a n n u a l r e p o r t 2 0 0 4

REWRITING THE FUTURE

contents

Letters to Shareholders 04

Our Differentiators 11

Achievements 2003-04 15

Board of Directors 18

Management's Discussion & Analysis 22

Directors' Report 44

Corporate Governance 53

Annual Accounts/Financials 70

Moser Baer India Limited

European Optic Media Technology GmbH (Europtic)

Consolidated Financial Statements

Change is not mandatory.Success is a choice.

In today's technology intensiveworld, change is an appropriate

synonym for success.

At Moser Baer, we embracechange. Rapid transformation liesat the core of our very foundation

as we make our mark in anindustry, which is continuously

expanding and evolving.

deepak puriCHAIRMAN & MANAGING DIRECTOR

Converging into theFuture

Change is inevitable… and who would know it better than those in our industry. For, unlike other oldeconomy industries like the automobiles sector where change generally means a new model each year,in our industry, when we think of change, it is usually in weeks, sometimes months and rarely in years.

In turn, adapting to change is unavoidable. It's how you respond to change that sets you apart. A simpleobservation by perhaps the greatest writer of our times, George Bernard Shaw, explained this in hisinimitable way. “The only man I know who behaves sensibly is my tailor,” wrote Shaw, “He takes mymeasurements anew each time he sees me. The rest go on with their old measurements and expect meto fit them.”

You can either embrace change proactively or follow it on a reactive note. In our world, there is only oneway to go. Proactive and rapid change. The 3/3/3 rule authored by Stan Shih in the IT sector is wellknown. That is 3 months to conceive and introduce a product; 3 months to make money, and 3 monthsto get out. While optical discs do not face the same pressures as semiconductors and memory chips,the parallels are striking. Time to market is the over-riding consideration.

The thrust of consumer demand continues to push us towards continuous investment in technology totry and attain the highest speed and the largest capacities possible. It is our constant endeavour to attainthe leadership status in our core focus area. Additionally, having established an early headstart into thedigital world, we have a unique opportunity to exploit our skill sets by leveraging them to drive value in abroader sense.

The knowledge economy is a specialized domain and our expertise in precision manufacturing, processintensive and knowledge intensive technological applications is clearly established. It would provide usimmense advantage if we were to explore synergistic areas for seamless avenues of growth beyond ourcurrent portfolio.

Historically, this has been the way forward once you attain critical mass in a particular area. Moser Baerhas displayed foresight and sharp business acumen in investing in the right products at the right time. Itis perhaps time to probe the future by an intense but broader look at synergistic avenues, keeping inmind the right mix of investment, risk and market potential and stability.

Without a doubt, the avenues should be on the cutting edge of technology with global market potentialand perhaps requiring high quality, low cost mass production. Moser Baer has expertise and experiencebroadening its basket and will leverage its considerable core competencies to broaden its portfolio andbalance risk for future growth.

Small steps forward that redefine and upgrade our everyday experiences come together to change ourworld. From diskettes to videos, from CDRs to DVDs, from red laser to blue laser, from 8X to 16X, andbefore you know it, the world has changed around you. On a broader level, the move from analog todigital meant simply a move from reading curves to reading dots and dashes.

And what a world of a difference that has made!

Proactive and rapid change

The future beckons

Synergy and growth

Small steps for Large strides

Converging into the Future

ratul puriEXECUTIVE DIRECTOR

New Rules for aNew Game

Every once in a while, the market throws up the cards and sends the players back to the starting line. It changes the rules of thegame forcing each contestant back to the drawing board to flesh out game-plans anew.

The successful takeover of the analog world by digital technology has resulted in something similar. It has brought all the playersback to the starting gate and continues to do so with regularity.

Previous credentials or experience provide little advantage without foresight and agility. The digital market bows only to newleaders who play the new game by its fresh rules. Victory will embrace players who display speed, strength, ability, innovation andanticipation.

In this new world timing is everything. The right time to invest, the right time to market, the right time to enter a product and the righttime to exit and move forward.

At Moser Baer, this is our strength. We have cultivated the foresight to predict market movements and embrace change.

We first invested in optical discs at a time when the market was in a downturn by correctly anticipating the underlying growthdrivers and long-term market potential. At the same time, we accurately foresaw the very powerful long-term competitiveadvantage that an India based enterprise could offer in an evolving industry; a highly skilled workforce, a competitive coststructure, and a differentiated manufacturing option.

We have consistently synergised our research, engineering, manufacturing capabilities to our marketing network to optimize ourtime to market and maximize return on investment and emerge as a market leader and the most profitable player in the removalstorage media industry.

Change is the only constant in our industry and manifests itself in many varied forms. It could emerge in the form of formatchanges, speed changes, process changes or market changes.

We, at Moser Baer, have been prepared. Moving into digital technology early, we have made a headstart with the right levels ofinvestment and have captured a significant international market share in the optical storage media industry.

With the industry becoming increasingly commoditised, the market today has moved everything to the lowest commondenominator. Yet, we have maintained our leadership by converting the art of playing the commodities game into a science. Wetook the value route when volume was the mantra. We stayed nimble-footed and agile despite catering to a mass-scale globalmarket.

As a prominent player on a worldwide canvas, Moser Baer understands its leadership responsibilities. We recognise the need tomake the most of our strong research, development and engineering capabilities to deliver even higher value added products tomarkets, while continuing to focus on increasing production efficiencies and yields to further increase our cost leadershipglobally.

The exploding global market in DVD and the growing disposable income levels within the domestic market presents immensescope ahead and we are well positioned to exploit this emerging opportunity. We intend to leverage our manufacturing base,expanded capacities, customer relationship and the explosive growth to significantly enhance our global share and not merelyretain, but further improve our leadership position within the industry. In addition, we intend to utilize our core mass manufacturingcapabilities, especially in high technology process driven industries to capitalize on the growing global trend towardsoutsourcing. Our strong core expertise in thin film coating provides us multiple opportunities in a number of high growth areasboth within and outside storage media industry. Together, this canvas represents Destination Next at Moser Baer.

Timing is everything

The multiple avatars of Change

The lowest common denominator

Destination Next

New Rules for a New Game

p m paiPRESIDENT

From Technology Leadership toProcess Leadership

Moser Baer is well known for its technology leadership. It has established with agility and speed its abilityto stay ahead of the curve in a fast growing and rapidly transforming industry. In addition to investment intechnology, Moser Baer has continuously gained market share by maintaining a sharp focus on cuttingedge products, world-class quality, cost leadership, and customer satisfaction.

This year, we have taken a big step forward in establishing systems internally to attain the criticalingredient for continuity of success - process leadership.

We have adopted this year the Balanced Scorecard, in order to ensure that each and every individual inour organization continues to stay aligned to the collective corporate goals even as the organizationgrows by a monthly average of 150 new hires a month.

The Moser Baer corporate scorecard rests on five broad strategic themes of Long Term financialstability, Customer first, Process standardization, Operational excellence and Employee engagement.

These, in turn, flow into the strategic objectives. It goes without saying that long term financial stabilitywould require strong pillars of ROCE, revenue growth, profitability, asset utilization and cost leadershipfor sustenance.

Similarly, a customer first choice orientation would require a first to market approach, relentless focus oncustomer satisfaction and relationship management. Having entered the branded segment in thedomestic market, it would also need sustained effort in maintaining leadership.

Process standardization needs to be all encompassing. Not only in the manufacturing processes, butalso in our financial processes including budgeting and control. In addition, we are focusing onstandardization of our supply chain management processes as well as our HR processes. This issymbiotic with operational excellence, which would focus on process improvement, supply demandbalancing and cycle time reduction.

All of the above need to rest on a foundation of a skillful and motivated workforce. Employee satisfaction,skill building, a culture of ownership and knowledge management have been the foundations on whichMoser Baer has built its success and we will continue to focus on improvement in these areas throughengagement, alignment and recognition.

The strategic themes and objectives identified are now flowing down to each and every level of theorganization, aligning and sharpening focus on our collective direction. Each function has formulatedstrategic measures by identifying critical processes and resources central to their success. Functionand unit scorecards have been finalized flowing down to individuals with appropriate KRAs with the rightweightings.

We, at Moser Baer, are clear about our success drivers in the past and at no point will our internalprocess focus take away from the established priorities of technology, quality and cost leadership.Process leadership is intended to only seal these with a stamp of continuity in success.

Ensuring continuity in Technology, Quality and Cost Leadership

Strategic Themes

Flowing across the organization

Maintaining the lifeline

From Technology Leadership to Process Leadership

Change... in speed

At the macro level, the global storagemarket is transitioning from analogue todigital. Our Optical disk world, not onlyevolves from one format to another, but

within formats we see continuouschange, with write speeds increasing by

as much as 10 fold in short periods oftime. Working hand in hand with drivemanufacturers we have built a strong

capability to deliver cutting edgeproducts to our customers, allowing usto command a premium position for our

products in the marketplace.

Change before you have to- Jack Welch

What makes us who we are? Is it our fierce commitment to quality, our dogged determination to take the 'Made in India' label to theworld, or our constant efforts to offer the best to our customers? Is it our efficiency in manufacturing, the agility with which wenavigate the changing market, or our love of innovation and change?

It's all of the above factors put together that sets us apart. Our industry is driven by change and rapid innovation. At Moser Baer, webelieve that we can stay ahead in the race by reacting swiftly to these changes. That's why we have unique, result-oriented systemsand strategies in place, which enable us to operate flexibly. But that's not the only reason why we're different, or why we'reconsidered among the top players in the global market for optical media storage products.

It's tough to sustain yourself without efficient manufacturing. We know this well, which iswhy we have built innovative solutions to manage mass manufacturing. The capabilities of our engineering and design,production lines, processes and manufacturing facilities allow us to move quickly from the concept stage to the finished product.By engineering and designing our own facilities along with our equipment vendors, we've maximized quality and reliability, whilereducing our capital investment costs. Our human resources are exceptionally strong. In fact, we've leveraged our high qualityand low cost human resource base to create one of the highest ratios of technically qualified personnel in the industry. Due to thevertical integration of our manufacturing operations, we are able to monitor quality and minimize costs. Our manufacturingfacilities are also highly flexible, allowing us to minimize obsolescence risks and adapt swiftly to changes in the market. Forinstance, our format-flexible production equipment lets us switch seamlessly between different formats without incurring highinvestment costs.

Our objective is to be first-to-market. Which means, we've got to respond to the twists and turns of the market withspeed and agility. In fact, we do it rather well and rapid commercialization is one of our key core competencies. Responding tochange with speed is like a reflex action for us, something that's intrinsic to the organization's culture. Using our expertise, we tryand develop new technologies as rapidly as possible. What helps us achieve speed is our decentralized yet cohesiveorganizational structure that makes it easy to take decisions. And get moving on the job.

Our strong research and engineering base allows us to rapidly introduce products in the market. We view R&D as anenabler that allows us to effectively deliver products to customers. Our R&D is of an applied nature that focuses on results. In thisway, it differs from the traditional and basic R&D that companies undertake. We produce virtually all our products usingproprietary in-house technologies. We attempt to understand customer requirements and develop processes that suit theirneeds. Recently, in an unique partnership, we developed a specific solution for one of the world's best-known PC makers, whichenabled them to provide value to their customers. Our R&D alliances with other global companies have resulted in thedevelopment of acclaimed product and process innovations. The company spent INR 306 million on R&D during the year,amounting to 1.9 per cent of total revenues. The company has over 80 people in its R&D division, with a extensive and wide rangeof expertise. This has enabled the company to launch new and innovative products and also helped increase productionefficiencies and process yields.

Efficient Manufacturing

Speed

R&D

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our differentiators

Quality and Cost:

Customer Focus

Supply Chain and Logistics

People Skills

Change Managers

Marketing Strategy

We believe that our commitment to providing quality products to customers has been vital to oursuccess. We are always looking to innovate on ways to reduce costs, so that we can pass on the benefit to our customers. To thisend, we have very structured cost-reduction programmes in place across all functional areas. At any point in time, you'll alwaysfind several QICR, or quality implementation and cost reduction programmes, running simultaneously across our operations.We're also fanatically obsessed with measurement, to the point that we try and measure and benchmark every aspect of ourbusiness in order to improve it. The goal is to make every business process predictable and scientific, in order to reduce our time-to-market. Our commitment to quality also reflects in the fact that our manufacturing facilities are certified by several leadinginternational certification bodies. Our newest manufacturing facility at Greater Noida achieved ISO 9002 within 12 months ofbeginning production. There is a strong focus on quality control across the organization, not least because we have invested inregular quality training and invested in building a quality conscious culture. Not to mention that our emphasis on quality meansthat we have an extremely low defect rate, one of the lowest in the industry.

In our business, building and sustaining customer relationships is critical, which is why our companyis driven by a strong customer focus. Our customer focus is evident in the fact that we've never lost a customer. On the contrary,we're hailed by our customers as being the most flexible and innovative supplier. That's because we integrate and align ourselveswith our customers by trying to understand their requirements and developing specific programmes that often exceed theirexpectations. This in turn enables them to differentiate themselves in the market and thus add value to their products. Byintegrating our IT system with those of our customers, we enable them to check the status of their deliveries online from anywherein the world.

: At Moser Baer, we realize that an efficient and seamless supply chain is crucial to ourglobal competitiveness. That's why we've invested so much thought and energy into ensuring that all our supply chain operationsare linked and customer deliveries are made swiftly and at a minimal cost. The entire production planning process works inperfect synergy with our logistics department. We are, in fact, a bit of a trendsetter in the way exports are handled in north Indiaand there are several 'firsts' to our credit. For instance, the first round-the-clock customs clearance facility at ICDs was introducedat our insistence. Similarly, we were the first company to have dedicated export trains for Moser Baer. We're also one of the fewcompanies to provide total logistics solutions to our customers. We've even built our own in-house software for managinginbound and outbound shipments to help track documents and containers instantly.

We're nothing without our intellectual capital. The power of this capital is reflected in process efficiencies,reengineered equipment, enhanced productivity, low manufacturing cost and new product launches, amongst others. We've alsotaken innovative steps to conserve our intellectual capital. For instance, we have a merit-led remuneration system. We alsoregularly invest in the training of our people. And we have incorporated and benchmarked the best HR practices. Needless to say,this has been a key driver of our success.

Our proactive approach to current and future challenges makes us good at dealing with change.In our industry, where short market cycles, rapid growth and the constant introduction of new products are routine, staying aheadcan be tough. With our systems approach to forecasting business cycles, however, we have been able to employ our capital at theright time for the right product in the right market. When we spot an opportunity, we are able to leverage our technologicalcapabilities to maximise benefits from any change in the environment. Our entry and exit into any market is pre-determined andalways follows a specific plan. In fact, we have accurately forecasted technological changes thereby enabling us to be first-to-market with new products. Our expertise, capabilities and flexibility also stand us in good stead to develop complementaryproducts outside our core business of optical media manufacturing.

Our marketing strategy is differentiated, to enable us to minimize our risk and optimise the valuewe offer to our customers. We have been able to build long term relationships with our customers, which offers stability andmitigates business risk. Our aim is to not simply provide them with products but with integrated solutions. Our global marketingoffices, subsidiaries and logistical and distribution centres make it possible for us to react quickly to customer requirements. InIndia, we launched the Moser Baer brand of storage media and are now enjoying a 25 per cent domestic market share in highvalue branded segments.

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Financial Strategy: As we operate in a high-growth and capital-intensive industry, efficiently financing our rapid growthis a critical factor driving competitive advantage. We are prudent when it comes to financial management. Our prudent mix ofequity, debt and internal accruals to finance our expansion plans has yielded significant returns and has helped us achieve aconservative risk to cost ratio. Over the past five years, we have successfully raised almost USD 350 million from international anddomestic lenders and USD 229 million from capital markets. Our overall goal is to maximise returns on invested capital andincrease the spread over weighted average cost of capital.

Change... in format

Driven by emerging new applicationsand evolving end-user requirements,formats are destined to change in our

industry, which is why Moser Baerplans its entry and exit precisely to

maximize returns on investment. Fromdiskettes to CDs to DVDs we have been

at the cutting edge of change as theworld changed from analog to digital

and promise to continue to do so as wemove into the future.

We must become the changewe want to see.

- Mahatma Gandhi

achievements 2003-04

What have we achieved this year? We've managed to grow, attract new customers and increase production efficiencies. We've builta brand, introduced new products and managed to sustain our state-of-the-art manufacturing facilities. Revenues and earningshave grown substantially, and so has our global market share.

Yet, it's been a year of mixed fortunes. On the upside, the market for CD and DVD Recordable discs in India is expected to grow atover 50 per cent annually, and the brand has made significant inroads into the domestic market.

On the other hand, we have seen a significantly competitive market environment emerge, resulting in a need for us to intensify ourefforts at cost reduction, increase our investments in technology and R&D, create better platforms to service customers, and overall enhance the value package we deliver to customers.

Our Greater Noida facility is the largest single-site opticalmedia production facility in the world. Within one year, we've ramped up operations at the facility in order to meet the increasingdemand for optical media products. Civil construction facilities for the second phase of expansion at this facility began in October2003.

The modular structure of the Greater Noida facility, along with the existing infrastructure and utilities, has provided the companywith the flexibility to quickly react to changes in market conditions at lower incremental costs.

A year after we started mass manufacturing of the DVD Recordable and Rewritable formats,we've made serious progress in R&D and significantly ramped up production capacities. In the short span of one year, welaunched new products including the 2X, 4X and 8X DVD Recordable and the 2.4x and 4X DVD Rewritable formats. We believethat our early leadership position in the DVD formats gives us a significant advantage over the next 2-3 years to capitalize on theexplosive growth that is expected.

We substantially increased gross revenues to INR 15,792.2 million, a growth of 45.5 per cent over FY02-03. Wewere ranked amongst the fastest growing companies (for our size and scale) in the country.

EBITDA (net of other income) at INR 6,359.0 million grew by 67.8 per cent over FY03. Also, EBITDA margins (net ofother income) rose to 41.4 per cent in FY04 as compared to 39.0 per cent in FY03.

Our net earnings after current years tax grew 50.7 per cent, over FY03, to INR 3577.2 Million . However, net profit forthe year after making provisions of INR 338.7 million for previous year/ deferred tax, grew 36.5 per cent to3238.5 million in FY04.

During the year we raised INR 6753.6 million, by placing Global Depository Receipts (GDR) and warrants with affiliatesof Warburg Pincus LLC. The proceeds from this issue will be used mainly to grow our DVD capacities during the coming year.

The Greater Noida manufacturing complex

DVD manufacturing

Revenues

EBITDA

Earnings

GDRs

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Capacity Building

Global Market Share

Investment in IT

Human Resources

Brand building

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The company has almost doubled its production capacities during FY04, with an increment of only38 per cent in its gross fixed assets. Using our in-house design and development capabilities, we managed to reduce ourinvestments to USD 170 million, which was substantially below budgeted levels. We also substantially grew our finishing,fulfilment and global delivery capabilities, which will enable us to substantially improve our “total value delivery system” tocustomers.

Our brand initiative in the domestic market got off to a successful start. In the first year of operations itself,the brand of storage media products has been able to garner a market share of 25 per cent.

We've acquired new customers, scaled up existing customers and within a short time becamea vital part of their global supply chain.

We continued our strong investments in technology, integrating our entire supply chain from vendors tocustomers. This internal and external integration, has significantly reduced our time to market.

We added 1661 personnel during the year, and significantly increased the number of sharesunder our ESOP scheme to 4.4 million from 2.2 million, in a continuing effort to provide members of the organization with a sharedsense of ownership.

Change... in environment

The environment we operate inundergoes continuous change. We haveengineered models to accurately predict

this change and are an activeparticipant in the standard setting

bodies that drive these changes. Thisenables us to be proactive in the newenvironment, effectively reducing the

risk profile of our business, whileenhancing the rewards.

Change is the law of life, andthose who look only to the

past or the present arecertain to miss the future.

- John F. Kennedy

boards of directors

Deepak Puri provides strategic direction to the company. He is the driving force in creating anenvironment of integrity, fair business practices, a respect for intellectual property and aceaseless quest for human capital development. He is also the chairman of Electronics andComputer Software Export Promotion Council (ESC), a non-profit, autonomous organisationof the Ministry of Information Technology, Government of India. He holds a master's degree inmechanical engineering from Imperial College, London, and is an alumnus of St. Stephen'sCollege and Modern School, New Delhi.

deepak puriMANAGING DIRECTOR

ratul puriEXECUTIVE DIRECTOR

Ratul Puri joined Moser Baer in 1994 and has been Executive Director since 2001. Prior to hisassuming the Directorship, Ratul was General Manager - Business Development. In thiscapacity, he was instrumental in setting up plants for manufacturing compact disc-recordables, the first to come up in India.

harnam wahiDIRECTOR

Harnam Wahi brings a wealth of experience and global expertise to the Board of the company,having worked in various senior positions in prestigious Indian and international organizationssuch as the Inchcape Group, London; Flender Macneill & Co, Germany; Johnstan Pumps(India) Ltd; Containers & Closures Ltd; Dewrance Macneill & Co Ltd; Kilburn & Co. Ltd;Ganges Printings Co. Ltd; and Ganges Rope Co. Ltd. and was closely associated with severalindustry associations.

nita puriDIRECTOR (Administration & HR)

Nita Puri is a whole-time Director. A graduate from Calcutta University, she has 31 years ofbusiness experience. As Director (Administration and HR), she has been closely involved withthe company since inception.

Prakash Karnik is an engineer from the reputed Indian Institute of Technology (Madras) and amanagement graduate, he has over 25 years of work experience in the engineering andfinance sectors. He has worked in senior positions in the government and private sectororganisations such as Jardine Fleming India Securities Ltd, Unit Trust of India, EconomicDevelopment Corporation of Goa Ltd, amongst others.

prakash karnikDIRECTOR

rajesh khannaDIRECTOR

Rajesh Khanna has been working with Warburg Pincus for the last six years. He is an MBAfrom Indian Institute of Management, Ahmedabad, and also a Chartered Accountant. He hasworked with leading finance and consulting firms such as Citibank N.A., and Arthur Andersen& Co.

bernard gallusDIRECTOR

Bernard Gallus brings to the company’s Board over 40 years of experience in internationaltechnology and finance. He was earlier Managing Director and member on the Board of J.Bosshard S.A. Lausanne, later taken over by W Moser Baer AG, Switzerland.

arun bharat ramDIRECTOR

Arun Bharat Ram graduated in Industrial Engineering from the University of Michigan, USA. Hestarted his career with DCM Ltd., moved to SRF Ltd. as Managing Director in 1975 andappointed Vice Chairman in 1988. He played a key role in professionalising the company. Hehas been on various Government-Industry Committees. He is ex- President of the Associationof Synthetic Fibre Industry and has served on the Managing Committee of Development Panelon Man-Made Fibre Industry. He has been the Chairman of Indo-Korea Joint BusinessCouncil. He was earlier Chairman of the Northern Region of Confederation of Indian Industry(CII) and is the past President of the National Body of CII. He is also deeply involved in the fieldof education and philanthropy.

john levackDIRECTOR

John Levack is Managing Director of Electra Partners Asia Limited. He has over 20 years ofprivate equity experience with Electra and 3i plc in Asia and Europe, four years of which havebeen in India. He is a director at Aksh Optifibre Limited, Zensar Technologies Limited, SPITechnologies Inc., Meghmani Organics Limited and RT Packaging Limited. Mr Levack has adegree in Business Administration from Bath University in UK.

organisation chartMr V J Prakash

MD - European Mfg. Proj.

Mr Deepak PuriChairman & Managing Director

Mrs Nita PuriDirector - Admin

Mr Ratul PuriExecutive Director

Mr P M PaiPresident

Mr B BartholomeuszVP - Strategic Initiaves

Mr M KobayashiVP - Japan

Mr Rakesh GovilHead Strategy & Treasurer

Mr Bhasker SharmaVP - Domestic Marketing

Mr S RajalingamSr GM - Plant A-164

Mr V C AgerwalVP - 66GN

Mr Robert O'DonnellGM - European Operation

Mr D P NandaGM - Commercial

Mr Vivek ChaturvedIGM - Intl Sales & Mktg

Mr G R NyatiHead - Engg & Tech

Mr B GaneshGM - Log. & Supply chain

Mr Muthu KumarGM - IT

Mr Naresh JandGM - Finance

Mr R GanesanGM - Accounts

Mr Deepak ShettyGM - Domestic Sales

Mr R W GheiSr GM - HR

Mr Ashish BhanuGM - A/V

Mr N C JainGM - SPAD

Mr N K ChaudharySr GM - Projects

Mr Shiv NathGM - Operations (OMG)

Mr Vijay BijlaniGM - Operations (P&P)

Mr Anil SawhneyGM - Admin

Mr Tarun JaitlyGM - Investor Relations

Mr Saurabh ChawlaGM - CS & T

Mr Praveen JaiswalGM - Operations

Mr Anil BhargavaGM - Quality

key people

Mr P M Pai

Mr V J Prakash

Mr Brian Bartholomeusz

Mr Rakesh Govil

Mr Ashish Bhanu

Mr Shiv Nath

Mr Vijay Bijlani

Mr Anil Sawhney

Mr V C Agerwal

Mr Bhaskar Sharma

Mr G R Nyati

Mr S Rajalingam

Mr N K Chaudhary

Mr R W Ghei

Mr D P Nanda

Mr Vivek Chaturvedi

Mr Tarun Jaitly

Mr Saurabh Chawla

Mr B Ganesh

Mr Muthu Kumar

Mr Naresh Jand

Mr R Ganesan

Mr Deepak Shetty

Mr Praveen Jaiswal

Mr N C Jain

Mr Anil Bhargava

President

VP - Strategic Business Initiatives

Head Strategy & Treasurer

GM A/V

GM - Operations (OMG)

GM - Operations (P&P)

GM - Admin

VP - 66 GN

VP - Domestic Marketing

Head - Engg. & Tech.

Sr - GM Plant A-164

Sr GM - Projects

Sr GM - HR

GM - Commercial

GM - International Sales & Marketing

GM - Investor Relations

GM - CS&T

GM - Log. & Supply Chain

GM - IT

GM - Finance

GM - Accounts

GM - Domestic Sales

GM - Operations

GM SPAD

GM - Quality

MD - European Mfg. Proj.

VP - Japan

GM - European Operation

Mr M Kobayashi

Mr Robert O'Donnell

management's discussion & analysis

Your Company

Global industry structure

Global industry developments in 2003-04

Moser Baer India, headquartered in New Delhi, India, wasestablished in 1983. The Company has successfullydeveloped cutting-edge technologies for recordable opticalmedia, constantly innovating and introducing new productsand process. An emphasis on high quality products andservices has enabled Moser Baer emerge as one of India'sleading technology companies and the third largest player in the global optical storage media industry. Thecompany currently employs over 4,000 people and has multiple manufacturing facilities in the suburbs of New Delhi. Thecompany services its customers through 6 marketing offices and subsidiaries in India, the US and Europe, and sells its productsin over 40 countries globally.

The removable storage media industry comprises three distinct categories:

Magnetic media (diskettes, data cartridges, magnetic tapes such as compact cassettes, VHS and Beta Cam, among others)

Optical media (CD, DVD formats including recordable, rewritable and pre-recorded formats) and

Solid state media (memory sticks and multimedia cards, among others).

We estimate that more than 70 per cent of the world's manufacturing capacity for recordable optical storage media (the segmentin which Moser Baer operates) is based in Taiwan and Japan. Market sources indicate that most of this capacity is highlyconcentrated, with the top 5 manufacturers accounting for over 80 per cent of this capacity.

Manufacturing in the industry is characterized by high entry barriers, driven by large capacities needed to derive economies ofscale and the fast pace of technological evolution constantly requiring the ability to innovate and develop new generations ofproducts. Due to the scale and size of the manufacturing facilities and the pace with which capacities need to be established,successful companies within the industry must have strong capabilities to establish highly complex facilities, and maturemanufacturing processes, involving nanometer scale technologies.

As the leading brands, most of which are owned by major multinational companies, control over 80 per cent of the global market,successful manufacturing companies in the industry must develop the ability to meet exacting quality standards across the largevolumes needed to service the requirements of customers. Establishing a strong global logistics, distribution and customerservice capability is also imperative to service the needs of customers.

In this competitive environment, Moser Baer has capitalized on its mass manufacturing, engineering and developmentcapabilities to emerge as one of the world's most profitable players in the removable optical storage media industry. TheCompany's Revenues has grown 10 times over the last 5 years and has emerged as the third largest manufacturer of opticalstorage media in the world. The company is also the largest manufacturer in India with a 25 per cent share of the domesticbranded segment.

During the last year, the global optical storage media industry witnessed robust growth. With demand-supply evenly matched formost part of the year, manufacturers were able to increase pricing, leading to improving performance from all major industryplayers.

The global optical storage media industry has started to experience pricing pressure for it's products, specially in the CD-R formatsince Q4 FY04. However, this is expected to be a transient trend and more of a seasonal effect rather than a fundamental andstructural change in the industry.

