asian PPG Industries Ltd.


Table 1: Details about Asian Paints’ Board of Directors

Name of Director Position Board meetings Board Whether Directorships Membershipsheld during the meetings attended in other in boardyear attended last AGM companies committees of

incorporated otherin India companies*

Ashwin C. Choksi Executive Chairman/ 6 6 Yes 2 2(1)Promoter

Ashwin S. Dani Executive Vice-Chairman/ 6 6 Yes 6 4(2)Managing Director/Promoter

Abhay A. Vakil Managing Director/ 6 6 Yes 3 3(-)Promoter

K. Rajagopalachari @ Non-executive 6 4 Yes --- ---

Mahendra C. Choksi Non-executive/Promoter 6 6 Yes 3 1(-)

Amar A. Vakil Non-executive/Promoter 6 5 No 3 ---

Hasit A. Dani Non-executive/Promoter 6 6 Yes 3 ---

Manubhai G. Patel # Non-executive/ 6 5 Yes 2 4(3)Independent

Tarjani Vakil Non-executive/ 6 6 Yes 4 4(3)Independent

Dipankar Basu Non-executive/ 6 6 Yes 7 7(4)Independent

Deepak M. Non-executive/ 6 5 Yes 7 5(2)Satwalekar Independent

Rajendra A. Shah Non-executive/ 6 5 Yes 15 10(4)Independent

Swaminathan Non-executive/ 6 3 Yes 3 1(-)Sivaram Independent

Mahendra M. Shah Non-executive/ 6 6 Yes 4 2(-)Independent

Notes:* The figures in parenthesis denote the number of chairmanship(s) of board committees in other companies.@ Mr. K. Rajagopalachari expired on 14 March 2005.# Mr. Manubhai G. Patel resigned from the board effective 25 March 2005.

Asian Paints’ philosophy has always been to practice the beststandards of Corporate Governance for the welfare ofstakeholders. The Company lays significant emphasis on theprinciples of accountability, integrity and transparency.

The Securities and Exchange Board of India (SEBI) has prescribedmandatory standards of corporate governance for all companieslisted on Indian stock exchanges and notified them under Clause49 of the listing agreement. This chapter, along with chapterson Management Discussion and Analysis and AdditionalShareholders Information, constitutes Asian Paints’ compliancewith Clause 49 of the listing agreement.

Asian Paints has already adopted a Code of Conduct whichlays down the standards of values, ethics and business principlesof the Management. Our business strategy and day to day affairsof the Company are conducted with highest level of compliances,sincerity and consistency.

BOARD OF DIRECTORS

Composition of Board

As on 31 March 2005, the Board comprised of twelve Directors,out of whom, six are promoter-Directors. Three of the sixpromoter-Directors, including the executive Chairman, arewhole-time executive Directors, while the other three arenon-executive. The remaining six Directors are non-executiveand independent.

Number of Board meetings

The Asian Paints Board met six times during the year. The Boardmeetings took place on 11 May 2004, 28 July 2004,27 October 2004, 3 December 2004, 19 January 2005 and25 March 2005.

Corporate Governance

38

Information supplied to the Board

The following, inter-alia, is provided to the board as a part ofthe agenda papers well in advance of the board meetings or istabled in the course of the Board meetings:

� annual budgets, operating plans and budgets, capital budgets,

� quarterly, half yearly and annual results of the Companyand its operating divisions or business segments,

� minutes of meetings of the audit committee and other boardcommittees,

� information on recruitment and remuneration of seniorofficers just below the Board level,

� materially important show cause, demand, prosecution andpenalty notices,

� fatal or serious accidents or dangerous occurrences,

� any materially significant effluent or pollution problems,

� any materially relevant defaults in financial obligations toand by the Company or substantial non-payment for goodssold by the Company,

� any issue which involves possible public or product liabilityclaims of a substantial nature,

� details of any joint venture or collaboration agreement,

� transactions that involve substantial payment towardsgoodwill, brand equity or intellectual property,

� significant labour problems and their proposed solutions,

� significant initiatives and developments on the humanresource and industrial relations fronts,

� sale of a material nature of investments, subsidiaries andassets, which are not in the normal course of business,

� investment of funds of the Company,

� quarterly details of foreign exchange exposure and the stepstaken by management to limit the risks of adverse exchangerate movement,

� status on legal cases,

� non compliance of any statutory nature of listing requirement; and

� proposals for investment, mergers and acquisitions.

Directors with materially significant related party transactions,pecuniary or business relationship with the Company

None of the non-executive Directors of Asian Paints have anypecuniary relationships with the Company except lateMr. K. Rajagopalachari who had been appointed as an advisorfor a period of five years with effect from 1 June 2000 andreceived a retainer fee of Rs.1,00,000 per month, a Companycar and driver, telephone facilities at home and office, andprovision of medical facilities as applicable to executives of theCompany.

He also drew a monthly pension of Rs.50,737.50 as perCompany rules. The appointment of late Mr. K. Rajagopalacharihad received the approval of the Department of Company Affairs,Ministry of Law, Justice and Company Affairs, Government ofIndia, under Section 309 (1)of the Companies Act,1956 (vide6/33/2000-CLVII of 1.11.2000).

As required under Accounting Standard 18 (AS-18) transactionswith related parties are furnished under Schedule M of the Notesto the Accounts. There are no transactions of material naturewith the promoter Directors or their relatives etc., that may havea potential conflict with the interest of the Company.

Disclosures have also been received from the Senior ManagerialPersonnel relating to the financial transactions in which they ortheir relatives may have a personal interest. However, none ofthese transactions have a potential conflict with the interest ofthe Company at large.

Remuneration of Directors

The executive Chairman and other executive Directors are paidremuneration as per their agreements with the Company. Theseagreements are approved by the Board, shareholders and suchother authorities as may be necessary. The remuneration structureof the executive Chairman and other executive Directors comprisessalary, house rent allowance, commission, perquisites, contributionto provident/superannuation fund, gratuity and leave travelallowance and these are reviewed by the Remuneration Committeeof the Board before being approved. The non-executive Directorsreceive commission and sitting fees, except forMr. K. Rajagopalachari, who in addition, drew remuneration asstated above. Table 2 gives the details of the remuneration packageof Directors and their relationship with each other.



Table 2: Details of the remuneration paid to Directors and their relationships with each other are as follows (in Rs.)

Name of Director Relationship Salary HRA Perquisites* Sitting Commission Totalwith each other fees

Ashwin C.Choksi Brother of Mahendra C.Choksi 18,75,000 7,50,000 26,32,179 --- 46,00,000 98,57,179

Ashwin S.Dani Father of Hasit A.Dani 18,75,000 7,50,000 28,20,335 --- 46,00,000 1,00,45,335

Abhay A.Vakil Brother of Amar A.Vakil 18,75,000 7,50,000 27,10,262 --- 46,00,000 99,35,262

K.Rajagopalachari @ --- --- --- 15,000 60,000 4,00,000 **4,75,000

Mahendra C.Choksi Brother of Ashwin C.Choksi --- --- --- 1,40,000 4,00,000 5,40,000

Amar A.Vakil Brother of Abhay A. Vakil --- --- --- 60,000 4,00,000 4,60,000

Hasit Dani Son of Ashwin S. Dani --- --- --- 1,30,000 4,00,000 5,30,000

Manubhai G.Patel # --- --- --- --- 1,10,000 4,40,000 5,50,000

Tarjani Vakil --- --- --- --- 1,60,000 4,00,000 5,60,000

Dipankar Basu --- --- --- --- 1,00,000 4,00,000 5,00,000

Deepak M. Satwalekar --- --- --- --- 90,000 4,00,000 4,90,000

Rajendra A.Shah --- --- --- --- 50,000 4,00,000 4,50,000

Swaminathan Sivaram --- --- --- --- 30,000 2,00,000 2,30,000

Mahendra M.Shah --- --- --- --- 1,40,000 4,00,000 5,40,000

Notes :

* Perquisites include company’s contribution to provident and superannuation fund, medical and leave travel allowance etc. as well as monetaryvalue of perquisites as per Income Tax rules. Pension and leave encashment, as applicable have been included.

** Includes retainership of Rs.1.25 million and pension of Rs. 0.58 million paid during the year.

@ Mr. K. Rajagopalachari expired on 14 March 2005.

# Mr. Manubhai G. Patel resigned from the board effective 25 March 2005.


The employment of Mr. Ashwin C. Choksi, Mr. Ashwin S. Daniand Mr. Abhay A. Vakil as executive Directors is contractualfor five years and can be terminated by six months notice oneither side. During 2003-04, the Company renewed the contractwith them for a period of five years.

Six employees are relatives of Directors of Asian Paints. Mr. JalajA. Dani, son of Mr. Ashwin S. Dani, is Vice-President-Internationaland joined the Company on 18 January 1999. The grossremuneration paid to him for 2004-05 is Rs.2,939,943/- as perthe approval of the members of the Company and the Governmentof India. Mr. Manish M. Choksi, son of Mr. Mahendra C. Choksi,is Vice-President - Strategic Planning and Information Technologyand joined the Company on 17 September 1992.The grossremuneration paid to him for 2004-05 is Rs. 2,921,363/- as perthe approval of the members of the Company and the Government

of India. Ms. Nehal A. Vakil, daughter of Mr. Abhay A. Vakil, isa Finance Executive and joined the Company on 18 January1999.The gross remuneration paid to her for 2004-05 isRs. 739,266/- as per the approval of the members of the Companyand the Government of India.

The Board of Directors at its meeting held on 11th May, 2005,based on the recommendation of the Remuneration Committee,revised the service conditions of Mr. Jalaj Dani, Mr. ManishChoksi and Ms. Nehal Vakil, subject to the approval of theshareholders at the general meeting and the Central Govt.thereafter. Necessary resolutions for the revision of serviceconditions, including remuneration of the above three Executivesas well as the Explanatory Statement u/s. 173(2) of theCompanies Act, 1956 are part of the Notice convening theAnnual General Meeting of the shareholders.

40

Corporate GovernanceMs. Amrita A. Vakil, daughter of Mr. Amar A. Vakil, HRExecutive, joined the Company on 6 January 2003 and left theCompany on 31 March 2005.The gross remuneration paid toher for 2004-05 was Rs. 354,161/- as per the approval of themembers of the Company. Mr. Rupen Choksi, son of Mr. AshwinChoksi, joined the Company on 8 September 2003 and left theCompany on 3 November 2004 as an Executive Trainee. Thegross remuneration paid to him for 2004-05 was Rs. 331,752/-as per the approval of the members of the Company.

Mr. Malav Dani, son of Mr. Ashwin S. Dani, is Manager - QualitySupport in the Corporate Centre of the Company and joined theCompany on 21 February 2005. His appointment andremuneration is subject to approval by the shareholders in theforthcoming annual general meeting and the Central Government.

Committees of the Board

Audit Committee

The Audit Committee comprised of Mr. Manubhai G. Patel(Chairman and independent Director), Mr. Mahendra C. Choksi(Non executive Director), Ms. Tarjani Vakil (independentDirector), Mr. Mahendra M. Shah (independent Director) andMr. Hasit Dani (Non executive Director). The audit committeewas reconstituted on 25 March 2005 and comprises of threenon-executive independent Directors. The members of theCommittee are Ms. Tarjani Vakil (Chairperson and independentDirector), Mr. Mahendra M. Shah (independent Director),Dipankar Basu (independent Director). All the members of thecommittee possess financial and accounting knowledge.

The terms of reference of the Audit Committee include thefollowing:

� Overseeing the Company’s financial reporting process andthe disclosure of its financial information.

� Recommending appointment and removal of the statutoryauditor, fixing of audit fees and approving payments forany other service.

� Reviewing with management quarterly, half-yearly andannual financial statements with primary focus onaccounting policies and practices, compliance withaccounting standards and stock exchange and legalrequirements concerning financial statements.

� Reviewing adequacy of internal control systems and theinternal audit function.

� Reviewing the Company’s financial and risk managementpolicies.

� Reviewing the internal investigations by the internal auditorsinto matters where there is suspected fraud or irregularityor failure of internal control systems of a material natureand reporting the matter to the Board.

� Reviewing reports furnished by the internal auditors and statutoryauditors and ensuring suitable follow up thereon.

� Reviewing the related party transactions.

The audit committee met six times during the year on 10 May2004, 27 July 2004, 13 September 2004, 12 October 2004,26 October 2004, and 18 January 2005. The details of numberof meetings held and attendance record of members are givenin table 3. The Executive Chairman of the Company, VicePresident - Corporate Finance & Company Secretary, FinancialController, Accounts Manager and Corporate Audit Manageralso attend audit committee meetings.

Table 3: Details about audit committee meetings

Name of Director No. of No. ofcommittee committeemeetings held meetings

attended

Manubhai G. Patel # 6 6Mahendra C. Choksi 6 6Tarjani Vakil 6 6Mahendra M. Shah 6 6Hasit Dani 6 6

# Mr. Manubhai G. Patel resigned from the board, effective 25 March 2005.

The composition, procedures, powers, role and functions ofthe audit committee constituted by the Company comply withrequirements of the Companies Act, 1956 as well as those ofclause 49 of the listing agreement.

Remuneration Committee

Due to the sad demise of Mr. K. Rajagopalchari, Director ofthe Company, the Remuneration Committee of Directors hasbeen reconstituted by the Board of Directors at its meeting heldon 25 March 2005. The remuneration committee comprises ofthree non-executive independent Directors. The members of theCommittee are Mr. Dipankar Basu (Chairman and independentDirector), Ms. Tarjani Vakil (independent Director) andMr. Deepak Satwalekar (independent Director). The details ofnumber of meetings held and attendance record of membersare given in table 4.


Corporate GovernanceTable 4: Details about remuneration committee meetings

Name of Director No.of No.ofCommittee committeemeetings held meetings

attended

Dipankar Basu 4 4Ms.Tarjani Vakil 4 4Deepak Satwalekar 4 4K. Rajagopalchari @ 4 1


The scope of the Remuneration Committee is as follows:

� To review and recommend to the Board, the salaries,commission, other benefits, service agreements andemployment conditions of Executive Directors. The Committeeconsiders these based on Company performance as well asindividual performance vis-a-vis agreed goals, taking intoaccount prevailing practices in the corporate world.

� To review the remuneration policies and practices relatingto senior management of the Company.

� To approve the selection and appointment of relatives ofDirectors as required by section 314 of the Companies Act,1956.

Shareholder/Investor Grievance Committee

The Company has constituted a Shareholder/Investor GrievanceCommittee of the Board of Directors to specifically look intocomplaints received from the shareholders of the Company.The Committee also oversees the performance of the Registrarand Transfer Agent of the Company and recommends measuresfor overall improvement in the quality of services to the investors.The Board of Directors on 25 March 2005 reconstituted theShareholders/ Investor Grievance Committee due to the saddemise of Mr. K. Rajagopalchari, Director of the Company.The members of the Company’s newly constituted Shareholders/Investor Grievance Committee are Mr. Mahendra M. Shah(Chairman and non-executive independent Director), Mr. AbhayA. Vakil (Managing Director), Mr. Mahendra C. Choksi (non-executive Director) and Mr. Hasit Dani (non- executive Director).Mr. Jayesh Merchant, Vice President - Corporate Finance &Company Secretary, is the compliance officer.

The committee met twice during the year on 27 July 2004 and30 March 2005 to review investor grievances and the details

of the number of meetings held and the attendance record ofthe members are given in table 5 and 6.

Table 5: Details about shareholder/investor grievancecommittee meeting before reconstitution


attended

K. Rajagopalachari @ 1 1

Abhay A. Vakil 1 1

Mahendra C. Choksi 1 1

Mahendra M. Shah 1 1


Table 6: Details about shareholder/investor grievancecommittee meeting after its reconstitution on 25 March 2005


attended

Mahendra M. Shah 1 1Abhay A. Vakil 1 1

Mahendra C. Choksi 1 1Hasit Dani 1 1

MANAGEMENTManagement Discussion and Analysis

This annual report has a detailed section on ManagementDiscussion and Analysis.

Disclosures by management

� The Company has complied with all requirements of theListing Agreement entered into with The Stock Exchange,Mumbai and The National Stock Exchange of India Ltd. aswell as SEBI regulations and guidelines. No penalties wereimposed or strictures were passed against the Companywith regard to the capital market in the last three years.

� As required by SEBI (Prohibition of Insider Trading)Regulations, 1992, the Company has adopted a policyfor Corporate Disclosure Practices for prevention of insidertrading with effect from June 2002. Mr. Jayesh Merchant,Vice President - Corporate Finance & Company Secretaryhas been appointed as the Compliance Officer.

42

Corporate GovernanceSHAREHOLDERS

Disclosures regarding re-appointment of Directors

As per the Companies Act, 1956, at least two-thirds of theBoard should consist of retiring directors. Of these, one-thirdare required to retire every year. Nine out of the twelve directorsof the Company are retiring directors.

Ms. Tarjani Vakil (68) completed her post-graduation fromMumbai University. She has extensive experience ininternational trade finance and export marketing strategy. Sheheld the position of Chairperson of the Export-Import Bank ofIndia. She has been on the Board of Directors of IDBI, ECGC,STCI, BHEL, LIC and GIC. She is also on the local advisoryBoard of ABN-Amro Bank. She has been a consultant todeveloping countries for setting up export credit agencies. Sheis a Managing Committee Member in Indian MerchantChamber. She is a Trustee in General Electoral Trust andQimpro Fundation. She is on the Board of Directors of IndianRayon & Industries Ltd., Mahindra Intertrade Ltd., DSP MerrillLynch Trustee Company Pvt. Ltd., i-flex Solutions Ltd., AlkylAmines Chemicals Ltd. She has been a Director in the Companysince 1 December 1998.

Shri Dipankar Basu (69) holds a Masters degree in Economicsfrom the Delhi University. He is a former Chairman of State Bankof India. He is on the Boards of various Companies. He has spenthis entire professional career with State Bank of India. Hespearheaded its foray into investment banking and was responsiblefor setting up SBI Capital Markets and SBI Mutual Fund.

He is a Director on the Boards of Securities Trading Corporationof India Ltd., Rain Calcining Ltd., Chambal Fertilizers andChemicals Ltd., Peerless General Finance and Investment Co.Ltd., iGate Global Solutions Ltd., Deepak Fertilizers andPetrochemicals Corporation Ltd., Sun F&C Asset Management(India) Pvt. Ltd., SBI Cards & Payment Services Pvt. Ltd., andSaregama India Ltd. He has been a Director in the Companysince 15 April 2000.

Deepak Satwalekar (56) is a B.Tech from the Indian Instituteof Technology (IIT), Mumbai and completed his post graduationin business administration from the American University,Washington DC. He was appointed Deputy Managing Directorof HDFC in 1990 and became Managing Director in 1993.

Presently he is the Managing Director of HDFC Standard LifeInsurance Company. He has been a consultant to the WorldBank, the Asian Development Bank, United States Agency forInternational Development (USAID) and the United NationsCentre for Human Settlement (HABITAT). He is on the Board ofDirectors of several companies. He was involved in policy workas a member of the Steering Committee on Urban Infrastructureand Housing for the Ninth Five Year Plan of the Govt. of Indiaand is actively involved in CII. He has been a Director in theCompany since 30 May 2000.

Information required under Clause 49 VI A of the listingagreement with The Stock Exchange, Mumbai (relating toCorporate Governance) with respect to the Directors retiringby rotation and being eligible and seeking re-appointment isgiven in notes to the notice convening the meeting.

Means of communication

The financial results of the Company are published in widelycirculated newspapers such as the Business Standard andLoksatta. The results are also displayed on the Company’swebsite www.asianpaints.com. The Company’s official newsreleases and presentations made to institutional investors andanalysts are available on the Company’s website. Pursuant toclause 51 of the listing agreement, financial information suchas the annual and quarterly financial statements, shareholdingpattern and segment-wise results are also available on the SEBIweb-site www.sebiedifar.nic.in.

Investor grievances

As mentioned earlier, the Company has constituted aShareholder/Investor Grievance Committee for redressingshareholder and investor complaints. The status on complaintsis reported to the Board of Directors as an agenda item.

Share transfer

The Board of Directors has delegated the power to attend toshare transfer approvals to a share transfer committee. Duringthe year the Share Transfer Committee was reconstituted. Ason 31 March 2005, the committee comprised Mr. Abhay A.Vakil (Managing Director of Asian Paints), Mr. Ashwin S. Dani(executive Vice-Chairman and Managing Director of AsianPaints) and Mr. Mahendra C. Choksi (non-executive Director).The committee ordinarily meets once every fortnight.


Corporate GovernanceGeneral body meetings

Location and time of the AGMs and EGMs held in the last three years

Year Location Meetings Date Time

2003-2004 Yashwantrao Chavan AGM 28 June 3:00 p.m.Pratisthan Auditorium, 2004Y. B. Chavan Centre,General Jagannath BhosleMarg, Next to SachivalayaGymkhana,Mumbai - 400 021.

2002-2003 Patkar Hall, AGM 18 July 10:30 a.m.Nathibai Thackersey Road, 2003New Marine Lines,Mumbai 400 020.

2002-2003 Patkar Hall, EGM 18 July 1:00 p.m.Nathibai Thackersey Road, 2003New Marine Lines,Mumbai 400 020.

2001-2002 Patkar Hall, AGM 26 July 3:00 p.m.Nathibai Thackersey Road, 2002New Marine Lines,

Mumbai 400 020.

No special resolutions were put through postal ballot in 2004-05.

Details regarding postal ballot to be passed for change of namefrom Asian Paints (India) Limited to Asian Paints Limited duringthe financial year 2005-06

Notice under Section 192A of the Companies Act, 1956 alongwith postal ballot form in relation to a Special Resolution underSection 21 of the Companies Act, 1956 seeking shareholders’consent for change of name of the Company from Asian Paints(India) Limited to Asian Paints Limited was posted on11 April 2005. The Board in its meeting dated 25 March 2005,has appointed Shri H.N. Shah, Chartered Accountant asScrutinizer for conducting the postal ballot. The Company hasfixed 14 May 2005 as the last date by which the postal ballotform duly completed and signed should reach the Scrutinizer.The declaration of result of postal ballot is scheduled on30 May 2005.