Drive shipments continue to be robust. An expanding global base of installed writers, increasing product applications,penetration and customer acceptance, coupled with the ever reducing cost of data storage for optical media format will continueto drive growth of the global optical storage media industry for years to come.

The calendar year 2003 emerged as the first 100 million drive year for the global optical storage media industry. The installed baseof read/write drives grew by over 48 per cent in CY03 to314 million units from 212 million units in CY02.

Product-wise analysis and outlook1. CD-Rs

2. DVD-Rs

One of the key factors that will ensure a long life cycle for CD-Rmedia is the backward compatibility of drives. Hence a DVDrecordable drive and a combo (CDR/RW + DVD ROM) canwrite and read CD-R discs. If these are all factored in alongwithCD and DVD ROM drives, current estimates suggest that this

year alone the total population of devices that can read CD-R media exceeds 1.5 billion. All of this lends credence tothe views expressed by industry analysts that CD-R will continue to be a major low cost recordable format of choice in the future.

During CY03, the installed base of CD-R write drives grew by over 48 per cent. In its latest update, Techno Systems & Research(TSR) expects the CD-R/RW drive population to expand to almost 393 million units in CY04, a 31 per cent growth over CY03.However, the quantum of incremental yearly shipments is falling due to increased shipments of DVD-R/RW drives which also writeand read CD-R media.

CDR media consumption grew by 28.5 per cent to 11.2 billion units, representing a little over 94 per cent of recordable opticalmedia consumed in CY03. CD-R media growth will continue as discs reach a run-rate of 13.3 billion in the fourth quarter of CY04,up from 11.2 billion for CY03.

CDR media pricing remained firm for most part of FY04 with a favorable demand-supply situation. However, since the fourthquarter of the financial year, there is a transient oversupply situation, which has impacted product pricing. This is expected to be ashort term phenomenon and continued growth in demand will rationalize the supply/demand equation.

After a tentative start characterized by a very visible and counter-productive format battle the blank DVD market is now globallyestablished and growing faster than almost anyone anticipated. The prices of both drives and media have reached massconsumption levels. Also, unlike for CD-R writers, the PC manufacturers have from the outset aggressively incorporated DVDwriters across their product lines. This integrated availability and aplethora of easy to use software applications have opportunisticallycapitalized on the global acceptance and momentum generated byCD-R and contributed to the rapid acceptance of DVD-R.

DVD recordable drives represented just under 25 per cent of thewritable drives shipped in 2003. By the fourth quarter of 2004, DVDdrive shipments will be nearly 55 per cent of Writer-drives shipped.The installed-base of DVD drives will nearly triple in CY04 whileannualised media consumption increases by over 400 per cent bythe fourth quarter of CY04 over CY03's shipments.

Demand for DVD-R/RW media formats grew sharply to 675 millionunits in CY03, against 125 million units in CY02. This number isexpected to triple in CY04, with a fourth quarter run rate of 2.9 billionDVD-R/RW discs consumed.

The transition to DVD writers is moving as fast as production capacities can ramp up. DVD pricing is expected to continue to fall inthe near term as manufacturing costs drop sharply and demand/production volumes rise sharply.

In contrast to the past, we see that the storage hardware industry is very aggressively driving the development of formatenhancements in an attempt to reverse the severe margin degradation that characterizes any PC peripheral. The 1x-52x CD-Rspeed race was one example of this. The DVD speed race is well underway with recent 8x product introduction and theexpectation of 16x recordable products by year end. In addition, significant efforts are underway to define and develop the nextgeneration blue laser storage format. At this point there are a number of contending format concepts. These formats will providea platform for the distribution and recording of High Definition Video and basically serve as the linchpin for a major transition to anew class of hardware products in much the same way DVD drove the adoption of more powerful PCs, larger hard drives,surround sound systems, large screen TVs, and the like.

Strengths

Weaknesses

Opportunities

Lower capital investment, manpower and overhead costs make Moser Baer one of the most competitive manufacturers in theworld

Strong focus on R&D and engineering enables Moser Baer to constantly innovate product offerings, and continually reducecosts

A growing captive local market adds to our growth potential and differentiation

Integrated manufacturing gives us cost efficiencies, tailor-made delivery capabilities and enhances our speed to market

Committed shareholders add strength, longevity and sustainability to our future plans

As Moser Baer continues to grow rapidly, we need to scale up our operation, human resources, management bandwidth, andevolve internal controls in line with the exponential growth.

As demand for most of our products is growing extremely fast, we need to constantly expand manufacturing capacities,requiring continuous and high levels of capital investment.

The exploding recordable DVD (DVD-R) market presents the biggest opportunity for our company. With world-classcapacities to manufacture DVD's, an existing top-tier customer base, and an efficient in-house developed technology, we arewell positioned to exploit this emerging and profitable opportunity.

India, with its large population and growing disposable income level represents a big opportunity for us. India has one of thelargest music and video industries in the world, publishing thousands of titles each year. India is the second largest compactcassette (audio cassette) market in the world. As consumers shift to using CD's for audio, and DVD's for their videorequirements, the domestic market for these products should explode. Moser Baer has a “home field advantage” in thispotential INR 15 billion market (by FY05).

A number of new CD and DVD applications are being opportunistically developed. The ability to conveniently transfer videoto a computer and edit or otherwise modify it in a random access fashion is proving to be a paradigm shift. Low cost DVDrecorders that resemble VCRs and which over time are expected to eventually replace them, are now freely available andincreasingly affordable. These devices share a number of common components with DVD-ROM drives and by capitalizing onthe economies of scale are expected to drop in price and replace not just VCRs but also DVD Videoplayers.

Significant efforts are underway to define and develop the next generation blue laser storage format. With capacities in the+20Gbyte range these formats will provide a platform for the distribution and recording of High Definition Video and basicallyserve as the linchpin for a major transition to a new class of hardware products. We already recognise the potential that thisformat offers and are ensuring that we are present right at the commencement of the products life cycle.

moserbaer - a SWOT analysis

Threats

Strategy

Further increase competitive edge

Value added products

Emerging technologies

Anti-dumping and anti-subsidy inquiry

Sharp fall in product prices

Short / Medium term

Long term

Near term operational objectives

In a dynamic technology environment, Moser Baer's businesscould be threatened from more efficient emergingtechnologies. However, considering the explosive growth indigital content, the low cost and ease of storage on opticalmedia, the huge installed base of both read and write drives

and the time to market for a new format, this threat is perceived as low. The company's strong R&D capability and joint R&Dprograms with leading technology players enables the company to lead innovation rather than trail it.

The company derives a significant part of its revenues from international markets, US and Europe being the most prominent ones.A growing protectionist attitude and a tendency by some local Governments, driven by a desire to protect local jobs, tend to useanti dumping and other trade protection tools to provide some measure of protection to local high cost and inefficientmanufacturers. This poses a significant threat to our ability to efficiently access these markets. There are anti-dumping dutiesimposed by the European Commission (EC) against most of our competitors. While Moser Baer does not have an anti-dumpingduty, the EC has imposed a 7.3 per cent anti-subsidy duty on recordable compact discs (CD-Rs) manufactured in India. We arecontesting this imposition at various levels.

These type of investigations could be instituted again in future and continue to pose a risk to our sales into Europe. However, weare following an active strategy to mitigate this threat by diversifying our global presence, customer base and rapidly moving intonewer and larger markets like the USA.

As the products move into the mature phase in their life cycle, they start to emulate commodity type characteristics. Also as theindustry is characterised by high volume , large capacities and investments, a sharp reduction in product pricing can severlyimpact performace. The pricing in the industry could fall due to oversupply, low demand, cost reduction due to reduction in inputcosts or setting up capacities in low cost regions. In addition to having highly efficient manufacturing process and facilities,Moser Baer has the advantage of being situated in a low cost economy which enables the company to emerge as an extremelyefficient manufacturer in the world .

Our near term strategy is to leverage our manufacturing base, expanded capacities, customer relationships to capture theexplosive growth expected in the DVD Recordable formats and to significantly enhance our global share. We believe, the opticalmedia industry in the medium term offers us sufficient growth opportunity with relatively low risk and high returns on investedcapital.

Our long-term strategy is to utilize our core mass manufacturing capabilities, especially in high technology process drivenindustries to capitalize on the growing global trend towards outsourcing. Our strong core expertise in precision thin film coatingprovides us multiple opportunities in a number of high growth areas both within and outside storage media industry.

We are continuing our relentless efforts to further drive down production costs. At the same time we are also focused on increasingproduction efficiencies and yields to further increase our cost leadership in the global industry.

We plan to improve our sales mix by leveraging our strong research and development and engineering capabilities to deliver

higher value added products to markets. These products aredesigned to meet the specific enhanced functionalitydemanded by high end customers.

Even though we are today supplying to 11 of the 12 largestglobal brands in the world, we plan to significantly strengthencustomer relations by entering into strategic alliances withcustomers. We also plan to provide our customer base with enhanced quality, product capability, packaging options,and logistic and supply chain capability.

Over the last few years, we have significantly reduced our share of sales in the European community and enhanced sales into theNorth American market. Going forward, we plan to penetrate and grow in emerging markets like China, India, the Middle East andLatin America.

As we move up the technological curve and ally with the leading technology developers within the industry, our ability to bringproducts to market and rapidly commercialize those products and grow capacities to generate economies of scale are vital to oursuccess in a competitive environment. A number of measures, including the development of flexible manufacturing systems,multiple format ready facilities, and the ready availability of skilled manpower, will enable us to achieve these goals.

Gross revenue in FY04 jumped 45.5 per cent over the previous year to INR 15,792.2 million, and net sales rose 40.9 per cent to INR15,021.7 million over the previous year. Net earnings after tax (including deferred tax for the current year) at INR 3,577.3 million,increased by 50.8 per cent over FY03. EBITDA (net of other income) at INR 6,359.0 million grew 67.8 per cent over the previousfiscal, while EBITDA margins (net of other income) rose to 41.4 per cent during the year under review compared with 39.0 per centin FY03.

Fully diluted earnings per share (before prior year items & not annualized) for FY04 is INR 36.8 against INR 24.4 in the previousyear, representing a growth of 50.7 per cent. The fully diluted earnings per share is INR 33.4 following the adjustment for prior yeardeferred tax. Gross cash flow grew 55.3 per cent during the year to INR 5,507.4 million.

The key highlights of the year are, strong demand situation and firm pricing in first half of the year and emergence of DVDRecordable as the future optical storage format. The situation reversed in the second half with the emergence of oversupply in thesystem, pressure on pricing and rising costs of inputs. This oversupply situation is expected to be transient as drive shipmentscontinue to be robust and real demand from consumers continues to grow.

Despite the imposition of the anti-subsidy duty on CD-R sales into EU during the first quarter and the impact of change incommercial terms with key customers in fourth quarter, revenues grew at a fast clip in FY04, driven by a near doubling of installedcapacities and fast scale up in DVD Recordable disc sales. The company continued to expand its competitive edge through R&Dinitiatives aimed at new/innovative products and efficiency improvements during the year.

On the marketing front the company further expanded its market reach and also moved into the high growth Indian market forbranded storage products by launching the “moserbaer” range of storage media.

The company also raised USD 110 million through an issue of Global Depository Receipts (GDRs) and warrants to affiliates ofWarburg Pincus LLC. This cashflow significantly strengthens the balance sheet and provides the platform to strategically growcapacities to capitalize on the attractive DVD Recordable growth curve. As over 90 per cent of this capital expenditure will begrowth oriented, it is expected to lead to a sharp growth in operating cash flows.

During the year the company also offered bonus shares to existing shareholders in the ratio of 1:1 to improve liquidity in the stock,which should benefit shareholders of the company. Additionally the company introduced its maiden ESOP scheme of 4.4 millionshares to its employees and directors (other than promoter directors).

Strengthen customer base

Improve geographical sales and distribution

Time to market

Moser Baer - Developments in 2003-04

Product wise performance & outlook

New Projects and expansion plans

Manufacturing

The company is a leading global manufacturer of storagemedia products, both optical and magnetic. Storage mediacomprising of various CD-R/RW and DVD-R/RW formats,floppy diskettes, among others, constituted almost 97 per centof the company's revenues in FY03-04, up from 94 per cent inFY02-03.

In the optical storage media products, while CD-R/RW formats will continue to be a large and profitable business for the company,DVD-R/RW products are emerging as the key driver for growth.

FY05 will be the first big-bang year for the DVD formats. Given Moser Baer's process technology, ramp-up with key accounts andexpanding capacity, the company is well positioned to rapidly increase its share of the highly profitable DVD market.

Optical media pricing remained firm for most part of FY04. However, during the second half of the year, normal softer demandtrend and some inventory in trade channels depressed pricing of CD-R/RW products. We expect this to be a transient trend. Thepricing of DVD-R/RW products will fall sharply as manufacturers derive scale economies, volumes rise sharply and as format raceemerges. However, this is the normal feature of this industry.

The modular structure of the Greater Noida facility, along with the existing infrastructure and utilities, has provided the companywith the flexibility to quickly react to changes in market conditions at lower incremental costs. The company has rapidly doubled itsinstalled capacity to 2 billion units per annum during FY04 at only a 38 per cent accretion to the gross block. This has not onlycreated a platform to increase our global market share, but will also enable us to achieve it more efficiently, thereby increasing ourcompetitiveness and ROCE.

The company has now embarked on the next phase of expansion, in line with our aim of capturing a higher market share of the fastgrowing global optical storage media industry by leveraging our low-cost advantage and world-class infrastructure andtechnology. The company plans to spend USD 135 million in FY05 to further increase its capacity to 2.4 billion units per annum. Inline with the company's extremely strong project management and commercialization capabilities, this project is expected tocommence production by the second half of FY05.

The company also plans to set up a new manufacturing unit in Germany. Moser Baer has incorporated European Optic MediaTechnology GmbH, (Europtic), as its 100 per cent subsidiary in Erfurt, Germany to implement this project. This project will providea strategic thrust to the global marketing position of Moser Baer. In addition to the benefits of close proximity to customers,Europtic will work closely with various technology companies to develop high value added and customized products for nichemarket segments. Niche products constitute a fast growing and high margin segment of the global optical storage market.

During the year, Moser Baer has almost doubled its media production capacity from 1.1 billion units per annum to 2 billion unitsper annum, with an increment of only 38 per cent in it's gross fixed assets. At the end of FY04, the company has now cumulativelyinvested USD 555 million (INR 25160 million) in establishing a world class-manufacturing infrastructure.

The company commissioned its new state-of-the-art Mastering and Galvanics facility in July 2003 to manufacture a wide range ofstampers for CD-ROM, DVD-ROM, CD-R/RW and DVD R/RW formats. This should help significantly reduce cost and shortenproduct development times.

The company has ventured into backward integration of packaging materials by setting up an integrated facility for themanufacture of high quality Jewel, Slim & Cake Boxes, for meeting the captive requirements of disc packaging. Printing andpackaging capacities were additionally ramped up with innovatively designed production flow layouts and material handlingsystems.

The company continued to take various initiatives in the area ofprocess optimisation, resulting in significantly higher overallequipment efficiency and production yields. Significantreduction in raw material costs were also achieved throughimprovement in material efficiency yields, closed looprecycling of dyes and enhancement of stamper life.

The company continued its forward thrust on buildingadditional capacity to cater to the growing demand for DVDRecordable media. Towards this end, civil construction activities for the second phase of expansion at the Greater Noida facilityhave commenced. The company has also commissioned an additional power plant of 15 mw capacity to achieve complete self-sufficiency in meeting its power requirements.

Moser Baer marketed a growing variety of products with a visiblebranding differentiation in FY04. The company continues to enjoystrong customer loyalties driven by high product quality, strictconfidentiality of proprietary processes and delivery of promisedstandards. In-house developed, and patented, packagingvariations, enabled us to offer a visibly differentiated productoffering to customers.

The captive Indian market, growing at over 50 per cent per annum,is one of the fastest growing markets for optical storage media inthe world. During the year, the company launched its domesticbrand business, under the “moserbaer” brand name, to capturethis high growth market opportunity. In less than 12 months ofoperation, ”moserbaer” brand has been able to garner a 25 per cent share of the branded segment of the domestic market.

Moser Baer realizes that its supply chain is a critical function and a key element towards its global competitiveness. High productquality and innovation has to be duly complimented with improvements in distribution and logistics infrastructure for ensuringstringent delivery compliances on export shipments as mandated by the various global technology OEMs.

Moser Baer's quality commitment remains enshrined in its Quality Policy:

“We are committed to Excellence and Total Customer Satisfaction through team work, Ceaseless Innovation, and Timely Deliveryof Quality Products of International Standards.”

During the year FY04, Moser Baer continued to maintain a sharp focus on strengthening its Quality Management Systems. As aresult of the various measures undertaken, the Greater Noida facility was accorded the ISO 9001:2000 Certification by DNV for thedesign, manufacture and supply of all formats of Optical Media and Stampers in December 2003.

Moser Baer has continuously created quality products through the intelligent use of technology, committed human resources,and the extensive use of advanced statistical techniques to monitor and control prouduct quality. As a result of this we havesurpassed world-class quality standards, with defect ratio for some of our products approaching six sigma levels. We movedcloser to our vision to make the 'Made in India' mark respected by customers and a testimony of world-class manufacturingstandard.

Marketing

Supply Chain Management

Quality Control

Research and development

Technology Challenges

Moser Baer continued its multi-pronged R&D initiatives duringthe year. The company spends 1.9 per cent of its revenues onR&D. The focus on R&D has enabled the company to developnew and innovative products, both in CD-R/RW andDVD-R/RW formats, and optimize production/efficiencyparameters to reduce the cost of production. Moser Baer alsocontinued to work very closely with key global technology

majors to research and develop various potential media formats in the Write-Once and Re-Writeable Technologies.

Moser Baer also entered into a technology license agreement with Hewlett-Packard Company [HP], to manufacture opticalmedia [all CD and DVD formats] using unique “LightScribe” technology. Moser Baer is one of the first media companies tocollaborate with HP on the deployment of this technology.

Some of the other key developments during the past year include continuous development and certification of high-speedwritable and re-writable products. The company successfully implemented a multi pronged approach of increasing processyields, increasing production output and innovating on component and input development to manufacture better products atcompetitive costs.

During the year FY04, some of the products launched by the company, include, 4x DVD Recordable followed by 8X, High SpeedCD-RW and DVD+RW media.

Extensive research and process development is being carried out for developing proprietary designs and groove geometry tofacilitate improved disc replication and to ensure wider Drive compatibility.

As a major manufacturer of optical disc products for leading global brands, Moser Baer has a broad product portfolio coveringCD-R, CD-RW, DVD-R, DVD+R and DVD+RW. Apart from the CD formats that have now attained some degree of maturity, thecompany has to simultaneously manage very rapid format evolution, cost reduction, and volume expansion for the other formats.This is a very sensitive balancing act that often requires seemingly contradictory technical solutions. Time to market andcompatibility with the installed base of writers are two of the most critical aspects governing the company's technology efforts.

Close technical links that have been forged with our strategic technology partners provides us with early access to a variety ofpossible technical solutions. At the same time, our active participation in various International standard setting bodies andindustry consortia provide us with early indications of the emerging technical benchmarks. Through the application of our rapidcommercialization core competency we are able to very quickly devise an optimal solution, often with a high degree ofindigenisation.

The strong links that we have formed with major drive manufacturers permit us to engage them in all stages of our productdevelopment process to ensure that the new generation of drives are fully compatible with Moser Baer media. As a result, we areone of the first wave of media companies certified by one or another drive manufacturer at product launch. At the same time, wework to ensure compatibility of our new media versions with the installed base of older drives. This emphasizes the importance weplace on compatibility, which we believe to be the key value proposition of blank CD and DVD.

There are often enhancements that are developed within a given format or across whole format families and as a major supplier toleading global brands Moser Baer has to be at the forefront of these developments. Apart from basic disc design it has becomeclear by now that a major factor governing the rapid ramp up of a new format is the capability of the manufacturing platformsthemselves. Moser Baer has a relatively advanced and modern manufacturing infrastructure and the internal experience andexpertise permit a substantial degree of equipment improvement and customization. For example, the advanced generation DVDmanufacturing equipment used by the company permitted the seamless migration to higher speed formats with their increasinglystringent specifications and decreasing tolerances. At the same time, the flexible manufacturing asset base provides thecompany the freedom to adjust its output to meet the blended demand profile.

At the same time as we are involved with the internal evolutionof current DVD formats, the company has begun exploring thenext generation, blue-laser based formats that are underdevelopment. The plan is to follow the proven path and workwith selected technology partners while at the same time aimfor a high degree of indigenization and customization that willbring a Moser Baer flavor to the final product and fully realizethe benefits of our strengths and inherent advantages.

Review of operating performance: (INR in million)

Revenue analysis

Particulars FY04 FY03 YoY growth %

Income from operations 15792.2 10855.2 45.5

Other income 229.7 288.2 (20.3)

Increase/(decrease) in stock of finished/semi-finished goods 320.1 (957.3)

Total income 16342.0 10186.1 60.4

Total expenditure 8982.7 5915.5 51.9

Interest 693.4 542.7 27.8

Depreciation 2268.9 1174.7 93.1

Profit before taxation 3626.5 2359.8 53.7

Provision for taxation (current) 49.2 12.9 281.4

Profit after taxation 3577.3 2372.7 50.8

Taxation (earlier year and deferred) 338.7 0.0

Net Profit available for appropriation 3238.5 2372.7 36.5

Proposed dividend 167.3 129.5 29.2

Dividend distribution tax 21.43 15.5 38.3

Transfer to general reserve 3049.8 2227.8 36.9

The FY04 has been a year of growth, challenges and opportunities for Moser Baer. The industry witnessed a strong demandsituation and firm pricing during the first half of the year. The situation reversed in the second half with the emergence ofoversupply in the system and pressure on pricing and rising costs of inputs. The European Commission (EC) dropped the anti-dumping inquiry against the company. However, the EC imposed an anti-subsidy on Indian exports of CDRs into Europe, whichnegatively impacted the company's revenue from that region. Additionally, the company changed delivery terms with few keyaccounts in Europe, thereby further depressing revenue growth in the last quarter of the financial year.

Despite these developments, Moser Baer's revenues grew at a fast clip in FY04, driven by a near doubling of our installedcapacities and fast scale up in DVD-R sales. The company has implemented its strategy to capitalize on the emerging marketopportunity for DVD-R formats. The company continues to expand its competitive edge through R&D initiatives aimed atnew/innovative products and efficiency improvements during the year.

financial analysis

Consequently, gross revenues increased from INR 10,855millions in FY03 to INR 15,792 millions in FY04, representing agrowth of 45.5 per cent.

The Average Selling Price (ASP) of the company is impacted bya number of factors:

The ratio of sales of different formats in the overall sales mix.

The type and style of packaging - CD-R and DVD-R are packaged in many different types of cases / boxes which cansignificantly impact the selling price.

The ratio of sales to cross licensee and non-cross licensees.

The company's ASP for optical media remained flat in FY04. However, the ASP declined in Q4 FY04, mainly due some pricingpressure, changes in packaging mix, a growing proportion of sales to cross licensee customers and the continued appreciationof the Indian Rupee.

EBITDA margins increased by 241 bps (basis points) over the previous years level to 41.5 per cent in FY04. The key contributors tothe margin growth of the company are, 1) firm pricing environment during the year, 2) scale economies on nearly doubledcapacities 3) improving production efficiencies 4) Improving product portfolio with increasing contribution from DVD-R formats5) full benefits of backward integration projects.

As of March 31, 2003 the company's sharecapital was INR 484.06 million, comprising 48.4 million equity shares of INR 10 each.During the year, the company issued bonus shares to its existing shareholders in the ratio of 1:1, thereby doubling its issued andpaid-up share capital. The company also implemented its maiden ESOP (employee stock option plan) of 4.4 million sharesduring the year.

Moser Baer issued Global Depository Receipts (GDR's) equivalent to 14.7 million underlying shares to affiliates of Warburg PincusLLC. In addition to the above, the company also issued warrants, equivalent to 5.4 million shares to affiliates of Warburg PincusLLC. Each GDR was priced at an effective price per underlying share of INR 336. Warrants are convertible at the option of theinvestor into one equity share, at any time within 18 months from the date of allotment at a price of INR 336 per share. The paid-upequity capital is INR 1115.2 million as of March 31, 2004.

Moser Baer's reserves increased 67 per cent from INR 10,994 million to INR 18,352 million in FY04, despite the capitalizationduring the year. This increase was primarily on account of 37 per cent rise in retained earnings and a INR 4792.2 million addition tothe share premium reserve during the year from the proceeds of the GDRs. The Securities Premium Account comprised 48 percent of the total reserves, while General Reserve comprised 52 per cent. There are no revaluation reserves as on March 31, 2004.

Product pricing

Margins

Capital structure

Reserves

Loans

Financial objectives, initiatives and achievements

Over the years, Moser Baer has part funded its ongoingexpansion programmes through loans raised at progressivelylower costs. We have also tried to build a prudent basket ofcurrencies to hedge against currency risks, and minimizecosts. As a result, our average cost of long term debt remainedat 5 per cent in FY04. Our current currency-wise total debtoutstanding is as follows:

We believe that our current total debt to equity ratio of 0.74 and interest service cover ratio of 9.2 place us in a prudent andcomfortable position.

The company's financial profile is characterised by high revenue growth resulting from the substantial expansion of its opticalmedia capacity, strong operating margins and healthy debt coverage indicators.

The company is taking proactive measures to ensure financial costs are effectively reduced to positively impact the bottom line.New benchmarks are being set continuously and at the same time raising the bar on existing benchmarks. The company hasshifted to working capital borrowings in foreign exchange, thereby reducing interest costs. Strong earnings growth and improvingworking capital management has enabled the company to generate INR 5,792.3 million of cash from operations in FY04. Theongoing foreign exchange risk management policy has been further strengthened by putting in place new policies/procedures toensure there is no adverse impact of volatile exchange rates beyond the agreed tolerance levels.

The outflow on account of interest and finance charges increased from INR 543 million to INR 693 million in FY04, representing anincrease of 27.8 per cent, primarily on account of a rise in the our overall debt levels and the scale of business.

The company invested INR 7448.7 million (USD 170 million) during FY04 at its state of the art manufacturing facilities, to meet theincreased demand for optical media products from our global client base. The company intends to enhance optical mediacapacity from 2 billion units per annum to 2.4 billion units per annum during FY05. The incremental capital expenditure is beingfunded through a prudent mix of debt, equity infusion and internal accruals. Incremental investments for capacity creation arebetween 20-25 per cent lower than our historic costs.

In FY04, gross block increased by 38.2 per cent from INR 19768.1 million to INR 27315.1 million on account of the almost doublingof optical media manufacturing capacity. Moser Baer's revenues-to-assets ratio improved from 0.56 in FY03 to 0.67 in FY04,reflecting an improved asset utilisation. Depreciation increased from INR 1175 million in FY03 to INR 2269 million in FY04 onaccount of increase in fixed assests. Due to the flexible nature of the asset base (most of our assets, production lines and facilitiescan be used to manufacture multiple formats) and the relatively long life cycles of products in industry we believe that the risk ofasset base becoming obsolete is low.

Currency Amount in currency Amount in INR % of total debt

USD 44,022,164 1924,208,808 13.25

EUR 95,941,099 5156,834,092 35.52

INR 7438,801,771 7438,801,771 51.23

Interest

Capital expenditure

Gross block and depreciation

Working capital management

Loans and advances

Capital employed

Surplus management

1 Revenue Recognition

We have effectively managed working capital levels during theyear through better information systems. Overall net workingcapital is 19.8 per cent of revenues in FY04.

We significantly reduced receivables from 93 days of revenues in FY03 to 71 days in FY04as against an industry benchmark of 90-120 days.

Inventory: By better utilizing our information systems, and managing our stock levels, we were able to control and effectivelymanage inventory levels during the year. The change in commercial terms with key customers and slackness in industryenvironment during the last quarter of FY04, led to a marginal increase in inventory levels.

In FY04, loans and advances stood at INR 781.5 million compared to INR 493.9 million in FY03, a 58.2 per cent increase. Thecompany disbursed loans and made advances to the suppliers of capital goods and raw materials. Most of these advances wereto capital equipment suppliers, which were secured against bank guarantees.

The total capital employed invested in the business increased from INR 23,237 million in FY03 to INR 34,513 million in FY04,representing an increase of 48.5 per cent. The company continues to generate a healthy Return on Average Capital Employed.

In a growing business, there were junctures when the temporary availability of resources was higher than the immediate use.These short-term surpluses were invested in low risk financial instruments that optimized returns and protected the investedprincipal.

Working Capital (INR in million)

Particulars FY01 FY02 FY03 FY04

Debtors 1,361.0 2,604.4 2,778.0 3,059.9

Days 145.8 137.8 93.4 70.7

Inventory 1,731.4 2,402.4 998.5 1,984.9

Days 185.5 127.1 33.5 45.9

Creditors 615.8 1,093.3 1,724.9 2,307.8

Days 65.9 57.8 58.0 53.3

A reduction in the receivables cycle:

Revenue from sales of goods is recognised on transfer of significant risks and rewards of ownership to the customer and when nosignificant uncertainty exists regarding realisation of the consideration. Sales are recorded net of sales returns, rebates and tradediscounts and price differences and are inclusive of duties.