44

ANNUAL GENERAL MEETINGDate: Monday, 27 June, 2005.Venue: Patkar Hall, Nathibai Thackersey Road, New Marine

Lines, Mumbai 400 020.Time: 15:00 hoursFinancial calendarFinancial year : 1 April to 31 MarchFor the year ended 31 March 2005, results were announcedon:� 28 July 2004 : First quarter� 27 October 2004 : Half yearly� 19 January 2005 : Third quarter� 11 May 2005 : Fourth quarter and annual.For the year ending 31 March 2006, results will be announced:� on or around 27 July 2005: First quarter� on or around 26 October 2005: Half yearly� on or around 31 January 2006: Third quarter� on or around 11 May 2006: Fourth quarter and annual.Book ClosureThe dates of book closure are from 24 June 2005 to27 June 2005, inclusive of both days.Dividend DateAn interim dividend of Rs. 4.00 per share (40 per cent dividend)was declared on 27 October 2004 and paid on 2 November2004. A final dividend of Rs. 5.50 (55 per cent dividend) pershare has been recommended on 11 May 2005 and, subjectto approval from the shareholders at the AGM, will be paid onor after 27 June 2005.ListingThe Company’s shares are listed on The Stock Exchange,Mumbai and the National Stock Exchange of India Limited(NSE). The stock exchange codes assigned to your Company'sshares at these stock exchanges are given in table 1.Table 1: Stock exchange codes

Stock exchange Code

BSE 500820NSE ASIANPAINT

Stock DataTable 2 gives the monthly high and low prices and volumes ofyour Company's shares at The Stock Exchange, Mumbai (BSE)for the year ended 31 March 2005.

Table 2: High, low and volumes of Asian Paints’ shares for2004-05

High Low Volume(Rupees) (Rupees) (No.of shares)

April 04 323.75 299.00 1698638May 04 315.95 245.00 715429June 04 317.50 282.25 282876July 04 323.75 295.10 132987August 04 326.60 307.55 160987September 04 338.00 304.00 132973October 04 325.00 293.00 370521November 04 306.00 289.00 718266December 04 330.00 295.60 1546289January 05 360.00 302.60 492757February 05 363.00 341.30 370701March 05 395.00 350.05 926187

Note: High and low are in rupees per traded share. Volumeis the total monthly volume of trade in Asian Paintsshares on BSE.

Chart A shows the comparison of your Company's share pricemovement vis-à-vis the movement of the BSE Sensex:Chart A: Asian Paints’ share performance versus the sensexfor 2004-05

Additional Shareholders’ Information

Note: Both Asian Paints share prices and the BSE Sensex have beenindexed to 100 as on 1 April 2004.

Distribution of Shareholder holdingsTable 3 and 4 give the distribution pattern of shareholding ofyour Company as on 31 March 2005 by ownership and sizeclass respectively.

50

90

130

170

210

250

Mar-0

5

Feb-0

5

Jan-05

Dec-0

4

Nov-0

4

Oct-0

4

Sep-0

4

Aug-0

4

Jul-0

4

Jun-0

4

May-0

4

Apr-0

4

Asian Paints

BSE Sensex


Additional Shareholders’ InformationTable 5: Number of shares in physical and demat form as on31 March 2005

No. of shares Percentage of totalshares

Physical segment 34962585 36.45

Demat segment 60957194 63.55

Total 95919779 100.00

Outstanding GDRs/ADRs/Warrants/Convertible Instrumentsand their impact on equity

Not applicable.

Details of public funding obtained in the last three years

Your Company has not obtained any public funding in the lastthree years.

Registrar & Transfer Agent

Sharepro Services (India) Pvt. Ltd. is the Registrar & TransferAgent of the Company.

Shareholders, beneficial owners and depository participants(DPs) are requested to send/deliver the documents/correspondence relating to the Company's share transfer activityetc. to Sharepro Services (India) Pvt. Ltd., Registrar and ShareTransfer Agent of the Company at the following addresses:

SHAREPRO SERVICES (INDIA) PVT. LTD.

Unit: Asian Paints (India) Ltd.Satam Estate, 3rd Floor, Above Bank of Baroda,Cardinal Gracious Road, Chakala,Andheri (E), Mumbai 400 099.Tel.No. 2821 5168, 2832 9828,2821 5991,2834 7719, 2834 8218Fax No. 2837 5646Email: [email protected]

SHAREPRO SERVICES (INDIA) PVT. LTD.

Unit: Asian Paints (India) Ltd.912, Raheja Centre, Free Press Journal Road,Nariman Point, Mumbai 400 021.Tel.No.: 2288 1568, 2288 1569,2282 5163, 2288 4527,Fax No. 2282 5484Email: [email protected]

Table 3: Distribution of shareholding by ownership

No. of shares % of Sharesheld held

Directors, relatives andassociates 41111965 42.86

Other Directors and theirrelatives 2923 0.00

Individuals 16790464 17.51

Domestic companies 843881 0.88

Financial institutions 12451144 12.98

Mutual Funds and Banks 2261262 2.36

FIIs and OCBs 20287955 21.15

Non-Resident Individuals 2170185 2.26

Total 95919779 100.00

Table 4: Distribution of shareholding by number of shares held

No. of equity No. of % of No. of % of shareshares held shareholders shareholders shares holding

1-100 23480 47.21 721950 0.75

101-200 6017 12.10 892034 0.93

201-500 10783 21.68 3844814 4.01

501-2000 7939 15.96 7506986 7.83

2001-5000 927 1.86 2949074 3.08

5001-10000 235 0.47 1710082 1.78

10001 and

above 358 0.72 78294839 81.62

Total 49739 100.00 95919779 100.00

De-materialisation of shares

The shareholders have the option to hold Asian Paints’ sharesin demat form through the National Securities Depository Limited(NSDL) or Central Depository Securities Limited (CDSL). TheISIN number allocated to Asian Paints by NSDL and CDSL isINE021A01018.

At present, 63.55 per cent of the Company’s shares are heldin electronic form. Table 5 gives the break up of shares inphysical and demat form:

46

Additional Shareholders’ InformationFor the benefit of shareholders, documents will also continueto be accepted at the following office of the Company:

ASIAN PAINTS (INDIA) LTD.

Asian Paints House6A Shantinagar, Santacruz (E)Mumbai - 400 055

Email: [email protected]

Members are requested to quote their e-mail address, telephonenumber and full address for prompt reply to theircommunication.

Website (www.asianpaints.com)

The Company’s website provides for the benefit of shareholders,information on topics such as transfer and transmission ofshares, equity history, dematerialisation, nomination, changeof address, loss of share certificates and the Company’sperformance and dividend policy.

Electronic Clearance Scheme (ECS) for Dividend

Your Company provides shareholders an option to receivedividends through the ECS facility. To avoid risk of loss/interception of dividend warrants in postal transit and/orfraudulent encashment, shareholders are requested to avail theECS facility — where dividends are directly credited in electronicform to their respective bank accounts. This also ensures fastercredit of dividend. Shareholders who desire receipt of theirdividend through ECS can obtain the application form fromthe office of the Registrar and Transfer agent.

Shareholders are requested to update their bank account detailswith their respective DPs. This would enable the Company toservice its investors better.

Shareholders located in places where ECS facility is notavailable may submit their bank details. This will enable theCompany to incorporate this information on dividend warrantsto minimise the risk of fraudulent encashment.

In terms of Sections 205A and 205C of the Companies Act,1956, the Company is required to transfer the amount ofdividend remaining unclaimed for a period of seven years fromthe date of transfer, to the unpaid dividend account with theInvestor Education and Protection Fund. Accordingly, in theyear 2005 the Company would be transferring the finaldividend for the year 1997-1998 and the Interim Dividend forthe year 1998-1999 to the Investor Education and ProtectionFund on 5 September 2005 and 27 November 2005respectively. Shareholders are requested to ensure that theyclaim the dividend(s) from the Company before transfer to theInvestor Education and Protection Fund.

Table 6: Dates of unclaimed dividend to be transferred toInvestor Education & Protection Fund (IEPF) u/s 205C.*

Year of Dividend Date of Declaration Date of Transferto IEPF

1997-98 (Final) 6 Aug 1998 5 Sept 2005

1998-99 (Interim) 28 Oct 1998 27 Nov 2005

1998-99 (Final) 15 Jul 1999 14 Aug 2006

1999-2000 (1st Interim) 29 Oct 1999 28 Nov 2006

1999-2000 30 Mar 2000 29 Apr 2007(2nd Interim/Final)

2000-2001 (Interim) 23 Oct 2000 22 Nov 2007

2000-2001 (Final) 28 Aug 2001 27 Sep 2008

2001-2002 (Interim) 30 Oct 2001 29 Nov 2008

2001-2002 (Final) 26 Jul 2002 25 Aug 2009

2002-2003 (Interim) 23 Oct 2002 22 Nov 2009

2002-2003 (Final) 18 Jul 2003 17 Aug 2010

2003-2004 (Interim) 30 Oct 2003 29 Nov 2010

2003-2004 (Final) 28 Jun 2004 27 July 2011

2004-2005 (Interim) 27 Oct 2004 26 Nov 2011

*within 30 days the dividend account to be transferred tounclaimed dividend account and thereafter, from that date itshould be transferred after seven years to IEPF.

Number and nature of complaintsYour Company received 62 complaints from its shareholdersduring 2004-05. Details are given in table 7.

Table 7: Details of complaints received

A. Type of complaintsNon receipt of shares 20

Non receipt of dividend warrant 34

Others 8

Total A 62

B. Complaints received through

SEBI 9

Stock Exchanges 1

Department of Company Affairs ---

Directly from shareholders 52

Total B 62


All the above complaints were attended to immediately. YourCompany endeavours to reply to all complaints received fromits shareholders within a period of two days. As on date, onlythose cases, which are constrained by dispute or legalproceedings or court orders, are pending.

Plant locationsPaint Plants:

Lal Bahadur Shastri Marg,Bhandup, Mumbai 400 078, Maharashtra.

Plot No. 2602, GIDC Industrial Area,Ankleshwar 393 002, Gujarat.

Plot Nos. 50-55, Industrial Development Area,Phase II, Patancheru 502 309Dist. Medak, Andhra Pradesh.

A-1, UPSIDC Industrial Area, Kasna - II,Kasna Village, Tehsil Sikandarabad,Dist. Bulandshahr 203 207, Uttar Pradesh.

SIPCOT Industrial Park,Plot No. E6- F13,Sriperumbudur 602 105,Kancheepuram District, TamilNadu.

Phthalic Plant:

Plot No.2702, GIDC Industrial Area,Ankleshwar 393 002, Gujarat.

Penta Plant:

B5-B10, Sipcot Industrial Complex,Cuddalore 607 005, Tamil Nadu.

Registered Office:

Asian Paints (India) Ltd.,6A, Shantinagar, Santacruz (East),Mumbai 400 055.Tel: +91-(0)22-5695 8000Fax: +91-(0)22-5695 8888

48

Auditors’ Report on Corporate Governance to the members of Asian Paints (India) Limited

We have examined the compliance of conditions of CorporateGovernance by Asian Paints (India) Limited for the year ended31 March, 2005 as stipulated in clause 49 of the ListingAgreement entered into with the stock exchanges.

The compliance of conditions of Corporate Governance is theresponsibility of the management. Our examination was limitedto procedures and implementation thereof, adopted by theCompany for ensuring the compliance of the conditions ofCorporate Governance. It is neither an audit nor an expressionof opinion on the financial statements of the Company.

In our opinion and to the best of our information and accordingto the explanations given to us, and the representations madeby the directors and the management, we certify that theCompany has complied with the conditions of CorporateGovernance as stipulated in the above mentioned ListingAgreement.

We state that no investor grievances are pending for a periodexceeding one month against the Company as per the recordsmaintained by the Shareholders/Investors Grievance Committee.

We further state that such compliance is neither an assuranceas to the future viability of the Company nor the efficiency oreffectiveness with which the management has conducted theaffairs of the Company.

For Shah & Co.Chartered Accountants

Mumbai H. N. Shah11th May, 2005 Partner

Membership No. 8152


We have audited the attached Balance Sheet of ASIAN PAINTS(INDIA) LIMITED as at 31st March 2005, and also the Profit andLoss Account and the cash flow statement of the Company forthe year ended on that date, annexed thereto, incorporatingtherein accounts of Penta Division audited by Branch Auditors.These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion onthese financial statements based on our audit.

We conducted our audit in accordance with auditing standardsgenerally accepted in India. Those Standards require that weplan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluatingthe overall financial statement presentation. We believe that ouraudit provides a reasonable basis of our opinion.

As required by the Companies (Auditor’s Report) Order, 2003,issued by the Central Government 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 paragraph4 and 5 of the said order to the extent applicable.

Further to our comments in the Annexure referred to in paragraph3 above, we state that:

(a) We have obtained all the information and explanations,which to the best of our knowledge and belief werenecessary for the purpose of our audit.

(b) In our opinion proper books of account as required by lawhave been kept by the Company so far as appears fromour examination of those books. The Branch Auditor’sReport of Penta Division has been forwarded to us and hasbeen appropriately dealt with.

(c) The Balance Sheet, the Profit and Loss Account and theCash Flow Statement referred to in this report are inagreement with the books of account and with the auditedaccounts of Penta Division.

(d) In our opinion, the Balance Sheet, the Profit and LossAccount and the Cash Flow Statement dealt with by thisreport comply with the Accounting Standards referred toin Section 211(3C) of Companies Act, 1956.

(e) On the basis of the written representations received fromthe directors, and taken on record by the Board of Directors,we report that none of the directors is disqualified as on31st March 2005 from being appointed as a director interms of clause (g) of sub-section (1) of section 274 of theCompanies Act, 1956.

(f) In our opinion and as per the information and accordingto the explanations given to us, the said Balance Sheet,Profit and Loss Account and the Cash Flow Statement readtogether with the notes thereon, give the informationrequired by the Companies Act, 1956, in the manner sorequired and give a true and fair view in conformity withthe accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairsof the Company as on 31st March 2005;

(ii) in the case of the Profit and Loss Account, of the profitof the Company for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cashflows for the year ended on that date.


H. N. ShahMumbai Partner11th May, 2005 Membership No. 8152

Auditors’ Report To the members of Asian Paints (India) Limited

50

Annexure1. (a) The Company has maintained proper records showing

full particulars including quantitative details andlocation of the Fixed Assets.

(b) There is a regular program of physical verification,which in our opinion is reasonable, having regardto the size of the Company and the nature of fixedassets. No material discrepancies have been noticedin respect of the assets physically verified duringthe year.

(c) The Company has not disposed off substantial part offixed assets during the year.

2. (a) Inventories have been physically verified during theyear by the management. In our opinion, thefrequency of verification is reasonable.

(b) The procedures of physical verification of stocksfollowed by the management are adequate inrelation to the size of the Company and the natureof its business.

(c) The Company is maintaining proper records ofinventory. The discrepancies noticed on verificationbetween the physical stocks and book records werenot material and have been properly dealt with inthe books of account.

3. (a) The Company has not accepted any loans duringthe year from the parties covered in the registermaintained under section 301 of the CompaniesAct, 1956.In view of clause 4 (iii)(a) of the Companies(Auditor’s Report) Order, 2003, clause 4 (iii)(b, c &d) are not applicable to the Company.

(b) The Company has not granted any loans during theyear to the parties covered in the register maintainedunder section 301 of the Companies Act, 1956.In view of clause 4 (iii)(e) of the Companies(Auditor’s Report) Order, 2003, clause 4 (iii)(f & g)are not applicable to the Company.

4. In our opinion, and according to the information andexplanations given to us, there are adequate internalcontrol system commensurate with the size of the Companyand the nature of its business with regard to purchase ofstores, raw materials including components, packingmaterials, plant and machinery, equipment and other assetsand with regard to sale of goods and services. There is nomajor weakness in the internal control procedures.

5. (a) The particulars of all contracts and arrangementsreferred to in section 301 of the Companies Act,1956 have been properly entered in the registermaintained under section 301 of the Act.

(b) In our opinion, and according to the informationand explanations given to us, the contracts andarrangements entered in the register maintained

under Section 301 of the Companies Act, 1956 havebeen made at prices which are reasonable havingregard to the prevailing market prices.

6. In our opinion and according to the information andexplanations given to us, the Company has compliedwith the directives issued by the Reserve Bank of Indiaand the provisions of Section 58A and 58AA or anyother relevant provisions of the Companies Act, 1956and the rules framed there under.

7. In our opinion, the Company has an internal audit systemcommensurate with the size and nature of its business.

8. We have broadly reviewed the books of accounts andother records maintained by the Company in respect ofresins where pursuant to the rules made by the CentralGovernment, the maintenance of cost records have beenprescribed under Section 209(1)(d) of the CompaniesAct, 1956. We are of the opinion that prima facie theprescribed accounts and records have been maintained.

9. (a) The Company is regular in depositing undisputedstatutory dues including Provident Fund, InvestorEducation and Protection Fund, Employees’ StateInsurance, Income Tax, Sales Tax, Wealth Tax,Service Tax, Custom Duty, Excise Duty, cess andother statutory dues with the appropriate authorities.

(b) Following dues are not deposited on account ofdisputes pending at various forums.

Name of Nature Financial Amount Forum whereof the of dues Year (Rs. in dispute isStatute Millions) pending

Sales Tax Assessment F.Y.1993-94 to 47.08 First Appellate levelDues F.Y.1995-96 and

F.Y.1997-98 toF.Y. 2002-03F.Y. 1995-96 and 7.82 Second AppellateF.Y. 1998-99 to levelF.Y. 2001-02F.Y. 1991-92, 17.19 TribunalF.Y.1993-94 toF.Y.1996-97 andF.Y. 2000-01 to2004-05

Total (A) 72.09

Exc iseCentral Excise Dispute F.Y. 2004-05 0.21 Adjudication levelAct 1944 relating to

CenvatCredit

F.Y.1986-87 to 8.48 First AppellateF.Y.1990-91,F.Y.1992-93 toF.Y.1995-96 andF.Y.1997-98 to1999-2000F.Y.1993-94, 4.02 Second AppellateF.Y.1996-97 toF.Y.1997-98 andF.Y.1999-2000F.Y. 1987-88 0.55 High CourtF.Y. 2004-05 0.56 Tribunal

Referred to in paragraph 3 of the Auditors’ Report to the members of Asian Paints (India)Limited for the year ended 31st March 2005


Dispute F.Y. 2003-04 and 6.79 Adjudication levelrelating to F.Y. 2004-05valuation

F.Y.1986-87 to 47.35 First AppellateF.Y.1988-89,F.Y.1992-93 toF.Y.1993-94,F.Y.1995-96,F.Y.1996-97 toF.Y.1997-98 andF.Y.1999-2000F.Y.2000-01 and 2.32 Second AppellateF.Y.2002-03F.Y.1986-87 and 0.71 TribunalF.Y.03-04

Dispute F.Y. 2003-04 and 5.94 Adjudication levelrelating to F.Y. 2004-05Service Tax

Total (B) 76.93

Income Tax A.Y. 2000-01 and 68.56 First AppellateA.Y. 2002-03

Total (C) 68.56

GrandTota l 217.58

10. The Company has not incurred cash loss in the currentyear and in the immediately preceding financial yearand there are no accumulated losses in the balance sheetas on 31st March, 2005.

11. The Company has not defaulted during the year inrepayment of dues to any financial institutions, banks ordebenture holders.

12. The Company has not granted any loans and advanceson the basis of security by way of pledge of shares,debentures and other securities.

13. As the Company is not a chit fund, nidhi, mutual benefitfund or society the provisions of clause 4(xiii) of theCompanies (Auditor’s Report) Order, 2003 is notapplicable to the Company.

14. As the Company is not dealing or trading in shares,securities, debentures and other investments, the provisionof clause 4(xiv) of the Companies (Auditor’s Report)Order, 2003 is not applicable to the Company.

15. The Company has given certain guarantees on behalf ofits dealers and subsidiaries as mentioned in Note B - 3(a)& (b) of Schedule M to the financial statements. In ouropinion based on the information and explanationsreceived, the terms and conditions of these guarantees arenot prejudicial to the interest of the company.

16. The Company has not taken any term loans during theyear.

17. According to the information and explanations receivedthe Company has not applied short term borrowings forlong term use.

18. The Company has not made any preferential allotmentof shares during the year.

19. The Company has not issued any debentures during theyear.

20. The Company has not raised any money by way of publicissue during the year.

21. As per the information and explanation given to us, nomaterial fraud on or by the Company has been noticedduring the year.



Membership No. 8152

Annexure Referred to in paragraph 3 of the Auditors’ Report to the members of Asian Paints (India)Limited for the year ended 31st March 2005

Name of Nature Financial Amount Forum whereof the of dues Year (Rs. in dispute isStatute Millions) pending

52

Balance Sheet as at 31st March, 2005

(Rs. in Millions)

FUNDS EMPLOYEDShareholders’ FundsShare Capital A 959.20 959.20Reserves and Surplus B 4,763.00 4,356.21

5,722.20 5,315.41Loan Funds CSecured Loans 283.65 229.23Unsecured Loans 555.12 475.50

838.77 704.73Deferred Tax Liability (Net) 305.38 486.56(Refer Note B - 27 in Schedule ‘M’)

Total 6,866.35 6,506.70

APPLICATION OF FUNDSFixed Assets DGross Block 7,127.04 6,511.93Less : Depreciation/Amortisation/Impairment 4,014.73 3,106.49Net Block 3,112.31 3,405.44Add : Capital Work in Progress 82.78 38.89

3,195.09 3,444.33Investments E 2,584.27 2,424.84

Current Assets, Loansand Advances FInterest accrued on investments 0.03 0.83Inventories 3,307.89 2,114.90Sundry debtors 1,489.63 1,379.20Cash and Bank Balances 210.42 245.53Other receivables 190.12 81.45Loans and Advances 727.25 787.88

5,925.34 4,609.79Less : Current Liabilities and Provisions G

Current Liabilities 3,721.32 3,087.23Provisions 1,117.03 885.03

4,838.35 3,972.26Net Current Assets 1,086.99 637.53

Total 6,866.35 6,506.70

Notes M

As at As atSchedules 31.03.2005 31.03.2004

As per our report of even date For and on behalf of the Board

For Shah & Co. Ashwin C. Choksi Ashwin S. Dani Abhay A. Vakil Tarjani VakilChartered Accountants Chairman Vice Chairman & Managing Director Director

Managing DirectorH. N. ShahPartner Jayesh MerchantMembership No. 8152 Vice President -

Corporate Finance &Company Secretary

Mumbai Mumbai11th May, 2005 11th May, 2005







Profit & Loss Account for the year ended 31st March, 2005

INCOMESales and operating income (Net of discounts) H 22,553.86 19,531.92Less: Excise 3,138.71 2,565.46Sales and operating income (Net of discounts and excise) 19,415.15 16,966.46Other income I 316.14 216.77

19,731.29 17,183.23

EXPENDITUREMaterials Consumed J 11,154.04 9,441.50Employees’ remuneration and benefits K 1,179.30 1,015.56Manufacturing, administrative, selling and distribution expenses L 4,144.05 3,814.02

16,477.39 14,271.08PROFIT BEFORE INTEREST, DEPRECIATION, EXTRAORDINARY ITEM AND TAX 3,253.90 2,912.15Less : Interest (Refer Note B - 17 in Schedule ‘M’) 27.54 52.65Less : Depreciation/Amortisation (Refer Note B - 19 in Schedule ‘M’) D 476.05 480.10PROFIT BEFORE TAX AND EXTRAORDINARY ITEM 2,750.31 2,379.40Less : Extraordinary item (Refer Note B - 23 in Schedule ‘M’) 42.31 68.06

PROFIT BEFORE TAX 2,708.00 2,311.34Less : Provision For Current Tax 988.00 880.00Less : Provision For Deferred Tax Liability/(Asset) (Refer Note B - 27 in Schedule ‘M’) (18.16) (44.46)

PROFIT AFTER TAX AND BEFORE PRIOR PERIOD ITEMS 1,738.16 1,475.80Add/(Less) : Prior period items (3.34) 2.07PROFIT AFTER TAX 1,734.82 1,477.87Add : Balance of Profit & Loss Account brought forward of

Pentasia Investments Ltd. on merger --- 8.40Add : Balance brought forward from previous year 820.00 720.00DISPOSABLE PROFIT 2,554.82 2,206.27

DISPOSAL OF ABOVE PROFITDividend:Equity Shares - Interim 383.69 335.73

- Final 527.56 479.60Tax on Dividend 125.36 104.47Transfer to General Reserve 518.21 466.47Balance carried to Balance Sheet 1,000.00 820.00

2,554.82 2,206.27

Earnings per share (Rs.) Basic and diluted (Face value of Rs.10 each) 18.53 16.12(Refer Note B - 30 in Schedule ‘M’)

Notes M

Year YearSchedules 2004-2005 2003-2004

(Rs. in Millions)

54






Cash Flow Statement for the year ended 31st March, 2005

(Rs. in Millions)

2004-2005 2003-2004A. Cash Flow from Operating Activities

Profit before prior period item, tax and afterextraordinary item 2,708.00 2,311.34Adjustments for :Depreciation 476.05 480.10Interest income (7.68) (37.06)Dividend income (93.78) (15.54)Interest expense 27.54 52.65Prior Period items (3.34) 2.07Extraordinary item 42.31 68.06Loss/(Profit) on Sale of Long Term Investments (0.50) (0.01)Loss/(Profit) on Sale of Short Term Investments (23.90) (1.65)Loss/(Profit) on Sale of Assets (27.44) 3.52Operating Profit before working capital changes 3,097.26 2,863.48Adjustments for :Trade Receivables (110.43) (204.59)Other Receivables (37.39) (215.06)Inventories (1,192.99) (45.94)Trade and Other Payables 670.25 818.63Cash generated from Operations 2,426.70 3,216.52Income Tax paid net of refund (853.56) (782.19)Net Cash generated from Operating Activities 1,573.14 2,434.33

B. Cash Flow from Investing ActivitiesPurchase of Fixed Assets (774.52) (322.31)Sale of Fixed Assets 138.47 17.60Purchase of Investments (299.62) (988.95)Sale of Investments 93.88 11.14Interest received 8.54 37.16Dividend received 93.78 15.54Net Cash used In Investing Activities (739.47) (1,229.82)

C. Cash Flow from Financing ActivitiesProceeds from long term borrowings 134.86 112.04Proceeds from short term borrowings 176.94 90.83Repayment of long term borrowings (90.16) (288.38)Repayment of short term borrowings (86.92) (246.43)Interest paid (29.29) (52.94)Dividend and Dividend tax paid (974.21) (846.03)

Net Cash used in Financing Activities (868.78) (1,230.91)D. Net (Decrease) / Increase in Cash (35.11) (26.40)Cash and cash equivalents as at 01.04.2004 245.53 271.93Cash and cash equivalents as at 31.03.2005 210.42 245.53


Schedules forming part of the accounts

(Rs. in Millions)

As at As at31.03.2005 31.03.2004

SCHEDULE A : SHARE CAPITALAuthorised99,500,000 Equity Shares of Rs. 10/- each 995.00 995.00

50,000 11% Redeemable CumulativePreference shares of Rs. 100/- each 5.00 5.00

1,000.00 1,000.00

Issued and Subscribed95,919,779 Equity Shares of Rs. 10/- each fully paid :

a) 93,989,940 Bonus Shares of Rs. 10/- each fully paid up issuedon capitalisation of Share premium (Rs. 21.91 million)and General Reserves (Rs. 917.98 million).

b) 294,000 shares of Rs. 10/- each issued as fully paid up pursuantto the Scheme of Rehabilitation / Amalgamation of PentasiaChemicals Ltd., without payment received in cash. 959.20 959.20

959.20 959.20

SCHEDULE B : RESERVES AND SURPLUSCapital Reserve 0.01 0.01Capital Redemption Reserve 5.00 5.00General ReserveAs per last Balance Sheet 3,488.70 3,215.56Add : Transfer from Profit and Loss Account 518.21 466.47Add : Transfer from Debenture Redemption Reserve 42.50 141.25Add : Excess deferred tax liability created in 2001-2002

transferred back --- 50.56Less : Capitalised for issue of Bonus shares --- (320.93)Less : Net reduction on account of merger of

Pentasia Investments Ltd. --- (64.21)Less : Provision for impairment of fixed assets as on

1st April, 2004 (Refer Note B - 19 in Schedule ‘M’) (454.45) ---Add : Reduction in deferred tax liability on impairment

of assets (Refer Note B - 19 in Schedule ‘M’) 163.03 ---3,757.99 3,488.70

Debenture Redemption ReserveAs per last Balance Sheet 42.50 183.75Less : Transfer to General Reserve (42.50) (141.25)

--- 42.50Profit and Loss Account 1,000.00 820.00

4,763.00 4,356.21

56


(Rs. in Millions)

As at As at31.03.2005 31.03.2004

SCHEDULE C : SECURED AND UNSECURED LOANSSecured LoansLong Term :Debentures13.75% Non-Convertible Debentures (Note No. 1) --- 85.00Loans and advancesFinancial Institution (Sales tax deferment scheme - State of Uttar Pradesh)(Note No. 2) 106.71 53.40

106.71 138.40

Short Term :Loans and advances from banksCash Credit Accounts (Note No. 3) 176.94 ---

Foreign Currency Loan (Note No. 3) --- 90.83

283.65 229.23

Unsecured LoansLong Term :Fixed Deposits 3.22 3.32(Repayable within one year Nil - Previous year Rs. 0.17 million)Interest accrued and due --- 0.01Trade deposits - Interest free 188.30 190.12Sales tax deferment - State of Andhra Pradesh (Note No. 4) 363.60 282.05

555.12 475.50

Notes:(1) Nil, (Previous year - 850) 13.75 % Secured Redeemable Non-Convertible Debentures

of Rs. 100,000/- each privately placed redeemable at par. 850 debentures wereredeemed during the year (Previous year - 825). --- 85.00

Amount repayable within one year. --- 85.00

Debentures were secured by pari passu charge on the Company’s movable andimmovable properties pertaining to the paint plants situated at Bhandup, Ankleshwarand Patancheru, excluding inventories at the above locations.

(2) Interest free term loan from the Pradeshiya Industrial Corporation of U.P. Ltd., (PICUP)under Sales Tax deferment scheme of U.P., is secured by a first charge on the Company’simmovable properties pertaining to the paint plant at Kasna and by way of hypothecationof all movable properties at the above location, subject to prior charge in favour of the Company’s bankers. 106.71 53.40

Amount repayable within one year. 11.18 ---

(3) Secured by hypothecation of inventories, book debts and other current assets. 176.94 90.83

(4) Sales tax deferment - State of Andhra Pradesh represents interest free loan availedunder the Sales Tax deferment scheme of the Government of Andhra Pradesh. 363.60 282.05

Amount repayable within one year. --- ---



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(Rs. in Millions)

Nos. Face value As at As at(Rs.) 31.03.2005 31.03.2004

SCHEDULE E : INVESTMENTSLong Term InvestmentsUnquoted(i) In Government Securities

National Savings Certificates, Indira Vikas Patra andDefence Certificates deposited with Governmentauthorities. 0.05 0.07(National Savings Certificate sold during the year Rs. 20,000)

(ii) Trade Investments (Preference shares)9% Preference shares ofMultitech Plast Containers Ltd. 2,510,000 10/- 25.10 25.10

(iii) Trade Investments (Fully paid Equity shares)(a) Multitech Plast Containers Ltd. --- 10/- --- 1.90

(190,000 Shares sold during the year) (190,000)(b) Ricinash Oil Mill Ltd. --- 10/- --- 1.10

(110,000 shares sold during the year) (110,000)(c) Asian PPG Industries Ltd. 14,625,000 10/- 146.25 146.25(d) Patancheru Enviro-tech Ltd. 12,900 10/- 0.13 0.13(e) SIPCOT Common Utilities Ltd. 2,830 100/- 0.28 0.28(f) Bharuch Eco-Acqua Infrastructure Ltd. 434,790 10/- 4.35 4.35

151.01 154.01

(iv) Other Investments(a) Units of Unit Trust of India under

Venture Capital Unit Scheme - 1990 --- 100/- --- 0.04(370 units redeemed during the year) (370)

(b) Contribution to Gujarat Venture Capital Fund -1990 (5% amounting to Rs. 25,000 0.09 0.11redeemed during the year)

(c) 10.5% tax free Bonds ofKonkan Railway Corporation Ltd. --- 1,000/- --- 25.64(25,000 bonds redeemed during the year) (25,000)

(d) Equity shares of Mark Auto Industries Ltd. 62,500 10/- 5.00 5.00

5.09 30.79

(v) Subsidiary Companies(a) Equity shares of Technical Instruments

Manufacturers (India) Ltd. 5,000 100/- 181.85 181.85(b) Equity shares of Asian Paints Industrial

Coatings Ltd. 9,000,000 10/- 90.00 80.00(1,000,000 shares allotted during the year) (8,000,000)

(c) Ordinary shares of Asian Paints (International) Ltd.,Mauritius 24,945,444 US $ 1/- 1,184.79 1,094.91(2,010,000 shares allotted during the year) (22,935,444)



(Rs. in Millions)


(d) Equity shares of Asian Paints 1,084,770 NRs 10/- 1.24 1.24(Nepal) Pvt. Ltd., Nepal

(e) Ordinary shares of Asian Paints --- MRs 10/- --- 111.12(Mauritius) Ltd., Mauritius. (6,670,755)(6,670,755 shares soldduring the year)Less: Provision for diminution(Refer Note B - 23 in Schedule ‘M’) --- (68.06)

--- 43.06

1,457.88 1,401.06

Total long term unquoted investments 1,639.13 1,611.03

Quoted (Fully Paid Equity shares)(i) Trade Investments

ICI (India) Ltd. 3,760,783 10/- 772.46 772.46

(ii) Other InvestmentsHousing Development FinanceCorporation Ltd. 93,000 10/- 1.24 1.24Apcotex Lattices Ltd. 3,418 10/- 0.11 0.11

Total long term quoted investments 773.81 773.81

Total long term investments 2,412,94 2,384.84

Short Term Investments (Unquoted)DSP Merrill Lynch Liquidity Fund -Growth Plan --- 10/- --- 20.00(13,09,036.220 units sold during the year) (13,09,036.220)

Birla Cash Plus Institutional Plan -Growth --- 10/- --- 20.00(11,76,829.370 units sold during the year) (11,76,829.370)

Birla Cash Plus Institutional Premium Plan -Dividend - acquired during the year 1,996,477.315 10/- 20.01 ---JM Fixed Maturity Plan - Dividend Optionacquired during the year 15,131,481.727 10/- 151.32 ---

Total Short Term Investments 171.33 40.00

Total Investments 2,584.27 2,424.84

Aggregate market value of Long term Quoted Investments : 924.99 748.05

Notes :1. Figures in brackets indicate that of previous year.

60

2. The following investments were purchased and sold during the year :

Nos. Face Value Purchase Cost(Rs.) (Rs. in Millions)

Units in Mutual Funds(1) Birla Cash Plus - Institutional Premium Plan Growth 43,470,784.103 10.00 440.00(2) Birla Cash Plus - Institutional Plan - Growth 5,244,887.760 10.00 90.00(3) Birla Cash Plus - Institutional Premium Plan - Dividend 24,304,455.310 10.00 243.52(4) Deutsche Insta Cash Plus Fund - Growth 10,325,555.492 10.00 110.00(5) Deutsche Insta Cash Plus Fund-Institutional Plan - Growth 26,521,468.475 10.00 270.00(6) DSP Merrill Lynch Liquidity Fund - Growth 26,671,610.750 10.00 420.00(7) Grindlays Cash Fund - Super Inst Plan C - Growth 9,818,456.735 10.00 100.00(8) HDFC Cash Management Fund - Savings Plan - Growth 31,314,609.391 10.00 420.00(9) HSBC Cash Fund - Institutional Plus - Dividend 30,184,972.680 10.00 302.02(10) HSBC Cash Fund - Institutional Plus - Growth 32,501,655.427 10.00 330.00(11) HSBC Cash Fund Institutional Plan - Growth 21,411,541.039 10.00 230.00(12) Prudential ICICI Institutional Liquid Plan - Growth 10,831,652.045 10.00 170.00(13) Prudential ICICI Liquid Plan - Growth 631,915.526 10.00 10.00(14) Prudential ICICI Liquid Plan Institutional Plus - Dividend 33,084,005.087 10.00 392.10(15) Prudential ICICI Liquid Plan Institutional Plus - Growth 31,434,353.917 10.00 500.00(16) Reliance Fixed Term Scheme - Monthly Plan -10 - Growth 6,000,000.000 10.00 60.00(17) Reliance Fixed Term Scheme - Monthly Plan -7 - Growth 6,000,000.000 10.00 60.00(18) Reliance Fixed Term Scheme - Monthly Plan -8 - Growth 6,024,720.000 10.00 60.25(19) Reliance Fixed Term Scheme - Monthly Plan - 9 - Growth 10,000,000.000 10.00 100.00(20) Reliance Fixed Term Scheme - Monthly Plan - 12 Growth 10,000,000.000 10.00 100.00(21) Reliance Fixed Term Scheme - Monthly Plan - 13 Growth 15,000,000.000 10.00 150.00(22) Reliance Fixed Term Scheme - Monthly Plan - 14 Growth 20,000,000.000 10.00 200.00(23) Reliance Fixed Term Scheme - Monthly Plan - 15 Dividend 25,000,000.000 10.00 250.00(24) Reliance Fixed Term Scheme - Monthly Plan - 16 Dividend 15,000,000.000 10.00 150.00(25) Reliance Fixed Term Scheme - Monthly Plan - 17 Dividend 15,000,000.000 10.00 150.00(26) SBI Magnum Insta Cash Fund - Cash Plan 27,297,209.536 10.00 390.00(27) SBI Magnum Institutional Income Fund-Savings - Dividend 84,764,289.414 10.00 850.40(28) SBI Magnum Institutional Income Fund-Savings - Growth 119,206,533.687 10.00 1,240.00(29) Tata Liquid Super High Investment Fund - Appreciation 48,320,806.227 10.00 570.00(30) Tata Liquid Super High Investment Fund - Daily Dividend 8,075,410.380 10.00 90.00(31) Tata Liquid Super High Investment Fund - Daily Dividend 81,043.839 1,000.00 90.32(32) Templeton India Treasury Mgmt A/c Inst Plan - Growth 158,515.065 1,000.00 160.00


(Rs. in Millions)

As at As at31.03.2005 31.03.2004

SCHEDULE F : CURRENT ASSETS, LOANS AND ADVANCESCURRENT ASSETS(i) Interest accrued on investments 0.03 0.83

(ii) Inventories - valued and certified by the Management(a) Raw materials 832.66 517.14(b) Packing materials 283.76 164.24(c) Finished goods 1,918.12 1,216.11(d) Work-in-process 202.42 160.82(e) Stores, spares and fuel 65.30 50.14(f) Other traded items 5.63 6.45

3,307.89 2,114.90


(Rs. in Millions)

As at As at31.03.2005 31.03.2004


(iii) Sundry debtors (Unsecured)(a) Outstanding for more than six months

Considered good 21.45 24.81Considered doubtful 32.89 38.97

54.34 63.78Less: Provision for doubtful debts 32.89 38.97

21.45 24.81(b) Other debts (Considered good) 1,468.18 1,354.39

1,489.63 1,379.20(iv) Cash and Bank Balances

(a) Cash on hand 1.66 2.32(b) Balances with Scheduled Banks :

(i) Current Accounts 206.14 200.29(ii) Term Deposits 2.62 3.29(iii) Cash Credit Accounts --- 39.63

210.42 245.53

(v) Other receivables 190.12 81.45

LOANS AND ADVANCES(i) Wholly owned subsidiaries

(a) Interest free loan - Secured and considered goodAsian Paints Industrial Coatings Ltd. 60.00 60.00(Maximum outstanding during the year Rs. 60.00 million.Previous year Rs. 60.00 million)Technical Instruments Manufacturers (India) Ltd. 77.02 85.69(Maximum outstanding during the year Rs. 85.69 million.Previous year Rs. 100.02 million). 137.02 145.69

(ii) Company in which directors are interestedHitech Plast Ltd. - Unsecured and considered good(Maximum outstanding during the year Rs. 1.30 million.Previous year Rs. 2.50 million) --- 1.30

(iii) Other Loans and Advances :Unsecured and considered good(a) Balances with Customs, Central Excise etc. 141.77 57.32(b) Income Tax refund receivable --- 187.35(c) Sundry deposits 105.41 115.67(d) Advances/claims recoverable in cash or in kind 241.97 199.15(e) Advances to employees 4.10 7.99(f) Share application money 28.43 ---(g) Advances against capital expenditure 42.48 60.26(h) Other advances to subsidiaries 26.07 13.15

590.23 640.89

727.25 787.88

5,925.34 4,609.79

62


(Rs. in Millions)

As at As at31.03.2005 31.03.2004

SCHEDULE G : CURRENT LIABILITIES AND PROVISIONSCurrent Liabilities(i) Acceptances 1,109.63 796.03

(ii) Sundry creditors- Trade 1,342.72 1,119.31- Others 334.75 271.87(Out of the above, the total outstanding dues to small scaleindustrial undertakings are Rs. 48.53 million - Previous yearRs. 60.01 million). (Refer Note B - 22 in Schedule ‘M’) 1,677.47 1,391.18

2,787.10 2,187.21(iii) Investor Education and Protection Fund *

(a) Unpaid / Unclaimed dividend 19.92 18.02(b) Unpaid / Unclaimed matured deposits 0.78 0.52(c) Unclaimed interest 0.31 0.38(d) Unclaimed amount of sale proceeds of fractional

coupons of bonus shares 0.41 0.44

21.42 19.36

(iv) Interest accrued but not due 0.15 1.85

(v) Other liabilities (Including Rs. 17.80 million due to Directors -Previous year Rs. 14.75 million). 912.65 878.81

3,721.32 3,087.23* There is no amount due and outstanding to be paid to the Investor

Education and Protection Fund as at 31st March, 2005. Theseamounts shall be paid to the fund as and when they become due.

Provisions

(i) Proposed Final Dividend 527.56 479.60(ii) Provision for tax on Proposed Final Dividend 73.99 61.45(iii) Provision for tax (Net of advance tax) 136.75 2.31(iv) Provision for Leave encashment (Refer Note B - 26 in Schedule ‘M’) 126.42 123.70(v) Other provisions (Refer Note B - 26 in Schedule ‘M’) 252.31 217.97

1,117.03 885.03

4,838.35 3,972.26



(Rs. in Millions)

Year Year2004-2005 2003-2004

SCHEDULE H : SALES & OPERATING INCOMESales :Home Market 23,533.64 20,455.10Exports 138.52 83.11

23,672.16 20,538.21Less : Goods returned 283.79 278.72

Turnover (Refer Note B - 7 in Schedule ‘M’) 23,388.37 20,259.49

Less : Discounts 1,073.05 1,013.15

Sales (Net of discounts) 22,315.32 19,246.34Processing charges 69.80 70.20Lease Rent 127.89 188.18Revenue from Home Solutions operations 40.85 27.20

22,553.86 19,531.92

SCHEDULE I : OTHER INCOME

Interest (Refer Note B - 21 in Schedule ‘M’) 7.68 37.06(TDS Rs. 0.68 million - Previous year Rs. 0.93 million)Claims received 3.41 0.28Dividends from subsidiary companies 5.42 8.81(TDS Rs. 0.27 million - Previous year Rs. 0.61 million)Dividend from long term investments- Trade 78.52 0.28- Others 1.32 1.02Dividend from short term investments 8.52 5.43Royalty (TDS Rs. 4.22 million - Previous year Rs. 1.09 million) 34.59 26.70Sundry balances written back (Net) (Refer Note B - 20 in Schedule ‘M’) 13.84 47.57Profit on sale of long term investments (net) 0.50 0.01Profit on sale of short term investments (net) 23.90 1.65Profit on sale of assets (net) (Refer Note B - 25 in Schedule ‘M’) 27.44 ---Exchange difference (net) 0.89 9.62Miscellaneous income 110.11 78.34

316.14 216.77

64


(Rs. in Millions)

Year Year2004-2005 2003-2004

SCHEDULE J : MATERIALS CONSUMEDRaw Materials ConsumedOpening Stock 517.14 568.61Add : Purchases and expenses 9,752.72 7,463.59

10,269.86 8,032.20Less: Closing Stock 832.66 517.14

9,437.20 7,515.06Packing Materials ConsumedOpening Stock 164.24 123.51Add : Purchases and expenses 2,154.61 1,627.79

2,318.85 1,751.30Less : Closing Stock 283.76 164.24

2,035.09 1,587.06

Purchase of Paints for resale 182.70 199.51(Quantity 10,231 MT - Previous year 11,549 MT)

Cost of other goods sold 242.66 198.62

11,897.65 9,500.25

Add / (Less) :Decrease / (Increase) in finished and semi-finished stocksOpening Stock 1,376.93 1,318.18Closing Stock 2,120.54 1,376.93

(743.61) (58.75)

11,154.04 9,441.50

SCHEDULE K : EMPLOYEES’ REMUNERATION AND BENEFITSSalaries, wages, allowances, commission, provision forbonus and accrued leave salary 974.54 848.07

Staff welfare expenses 64.40 54.67

Contribution to Provident Fund, Gratuity Fund and Superannuation Fund 140.36 112.82

1,179.30 1,015.56



(Rs. in Millions)

Year Year2004-2005 2003-2004

SCHEDULE L : MANUFACTURING, ADMINISTRATIVE,SELLING AND DISTRIBUTION EXPENSES

Stores and spares 100.00 111.89Power and fuel 254.38 228.30Processing charges 133.28 107.30Freight and handling charges 836.88 697.34Repairs and maintenance:Buildings 18.26 19.85Machinery 41.88 47.84Other assets 99.01 109.49

159.15 177.18

Rent 171.73 158.76Rates and taxes 147.37 126.06Insurance 33.41 33.74Advertisement and sales promotional expenses 699.17 682.42Cash discount and Payment performance discount 908.88 785.28Printing, stationery and communication expenses 121.30 129.08Travelling expenses 133.79 140.34Commission on sales 10.35 12.05Donations 9.03 9.90Loss on sale of assets (net) --- 3.52Miscellaneous expenses (Refer Note B - 24 in Schedule ‘M’) 279.12 217.54Commission to Non executive directors 4.24 3.12Directors’ sitting fees 1.06 ---Bad and doubtful debts 9.27 28.01Auditors’ remuneration 4.52 3.76Financial charges 38.23 34.35Information technology expenses 63.87 96.12Legal and professional expenses 25.02 27.96

4,144.05 3,814.02

66


SCHEDULE M: NOTES ON BALANCE SHEET AND PROFIT AND LOSS ACCOUNTA. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES FOLLOWED IN THE COMPILATION OF ACCOUNTS

1. Basis for preparation of financial statements

The financial statements are prepared in accordance with the accounting principles generally accepted in India and complywith the Accounting Standards specified by the Institute of Chartered Accountants of India under section 211(3C) of theCompanies Act, 1956.