Significant accounting policies

2 Inventory valuation

3 Fixed Assets

4 Depreciation and Amortisation

5 Taxation - Current

Deferred

Finished Goods, Work in process, Goods held for resale, RawMaterials, Packing Materials and Stores & Spares: at lower ofcost and net realisable value. Cost of raw material, goods heldfor resale, packing materials and stores and spares, isdetermined on the basis of the weighted average method. Costof work in process & finished goods, is determined byconsidering direct material cost and appropriate proportion ofoverheads .

Tangible fixed assets are stated at cost less accumulated depreciation. Cost includes all incidental and direct expenses.Expenses of revenue nature which can be regarded as incidental and related to project set-up are transferred to "IncidentalExpenditure Pending Capitalisation". These expenses are allocated to related productive fixed assets in the year ofcommencement of the related project.

Depreciation on tangible fixed assets is provided on straight line method on pro-rata basis at rates and in the manner specified inSchedule XIV to the Companies Act, 1956 other than on certain plant and machinery at the magnetic and optical mediamanufacturing units which is depreciated at the rate of 10.34 per cent which has been determined based on the management'sestimate of useful life of the assets and is higher than the rates specified in Schedule XIV to the Companies Act, 1956.

Provision is made for current income tax liability based on the applicable provisions of the Income Tax Act 1961 , for the incomechargeable under the said Act and as per the applicable overseas laws relating to the foreign branch.

The company provides for deferred tax using the net liability method based on the tax effect of timing differences resulting fromrecognition of items in the financial statements. The deferred tax charge or credit is recognised using the tax rates and tax lawsthat have been enacted or substantially enacted by the balance sheet date.

Moser Baer recognises that a large part of its success is attributed to the excellent human resource base created over the year.This intellectual capital is reflected in the quality of our business strategy, our customer relationships, our manufacturing systems,strong project management & commercialisation skills, our financial health and our product development capabilities.

During FY03-04, we added 1661 personnel, taking our employee strength as on 31 March, 2004 to 3882. The company alsointroduced the “Employee Stock Option Plan" during the year. We are also in the process of implementing an integratedPerformance Management System (PMS) across the company. The new system will ensure objective measurement ofperformance by setting Individual KRAs.

New Hires 438 875 1006 1661

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Year 2001 2002 2003 2004

The efficiency of the internal control system have improved with implementation of an ERP system ( Enterprise Resource Planningsoftware ) which provides a high level of system-based checks and controls . All transactions are authorized, recorded andreported correctly. Regular internal audits and checks are carried out to ensure that the responsibilities are executed effectivelyand that adequate systems are in place to maintain authenticity and correctness of the recorded transactions .

Human Resources/Industrial Relations

Internal control systems and their adequacy

Disclosures

Management's responsibilitystatement

Disclaimer

During the year under review, the company has not entered intoany transaction of material nature with its Promoters, theDirectors or the management, their subsidiaries or relatives,etc. that may have potential conflict with the interest of thecompany at large.

The management is responsible for preparing the company's consolidated financial statements and related information thatappears in this annual report. The management believes that these financial statements fairly reflect the form and substance oftransactions and reasonably represent the company's financial condition and results of operations in conformity with IndianGenerally Accepted Accounting Principles (GAAP).

Some of the statements in this report that are not historical facts are forward-looking statements. The forward-looking statementsinclude our financial growth projections as well as statements concerning our plans, strategies, intentions and beliefs concerningour business and the markets in which we operate. These statements are based on information currently available to us, and weassume no obligation to update these statements as circumstances change. These are risks include, but uncertainties that couldcause actual events to differ materially from these forward-looking statements. These risk include, but are not limited to, the levelof market demand for our services, the highly-competitive market for the types of products that we offer, market conditions thatcould cause our customers to reduce their spending for our products, our ability to create, acquire and build new businesses andto grow our existing businesses, our ability to attract and retain qualified personnel, currency fluctuations and market conditionsin India and elsewhere around the world and other risks not specifically mentioned.

risk management

Risk ManagementAs a company poised to take on the mantle of industry leadership, Moser Baer is exposed to various risks. Some of these risks areexternal and result from the business environment we operate in, while some are internal to the company. We have developed arisk reporting management process to help manage potential risks in an informed manner.

We have a three-pronged risk management process.

Our comprehensive risk governance culture ensures that business decisions taken balance risk and reward. Consequently, ourearnings-generating initiatives are consistent with our risk standards.

Our risk-management revolves around corporate policies that outline standards and provide measurement guidelines for eachrisk category. The company proactively evaluates and puts in place risk-mitigation initiatives, sets prudent limits on the quantumof risk undertaken and does risk evaluation of major policy decisions.

We manage the variables impacting business risk with a disciplined risk management process in keeping with establishedstandards. The risk management strategies and processes are constantly reviewed in keeping with the changing environment.

Moser Baer's risk-management mechanisms are consistent with the strategic direction of the company, desired total returns toshareholders and the credit rating of the company. Our risk appetite dictates the risk-management initiatives.

Risk environment

Steps taken to mitigate technologies risks

A number of potential risks in the current environment might make the optical media industry prospects unattractive over thecoming years. These risks may stem from technology obsolescence, customer concentration risk and geographical risksamongst others. Moser Baer is, however, well poised to manage and mitigate these risks.

The obsolescence of technology is inevitable and Moser Baer's real challenge is to anticipate and respond to both evolutionaryand disruptive changes. However, many technologies may prove to be more resilient than anticipated. For example, theremovable storage segment has proven to be remarkably resilient in the face of rapid technological developments with the needfor broad based global compatibility being a strong stabilizing influence. The 3.5 inch floppy diskette still survives and is only nowmaking its exit after 22 years despite being regularly confronted with far more advanced and capable storage solutions.

The same solid entrenchment is observed with CD-R whereby a huge global installed base of readers and writers, estimated to farexceed 2 billion units by 2005, have served to provide the format with considerable staying power even in the face of exiting newoptions such as high capacity optical disc, solid state memory, broadband, and wireless delivery. The position is furtherstrengthened by a number of compelling factors; The versatility of the CD and DVD format families has served to establish themas a bridge between the information storage and entertainment segments thereby greatly extending their utility and reach. Therapidly proliferating DVD format, the most rapidly growing Consumer Electronic (CE) product in history, not only maintainsseamless backwards compatibility with CD-R and the other members of the CD family but opens up complementary new video,multi-media, and game application segments further strengthening the global mass appeal of the 120mm disc formats.

The flexibility and reach of the CD and DVD formats has proven to be compelling technology enabler for a broad range ofIndustries spanning the Personal Computer and CE segments. These now have a vested interest in the preservation and orderlyevolution of this technology infrastructure.

Moser Baer expects that the above factors will prolong the decay time for CDR media beyond 2010 and that the market for DVDrecordable and rewritable disc will grow to comparable levels; with global demand climbing to the level of billions of discs in thenext few years.

At the same time, the company has taken concrete steps to ensure that its manufacturing infrastructure and technology base arefully capable to meet the needs and requirements of the anticipated evolution in optical disc technology from CD to DVD andbeyond this, to the Blue Laser/high density formats.

Thus, while various new and emerging technologies have the potential to compete technologically with CD and DVD, we believethat significant barriers are in place to prevent, or at least slow down, the displacement and eventual obsolescence of theseformats. These include:

Hundreds of millions of satisfied, cost conscious users and an estimated global installed infrastructure base of over 1.5 billioncompatible hardware devices.

The latest projections suggest that even as far out as 2010 almost 80 per cent of the installed base of optical disc writers will beCD-R compatible.

A broad coalition made up of almost all major global PC/CE companies and content providers into whose business modelsCD/DVD products and applications have been integrated and who must gain from any transition.

Billions of dollars invested in CD/DVD hardware and disc manufacturing capacity and the need for similar infrastructureinvestments for alternative technologies.

In the dynamic storage market segment, significant technological risks exist in a number of critical areas, all of which can haveconsiderable commercial/financial implications. Moser Baer has invested substantially in addressing and mitigating risks in allthese areas, often with multiple degrees of redundancy.

Technology Obsolesce Risk Management

Ability to rapidly commercialise new products:

Access to new technology

Drive/media compability

Evolutionary capabilities of manufacturing infrastructure

Industry Risk Management

Customer Attrition Risk Control

Geographic Risk Management

The internal R&D resources have been steadily expanded and strengthened and today cover the spectrum from CD to DVD (pre-recorded, recordable and rewritable). Numerous internal innovations have resulted in a product leadership position for MoserBaer in CD-R and we are rapidly extending this to other formats.

The newly commissioned state-of-the art mastering facility will round off Moser Baer's technology platform and equip thecompany with resource base required for the next decade. In fact, preliminary R&D efforts in Blue laser based formats (expectedto reach the mass market in the 2005/2006 timeframe) have begun.

Through long standing strategic partnerships and working projects with key technology providers, including many of the leadingglobal companies at the forefront of new format development, we have unfettered access to cutting edge technology andprocess know-how.

Today, by virtue of being recognized as one of the major suppliers of optical media to the global markets, Moser Baer has forgedexcellent cooperative links with all major hardware suppliers. They commonly utilize our media in their product developmentactivities and regularly provide Moser Baer with pre-production samples to ensure seamless compatibility. In addition, MoserBaer's blue-chip customer base provides an additional level of product compatibility assurance.

By virtue of its relatively late expansion, Moser Baer is in the unique position of possessing a very high proportion of advanced, 3rdgeneration, multi-format capable manufacturing platforms. These will provide us a seamless pathway to “future proof” its capitalinvestments and more importantly, to tailor its operations to provide an optimal, evolutionary product mix.

The company, however, faces no immediate threat from the dynamic environment in which it operates. On the contrary, it stands tobenefit from the current growth trends in the DVD R/RW formats.

As consumption evolves from analogue to digital technology, it is prompting legacy recordings to migrate to new media. Besides,the growing popularity and increased functionality of new products like drives, readers, writers and PCs owing to their betterstorage capacity, wider applications and greater security, are expected to drive demand exponentially.

Given our product quality, unbeatable price-value proposition and excellent service, Moser Baer has now acquired 11 of the 12top global brands as its customers. A combination of these initiatives extended our reach to a wider larger spread of customers.Due to our wide customer base (we believe that we have one of the widest customer bases in the industry), and the ability thatgives us to increase volumes with customers, we believe that the impact on the company in the event of customer attrition wouldbe low.

To mitigate the risks arising from servicing customers in only a few regions - USA, Europe and Japan - Moser Baer marketedproducts to 40 geographies over the last few years. We continue to focus on emerging markets like India, Latin America and theMiddle East, even as we service customers in Europe and North America.

Moser Baer operates in an industry where technology trends are constantly changing and evolving which mayjeopardize future growth.

Our over-dependence on a few customers could impact revenues in the event of attrition.

A geographically concentrated revenue base may affect growth in the event of some of these regions not performingup to expectations.

Other risks and key management initiatives

As a de-risking measure, we have reduced our exposure to European customers, to minimize the impact of protectionistmeasures the EC may undertake in the future.

Being in a highly competitive & technology advanced environment, retaining talent is always the primary focus for HR. During theyear our attrition was well within the manageable limit. However, in order to retain the talent our company has been promoting thesense of ownership and pride in association by way of several HR initiatives. Various initiatives like Long Associate Awards,ESOPs, employee friendly policies etc have helped us in keeping the attrition rate well in control & below the industry average.

The company has worked towards providing challenging high growth environment for its employees. We have continuouslybenchmarked ourselves to improve our HR policies and practices.

Moser Baer has responded to price-based competition with an unbeatable price-value proposition superior quality, timelydelivery, attractive price and regular introduction of new products. The success of this approach is reflected in the company'sincreasing global share and high growth.

The company operates in a high growth and capital intensive industry. Hence it is imperative to efficiently estimate and managecash flows in this volatile environment. The company's working capital arrangements are well in place to guard against anyuneven or seasonal factors. Besides, the company has also tied up additional alternative financing for cost optimization / fundingthe operations. The company monitors liquidity on a daily basis. Besides liquidity needs are estimated over a 12 month period ona rolling basis and compared with amount of available liquidity for management thereof.

As a part of its Disaster Recovery Plan, all related risks have been mapped by the company. A Disaster Management Team hasbeen entrusted with mobilization of resources and asset safety during emergencies.

High quality human resources are vital to the success of our business.

As installed capacities in global data storage industry have risen, prices have sharply declined.

Efficient cash flow management imperitive to grow.

Operations could be disrupted due to natural, political and economic disturbances.

People Risk Management

Competition De-risking

Cash Flow Risk

Security Risk Management

Creating Value

EVA Fact Sheet

Economic Value Added (EVA)

Risk-free return (R f )

Equity beta (ß e )

Market risk premium (MRP)

EVA Calculation

EVA analysis starts with the premise that investors are primarily concerned with the cash return on their cash investment and therisk associated with that investment.

This return can be directly compared with the return expected by investors, the company's WACC. Value is created/destroyed ifthe business generates a return above/below its cost of capital. EVA is thus defined as:

We have used the yield on the 10-year government bond as the risk-free rate. This bond currently yields 6.0% per annum, havingcome off the levels in FY03.

Based on an analysis of comparable optical storage media companies in Asia as well as Moser Baer's beta estimate fromBloomberg, Moser Baer's adjusted equity beta is estimated to be 0.94 for FY03-04.

The MRP is the additional return over and above the risk-free return investors require to invest in the market portfolio. We estimatethe MRP to be 6.0%.

Average capital employed (INR in million) 25864.8 17227.3 12018.9 6727.7 2714.9 1289.0 934.0

Average debt (INR in million) 13181.5 10021.8 5927.8 3092.9 1709.4 813.4 601.7

Beta Variant 0.9 1.0 1.3 1.3 1.1 1.2 1.1

Risk-free debt cost (%) 6.0 7.5 7.5 10.1 10.0 12.0 12.0

Market risk premium 6.0 6.0 7.0 8.0 8.5 8.5 8.5

Prime lending Rate (%) 10.3 10.8 11.3 11.5 11.3 12.0 13

Marginal Tax Rate (%) 35.7 35.7 35.7 40.3 40.3 40.3 35

Cost of equity (%) 11.6 13.6 16.9 20.7 19.6 22.2 21.3

Post-tax cost of debt (%) 6.6 6.9 7.3 6.9 6.8 7.2 8.5

Weighted average cost of capital (WACC) (%) 10.1 10.4 13.9 18.3 16.8 13.8 11.9

Economic value added (EVA)

Operating profit (PBT excl extraordinaries) 3594.6 2359.8 2200.3 1385.9 441.5 204.6 132.1

Less: tax -350.3 12.9 42.4 0.3 0.3 0.2 0.1

Less: cost of capital 2615.0 1792.0 1669.0 1234.0 457.0 178.0 111.0

Enterprise value

Market value of equity 30275.5 11085.9 13119.1 14758.7 6113.2 642.6 223.1

Less: cash and cash equivalents

Add: net debt 6534.7 9051.8 7137.5 2283.6 1499.0 513.5 602.4

Enterprise value 36810.3 20137.7 20256.6 17042.4 7612.1 1156.1 825.5

Ratio

EVA as a percentage of capital employed (%) 5.1 3.2 4.1 2.3 -0.6 2.0 2.2

Enterprise value/average capital employed 1.4 1.2 1.7 2.5 2.8 0.9 0.9

EVA= (ROIC - WACC) x Capital

Year ended March 31 2004 2003 2002 2001 2000 1999 1998

Economic value added 1330.0 555.0 489.0 152.0 -15.0 26.0 21.0

ratios

Ratio AnalysisRatio analysis

Year ended March 31 2004 2003 2002 2001 2000

Financial performance ratios

Balanced sheet ratios

Growth ratios

Per share data

Export revenue/total revenue (%) 82.2% 85.0% 81.2% 84.7% 84.6%

Gross profit/total revenue (%) 53.0 47.9 58.2 62.0 46.4

Selling, general & administrative expenses/total revenue (%) 11.1 13.2 11.8 8.1 7.9

Employee cost/total revenue (%) 3.3 3.0 2.7 2.6 3.3

Operating profit/total revenue (%) 41.0 38.6 42.8 48.5 36.5

Tax/PBT (%) 1.4 -0.6 1.9 0.0 0.0

ROCE (EBIT/average capital emploed) (%) 16.0 16.8 21.4 24.4 12.7

Average debt-equity ratio (%) 66.0 85.2 64.3 46.3 91.5

Debtors turnover days 70.7 93.4 139.7 147.8 98.9

Inventory turnover days 45.9 33.6 128.8 188.0 143.4

Creditors turnover days 64.7 55.9 58.6 66.9 58.9

Sales value (%) 45.5 59.5 102.5 117.1 52.8

Export revenue growth (%) 34.3 57.6 88.7 128.8 64.0

Operating profit (%) 61.6 26.1 66.5 219.8 75.1

Net earnings (%) 36.5 10.0 55.7 214.1 115.9

Earnings per share (INR) 36.8 24.4 22.3 15.4 7.1

Fully diluted earnings per share (INR) 33.5 24.4 22.3 14.9 7.1

Cash earnings per share (INR) 50.5 37.8 29.1 26.9 8.5

Dividend per share (INR) 1.5 2.5 2.6 3.1 1.7

Book value per share (INR) 176.2 120.0 95.2 107.3 30.0

Price/earnings (x) 8.3 4.7 5.7 7.4 11.5

Price/cash earnings (x) 6.1 6.0 8.7 8.4 13.1

Price/book value (x) 1.7 1.9 2.6 2.1 3.3

directors' report

Financial Results

Dear Shareholders,

Your Directors are pleased to present the 21 Annual Report and Audited Accounts for the financial year ended 31 March, 2004.st st

OperationsRevenues grew 43.8 per cent to INR 16.02 billion, EBIDTA (Earnings Before Interest Depreciation and Tax) grew 61.6 per cent toINR 6.59 billion, and Profit After Tax grew 36.5 per cent to INR 3.24 billion. The market environment during the year was strong, withsignificant growth in all areas of the optical media market. 2003 was the first year of mass market adoption of the DVD-R format,with global demand growing 3 times over 2002. During the year, your company firmly established itself in this important andrapidly growing segment, which will be the main engine of growth for the company over the next 2-3 years. The company rapidlyexpanded its capacities at its Greater Noida Complex, further reinforcing it's position as the single largest Optical Disk productionsite in the world.

(INR in Million)

Year ended March 31,

2004 2003

GROSS SALES AND OTHER INCOME 16,021.86 11,143.38

PROFIT BEFORE DEPRECIATION & INTEREST 6,588.71 4,077.27

DEPRECIATION 2,268.87 1,174.69

INTEREST AND FINANCE CHARGES 693.37 542.74

PROFIT BEFORE TAX 3,626.47 2,359.84

PROVISION FOR TAXATION (inc. Deferred Tax) 387.96 (12.89)

PROFIT AFTER TAX 3,238.51 2,372.73

PROFIT AVAILABLE FOR APPROPRIATION 2,372.73

APPROPRIATIONS:

DIVIDEND (PROPOSED) 167.27 129.45

PROVISION FOR TAX ON PROPOSED DIVIDEND 21.43 15.51

TRANSFER TO GENERAL RESERVE 3,047.80 2,227.77

3,238.51

Market Environment

New Projects and Expansion Plans

Market Development

The market environment substantially improved during the second half of the financial year, which was reflected by significantlyreduced inventories, improving prices, and strong demand. Key highlights for the financial year are:

Revenues of INR.16,021.86 million

Cash profits (Earnings before Depreciation and Taxes)- INR.5,507.38 Million.

Profit After tax of INR.3,238.51 million

Earnings per share of INR.33.41 (After prior period items)

Significant working capital reductions, due to improved market conditions and benefits from use of technology.

Significant increases in capacity at the Greater Noida complex.

Your company started production of 8x DVD-R's and 4x DVD-RW's.

Working Capital has been one of the key focus areas for the company during the year. Consequently, Net Working Capital as apercentage of gross revenues stands at 19.8 per cent.

The modular structure of the Greater Noida facility, along with the existing infrastructure and utilities, has provided your companywith the flexibility to quickly react to changes in market conditions at lower incremental costs. The company has nearly doubled itsinstalled capacity to 2 billion units per annum during FY03-04 with a 38 per cent increase in fixed assets. This has not only createda platform to increase our global market share, but will also enable us to achieve it more efficiently, resulting in an increasingcompetitiveness and raising our returns on deployed capital.

Working Capital (INR in million)

Particulars FY01 FY02 FY03 FY04

Debtors 1,361.0 2,604.4 2,778.0 3,059.9

Days 145.8 137.8 93.4 70.7

Inventory 1,731.4 2,402.4 998.5 1,984.9

Days 185.5 127.1 33.5 45.9

Creditors 615.8 1,093.3 1,724.9 2,307.8

Days 65.9 57.8 58.0 53.3

Moser Baer marketed a growing variety of products with a visible branding differentiation in FY03-04. Your company continues toenjoy strong customer loyalties driven by high product quality, product and process innovation and delivery of promisedstandards. In-house developed and patented packaging variations enabled us to offer a visibly differentiated product offering tocustomers.

The captive Indian market, expected to grow at a CAGR of over 40 per cent over the next 3 years, is one of the fastest growingmarkets for optical storage media in the world. During the year, your company promoted its domestic brand business, under the“moserbaer” brand name, to capture this high growth market opportunity and the “moserbaer” brand has been able to capture anestimated 25 per cent share of the branded segment of the domestic market. The company's retail strategy has been extremelysuccessful, with the “moserbaer” brand being associated with quality and innovation, and widely distributed across over 10,000retail outlets in 32 cities in the country.

Your company has now embarked on the next phase of expansion, in line with our aim of capturing a higher market share of thefast growing global optical storage media industry. We will do this by leveraging our low-cost advantage and world-classinfrastructure and technology. This project is expected to commence production by the end of FY04-05.

Your company's subsidiary - European Optic Media Technology GmbH (Europtic) will provide a strategic thrust to the globalmarketing position of Moser Baer. In addition to the benefits of close proximity to customers, Europtic will work closely with varioustechnology companies to develop very high value added and customized products for niche market segments.

The company has incorporated a subsidiary company in Germany viz., European Optic Media Technology GmbH (hereinafterreferred to as- “Europtic”) to expand its area of operations to Europe. The annexed accounts pertain for the period January, 2003to March, 2004. As required under Section 212 of the Companies Act, 1956, the Balance Sheet, P & L Account and the Directors'Report on the affairs of Europtic are annexed herewith together with the statement of the said subsidiary company. Also, theGerman law does not regulate any audit duties for its financial statements as the provisions of Code of Commercial Law ofGermany are not attracted for the said duration. Accordingly, Auditors' Report has not been prepared for the said period.

During the year under review, the company has divested its investment in Glyphics Media Inc, realizing the full value of its initialinvestment. However, the accounts of Glyphics Media Inc till 30 August, 2003 have been included while preparing theconsolidated accounts of your company.

Your Directors are pleased to recommend dividend @ 15 per cent on the paid-up Equity Share Capital of the company forFY03-04. The total pay-out will be INR 188.70 million inclusive of dividend tax and surcharge thereon.

In terms of the provisions of Sections 255 and 256 of the Companies Act, 1956 and Articles of Association of the company, Mr.Ratul Puri, Executive Director and Mr. Harnam Dass Wahi, Director retire at the ensuing Annual General Meeting and, beingeligible, have offered themselves for reappointment.

The term of M/s. K. C. Khanna & Co., Chartered Accountants is due to expire at the forthcoming Annual General Meeting.Pursuant to a resolution of the Board of Directors of the company, it has been resolved that, subject to the approval of themembers in a general meeting by Special Resolution, M/s. Price Waterhouse, Chartered Accountants, be appointed as StatutoryAuditors of the company, in their place and M/s. Price Waterhouse shall hold office from the conclusion of the 21 Annual General

Moser Baer continued its multi-pronged R&D initiatives during the year. The focus on R&D has enabled your company to developnew and innovative products, both in CD-R/RW and DVD-R/RW formats, and optimize production/efficiency parameters toreduce the cost of production. Moser Baer also continued to work very closely with key global technology majors to research anddevelop various potential media formats in the Write-Once and Re-Writeable Technologies.

During the year under review, your company and Imation Corp have entered into a 49:51 joint venture and established a company- Global Data Media FZ LLC in Dubai for marketing and distribution and research and development of the company's products.

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Technology, Engineering and Research & Development

Associate Company

Subsidiary Company

Dividend

Directors

Auditors

Meeting until the conclusion of the 22 Annual General Meeting of the company.

At the Extraordinary General Meeting of the company held on 29 August, 2003, you had approved the issue of stock options inrespect of 2,200,000 Equity Shares to the employees of the company and of its subsidiary companies. The companyimplemented the Employees Stock Option Plan 2004 with a view to promote the success of the company and the interest of itsshareholders by rewarding, attracting, motivating and retaining employees for high levels of individual performance and forefforts to improve the financial performance of the company.

At the Extraordinary General Meeting of the company held on 5 February, 2004, you had authorized the Board of Directors or anyCommittee thereof to increase the number of options to be granted to the employees of the company and of its subsidiaryCompanies to 4,400,000. The Compensation Committee of the Directors has granted 2,030,300 stock options to the eligibleemployees on 9 January, 2004. The details of the Stock Options granted under the ESOP including grants to SeniorManagement are given in the Annexure to the Directors' Report.

The company has used intrinsic value of the stock options. Had compensation cost for the ESOP been determined in a mannerconsistent with the fair value approach, the company's net income and Basic Earnings Per Share (EPS) would have been reducedto the amounts indicated below:-

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Year ending 31st March, 2004

Net Income As reported INR 3,238,510,943Less: Amount amortised* INR 127,232,133Adjusted amount INR 3,111,278,810

Basic & Diluted EPS As reported (after prior period items) INR 33.41Adjusted amount INR 32.09

The fair value of each option has been estimated on the date of the grant of the options using the Black Scholes (EnhancedModel) with the following assumptions:-

Stock Price INR 351 (as on 9 January 2004 as per NSE data)

Exercise Price INR 342 - Market price.

Total life of the options 7 years

Vesting period 3 years

Exit rate (pre-vesting) NIL

Exit rate (post-vesting) 3 per cent p.a.

Exercise multiple 1.25x (assuming that employees would exercise the options vested withthem once the multiple, i.e. Market Price over Exercise Price reaches1.25x)

Risk free rate 4.21per cent (for 6 years, source-Reuters as on 9 January 2004)

Expected Volatility p.a. 70 per cent (based on 4 year stock data from NSE)

Expected Dividend Yield p.a. 1 per cent (based on the dividend history of past 3 financial years, with aweighted of 50 per cent, 30per cent and 20 per cent for financial yearending '03, financial year ending '02 and financial year ending '01)

*Thus the fair value of the options comes to INR 188 per option.Total value of the options = 2,030,300 x INR 188 = INR 381,696,400Amortisation = INR 127,232,133.

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Employees' Stock Option Plan

Issue and Allotment of Global Depository Receipts and Warrants

Bonus Shares

Countervailing Duty

Particulars of Employees

Conservation of Energy, Research and Development, Technology Absorption,Foreign Exchange Earnings and Outgo

Fixed Deposits

At the Extraordinary General Meeting of the company held on 5 February, 2004, you had approved the issue and allotment ofAmerican Depository Receipts/ Global Depository Receipts, Equity Shares and convertible Warrants on a preferential basis sothat the aggregate issue of Equity Shares (including upon conversion of Warrants) do not exceed 20,100,000 Equity Shares.

On 29 March, 2004, 14,700,000 Equity Shares of INR 10 each at a premium of INR 326 per share have been issued to thedepository- Deutsche Bank Trust Company Americas. These Equity Shares are underlying in 147,000 Global Depository Receiptsof the face value of INR 336 each, which have been issued to Woodgreen Investment Ltd., an affiliate of Warburg Pincus LLC.

On 29 March, 2004, 5,400,000 Warrants of the face value of INR 336 each have also been allotted to Woodgreen Investment Ltd.These Warrants are convertible into an equal number of Equity Shares of INR 10 each at a premium of INR 326 per share within aperiod of 18 months from the date of allotment at the option of the Warrant-holder.

At the Annual General Meeting of the company held on 21 October, 2003, you had approved capitalization of reserves of theCompany to issue Bonus Shares in the ratio of 1:1 to then existing Equity Shareholders of the company. On 18 December, 2003,48,406,472 Equity Shares of INR 10 each were issued to those persons who were members/beneficial owners of the shares of thecompany as on 28 November, 2003.

The European Commission announced the termination of its anti-dumping proceedings against your company with respect to themanufacturing of Recordable Compact Discs (CD-R) as its investigations did not reveal any evidence of dumping by yourcompany. Thus, no anti-dumping duty was imposed with respect to the manufacturing of CD-Rs. However, the EuropeanCommission has imposed a 7.3 per cent countervailing duty on the value of imports of CD-Rs originating in India. The duty is paidby importers of CD-R media in Europe, and does not affect any of the company's other products like CD-R/W, DVD-R & DVD-R/W.