2. Method of Accounting

The Company is following accrual basis of accounting.

3. Fixed Assets

a) The ‘Gross Block’ of fixed assets is shown at the cost of acquisition, which includes taxes, duties (net of tax credits asapplicable) and other identifiable direct expenses. Interest on borrowed funds attributable to the qualifying assets upto the period such assets are put to use, is included in the cost.

b) Know-how related to plans, designs and drawings of buildings or plant and machinery is capitalised under the relevantasset heads.

c) Depreciation on tinting systems except computers leased to dealers is provided under Straight Line Method over theestimated useful life of nine years as per technical evaluation. Depreciation on computers given on lease is providedunder Straight Line Method and at rates specified under Schedule XIV to the Companies Act, 1956.

d) Leasehold land is amortised over the period of lease.

e) Depreciation on all other fixed assets is provided under Straight Line Method and at rates specified under Schedule XIVto the Companies Act, 1956 except for the following classes of fixed assets, where the depreciation is provided underStraight Line Method based on estimated useful life of the assets as under: -Information Technology Assets : 4 yearsScientific Research Equipment : 8 yearsFurniture and Fixtures : 8 yearsOffice Equipment and Vehicles : 5 years

f) Intangible Assets

i) User licence fees for major software are amortised over a period of four years.

ii) Trade Mark is amortised over a period of five years.

g) At the balance sheet date, an assessment is done to determine whether there is any indication of impairment in thecarrying amount of the Company’s fixed assets. If any such indication exists, the asset’s recoverable amount is estimated.An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.After recognition of impairment loss, the depreciation charge for the asset is adjusted in future periods to allocate theasset’s revised carrying amount, less its residual value (if any), on Straight Line basis over its remaining useful life.

4. Revenue RecognitionSale of products is recognised when the risks and rewards of ownership are passed on to the customers, which is on despatchof goods. Sales are stated exclusive of sales tax.Processing income is recognised upon rendition of the services.Dividend income is recognised when the right to receive dividend is unconditional at the balance sheet date.

5. Lease AccountingThe Company has provided tinting systems to dealers on an operating lease basis. Lease rentals are accounted on accrualbasis in accordance with the respective lease agreements and any variation thereof.



6. Inventory

a) Inventories are valued at the lower of cost and net realisable value. Damaged, unserviceable and inert stocks aresuitably depreciated.

b) In case of raw materials, packing materials, stores, spares and consumables, the cost includes duties and taxes (net ofCENVAT, wherever applicable) and is arrived at on weighted average cost basis.

c) Cost of finished goods and work-in-process includes the cost of raw materials, packing materials, an appropriate shareof fixed and variable production overheads on the basis of standard cost method, excise duty as applicable and othercosts incurred in bringing the inventories to their present location and condition.

d) Traded goods are valued at cost on weighted average basis.

7. Investments

Short term investments are carried at the lower of cost and fair value computed category wise. Long term investments arecarried at cost. Provision for diminution in the value of long term investments is made only if such a decline is not temporaryin the opinion of the management.

8. Transactions in Foreign Exchange

Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transactions. In respect oftransactions covered by forward exchange contracts, the difference between the forward rate and the exchange rate on thedate of the transaction is recognised as income or expense over the life of the contract. Transactions not covered by forwardcontracts and outstanding at year end are translated at exchange rates prevailing at the year end and the profit/loss sodetermined is recognised in the Profit and Loss Account.

9. Sundry Debtors

Sundry debtors are stated after writing off debts considered as bad. Adequate provision is made for debts considereddoubtful. Discounts due, yet to be quantified at the customer level are included under the head ‘Current Liabilities andProvisions’.

10. Employees’ Retirement BenefitsCompany’s contribution to Provident and Superannuation funds and Pension is charged to Profit and Loss Account on accrualbasis. Liability for Gratuity and Leave encashment benefits are charged to Profit and Loss Account on the basis of actuarialvaluation.

11. Research and Developmenta) Capital expenditure is shown separately under respective heads of fixed assets.b) Revenue expenses including depreciation are included under the respective heads of expenses.

12. Provision for TaxationProvision for current tax is computed as per ‘Total Income’ returnable under the Income Tax Act, 1961 taking into accountavailable deductions and exemptions. Deferred tax is recognised for all timing differences being the differences betweentaxable income and accounting income that originate in one period and are capable of reversal in one or more subsequentperiods.

13. Proposed DividendDividend proposed by the Board of Directors is provided for in the accounts, pending approval at the Annual GeneralMeeting.

68


(Rs. in Millions)

2004-2005 2003-2004B. NOTES :1. Estimated amount of contracts remaining to be executed on capital account

and not provided for 86.94 378.792. Letters of credit and bank guarantees issued by bankers and outstanding as on 31.03.05 451.21 509.643. Contingent liabilities:

(a) Guarantee given on behalf of Company’s dealers in respect of loans grantedto them by a bank for acquiring tinting systems 279.56 417.77

(b) Corporate guarantee issued by the Company on behalf of its subsidiaries 879.17 769.68(c) Claims against the Company not acknowledged as debts:

(i) Tax matters in dispute under appeal 231.60 116.03(ii) Others 11.01 25.29

4. Auditors’ remuneration (including service tax, wherever applicable)Statutory audit fee 1.85 1.84Tax audit fees 0.40 0.40Certification fees 1.60 0.87Out of pocket expenses 0.38 0.37Cost audit fees 0.07 0.08Branch audit fees 0.07 0.05In addition, an associate firm of the statutory auditor’s firm has been paidRs. 0.15 million for taxation services during the year (Previous year Rs. 0.16 million)

5. (a) Computation of Profit for the year ended 31st March, 2005under section 349 of the Companies Act, 1956.Net Profit as per Profit and Loss Account 1,738.16 1,475.80

Add : Provision for taxation 988.00 880.00Provision for deferred tax (18.16) (44.46)Managerial remuneration 35.72 29.71Loss on sale of assets (net) --- 3.52

2,743.72 2,344.57Less : Surplus on sale of long term investments (net) 0.50 0.01

Surplus on sale of short term investments (net) 23.90 1.65Profit on sale of assets 27.44 ---Extraordinary item (Refer Note 23) 42.31 68.06Prior period items (net) (3.34) 2.07Profit under Section 198 of the Companies Act,1956 2,652.91 2,272.78Commission to Non-Executive Directors:Subject to a ceiling of 1% of profit as computed above 26.53 22.73Commission actually paid 4.24 3.12Remuneration to Wholetime Directors:Subject to a ceiling of 10% of profit as computed above 265.29 227.28Total remuneration actually paid 30.42 26.59

(b) Details of managerial remuneration under Section 198 of theCompanies Act, 1956Salaries and allowances 7.88 6.30Commission to Executive Directors (0.17% of Profit before taxes foreach of the Executive Directors) 13.80 11.79Contribution to Provident and Superannuation funds 5.24 4.52Perquisites 3.50 3.98Sitting Fees to Non-Executive Directors 1.06 ---Commission to Non-Executive Directors 4.24 3.12

35.72 29.71The above remuneration does not include contribution to gratuity fund and leave encashment as this contribution is a lumpsum amount based on actuarial valuation.The Company depreciates certain fixed assets at higher rates of depreciation based on estimated useful lives which are loweror equal to the implicit estimated useful lives prescribed by Schedule XIV of the Companies Act, 1956. The above higher valueof depreciation has been considered as deduction for the computation of managerial remuneration in (a) above.



Unit Location Installed Capacity Production

As at As at31st March, 31st March, 2004-2005 2003-2004

2005 2004

6. Production :

(a) Paints, enamels, varnishes MT/KL In-house(1) 300150 240150 220284(2) 187221(2)

and blacksContract

Manufacture/Purchase --- --- 71776 61215

(b) Synthetic Resins (For mainlycaptive consumption) MT In-house(1) 77880 70600 84306(3) 74831(3)

(c) Phthalic Anhydride MT Ankleshwar 24000 24000 22183(4) 21592(4)

(d) Pentaerythritol MT Cuddalore 3000 3000 4430(5) 4235(5)

(e) Sodium Formate MT Cuddalore 1800 1800 2505 2230(f) Formaldehyde (50%)(6) MT Cuddalore 13500 13500 10598 10570

Capacities are expressed in terms of :

(i) Double-shift working for a period of nine months and three shift working for the remaining period of three months in the year for Paints.(ii) Three shift working for Synthetic Resins, Phthalic Anhydride, Pentaerythritol, Sodium Formate and Formaldehyde, seven days a week,

throughout the year.(As per certificate given by the Management).(1) Manufacturing plants at Mumbai, Ankleshwar, Patancheru, Kasna and Sriperumbudur.(2) Includes 6958 MT (Previous year 6275 MT) of products processed for third party.(3) Includes 3573 MT (Previous year 3029 MT) of resins processed for third party.(4) Includes 9166 MT (Previous Year 7695 MT) Phthalic Anhydride transferred to paint plants for captive consumption.(5) Includes 2926 MT (Previous Year 2398 MT) Pentaerythritol transferred to paint plants for captive consumption.(6) Mainly for internal consumption in the manufacture of Pentaerythritol.

7. Stocks and Turnover :

Opening Stock Closing Stock Turnover *

Unit Qty. Value Qty. Value Qty. Value(Rs. in millions) (Rs. in millions) (Rs. in millions)

(a) Paints, enamels, varnishes MT/KL 21353 1148.67 31004 1858.02 275252 22194.59and blacks (22549) (1151.50) (21353) (1148.67) (243148) (19195.60)

(b) Phthalic Anhydride MT 102 4.14 411 20.23 12709 674.00(181) (8.36) (102) (4.14) (13975) (602.49)

(c) Pentaerythritol MT 930 61.23 421 35.93 1936 172.68(214) (17.66) (930) (61.23) (1129) (106.43)

(d) Sodium Formate MT 6 0.09 223 3.54 2088 37.70(95) (1.48) (6) (0.09) (2319) (36.92)

(e) Formaldehyde (50%) MT 191 1.98 51 0.40 315 3.03(134) (2.02) (191) (1.98) (672) (10.43)

(f) Others (Refer Note (ii) below) --- --- --- --- --- 306.37(307.62)

Total 1216.11 1918.12 23388.37(1181.02) (1216.11) (20259.49)

* Includes sale of materials processed outside, resale of finished paints and dealer tinting systems purchased.i. Figures in brackets are for the previous year.ii. This comprises of resins, machinery spares, stationery items, plant and machinery, dealer tinting systems and other miscellaneous

items.

70


} }

8. Raw materials consumed :

2004-2005 2003-2004Unit Qty. Value Qty. Value

(Rs. in millions) (Rs. in millions)

(a) Pigments, Extenders, Minerals etc. MT 130,994 3,089.28 109,282 2,710.79(b) Additives MT 14,983 1,265.27 11,824 956.74(c) Solvents MT 5,295 4,314

KL 52,902 1,383.40 47,692 941.74(d) Resins MT 7,157 450.72 3,933 229.17(e) Oils MT 22,865 1,038.53 20,206 913.74(f) Ortho Xylene MT 23,632 887.16 23,514 704.58(g) Methanol MT 6,659 111.55 6,481 130.24(h) Acetaldehyde MT 1,741 64.45 1,581 40.40(i) Monomers MT 9,551 763.42 8,291 542.16(j) Others MT 13,442 383.42 11,114 345.50

9,437.20 7,515.06

9. CIF value of direct imports :2004-2005 2003-2004

(Rs. in millions) (Rs. in millions)(a) Raw materials 1,426.71 1,219.57(b) Packing materials 29.60 5.62(c) Stores and spares 34.27 19.36(d) Capital goods 54.19 21.08

10. Value of imported and indigenous raw materials and spares consumed and percentage of each to total consumption :

2004-2005 2003-2004(Rs. in millions) % to Total (Rs. in millions) % to Total

(a) Raw materials :Direct imports 1,737.49 18.41 1,458.07 19.40Others (Including value of consumption ofimported raw materials purchased throughindigenous sources Rs. 1,175.97 million -Previous year Rs. 800.59 million) 7,699.71 81.59 6,056.99 80.60

9,437.20 100.00 7,515.06 100.00(b) Stores and spares :

Direct imports 27.65 27.65 18.91 16.90Others 72.35 72.35 92.98 83.10

100.00 100.00 111.89 100.00

11. Net dividend remitted in foreign currency :

2004-2005 2003-2004Number of Non- Number of Dividend Number of Number of Dividendresident Equity Shares remitted Non-resident Equity Shares remittedShareholders held (net of tax) Shareholders held (net of tax)

(Rs. in millions) (Rs. in millions)

Final Dividend 2002-2003 --- --- --- 21 60,492 0.39Interim Dividend 2003-2004 --- --- --- 21 90,734 0.32Final Dividend 2003-2004 19 87,031 0.44 --- --- ---Interim Dividend 2004-2005 18 35,431 0.14 --- --- ---

}



(Rs. in Millions)

12. Expenditure in foreign currency :2004-2005 2003-2004

(a) Annual maintenance for software 8.31 7.09(b) Royalty --- 0.10(c) Procurement of software --- 5.52(d) Professional fees 1.47 3.48(e) Shade cards and other sales promotional items 15.40 ---(f) Travelling and training expenses 8.86 8.44(g) Others 4.92 4.01

38.96 28.64

13. Earnings in foreign currency :2004-2005 2003-2004

(a) Export of own products at FOB value 102.08 52.06(b) Export of traded goods at FOB value 2.15 20.42(c) Royalty 18.16 13.93(d) Dividend 5.42 8.81(e) Other receipts 9.42 7.35

137.23 102.57

14. The Company’s new paint plant at Sriperumbudur, near Chennai in the state of Tamil Nadu commenced production on20th January, 2005 with an initial installed capacity of 30,000 MTs per annum.

15. Sundry debtors include Rs. 31.95 million (Previous year Rs. 23.34 million) due from subsidiary companies.16. Revenue expenses amounting to Rs. 96.36 million (Previous year Rs. 75.89 million) on Research and Development have been

included under the respective heads of expenses.17. Interest expense includes:

2004-2005 2003-2004On Debentures and other fixed loans 4.13 31.35Other interest 23.41 21.30

27.54 52.65

18. Hitherto, the Company has been recognising inter-division transfers of Phthalic Anhydride and Pentaerythritol to paintplants for captive consumption as revenue and the same was disclosed separately in Schedule H ‘Sales & Operating Income’.The value of such inter-division transfers was included in material consumption of the consuming divisions.

With effect from the financial year ended 31st March 2005, the Company has discontinued the method of recognising inter-division transfers as sales as well as material consumption. The previous year’s figures have been restated accordingly. Theabove change in the method of revenue recognition has resulted in a reduction in Net Sales and operating income byRs. 600.28 million (previous year Rs. 458.16 million) with a corresponding reduction in material consumption and has noimpact on the profits of the Company.

19. (A) Pursuant to Accounting Standard (AS 28) - Impairment of Assets issued by the Institute of Chartered Accountants ofIndia, the company made an assessment as at 1st April 2004 for any indication of impairment in the carrying amountof the Company’s fixed assets and determined impairment loss on certain fixed assets. As required by AS 28, theimpairment loss as at 1st April 2004 is adjusted against opening balance of revenue reserves net of deferred tax credit,being the impairment loss relating to prior periods. The details of the same are as under :

(a) Fixed assets, being tinting systems leased to the dealers, have been written down by Rs. 248.21 million as thecarrying amount of such assets was significantly higher than the current replacement cost.

(b) Fixed assets being plant & machinery (including information technology assets and electric & pipe fittings),scientific research equipment, furniture & fittings and office equipment have been written down by Rs. 206.24million mainly due to technological obsolescence and expected disposal of such assets before the previouslyestimated useful life.

72

The total impairment provision of Rs. 291.42 million (Gross - Rs 454.45 million less Deferred Tax credit - Rs. 163.03)has been adjusted against the opening General Reserves of the company as at 1st April 2004. After recognising theimpairment loss, the Company has provided depreciation on the asset’s revised carrying amount less its residual value(if any), over its remaining useful life. Consequent to the above provision for impairment, the depreciation for the yearended 31st March, 2005 has reduced by Rs. 100.92 million and the deferred tax liability for the year has increased byRs. 33.97 million resulting in net increase in the profits of the Company by Rs. 66.95 million.

The Company has assessed its fixed assets for impairment as at 31st March, 2005 and concluded that there has beenno significant change in the above impairment provision.

(B) Till the financial year ended 31st March, 2004, the company had been providing depreciation on its fixed assets underStraight Line Method and at rates specified under Schedule XIV to the Companies Act, 1956 except tinting systems(excluding computers which are part of tinting systems) leased to dealers which are depreciated over the estimateduseful life of nine years. Based on the management’s estimate of useful life, the Company has increased the rate ofdepreciation of certain classes of assets as follows:

Asset Class Rate of Depreciation (%) Revised Useful Revised Rate of till 31st March, 2004. Life (years) Depreciation (%)

Information Technology Assets 16.21 4 25.00Scientific Research Equipment 4.75 8 12.50Furniture 6.33 8 12.50Office Equipment 4.75 5 20.00Vehicles 9.50 5 20.00

The carrying amount of the above assets as at 1st April, 2004 is being depreciated over the revised remaining useful life.

The above revision in useful life has resulted in additional depreciation amounting to Rs. 83.13 million for the financialyear ended 31st March, 2005 which has been charged to Profit and Loss account as required under AccountingStandard (AS 6) Depreciation Accounting. Consequently, the Deferred Tax Liability for the year ended 31st March,2005 has reduced by Rs 27.98 million resulting in net decrease in the profits of the company by Rs. 55.15 million.

The combined impact of (A) and (B) above has resulted in a net reduction in depreciation by Rs. 17.79 million, a netincrease in Deferred Tax Liability by Rs. 5.99 million, and net increase in the profits for the financial year ended 31stMarch, 2005 by Rs. 11.80 million.

20. Sundry balances write back (net) include write back of provisions made in the earlier years towards statutory and otherliabilities which have been determined to be no longer required in the current financial year.

21. Interest income includes Rs. 1.53 million (previous year Rs. 2.63 million) from non-trade investments. Interest income for theyear ended 31st March, 2004 included Rs. 29.78 million received on account of completion/disposal of various taxassessments/appeals.

22. The amount due to Small Scale Industrial undertakings (SSIs) is furnished under the relevant head, on the basis of informationavailable with the Company regarding small scale industry status of the suppliers. There are no amounts outstanding to suchsuppliers which are due for more than 30 days beyond the agreed credit period.

23. During the year the Company sold its investment in its subsidiary Asian Paints (Mauritius) Ltd. aggregating to 6,670,755ordinary shares of Mauritian Rupees 10/- each being 89.58% of total ordinary share capital to some of the existing shareholdersof the subsidiary company for a consideration of Rs. 0.76 million (equivalent to Mauritian Rupees 500,000). The Companyhad invested Rs. 111.12 million in the subsidiary till the date of transfer. The Company had made a provision of Rs. 68.06million towards permanent diminution in the value of investments in the financial year ended 31st March 2004. The balanceamount of Rs. 42.31 million net of consideration received has been recognised in the Profit and Loss Account as anextraordinary item towards loss on sale of investment.

24. ‘Miscellaneous Expenses‘ includes initial project expenses incurred in setting up a paint plant at Pondicherry amounting toRs. 22.90 million written off during the year as the project is no longer pursued.

25. ‘Profit on sale of Assets’ includes Rs. 31.90 million towards profit on disposal of the Company’s property in Mumbai.

26. Pursuant to the Accounting Standard (AS 29) – Provisions, Contingent Liabilities and Contingent Assets, the disclosure relatingto provisions made in the accounts for the year ended 31st March, 2005 is as follows:



*Provision for *Provision for discounts Provision for Leave Provision for Bad andExcise(1) and sales promotional Encashment(3) Doubtful Debts(4)

expenses(2)

2004-05 2003-04 2004-05 2003-04 2004-05 2003-04 2004-05 2003-04Opening Balance 59.96 69.86 158.02 161.27 123.70 120.91 38.97 24.18Additions 0.56 0.18 200.32 158.02 2.72 13.37 9.45 23.09Utilization --- --- 144.01 157.47 --- 10.58 8.52 5.05Reversals 8.53 10.08 14.01 3.80 --- --- 7.01 3.25Closing Balance 51.99 59.96 200.32 158.02 126.42 123.70 32.89 38.97

* Provision for Excise and Provision for discounts & Sales promotional expenses have been grouped under the head ‘Otherprovisions’ of Schedule G.

(1) Excise provision is made towards matters disputed at various appellate levels.(2) Provision is made towards discounts and sales promotion, but yet to be quantified at customer level.(3) Provision is made based on actuarial valuation.(4) Provision for doubtful debts is made based on the management’s estimate.27. The Company has recognised deferred tax arising on account of timing differences, being the difference between the

taxable income and accounting income, that originates in one period and is capable of reversal in one or more subsequentperiod(s) in compliance with Accounting Standard (AS 22) - Accounting for Taxes on Income issued by Institute of CharteredAccountants of India.The major components of deferred tax assets/(liabilities) arising on account of timing differences as at 31st March, 2005are as follows :

(Rs. in Millions)

As at As at31st March, 2005 31st March, 2004

Deferred tax Assets/(Liabilities)Difference between the Written Down Value of assets asper books of accounts and Income Tax Act, 1961. (397.17) (583.21)Expenses allowed for tax purpose on payment basis 58.16 52.37Provision for doubtful debts 11.07 13.95Voluntary Retirement Scheme (VRS) expenditure debited toProfit & Loss Account but allowed under the Income tax Act over five years 4.80 3.44Capital Losses carried forward under the Income Tax Act, 1961. 17.76 26.89

Net Deferred tax Assets/(Liabilities) (305.38) (486.56)Excess Liability created in 2001-2002 transferred back toGeneral Reserve --- 50.56Deferred tax liability reversed on assets impaired as at 1st April, 2004. 163.03 ---Deferred tax Assets/(Liabilities) for the year 18.16 44.46

28. Pursuant to Accounting Standard (AS 19) - Leases issued by the Institute of Chartered Accountants of India, the followinginformation is given :a) The Company has provided tinting systems to its dealers on an operating lease basis. The lease period varies between

nine and ten years. Lease rentals are payable monthly. A refundable security deposit is collected at the time of signingthe agreement. The equipment shall be used only to tint products of the lessor.

b) Future minimum lease rentals receivable as at 31st March, 2005 as per the lease agreements:(Rs. in Millions)

2004-2005 2003-2004

i) Not later than one year 80.42 136.83ii) Later than one year and not later than five years 27.51 105.83iii) Later than five years 0.30 1.49

108.23 244.15

The information pertaining to future minimum lease rentals receivable is based on the lease agreements entered intobetween the Company and the dealers and variation made thereto. Lease rentals are reviewed periodically taking intoaccount prevailing market conditions.


(Rs. in Millions)

74

29. Pursuant to the Accounting Standard (AS 27) - Financial Reporting of Interests in Joint Venture, the disclosures relating toJoint Venture viz., Asian PPG Industries Limited (hereinafter referred to as JV) are as follows:a) The proportion of interest of the Company in the JV is by way of equal equity participation with PPG Industries Inc., U.S.A.b) The aggregate amount of assets, liabilities, income and expenses related to the Company’s interests in the JV as at 31st

March, 2005 is as follows:(Rs. in Millions)

2004-2005 2003-2004

i) Assets 563.73 459.82ii) Liabilities 197.26 174.96iii) Income 1,025.74 787.60iv) Expenses 927.59 731.83

c) The Company’s share of capital commitments in the JV as at 31st March, 2005 is Rs. 2.54 million (Previous yearRs. Nil).

d) The Company’s share of contingent liabilities of the JV as at 31st March, 2005 is Rs. 1.32 million (Previous yearRs. 1.32 million).

e) No contingent liabilities and capital commitments have been incurred as at 31st March, 2005 in relation to the Company’sinterests in the JV along with the other venturer (Previous year Rs. Nil).

30. Earnings per share:2004-2005 2003-2004

a) Basic and diluted earnings per share before extraordinary item in rupees(face value - Rs. 10/- per share) 18.53 16.12

b) Profit after tax and prior period items but before extraordinary itemas per Profit & Loss Account (Rs. in million) 1,777.13 1,545.93

c) Weighted average number of equity shares outstanding 95,919,779 95,919,779


c) Total amount of contingent rents recognised as income —NIL (Previous Year - NIL).d) The initial direct cost relating to acquisition of tinting systems is capitalised.e) The information on gross amount of leased assets, depreciation and impairment is given in Schedule ‘D’ to the Balance Sheet.

II. a) The Company has taken certain assets like cars, computers etc., on an operating lease basis for a period of 48 months.The lease rentals are payable on a monthly/quarterly basis by the Company.

b) Future minimum lease rentals payable as at 31.03.2005 as per the lease agreements :(Rs. in Millions)

2004-2005 2003-2004

i) Not later than one year 30.09 29.17ii) Later than one year and not later than five years 36.13 53.92iii) Later than five years --- ---

66.22 83.09

c) Lease payments recognised in the Profit and Loss Account for the period are Rs. 29.22 million (Previous year Rs. 22.60million).



31. Information on related party transactions as required by Accounting Standard (AS 18) for the year ended 31st March, 2005.

(Rs. in Millions)

Particulars Joint Venture Subsidiaries Key Management Relatives of Key Companies Employee benefit OthersPersonnel Management Controlled by plans where

Personnel (*) Directors/Relatives control exists

2004-05 2003-04 2004-05 2003-04 2004-05 2003-04 2004-05 2003-04 2004-05 2003-04 2004-05 2003-04 2004-05 2003-04

Processing of goods(Income) 65.41 65.78 4.96 4.42Sale of goods 91.67 50.21 71.25 46.53 7.15 3.01

Purchase of goods 10.87 10.44 --- 0.11 260.65 156.49Processing of goods(Expense) 138.58 106.48Consignment sales 0.03 0.99Royalty received 9.91 6.23 24.69 20.47

Consultancy 1.59 ---Other recoveries 48.57 45.83 1.11 7.35 0.14 0.32Interest on loan 0.06 0.20

Rent deposit --- (0.10)

Sale of investments --- 0.05 --- --- 1.25 3.00 8.12Equity contribution 99.88 211.24

Share Application 28.43 ---Repayment ofloan given 17.47 14.33 13.00 1.20Rent paid 19.50 19.50Remuneration 29.84 25.98 7.29 6.89Commission to Non-Executive Directors 0.40 0.28 1.20 0.84Sitting fees paid toNon-Executive Directors 0.07 --- 0.33 ---Sitting fees received(From subsidiariesfor nominee Directors) 1.68 ---Other services -receipts 5.74 ---Retainership feeand otherreimbursements 1.83 1.91Fixed Depositsaccepted --- 0.15Fixed Depositsrepaid 0.15 0.02Donation 1.20 2.90

Sale of assets 7.14 ---

Dividend received 29.25 --- 5.42 8.81 2.26 0.25Contribution duringthe year 204.45 163.26Outstanding ason 31.3.2005 :Loans 158.02 145.69 --- 1.30

Deposits (0.65) (0.65) --- --- --- (0.15) --- --- (0.10) (0.10)Others 26.74 39.69 34.43 34.43 (14.20) (12.07) (1.20) (0.84) (15.33) (7.48) (54.08) (22.03)

Corporate guarantee issued by the Company on behalf of its subsidiaries amounting to Rs. 879.17 million as at 31st March, 2005 (Previous year Rs. 769.68 million).* Under the employment of the Company pursuant to the necessary approvals from the shareholders and the Central Govt. under section 314 of the Companies Act, 1956.

76

a) Joint Venture : Asian PPG Industries Ltd.b) Subsidiaries :

Asian Paints (Nepal) Pvt. Ltd. Berger Paints Singapore Pte Ltd. Berger International Ltd.

Asian Paints (International) Ltd. Berger Building Services (Singapore) Pte. Ltd. Berger Paints Trinidad Ltd.

Asian Paints (South Pacific) Holdings Ltd. Berger International Sdn Bhd. Enterprise Paints Ltd.

Asian Paints Industrial Coatings Ltd. Berger Paints (Thailand) Ltd. Lewis Berger (Overseas Holdings) Ltd.

Asian Paints (S.P.) Ltd. Berger Paints Manufacturing Ltd. Nirvana Investments Ltd.Asian Paints (Tonga) Ltd. Berger Paints (Ningbo) Co. Ltd. Samoa Paints Ltd.

Asian Paints (S.I.) Ltd. Berger Paints (Hong Kong) Ltd. SCIB Chemical, S.A.E.

Asian Paints (Vanuatu) Ltd. Berger Contractor (Singapore) Pte. Ltd. Surya Powder Coating Limited (Formerly known as

Asian Paints (Queensland) Pty. Ltd. Berger Paints Emirates Ltd. Surya Gelcaps Limited)*

Asian Paints (Lanka) Ltd. Berger Paints Jamaica Ltd. Taubmans Paints Fiji Ltd.

Asian Paints (Bangladesh) Ltd. Berger Paints Barbados Ltd. Technical Instruments Manufacturers (India) Ltd.

Asian Paints (Middle East) LLC Berger Paints Bahrain WLL Universal Paints Ltd.

* acquired on 25th October, 2004.The following subsidiaries have been liquidated/struck off/disposed off during the year :

Name of Subsidiary Date of disposal/liquidation

Asian Paints Distributors (Private) Ltd.Sri Lanka Under voluntary liquidationAsian Paints (Mauritius) Limited 30th March, 2005Berger Paints (Malta) Ltd. 12th May, 2004Berger Paints (Shanghai) Ltd. 23rd February, 2004

c) Associate Company :Dutch Boy Philippines Inc.

d) Key management personnel :Name of the Director Designation

Ashwin C. Choksi ChairmanAshwin S. Dani Vice Chairman & Managing DirectorAbhay A. Vakil Managing DirectorK. Rajagopalachari Non-Executive Director (till 14th March, 2005)




e) Relatives of Key management personnel :Directors :Mahendra C. Choksi Non-Executive DirectorAmar A. Vakil Non-Executive DirectorHasit A. Dani Non-Executive DirectorEmployees :Jalaj Dani, Manish Choksi, Nehal Vakil, Amrita Vakil, Rupen Choksi and Malav Dani.

f) Companies controlled by directors/relatives :AR Intertect Design Pvt. Ltd. Gujarat Organics Ltd. Resins and Plastics Ltd.Ashwin Holdings Pvt. Ltd. Geetanjali Trading & Investments Ltd. Ricinash Oil Mill Ltd.Asteroids Trading and Investments Pvt. Ltd. Hitech Plast Ltd. Rita Choksi Holdings Pvt. Ltd.Castle Investments and Industries Pvt. Ltd. Himanshu Holdings Pvt. Ltd. Rupen Investments and Industries Pvt. Ltd.Centaurus Trading and Investments Pvt. Ltd. Jalaj Trading and Investments Pvt.Ltd. S.C. Dani Research Foundation Ltd.Clear Plastic Ltd. Jaldhar Investments and Trading Co. Pvt. Ltd. Sadavani Investments and Trading Co. Pvt. Ltd.Coatings Specialities (India) Ltd. Jatayu Investments Ltd. Sanjivani Chemicals Ltd.Dani Capital and Investments Pvt. Ltd. Kalica Paper Industries Pvt. Ltd. Sapan Investments Pvt. Ltd.Dani Enterprises Pvt. Ltd. Lambodar Investments & Trading Co. Ltd. Satyadharma Investments & Trading Co. Pvt. Ltd.Dani Finance and Investments Co. Pvt. Ltd. Lyon Investments and Industries Pvt. Ltd. Sudhanva Investments and Trading Co. Pvt. Ltd.Dani Finlease Ltd. Multitech Plast Containers Ltd. Suprasad Investments & Trading Co. Ltd.Dani Holdings & Trading Co. Pvt. Ltd. Murahar Investments and Trading Co. Ltd. Suptaswar Investments and Trading Co. Ltd.Dani Securities Ltd. Navbharat Packaging Industries Ltd. Tru Trading and Investments Pvt. Ltd.Dani Trading and Investments Ltd. Nehal Trading and Investments Pvt. Ltd. Unnati Trading and Investments Pvt. Ltd.Doli Trading and Investments Pvt. Ltd. Omega Properties Pvt. Ltd. Urvashi Holding Pvt. Ltd.Elcid Investments Ltd. Pragati Chemicals Ltd. Vikatmev Containers Ltd.ELF Trading and Chemical Mfg. Co. Ltd. Rangmeet Investments Ltd.

g) Employee Benefit Funds where control exists :Asian Paints Office Provident Fund, Asian Paints Factory Employees’ Provident Fund, Asian Paints ManagementCadres’ Superannuation Scheme, Asian Paints (India) Limited Employees’ Gratuity Fund.

h) Other entities over which there is significant control : Asian Paints Charitable Trust.

78


32. Segment Information for the year ended 31st March, 2005:(Rs. in Millions)

2004-2005 2003-2004

Paints Others* Total Paints Others* Total

RevenueNet salesExternal 18,665.64 749.51 19,415.15 16,329.39 637.07 16,966.46Inter-Segment --- 600.28 600.28 — 458.16 458.16Other Income 99.50 31.56 131.06 105.89 17.82 123.71Total Revenue 18,765.14 1,381.35 20,146.49 16,435.28 1,113.05 17,548.33

ResultSegment result 2,915.22 121.57 3,036.79 2,661.89 49.57 2,711.46Unallocated Corporate expenses (444.00) (372.74)

Operating Profit 2,592.79 2,338.72Interest Expenses (27.54) (52.65)Interest Income 4.60 37.06Dividends 93.78 15.54Profit/(Loss) on sale of long terminvestments 0.50 0.01Profit/(Loss) on sale of short terminvestments 23.90 1.65Profit on sale of assets 32.10 ---Miscellaneous income 30.18 39.07Extraordinary items (42.31) (68.06)Income taxes (969.84) (835.54)Net Profit 1,738.16 1,475.80

Other InformationSegment assets 7,785.29 691.69 8,476.98 6,427.06 553.99 6,981.05Unallocated corporate assets 3,227.69 3,497.92

Total assets (after impairment loss) 11,704.67 10,478.97

Segment liabilities 3,696.30 245.94 3,942.24 3,270.14 51.98 3,322.12Unallocated corporate liabilities 2,040.23 1,841.44

Total liabilities 5,982.47 5,163.56

Capital Expenditure 699.43 22.18 721.61 238.90 10.62 249.52Unallocated corporate capitalexpenditure 26.79 13.36

Total 748.40 262.88

Depreciation 387.36 36.04 423.40 404.61 34.72 439.33Unallocated corporate depreciation 52.64 40.77

Total 476.04 480.10

Impairment loss on segment assets as on1st April, 2004 384.17 2.30 386.47 --- --- ---

Impairment loss on unallocated corporateassets as on 1st April, 2004 67.98 ---

Total 454.45 ---


* Others include Company’s business units manufacturing Phthalic Anhydride and Pentaerythritol.

33. Previous year’s figures have been regrouped, wherever necessary.

Signatures to Schedules A to M







80

Statement

I. Registration DetailsRegistration No. State Code

Balance Sheet Date

II. Capital Raised During the Year (Amount - Rs. in Thousands)

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

Sources of Funds

Application of Funds

V. Performance of the Company (Amount - Rs. in Thousands)

Date

Bonus Issue

3 1

0 4 5 9 8

Month Year

0 3 2 0 0 5

Rights Issue

Private Placement

N I L

N I L

1 1

Total Liabilities6 8 6 6 3 5 0

Total Assets6 8 6 6 3 5 0

Paid-up Capital9 5 9 1 9 8

Secured Loans2 8 3 6 5 1

Reserves and Surplus4 7 6 3 0 0 0

Investments2 5 8 4 2 7 0

V. Generic Names of three Principal Products/Services of the Company(As per Monetary Terms)

PURSUANT TO PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956 BALANCE SHEET ABSTRACT AND COMPANY’SGENERAL BUSINESS PROFILE

N I L

Public IssueN I L

Cancellation of sharesN I L

Deferred Tax Liability3 0 5 3 8 0

Net Fixed Assets3 1 9 5 0 9 0

Net Current Assets1 0 8 6 9 9 0

Accumulated LossesN I L

Unsecured Loans5 5 5 1 2 1

Turnover

2 3 3 8 8 3 7 0

Profit/(Loss) Before Tax+ -

Total Expenditure

2 0 6 8 0 3 7 0

Profit/(Loss) After Tax+ -

(Please tick Appropriate box + for profit, - for loss)

2 7 0 8 0 0 0� 1 7 3 4 8 2 0�

Earnings Per Share (Rs.)1 8 . 5 3

Dividend Rate (%)0 9 5

Item Code No. (ITC Code)3 2 0 8 9 0 0 3



P H T H A L I C A N H Y D R I D EProduct Description

Product DescriptionP E N T A E R Y T H R I T O L

S Y N T H E T I C E N A M E L ,

O T H E R C O L O U R S

Product Description

ConsolidatedFinancial Statements

82

Annexure

We have audited the attached consolidated Balance Sheet ofAsian Paints (India) Limited group as at 31st March 2005,and also the Consolidated Profit and Loss Account and thecash flow statement for the year ended on that date annexedthereto. These financial statements are the responsibility of theAsian Paints (India) Limited’s management and have beenprepared by the management on the basis of the separatefinancial statements and other financial information regardingits subsidiaries. Our responsibility is to express an opinion onthese financial statements based on our audit.

We conducted our audit in accordance with generally acceptedauditing standards in India. These standards require that weplan and perform the audit to obtain reasonable assurancewhether the financial statements are prepared, in all materialrespects, in accordance with and identified financial reportingframework and are free of material misstatements. An auditincludes examining on a test basis, evidence supporting theamounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used andsignificant estimates made by management, as well asevaluating the overall financial statements. We believe thatour audit provides a reasonable basis for our opinion.

We did not audit the financial statements of subsidiariesmentioned in Annexure to this report whose total assets andtotal revenues are mentioned in the annexure to this reportexcept Asian Paints Industrial Coatings Ltd. and TechnicalInstruments Manufacturers (India) Ltd. whose accounts areaudited by us. The financial statements of other subsidiariesother than those mentioned above have been audited by otherauditors whose reports have been furnished to us, and ouropinion, in so far as it relates to the amounts included in respectof subsidiaries, is based solely on the reports of the otherauditors.

We report that the consolidated financial statements have beenprepared by the Company in accordance with the requirementsof Accounting Standard (AS-21) - Consolidated FinancialStatements, (AS-23) Accounting for Investments in Associatesin Consolidated Financial Statements and (AS-27) FinancialReporting of Interests in Joint Ventures issued by the Institute ofChartered Accountants of India.

Based on our audit of financial statements of Asian Paints (India)Limited and on consideration of reports of other auditors ofsubsidiaries, included in the consolidated financial statementsread with Notes 5 and 6, of Schedule ’M’ - B, and to the best ofour information and according to explanations given to us, weare of the opinion that the attached consolidated financialstatements give a true and fair view in conformity with theaccounting principles generally accepted in India:

a) In the case of consolidated Balance Sheet, of the state ofaffairs of Asian Paints (India) Limited group as at 31stMarch 2005;

b) In the case of consolidated Profit and Loss Account, ofthe profit for the year ended on that date; and

c) in the case of the consolidated cash flow statement, ofthe cash flows for the year ended on that date.



Membership No. 8152

Auditors’ Report to the Board of Directors of Asian Paints (India) Limited group on theConsolidated Financial Statements of Asian Paints (India) Limited and itssubsidiaries

The subsidiary companies considered in the consolidated financial statements are:Direct Subsidiaries: (Rs. in Millions)Name of the Company Financial Year Total Assets Total Revenues

Asian Paints (Nepal) Limited 15th Jan-14th Jan 128.89 139.61Asian Paints (Mauritius) Limited (Refer note below) Jan-Dec 0.00 25.06Asian Paints (International) Limited Jan-Dec 4,227.08 4861.15Asian Paints Industrial Coatings Limited. Apr-MarTechnical Instruments Manufacturers (India) Limited Apr-Mar

Note –Subsequent to the Balance Sheet date of Asian Paints (Mauritius) Limited, the parent Company has sold its 89.58% stake inAsian Paints (Mauritius) Limited on 30th March 2005.


Indirect Subsidiaries:i) Subsidiaries of the wholly owned subsidiary, Asian Paints (International) Limited, Mauritius.

Accounting periodAsian Paints (South Pacific) Holdings Limited Jan-DecAsian Paints (South Pacific) Limited Jan-DecAsian Paints (Tonga) Limited Jan-DecAsian Paints (Soloman Island) Limited Jan-DecAsian Paints (Vanuatu) Limited Jan-DecAsian Paints (Queensland) Pty. Limited Jan-DecAsian Paints (Lanka) Limited Jan-DecAsian Paints (Bangladesh) Limited Jan-DecAsian Paints (Middle East) LLC Jan-DecSCIB Chemical, S.A.E., Egypt Jan-DecBerger International Limited, Singapore Jan-Dec

ii) Subsidiary of Asian Paints (South Pacific) Limited:Taubmans Paints (Fiji) Limited Jan-Dec

iii) Subsidiary of Taubmans Paint (Fiji) Limited:Samoa Paints Limited Jan-Dec

i v ) Subsidiary of Asian Paints Lanka Limited:Asian Paints Distributors (Pvt.) Limited(In voluntary liquidation) Jan-Dec

v ) Subsidiaries of Berger International Limited, SingaporeAccounting period

Berger Paints Singapore Pte. Ltd. Jan - DecBerger Building Services (Singapore) Pte. Ltd. Jan - DecBerger International Sdn Bhd. Jan - DecBerger Paints (Thailand) Ltd. Jan - DecBerger Paints Manufacturing Ltd. Jan - DecBerger Paints (Ningbo) Co. Ltd. Jan - DecBerger Paints (Hong Kong) Ltd. Jan - DecBerger Paints (Malta) Ltd., (Disposed on 12th May, 2004) Jan - DecEnterprise Paints Limited Jan - DecUniversal Paints Limited Jan - DecLewis Berger (Overseas Holdings) Ltd. Jan - DecBerger Paints (Shanghai) Ltd. (Liquidated on 23rd February, 2004) Jan - Dec

vi) Subsidiary of Berger Building Services (Singapore) Pte Ltd.Berger Contractor (Singapore) Pte. Ltd. Jan - Dec

vii) Subsidiary of Enterprise Paints Limited:Nirvana Investments Ltd. Jan - Dec

viii) Subsidiary of Nirvana Investments Ltd.Berger Paints Emirates Ltd. Jan - Dec

i x ) Subsidiaries of Lewis Berger (Overseas Holdings) Ltd.:Berger Paints Jamaica Ltd. Jan - DecBerger Paints Trinidad Ltd. Jan - DecBerger Paints Barbados Ltd. Jan - Dec

x) Subsidiary of Universal Paints Limited:Berger Paints Bahrain W.L.L. Jan - Dec

xi) Subsidiary of Asian Paints Industrial Coatings Limited:Surya Powder Coatings Limited(Formerly known as Surya Gelcaps Limited) Apr - Mar

Joint Venture:The Joint Venture unit considered in the consolidated financial statements is Asian PPG Industries Limited, a joint venturebetween the parent company and PPG Industries Inc., U.S.A. wherein the parent company has equal equity participation.Associate Company:Dutch Boy Philippines, Inc., wherein one of the indirect subsidiaries i.e. Berger International Limited is holding 30% equity interest.