Particulars of employees as required under Section 217(2A) of the Companies Act, 1956 read with the companies (Particulars ofEmployees) Rules, 1975, as amended, form part of this report. However, in pursuance of Section 219(1)(b)(iv) of the companiesAct, 1956, this report is being sent to all the shareholders of the company excluding the aforesaid information and the saidparticulars are made available at the Registered Office of the company. The members interested in obtaining such particulars maywrite to the Company Secretary at the Regd. Office of the company.

The information pertaining to conservation of energy, research & development, technology absorption, foreign exchangeearnings and outgo, as required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure ofparticulars in the report of the Board of Directors) Rules, 1988 is given as per Annexure and forms part of Directors' Report.

During the year under review, the company has not accepted any deposit under Section 58A of the Companies Act, 1956 readwith Companies (Acceptance of Deposits) Rules, 1975.

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Corporate Governance

Management Discussion and Analysis

Directors' Responsibility Statement

Conclusion

A report on Corporate Governance along with a certificate from the Statutory Auditors has been included in the Annual Reportdetailing the compliances of corporate governance norms as enumerated in Clause 49 of the Listing Agreements with the StockExchanges.

A Management Discussion and Analysis Report has been attached and forms part of the Directors' Report.

Your Directors state:-

(i) that in the preparation of the annual accounts, the applicable accounting standards have been followed;

(ii) that we have selected such accounting policies and applied them consistently and made judgments and estimates that arereasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the FY03-04 and ofthe profit of the company for that year;

(iii) that we have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraudand other irregularities;

(iv) that we have prepared the annual accounts on a going concern basis.

Your company continues to consolidate its leadership position in its business through value addition to its products and services.It is also progressively gaining international competitiveness in quality and cost benchmarks and aims to build shareholder valueand sustain its performance track record. Your Directors look forward to the future with confidence.

Your Directors place on record their appreciation for the overwhelming co-operation and assistance received from investors,customers, business associates, bankers, vendors, regulatory and governmental authorities. Your Directors also thank theemployees at all levels, who through their dedication, co-operation, support and smart work have enabled the company toachieve rapid growth.

For and on behalf of the Board of Directorsof MoserBaer India Limited

Sd/-Place : New Delhi Deepak PuriDate :29th June, 2004 Chairman & Managing Director

Information regarding the Employee Stock Option Scheme(as on 31-03-2004)

a) Number of Stock Options granted 2,030,000 numbers

b) Pricing formula The average of the two weeks' high and low price of theshare prior to the date of grant of options as quoted atNational Stock Exchange, rounded-off to the nearestRupee.

c) Number of Options vested Nil

d) Number of Options exercised Nil

e) Number of shares arising as a result of exercise of options Nil

f) Number of Options lapsed Nil

g) Variance of terms of options Nil

h) Money realized by exercise of options Nil

i) Number of options in force 2,030,000 numbers

j) Employee wise details of options granted to No. of options

(i) Senior managerial personnel

a) Mr P M Pai, President 400,000

b) Mr V J Prakash, MD-European Operations 24,000

c) Mr Brian J, VP - Strategic Initiatives 200,000

d) Mr M Kobayashi, VP - Japan Operations 24,000

e) Mr Rakesh Govil, Head - Corp Strategy & Treasury 150,000

(ii) Employees who were granted options amounting to5 per cent or more of the options granted during the year M

(iii) Employees who were granted options in anyone year equal to or exceeding 1 per cent of the

capital of the company. NIL

k) Diluted Earnings Per Share (EPS) pursuant to issue ofshares on exercise of options calculated in accordancewith International Accounting Standard (IAS) 33 Not Applicable (as no option has been exercised so far)

l) Weighted average exercise price of the options

m) Weighted average fair value of the options

n) A description of the method and significant assumptionsused during the year to estimate the fair value of options,including the following weighted average information:-

r P M Pai, President

Mr. Brian J, VP - Strategic Initiatives

Mr. Rakesh Govil, Head - Corp Strategy & Treasury

issued

Not Applicable (as no option has been exercised so far)

Not Applicable (as no option has been exercised so far)

annexure A

(i) risk free interest rate 4.21per cent (for 6 years, source-Reuters as on09/01/2004)

(ii) expected life 7 years

(iii) expected volatility 70 per cent (based on 4 year stock data from NSE)

(iv) expected dividends 1per cent (based on the dividend history of past 3financial years, with a weighted of 50 per cent,30 per centand 20 per cent for financial year ending '03, financial yearending '02 and financial year ending '01)

(v) the price of the underlying share in market at the INRtime of option grant

Your company's energy requirements continue to develop significantly as it commissioned new manufacturing facilities and as itincreased production at its existing facilities. The company undertook a number of measures during the year to reduce the energyconsumption including:-

1. Commissioning of steam based vapour absorption systems, which effectively recycle exhaust gases from the company'spower plants.

2. The company developed a new production process which had process windows far wider than its earlier process enablingreduction in the level of conditioning needed in the coating areas and thereby further reducing energy consumption.

3. The company is working on a number of energy reduction projects, the estimated investments in these projects amount toapprox. INR 15 million and should result in energy savings in the region of INR 8 - 10 million each year.

I. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

As technology plays a bigger role in our ability to offer a complete basket of products to our customers, your company hasentered in the acquisition of technology and the right to use technology belonging to other third party companies. Duringthe year, a number of agreements were completed to acquire technology belonging to companies whose R&D effortshave been complementary to our technology development program. This technology has been successfullyincorporated into some of the company's products and an ongoing effort is being made to improve the utilization of thistechnology and produce newer innovative products based on this technology.

At the same time, your company is also part of many International Forums and R&D initiatives that are dedicated to thedevelopment of future formats like scribe technology, HD DVD and Blue ray. Such participative activities have significantlyenhanced the image of your company as an individual entity and our country as a whole in the mind of the Internationalcommunity.

342 per share

Information as per Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure ofParticulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors' Report

for the year ended 31st March, 2004.

A. Conservation of energy:

B. Technology absorption, adaptation and innovation, research & development:

annexure B

II. RESEARCH & DEVELOPMENT

1. Specific areas in which R&D carried out by the company

(a) Development of high speed CD-R 52X process using alternate dye technologies resulting in significant reductionin cost per CD-R.

(b) Development of 4X, 8X DVD-R and 4X DVD+RW processes to keep pace with technology and market trends.

(c) Improvement in existing processes to achieve significant improvement in archival life of products.

(d) Establishment of highly advanced state of the art Mastering and Galvanics facility. This has further improved ouroverall cost of operation.

2. Future Plan of Action

(a) To develop 16X DVD-R, 8X DVD+RW and dual layer DVD+R products.

(b) To work on development of future formats like HD DVD and Blue-ray discs.

3. Expenditure incurred on R&D during FY 03-04:-

(a) Capital Expenditure: INR 126 Million

(b) Recurring Expenditure: INR 180 Million

(c) Total Expenditure: INR 306 Million

(d) Total R&D expenditure as a percentage of total turnover: 1.9 %

Your company has undertaken the following steps in respect of activities relating to increasing the exports and for development ofnew export markets for the company's products:-

(a) The company has established an office in Japan to cater to the Far- East market.

(b) The company has established a 49:51 joint venture Company in Dubai, namely- Global Data Media FZ LLC to cater to theMiddle East market.

(c) Focus on Latin America, Middle East and South East Asian markets.

(d) B2B initiative with customers.

(e) CEBIT, GITEX, IFA participation.

Total foreign exchange earned comprising of FOB value of exports was INR 12,347.42 Million and total foreign exchange usedcomprising of CIF value of imports, dividend remitted and other outgoings was INR 12,757.40 Million.

For and on behalf of the Board of Directorsof MoserBaer India Limited

Sd/-Place : New Delhi Deepak PuriDate :29th June, 2004 Chairman & Managing Director

C. Foreign exchange earnings and outgo:

corporate governance

1. COMPANY'S PHILOSOPHY ON CORPORATE GOVERNANCE

2. BOARD OF DIRECTORS

Moser Baer India Limited is committed to adhere to the code of corporate governance as it means adoption of best businesspractices aimed at growth of the company coupled with bringing benefits to investors, customers, creditors, employees and thesociety at large.

The present strength of the Board is Nine Directors. The Board comprises of three Executive Directors and six Non-ExecutiveIndependent Directors. The Non-Executive Directors bring independent judgement in the Board's deliberations and decisions.

*During the year FY03-04, Mr. Rakesh Govil was appointed as an Alternate Director to Mr. Deepak Puri. However, he ceased to bethe Alternate Director w.e.f. 16 January, 2004.th

COMPOSITION OF THE BOARD

Mr. Deepak Puri* Executive N.A.

Mr. Harnam D. Wahi Independent and Non-Executive N.A.

Mr. Arun Bharat Ram Independent and Non-Executive N.A.

Mrs. Nita Puri Executive N.A.

Mr. John Levack Independent and Non-Executive Electra Partners Mauritius Limited.

Mr. Rajesh Khanna Independent and Non-Executive Bloom Investments Limited (BIL), EalingInvestments Limited (EIL), Randall InvestmentsLimited (RIL) and Woodgreen Investment Ltd (WIL).BIL, EIL, RIL and WIL are affiliates of WarburgPincus LLC.

Mr. Prakash Karnik Independent and Non-Executive N.A.

Mr. Bernard Gallus Independent and Non-Executive N.A.

Mr. Ratul Puri Executive N.A.

Name of the Director Category Equity Investors represented

DIRECTORSHIP IN OTHER COMPANIES AND BOARD COMMITTEES:

Mr. Deepak Puri 1 --- 2Mr. Harnam D. Wahi* 1 3 ---Mr. Arun Bharat Ram 10 --- 5Mrs. Nita Puri 1 --- 1Mr. John Levack 4 --- 5Mr. Rajesh Khanna 2 --- 2Mr. Prakash Karnik --- --- 3Mr. Bernard Gallus --- --- ---Mr. Ratul Puri --- --- 1

(i) 23 April, 2003 (ii) 29 July, 2003 (iii) 5 August, 2003(iv) 20 September, 2003 (vi) 11 January, 2004(vii) 27 January, 2004

ATTENDANCE RECORD OF DIRECTORS:

Mr. Deepak Puri 7 4 1 YesMr. Harnam D. Wahi 7 7 --- Yes

Mrs. Nita Puri 7 3 1 YesMr. John Levack 7 4 --- NoMr. Rajesh Khanna 7 4 2 NoMr. Prakash Karnik 7 6 --- NoMr. Bernard Gallus 7 Leave of absence --- NoMr. Ratul Puri 7 7 --- YesMr. Rakesh Govil-Alternate Director toMr. Deepak Puri 7 1 --- N.A.

Name of the Director No. of other Directorships

(excluding foreign companies

and private limited companies)

Chairman Member

Name of the Director Board Meetings Meetings attended Attended last AGM

held during the year held on October 21,

2003

In Person Through Audio

Conferencing

No. of Committee Memberships

(including MBIL's Committees)

rd th th

th th

th

(v) 24 October, 2003

Mr. Arun Bharat Ram 7 2 --- No

th

None of the Directors of the Board serve as members of more than 10 Committees nor are they Chairman of more than 5Committees, as per the requirements of the Listing Agreement.

*Mr. Harnam D. Wahi has notified the company that he has ceased to be a Director in DCM Shriram Consolidated Limited w.e.f.18 August, 2003.

The Board met seven times on the following dates during the financial year 2003-2004 and the gap between two meetings did notexceed four months:

The information as required under Annexure I to Clause 49 of the Listing Agreement is made available to the Board. Adequateinformation is circulated as part of the agenda papers to enable the Board to take informed decisions.

th

3. AUDIT COMMITTEE

The company has a qualified and independent Audit Committee. Mr Harnam D. Wahi is the Chairman of the Audit Committee.Other members of the Committee are- Mr. Prakash Karnik, Mr. Rajesh Khanna and Mr. John Levack. The Company Secretary ofthe company acts as the Secretary of the Committee.

a) Overseeing the company's financial reporting process and the disclosure of financial information to ensure that the financialstatement is correct, sufficient and credible.

b) Recommending the appointment and removal of external auditors, fixation of audit fee and also approval for payment for anyother service.

c) Reviewing with management the annual financial statements before submission to the Board, focusing primarily on;

Any changes in accounting policies and practices.

Major accounting entries based on exercise of judgement by management.

Qualifications in draft audit report.

Significant adjustments arising out of audit.

The going concern assumption.

Compliance with accounting standards.

Compliance with stock exchange and legal requirements concerning financial statements.

Any related party transactions i.e. transactions of the company of material nature, with promoters or the management,their subsidiaries or relatives etc. that may have potential conflict with the interests of company at large.

Reviewing with the management, external and internal auditors, the adequacy of internal control systems.

e) Reviewing the adequacy of internal audit function, including the structure of the internal audit department staffing andseniority of the official heading the department, reporting structure coverage and frequency of internal audit.

f) Discussing with internal auditors any significant findings and follow up thereon.

g) Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud orirregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.

h) Discussing with external auditors before the audit commences- nature and scope of audit as well as have post-auditdiscussion to ascertain any area of concern.

i) Reviewing the company's financial and risk management policies.

j) Looking into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case ofnon-payment of declared dividends) and creditors, if any.

Terms of reference:-

The Audit Committee performs the following functions:-

d)

During the year, the Committee met seven times on the following dates:

(i) 23 April, 2003 (ii) 29 July, 2003 (iii) 30 July, 2003(iv) 5 August, 2003 (v) 20 September, 2003 (vi) 24 October, 2003(vii) 27 January, 2004

rd th th

th th th

th

Following are the details regarding the Committee meetings attended by the members:-

Mr. Harnam D. Wahi (Chairman) 7 7 ---

Mr. Prakash Karnik 7 7 ---

Mr. Rajesh Khanna 7 5 2

Mr. John Levack 7 4

Mr. Ratul Puri * 7 7 ---

* Mr. Ratul Puri resigned from the membership of the Audit Committee with effect from 25 March, 2004.

(i) 23 April, 2003 (ii) 29 July, 2003 (iii) 24 October, 2003(iv) 11 January, 2004

Following are the details regarding the Committee meetings attended by the members:-

Mr. Harnam D. Wahi (Chairman) 4 4

Mr. Prakash Karnik 4 2

Mr. Rajesh Khanna 4 3

Mr. John Levack 4 2

Mr. Deepak Puri * 4 3

Mr. Rakesh Govil-Alternate Director toMr. Deepak Puri 4 1

* Mr. Deepak Puri resigned from the membership of the Compensation Committee with effect from 25 March, 2004.

Member Director Committee Meetings

held during the year

In Person Through Audio Conferencing

Member Director Committee Meetings held during the year No. of Meetings Attended

Meetings Attended

th

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th

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4. COMPENSATION COMMITTEE

Mr Harnam D. Wahi is the Chairman of the Compensation Committee. Other members of the Committee are - Mr. Prakash Karnik,Mr. John Levack and Mr. Rajesh Khanna. The Company Secretary of the company acts as the Secretary of the committee.

The company's compensation policy is based on the principles of responsibility, performance and potential. The company'sCompensation Committee has been constituted to administer the Employees Stock Option Plan and to decide about theremuneration package of all the Executive Directors of the company.

During the year, the Committee met four times on the following dates:

Terms of reference:-

REMUNERATION POLICY

Salaries, Allowances 1,725,600 454,800 2,910,000

PF Contribution 115,200 36,000 180,000

Perquisites 95,054 103,400 107,990

(i) 23 April, 2003 (ii) 29 July, 2003 (iii) 24 October, 2003(iv) 27 January, 2004

Particulars Managing Director Whole Time Director Executive Director

Mr. Deepak Puri, Managing Director; Mrs. Nita Puri, Whole Time Director and Mr. Ratul Puri, Executive Director

TOTAL 1,935,854 594,200 3,197,990

Service Contracts, Notice Period, Severance Fees

Service Contracts, Notice Period, Severance Fees

rd th th

th

(i) Executive Directors:-

(ii) Non-Executive Directors:-

Terms of reference:-

The details of the remuneration paid to Mr. Deepak Puri, Managing Director, Mrs. Nita Puri, Whole Time Director and Mr. RatulPuri, Executive Director during the year FY03-04 are as follows:

The company has executed a Service Contract each with Mr. Deepak Puri, Managing Director, Mrs. Nita Puri, Whole Time Directorand Mr. Ratul Puri, Executive Director whereby each of them has been appointed for a period of five years w.e.f. 1 September,2001, 1 December, 2001 and 1 October, 2001 respectively. Each of them is entitled to resign from his/her office at any time upongiving to the company at least three calendar months' written notice. No severance fees shall be payable toeither of them.

The Non-Executive Directors have not drawn any remuneration from the company for the year ended March 31, 2004. However,they were paid a sitting fee of Rs.5,000 for each Board/Committee meeting attended till 21 October, 2003 and Rs.20,000 for eachBoard Meeting and Rs.10,000 for each Committee meeting attended thereafter. Mr. Rajesh Khanna, nominee Director of BIL, EIL,RIL and WIL does not charge any Sitting Fees for attending any meeting of the Board or Committees thereof.

Mr. Harnam D. Wahi, Mr. Arun Bharat Ram, Mr. Bernard Gallus and Mr. Prakash Karnik are liable to retire by rotation. No severancefees will become payable to them if they desire not to continue as Directors of the company.

The Chairman of the committee, Mr. Harnam D. Wahi, is a Non-Executive Independent Director. Other members of the Committeeare- Mr.Prakash Karnik, Mr. John Levack, Mr. Deepak Puri and Mrs. Nita Puri. The Company Secretary of the company acts as theSecretary of the Committee.

The Investors' Grievance Committee looks into redressal of shareholders' and investors' complaints like - transfer of shares,non-receipt of Annual Reports, non-receipt of dividend and allied matters.

During the year, the committee met four times on the following dates:

st

st st

st

Mr. John Levack non-rotational nominee Director- representative of Electra Partners Mauritius Ltd.: - No severance fees willbecome payable to him if ElectraPartners Mauritius Ltd. withdraws his nomination as a Director of the company.

Mr. Rajesh Khanna non-rotational nominee Director-representative of BIL, EIL, RIL and WIL - affiliates of Warburg Pincus LLC.: -No severance fees will become payable to him if BIL, EIL, RIL and WIL withdraw his nomination as a Director of the company.

5. INVESTORS' GRIEVANCE COMMITTEE

Following are the details regarding the Committee meetings attended by the members:-

Mr. Harnam D. Wahi (Chairman) 4 4

Mr. Prakash Karnik 4 3

Mr. John Levack 4 3

Mr. Deepak Puri 4 3

Mrs. Nita Puri 4 2

:- Mrs. Minni Katariya, Company Secretary.

Telephone numbers : 51635201-5, 26911570-74

Fax number : 51635211, 26911860

Complaints received and processed by M/s. MCS Limited and the Company from 1 April, 2003 to 31 March, 2004

Relating to transfer, transmission, etc. 19 19 ---

Relating to dematerialization 1 1 ---

Relating to dividend 3 3 ---

Relating to miscellaneous matters 15 15 ---

Relating to bonus 17 17 ---

SEBI / DSE/ BSE Complaints status from 1 April, 2003 to 31 March, 2004

Relating to transfer, transmission, etc. 28 28 ---

Relating to dematerialization --- --- ---

Relating to dividend 18 18 ---

Relating to miscellaneous matters --- --- ---

Relating to bonus 12 12 ---

Names of members Committee Meetings held during the year No. of Meetings Attended

Nature of complaints Received Disposed off Pending

Name and designation of the Compliance Officer

shares@moserbaer.net

st st

st st

TOTAL 55 55 ---

TOTAL 58 58 ---

Nature of complaints Received Disposed off Pending

The transfer / transmission of physical share certificates is approved by the Company Secretary generally on a weekly basis onthe basis of recommendations received from the company's Registrars and Share Transfer Agent-M/s. MCSLimited.

The investors may lodge their grievances through e-mail at or contact the Compliance Officer at thefollowing numbers: -

Information regarding complaints received from the shareholders

6. CORPORATE GOVERNANCE COMMITTEE

7. COMPLIANCE WITH SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS, 2002

Terms of reference:-

Guided by the principles of good corporate governance, the company has constituted a Committee on Corporate Governanceduring the year 2003-04:-

(a) to advise the company on the best practices being followed on corporate governance issues worldwide and o implementthem in the company appropriately;

(b) to appoint any outside agency to report on corporate governance matters; and

(c) to appoint consultants in this regard.

The Chairman of the committee, Mr. Rajesh Khanna, is a Non-Executive Independent Director. Other members of the Committeeare:- Mr. Prakash Karnik, Director; Mr. John Levack, Director; and Mr. Deepak Puri, Managing Director. The Company Secretary ofthe company acts as the Secretary of the Committee.

During the year, the committee met three times on the following dates:

In pursuance of these regulations, the company has formulated Standing Instructions for the Employees and Directors for dealingin Shares of the company and these Standing Instructions were implemented with effect from 9 September, 2002. Various formshave been designed to receive periodical information from the employees and the Directors of thecCompany, as required interms of these regulations. Further, the Trading Window for dealing in shares of the company has been closed for the Directorsand employees of the Company as per the following details: -

t

th

(i) 20 September, 2003 (ii) 24 October, 2003 (iii) 27 January, 2004

Following are the details regarding the Committee meetings attended by the members:-

Mr. Rajesh Khanna (Chairman) 3 2

Mr. Prakash Karnik 3 2

Mr. John Levack 3 2

Mr. Deepak Puri 3 1

Tuesday, 01/04/2003 to Thursday, 24/04/2003 Consideration of un-audited financial resultsfor the quarter ended 31 March, 2003.

Wednesday, 09/07/2003 to Wednesday, 30/07/2003 Consideration of un-audited financial resultsfor the quarter ended 30 June, 2003.

Wednesday, 17/09/2003 to Monday, 22/09/2003Company for the year 2002-03.

Tuesday, 07/10/2003 to Saturday, 25/10/2003 Consideration of un-audited financial resultsfor the quarter ended 30 September, 2003.

Thursday, 01/01/2004 to Saturday, 31/01/2004 Consideration of un-audited financial resultsfor the quarter ended 31 December, 2003.

Thursday, 01/04/2004 to Friday, 30/04/2004 Consideration of un-audited financial resultsfor the quarter ended 31 March, 2003.

th th th

st

th

th

st

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Names of members Committee Meetings held during the year No. of Meetings Attended

Dates of closure of trading window Purpose of closure

Consideration of audited annual accounts of the

8. PARTICULARS OF ANNUAL GENERAL MEETINGS AND EXTRAORDINARY GENERAL MEETINGSHELD DURING THE LAST THREE YEARS

General Meeting Date Time Venue Special Resolutions passed

Annual General Meeting 28/09/2001 9:30 A.M. Centaur Hotel,New Delhi- 110 037 records, documents, etc of the

company from its registeredoffice to its corporate office.

Annual General Meeting 27/09/2002 9:30 A.M. Centaur Hotel,New Delhi- 110 037 Nil

Extraordinary General 29/08/2003 9.30 A.M. Centaur Hotel,New Delhi- 110 037 of the company de-listed from the

Stock Exchanges located at Delhi,Kolkata, Ahmedabad and Kanpur.

(b) For alteration of the Article 6 ofthe Articles of Association of thecompany.

(c) For alteration of the Article 5(a)of the Articles of Association of thecompany.

(d) For shifting of statutory registers,records, documents, books ofaccounts, etc of the company fromits corporate office to its registeredoffice.

(e) For issue of Equity Shares underSEBI (ESOS and ESPS) Guidelines,1999 to the employees of thecompany.

(f) For issue of Equity Shares underSEBI (ESOS and ESPS) Guidelines,1999 to the employees of subsidiarycompanies of the company.

Annual General Meeting 21/10/2003 9.30 A.M. FICCI Golden JubileeAuditorium,Federation House, cTansen Marg,New Delhi- 110 001

ompany for issuing Bonus Shares.

Extraordinary General 05/02/2004 10.00 A.M. Centaur Hotel,New Delhi- 110 037 the Articles of Association of the

company.

(b) For increasing the number of EquityShares to be issued under SEBI(ESOS and ESPS) Guidelines, 1999to the employees of the company.

For shifting of statutory registers,

(a) For getting the Equity SharesMeeting

(a) For alteration of the Article 94 of theArticles of Association of theompany.

(b) For capitalisation of reserves of thec

(a) For alteration of the Article 5(a) ofMeeting

(c) For increasing the number of EquityShares to be issued under SEBI(ESOS and ESPS) Guidelines, 1999to the employees of subsidiaryCompanies of the Company.

(d) For issue and allotment ofADRs/GDRs on a preferential basisto various Institutional Investors.

(e) For issue and allotment of EquityShares on a preferential basis toWoodgreen Investment Ltd or anyother affiliates of Warburg PincusLLC.

(f) For issue and allotment of Warrantsconvertible into Equity Shares on apreferential basis to WoodgreenInvestment Ltd or any otheraffiliates of Warburg Pincus LLC.

(g) For increasing the shareholdinglimit for FIIs in the Company to 74%.

a)

a)

(i) The Economic Times.(ii) The Times of India.(iii) The Hindustan Times.(iv) The Pioneer.(v) Navbharat Times.(vi) Business Standard.(vii) Financial Express.

b) :-www.moserbaer.com

Further, no resolution was required to be put through postal ballot at the last Annual General Meeting. No resolution is proposedto be passed through postal ballot at the forthcoming Annual General Meeting.

Disclosures on materially significant related party transactions, i.e. transactions of the company of material nature, with itsPromoters, the Directors or the management, their subsidiaries or relatives, etc. that may have potential conflict with theinterest of the company at large - NIL.

b) Details of non-compliance by the company, penalties, strictures imposed by Stock Exchange or SEBI or any statutoryauthority, on any matter related to capital markets, during the last three years- NIL

The company ensures that its financial results are sent to the concerned Stock Exchanges immediately after the same havebeen considered and taken on record by the Board of Directors and published in the following newspapers:-

The company also ensures that these results are promptly and prominently displayed on the company's website

9. DISCLOSURES

10.MEANS OF COMMUNICATION

c)

a) 21 ANNUAL GENERAL MEETING

Date : Monday, 26th July, 2004 :Time : 9:30 AMVenue : FICCI Golden Jubilee Auditorium,

Federation House, Tansen Marg, New Delhi 110 001

b) FINANCIAL CALENDAR : 1 April to 31 March

c) BOOK CLOSURE : Thursday, 22nd July, 2004 to Monday, 26th July, 2004

d) DIVIDEND PAYMENT DATE : The dividend for the year2003-04, as recommendedby the Directors and if declared at the forthcomingAnnual General Meeting, will be paid on orbefore Tuesday, 24th August, 2004 to thosemembers whose names appear:-

(i) as

(ii) as

e) LISTING

The Equity Shares of the company are listed at thefollowing Stock Exchanges* ii) National Stock Exchange of India Limited.

iii) The Calcutta Stock Exchange Association Limited.

f) STOCK CODE

The Stock Code at: -

i) Mumbai Stock Exchange is : 517140ii) National Stock Exchange is : MOSERBAERiii) Calcutta Stock Exchange is : 23164 and 10023164

st

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: i) The Stock Exchange, Mumbai.

The company also complies with SEBI regulations regarding filing of its financial results under the EDIFAR system.

d) The company's official news releases are also displayed on the company's web site.

e) Management Discussion and Analysis Report is a part of the Annual Report of the company for the year FY03-04.

beneficial owners as at the closure of thebusiness hours on Monday, 26th July, 2004 as perthe list being furnished by National SecuritiesDepository Limited and Central DepositoryServices (India) Limited in respect of the sharesheld in electronic form; and

members in the Register of Members of thecompany as at the closure of business hours onMonday, 26th July, 2004

* During the year 2003-04, the equity shares of the company were voluntarily delisted by the company from The AhmedabadStock Exchange, The Delhi Stock Exchange and The Uttar Pradesh Stock Exchange. Further, the company has filed anapplication with The Calcutta Stock Exchange for voluntary delisting. Application for the same is under process and approvalis pending.