Membership No. 8152

84

(Rs. in Millions)

Consolidated Balance Sheet as at 31st March, 2005






As at As atSchedules 31.03.2005 31.03.2004

FUNDS EMPLOYEDShareholders’ FundsShare Capital A 959.20 959.20Reserves and Surplus B 4,690.13 4,313.15Capital Reserve on consolidation 22.42 22.42

5,671.75 5,294.77Loan Funds CSecured Loans 982.64 441.88Unsecured Loans 1,412.40 1,251.34

2,395.04 1,693.22Deferred Tax Liability (Net) 353.37 533.41(Refer Note B - 17 in Schedule ‘M’)Minority Interest 638.53 697.81Total 9,058.69 8,219.21

APPLICATION OF FUNDSFixed Assets DGross Block 9,363.80 8,867.74Less: Depreciation/Amortisation/Impairment 5,090.95 4,174.24Net Block 4,272.85 4,693.50Capital Work in Progress 96.70 46.47

4,369.55 4,739.97Investments E 1,138.36 1,018.06Current Assets, Loans and Advances FInterest accrued on investments 0.03 0.87Inventories 4,545.44 3,181.85Sundry debtors 2,958.67 2,649.77Cash and Bank Balances 608.19 698.00Other receivables 163.93 184.73Loans and Advances 800.31 760.92

9,076.57 7,476.14Retirement benefit assets (Refer Note B - 7 (vi) in Schedule M) 152.10 123.73Less : Current Liabilities and Provisions G

Current Liabilities 5,005.99 4,751.31Provisions 1,172.03 969.10

6,178.02 5,720.41Net Current Assets 3,050.65 1,879.46Goodwill on consolidation 500.13 581.72Miscellaneous Expenditure --- 0.01(To the extent not written off)Total 9,058.69 8,219.21Notes M

Consolidated Financial Statements


Year YearSchedules 2004-2005 2003-2004

INCOMESales and operating income (Net of discounts) H 28,966.96 24,916.05Less: Excise 3,361.74 2,736.97

Sales and operating income (Net of discounts and excise) 25,605.22 22,179.08Other income I 323.69 263.55

25,928.91 22,442.63EXPENDITUREMaterials Consumed J 14,892.88 12,463.37Employees’ remuneration and benefits K 2,015.52 1,851.41Manufacturing, administrative, selling and distribution expenses L 5,345.50 4,892.72

22,253.90 19,207.50

PROFIT BEFORE INTEREST, DEPRECIATION AND TAX 3,675.01 3,235.13Less : Interest 108.15 152.03Less : Depreciation/Amortisation D 613.60 628.35Add : Profit from Associate Company 2.18 39.14

PROFIT BEFORE TAX AND AMORTISATION OF GOODWILL 2,955.44 2,493.89Less : Amortisation of Goodwill 77.10 78.26

PROFIT BEFORE TAX 2,878.34 2,415.63Less : Provision For Current Tax 1,079.68 999.75Less : Provision For Deferred Tax Liability/(Asset)

(Refer Note B - 17 in Schedule ‘M’) (18.86) (59.25)

PROFIT AFTER TAX BEFORE PRIOR PERIOD ITEMS 1,817.52 1,475.13Add/(Less) : Prior period items (Net) (4.98) 2.07

PROFIT AFTER TAX AND PRIOR PERIOD ITEMS 1,812.54 1,477.20Less : Minority Interest 71.63 28.31

ATTRIBUTABLE TO SHAREHOLDERS 1,740.91 1,448.89Add : Balance brought forward from previous year 820.00 646.16

DISPOSABLE PROFIT 2,560.91 2,095.05DISPOSAL OF ABOVE PROFITDividend to shareholders of parent companyEquity Shares - Interim 383.69 335.73

- Final 527.56 479.60Tax on Dividend 130.01 104.47Transfer to General Reserve 519.65 355.25Balance carried to Balance sheet 1,000.00 820.00

2,560.91 2,095.05Earnings per share (Rs.) Basic and diluted - (Face value of Rs.10/- each) 18.15 15.11(Refer Note B - 18 in Schedule ‘M’)Notes M

(Rs. in Millions)

Consolidated Profit & Loss Accountfor the year ended 31st March, 2005






86

2004-2005 2003-2004A. Cash from Operating Activities:

Net profit before prior period items and tax: 2,878,34 2,415.63Adjustments for:Depreciation 613.60 628.35Amortisation of Goodwill 77.10 78.26Interest Income (10.42) (46.01)Interest Expense 108.15 152.03Prior Period adjustments (4.98) 2.07Dividend Income (62.52) (7.34)Adjustment on Consolidation (8.41) (28.46)Profit from Associate Company (2.18) (39.14)Foreign exchange translation (34.73) (34.46)Profit on sale of Investments (24.51) (1.61)Loss on disposal of subsidiary 16.10 ---Profit on disposal of subsidiary (14.22) ---Retirement benefit assets (33.10) 18.06Profit on sale of assets (30.01) ---Loss on sale of assets 0.06 (2.54)

Operating Profit before working capital changes 3,468.27 3,134.84Adjustment for:Trade receivables (327.84) (93.76)Other receivables (17.60) (206.69)Inventories (1,385.59) 40.07Trade and other payable 287.40 467.50Cash generated from Operations 2,024.64 3,341.96Less: Income tax paid (net of refund) (957.47) (854.16)

Net Cash generated from Operating Activities 1,067.17 2,487.80B. Cash flow from Investing Activities:

Purchase of Fixed Assets (966.95) (441.88)Sale of Fixed Assets 242.79 202.66Purchase of Investments (269.71) (865.80)Sale of Investment 168.76 ---Additional Interest in Subsidiaries --- (38.83)Cash outflow on acquisition of Subsidiaries (0.33) (34.40)Cash inflow on disposal of Subsidiaries 13.16 (7.01)Interest received 11.26 46.48Dividend received 62.52 7.34

Net Cash used in Investing Activities (738.50) (1,131.44)C. Cash flow from Financing Activities:

Availment of secured loans 716.59 ---Repayment of debentures and other secured loans (156.29) (900.73)Repayment of unsecured loans (1.23) ---Availment of unsecured loans 163.98 624.57Interest paid (109.88) (167.68)Dividends paid (including paid to minority shareholders) (1,031.65) (894.81)Net Cash used in Financing Activities (418.48) (1,338.65)

D. Net Increase/(Decrease) in Cash and Cash Equivalents (89.81) 17.70Cash and Cash Equivalents as on 01.04.2004 698.00 680.30Cash and Cash Equivalents as on 31.03.2005 608.19 698.00

(Rs. in Millions)

Cash Flow Statement for the year ended 31st March, 2005

As per our report of even date For and on behalf of the BoardFor Shah & Co. Ashwin C. Choksi Ashwin S. Dani Abhay A. Vakil Tarjani VakilChartered Accountants Chairman Vice Chairman & Managing Director Director






(Rs. in Millions)

As at As at31.03.2005 31.03.2004

SCHEDULE A : SHARE CAPITAL

Authorised99,500,000 Equity Shares of Rs. 10/- each 995.00 995.0050,000 11% Redeemable Cumulative Preference shares of Rs. 100/- each 5.00 5.00

1,000.00 1,000.00

Issued and Subscribed95,919,779 Equity Shares of Rs. 10/- each fully paid:

a) 93,989,940 Bonus Shares of Rs. 10/- each fully paid up issuedon capitalisation of Share premium (Rs. 21.91 million)and General Reserves (Rs. 917.98 million).

b) 294,000 shares of Rs. 10/- each issued as fully paid up pursuantto the Scheme of Rehabilitation / Amalgamation of PentasiaChemicals Ltd., without payment received in cash. 959.20 959.20

959.20 959.20


SCHEDULE B : RESERVES AND SURPLUS

Capital Reserve 0.01 0.01Capital Redemption Reserve 53.74 53.74

General ReserveAs per last Balance Sheet 3,431.46 3,233.79Add : Transfer from Profit and Loss Account 519.65 355.25Add : Transfer from Debenture Redemption Reserve 42.50 141.25Add : Realised on disposal of subsidiary transferred from foreign currency translation reserve 19.50 ---Add : Excess Deferred Tax Liability created in 2001-2002 transferred back --- 50.56Add/(Less) : Adjustments on consolidation 3.48 (28.46)Less : Capitalised for issue of Bonus shares --- (320.93)Less : Provision for impairment on fixed assets as on 1st April, 2004 (454.45) ---

(Refer Note - B 16A in Schedule M)Add : Reduction in the deferred tax liability on impairment of fixed assets 163.03 ---

(Refer Note - B 16A in Schedule M)3,725.17 3,431.46

Foreign Currency Translation ReserveAs per last Balance Sheet (34.56) ---Add : Currency translation during the year (34.73) (34.56)Less : Realised on disposal of subsidiary transferred to General Reserve (19.50) ---

(88.79) (34.56)Debenture Redemption ReserveAs per last Balance Sheet 42.50 183.75Less : Transfer to General Reserve (42.50) (141.25)

--- 42.50

Profit and Loss Account 1,000.00 820.00

4,690.13 4,313.15

88

(Rs. in Millions)


As at As at31.03.2005 31.03.2004

SCHEDULE C : SECURED AND UNSECURED LOANSSecured LoansLong Term :Debentures13.75% Non-Convertible Debentures (Note No. 1) --- 85.00Loans and advancesFrom Banks and Financial Institution (Note No. 2) 374.13 266.05

374.13 351.05

Short Term :Loans and advances from banksCash Credit Accounts (Note No. 3) 608.51 ---

Foreign Currency Loan --- 90.83

982.64 441.88

Unsecured LoansLong Term :Fixed Deposits 3.22 3.32Trade deposits - Interest free 189.14 191.96Other loans (Note No. 4) 1,220.04 1,056.06

1,412.40 1,251.34

Notes:(1) Nil, (Previous year - 850) 13.75 % Secured Redeemable Non-Convertible Debentures

of Rs. 100,000/- each privately placed redeemable at par. 850 debentures wereredeemed during the year (Previous year - 825). --- 85.00

Debentures were secured by pari passu charge on the Company’s movable and --- 85.00immovable properties pertaining to the paint plants situated at Bhandup, Ankleshwarand Patancheru, excluding inventories at the above locations.

(2) (a) Interest free Term loan from the Pradeshiya Industrial Corporation of U.P. Ltd.,(PICUP) under Sales Tax deferment scheme of Govt. of U.P., is secured by a firstcharge on the Company’s immovable properties pertaining to the paint plant atKasna and by way of hypothecation of all movable properties at the abovelocation, subject to prior charge in favour of the Company’s bankers. 106.71 53.40

(b) Secured either by fixed/floating charge on the assets of various subsidiaries 267.42 212.65

374.13 266.05

(3) Secured by hypothecation of inventories, book debts and other current assets. 608.51 90.83

(4) Other loans represent :(a) Interest free loan availed under the Sales tax deferment scheme of the

Government of Andhra Pradesh by parent Company. 363.60 282.05(b) Loans availed by various subsidiaries through guarantee/comfort letter

from the parent Company. 836.86 749.19(c) Finance leases of subsidiaries. 19.58 24.82

1,220.04 1,056.06




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(Rs. in Millions)

SCHEDULE E : INVESTMENTSLong Term InvestmentsUnquoted(i) In Government Securities

National Savings Certificates, Indira Vikas Patra andDefence Certificates deposited with Government authorities. 0.05 0.07(National Savings Certificate sold during the year Rs. 20,000)

(ii) Trade Investments (Preference shares)9% Preference shares ofMultitech Plast Containers Ltd. 2,510,000 10/- 25.10 25.10

(iii) Trade Investments (Fully paid Equity shares)(a) Multitech Plast Containers Ltd. --- 10/- --- 1.90

(190,000 Shares sold during the year) (190,000)(b) Ricinash Oil Mill Ltd. --- 10/- --- 1.10

(110,000 shares sold during the year) (110,000)(c) Patancheru Enviro-tech Ltd. 12,900 10/- 0.13 0.13(d) SIPCOT Common Utilities Ltd. 2,830 100/- 0.28 0.28(e) Bharuch Eco-Acqua Infrastructure Ltd. 434,790 10/- 4.35 4.35(f) Apco Coatings (NZ) Ltd. 23,500 1 NZ 0.72 0.72(g) Danish for Wood 2,500 10 LE 0.18

Less : Provision for diminution in the value of investments (0.18) --- ---

(h) Masters Builders Technologies Egypt 500 10 LE 0.04 0.04(i) Maseter Builders Technologies 125 10 LE 0.01 0.01(j) Misr Quena 1,000 10 LE 0.07 0.07(k) Den Braven 500 10 LE 0.04 0.04

30.74 33.74

(iv) Other Investments(a) Units of Unit Trust of India under

Venture Capital Unit Scheme - 1990 --- 100/- --- 0.04(370 units redeemed during the year) (370)

(b) Contribution to Gujarat Venture Capital Fund -1990 (5% amounting to Rs. 25,000 0.09 0.11redeemed during the year)

(c) 10.5% tax free Bonds ofKonkan Railway Corporation Ltd. --- 1,000/- --- 25.64(25,000 bonds redeemed during the year) (25,000)

(d) Equity shares of Mark Auto Industries Ltd. 62,500 10/- 5.00 5.00

(v) Dutch Boy Philippines, Inc. (including share of profit) 427,500 100/- 58.96 64.24(Refer Note No. B - 13 in Schedule M) in Peso

64.05 95.03

Total long term unquoted investments 94.84 128.84


Nos. Face value As at As at (Rs.) (Unless 31.03.2005 31.03.2004

specified otherwise)



(Rs. in Millions)

Quoted (Fully Paid Equity Shares)(i) Trade Investments

ICI (India) Ltd. 3,760,783 10/- 772.46 772.46

(ii) Other InvestmentsHousing Development Finance Corporation Ltd. 93,000 10/- 1.24 1.24Apcotex Lattices Ltd. 3,418 10/- 0.11 0.11

Total long term quoted investments 773.81 773.81

Total long term investments 868.65 902.65

Short Term Investments (Unquoted)DSP Merrill Lynch Liquidity Fund - Growth Plan --- 10/- --- 20.00(13,09,036.220 units sold during the year) (13,09,036.220)

Birla Cash Plus Institutional Plan - Growth --- 10/- --- 20.00(11,76,829.370 units sold during the year) (11,76,829.370)

Birla Cash Plus Institutional Premium Plan -Dividend Growth - acquired during the year 1,996,477.315 10/- 20.01 ---

JM Fixed Maturity Plan - Dividend Optionacquired during the year 15,131,481.727 10/- 151.32 ---

SBI Magnum Instacash Fund - Dividend Plan --- 10/- --- 75.41(7,158,442,130 units sold during the year) (7,158,442,130)

Birla FMP Quarterly series 1 - Plan A - 3,699,029.008 10/- 37.01 ---Dividend Pay out(3,699,029.008 units purchased during the year)

Birla FMP Quarterly series 2 - Plan A - 999,412.044 10/- 10.00 ---Dividend Pay out(999,412.044 units purchased during the year)

Birla FMP Quarterly series 3 - Plan A - 5,129,887.603 10/- 51.37 ---Dividend Pay out(5,129,887.603 units purchased during the year)

Total short term investments 269.71 115.41

Total Investments 1,138.36 1,018.06

Aggregate market value of Long term Quoted Investments : 924.99 748.05

Note : Figures in brackets indicate that of previous year.



92

Loans and Advances(i) Loans and Advances :

Unsecured and considered good(a) Balances with Customs, Central Excise etc. 145.59 68.74(b) Sundry deposits 134.12 138.80(c) Advances/claims recoverable in cash or in kind 302.69 242.85(d) Advances to employees 17.15 19.56(e) Advances against Capital expenditure 42.76 60.71(f) Income Tax Refund Receivable --- 187.35(g) Prepaid expenses 0.73 ---(h) Others 157.27 42.91

800.31 760.92

9,076.57 7,476.14

(Rs. in Millions)


As at As at31.03.2005 31.03.2004

SCHEDULE F : CURRENT ASSETS, LOANS AND ADVANCES

Current Assets(i) Interest accrued on investments 0.03 0.87

(ii) Inventories(a) Raw and packing materials 1,849.22 1,240.54(b) Finished goods 2,379.26 1,683.45(c) Work-in-process 237.50 193.86(d) Stores, spares, fuel and other traded goods 79.46 64.00

4,545.44 3,181.85(iii) Sundry debtors (Unsecured)

(a) Outstanding for more than six monthsConsidered good 246.65 75.33Considered doubtful 427.29 484.76

673.94 560.09Less: Provision for doubtful debts 427.29 484.76

246.65 75.33(b) Other debts (considered good) 2,712.02 2,574.44

2,958.67 2,649.77

(iv) Cash and Bank Balances(a) Cash on hand 9.21 21.06(b) Balances with Banks:

(i) Current Accounts 480.81 513.83(ii) Cash Credit Accounts --- 17.16(iii) Term Deposits 118.17 145.95

608.19 698.00

(v) Other receivables 163.93 184.73



(Rs. in Millions)


As at As at31.03.2005 31.03.2004

SCHEDULE G : CURRENT LIABILITIES AND PROVISIONS

Current Liabilities(i) Acceptances 1,141.74 819.03(ii) Sundry creditors:

— Trade 2,018.73 2,445.54— Others 926.35 278.78

2,945.08 2,724.32

4,086.82 3,543.35(iii) Unpaid/unclaimed dividend 19.92 18.02

Unpaid/unclaimed matured deposits 0.78 0.52Unclaimed interest 0.31 0.38

21.01 18.92(iv) Interest accrued but not due 0.19 1.85(v) Other liabilities 897.97 1,187.19

5,005.99 4,751.31

Provisions(i) Proposed final dividend 527.56 479.60(ii) Provision for tax on proposed final dividend 73.99 61.45(iii) Provision for taxation (net of advance taxes paid) 177.28 55.07(iv) Provision for leave encashment 127.78 133.69(v) Other provisions 265.42 239.29

1,172.03 969.10

6,178.02 5,720.41

94

Year Year2004-2005 2003-2004

(Rs. in Millions)


SCHEDULE H : SALES AND OPERATING INCOME

Sales:Sales 30,163.16 26,036.60Less: Goods returned 310.25 307.33

Turnover 29,852.91 25,729.27Less: Discounts 1,127.47 1,095.58

Sales (Net of discounts) 28,725.44 24,633.69Processing charges 69.88 65.78Lease Rent 130.79 189.38Revenue from Home Solutions operations 40.85 27.20

28,966.96 24,916.05

SCHEDULE I : OTHER INCOMEInterest received 10.42 46.01Claims received 3.68 5.47Dividends 62.52 7.34Royalty 21.91 9.44Profit on sale of subsidiaries 14.22 ---(Refer Note B - 8 in Schedule M)Sundry balances written back (net) 17.15 56.19Profit on sale of investments 24.51 1.66Profit on sale of assets 30.01 6.25Exchange difference (net) 2.71 9.97Miscellaneous income 136.56 95.78Retirement Benefit Fund revaluation --- 25.44

323.69 263.55



Year Year2004-2005 2003-2004

(Rs. in Millions)


SCHEDULE J : MATERIALS CONSUMEDRaw and Packing Materials ConsumedOpening Stock 1,240.54 1,267.69Add: Purchases and expenses 15,373.59 11,832.43

16,614.13 13,100.12Less: Closing Stock 1,852.02 1,240.54

14,762.11 11,859.58Purchase of Paints for resale 623.95 310.37Cost of other goods sold 247.31 273.89

15,633.37 12,443.84Add/(Less) :Decrease/(Increase) in finished and semi-finished stockOpening Stock 1,877.31 1,896.84Closing Stock 2,617.80 1,877.31

(740.49) 19.53

14,892.88 12,463.37

SCHEDULE K : EMPLOYEES’ REMUNERATION AND BENEFITS

Salaries, wages, allowances, commission, provisions forbonus and accrued leave salary 1,791.97 1,601.73Staff welfare expenses 79.21 107.58Contribution to Provident Fund, Gratuity and other funds 144.34 142.10

2,015.52 1,851.41

96

Year Year2004-2005 2003-2004

(Rs. in Millions)


SCHEDULE L : MANUFACTURING, ADMINISTRATIVE, SELLINGAND DISTRIBUTION EXPENSES

Stores and spares 159.55 158.65Power and fuel 290.23 260.30Processing charges 208.61 111.89Freight and handling charges 942.40 786.06Repairs and maintenance:

Buildings 27.53 25.54Machinery 61.90 65.11Other assets 115.83 121.37

205.26 212.02Rent 198.31 187.90Rates and taxes 163.14 139.78Insurance 71.03 71.33Advertisement and sales promotional expenses 956.05 873.75Cash discount and Payment performance discount 908.88 805.41Printing, stationery and communication expenses 174.65 177.79Travelling expenses 208.77 212.77Commission on sales 162.03 21.25Donations 10.58 11.20Loss on sale of assets 0.06 3.71Loss on sale of short term investments --- 0.05Miscellaneous expenses 603.16 746.56Commission to Non-executive directors 4.28 3.89Directors’ sitting fees 1.06 ---Bad and doubtful debts 44.67 89.37Auditors’ remuneration 16.24 19.04Loss on sale of subsidiary (Refer Note B - 9 in Schedule M) 16.10 ---Exchange difference (net) 0.44 ---

5,345.50 4,892.72



SCHEDULE M: NOTES ON CONSOLIDATED FINANCIAL STATEMENTS

A. Statement of Significant Accounting Policies

1. Basis for preparation of consolidated financial statements

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles andcomply with the Accounting Standard (AS 21) - Consolidated Financial Statements, Accounting Standard (AS 23) - Accountingfor Investments in Associates in Consolidated Financial Statements and Accounting Standard (AS 27) - Financial Reporting ofinterests in Joint Venture issued by the Institute of Chartered Accountants of India.

2. Method of Accounting

The financial statements have been prepared on accrual basis of accounting.

3. Fixed Assets

The ‘Gross Block’ of fixed assets is shown at the cost of acquisition, which includes taxes, duties (net of tax credits, asapplicable) and other identifiable direct expenses. Interest on borrowed funds attributable to the qualifying assets upto theperiod such assets are put to use, is included in the cost.

Know-how related to plans, designs and drawings of buildings or plant and machinery is capitalised under the relevant assetheads.

The depreciation on fixed assets is provided on Written Down Value / Straight Line methods as the case may be and at ratespermissible under applicable local laws or at such rates so as to write off the value of assets over their useful life.

Leasehold land is amortised over the period of the lease.