11. GENERAL SHAREHOLDER INFORMATION

g) STOCK PRICE DATA

Stock Market Data at BSE and NSE for the period 1 April, 2003 to 31 March, 2004

: -

April, 2003 284.50 227.50 284.90 225.25May, 2003 306.90 266.05 330.00 230.00June, 2003 345.00 284.00 345.00 248.00July, 2003 375.00 305.00 380.00 305.00August, 2003 333.00 244.95 321.50 253.20September, 2003 418.75 277.30 417.45 271.60October, 2003 512.80 372.50 513.00 351.15November, 2003 598.00 281.00 598.00 281.50December, 2003 362.70 278.25 362.20 242.00January, 2004 421.00 311.15 419.00 311.00February, 2004 360.00 306.00 360.00 306.00March, 2004 332.90 234.00 333.00 233.20

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MONTHS BSE NSE

Highest Lowest Highest Lowest

g) i) :-STOCK PERFORMANCE IN COMPARISON TO NSE INDEX

Moser Baer vs Nifty

Monthly high and low quotations of shares traded at the Stock Exchange, Mumbai (BSE) and National Stock ExchangeLtd. (NSE) are as follows

200.00

240.00

280.00

320.00

360.00

400.00

440.00

480.00

520.00

560.00

600.00

800.00

900.00

1000.00

1100.00

1200.00

1300.00

1400.00

1500.00

1600.00

1700.00

1800.00

1900.00

2000.00

2100.00

Moser Baer India Ltd. N S E Nif ty

h) ADJUSTED STOCK PRICE DATA:-

April, 2003

MONTHS BSE NSE

Highest Lowest Highest Lowest

Moser Baer vs Nifty

h) i) :-STOCK PERFORMANCE IN COMPARISON TO NSE INDEX

Calculated after taking into consideration the issue of Bonus Shares in the ratio of 1:1 (therecord date being - 28 November, 2003 and the date of allotment being - 18 December, 2003).

142.25 113.75 142.45 112.63May, 2003 153.45 133.03 165.00 115.00June, 2003 172.50 142.00 172.50 124.00July, 2003 187.50 152.50 190.00 152.50August, 2003 166.50 122.48 160.75 126.60September, 2003 209.38 138.65 208.73 135.80October, 2003 256.40 186.25 256.50 175.58November, 2003 299.00 140.50 299.00 140.75December, 2003 362.70 278.25 362.20 242.00January, 2004 421.00 311.15 419.00 311.00February, 2004 360.00 306.00 360.00 306.00March, 2004 332.90 234.00 333.00 233.20

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100.00

140.00

180.00

220.00

260.00

300.00

340.00

380.00

800.00

900.00

1000.00

1100.00

1200.00

1300.00

1400.00

1500.00

1600.00

1700.00

1800.00

1900.00

2000.00

2100.00

Moser Baer India Ltd. N S E Nifty

i) 31 MARCH, 2004

Upto 5,000 32,988 89.07 4294987 3.855,001 to 10,000 2,469 6.67 1923210 1.7210,001 to 20,000 915 2.47 1428582 1.2820,001 to 30,000 243 0.66 631579 0.5730,001 to 40,000 116 0.31 423028 0.3840,001 to 50,000 53 0.14 245782 0.2250,001 to 100,000 101 0.27 702701 0.63100,001 & above 153 0.41 101863075 91.35

j) REGISTRARS AND SHARE TRANSFER AGENTS

:

Phone numbers : 26384909-11 and 51609386

Fax number : 26384907

E-mail address : mcsdel@vsnl.com

k) SHARE TRANSFER SYSTEM

Following is the procedure of transfer of physical share certificates:-

i) Entry of share certificates in the computer on receipt thereof in the office.

ii)

DISTRIBUTION OF SHAREHOLDING AS ON st

No. of Equity Shares No. of shareholders Per cent No. of shares Per cent

Total 37,038 100.00 111512944 100.00

MCS Limited is the Registrar & Share Transfer Agent of the company and its office is located at W-40, Okhla Industrial Area,Phase-II, New Delhi 110 020. Contact Person: - Mr. K.R.Menon. Contact numbers are as follows

The application for transfer, transmission and transposition of shares are received by the company at its registered office orat the office of Registrars and Share Transfer Agent- M/s. MCS Limited.

Scrutiny of transfer deeds.

iii) Tallying of transferor's signature with the specimen signature available with the Registrar and Share Transfer Agent.

iv) Data entry of transfer deeds.

v) Preparation of objection memos and notices in respect of un-transferred shares.

vi) Generation of checklist for valid and invalid transfer deeds.

vii) Correction of data in the computer system on the basis of changes marked in the checklist.

viii) Recording of transfer of shares in the computer system.

ix) Endorsement and signatures on the reverse side of the share certificates.

x) Generation of covering letters for the transferred share certificates and dispatch of transferred share certificates, objectionmemos and notices by registered post.

Upon completion of the share transfer process, an offer letter is sent to the transferee with an option to receive credit of thetransferred shares in electronic form, if so desired, under the “Transfer-cum-Demat” facility extended by the company. In terms ofSEBI's letter number D&CC/NSDL-CDSL/3524/2003 dated 12 February, 2003, this facility is available for transfer upto 500shares. Shareholders who opt for this facility by submitting the offer letter along with Dematerialisation Request Form (DRF) dulyauthenticated by Depository Participant (DP), receive electronic credit of their shares in their Demat Account maintained with DP.

th

In case transferee opts to receive transferred share certificate(s) in physical form or does not submit the offer letter within thestipulated time, share certificate(s) is/are sent to the transferee.

Following is the procedure for dematerialization of shares:-

ntry of the share certificates and the dematerialization request form in the computer.

ii) Scrutiny of the share certificates and the dematerialization request form in the computer.

iii) Tallying of signature of the shareholder on the dematerialization request form with the specimen signature available with theRegistrar and Share Transfer Agent.

iv) Data entry of transfer deeds.

v) Generation of checklist.

vi) Change of shares from physical todemat mode.

vii) Send confirmati

The Equity Shares of the company are actively traded at major Stock Exchanges in demat mode. As on 31 March, 2004, 69.34%of the shares were held in dematerialized mode by 90.86% of the total shareholders of the Company.

On 29 March, 2004, the company has allotted, on a private placement basis, 14,700,000 Equity Shares of Rs. 10/- each at apremium of Rs. 326 per share to Deutsche Bank Trust Company Americas, which has issued 147,000 Global Depository Receipts(GDRs) of the face value of Rs. 336 per GDR toWoodgreen Investment Ltd.

On 29 March, 2004, the company has also allotted 5,400,000 Warrants convertible into 5,400,000 Equity Shares of Rs. 10/- eachat a premium of Rs. 326 per Share to Woodgreen Investment Ltd., on a private placement basis and on receipt of a considerationwhich is 10% of the face value of the Warrants. These Warrants are convertible, at the option of the Warrant- holder, within a periodof 18 months from the date of allotment and on payment of the balance consideration of 90% of the face value of the Warrants, intoan equivalent number of Equity Shares.

As on date, Woodgreen Investment Ltd has neither exchanged its GDRs with Equity Shares nor has it converted the Warrants intoEquity Shares.

66, NSEZ, Noida, District- Gautam Budh Nagar U.P.ii) A-164, Sector 80 Noida- II, Distt. Gautam Budh Nagar U.P.iii) B-4, NSEZ, Noida, District- Gautam Budh Nagar U.P.iv) B-17, Sector 9, Noida, District- Gautam Budh Nagar U.P.v) A-33, Sector-57, Noida, U.P.vi) 66, Udyog Vihar Industrial Area, Greater Noida, U.P.

All correspondence regarding transfer and dematerialization of share certificates should be addressed to our Registrarand Share Transfer Agent - MCS Limited located at W-40, Okhla Industrial Area, Phase-II, New Delhi - 110 020. Followingare the contact numbers

st

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i) E

on to NSDL and CDS(I)L.

l) DEMATERIALISATION OF SHARES AND LIQUIDITY

m) CONVERSION OF INSTRUMENTS

n) PLANT LOCATIONS

i)

o) ADDRESSFOR CORRESPONDENCE

i)

: -

Telephone numbers : 26384909-11 and 51609386Fax number : 26384907E-mail address : mcsdel@vsnl.com

ii) F:-

Telephone numbers : 51635201 to 51635205, 26911570-74Fax numbers : 51635211, 26911860E-mail address :

(a)

shares@moserbaer.net

or any other information, the shareholders may contact the Company Secretary at the Registered Office of the companylocated at 43- A, Okhla Industrial Estate, New Delhi - 110020. Following are the contact numbers

In terms of the provisions of Section 205C of the Companies Act, 1956, unclaimed equity dividend for the year 1995-96 hasbeen transferred to the Investor Education and Protection Fund.

(b) The company will transfer the amount remaining unpaid in its dividend account for the year 1996-97 to the Investor Educationand Protection Fund by Friday, 10 December, 2004. Those members who have not yet encashed their dividend warrants forthe said year may refer the matter along with relevant details to the Company Secretary at the Registered Office of thecompany located at 43-A, Okhla Industrial Estate, New Delhi-110020 latest by Monday, 15 November, 2004 to claim theirunpaid dividend.

th

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12. OTHER INFORMATION

Certificate

To the members ofMoser Baer India Limited

We have examined the compliance of conditions of Corporate Governance by Moser Baer India Limited, for the year ended onMarch 31, 2004, as stipulated in Clause 49 of the Listing Agreement of the said company with Stock Exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination was limited toprocedures and implementation thereof, adopted by the company for ensuring the compliance of the conditions of the CorporateGovernance. It is neither an audit nor an expression of opinion on the financial statements of the company.

In our opinion and to the best of our information and according to the explanations given to us :-

1. We certify that the company has complied with the conditions of Corporate Governance as stipulated in the above mentionedListing Agreement.

2. As per the records maintained by the Investors' Grievance Committee, no investor grievances against the company arepending for a period exceeding one month.

3. We further state that such compliance is neither an assurance as to the future viability of the company nor the efficiency oreffectiveness with which the Management has conducted the affairs of the company.

For K. C. Khanna & Co.,

Membership No. 83084H-96, Connaught Circus,New Delhi 110 001Date : June 18, 2004

Chartered Accountants(Nitin K. Jain)

Partner

list of working capital lenders

IDBI Bank Ltd.,Surya Kiran Building,K.G.Marg,New Delhi-110 001

UTI Bank Ltd.,Statesman House,Barakhamba Road,New Delhi-110 001

HDFC Bank Limited,Kailash Building,K.G.Marg,New Delhi-110 001

State Bank of India,Overseas Branch,Vijya Building,Barakhamba Road,New Delhi-110 001

State Bank of Patiala,Chanderlok Building,New Delhi-110 001

State Bank of Bikaner & Jaipur,G-72,Connaught Circus,New Delhi-110 001

State Bank of Travancore,Industrial Finance Branch,Travancore House,K.G.Marg, New Delhi-110 001

State Bank of Saurashtra,C-37,Connaught Circus,New Delhi-110 001

The Karnataka Bank Ltd.,Chaudhry Building,K Block, Connaught Circus,New Delhi-110 001

Punjab National Bank,Large Corporate Branch,A-9,Connaught Circus,New Delhi-110 001

The Bank of Nova Scotia,Dr.Gopal Das Bhawan,28, Barakhamba Road,New Delhi-110 001

Union Bank of India,M Block,Connaught Circus,New Delhi-110 001

HSBC Limited,ECE House,K.G.Marg,New Delhi-110 001

CitiBank,DLF Centre,Parliament Street,New Delhi-110 001

Standard Chartered Bank,Parliament Street,New Delhi 110001

BNP Paribas,1 India Place,A Block, Sushant Lok Phase I,Mehrauli Gurgaon Road,Gurgaon

Export Import Bank of India,Centre One,Floor 21, World Trade Centre,Cuffe Parade, Mumbai-400 005

ING Vysya Bank Ltd,G-35,Connaught Place,Opp. Madras Hotel,New Delhi-110 001

st

financials

To the Members of Moser Baer India Limited

1. We have audited the attached Balance Sheet of MOSER BAER INDIA LIMITED, as at 31 March, 2004, the Profit and LossAccount and also the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements arethe responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statementsbased on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. These Standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significant estimates made byManagement, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.

3. 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 in the Annexure, a statement on the matters specified inparagraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to above, we report that :

i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary forthe purposes of our audit;

ii) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from ourexamination of those books;

iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with thebooks of account;

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

v) On the basis of written representations received from the directors, as on 31 March, 2004, and taken on record by theBoard of Directors, we report that none of the directors is disqualified as on 31 March, 2004 from being appointed as adirector in terms of Clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts readwith the Accounting Policies and Notes thereon, give the information required by the Companies Act, 1956, in themanner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31 March, 2004;

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

c) in the case of the Cash Flow Statement, of the cash flow for the year ended on that date.

For K.C. Khanna & Co.,Chartered Accountants

(Nitin K. Jain)Partner

Membership No. 83084H-96, Connaught Circus,New Delhi 110 001.Dated : June 18, 2004

st

st

st

st

auditors' report

(Referred to in paragraph 3 of our report to the members of Moser Baer India Limited)

1 (a) The Company has maintained proper records to show full particulars, including quantitative details and situation of itsfixed assets.

(b) A major portion of the fixed assets have been physically verified by the Management during the year and there is aregular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and thenature of its assets. According to the information and explanations given to us, no material discrepancies have beennoticed on such physical verification as compared to the book records.

(c) During the year, the Company has disposed of some items of the plant and machinery. According to the information andexplanations given to us, we are of the opinion that the sale of the said items of plant and machinery has not affected the“going concern” status of the Company.

2 (a) Physical verification has been carried out by the Management in respect of inventory at reasonable intervals including ason 31.03.2004, as per the records reviewed by us.

(b) Based on information and explanations given and the records produced, in our view, the procedures of physicalverification of inventory followed by the Management during the accounting year are reasonable and adequate inrelation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory. As per the information furnished by the Management, nomaterial discrepancy was observed between physical inventories and the book records, and the same has beenproperly dealt with in the books of account.

3. The Company has, during the year, neither granted nor taken any loans, secured or unsecured to / from companies, firms orother parties covered in the register maintained under section 301 of the Companies Act, 1956; and accordingly the questionof repayment of principal / interest or any overdues, is not relevant.

4. In our opinion and according to the information and explanations given to us during the course of audit, there are internalcontrol procedures, generally considered adequate, commensurate with the size of the Company and the nature of itsbusiness for purchases of inventory and fixed assets and with regard to sale of goods. During the course of our audit, we havenot observed any continuing failure to correct major weakness in internal controls.

5 (a) According to the information and explanations given to us, there are no contracts or arrangements entered into by theCompany during the year that are required to be entered into the register maintained under section 301 of theCompanies Act, 1956.

(b) In our opinion and according to the information and explanations given to us, the Company has not entered into anytransaction during the year exceeding the value of rupees five lakhs in respect of any party required to be noted in theregister maintained under section 301 of the Companies Act, 1956.

6. The Company did not have, during the year, any deposits requiring compliance of the provisions of Section 58A and 58AA ofthe Companies Act, 1956 and the rules framed thereunder with regard to acceptance of deposits.

7. The Company has an internal audit system which, in our opinion, is considered as commensurate with the size of theCompany and the nature of its business.

8. As explained to us, the Central Government has not prescribed under Section 209 (1) (d) of the Companies Act, 1956, themaintenance of cost records in respect of the Company's business.

9 (a) (i) The Company is regular in depositing with appropriate authorities, undisputed statutory dues including providentfund, investor education and protection fund, employees' state insurance, income-tax, wealth-tax, sales-tax,custom duty, excise-duty, cess and other material statutory dues applicable to it.

(ii) According to the information and explanations given to us, no undisputed amounts payable in respect of income-tax, wealth-tax, sales-tax, custom duty, excise duty and cess were in arrears, as at 31.3.2004 for a period of morethan six months from the date they became payable.

annexure to auditors' report

(b) According to the information and explanations given to us, there are no dues of income-tax, wealth-tax, sales-tax,custom duty, excise duty and cess which have not been deposited on account of any dispute, except as furnishedhereunder:

Entry Tax Act Realization of Entry tax forAssessment Year 1999-2000and 2000-01 on account ofentry tax exemption forpurchase of machinery

Central Excise Act Goods found in excess of thequantity disclosed in theregister maintained for stockkeeping of excisable goods

10. The Company has neither accumulated losses at the end of the financial year nor incurred cash losses during the year and inthe immediately preceding year.

11. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment ofdues to any financial institution or bank. The Company does not have any debenture holders.

12. According to the information and explanations given to us, the Company has not granted loans and advances on the basis ofsecurity by way of pledge of shares, debentures and other securities, and accordingly, the maintenance of records in thisregard is not relevant for the year.

13. The Company is not a chit fund or a nidhi /mutual benefit fund / society; and accordingly, the provisions of clause 4(xiii) of theCompanies (Auditor's Report) Order, 2003 are not applicable to the Company.

14. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly,the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order, 2003 are not applicable to the Company.

15. In accordance with the information and explanations given to us, the Company has not given any guarantees for loans takenby others from banks or financial institutions.

16. In our opinion, the term loans taken by the Company, have been applied for the purpose for which they were raised.

17. According to the information and explanations given to us and on an overall examination of the balance sheet of theCompany, we report that no funds raised on short-term basis have been used for long-term investment. No long-term fundshave been used to finance short-term assets, except permanent working capital.

18. During the year the Company has not made any preferential allotment of shares to parties and companies covered in theregister maintained under section 301 of the Companies Act, 1956.

19. The Company did not have any outstanding debentures during the year.

20. The Company has not raised any money by public issue during the year.

21. According to the information and explanations given to us, no fraud on or by the Company has been noticed or reportedduring the course of our audit.

Name of the statute Nature of the dues Amount (Rs) Period to whichthe amount relates is pending

Total 106,164,895

Forum where dispute

106,059,645 1999-2000 and 2000-01 Supreme Court of India

105,250 1997-98 Customs, Excise andService tax AppellateTribunal

For K.C. Khanna & Co.,Chartered Accountants

(Nitin K. Jain)Partner

Membership No. 83084H-96, Connaught Circus,New Delhi 110 001.Dated : June 18, 2004

As per our report of even dateFor K. C. Khanna & Co.Chartered Accountants.

PartnerMembership No 83084

Place: New DelhiDate: June 18, 2004

Nitin K. Jain R GanesanDeepak Puri Harnam D.Wahi Minni KatariyaChairman and Managing Director Director Company Secretary General Manager Accounts

balance sheet

As at 31st March (Amount in Rupees)

Share Capital 1 1,115,129,440 484,064,720

Reserves and Surplus 2 18,352,371,076 10,994,425,663

19,467,500,516 11,478,490,383

181,440,000 --

(Refer Note 11 of Schedule 19 - Part B)

Secured Loans 3 14,387,677,195 10,986,798,722

Unsecured Loans 4 132,167,476 772,375,736

345,144,000 --

(Refer Note 5 of Schedule 19 - Part B)

5

Gross Block 27,315,091,445 19,768,057,986

Less: Depreciation 4,628,534,811 2,369,833,413

Net Block 22,686,556,634 17,398,224,573

Capital Work-in-progress 875,650,614 797,940,483

23,562,207,248 18,196,165,056

6 4,861,037 99,003,414

(New Projects)

7 524,469,719 413,553,784

Inventories 8 1,984,976,423 998,534,150

Sundry Debtors 9 3,059,948,316 2,778,042,980

Cash and Bank Balances 10 7,944,656,032 2,720,116,744

Loans and Advances 11 781,488,645 493,921,747

13,771,069,416 6,990,615,621

Less: 12

Current Liabilities 3,075,358,858 2,313,919,611

Provisions 273,319,375 173,430,997

3,348,678,233

Net Current Assets 10,422,391,183

13 -- 25,677,574

(To the extent not written off or adjusted)

19

Schedule 2004 2003

I.

SHAREHOLDERS FUNDS

SHARE WARRANTS - Fully Convertible

LOAN FUNDS

Deferred Tax Liability

TOTAL 34,513,929,187 23,237,664,841

II.

FIXED ASSETS

INCIDENTAL EXPENDITURE PENDING CAPITALISATION

INVESTMENTS

CURRENT ASSETS, LOANS AND ADVANCES

CURRENT LIABILITIES AND PROVISIONS

MISCELLANEOUS EXPENDITURE

TOTAL 34,513,929,187 23,237,664,841

ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

SOURCES OF FUNDS

APPLICATION OF FUNDS

2,487,350,608

4,503,265,013

profit and loss account

For the year ended 31st March (Amount in Rupees)

Gross Sales 15,792,194,139 10,855,218,951

Less: Duty (Including Excise Duty) 770,524,261 193,337,862

15,021,669,878 10,661,881,089

Other Income 14 229,667,068 288,166,585

Increase/(Decrease) in stock of Finished Goods/Work in Process 15 320,057,794 (957,265,443)

Raw Materials and Components Consumed 5,614,030,633 3,342,910,085

Trade Purchases 12,728,467 86,057,181

Stores, Spares and Tools Consumed 461,864,960 423,631,628

Personnel Expenses 16 526,660,862 305,462,865

Administration and Other Expenses 17 2,367,396,759 1,757,453,903

Interest and Finance Charges 18 693,375,767 542,736,289

Depreciation 2,268,870,139 1,174,690,104

Provision for Taxation:

Current Tax 32,500,000 23,500,000

Deferred Tax 16,713,000 (36,392,225)

Short Provision of Taxation for earlier years 10,312,210 --

Provision for Deferred Tax for earlier years (Considered as

Prior Period Item - Refer Note 5 of Schedule 19 - Part B) 328,431,000 --

Dividend:

– Preference Shares -- 8,435,959

– Equity Shares (Proposed) 167,269,416 121,016,180

167,269,416 129,452,139

Corporate Tax on Proposed Dividend 21,431,394 15,505,198

Transfer to General Reserve 3,049,810,133 2,227,775,064

- Before prior period items

- After prior period items

(Refer Note 8 of Schedule 19 - Part B)

Schedule 2004 2003

INCOME

15,571,394,740 9,992,782,231

EXPENDITURE

11,944,927,587 7,632,942,055

PROFIT BEFORE TAX 3,626,467,153 2,359,840,176

Net Profit after Provision for Taxation 3,577,254,153 2,372,732,401

NET PROFIT/SURPLUS AVAILABLE FOR APPROPRIATION 3,238,510,943 2,372,732,401

APPROPRIATIONS

TOTAL 3,238,510,943 2,372,732,401

Earnings per share (Face Value of Rs. 10 each)

Basic & Diluted :

36.80 24.42

33.41 24.42

ACCOUNTING POLICIES AND NOTES ON ACCOUNTS 19

As per our report of even dateFor K. C. Khanna & Co.Chartered Accountants.

PartnerMembership No 83084

Place: New DelhiDate: June 18, 2004

Nitin K. Jain R GanesanDeepak Puri Harnam D.Wahi Minni KatariyaChairman and Managing Director Director Company Secretary General Manager Accounts

schedules to the accounts

As at 31st March (Amount in Rupees) 2004 2003

142,500,000 (Previous Year 62,500,000) Equity Shares of Rs.10 each 1,425,000,000 625,000,000

750,000 Preference Shares of Rs.100 each 75,000,000 75,000,000

*111,512,944 (Previous Year 48,406,472)

Equity Shares of Rs. 10 each fully paid up

* Includes:

- 48,406,472 Shares issued as fully paid Bonus Shares by capitalisation of

Securities Premium; and

- 14,700,000 Shares allotted in cash at a premium of Rs. 326 each toDeutsche Bank Trust Company Americas (DBTCA), DBTCA issued 147,000

Global Depository Receipts (GDRs), each GDR represents 100 Shares,

to Woodgreen Investment Limited.

State Capital Investment Subsidy 1,000,000 1,000,000

As per last Balance Sheet 4,583,484,724 4,583,484,724

Added during the year 4,792,200,000 --

9,375,684,724 4,583,484,724

Less: Utilised during the year 484,064,720 --

8,891,620,004 4,583,484,724

As per last Balance Sheet 6,409,940,939 4,147,950,072

Add: Adjustment for Deferred Tax Liability as on 01.04.2001 -- 34,215,803

Transfer from Profit and Loss Account 3,049,810,133 2,227,775,064

9,459,751,072 6,409,940,939

i) Export Import Bank of India-EXIM Bank

## Working Capital Term Loan (WCTL) 30,750,000 51,250,000

## 64,000,000

## Production Equipment Finance Loan 42,310,944 70,518,240

121,060,944 185,768,240

ii) The Federal Bank 500,000,000 500,000,000

# iii) ING-Vysya Bank 450,000,000 450,000,000

## iv) State Bank of India - I 154,122,522 253,693,988

v) State Bank of India - II 250,000,000 --

vi) Union Bank of India (including interest accrued and due - Rs. 3,445,355) 509,090,866 --

# vii) State Bank of Saurashtra 500,000,000 --

viii) Canara Bank 260,000,000 --

ix) IDBI Bank Ltd 200,000,000 --

x) United Bank of India 500,000,000 --

xi) State Bank of Indore 500,000,000 --

xii) Syndicate Bank 499,999,691 --

xiii) State Bank of Mysore 249,997,380 --

xiv) Indian Bank (including interest accrued and due - Rs. 10,960) 500,010,960 --

1 SHARE CAPITAL

1,500,000,000 700,000,000

1,115,129,440 484,064,720

2 RESERVES AND SURPLUS

TOTAL 18,352,371,076 10,994,425,663

3 SECURED LOANS

1

A. Rupee Loans

5,194,282,363 1,389,462,228

Authorised

Issued, Subscribed and Paid-up

Capital Reserve

Securities Premium Account

General Reserve

Term Loans

Note

Research & Development Loan (R&D) 48,000,000

schedules to the accounts

As at 31st March (Amount in Rupees) 2004 2003

# i) From Exim Bank of India 783,720,300 1,141,461,000

(US$ 17,930,000: Previous Year US$ 23,930,000)

## ii) From Industrial Development Bank of India 134,121,032 230,000,671

(US$ 3,068,429: Previous year US$ 4,821,817)

iii) From Bayeriesche Hypo - und Vereinsbank AG, (Munich) 1,793,667,046 1,481,779,861

(Euro 33,370,549: Previous year Euro 28,359,424)

iv) From ANZ Bank, (Frankfurt) 896,833,523 740,889,916

(Euro 16,685,275: Previous year Euro 14,179,711)

v) From Standard Chartered Bank (London) 896,833,523 740,889,916

(Euro 16,685,275: Previous year Euro 14,179,711)vi) From Canara Bank 655,650,000 715,500,000

(US$ 15,000,000: Previous year US$ 15,000,000)

## vii) From Karnataka Bank 218,550,000 238,500,000

(US$ 5,000,000: Previous year US$ 5,000,000)

viii) From International Finance Corporation, Washington, USA 1,569,500,000 1,831,362,500

(Euro 29,200,000: Previous year Euro 35,050,000)

(@ including interest accrued and due Rs. 1,314,921) 2,241,548,089 2,475,178,894

Secured by hypothecation of stock-in-trade and book debts.

(Guaranteed by directors to the extent of Rs. 921,212,462: Previous Year 1,275,902,114)

2,971,319 1,773,736

Secured by hypothecation of specific vehicles

(Amount due within one year Rs. 667,747: Previous year Rs. 666,108)

Notes:

1 Loans from State Bank of India, Union Bank of India, State Bank of Saurashtra, Canara Bank, Federal Bank, Exim Bank - WCTL, R&D loans and Foreign currency loans frombanks/financial institutions are secured by way of first mortgage and charge on all the immovable and movable assets, present and future, of the Company (subject to prior chargeon specified movables as otherwise stated, including in favour of the company's bankers by way of security for the borrowing for working capital), ranking pari-passu with chargesfor the Term Loans.

2 Production Equipment Finance Loan from Exim Bank is secured by way of hypothecation of specific equipments acquired/to be acquired with finance out of the loan.

3 Loan from ING Vysya Bank is secured by way of pari-passu first charge on current assets.

4 Loan from IDBI Bank is secured by way of subsequent and subservient charge on Current Assets.

5 Loans from United Bank of India, State Bank of Indore, Syndicate Bank and State Bank of Mysore are secured by way of hypothecation of whole of the movable fixed assets.

6 Loan from Indian Bank is secured by way of hypothecation of whole of the movable assets.

7 Guaranteed by #2 Directors, ##3 Directors of the Company

8 Term Loans repayable within one year - Rs. 2,801.12 million (Previous year - Rs. 1,498.77 million)

9 Charges are registered after Balance Sheet date in respect of Term Loans taken from State Bank of India (Rs. 250 Million) and Indian Bank (Rs. 500 Million)

10 Foreign currency converted @ US$ 1 = Rs 43.71 : (Previous year US$1 = Rs 47.70) and @ 1 Euro - Rs 53.75 (Previous year 1 Euro - Rs 52.25)

3 SECURED LOANS (Contd..)

B) Foreign Currency Loans

6,948,875,424 7,120,383,864

12,143,157,787 8,509,846,092

2

A) Short Term Loans from Banks @

B) From Others

2,244,519,408 2,476,952,630

TOTAL 14,387,677,195 10,986,798,722

Other Loans

4 UNSECURED LOANS

Short Term Loans - from Banks

Total 132,167,476 772,375,736

- Rupee Loan -- 100,025,500

- Foreign Currency Loans (USD 3,023,735 : Previous year USD 14,000,000) 132,167,476 667,800,000

132,167,476 767,825,500

Add: Interest accrued and due -- 4,550,236

Note: Foreign currency converted @ US$ 1 = Rs 43.71 : (Previous year US$1 = Rs 47.70)

schedules to the accounts

As at 31st March, 2004 (Amount in Rupees)5 - FIXED ASSETS

Land (Leasehold except tothe extent of Rs 170,081) 268,919,516 -- -- 268,919,516 2,598,005 2,911,722 -- 5,509,727 263,409,789 266,321,511Buildings 1,871,472,542 146,228,828 3,542,611 2,014,158,759 101,169,312 65,161,935 1,920,632 164,410,615 1,849,748,144 1,770,303,230Leasehold Improvements -- 22,497,009 -- 22,497,009 -- 1,864,320 -- 1,864,230 20,632,689 --Plant and Machinery,Electrical Installationand other Equipments 17,413,041,085 7,346,424,631 95,764,454 24,663,701,262 2,234,144,549 2,159,217,924 7,501,181 4,385,861,292 20,277,839,970 15,178,896,536Furniture, Fixturesand office Equipments 93,825,972 36,123,263 999,426 128,949,809 19,053,084 8,004,510 364,627 26,692,967 102,256,842 74,772,888Computers 41,909,113 33,936,562 724,835 75,120,840 7,781,985 10,086,938 177,281 17,691,642 57,429,198 34,127,128Vehicles 13,985,574 1,001,815 16,662 14,970,727 3,841,095 1,544,433 205,020 5,180,508 9,790,219 10,144,479

Software 9,785,106 7,995,264 -- 17,780,370 5,367 3,028,947 -- 3,034,314 14,746,056 9,779,739Technical Know How 52,083,202 52,260,269 -- 104,343,471 -- 16,392,302 -- 16,392,302 87,951,169 52,083,202

Vehicles 3,035,876 1,613,806 -- 4,649,682 1,240,016 657,108 -- 1,897,124 2,752,558 1,795,860

PREVIOUS YEAR 9,131,951,534 10,670,027,822 33,921,370 19,768,057,986 1,205,055,777 1,174,690,104 9,912,468 2,369,833,413Capital work-in-Progress (including capital advances Rs. 93,838,078 : Previous year Rs. 83,784,046) 875,650,614 797,940,483

1. Additions to fixed assets include Rs.291,871,810 (Previous year Rs. 684,596,111) and deductions include Rs. 78,099,384 (Previous year Rs Nil)on account of exchange differences.2. Interest Capitalised during the year Rs. 21,148,355 ( Previous Year Rs. 68,710,975).

DESCRIPTION GROSS BLOCK DEPRECIATION NET BLOCKAs at Additions Deductions As at Upto For the Deductions Upto As at As at

01.04.2003 31.03.2004 01.04.2003 year 31.03.2004 31.03.2004 31.3.2003

Total 19,768,057,986 7,648,081,447 101,047,988 27,315,091,445 2,369,833,413 2,268,870,139 10,168,741 4,628,534,811 22,686,556,634 17,398,224,573

Total 23,562,207,248 18,196,165,056Notes:

Tangible Assets

Intangible Assets

Leased Assets

As at 31st March (Amount in Rupees)

99,003,414 331,147,605

Consumption of Materials, Stores, Tools etc -- 60,637,648

Electricity and Power -- 71,244,390

Salaries, allowances and other benefits 16,928,034 51,582,948

Travelling Expenses (including for Directors) 2,895,795 6,017,877

Interest & Financial Charges (net) 18,950,736 110,828,550

Insurance -- 12,204,514

Miscellaneous Expenses 9,296,741 13,749,665

Legal and Professional Charges -- 16,172,507Total 147,074,720 673,585,704

Less: Capitalised during the year 142,213,683 574,582,290

European Optic Media Technology GmbH*

Share Capital of Euro 2,025,000 111,263,750 --

Glyphics Media Inc - USA**

95 shares of US$ 10 each -- 111,263,750 92,880,000 92,880,000

CAPCO LUXEMBOURG S.a.r.l.

1 Equity share of Euro 125 each 4,961 4,961

63,366 Preferred Equity Certificates of Euro 125 each 320,668,823 320,673,784 320,668,823 320,673,784

Global Data Media FZ LLC (Associate)*

7,194 Shares of AED 1,000 each 92,532,185

(aggregate value of unquoted investments)

(*Acquired and **Solid during the year)

(For movements in other investments - Refer Note 4 of Schedule 19 - Part B)

2004 2003

6 INCIDENTAL EXPENDITURE

PENDING CAPITALISATION (New Projects)

Opening Balance

Balance carried to Balance Sheet as at the year end 4,861,037 99,003,414

7 INVESTMENTS

Investments in Subsidiaries

Investments in Others

TOTAL 524,469,719 413,553,784

Additions during the year :

Long Term: Unquoted - at cost (Trade):

schedules to the accounts

As at 31st March (Amount in Rupees) 2004 2003

8 INVENTORIES

Total 1,984,976,423 998,534,150

9 SUNDRY DEBTORS

Debts outstanding for a period exceeding six months

Other Debts

10 CASH AND BANK BALANCES

Total 7,944,656,032 2,720,116,744

Notes:

(As taken, valued and certified by the Management)

Raw Materials and Components 842,735,460 368,188,197

Work in Process 351,034,267 192,851,987

Manufactured Finished Goods 435,567,182 267,007,765

Trading Stock 1,163,328 7,847,231

Stores and Spares 354,476,186 162,638,970

(Unsecured - considered good, unless otherwise stated)

Considered Good 306,887,998 24,114,070

Considered Doubtful 54,102,105 35,265,827

360,990,103 59,379,897Less: Provision for Doubtful Debts 54,102,105 306,887,998 35,265,827 24,114,070

Considered Good 2,753,060,318 2,753,928,910

Considered Doubtful 6,582,661 --

2,759,642,979 2,753,928,910

Less: Provision for Doubtful Debts 6,582,661 2,753,060,318 -- 2,753,928,910

TOTAL 3,059,948,316 2,778,042,980

Cash on hand including cheques/drafts and imprest balances with employees

(*includes cheques - Rs 54,285,261 : Previous year Rs. 4,630,663) 59,807,243 9,176,949

Current Accounts 514,318,671 186,304,078

Margin Money/Fixed Deposit Accounts 6,988,229,819 2,122,097,606

(Including interest accrued)

(held under lien Rs. 559,340,982 : Previous year Rs. 264,782,784)

Unclaimed Dividend Account 5,709,205 5,382,909

EEFC Accounts (Euro 104,717 and USD 550,460

Previous Year Euro 2,361 and USD 48,366) 29,341,423 2,405,257

7,537,599,118 2,316,189,850

- Current Account with China Trust Commercial bank -- 124,825

- ABN Amro Bank N.V. - Current Account 5,316,795 380,813,122

(Euro 100,907 : Previous year Euro 3,335,704 ;

GBP 20,815 ; USD 4,412,682)

- ING Bank N.V. - Current Account 327,622,299 --

(Euro 6,217,922 : Previous year Nil)

- Deutsche Bank A.G. - Deposit Account 14,310,577 13,811,998

(Euro 271,599 : Previous year Euro 269,660)

347,249,671 394,625,120

1 Maximum balance outstanding at any time during the year was:

- : (Euro 5,383,040 : Previous year Euro 4,741,664) (Rs. 283,632,378 : Previous year Rs. 242,868,030)

- : (Euro 6,217,922 : Previous year Nil) (Rs. 327,622,299 : Previous year Rs. Nil)

- : (Euro 271,599 : Previous year Euro 6,348,099) (Rs. 14,310,577 : Previous year Rs. 267,001,040)

- : (Rs. 124,825 : Previous year Rs. 124,925)

2 Rate of conversion applied:Euro 1 = Rs. 52.69; USD 1 = Rs. 43.28 : Previous year Euro 1 = Rs. 51.22; GBP 1 = Rs. 74.34; USD 1 = Rs. 47.23

Balances with Scheduled Banks:

Balances with Other Banks:

Balances held outside India:

ABN Amro Bank N.V.

ING Bank N.V.

Deutsche Bank A.G.

China Trust Commercial Bank

schedules to the accounts

14 OTHER INCOME

Total 229,667,068 288,166,585

Interest Received (Gross):

a) On Deposits with banks 93,505,306 42,219,789

b) Others 4,334,481 97,839,787 199,285 42,419,074

(Tax Deducted at Source Rs.15,713,446 : Previous year Rs. 9,942,307)

Excess provisions and unclaimed credit balances written back 8,340,496 4,258,222

Difference in Exchange Rates (Net) 32,714,392 164,860,621

Profit on sale of Forward Contracts (Net) 15,286,497 12,925,620

Profit on sale of Fixed Assets 57,714 --

Dividend from:

- long term investments -- 13,125

- current investments 593,386 135,673Miscellaneous Income 74,834,796 63,554,250

As at 31st March (Amount in Rupees) 2004 2003

11 LOANS AND ADVANCES

Total 781,488,645 493,921,747

12 CURRENT LIABILITIES AND PROVISIONS

A.

B

Total 3,348,678,233 2,487,350,608

13 MISCELLANEOUS EXPENDITURE

Total -- 25,677,574

(Unsecured - Considered Good, unless otherwise stated)

Advances and other amounts recoverable in cash or in kind or for value to be received

- Considered Good 633,227,600 426,396,414

- Considered Doubtful 195,000 2,695,000

633,422,600 429,091,414

Less: Provision for Doubtful Advances 195,000 2,695,000

633,227,600 426,396,414

Share Application Money - European Optic Media Technology GmbH 24,256,296 --

Balance with Excise Authorities 11,506,818 6,953,818

Earnest Money/Security Deposits 11,662,857 9,554,199

Advance Tax/Tax Deducted at Source 100,835,074 51,017,316

Sundry Creditors

- Small Scale Industrial Undertakings (Refer Note 10 of Schedule 19 - Part B) 971,751 1,190,151

- Others 2,801,049,678 1,987,658,549

2,802,021,429 1,988,848,700

Due to Directors 545,341 545,341

Other Liabilities (Includes Rs. 63,546,003 : Previous year Rs. 119,560,438 due to banksbeing cheques issued in excess of book balances) 184,623,170 254,259,344

Security Deposits 44,028,892 12,950,989

Interest accrued but not due on Secured Loans 39,034,721 52,505,346

Unclaimed Dividend 5,105,305 4,809,891

Total 3,075,358,858 2,313,919,611

For Taxation 74,243,548 32,845,870

For Proposed Dividend 167,269,416 121,016,180

For Corporate tax on Dividend 21,431,394 15,505,198

For Retirement Benefits (Gratuity/Leave Encashment) 10,375,017 4,063,749

Total 273,319,375 173,430,997

(To the extent not written off or adjusted)

Deferred Revenue Expenditure -- 25,556,827

Share/Right Issue Expenses -- 120,747

Current Liabilities:

Provisions:

schedules to the accounts

As at 31st March (Amount in Rupees) 2004 2003

15 INCREASE/(DECREASE) IN STOCK OF FINISHED GOODS/WORK IN PROCESS

Total Increase/(Decrease) 320,057,794 (957,265,443)

16 PERSONNEL EXPENSES

Total 526,660,862 305,462,865

17 ADMINISTRATION AND OTHER EXPENSES

Total 2,367,396,759 1,757,453,903

18 INTEREST AND FINANCE CHARTES

Total 693,375,767 542,736,289

Closing Stock:

Finished Goods 436,730,510 274,854,996

Work in Process 351,034,267 192,851,987

787,764,777 467,706,983

Less:

Finished Goods 274,854,996 1,243,933,777

Work in Process 192,851,987 181,038,649

467,706,983 1,424,972,426

Salaries, Allowances and Bonus 458,430,015 265,020,642Contribution to Provident Fund and Other Funds 23,537,449 15,003,966

Employees Welfare Expenses 34,470,586 21,479,307

Leave Encashment 3,659,636 155,270

Gratuity 6,563,176 3,803,680

Electricity and Power 503,402,620 356,682,670

Excise Duty 1,917,743 1,043,199

Commission on Sales (Other Selling Agents) 14,085,440 522,226

Rent (Including Lease Rent) 32,499,845 41,205,135

Repairs and Maintenance:

- Building 2,164,250 469,325

- Plant and Machinery 12,408,987 4,093,059

- Others 15,048,759 8,334,954

Freight and Forwarding 354,628,887 236,259,845

Insurance 100,622,267 73,016,929

Rates and Taxes 5,577,333 2,931,174

Director's Sitting Fees 589,050 145,000Remuneration to Auditors 4,068,520 3,661,450

Royalty/Technical Know-how Fees 811,761,616 704,839,739

Loss on sale of long term investments 1,249,867 7,500

Bad Debts Written Off 33,400,757 30,151,818

Provision for doubtful debts and advances 60,684,766 38,850,137

Miscellaneous Expenses 372,834,835 204,437,327

Stock Written Off 155,583 39,762,632

Fixed Assets Written Off 14,417,593 5,152,450(Refer Note 12(a) of Schedule 19 - Part B)

Provision for Taxation (Foreign Branch) 200,467 2,895,433

Miscellaneous Expenditure Written Off 120,747 419,731

Deferred Revenue Expenditure Written Off 25,556,827 2,572,170(Refer Note 12(b) of Schedule 19 - Part B)

On Term Loans 531,476,176 328,968,297

Others (Including Bank Charges) 161,899,591 213,767,992

Opening Stock:

schedules to the accounts

19 ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

Part A

1. Method of Accounting

2. Use of Estimates

3. Revenue Recognition

4. Fixed Assets

5. Depreciation/Amortization

6. Investments

7. Inventory Valuation

8. Government Grants

9. Borrowing Costs

SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in accordance with the historical cost convention on an accrual basis of accounting and in accordance with generally accepted accountingpractices in India and conform to the applicable Accounting Standards issued by the Institute of Chartered Accountants of India and relevant provisions of the Companies Act, 1956.

The presentation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reportedamount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actualresults and estimates is recognised in the period in which the results are crystallised.

Revenue from sales of goods is recognised on transfer of significant risks and rewards of ownership to the customer and when no significant uncertainty exists regarding realisationof the consideration. Sales are recorded net of sales returns, rebates and trade discounts and price differences and are inclusive of duties (including excise duty).

Tangible Fixed Assets are stated at cost less accumulated depreciation. Cost includes all direct and incidental expenses including borrowing cost.

Expenses of revenue nature which can be regarded as incidental and related to projects being set-up are transferred to "Incidental Expenditure Pending Capitalisation". Theseexpenses are allocated to related productive fixed assets in the year of commencement of the related project.Intangible fixed assets are stated at cost less accumulated amortization.

Depreciation on tangible fixed assets is provided on straight-line method on pro-rata basis at rates and in the manner specified in Schedule XIV to the Companies Act, 1956 otherthan on certain Plant and Machinery and Optical Media manufacturing units which is depreciated at the rate of 10.34% which has been determined based on the management'sestimate of useful life of the assets and is higher than the rates specified in Schedule XIV to the Companies Act, 1956.

Intangible fixed assets are amortized on equated basis over their estimated economic life not exceeding 10 years.

Leasehold Land and improvement to the leased premises are amortised over the period of the lease.

The assets taken on finance lease are depreciated over the lease period.

Long term investments are stated at cost of acquisition inclusive of expenditure incidental to acquisition. A provision for diminution is made to recognise a decline, other thantemporary in the value of long term investments.

Current investments are stated at lower of cost and fair value determined on an individual basis.

Finished Goods, Work in process, Goods held for resale At lower of cost andRaw Materials, Packing Materials and Stores & Spares net realisable value

Cost of Raw Materials, goods held for resale, packing materials and stores and spares, is determined on the basis of 'Weighted Average' method.

Cost of Work in process & finished goods, is determined by considering direct material cost and appropriate portion of overheads.

Liability for excise duty in respect of goods manufactured by the company, other than for exports, is accounted upon completion of manufacture, and provision is made for exciseablemanufactured goods.

Customs duty exigible on materials (intended for domestic consumption), lying in bonded warehouses, is provided on accrual basis.

Grants of the nature of contribution towards capital cost of setting up projects, are treated as Capital reserve and grants in respect of specific fixed assets are adjusted from thecost of the related fixed assets.

Borrowing costs directly attributable to the acquisition of qualifying assets are capitalised as part of the cost of assets till the date of commencement of commercial use of the asset.All other borrowing costs are charged to Profit and Loss Account.

Liability towards gratuity payable on death/retirement of employees is accrued based on an actuarial valuation, and covered by funding/premium as determined by Life InsuranceCorporation of India.

Provision for the benefit of leave encashment to the employees as per Company's policy is based on an actuarial valuation as of the balance sheet date.

Transactions in foreign currency are converted at the exchange rate prevailing at the date of the transactions. Foreign currency monetary assets and liabilities not covered byforward exchange contracts are restated at the year end rates and the resultant gains or losses are recognised in the Profit and Loss Account, except exchange differences arisingon settlement and/or translation of foreign currency liabilities relating to acquisition of fixed assets which are adjusted against the carrying costs of respective fixed assets.

In respect of foreign branches, all revenues, expenses, monetary assets/liabilities and fixed assets are accounted at the exchange rate prevailing on the date of the transaction.Monetary assets and liabilities are restated at the year end rates and resultant gains or losses are recognised in the Profit and Loss Account.

Gains and losses on foreign exchange forward contracts are recognised in the Profit and Loss Account over the life of the contract, except in respect of liabilities incurred foracquiring fixed assets, in which case such difference is adjusted to the carrying amount of the respective fixed assets. Any profit or loss arising on cancellation of a forward contractis recognised as income or expense for the period.

Expenditure in respect of issue of shares, pre-incorporation and other preliminary expenses, is written-off over a period of 10 years from the year in which these are incurred.

Provision is made for current income tax liability based on the applicable provisions of the Income Tax Act 1961, for the income chargeable under the said Act and as per the applicableoverseas laws relating to the foreign branch.

10. Retirement Benefits

11. Foreign Currency Transactions

12. MISCELLANEOUS EXPENDITURE

13. Taxation

}

Part B

1. Contingent Liabilities etc.

2. Capital Commitments

3. Lease Obligations

Present value of

Minimum Lease minimum lease Lease

payments (Rs) payments (Rs) charges (Rs)

4. Movements in Other Investments

2003-04 2002-03

5. Taxation

NOTES ON ACCOUNTS

1.1 In respect of:

- Bank guarantees given by/on behalf of the Company Rs.255.72 Million (Previous Year Rs. 240.24 Million)

- Letters of Credit opened by banks on behalf of the Company - Rs. 2,387.00 Million (Previous Year Rs. 1,688.86 Million)

1.2 - Disputed demands in respect of Income tax Rs. nil (Previous year Rs. 43.26 Million); Entry tax Rs. 106.00 Million (Previous year Rs. 91.72 Million);

- Service tax Rs. 60.87 Million (Previous year Rs. Nil); Excise duty Rs. 0.11 Million (Previous year Rs. Nil) and Custom duty Rs. 140.71 Million (Previous year Rs. Nil)

1.3 Claims against the Company not acknowledged as debts - Rs 1.47 Million (Previous Year Rs.7.34 Million)

Estimated value of contracts remaining to be executed on capital account and not provided for (net of advances) - Rs.2,245.48 Million (Previous Year Rs.1,438.70 Million).

Future obligations for rentals under operating leases amount to Rs. 146.69 Million (Previous year Rs. 16.57 Million). The total lease payments recognised in the statement of profitand loss account amounting to Rs. 21.35 Million (Previous year Rs. 20.90 Million)

Future obligations for rentals under finance lease arrangement for plant and machinery amount to Rs. Nil (Previous year Rs. 1.90 Million). Reconciliation of minimum lease paymentsand their present value in respect of vehicles taken on lease , is as under

Provision for taxation has been made based on Minimum Alternate Tax as applicable to the company for the current year in accordance with the relevant provisions of the Income TaxAct, 1961.

During the year ended 31.03.2003, based on expert opinion obtained, the deferred tax liability was considered at nil, in view of the exemption available to the undertakings of thecompany under Income Tax Act, 1961, the computation / determination of such tax liability being measured in the proportion of profits of the undertakings from domestic operationsin section 10A/10B of the said act in accordance with the expert opinion obtained to that effect.

The management has made a review of the matter and sought a fresh opinion as regard the interpretation of ASI-5 read with AS-22 'Accounting for Taxes on Income' issued by theInstitute of Chartered Accountants of India; and based thereon and as a prudent measure decided to provide for the deferred tax liability upto the year 2003-04.

Deferred tax liability is net of deferred tax asset of Rs. 860,126,966 on account of losses to be setoff against taxable profit in future. Based on its existing and potential business inthe near future, including projections / profitability the management is virtually certain of such setoff of the unabsorbed losses; on which assertion the auditor have placed reliance.

In consonance with the methodology so adopted, a recomputation of deferred tax liability has been made for the year, as well as upto the preceding year end (which has beenconsidered as a prior period item and separately shown in the Profit and Loss Account).

Amount paid upto 31.3.2004 2,579,558 1,587,512 992,046

Amount payable not later than one year 994,009 667,747 326,262

Amount payable later than one year but not later than five years 2,646,019 2,312,022 333,997

revious year 4,299,025 2,641,606 1,657,419

The total cost of the vehicles and their carrying amount as at 31st March 2004 are Rs. 4,649,682 (Previous Year Rs.3,035,876) and Rs.2,752,558 (Previous Year Rs.1,795,860)respectively.

Current Investments (Unquoted) No. Cost (Rs.) No. Cost (Rs.)

(Mutual Fund Units of the Face value of Rs. 10 each acquired/sold during the year)

- Birla Sun Life Mutual Fund 51,025,506 550,316,573 21,209,115 225,000,000

- Prudential ICICI Mutual Fund 22,650,584 285,219,588 11,640,524 160,000,000

- SBI Mutual Fund 4,755,111 50,038,012 -- --

Total 78,431,201 885,574,173 32,849,639 385,000,000

Total 6,219,586 4,567,281 1,652,305

P

schedules to the accounts

The Company provides for deferred tax using the net liability method based on the tax effect of timing differences resulting from recognition of items in the financial statements. Thedeferred tax charge or credit is recognized using the tax rates and tax laws that have been enacted or substantially enacted by the balance sheet date.

Assets acquired under finance leases are recognised as Asset and a Liability at the lower of the fair value of the leased assets at inception of the lease and the present value ofminimum lease payments. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to periodsduring the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Stock options granted to the employees under the Company's Employees Stock Option Scheme are accounted in accordance with Securities and Exchange Board of India (EmployeesStock Option Scheme and Employees Stock Purchase Scheme) guidelines, 1999. Accordingly, the excess, if any, of the market price of the underlying equity shares as of the date ofthe grant of the option over the exercise price of the option, is recognised as employee compensation cost and amortised on straight line basis over the vesting period.

14. Leases

15. Employees Stock Option Scheme

PART A SIGNIFICANT ACCOUNTING POLICIES (contd...)

schedules to the accounts

The Break up of Net Deferred Tax Liability is as under:

Depreciation -- 790,769,638 790,769,638

Unabsorbed Depreciation 443,874,000 -- (443,874,000)

Brought Forward Losses 18,464,638 -- (18,464,638)

Depreciation -- 414,501,328 414,501,328

Unabsorbed Depreciation 397,788,328 -- (397,788,329)

The Company, has on 09-01-2004, in terms of ESOP granted 2,030,300 stock options to its employees, at the exercise price of Rs. 342 per share. The Options granted are vestedover a period of maximum of four years from the date of grant. As at the date of balance sheet no option has been exercised by any employee.

7.1 Licensed Capacity Not Applicable for any product of the company

7.2 Installed Capacity *Installed Capacity Actual Production(figures in bracket are for the previous year)

Storage Media ( Nos.) 2,125,820,000 1,608,396,069

(1,185,820,000) (931,474,745)

* (As certified by the management and on which auditors have placed reliance without verification, this being a technical matter)

7.3 In terms of order no. 46/64/2004-CL-III dated 16.06.2004 issued by Department of Company Affairs under Section 211(4) of the Companies Act, 1956 disclosure has notbeen made for the quantitative details for the accounting year 2003-04, in respect of details pursuant to paras 3(i) (a) and 3(ii) (a), (1) & (2) of part II of Schedule VI to theCompanies Act, 1956 (as amended vide Notification No GSR 494 (E) dated 30th October, 1973).

7.4 Composition of Raw Materials, Packing Materials and Spares Consumed:(figures in bracket are for the previous year)

a) Imported 54.13 3,038,794,910 76.87 355,053,248

(79.92) (2,671,784,338) (75.30) (318,986,134)

b) Indigenous 45.87 2,575,235,723 23.13 106,811,712

(20.08) (671,125,747) (24.70) (104,645,494)

(100.00) (3,342,910,085) (100.00) (423,631,628)

7.5 Foreign Currency Transactions:

7.5.1 Value of Imports on C.I.F Basis:

Purchase of Finished Goods 13,044,068 67,878,743

Raw Materials & Components 4,397,395,533 2,293,174,829

Capital Goods (including Rs.498.29 Million : Previous year Rs. 580.37 Million debited to Capital work in progress) 6,431,204,686 5,536,767,467

Stores, Spares and Consumables 530,378,919 298,044,749

Packing Material 58,959,943 35,997,503

Particulars of Timing Differences Deferred Tax Deferred Tax Net Deferred

Assets (Rs.) Liability (Rs.) Tax Liability (Rs.)

(a) Upto the Financial year 2002-03

Total 462,338,638 790,769,638 328,431,000

(b) For the Financial year 2003-04

Total 397,788,328 414,501,328 16,713,000

Total Deferred Tax Liability 345,144,000

6 Employee Stock Option Plan (ESOP)

7 ADDITIONAL INFORMATION PURSUANT TO REQUIREMENTS OF PART II OF SCHEDULE VI TO THE COMPANIES ACT, 1956 (As Certified By The Management), AND OTHERDISCLOSURES

Raw Materials & Packing Material Stores & spares

Percentage Value (Rs.) Percentage Value (Rs.)

Total 100.00 5,614,030,633 100.00 461,864,960

2003-04 (Rs.) 2002-03 (Rs.)

PART B NOTES ON ACCOUNTS (contd...)

7.5.3 Earnings in Foreign Exchange

- Value of Exports on FOB basis 12,340,520,809 9,269,389,222

- Services 6,794,750 --

- Interest 109,745 --

7.5.4 Amount remitted in Foreign Currencies for Dividend:

Dividend remitted on fully pad - up equity shares of Rs. 10 each

a) Number of Non Resident Shareholders 2 3

b) Number of Shares held 5,887,615 5,889,715

c) Year to which relates 2002-2003 2001-2002

d) Dividend remitted in (Rs.) 14,719,038 14,724,288

7.6 Managerial Remuneration (Remuneration to Directors):(figures in bracket are for the previous year) (Amount in Rupees)

a) Salaries/Allowances 1,725,600 454,800 2,910,000

(1,440,000) (420,000) (2,220,000)

b) PF contribution 115,200 36,000 180,000

(115,200) (36,000) (180,000)

c) Perquisites 95,054 103,400 107,990

(357,600) (112,517) (772,068)

(1,912,800) ( 568,517) (3,172,068)

Note: Provision for leave encashment and Gratuity amounting to Rs. 272,988 and Rs. 652,309 respectively made during the year has not been included above.

7.7 Related Party Transactions:

In accordance with the requirements of Accounting Standard - 18 'Related Party Disclosures' the names of the related party where control exists/able to exercise significantinfluence along with the aggregate transactions and year end balance with them as identified and certified by the management are given below:

7.7.1

Subsidiary European Optic Media Technology GmbH 100%

Subsidiary Glyphics Media Inc, USA Divested

Associate Company Global Data Media FZ LLC (including its subsidiaries) 49%

Managing Director Mr Deepak PuriWhole Time Directors Mrs Nita Puri

Mr Ratul Puri

2003-04 (Rs.) 2002-03 (Rs.)

DEEPAK PURI* NITA PURI* RATUL PURI*Managing Director Whole time director Whole time director

Total 1,935,854 594,200 3,197,990

Nature of relationship Name of the related party Share holding

Key Management Personnel

schedules to the accountsPART B NOTES ON ACCOUNTS (contd...)

7.5.2 Expenditure in foreign currency (on payment basis):

a) Travel 7,984,801 10,668,635

b) Interest payment to Financial Institutions/ Banks in Foreign Currency 229,193,016 241,098,425

c) Royalty/Technical Know-how Fees (including advance royalty) 980,915,465 592,550,202

d) Directors Sitting Fees 109,870 --

e) Other expenditure 34,054,614 29,383,821

f)

Staff Welfare 2,247,335 7,238Rent/Lease Rent 4,225,559 2,917,417Packing Material -- 12,448,962Freight and Forwarding 19,971,978 63,006,645Legal and Professional Expenses 9,419,064 10,673,057Miscellaneous Expenses 3,232,650 18,314,110Financial Charges 14,527,165 11,227,683Insurance 113,767 1,612,164Salaries and Wages 4,153,613 1,686,022Repairs and Maintenance 25,072 92,061Commission on Sales (other selling agents) 1,523,308 339,809

2003-04 (Rs.) 2002-03 (Rs.)