Intangible assets are capitalised and amortised on straight line basis over their estimated useful lives.

At the balance sheet date, an assessment is done to determine whether there is any indication of impairment of the carryingamount of the Group’s fixed assets. If any such indication exists, the asset’s recoverable amount is estimated. An impairmentloss is recognised whenever the carrying amount of asset exceeds its recoverable amount.

After recognition of impairment loss, the depreciation charge for the asset is adjusted in future periods to allocate the asset’scarrying amount, less its residual value (if any), over its remaining useful life.

4. Goodwill

Goodwill on consolidation is amortised over a period of ten years.

5. Revenue Recognition

Sale of products is recognised when the risks and rewards of ownership are passed on to the customers, which is on despatchof goods. Sales are stated exclusive of sales tax/VAT.

Revenue from rendering of services is recognised by reference to the stage of completion of the transaction at the balancesheet date determined by services performed to date as a percentage of total services.

Processing income is recognised upon rendition of the services.

Dividend income is recognised when the right to receive dividend is unconditional at the balance sheet date.

6. Lease Accounting

In respect of Operating leases, lease rentals are accounted on accrual basis in accordance with the respective lease agreements.

In respect of Finance leases, assets are recognised at their fair value at the date of acquisition or, if lower, at the present valueof the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance leaseobligation. The excess of lease payments over the recorded lease obligations are treated as finance charges which areallocated to each lease term so as to produce a constant rate of charge on the remaining balance of the obligations. Theassets are depreciated as owned depreciable assets.

Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group’s net investment in theleases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on theGroup’s net investment outstanding in respect of the leases.


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7. Inventory

Inventories are valued at the lower of cost and net realisable value. Damaged, unserviceable and inert stocks are suitablydepreciated.

In case of raw materials, packing materials, stores, spares and consumables, the cost includes duties and taxes (net of taxcredits as applicable) and is arrived at on weighted average cost basis. In respect of the joint venture, stores, spares andconsumables are charged to revenue at the time of procurement.

The finished goods and work-in-process cost includes the cost of raw materials, packing materials (if applicable), an appropriateshare of fixed and variable production overheads on the basis of standard cost method, duties (if applicable) and other costsincurred in bringing the inventories to their present location and condition. Traded goods are valued at cost.

8. Investments

Short term investments are carried at the lower of cost and fair value computed category wise. Long term investments arecarried at cost. Cost is arrived at by applying specific identification method. Provision for diminution in the value of long terminvestments is made only if such a decline is not temporary in the opinion of the management.

9. Transactions in Foreign Exchange

Transactions in foreign currency are recorded at the rates of exchange in force at the time of transaction date. At the yearend, monetary items denominated in foreign currency are reported using the closing rates of exchange. Exchange differencesarising on realisation/payments of foreign exchange are accounted in the year of actual realisation/payment. The values offixed assets acquired through foreign currency loans are adjusted at the end of each financial year by any change in liabilityarising out of expressing the outstanding foreign currency loans at the closing rates of exchange prevailing at the date ofBalance Sheet.

In case of forward contracts, the exchange difference between the forward rate and the exchange rate at the date oftransaction is recognised as income or expense over the life of the contract, except in respect of liabilities incurred foracquiring fixed assets, in which case such differences are adjusted in the carrying amount of the respective fixed assets.

10. Translation of Foreign Currency Statements

In translating the financial statements of foreign entities for incorporation in the consolidated financial statements, the assetsand liabilities are translated at the exchange rate prevailing at the balance sheet date of respective subsidiaries and incomeand expense items are translated at the average rates of exchange for the year. The resulting exchange differences areclassified as foreign currency translation reserve.

11. Sundry Debtors

Sundry debtors are stated after writing off debts considered as bad. Adequate provision is made for debts considereddoubtful. Bad debts are written off during the period in which they are identified. Discounts due, yet to be quantified at thecustomer level are included under the head ‘Current Liabilities and Other Provisions’.

12. Employees’ Retirement Benefits

In respect of the holding company, contribution to Provident fund, Superannuation fund and Pension is charged to Profit andLoss Account on accrual basis. Liability for Gratuity and Leave encashment benefits are charged to profit and loss account onthe basis of actuarial valuation.

In respect of some of the subsidiaries -

Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments made tostate-managed retirement benefit schemes are dealt with as payments to defined contribution plans where the company’sobligations under the schemes are equivalent to those arising in a defined contribution retirement benefit plan.

For defined retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, withactuarial valuations being carried out at each balance sheet date. Actuarial gains and losses that exceed 10 per cent of thegreater of the present value of the company’s defined benefit obligation and the fair value of plan assets are amortised overthe expected average remaining working lives of the participating employees. Past service cost is recognised immediately tothe extent that the benefits are already vested, and otherwise is amortised on a straight line basis over the average perioduntil the benefits vest.




The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined obligation asadjusted for unrecognised actuarial gains and losses and unrecognised past service cost, and as reduced by the fair value ofplan assets. Any asset resulting from this calculation is limited to unrecognised actuarial losses and past service cost, plus thepresent value of available refunds and reductions in future contributions to the plan.

13. Research and Development

Capital expenditure is shown separately under respective heads of fixed assets. Revenue expenses including depreciation areincluded under the respective heads of expenses.

14. Taxes on Income

Provision for current tax is computed as per ‘Total Income’ returnable under the applicable laws taking into account availabledeductions and exemptions.

Deferred tax is recognised for all timing differences being the differences between taxable income and accounting incomethat originate in one period and are capable of reversal in one or more subsequent periods.

15. Proposed Dividend

Dividend proposed by the Board of Directors is provided for in the accounts, pending approval at the Annual GeneralMeeting.


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5. Details of Subsidiaries, Joint Venture and Associate Company :Subsidiaries:

The subsidiary companies considered in the consolidated financial statements are:

Name of the Company Country of % of FinancialIncorporation voting power Year

Direct SubsidiariesAsian Paints (Nepal) Pvt. Limited Nepal 51% 15th Jan-

14th Jan

Asian Paints (Mauritius) Limited (Refer note below) Mauritius 89.58% Jan-Dec

Asian Paints (International) Limited Mauritius 100% Jan-Dec

Asian Paints Industrial Coatings Limited India 100% Apr-Mar

Technical Instruments Manufacturers (India) Limited India 100% Apr-Mar

Notes :Subsequent to the Balance Sheet date of Asian Paints (Mauritius) Limited, the Group has sold its 89.58% stake inAsian Paints (Mauritius) Limited on 30th March, 2005 to certain local shareholders of the Company for a considerationof Rs. 0.76 million.

(Rs. in Millions)

2004-2005 2003-2004

B. NOTES :1. Estimated amount of contracts remaining to be executed

on capital account and not provided for. 117.64 412.962. Letters of credit and bank guarantees issued by bankers and outstanding

as at the Balance Sheet date 491.87 530.173. Contingent liabilities:

i. Guarantees given -a) to a bank on behalf of the parent Company’s dealers in respect of

loans granted to them by a bank for acquiring tinting systems 279.56 417.77b) to others 42.42 11.53

ii. Claims against the Company not acknowledged as debtsa) Tax matters in dispute under appeal 234.28 120.15b) Others 17.68 37.09

4. One of the subsidiaries, Berger International Limited and its subsidiary, Berger Paints Trinidad Limited, are engaged inlitigation initiated by its former Regional Managing Director. The company upon discontinuing his services has paid himcompensation as per his contract of employment and the same has been charged to income statement. This matter is subjectto Trinidad and Tobago’s High Court Action No.2241 of 2003. Based on the information presently available, the likelyoutcome of this trial cannot be determined with any reasonable certainty. Therefore, no further provision has been made inthese financial statements for this matter.




Country of % AccountingIncorporation holding period

i) Subsidiaries of the wholly owned subsidiary,Asian Paints (International) Limited, Mauritius:

Asian Paints (South Pacific) Holdings Limited Vanuatu 100% Jan-Dec

Asian Paints (South Pacific) Limited Fiji Islands 51% Jan-Dec

Asian Paints (Tonga) Limited Kingdom of Tonga 51% Jan-Dec

Asian Paints (S.I.) Limited Solomon Islands 75% Jan-Dec

Asian Paints (Vanuatu) Limited Republic of Vanuatu 60% Jan-Dec

Asian Paints (Queensland) Pty. Limited Australia 88.57% Jan-Dec

Asian Paints (Lanka) Limited Sri Lanka 98.20% Jan-Dec

Asian Paints (Bangladesh) Limited Bangladesh 71.23% Jan-Dec

Asian Paints (Middle East) LLC Sultanate of Oman 49% Jan-Dec

SCIB Chemical S.A.E. Egypt 60% Jan-Dec

Berger International Limited Singapore 50.10% Jan-Dec

ii) Subsidiary of Asian Paints (South Pacific) Limited:Taubmans Paints (Fiji) Limited Fiji Islands 100% Jan-Dec

iii) Subsidiary of Taubmans Paints (Fiji) Limited:Samoa Paints Limited Samoa 80% Jan-Dec

iv) Subsidiary of Asian Paints (Lanka) Limited:Asian Paints Distributors (Pvt.) Limited Sri Lanka 100% Jan-Dec(under voluntary liquidation)

Indirect Subsidiaries


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Country of % AccountingIncorporation holding period

v) Indirect subsidiaries i.e. subsidiaries of BergerInternational Limited, Singapore:Berger Paints Singapore Pte Ltd. Singapore 100% Jan - DecBerger Building Services Singapore 100% Jan - Dec(Singapore) Pte. Ltd.Berger International Sdn Bhd. Malaysia 100% Jan - DecBerger Paints (Thailand) Ltd. Thailand 81.3% Jan - DecBerger Paints Manufacturing Ltd. Myanmar 60% Jan - DecBerger Paints (Ningbo) Co. Ltd. People’s Republic of 100% Jan - Dec

ChinaBerger Paints (Hong Kong) Ltd. Hongkong 100% Jan - DecBerger Paints (Malta) Ltd. Malta 84.2% Jan - Dec(Disposed on 12th May, 2004)Enterprise Paints Limited Isle of Man, U.K. 100% Jan - DecUniversal Paints Limited Isle of Man, U.K. 100% Jan - DecLewis Berger (Overseas Holdings) Ltd. U.K. 100% Jan - DecBerger Paints (Shanghai) Ltd. China 100% Jan - Dec(Liquidated on 23rd February, 2004)

vi) Subsidiary of Berger Building Services (Singapore) Pte. Ltd.:Berger Contractor (Singapore) Pte. Ltd. Singapore 100% Jan - Dec

vii) Subsidiary of Enterprise Paints Ltd.:Nirvana Investments Ltd. Isle of Man, U.K. 100% Jan - Dec

viii) Subsidiary of Nirvana Investments Ltd.:Berger Paints Emirates Ltd. U.A.E. 100% Jan - Dec

ix) Subsidiaries of Lewis Berger (Overseas Holdings) Ltd.:Berger Paints Jamaica Ltd. Jamaica 51% Jan - DecBerger Paints Trinidad Ltd. Trinidad 70% Jan - DecBerger Paints Barbados Ltd. Barbados 100% Jan - Dec

x) Subsidiary of Universal Paints Ltd.:Berger Paints Bahrain W.L.L. Bahrain 100% Jan - Dec

xi) Subsidiary of Asian Paints Industrial Coatings Ltd.:Surya Powder Coating Limited India 100% Apr - Mar(Formerly known as Surya Gelcaps Limited)(Acquired on 25th October, 2004)

Joint Venture:The Joint Venture unit considered in the consolidated financial statements is Asian PPG Industries Limited, a joint venture betweenthe parent company and PPG Industries Inc., U.S.A. wherein the parent company has 50% equity participation.Associate Company:Dutch Boy Phillippines, Inc., wherein one of the subsidiaries i.e. Berger International Limited is holding 30% equity interest.




6. Principles of consolidation:i) The consolidated financial statements are based on the audited financial statements of the subsidiaries for their respective

financial years. In respect of indirect subsidiaries of Asian Paints (International) Limited, the audited consolidatedfinancial statements of Asian Paints (International) Limited have been considered for the purpose of consolidation.

ii) The financial statements of the parent company and its subsidiaries have been combined to the extent possible on a lineby line basis by adding together like items of assets, liabilities, income and expenses. All significant intra groupbalances and transactions have been eliminated on consolidation. The amounts shown in respect of reserves compriseof the relevant reserves as per the balance sheet of the parent company and its share in the increase in the post -acquisition relevant reserves of the subsidiaries.

iii) The goodwill/capital reserve on consolidation has been recognised in the consolidated financial statements. The goodwillis amortised over a period of ten years on straight line basis.

iv) The consolidated financial statements have been prepared using uniform accounting policies for like transactions andother events in similar circumstances and are presented to the extent possible, in the same manner as the parentcompany’s financial statements.

v) Minority interest in the net income and net assets of the consolidated financial statements are computed and shownseparately.

7. Certain subsidiaries operate a defined benefit plans scheme. These plans are salary defined benefits plan and are fullyfunded. The assets of the fund are held separately from those of the subsidiaries in an independently administered fund. Theplans are funded by payments from employees and the subsidiaries based on the recommendations of independent qualifiedactuaries. These plans are valued by independent actuaries every one to three years using the projected unit credit method.The actuarial valuation was carried out by the respective subsidiaries on 1st January, 2004 and 31st December 2004.

8. The Group disposed off its 84.2% stake in its subsidiary, Berger Paints (Malta) Limited on 12th May, 2004. The net assets ofBerger Paints (Malta) Limited as at the date of disposal were as follows:

Particulars (Rs. in Millions)

2004-05

Fixed Assets 4.67Current Assets 50.77Current Liabilities (10.75)Capital Reserve (3.43)Minority Interest (7.08)

34.18Gain on Disposal 14.22Total Consideration 48.40Satisfied by:Cash Consideration 23.66Loan receivable 24.74

48.40Net Cash inflow on disposal:Cash Consideration 23.66Cash and Cash Equivalents disposed off (11.02)Net Cash Inflow 12.64

9. Subsequent to the Balance Sheet date of Asian Paints (Mauritius) Limited, the Group has sold its 89.58% stake in Asian Paints(Mauritius) Limited on 30th March 2005 to certain local shareholders for a consideration of Rs. 0.76 Million. Hence thefinancial statements of Asian Paints (Mauritius) Limited have been consolidated for the period from 1st January 2004 to 30thMarch 2005 (i.e. till the date of disposal of stake in the subsidiary) The net assets of Asian Paints (Mauritius) Limited as on thedate of disposal were as follows:

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Particular (Rs. in Millions)

Fixed Assets 34.81Investments 0.02Long Term Loan (1.44)Current Assets 7.24Current Liabilities (21.73)Minority Interest (2.05)

16.85Loss on Disposal (16.10)Total Consideration 0.76Satisfied by:Cash Consideration 0.76Net Cash inflow on disposal:Cash consideration 0.76Cash and Cash Equivalents (disposed off) (0.24)Net Cash Inflow 0.52

10. On 25th October, 2004, one of the subsidiaries, Asian Paints Industrial Coatings Limited acquired 100% stake in SuryaPowder Coating Limited (previously known as Surya Gelcaps Limited). The goodwill arising on acquisition of Surya PowderCoating Limited amounting to Rs. 0.43 million has been recognised in the consolidated financial statements.The assets and liabilities of Surya Powder Coating Limited as on the date of acquisition were as follows:Particulars (Rs. in Millions)

Fixed Assets (including Capital Work in Progress) 8.50Long Term Loans (5.00)Current Assets 0.57Current Liabilities (3.60)Net Assets as on the date of acquisition 0.47Goodwill on Consolidation 0.43Cash Consideration 0.90Net Outflow of Cash and Cash Equivalents 0.33

11. Permanent diminution in the value of long term Investments in Asian Paints (Sri Lanka) Limited, Berger International Sdn Bhd,Malaysia and Berger Paints Manufacturing Limited, Myanmar has been recognised in the financial statements of respectiveholding Companies. Consequently, the Goodwill pertaining to the investment in the above subsidiaries amounting to Rs. 8.83millions has been charged to the consolidated Profit and Loss Account.

12. During the financial year ended 31st December 2003, a decision was taken in the case of one of the subsidiaries, BergerPaints (Jamaica) Limited to discontinue the provision of the medical benefits to its pensioners as at 31st December 2003.However, during 2004, the decision was not effected as the directors, based on information available, were of the opinionthat such a position could not be sustained. As a result, the actuarial valuation as at 31st December 2003 was carried out toreflect the liability in respect of this plan and the total provision of Rs. 7.91 millions have been charged to the consolidatedProfit and Loss Account as prior period item.

13. The investment in Dutch Boy Philippines Inc., where Berger International Limited, Singapore holds 30% has been accountedfor under equity method of accounting as under:

(Rs. in Millions)

2004-05 2003-04

Opening Balance of investment 64.24 ---Investment in associate on acquisition of subsidiary --- 38.38Add: Share of profit 2.18 39.14Less: Share of taxation (0.70) (12.54)Less: Exchange difference (6.76) (0.74)Closing balance of investment 58.96 64.24




14. As required under Accounting Standard (AS 27) - Financial Reporting of Interests in Joint Venture, the audited financialstatements of Asian PPG Industries Limited (hereinafter referred to as JV), the Joint Venture between the parent company andPPG Industries Inc., U.S.A. have been consolidated using proportionate consolidation method.� The financial year of the JV is April to March. The parent company’s share of each of the assets, liabilities, income and

expenses of JV have been included in the consolidated financial statements.� The parent company’s share of capital commitments in the JV as at 31st March, 2005 is Rs. 2.54 millions. (Previous

year Rs. Nil). (Included in Note B - 1 in Schedule ‘M’).� The parent company’s share of contingent liabilities of the JV as at 31st March, 2005 is Rs. 1.32 millions (Previous year

Rs. 1.32 millions). (Included in Note B - 4 (a) in Schedule ‘M’).� No contingent liabilities and capital commitments have been incurred as at 31st March, 2005 in relation to the parent

company’s interests in the JV along with the other venturer. (Previous year Rs. Nil)15. Hitherto, the parent Company has been recognising inter-division transfers of finished goods for captive consumption as

revenue and the same was disclosed separately in Schedule ‘H’ - ‘Sales and Operating Income’. The value of such inter-division transfers was included in material consumption of the consuming divisions.With effect from the financial year ended 31st March 2005, the parent Company has discontinued the method of recognitionof inter-division transfers as sales as well as material consumption. The previous year’s figures have been restated accordingly.The above change in the method of revenue recognition has resulted in a reduction in Net Sales by Rs. 600.28 Million(previous year Rs. 458.16 million) with a corresponding reduction in material consumption. The above change does not haveany impact on the profits of the Group.

16. A. Pursuant to Accounting Standard (AS 28) – Impairment of Assets issued by the Institute of Chartered Accountants ofIndia, the parent Company made an assessment as at 1st April 2004 for any indication of impairment in the carryingamount of the Company’s fixed assets. On the basis of such assessment, the parent Company has determined impairmentloss on certain fixed assets amounting to Rs. 454.45 millions. As required by AS 28, the impairment loss (net ofdeferred tax credit amounting to Rs. 163.03) as at 1st April 2004 is adjusted against opening balance of revenuereserves, being the impairment loss pertaining to prior periods. After recognising the impairment loss, the Companyhas provided depreciation on the asset’s revised carrying amount less its residual value (if any), over its remaininguseful life. Consequent to the above provision for impairment, the depreciation for the year ended 31st March 2005has reduced by Rs. 100.92 million and the deferred tax liability for the year has increased by Rs. 33.97 millionresulting in net increase in the profits of the group by Rs. 66.95 million.

B. Till the financial year ended 31st March 2004, the parent company had been providing depreciation on its fixed assetsunder Straight Line Method and at rates specified under Schedule XIV to the Companies Act, 1956 except tintingsystems (excluding computers which are a part of tinting systems) leased to dealers which were depreciated over theestimated useful life of nine years. Based on the management’s estimate of useful life, the parent company has increasedthe rate of depreciation of certain classes of assets as follows:

Asset Class Rate of Depreciation (%) Revised Useful Revised Rate of till 31st March, 2004 Life (years) Depreciation (%)

Information Technology Assets 16.21 4 25.00Scientific Research Equipment 4.75 8 12.50Furniture 6.33 8 12.50Office Equipment 4.75 5 20.00Vehicles 9.50 5 20.00

The carrying amount of the above assets as at 1st April, 2004 is being depreciated over the revised remaining useful life.The above revision in useful life has resulted in additional depreciation amounting to Rs. 83.13 millions for the financial yearended 31st March, 2005 which has been charged to Consolidated Profit and Loss account as required under AccountingStandard (AS 6) – Depreciation Accounting. Consequently, the Deferred Tax Liability for the year ended 31st March, 2005has reduced by Rs 27.98 millions resulting in net decrease in the profits of the Group by Rs. 55.15 millions.

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17. The group has recognised deferred tax arising on account of timing differences, being the difference between the taxableincome and accounting income, that originates in one period and is capable of reversal in one or more subsequent periodsin compliance with the applicable accounting standards.

The major components of Deferred tax assets/(liabilities) arising on account of timing differences as at 31st March, 2005 areas follows :

(Rs. in millions)

As at As at31.03.2005 31.03.2004

Deferred tax LiabilitiesDifference between the Written Down Value of assets as per books ofaccounts and Income Tax Act (406.27) (608.91 )Acclerated Capital Allowances and Unremitted income (20.71) (15.52)Deferred tax liability on account of income on retirement assets (48.24) (40.05)Preconstruction interest capitalised in accounts, Deductions for the sameclaimed under Income Tax Act over a period of 5 years (6.00) (5.32)Total (481.22) (669.80)

Deferred tax AssetsExpenses allowed under the Income Tax Act purpose on payment basis 58.64 53.45Provision for doubtful debts 13.73 16.43Expenditure debited to Profit and Loss Account but allowed under Incometax Act over a larger period. 5.73 3.57Losses carried forward under Income Tax Act 49.75 62.94Total 127.85 136.39

Net Deferred Tax Asset/(Liability) (353.37) (533.41)

18. Earnings per share:2004-2005 2003-2004

(a) Basic and diluted earnings per share in rupees (face value -Rs.10/- per share) 18.15 15.11

(b) Profit after tax as per Profit & Loss Account (Rs. in million) 1,740.91 1,448.89(c) Weighted average number of equity shares outstanding 95,919,779 95,919,779



19. Information on related party transactions as required by Accounting Standard (AS 18) for the year ended31st March, 2005:

(Rs. in millions)


Particulars Key Management Relatives of Key Companies Employee benefit OthersPersonnel Management Controlled by plans where

Personnel(*) Directors / Relatives / control existsAssociates

2004-05 2003-04 2004-05 2003-04 2004-05 2003-04 2004-05 2003-04 2004-05 2003-04

Processing of goods (Expense) 138.58 106.48

Sale of goods 62.67 60.57

Purchase of goods 274.76 169.36

Royalty paid 28.41 14.21

Consultancy 1.59 ---

Other recoveries 0.14 0.81

Interest on loan 0.06 0.20

Interest paid 6.67 15.71

Rent Deposit --- (0.10)

Sale of Investments --- 1.25 3.00 8.12

Repayment of loan 13.00 1.20

Remuneration 56.34 50.22 7.29 6.89

Commission toNon-executive Directors 0.40 0.28 1.20 0.84

Sitting fees paid to Non-executive Directors 0.07 --- 0.33 ---

Dividend paid 14.63 ---

Other services 3.50 ---

Retainership fee andother reimbursements 1.83 1.91

Fixed Deposits accepted --- 0.15

Fixed Deposits repaid 0.15 0.02

Donation 1.20 2.90

Dividend received 2.26 0.25

Contribution duringthe year 204.45 163.26

Outstanding ason 31.03.05:

Loans --- 1.30

Deposits --- (0.15) (0.10) (0.10)

Others (14.20) (12.07) (1.20) (0.84) 3.50 (236.15) (54.08) (22.03)

* Under the employment of the parent company pursuant to the necessary approval from the shareholders and the CentralGovt. u/s. 314 of the Companies Act, 1956.