Expenditure of Foreign Branch:

schedules to the accounts

7.7.2 Details of Transactions with the Related Parties in the ordinary course of business:(figures in brackets are for the previous year) (Amount in Rupees)

Purchases -- -- --l

(356,534) (--) (--)

Sale of Finished goods 82,343,699 4,185,113,145 --

(201,726,762) (--) (--)

Outstanding receivables

- In respect of sales -- 1,373,914,658 --

(136,794,343) -- --

- In respect of expenses -- 2,418,186 --

(--) (--) (--)Equity Acquired 111,263,750 92,532,185 --

(--) (--) (--)

Equity Divested 92,880,000 -- --

(--) (--) (--)

Directors Remuneration -- -- 5,728,044

(--) (--) (5,653,385)

7.8 Remuneration to Auditors: (Amount in Rupees)

This comprises the following, including Service Tax :

For Statutory audit ( incl. branch auditor's fee Rs Nil : Previous year Rs. 2,700) 2,088,000 1,946,700

For Limited Review 648,000 756,000

For Certification / Other Reports 1,112,400 813,000

For reimbursement of out of pocket expenses 220,120 145,750

Particulars Subsidiaries Associates Key Management Personnel

Total 4,068,520 3,661,450

2003-04 2002-03

8 Earnings per share

9. Secondary segment information (by Geographic segments)

Domestic OverseasOperations Operations Total

a) Calculation of Weighted Average number of equity shares

No. of Shares at the beginning of the year 48,406,472 48,406,472

Bonus Issue during the FY 2003-04 in 1:1 ratio 48,406,472 48,406,472

Equity Shares issued on 29 March, 2004 14,700,000 --Total number of equity shares outstanding at the end of the year 111,512,944 96,812,944

Equity shares outstanding for 365 days 96,812,944 48,406,472

Equity shares outstanding for 3 days 14,700,000 --

Weighted Average number of equity shares outstanding during the year 96,933,766 96,812,944

b) Net Profit after tax available for equity shareholders 3,238,510,943 2,364,296,442

Earnings per share (face value per share Rs. 10 each)

Basic and Diluted:

- Before prior period items (Rs.) 36.80 24.42

- After prior period items (Rs.) 33.41 24.42

Note: Due to the issue of bonus Shares during the year 2003-04, the Earnings Per Share for financial year 2002-03 has been recomputed/restated.

Revenues-Sales (net of taxes/duties) (Current Year) 2,348,182,348 12,673,487,530 15,021,669,878

Revenues-Sales (net of taxes/duties) (Previous Year) 1,225,058,915 9,436,822,174 10,661,881,089

Carrying Amount of Segment Assets (Current Year) 130,155,808 2,929,792,508 2,059,948,316

Carrying Amount of Segment Assets (Previous Year) 139,160,146 2,638,882,834 2,778,042,980

Notes on Segment Information:

Considering the nature of the company's business, its activities and operations, the internal financial reporting and the element of risk and returns, as also that it is predominantlyengaged in the manufacture of storage media products, there are no business segments within the meaning of AS 17 - Segment Reporting,Information has therefore, been given asabove in relation to the domestic/overseas operations, by way of geographic segments.

PART B NOTES ON ACCOUNTS (contd...)

schedules to the accountsPART B NOTES ON ACCOUNTS (contd...)

Creditors comprising Small Scale Industrial Undertakings to which the company owes amounts outstanding for more than 30 days (as per information available with themanagement) are as under:

Advance Systems Inc.

AKS Packaging Co. Pvt. Ltd.

Highland Industries

Prabhat Containers Pvt. Ltd.

Packraft Containers (I) Pvt. Ltd

Vimal Hi-Tech Pvt. Ltd.

Pursuant to an agreement dated 25.03.2004, the Company issued 5,400,000 Share Warrants, each convertible into one equity share at an exercise price of Rs. 336 per warrant.The Company has received an advance of 10% of the exercise price, amounting to Rs. 181,440,000 from Woodgreen Investment Limited (WIL). The warrants may be exercised atthe sole option of WIL at any time before September 28, 2005. If the warrants are exercised by WIL, the Company will allot 5,400,000 fully paid up equity shares of Rs. 10 each onreceipt of the balance consideration of Rs. 1,632,960,000. If the warrants are not exercised by WIL, the advance will be forfeited by the Company.

a) Fixed Assets written off comprise assets discarded (Rs. 14,417,593) on redundancy due to discontinuation of manufacturing operations in respect of one of the product line.

b) Deferred Revenue expenditure (Schedule 17 - Administration and Other Expenses) includes Rs. 10,931,719 pertaining to a product line discontinued during the year.

Corresponding figures for the previous year have been regrouped/rearranged, wherever necessary to conform to current year classification.Schedules 1 to 19 are annexed to and form an integral part of the Balance Sheet as at 31.3.2004 and the Profit and Loss Account for the year ended on that date.

10.

11.

12.

13.14.

For K. C. Khanna & Co.Chartered Accountants.

PartnerMembership No 83084

Place: New DelhiDate: June 18, 2004

Nitin K. Jain R GanesanDeepak Puri Harnam D.Wahi Minni KatariyaChairman and Managing Director Director Company Secretary General Manager Accounts

(Pursuant to Listing Agreement with Stock Exchanges)cash flow statement

For the year ended 31st March (Rupees in Million) 2004 2003

A CASH FLOWS FROM OPERATING ACTIVITIES

Adjustment for:

Operating profit before working capital changes 6,737.70 4,010,82

:

Cash generated from operations 5,819.12 6,543.86

Net cash from operating activities 5,792.33 6,612.17

B CASH FLOWS FROM INVESTING ACTIVITIES

Net cash used in investing activities (7,381.05) (6,973.67)

C CASH FLOWS FROM FINANCING ACTIVITIES

Net cash from financing activities 6,813.26 2,164.49

Net profit before tax 3,626.47 2,359.84

Depreciation 2,268,87 1,174,69

Interest Expense 693.38 542.74

Interest Income (97.84) (42.42)

Income from Investments (0.59) (0.15)

Finance Lease Payments 0.35 9.93

Profit on Fixed Assets sold (0.06) --

Loss on sale of Investments 1.25 0.01

Miscellaneous Expenditure written off 0.12 0.42

Deferred revenue expenditure written off 25.56 2.57

Bad Debts Written off 33.40 30.73

Provision for Bad & Doubtful Debts 60.68 38.85

Unclaimed balances Written back (8.34) (4.26)

Provision for Gratuity & Leave Encashment 7.44 3.96

Taxation on Foreign Branch 0.20 2.90

Stock Written off 1.91 50.72

Fixed Asset Written off 14.42 5.15

Unrealised foreign exchange (gain)/loss 110.48 (164.86)

- Trade and Other Receivables (660.39) 285.27

- Inventories (988.36) 1,353.16

- Trade and Other Payables 730.17 894.61

- Direct Taxes Paid (26.79) 4.17

- Miscellaneous Expenditure -- 64.14

Purchase of Fixed Assets (7,448.73) (9,922.97)

Capital Work in Progress (including Incidental Expenditure) 16.43 2,906.53

Sale of fixed assets 90.94 --

Sale of investments 977.20 385.20

Purchase of investments (1.089.37) (385.00)

Interest Received 71.89 42.42

Income from Investments 0.59 0.15

Proceeds from Issue of Share Capital/Share Warrants 5,120.64 --

(Including Share Premium)

Repayment of Preference Share Capital -- (75.00)

Proceeds from Long Term Borrowings 4,615.72 9,896.08

Repayment of Long Term Borrowings (1,836.38) (6,618.49)

Proceeds from short term borrowings (net) (232.43) (413.01)

Finance Lease Rent Payment (Principal Portion) (0.35) (9.93)

Interest Paid (709.27) (488.92)

Dividend Paid (Including Corporate Dividend Tax) (144.67) (126.24)

Adjustments for

For the year ended 31st March (Rupees in Million) 2004 2003

7,944.66 2,720.12

Cash and cash equivalents comprise:

7,944.66 2,720.12

D NET INCREASE IN CASH AND CASH EQUIVALENT (A+B+C) 5,224.54 1,802.99

Cash and cash equivalents at the beginning of the year 2,720.12 917.13

Cash and cash equivalents at the end of the year

Cash, Cheques / Drafts and imprest balances with employees 59.81 9.18

Fixed Deposits 6,988.23 2,122.10

Balance with Banks 896.62 588.84

Notes:

1 The above Cash flow statement has been prepared under the indirect method set out in AS-3 'Cash Flow Statements' issued by the Institute of Chartered Accountants of India

2. Interest paid is exclusive of and purchase of Fixed Assets is inclusive of interest capitalised Rs. 21.15 Million (Previous Year Rs. 68.71 Million)3 Purchase of Investments include purchase of shares in subsidiary and associate:

(a) European Optic Media GmbH (Subsidiary) Rs. 111.26 Million (Previous Year Rs. Nil.)

(b) Global Data Media FZ LLC (associate) Rs. 92.53 Million (Previous Year Rs. Nil.)

4 Previous year figures have been regrouped and recast wherever necessary to conform to the current year classification

5 Following non cash transactions have not been considered in the cash flow statement

- Tax deducted at source

- Assets acquired on credit/lease/hire purchase

6 Cash and cash equivalents include Rs. 5,709,205: Previous year Rs. 5,382,909 which are not available for use by the Company. (Refer schedule 10 in the accounts)

cash flow statement (contd.)

As per our report of even dateFor K. C. Khanna & Co.Chartered Accountants.

PartnerMembership No 83084

Place: New DelhiDate: June 18, 2004

Nitin K. Jain R GanesanDeepak Puri Harnam D.Wahi Minni KatariyaChairman and Managing Director Director Company Secretary General Manager Accounts

(Pursuant to Listing Agreement with Stock Exchanges)

balance sheet abstract and company's general business profile

I Registration Details

II Capital Raised during the year

III Position of Mobilisation and Deployment of Funds

Sources of Funds

Applications of Funds

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

V Generic Name of Three Principal Products/Services of Company (as per monetary terms)

Registration No. 1 5 4 1 8 State Code

Balance Sheet Date 3 1 0 3 0 4 5 5

Date Month Year

Public Issue Rights Issue

N I L N I L

Bonus Issue Private Placement)

4 8 4 0 6 5 1 4 7 0 0 0

Total Liabilities Total Assets

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

Paid-up Capital Reserves & Surplus

1 1 1 5 1 2 9 1 8 3 5 2 3 7 1

Share Warrants Unsecured Loans

1 8 1 4 4 0 1 3 2 1 6 8

Secured Loans Deferred Tax Liability

1 4 3 8 7 6 7 7 3 4 5 1 4 4

Net Fixed Assets Investments

2 3 5 6 7 0 6 8 5 2 4 4 7 0

Net Current Assets Miscellaneous Expenditure

1 0 4 2 2 3 9 1

Accumulated Losses

N I L

Turnover Total Expenditure

1 6 0 2 1 8 6 1 1 2 3 9 5 3 9 4

Profit/Loss Before Tax Profit/Loss After Tax

3 6 2 6 4 6 7 3 2 3 8 5 1 1

Earning per share in Rupees Dividend Rate %

3 3 . 4 1 1 5 %

Item Code No. : (ITC Code) 852320

Product Description : MAGNETIC DISK

Item Code No : (ITC Code) 852390

Product Description : COMPACT DISK RECORDABLE

Item Code No : (ITC Code) 847193.09Product Description : STORAGE UNITS

Deepak Puri Harnam D.Wahi Minni Katariya R GanesanChairman and Managing Director Director Company Secretary General Manager Accounts

Place: New DelhiDate: June 18, 2004

directors' report

To the members,The Directors are pleased to present the First Annual Report and Accounts for the year ended 31st March, 2004. A summary of the financial results is as follows:-

Income (Bank Interest) 3,226Administrative expenses 198,932Net loss (195,706)

Place: Erfurt V J Prakash

Date: 16th June, 2004 Managing Director

Particulars For 2003-04

Accumulated deficit at end of the year (195,706)

Operations

The Company is in the process of installing a manufacturing facility in the State of Thueringen. A plot of land has been identified and the architectural workhas been completed. All the requisite building permissions have been obtained.

This project is eligible for State aid and the Government also guarantees part of the bank funding. Efforts are also being made to obtain the financialclosure and the necessary Government sanctions for the state aid and guarantees. Construction of the factory premises is likely to start once all thepermissions are in place and the financial closure has been obtained.

Since the Company is still in the start-up phase, no audit is required as per German laws.

There were no employees on board till the 31 March 04.

Future Actions

Auditors

Particulars of Employeesst

of European Optic Media Technology GmbH (Europtic)

As at 31st March, 2004 Note

Authorized Capital 2,025,000

Share Capital 3 2,025,000

Capital Reserve 464,000

Opening Balance

Profit/(Loss) during the period (195,706) (195,706)

2.2

Project Expenses 1,211,950

Bank Balances 1,042,163

VAT receivable 60,472 1,102,635

Less: Current Liabilities & Provisions 4 21,291

EUR

Total 2,293,294

Total 2,293,294

SOURCES OF FUNDS

RESERVES AND SURPLUS

APPLICATION OF FUNDS

Assets

Current Assets

balance sheet of European Optic Media Technology GmbH (Europtic)

income statement of European Optic Media Technology GmbH (Europtic)

For the period ended 31st March, 2004

Bank Interest 3,226

Legal & Professional charges 170,106

Travelling Expenses 20,871

Bank Charges 2,784

Telephone Expenses 1,397

Printing & Stationary 64

Office Rent 3,710

EUR

Total Income (A) 3,226

Total Expenses (B) 198,932

Income/Expenditure = (A) - (B) (195,706)

INCOME

EXPENDITURE

Statement under Section 212 of the Companies Act, 1956 relating to the Subsidiary Company1 Name of the Company European Optic Media Technology GmbH

2 Financial period of the Subsidiary ended on 31st March, 2004

3 Holding Company’s Interest in the Subsidiary Company 100% of Equity Share Capital of Euro 2,025,000

4 Net aggregate amount of the Profit/(Loss) of the Subsidiary Company (concerning the members of

Moser Baer India Limited) not dealt with or provided for in the accounts of Moser Baer India Limited

(a) For the current year *(EURO 195,706)

(Rs. 10,570,275)

(b) For the previous years since it became a subsidiary Not applicable, since this is the first

period of operations of subsidiary

5 Net aggregate amount of the Profit/(Loss) of the Subsidiary Company (concerning the members of

Moser Baer India Limited) dealt with or provided for in the accounts of Moser Baer India Limited

(a) For the current year Nil

(b) For the previous years since it became a subsidiary NA

*converted at the year-end exchange rate.

section 212

notes to financial statements of European Optic Media Technology GmbH (Europtic)

1 GENERAL

European Optic Media Technology was incorporated in Erfurt, Germany on January 30, 2003. The Company has its registered office at Maiozerhofstrabe 12, 99084 Erfurt,Germany.

The object of the company are the pan-European trade and production of data media. The Company may conduct all business which directly or indirectly promotes its objects orwhich furthers the developments of its product.

The first financial year shall begin on 30th January 2003 and terminates on 31st March 2004.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1

The accounts are held in EURO Assets, Liabilities, Income and expenses are recorded at the rates Prevailing at the balance sheet date. Realised gains and losses as well asunrealised losses are recorded in the profit and loss account.

2.2

Project expenses represent expenses incurred during the project stage, which will be apportioned to the value of the assets capitalized.

3 CAPITAL

The subscribed capital is fully paid up and is represented by 1 share of a par value of EURO 2,025,000.

4 CREDITORS

Trade creditors represent expenses payable and due within one year.

Foreign currencies

Project Expenses

Deepak Puri Harnam D.Wahi Minni Katariya R GanesanChairman and Managing Director Director Company Secretary General Manager Accounts

Place: New DelhiDate: June 18, 2004

The Boardof Directors

Moser Baer India Ltd.

New Delhi.

We have examined the attached Consolidated Balance Sheet of the group comprising Moser Baer India Limited (the Company), GlyphicsMedia Inc. and European Optical Media Technology GmbH (the subsidiaries) and Global Data Media FZ LLC (the associate) as at March, 31,2004 and also the Consolidated Profit and Loss Account and Consolidated Cash Flow Statement of the said Group for the year ended on thatdate.

These consolidated financial statements are the responsibility of the Management of Moser Baer India Limited. Our responsibility is to expressan opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted AuditingStandards in India. These Standards require that we plan and perform the audit to obtain reasonable assurance whether the financialstatements are prepared, in all material respects, in accordance with an identified financial reporting framework and are free of material mis-statements. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overallfinancial statements. We believe that our audit provides a reasonable basis for our opinion.

Wereport that :

1. Wedid not audit theFinancial Statements of the subsidiaries, the financial statements of which reflect :

(a) in case of the overseas subsidiary Glyphics Media Inc. (upto 31 August 2003) net assets of (-) Rs. 13,252,948 and revenues ofRs. 272,829,271 for the period from 1 April, 2003 to 31 August, 2003; and

(b) in case of the overseas subsidiary European Optical Media Technology GmbH (newly formed fully owned), net assets ofRs. 124,949,771and revenues of Rs. 174,239 for the period from 30 January, 2003 to 31 March, 2004.

2. The Financial Statements of the associate, Global Data Media FZ LLC, for the period from 17 September, 2002 (date of incorporation) to31 December, 2003, have been audited by another auditor whose report has been made available to us, and our opinion in so far as itrelates to the amounts included in respect of the associate, is based solely on the report of the other auditor,

3. We report that the consolidated financial statements have been prepared by the Company in accordance with the requirements ofAccounting Standard-21, “Consolidated Financial Statements” and Accounting Standard-23, “Accounting for Investments in Associates inConsolidated Financial Statements”, issued by the Institute of Chartered Accountants of India and on the basis of the separate financialstatements of Moser Baer India Limited, its subsidiaries and associate included in the Consolidated Financial Statements.

4. On the basis of the information and explanations given to us and on the consideration of the separate audit report on individual auditedfinancial statements of Moser Baer India Limited and its aforesaid subsidiaries and associate,

, we are of the opinion that the consolidated financial statementsgives a true and fair view in conformity with the accountingprinciples generally accepted in India :

a) in the case of Consolidated Balance Sheet, of the consolidated state of affairs of the company, its subsidiaries and associate as atMarch 31, 2004;

b) in the case of Consolidated Profit and Loss Account, of the consolidated results of operations of the Company, its subsidiaries andassociate, for the year then ended; and

c) in the case of the Consolidated Cash Flow Statement, of the consolidated cash flow of the Company, its subsidiaries and associatefor the year then ended.

For K.C. Khanna & Co.,

Chartered Accountants

(Nitin K. Jain)

Partner

Membership No. 83084

H-96, Connaught Circus,

New Delhi 110 001.

Dated : June 18, 2004

st

st st

th st

th

st

The financial statements of these subsidiaries are unaudited, and in respect of European Optical Media TechnologyGmbH, consolidation covers a period of more than 12 months.

except that the reportingperiod is more than 12months not ending on the same date as that of the parent company.

subject to consolidation of results ofoverseas entities on the basis as stated in paras 1 and 2 above

auditors' report on consolidated financial statements

consolidated balance sheet of MoserBaer India Limited and its subsidiaries/associate

As at 31st March (Amount in Rupees)

Share Capital 1 1,115,129,440 484,064,720

Reserves and Surplus 2 18,308,131,492 10,900,385,989

19,423,260,932 11,384,450,709

181,440,000 --

(Refer Note 4.2.11 of Schedule 19)

Secured Loans 3 14,387,677,195 10,986,798,722

Unsecured Loans 4 132,167,476 772,375,736

345,144,000 --

(Refer Note 4.2.5 of Schedule 19)

Goodwill -- 4,641,794

Gross Block 5 27,315,091,445 19,770,371,711

Less: Depreciation 4,628,534,811 2,371,151,535

Net Block 22,686,556,634 17,399,220,176

Capital Work-in-progress 940,150,593 797,940,483

23,626,707,227 18,197,160,659

6 4,861,037 99,003,414

(New Projects)

7 382,437,324 320,673,784

Inventories 8 1,984,976,423 1,038,204,464

Sundry Debtors 9 3,059,948,316 2,708,473,674

Cash and Bank Balances 10 8,000,119,947 2,744,574,300

Loans and Advances 11 760,450,669 494,933,559

13,805,495,355 6,986,185,997

Less: 12

Current Liabilities 3,076,491,965 2,316,240,073

Provisions 273,319,375 173,477,982

3,349,811,340 2,489,718,055

Net Current Assets 10,455,684,015 4,496,467,942

13 -- 25,677,574

(To the extent not written off or adjusted)

19

Schedule 2004 2003

I.

SHAREHOLDERS FUNDS

SHARE WARRANTS - Fully Convertible

LOAN FUNDS

Deferred Tax Liability

TOTAL 34,469,689,603 23,143,625,167

II.

FIXED ASSETS

INCIDENTAL EXPENDITURE

PENDING CAPITALISATION

INVESTMENTS

CURRENT ASSETS, LOANS AND ADVANCES

CURRENT LIABILITIES AND PROVISIONS

MISCELLANEOUS EXPENDITURE

TOTAL 34,469,689,603 23,143,625,167

ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

SOURCES OF FUNDS

APPLICATION OF FUNDS

As per our report of even dateFor K. C. Khanna & Co.Chartered Accountants.

PartnerMembership No 83084

Place: New DelhiDate: June 18, 2004

Nitin K. Jain R GanesanDeepak Puri Harnam D.Wahi Minni KatariyaChairman and Managing Director Director Company Secretary General Manager Accounts

For the year ended 31st March (Amount in Rupees)

Gross Sales 15,981,117,269 11,119,910,347

Less: Duty (Including Excise Duty) 770,524,261 193,337,862

15,210,593,008 10,926,572,485

Other Income 14 332,876,237 289,386,296

Increase/(Decrease) in stock of Finished Goods/Work in Process 15 280,387,480 (969,972,946)

Raw Materials and Components Consumed 5,614,030,633 3,342,910,085

Trade Purchases 151,300,075 336,425,595

Stores, Spares and Tools Consumed 461,864,960 423,631,628

Personnel Expenses 16 535,876,200 335,281,053

Administration and Other Expenses 17 2,391,231,797 1,774,641,750

Interest and Finance Charges 18 693,647,033 543,381,034

Depreciation 2,268,870,139 1,175,178,410

Share in loss of Associate 30,768,645 --

Provision for Taxation:

Current Tax 32,500,000 23,586,472

Deferred Tax 16,713,000 (36,392,225)

Short Provision of Taxation for earlier years 10,312,210 --

Provision for Deferred Tax for earlier years (Considered as

Prior Period Item - Refer Note 4.2.5 of Schedule 19) 328,431,000 --

Less: Minority interest -- (2,012,458)

Dividend:

– Preference Shares -- 8,435,959

– Equity Shares (Proposed) 167,269,416 121,016,180

167,269,416 129,452,139

Corporate Tax on Proposed Dividend 21,431,394 15,505,198

Transfer to General Reserve 3,099,610,223 2,184,297,154

- Before prior period items

- After prior period items

(Refer Note 4.2.9 of Schedule 19)

Schedule 2004 2003

INCOME

15,823,856,725 10,245,985,835

EXPENDITURE

12,147,589,482 7,931,549,555

PROFIT BEFORE TAX 3,676,267,243 2,314,436,280

Net Profit after Provision for Taxation 3,627,054,243 2,327,242,033

NET PROFIT AFTER TAX 3,288,311,033 2,327,242,033

NET PROFIT/SURPLUS AVAILABLE FOR APPROPRIATION 3,288,311,033 2,329,254,491

APPROPRIATIONS

TOTAL 3,288,311,033 2,329,254,491

Earnings per share (Face Value of Rs. 10 each)

Basic & Diluted :

37.31 23.97

33.92 23.97

ACCOUNTING POLICIES AND NOTES ON ACCOUNTS 19

consolidated profit and loss account of MoserBaer India Limited and its subsidiaries/associate

As per our report of even dateFor K. C. Khanna & Co.Chartered Accountants.

PartnerMembership No 83084

Place: New DelhiDate: June 18, 2004

Nitin K. Jain R GanesanDeepak Puri Harnam D.Wahi Minni KatariyaChairman and Managing Director Director Company Secretary General Manager Accounts

As at 31st March (Amount in Rupees) 2004 2003

142,500,000 (Previous Year 62,500,000) Equity Shares of Rs.10 each 1,425,000,000 625,000,000

750,000 Preference Shares of Rs.100 each 75,000,000 75,000,000

*111,512,944 (Previous Year 48,406,472)

Equity Shares of Rs. 10 each fully paid up

Note

* Includes:

- 48,406,472 Shares issued as fully paid Bonus Shares by capitalisation of

Securities Premium; and

- 14,700,000 Shares allotted in cash at a premium of Rs. 326 each toDeutsche Bank Trust Company Americas (DBTCA), DBTCA issued 147,000

Global Depository Receipts (GDRs), each GDR represents 100 Shares,

to Woodgreen Investment Limited.

State Capital Investment Subsidy 1,000,000 1,000,000

As per last Balance Sheet 4,583,484,724 4,583,484,724

Added during the year 4,792,200,000 --

9,375,684,724 4,583,484,724

Less: Utilised during the year 484,064,720 --

8,891,620,004 4,583,484,724

As per last Balance Sheet 6,315,901,265 4,097,388,308

Add: Adjustment for Deferred Tax Liability as on 01.04.2001 -- 34,215,803

Transfer from Profit and Loss Account 3,099,610,223 2,184,297,154

9,415,511,488 6,315,901,265

i)

## Working Capital Term Loan (WCTL) 30,750,000 51,250,000

## 64,000,000

## Production Equipment Finance Loan 42,310,944 70,518,240

121,060,944 185,768,240

ii) The Federal Bank 500,000,000 500,000,000

# iii) ING-Vysya Bank 450,000,000 450,000,000

## iv) State Bank of India - I 154,122,522 253,693,988

v) State Bank of India - II 250,000,000 --

vi) Union Bank of India (including interest accrued and due - Rs. 3,445,355) 509,090,866 --

# vii) State Bank of Saurashtra 500,000,000 --

viii) Canara Bank 260,000,000 --

ix) IDBI Bank Ltd 200,000,000 --

x) United Bank of India 500,000,000 --

xi) State Bank of Indore 500,000,000 --

xii) Syndicate Bank 499,999,691 --

xiii) State Bank of Mysore 249,997,380 --

xiv) Indian Bank (including interest accrued and due - Rs. 10,960) 500,010,960 --

1 SHARE CAPITAL

1,500,000,000 700,000,000

1,115,129,440 484,064,720

2 RESERVES AND SURPLUS

TOTAL 18,308,131,492 10,900,385,989

3 SECURED LOANS

1

A. Rupee Loans

5,194,282,363 1,389,462,228

Authorised

Issued, Subscribed and Paid-up

Capital Reserve

Securities Premium Account

General Reserve

Term Loans

Export Import Bank of India-EXIM Bank

Research & Development Loan (R&D) 48,000,000

schedules to the consolidated accounts

As at 31st March (Amount in Rupees) 2004 2003

# i) From Exim Bank of India 783,720,300 1,141,461,000

(US$ 17,930,000: Previous Year US$ 23,930,000)

## ii) From Industrial Development Bank of India 134,121,032 230,000,671

(US$ 3,068,429: Previous year US$ 4,821,817)

iii) From Bayeriesche Hypo - und Vereinsbank AG, (Munich) 1,793,667,046 1,481,779,861

(Euro 33,370,549: Previous year Euro 28,359,424)

iv) From ANZ Bank, (Frankfurt) 896,833,523 740,889,916

(Euro 16,685,275: Previous year Euro 14,179,711)

v) From Standard Chartered Bank (London) 896,833,523 740,889,916

(Euro 16,685,275: Previous year Euro 14,179,711)vi) From Canara Bank 655,650,000 715,500,000

(US$ 15,000,000: Previous year US$ 15,000,000)

## vii) From Karnataka Bank 218,550,000 238,500,000

(US$ 5,000,000: Previous year US$ 5,000,000)

viii) From International Finance Corporation, Washington, USA 1,569,500,000 1,831,362,500

(Euro 29,200,000: Previous year Euro 35,050,000)

(@ including interest accrued and due Rs. 1,314,921) 2,241,548,089 2,475,178,894

Secured by hypothecation of stock-in-trade and book debts.

(Guaranteed by directors to the extent of Rs. 921,212,462: Previous Year 1,275,902,114)

2,971,319 1,773,736

Secured by hypothecation of specific vehicles

(Amount due within one year Rs. 667,747: Previous year Rs. 666,108)

Notes:

1 Loans from State Bank of India, Union Bank of India, State Bank of Saurashtra, Canara Bank, Federal Bank, Exim Bank - WCTL, R&D loans and Foreign currency loans from banks/financialinstitutions are secured by way of first mortgage and charge on all the immovable and movable assets, present and future, of the Company (subject to prior charge on specified movables asotherwise stated, including in favour of the company's bankers by way of security for the borrowing for working capital), ranking pari-passu with charges for the Term Loans.

2 Production Equipment Finance Loan from Exim Bank is secured by way of hypothecation of specific equipments acquired/to be acquired with finance out of the loan.