108

1. Key management personnel:Directors of parent Company : Ashwin C. Choksi, Chairman, Ashwin S. Dani, Vice Chairman & Managing Director,Abhay A. Vakil, Managing Director and K. Rajagopalachari, Non-Executive Director (till 14th March, 2005)

Directors/Key management personnel of subsidiaries/Joint venture:V. S. Ram, Jagdish Acharya, J.N. Shahani, I.K. Jaiswal and Amitav Sur.

2. Relatives of Key management personnel: Mahendra C. Choksi, Non-Executive Director, Amar A. Vakil, Non-ExecutiveDirector, Hasit A. Dani, Non-Executive Director, Jalaj Dani*, Manish Choksi, Nehal Vakil, Amrita Vakil, Rupen Choksiand Malav Dani.* Mr. Jalaj Dani, a relative of parent Company’s Vice Chairman & Managing Director is also a Director on most of thesubsidiary companies.

3. (a) Companies over which the Directors have significant influence or control:

AR Intertect Design Pvt. Ltd. Gujarat Organics Ltd. Resins and Plastics Ltd.Ashwin Holdings Pvt. Ltd. Geetanjali Trading & Investments Ltd. Ricinash Oil Mill Ltd.Asteroids Trading and Investments Pvt. Ltd. Hitech Plast Ltd. Rita Choksi Holdings Pvt. Ltd.Castle Investments and Industries Pvt. Ltd. Himanshu Holdings Pvt. Ltd. Rupen Investments and Industries Pvt. Ltd.Centaurus Trading and Investments Pvt. Ltd. Jalaj Trading and Investments Pvt.Ltd. S.C. Dani Research Foundation Ltd.Clear Plastic Ltd. Jaldhar Investments and Trading Co. Pvt. Ltd. Sadavani Investments and Trading Co. Pvt. Ltd.Coatings Specialities (India) Ltd. Jatayu Investments Ltd. Sanjivani Chemicals Ltd.Dani Capital and Investments Pvt. Ltd. Kalica Paper Industries Pvt. Ltd. Sapan Investments Pvt. Ltd.Dani Enterprises Pvt. Ltd. Lambodar Investments & Trading Co. Ltd. Satyadharma Investments & Trading Co. Pvt. Ltd.Dani Finance and Investments Co. Pvt. Ltd. Lyon Investments and Industries Pvt. Ltd. Sudhanva Investments and Trading Co. Pvt. Ltd.Dani Finlease Ltd. Multitech Plast Containers Ltd. Suprasad Investments & Trading Co. Ltd.Dani Holdings & Trading Co. Pvt. Ltd. Murahar Investments and Trading Co. Ltd. Suptaswar Investments and Trading Co. Ltd.Dani Securities Ltd. Navbharat Packaging Industries Ltd. Tru Trading and Investments Pvt. Ltd.Dani Trading and Investments Ltd. Nehal Trading and Investments Pvt. Ltd. Unnati Trading and Investments Pvt. Ltd.Doli Trading and Investments Pvt. Ltd. Omega Properties Pvt. Ltd. Urvashi Holding Pvt. Ltd.Elcid Investments Ltd. Pragati Chemicals Ltd. Vikatmev Containers Ltd.ELF Trading and Chemical Mfg. Co. Ltd. Rangmeet Investments Ltd.

(b) Associates, promoters and affiliates of subsidiary companies/joint venture:

LKP Hardware, Solomon Islands Al - Hassan Group, OmanSultan Bin Sulayem, UAE Dutch Boy Philippines IncorporatedPPG Industries, Inc. Port Vila HardwaresRene Ah Pow ABM SantoAriza Holdings Ltd. AP Vanuatu Shareholders

4. Employee Benefit Plans and other entities where control exists :

Asian Paints Office Provident Fund, Asian Paints Factory Employees’ Provident Fund, Asian Paints Management Cadres’Superannuation Scheme and Asian Paints (India) Limited Employees’ Gratuity Fund.

5. Others: Asian Paints Charitable Trust.

20. Pursuant to the Accounting Standard (AS 19) - Leases issued by the Institute of Chartered Accountants of India, the followinginformation is given:

I. a) The parent company has provided tinting systems to its dealers on an operating lease basis. The lease periodvaries between nine and ten years. The lease rentals are payable monthly. A refundable security deposit iscollected at the time of signing the agreement. The equipment shall be used only to tint the products of the lessor.The initial direct cost relating to acquisition of tinting system is capitalised.

b) In addition, the Joint Venture has given certain ‘mixing racks’ on non-cancellable operating lease to its dealers.Initial direct costs are recognised as expenses in the Profit and Loss Account.

c) Certain subsidiaries provide tinting systems to their dealers on an operating lease basis. The lease normallyranges for a 5 year period. A security deposit is collected at the time of signing the agreement.





(Rs. in Millions)

2004-2005 2003-2004

Minimum Finance Present Minimum Finance Presentlease charge Value lease charge Value

payments allocated to payments allocated tofuture periods future periods

i) Not later thanone year 7.92 1.23 6.69 13.50 2.18 11.32

ii) Later than oneyear andnot later thanfive years 13.28 1.48 11.80 15.82 2.32 13.50

iii) Later thanfive years 1.20 0.11 1.09 --- --- ---

22.40 2.82 19.58 29.32 4.50 24.82

d) Future minimum lease rentals receivable as at 31.03.2005 as per the lease agreements:

(Rs. in Millions)

2004-2005 2003-2004

i) Not later than one year 81.50 138.50ii) Later than one year and not later than five years 28.89 106.59iii) Later than five years 0.30 1.49

110.69 246.58

The information pertaining to future minimum lease rentals receivable is based on the lease agreements enteredinto between the respective companies and the dealers and variation made thereto. The lease rentals are reviewedperiodically taking into account prevailing market conditions.

e) Total amount of contingent rents recognised as income - Rs. NIL (Previous year - NIL).

f) The information on gross amount of leased assets and depreciation is given in Schedule ‘D’ to the Balance Sheet.

II. a) The parent company has taken certain assets like cars, computers etc., on an operating lease basis for a periodof 48 months. The lease rentals are payable on a monthly/quarterly basis by the parent company.

b) The Joint Venture has entered into an arrangement to obtain computer equipments, mixing racks etc, on non-cancellable operating lease for thirty six months. As per the lease agreement, the Joint Venture does not have anoption to purchase the assets.

c) Future minimum lease rentals payable as at 31.03.2005 as per the lease agreements:(Rs. in Millions)

2004-2005 2003-2004

i) Not later than one year 33.73 52.54ii) Later than one year and not later than five years 39.37 94.46iii) Later than five years --- 37.00

73.10 184.00

d) Operating Lease payments recognised in the Profit and Loss Account for the period is Rs. 33.15 million (Previousyear Rs. 33.32 million).

e) Total amount of contingent rents recognised as expense - Rs. NIL (Previous year - NIL).III. a) Certain overseas subsidiaries have taken property, plant and equipment on finance lease which effectively

transferred to the respective subsidiaries substantially all of the risks and benefits incidental to the ownership.b) Future minimum lease rentals payable as at 31.03.2005 as per the lease agreements:

110

21. Segment Information for the year ended 31st March, 2005:i) Primary segment information:

(Rs. in Millions)

2004-2005 2003-2004

Paints Others* Total Paints Others* Total

RevenueExternal Sales (Net) 24,855.71 749.51 25,605.22 21,542.01 637.07 22,179.08Inter-Segment Sales (Net) 600.28 600.28 458.16 458.16Other Income 127.91 31.56 159.47 153.12 17.82 170.94

Total Revenue 24,983.62 1,381.35 26,364.97 21,695.13 1,113.05 22,808.18ResultSegment result 3,144.70 121.57 3,266.67 2,805.69 49.57 2,855.26Unallocated Corporate expenses 444.00 380.21Operating Profit 2,822.27 2,475.05Interest Expenses (108.15) (152.03)Interest Income 10.42 46.01Dividends 62.52 7.34Exchange DifferenceProfit/(Loss) on sale ofinvestments 24.51 1.66Profit/(Loss) on sale of fixedassets 29.95 ---Profit/(Loss) on sale of subsidiaries (1.88) ---Miscellaneous income 38.70 37.60Income taxes (1,060.82) (940.50)Net Profit before priorperiod items 1,817.52 1,475.13

Other InformationSegment assets 12,068.73 691.69 12,760.42 10,625.39 553.99 11,179.38Unallocated corporate assets 2,476.29 2,760.24Total assets (after impairment loss) 15,236.71 13,939.62Segment liabilities 4,994.89 245.94 5,240.83 4,957.37 51.98 5,009.35Unallocated corporate liabilities 4,324.13 3,635.50

Total liabilities 9,564.96 8,644.85

Capital Expenditure 885.72 22.18 907.90 325.88 10.62 336.50Unallocated corporate capitalexpenditure 26.79 13.37

Total 934.69 349.87

Depreciation 522.91 36.04 558.95 550.85 34.72 585.57Unallocated corporatedepreciation 54.65 42.78

Total 613.60 628.35

Unallocated corporate non-cashexpense other than depreciation 77.10 78.26Total 77.10 78.26

Impairment loss on segment assetsas on 1st April, 2004 384.17 2.30 386.47 ---

Impairment loss on unallocatedcorporate assets as on 1st April, 2004 67.98 ---

Total 454.45 ---

* Others include the parent company’s business units manufacturing Phthalic Anhydride and Pentaerythritol.


Business Segment:



(Rs. in Millions)ii) Secondary segment information:

Geographical Segment:2004-2005 2003-2004

Domestic International Total Domestic International TotalOperations Operations Operations Operations

Segment Revenue 20,903.10 5,025.81 25,928.91 18,112.81 4,329.82 22,442.63Carrying cost ofsegment assets 10,912.37 4,324.34 15,236.71 9,942.70 3,996.92 13,939.62Additions to Fixed assetsand intangible assets 763.96 170.73 934.69 277.62 72.25 349.87

22. Previous year’s figures have been regrouped, wherever necessary.

Signatures to Schedules A to M







112

Not

es :

1.A

sian

Pai

nts

Dis

tribu

tors

(Pvt

.) Li

mite

d—

Und

er v

olun

tary

Liq

uida

tion

Berg

er P

aint

s (M

alta

) Ltd

.,—

Dis

pose

d o

n 12

th M

ay 2

004

Berg

er P

aint

s (S

hang

hai)

Ltd,

—Li

quid

ated

on

23rd

Feb

ruar

y 20

04A

sian

Pai

nts

(Mau

ritiu

s) L

imite

d—

Dis

pose

d o

n 30

th M

arch

200

5Su

rya

Pow

der

Coa

tings

Lim

ited

—A

cqui

red

on 2

5th

Oct

ober

, 200

4

2.C

apita

l,Res

erve

s,To

tal a

sset

s an

d To

tal l

iabi

litie

s ha

ve b

een

trans

late

d at

the

rate

s pr

evai

ling

at th

e en

d of

the

resp

ectiv

e fin

anci

al y

ears

.3.

Sale

s, O

ther

Inco

me,

Pro

fit b

efor

e ta

x , P

rovi

sion

for

tax

, Pro

fit a

fter

tax

and

divi

dend

hav

e be

en tr

ansla

ted

at a

vera

ge r

ates

pre

vaili

ng d

urin

g th

e re

spec

tive

finan

cial

yea

rs.

SUM

MA

RY O

F FI

NA

NC

IAL

STA

TEM

ENTS

OF

SUBS

IDIA

RY C

OM

PAN

IES.

All

figur

es in

INR

mill

ions

Acco

untin

gCa

pita

lRe

serv

esTo

tal L

iabi

litie

sTo

tal A

sset

sSa

les

Oth

er In

com

ePr

ofit

befo

re T

axTa

x pr

ovisi

onPr

ofit

afte

r Tax

Divi

dend

Subs

idia

ry N

ame

Curr

ency

Perio

dCu

rrent

Prev

ious

Curre

ntPr

evio

usCu

rrent

Prev

ious

Curre

ntPr

evio

usCu

rrent

Prev

ious

Curre

ntPr

evio

usCu

rrent

Prev

ious

Curre

ntPr

evio

usCu

rrent

Prev

ious

Curre

ntPr

evio

uspe

riod

perio

dpe

riod

perio

dpe

riod

perio

dpe

riod

perio

dpe

riod

perio

dpe

riod

perio

dpe

riod

perio

dpe

riod

perio

dpe

riod

perio

dpe

riod

perio

d

Asia

n Pa

ints

(Ban

glad

esh)

Ltd

Taka

Jan

to D

ec93

.77

55.5

2-9

9.63

-60.

5919

6.85

156.

1619

0.98

151.

0911

1.13

52.7

40.

180.

00-4

0.16

-42.

360.

00-0

.78

-40.

16-4

3.14

0.00

0.00

Asia

n Pa

ints

(Inte

rnat

iona

l) Ltd

US $

Jan

to D

ec10

90.8

697

3.40

-115

.52

3.61

107.

7577

.39

1083

.09

1054

.39

0.00

0.00

9.99

10.4

8-1

20.6

96.

61-0

.83

-0.9

8-1

21.5

25.

630.

001.

49

Asia

n Pa

ints

(Mid

dle

East)

LLC

Om

an O

RJa

n to

Dec

70.8

373

.74

-54.

64-6

1.83

146.

0712

1.81

162.

2613

3.72

141.

8111

2.09

1.31

0.22

4.70

0.01

0.00

0.00

4.70

0.01

0.00

0.00

Asia

n Pa

ints

(Nep

al) P

vt Ltd

Nep

al R

s15

th Ja

n to

14t

h Ja

n13

.47

13.7

061

.29

71.7

854

.13

49.2

412

8.89

134.

7214

8.35

120.

462.

211.

998.

4314

.41

-4.9

6-3

.63

3.47

10.7

812

.38

12.2

7

Asia

n Pa

ints

(Que

ensla

nd) P

ty Lt

dA

us $

Jan

to D

ec81

.19

81.2

9-4

6.02

-41.

0410

8.86

103.

4214

4.03

143.

6618

7.77

171.

620.

471.

44-6

.63

1.72

1.61

-0.4

8-5

.02

1.24

0.00

0.00

Asia

n Pa

ints

(S.I.

) Ltd

SI $

Jan

to D

ec3.

753.

7750

.61

50.6

13.

333.

6657

.70

58.0

437

.58

33.0

10.

051.

134.

045.

92-0

.09

-0.5

73.

955.

353.

763.

97

Asia

n Pa

ints

(Sou

th P

acifi

c) F

iji Lt

dFi

ji $

Jan

to D

ec11

.38

11.3

122

2.43

209.

7748

.90

65.3

128

2.70

286.

3927

1.44

258.

029.

1411

.71

31.8

830

.89

-8.2

1-9

.63

23.6

721

.26

13.6

99.

58

Asia

n Pa

ints

(Ton

ga) L

td$

Top

Jan

to D

ec2.

732.

7247

.49

45.3

41.

263.

9051

.48

51.9

725

.97

23.2

30.

461.

140.

03-0

.23

1.90

-0.0

21.

93-0

.24

0.00

0.00

Asia

n Pa

ints

(Van

uatu

) Ltd

Vatu

Jan

to D

ec12

.80

12.4

216

.47

13.3

212

.44

16.6

641

.71

42.4

034

.39

30.0

70.

010.

452.

701.

370.

000.

002.

701.

370.

003.

02

Asia

n Pa

ints

Indu

stria

l Coa

tings

Ltd

INR

Apr

to M

ar90

.00

80.0

00.

31-6

.23

132.

8611

4.53

223.

1718

8.30

285.

6723

2.78

0.50

1.19

9.93

4.46

-3.3

7-3

.04

6.56

1.43

0.00

0.00

Asia

n Pa

ints

Lank

a Ltd

SL R

sJa

n to

Dec

139.

9821

.27

-88.

45-8

9.99

125.

3922

4.42

176.

9215

5.71

163.

4616

3.18

2.74

1.54

-9.4

9-4

4.21

0.00

0.00

-9.4

9-4

4.21

0.00

0.00

Asia

n Pa

ints

Sout

h Pa

cific

Hold

ings

Ltd

US $

Jan

to D

ec54

.99

57.3

58.

934.

031.

635.

7565

.56

67.1

30.

000.

0010

.42

2.95

6.30

0.04

0.00

0.00

6.30

0.04

1.12

1.15

Berg

er B

uild

ing

Serv

ices (

Sing

apor

e) P

te Ltd

SG$

Jan

to D

ec26

.71

26.8

5-2

9.70

-29.

753.

263.

170.

270.

270.

000.

000.

0021

1.82

-0.1

121

1.42

0.00

0.00

-0.1

121

1.42

0.00

0.00

Berg

er C

ontra

ctor (

Sing

apor

e) P

te Lt

dSG

$Ja

n to

Dec

120.

2012

0.83

-121

.78

-122

.06

1.58

1.37

0.00

0.13

0.00

0.00

0.00

84.6

3-0

.35

84.6

10.

000.

00-0

.35

84.6

10.

000.

00

Berg

er In

tern

atio

nal L

tdSG

$Ja

n to

Dec

693.

8469

7.44

-220

.24

33.4

697

8.62

1106

.88

1452

.22

1837

.77

0.00

0.00

204.

3999

.26

-229

.19

-6.5

5-8

.20

-0.1

3-2

37.3

9-6

.69

0.00

0.00

Berg

er In

tern

atio

nal S

dn. B

hd.

MYR

(Mal

aysia

)Ja

n to

Dec

276.

7220

4.00

-294

.41

-271

.22

165.

4322

6.01

147.

7415

8.78

171.

7620

4.36

0.03

0.10

-34.

50-7

1.49

0.00

0.00

-34.

50-7

1.49

0.00

0.00

Berg

er P

aint

s (Ho

ng K

ong)

Ltd

HK $

Jan

to D

ec9.

569.

940.

791.

444.

834.

9415

.18

16.3

236

.89

37.9

80.

000.

45-0

.61

3.95

0.00

0.00

-0.6

13.

950.

005.

79

Berg

er P

aint

s (N

ingb

o) C

o. Lt

dCN

YJa

n to

Dec

266.

4025

7.51

-189

.27

-168

.71

72.5

861

.14

149.

7114

9.95

22.5

16.

600.

000.

00-2

7.78

-28.

110.

000.

00-2

7.78

-28.

110.

000.

00

Berg

er P

aint

s (Th

aila

nd) L

tdTH

BJa

n to

Dec

55.9

557

.59

-8.1

3-1

1.88

130.

6370

.40

178.

4511

6.12

202.

7616

1.72

1.16

0.90

3.46

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10.

00-2

.53

3.46

-9.5

40.

000.

00

Berg

er P

aint

s Bah

rain

W.L.

L.BH

DJa

n to

Dec

48.4

950

.43

191.

0417

5.32

111.

2990

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350.

8231

5.95

342.

6730

7.52

2.21

1.08

68.3

352

.62

0.00

0.00

68.3

352

.62

45.4

40.

00

Berg

er P

aint

s Bar

bado

s Ltd

Barb

ados

$Ja

n to

Dec

41.1

543

.08

112.

2611

9.90

83.2

563

.30

236.

6622

6.28

227.

4821

7.93

1.90

3.47

0.48

3.07

2.58

0.57

3.06

3.64

5.60

5.62

Berg

er P

aint

s Em

irate

s Ltd

AED

Jan

to D

ec11

.91

12.4

0-1

15.4

8-8

8.26

522.

0644

2.90

418.

4936

7.04

630.

9851

9.89

3.54

4.94

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341.

280.

000.

00-3

1.34

1.28

0.00

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Berg

er P

aint

s Jam

aica

Ltd

Jam

aica

n $

Jan

to D

ec76

.75

81.4

322

2.82

234.

4119

0.39

189.

6948

9.96

505.

5281

7.30

841.

281.

335.

2877

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7349

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67.6

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35.7

3

Berg

er P

aint

s Man

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g Ltd

Kyat

Jan

to D

ec0.

870.

9110

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14.7

732

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40.6

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00

Berg

er P

aint

s Sin

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re P

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dSG

$Ja

n to

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388.

4439

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101.

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5.98

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Berg

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aint

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$Ja

n to

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41.5

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162.

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4.84

89.6

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293.

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BPJa

n to

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12.2

611

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5.94

13.4

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is Be

rger

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ding

s) Ltd

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Jan

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7.55

152.

6518

5.94

254.

8628

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372.

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2.17

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oa P

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amoa

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n to

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1.45

1.45

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4.76

8.85

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33.2

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1.12

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4.21

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Jan

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371.

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7.66

0.00

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man

s Pai

nts F

iji Lt

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ji $

Jan

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264.

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43.9

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18.8

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87.

310.

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Tech

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l Ins

trum

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INR

Apr

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500.

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23.3

783

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97.9

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7.25

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0019

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00

Unive

rsal

Pai

nts L

tdG

BPJa

n to

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36.1

635

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2-1

.82

0.00

0.00

33.7

533

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0.00

0.00

12.0

121

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11.4

821

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0.00

11.4

821

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12.0

121

.44

Sury

a Po

wde

r Coa

ting

Limite

dIN

RA

pr to

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0.50

0.00

0.00

0.00

8.09

0.00

8.59

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

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