3 Loan from ING Vysya Bank is secured by way of pari-passu first charge on current assets.

4 Loan from IDBI Bank is secured by way of subsequent and subservient charge on Current Assets.

5 Loans from United Bank of India, State Bank of Indore, Syndicate Bank and State Bank of Mysore are secured by way of hypothecation of whole of the movable fixed assets.

6 Loan from Indian Bank is secured by way of hypothecation of whole of the movable assets.

7 Guaranteed by #2 Directors, ##3 Directors of the Company

8 Term Loans repayable within one year - Rs. 2,801.12 million (Previous year - Rs. 1,498.77 million)

9 Charges are registered after Balance Sheet date in respect of Term Loans taken from State Bank of India (Rs. 250 Million) and Indian Bank (Rs. 500 Million)

10 Foreign currency converted @ US$ 1 = Rs 43.71 : (Previous year US$1 = Rs 47.70) and @ 1 Euro - Rs 53.75 (Previous year 1 Euro - Rs 52.25)

3 SECURED LOANS (Contd..)

B) Foreign Currency Loans

6,948,875,424 7,120,383,864

12,143,157,787 8,509,846,092

2

A) Short Term Loans from Banks: @

B) From Others:

2,244,519,408 2,476,952,630

TOTAL 14,387,677,195 10,986,798,722

Other Loans

4 UNSECURED LOANS

Short term loans - from banks

Total 132,167,476 772,375,736

- Rupee Loan -- 100,025,500

- Foreign Currency Loans (USD 3,023,735 : Previous year USD 14,000,000) 132,167,476 667,800,000

132,167,476 767,825,500

Add: Interest accrued and due -- 4,550,236

Note: Foreign currency converted @ US$ 1 = Rs 43.71 : (Previous year US$1 = Rs 47.70)

schedules to the consolidated accounts

As at 31st March, 2004 (Amount in Rupees)5 FIXED ASSETS

Land (Leasehold except tothe extent of Rs 170,081) 268,919,516 -- -- 268,919,516 2,598,005 2,911,722 -- 5,509,727 263,409,789 266,321,511Buildings 1,871,472,542 146,228,828 3,542,611 2,014,158,759 101,169,313 65,161,935 1,920,633 164,410,615 1,849,748,144 1,770,303,229Leasehold Improvements -- 22,497,009 -- 22,497,009 -- 1,864,320 -- 1,864,230 20,632,689 --Plant and Machinery,Electrical Installationand other Equipments 17,413,041,086 7,346,424,630 95,764,454 24,663,701,262 2,234,144,549 2,159,217,924 7,501,181 4,385,861,292 20,277,839,970 15,178,896,537Furniture, Fixturesand Office Equipments 96,139,696 36,123,263 3,313,150 128,949,809 20,371,205 8,004,510 1,682,748 26,692,967 102,256,842 75,768,491Computers 41,909,113 33,936,562 724,835 75,120,840 7,781,985 10,086,938 177,281 17,691,642 57,429,198 34,127,128Vehicles 13,985,574 1,001,815 16,662 14,970,727 3,841,095 1,544,433 205,020 5,180,508 9,790,219 10,144,479

Software 9,785,106 7,995,264 -- 17,780,370 5,367 3,028,947 -- 3,034,314 14,746,056 9,779,739Technical Know How 52,083,202 52,260,269 -- 104,343,471 -- 16,392,302 -- 16,392,302 87,951,169 52,083,202

Vechicles 3,035,876 1,613,806 -- 4,649,682 1,240,016 657,108 -- 1,897,124 2,752,558 1,795,860

PREVIOUS YEAR 9,134,244,794 10,670,048,287 33,921,370 19,770,371,711 1,205,785,593 1,175,278,410 9,912,468 2,371,151,535Capital work-in-Progress (including capital advances Rs. 93,838,078 : Previous year Rs. 83,784,046) 940,150,593 797,940,483

1. Additions to fixed assets include Rs.291,871,810 (Previous year Rs. 684,596,111) and deductions include Rs. 78,099,384 (Previous year Rs Nil)on account of exchange differences.2. Interest Capitalised during the year Rs. 21,148,355 ( Previous Year Rs. 68,710,975).

DESCRIPTION GROSS BLOCK DEPRECIATION NET BLOCKAs at Additions Deductions As at Upto For the Deductions Upto As at As at

01.04.2003 31.03.2004 01.04.2003 year 31.03.2004 31.03.2004 31.3.2003

Total 19,770,371,711 7,648,081,446 103,361,712 27,315,091,445 2,371,151,535 2,268,870,139 11,486,863 4,628,534,811 22,686,556,634 17,399,220,176

Total 23,626,707,227 18,197,160,659Notes:

Tangible Assets

Intangible Assets

Leased Assets

As at 31st March (Amount in Rupees)

99,003,414 331,147,605

Consumption of Materials, Stores, Tools etc -- 60,637,648

Electricity and Power -- 71,244,390

Salaries, allowances and other benefits 16,928,034 51,582,948

Travelling Expenses (including for Directors) 2,895,795 6,017,877

Interest & Financial Charges (net) 18,950,736 110,828,550

Insurance -- 12,204,514

Miscellaneous Expenses 9,296,741 13,749,665

Legal and Professional Charges -- 16,172,507Total 147,074,720 673,585,704

Less: Capitalised during the year 142,213,683 574,582,290

CAPCO LUXEMBOURG S.a.r.l.

1 Equity share of Euro 125 each 4,961 4,961

63,366 Preferred Equity Certificates of Euro 125 each 320,668,823 320,668,823

320,673,784 320,673,784

Global Data Media FZ LLC (Associate)*

7,194 Shares of AED 1,000 each 61,763,540

(Refer Note 2.2 of Schedule 19)

(aggregate value of unquoted investments)

(*Acquired during the year)

(For movements in other investments - Refer Note 4.2.4 of Schedule 19)

2004 2003

6 INCIDENTAL EXPENDITURE

PENDING CAPITALISATION (New Projects)

Opening Balance

Balance carried to Balance Sheet as at the year end 4,861,037 99,003,414

7 INVESTMENTS

Investments in Others

TOTAL 382,437,324 320,673,784

Additions during the year :

Long Term: Unquoted - at cost (Trade):

schedules to the consolidated accounts

As at 31st March (Amount in Rupees) 2004 2003

8 INVENTORIES

Total 1,984,976,423 1,038,204,464

9 SUNDRY DEBTORS

Debts outstanding for a period exceeding six months

Other Debts

TOTAL 3,059,948,316 2,708,473,674

10 CASH AND BANK BALANCES

Total 8,000,119,947 2,744,574,300

Notes:

(As taken, valued and certified by the Management)

Raw Materials and Components 842,735,460 368,188,197

Work in Process 351,034,267 192,851,987

Manufactured Finished Goods 435,567,182 267,007,765

Trading Stock 1,163,328 47,517,545

Stores and Spares 354,476,186 162,638,970

(Unsecured - considered good, unless otherwise stated)

Considered Good 306,887,998 24,114,070

Considered Doubtful 54,102,105 38,108,747

360,990,103 62,222,817Less: Provision for Doubtful Debts 54,102,105 38,108,747

306,887,998 24,114,070

Considered Good 2,753,060,318 2,684,359,604

Considered Doubtful 6,582,661 --

2,759,642,979 2,684,359,604

Less: Provision for Doubtful Debts 6,582,661 --

2,753,060,318 2,684,359,604

Cash on hand including cheques/drafts and imprest balances with employees

(*includes cheques - Rs 54,285,261 : Previous year Rs. 4,630,663) 115,271,158 33,634,505

Current Accounts 514,318,671 186,304,078

Margin Money/Fixed Deposit Accounts 6,988,229,819 2,122,097,606

(Including interest accrued)

Unclaimed Dividend Account 5,709,205 5,382,909

EEFC Accounts (Euro 104,717 and USD 550,460

Previous Year Euro 2,361 and USD 48,366) 29,341,423 2,405,257

7,537,599,118 2,316,189,850

- Current Account with China Trust Commercial bank -- 124,825

- ABN Amro Bank N.V. - Current Account 5,316,795 380,813,122

(Euro 100,907 : Previous year Euro 3,335,704 ;

GBP 20,815 ; USD 4,412,682)

- ING Bank N.V. - Current Account 327,622,299 --

(Euro 6,217,992 : Previous year Nil)

- Deutsche Bank A.G. - Deposit Account 14,310,577 13,811,998

(Euro 271,599 : Previous year Euro 269,660)

347,249,671 394,625,120

1 Maximum balance outstanding at any time during the year was:

- : Euro 5,383,040 : Previous year Euro 4,741,664) (Rs. 283,632,378 : Previous year Rs. 242,868,030)

- : (Euro 6,217,922 : Previous year Nil) (Rs. 327,622,299 : Previous year Rs. Nil)

- : (Euro 271,599 : Previous year Euro 6,348,099) (Rs. 14,310,577 : Previous year Rs. 267,001,040)

- : (Rs. 124,825 : Previous year Rs. 124,925)

2 Rate of conversion applied:

Euro 1 = Rs. 52.69; USD 1 = Rs. 43.28 : Previous year Euro 1 = Rs. 51.22; GBP 1 = Rs. 74.34; USD 1 = Rs. 47.23

Balances with Scheduled Banks:

Balances with Other Banks:

Balances held outside India:

ABN Amro Bank N.V.

ING Bank N.V.

Deutsche Bank A.G.

China Trust Commercial Bank

schedules to the consolidated accounts

As at 31st March (Amount in Rupees) 2004 2003

11 LOANS AND ADVANCES

Total 760,450,669 494,933,559

12 CURRENT LIABILITIES AND PROVISIONS

A.

B

Total 3,349,811,340 2,489,718,055

13 MISCELLANEOUS EXPENDITURE

Total -- 25,677,574

(Unsecured - Considered Good, unless otherwise stated)

Advances and other amounts recoverable in cash or

in kind or for value to be received

- Considered Good 636,445,920 427,408,226

- Considered Doubtful 195,000 2,695,000

636,640,920 430,103,226

Less: Provision for Doubtful Advances 195,000 2,695,000

636,445,920 427,408,226

Balance with Excise Authorities 11,506,818 6,953,818

Earnest Money/Security Deposits 11,662,857 9,554,199

Advance Tax/Tax Deducted at Source 100,835,074 51,017,316

Sundry Creditors

- Small Scale Industrial Undertakings 971,751 1,190,151

- Others 2,801,049,678 1,989,979,011

2,802,021,429 1,991,169,162

Due to Directors 545,341 545,341

Other Liabilities (Includes Rs. 63,546,003 : Previous year Rs. 119,560,438 due to banksbeing cheques issued in excess of book balances) 185,756,277 254,259,344

Security Deposits 44,028,892 12,950,989

Interest accrued but not due on Loans 39,034,721 52,505,346

Unclaimed Dividend 5,105,305 4,809,891

Total 3,076,491,965 2,316,240,073

For Taxation 74,243,548 32,892,855

For Proposed Dividend 167,269,416 121,016,180

For Corporate tax on Dividend 21,431,394 15,505,198

For Retirement Benefits (Gratuity/Leave Encashment) 10,375,017 4,063,749

Total 273,319,375 173,477,982

(To the extent not written off or adjusted)

Deferred Revenue Expenditure -- 25,556,827

Share/Right Issue Expenses -- 120,747

Current Liabilities:

Provisions:

14 OTHER INCOME

Total 332,876,237 289,386,296

Interest Received (Gross):

a) On Deposits with banks 93,869,503 43,051,554

b) Others 4,334,481 199,285

(Tax Deducted at Source Rs.15,713,446 : Previous year Rs. 9,942,307) 98,203,984 43,250,839

Excess provisions and unclaimed credit balances written back 8,340,496 4,258,222

Difference in Exchange Rates (Net) 30,799,918 165,248,567

Profit on sale of Forward Contracts (Net) 15,286,497 12,925,620

Profit on sale of Fixed Assets 57,714 --

Surplus on Divestment of Subsidiary 103,386,961 --

Divident from:

- long term investments -- 13,125- current investments 593,386 135,673

Miscellaneous Income 76,207,281 63,554,250

schedules to the consolidated accounts

As at 31st March (Amount in Rupees) 2004 2003

15 INCREASE/(DECREASE) IN STOCK OF FINISHED GOODS/WORK IN PROCESS

Total Increase/(Decrease) 280,387,480 (969,972,946)

16 PERSONNEL EXPENSES

Total 535,876,200 335,281,053

17 ADMINISTRATION AND OTHER EXPENSES

Total 2,391,231,797 1,774,641,750

18 INTEREST AND FINANCE CHARGES

Total 693,647,033 543,381,034

Closing Stock:

Finished Goods 436,730,510 314,525,310

Work in Process 351,034,267 192,851,987

787,764,777 507,377,297

Less:

Finished Goods 314,525,310 1,296,311,594

Work in Process 192,851,987 181,038,649

507,377,297 1,477,350,243

Salaries, Allowances and Bonus 467,645,353 294,838,830Contribution to Provident Fund and Other Funds 23,537,449 15,003,966

Employees Welfare Expenses 34,470,586 21,479,307

Leave Encashment 3,659,636 155,270

Gratuity 6,563,176 3,803,680

Electricity and Power 503,402,620 356,682,670

Excise Duty 1,917,743 1,043,199

Commission on Sales (Other Selling Agents) 16,326,732 522,226

Rent (Including Lease Rent) 32,700,226 43,016,099

Repairs and Maintenance:

- Building 2,164,250 469,325

- Plant and Machinery 12,408,987 4,093,059

- Others 15,279,435 8,619,447

Freight and Forwarding 358,280,811 236,259,845

Insurance 101,153,454 74,599,319

Rates and Taxes 5,641,778 2,931,174

Director's Sitting Fees 589,050 145,000Remuneration to Auditors 4,068,520 3,661,450

Royalty/Technical Know-how Fees 811,761,616 704,839,739

Loss on sale of long term investments 1,249,867 7,500

Bad Debts Written Off 33,533,940 30,292,383

Provision for doubtful debts and advances 60,684,766 38,850,137

Miscellaneous Expenses 389,616,785 217,806,762

Stock Written Off 155,583 39,762,632

Fixed Assets Written Off 14,417,593 5,152,450(Refer Note 4.2.12(a) of Schedule 19)

Provision for Taxation (Foreign Branch) 200,467 2,895,433

Miscellaneous Expenditure Written Off 120,747 419,731

Deferred Revenue Expenditure Written Off 25,556,827 2,572,170(Refer Note 4.2.12(b) of Schedule 19)

On Term Loans 531,476,176 328,968,297

Others (Including Bank Charges) 162,170,857 214,412,737

Opening Stock:

schedules to the consolidated accounts

19 ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

1. Basis of Preparation of Consolidated Financial Statemtents:

2 Subsidiaries and Associates:

Associates:

Parcitulars of the Investments in Associates:

3 Consolidation Procedure:

Additional Disclosures:

4 Significant Accounting Policies and Notes on Accounts of the Parent:

4.1 Significant Accounting Policies:

4.1.1 Method of Accounting

4.1.2 Use of Estimates

1.1 Consolidated Financial Statements (CFS) of the Company (Parent), its subsidiaries and associates are prepared to comply, in all material respects with applicable statutory/regulatory provisions, Accounting Standards/generally accepted accounting principles and practices prevailing in India, unless otherwise stated.

1.2 The consolidated Financial Statements are prepared under the historical cost convention and on accrual basis.

2.1 The Consolidated Financial Statements (CFS) comprise the results of the Parent and the subsidiaries/associates:

2.1.1

Glyphics Media Inc. Rochester, New York, USA 95% (upto 31st August, 2003)

European Optic Media Technology GmbH Erfurt, Germany 100%

2.1.2

The particulars of associate considered in the Consolidated Financial Statements are as under :

Global Data Media FZ LLC Dubai, United Arab Emirates 49%

2.2

(a) Cost of investments in associates 92,532,185 --(b) Goodwill on acquisition included in (a) above -- --

(c) Share of post acquisition profits/(loss) (Net) (30,768,645) --

(d) Investments as at 31.03.2004 (a+c) 61,763,540 --

3.1 The Consolidated Financial Statements are prepared in accordance with Accounting Standard (AS-21) “Consolidated Financial Statements” issued by the Institute ofChartered Accountants of India (ICAI). The financial statements of the Parent and its subsidiaries are combined on a line by line basis by adding together sums of like nature,comprising assets, liabilities, income and expenses, after eliminating intra-group balances/ transactions and resulting unrealized profit/ loss.

3.2 The Financial Statements of subsidiaries, which are overseas, are prepared by them on the basis of generally accepted accounting principles, local laws and regulations asprevalent in their respective countries and such financial statements are considered for consolidation. The effect of adjustments on account of variance in accounting policies ofoverseas subsidiaries vis '-à-vis those of the parent is not material, and accordingly, not considered.

The Financial Statements of associate is prepared by them on the basis of generally accepted accounting principles, local laws and regulations as prevalent in the respectivecountry. The effect of adjustments on account of variance in accounting policies of associate vis-à-vis that of the parent is not considered material and, accordingly, notconsidered.

3.3 Investments in associate are accounted for under the Equity Method as per AS-23 “Accounting for Investments in Associates in Consolidated Financial Statements” issued byThe Institute of Chartered Accountants of India based on the financial statements of the associate upto period ended on 31st December, 2003.

3.4 Minority interest in the net income of subsidiary has been identified and adjusted against the income of the group in order to arrive at the net income attributable to the Parentcompany.

3.5 The financial statements of the subsidiaries viz Glyphics Media Inc has been drawn upto 31st August, 2003 i.e. upto the date of holding before divestment; European OpticMedia Technology GmbH has been drawn for the period from 30th January, 2003 to 31st March, 2004 and that of the associate have been drawn for the period from 17thSeptember, 2002 to 31st December, 2003. There are no significant transactions or other events between 1st January, 2004 to 31st March, 2004 requiring adjustmenttherein.

3.6 One of the subsidiaries viz. European Optic Media Technology GmbH, the financial statements of which, as per local laws/regulations are not required to be audited, have beenconsidered as such in the consolidated financial statements.

3.7 The Parent’s cost of its investment in its subsidiaries has been eliminated against the Parent’s portion of equity of each subsidiary as at the year end, instead of Parent’sportion of equity of each subsidiary as on the date on which investment is made in the subsidiary. The amount of Goodwill/ Capital Reserve on consolidation has not arisen beingnewly formed companies.

3.8 The difference between the proceeds from disposal of investment in a subsidiary and the carrying amount of its assets less liabilities as of the date of disposal is recognised inthe consolidated statement of Profit and Loss Account as the profit or loss on disposal of investment in subsidiary.

3.9 For the purpose of compilation of the consolidated financial statements the foreign currency assets, liabilities , income and expenditure are translated as per AccountingStandard (AS-11) on 'Accounting for the effects of changes in foreign exchange rates', issued by the Institute of Chartered Accountants of India.

3.10

Additional information disclosed in the separate financial statements of the parent and the subsidiaries having no bearing on the true and fair view of the CFS, as also theinformation pertaining to the items which are not material, have not been disclosed in the CFS.

The financial statements are prepared in accordance with the historical cost convention on an accrual basis of accounting and in accordance with generally acceptedaccounting practices in India and conform to the applicable Accounting Standards issued by the Institute of Chartered Accountants of India and relevant provisions ofthe Companies Act, 1956.

The presentation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affectthe reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period.Difference between the actual results and estimates is recognised in the period in which the results are crystallised.

Name of Subsidiary (Overseas) Country of Incorporation Proportion of Ownership

Name of Associate (Overseas) Country of Incorporation Proportion of Ownership

Sl. no. Particulars As at 31.03.2004 (Rs) As at 31.03.2003 (Rs.)

schedules to the consolidated accounts

Tangible Fixed Assets are stated at cost less accumulated depreciation. Cost includes all direct and incidental expenses including borrowing cost.

Expenses of revenue nature which can be regarded as incidental and related to projects being set-up are transferred to "Incidental Expenditure Pending Capitalization".These expenses are allocated to related productive fixed assets in the year of commencement of the related project.

Intangible fixed assets are stated at cost less accumulated amortization.

Depreciation on tangible fixed assets is provided on straight-line method on pro-rata basis at rates and in the manner specified in Schedule XIV to the Companies Act,1956 other than on certain Plant and Machinery at the Magnetic and Optical Media manufacturing units which is depreciated at the rate of 10.34% which has beendetermined based on the management's estimate of useful life of the assets and is higher than the rates specified in Schedule XIV to the Companies Act, 1956.

Intangible fixed assets are amortized on equated basis over their estimated economic life not exceeding 10 years.

Leasehold Land and improvement to the leased premises are amortised over the period of the lease.

The assets taken on finance lease are depreciated over the lease period.

Long term investments are stated at cost of acquisition inclusive of expenditure incidental to acquisition. A provision for diminution is made to recognise a decline, otherthan temporary in the value of long term investments.

Current investments are stated at lower of cost and fair value determined on an individual basis.

Finished Goods, Work in process, Goods held for resale At lower of cost and net

Raw Materials, Packing Materials and Stores and Spares realisable value

Cost of Raw material, goods held for resale, packing materials and stores and spares, is determined on the basis of weighted average method.

Cost of Work in process and finished goods, is determined by considering direct material cost and appropriate portion of overheads.

Liability for excise duty in respect of goods manufactured by the company, other than for exports, is accounted upon completion of manufacture, and provision is madefor exciseable manufactured goods.

Customs duty exigible on materials (intended for domestic consumption), lying in bonded warehouses, is provided on accrual basis.

Grants of the nature of contribution towards capital cost of setting up projects, are treated as Capital Reserve and grants in respect of specific fixed assets areadjusted from the cost of the related fixed assets.

Borrowing costs directly attributable to the acquisition of qualifying assets are capitalised as part of the cost of assets till the date of commencement of commercialuse of the asset. All other borrowing costs are charged to the Profit and Loss Account.

Liability towards gratuity payable on death/retirement of employees is accrued based on an actuarial valuation, and covered by funding/premium as determined by LifeInsurance Corporation of India.

Provision for the benefit of leave encashment to the employees as per Company's policy is based on an actuarial valuation as of the balance sheet date.

Transactions in foreign currency are converted at the exchange rate prevailing at the date of the transactions. Foreign currency monetary assets and liabilities notcovered by forward exchange contracts are restated at the year end rates and the resultant gains or losses are recognised in the Profit and Loss Account, exceptexchange differences arising on settlement and/or translation of foreign currency liabilities relating to acquisition of fixed assets which are adjusted against thecarrying costs of respective fixed assets.

In respect of foreign branches, all revenues, expenses, monetary assets/liabilities and fixed assets are accounted at the exchange rate prevailing on the date of thetransaction. Monetary assets and liabilities are restated at the year end rates and resultant gains or losses are recognised in the Profit and Loss Account.

Gains and losses on foreign exchange forward contracts are recognised in the Profit and Loss Account over the life of the contract, except in respect of liabilitiesincurred for acquiring fixed assets, in which case such difference is adjusted to the carrying amount of the respective fixed assets. Any profit or loss arising oncancellation of a forward contract is recognised as income or expense for the period.

Expenditure in respect of issue of shares, pre-incorporation and other preliminary expenses, is written-off over a period of 10 years from the year in which these areincurred.

Provision is made for current income tax liability based on the applicable provisions of the Income Tax Act 1961, for the income chargeable under the said Act and as perthe applicable overseas laws relating to the foreign branch.

The Company provides for deferred tax using the net liability method based on the tax effect of timing differences resulting from recognition of items in the financialstatements. The deferred tax charge or credit is recognized using the tax rates and tax laws that have been enacted or substantially enacted by the balance sheet date.

Assets acquired under finance leases are recognised as Asset and a Liability at the lower of the fair value of the leased assets at inception of the lease and the presentvalue of minimum lease payments. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge isallocated to periods during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

4.1.4 Fixed Assets

4.1.5 Depreciation/Amortization

4.1.6 Investments

4.1.7 Inventory Valuation

4.1.8 Government Grants

4.1.9 Borrowing Costs

4.1.10 Retirement Benefits

4.1.11 Foreign Currency Transactions

4.1.12 Miscellaneous Expenditure

4.1.13 Taxation

4.1.14 Leases

}

schedules to the consolidated accountsACCOUNTING POLICIES AND NOTES ON ACCOUNTS (contd...)

Revenue from sales of goods is recognised on transfer of significant risks and rewards of ownership to the customer and when no significant uncertainty existsregarding realisation of the consideration. Sales are recorded net of sales returns, rebates and trade discounts and price differences and are inclusive of duties(including excise duty).

4.1.3 Revenue Recognition

4.2 Notes on Accounts

4.2.1 Contingent Liabilities etc.

4.2.2 Capital Commitments

4.2.3 Lease Obligations

i) In respect of:

- Bank guarantees given on behalf of the Company Rs.255.72 Million (Previous Year Rs.240.24 Million)

- Letters of Credit opened by banks on behalf of the Company-Rs.2387.00 Million (Previous Year Rs.1688.86 Million)

ii) Disputed demands in respect of Income tax Rs.Nil (Previous year Rs. 43.26 Million); Entry tax Rs.106.06 Million (Previous year Rs. 91.72 Million); Service taxRs.60.87 Million (Previous year Rs. Nil); Excise duty Rs.0.11 MIllion(Previous year Rs. Nil) and Custom duty Rs.140.71 Million (Previous year Rs. Nil).

iii) Claims against the Company not acknowledged as debts - Rs 1.47 Million (Previous Year Rs. 7.34 Million).

Estimated value of contracts remaining to be executed on capital account and not provided for (net of advances)-Rs.2245.48 Million (Previous Year Rs.1438.70Million).

Future obligations for rentals under operating leases amount to Rs. 146.69 Million (Previous year Rs. 16.57 Million). The total lease payments recognised in thestatement of profit and loss account amounting to Rs. 21.35 Million (Previous year Rs. 20.90 Million)

Future obligations for rentals under finance lease arrangement for plant and machinery amount to Rs. Nil (Previous year Rs. 1.90 Million).

Reconciliation of minimum lease payments and their present value in respect of vehicles taken on lease, is as under

Amount paid upto 31.3.2004 2,579,558 1,587,512 992,046

Amount payable not later than one year 994,009 667,747 326,262

Amount payable later than one year but not later than five years 2,646,019 2,312,022 333,997

Previous year 4,299,025 2,641,606 1,657,419

The total cost of the vehicles and their carrying amount as at 31st March 2004 are Rs. 4,649,682 (Previous Year Rs.3,035,876) and Rs.2,752,558 (Previous YearRs.1,795,860) respectively.

Current Investments (Unquoted) No. Cost (Rs.) No. Cost (Rs.)

(Mutual Fund Units of the Face value of Rs. 10 eachacquired/sold during the year)

- Birla Sun Life Mutual Fund 51,025,506 550,316,573 21,209,115 225,000,000

- Prudential ICICI Mutual Fund 22,650,584 285,219,588 11,640,524 160,000,000

- SBI Mutual Fund 4,755,111 50,038,012 -- --

Provision for taxation has been made based on Minimum Alternate Tax as applicable to the company for the current year in accordance with the relevant provisions ofthe Income Tax Act, 1961.

During the year ended 31.03.2003, based on expert opinion obtained, the deferred tax liability was considered at nil, in view of the exemption available to theundertakings of the company under Income Tax Act, 1961, the computation / determination of such tax liability being measured in the proportion of profits of theundertakings from domestic operations in section 10A/10B of the said act in accordance with the expert opinion obtained to that effect.

The management has made a review of the matter and sought a fresh opinion as regard the interpretation of ASI-5 read with AS-22 'Accounting for Taxes on Income'issued by the Institute of Chartered Accountants of India; and based thereon and as a prudent measure decided to provide for the deferred tax liability upto the year2003-04.

Deferred tax liability is net of deferred tax asset of Rs. 860,126,966 on account of losses to be setoff against taxable profit in future. Based on its existing andpotential business in the near future, including projections / profitability the management is virtually certain of such setoff of the unabsorbed losses; on whichassertion the auditor have placed reliance.

Present value of

Minimum Lease minimum lease Lease

payments (Rs) payments (Rs) charges (Rs)

Total 6,219,586 4,567,281 1,652,305

4.2.4 Movements in Other Investments

2003-04 2002-03

Total 78,431,201 885,574,173 32,849,639 385,000,000

4.2.5 Taxation

schedules to the consolidated accountsACCOUNTING POLICIES AND NOTES ON ACCOUNTS (contd...)

Stock options granted to the employees under the Company's Employees Stock Option Scheme are accounted in accordance with Securities and Exchange Board ofIndia (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999. Accordingly, the excess, if any, of the market price of the underlyingequity shares as of the date of the grant of the option over the exercise price of the option, is recognised as employee compensation cost and amortised on straight linebasis over the vesting period.

4.1.15 Employees Stock Option Scheme

4.2.6 Employee Stock Option Plan (ESOP)

4.2.7 Other Disclosures

i) Managerial Remuneration (Remuneration to Directors):

DEEPAK PURI* NITA PURI* RATUL PURI*Managing Director Whole time director Whole time director

Total 1,935,854 594,200 3,197,990

ii) Remuneration to Auditors:

2003-04 2002-03

Total 4,068,520 3,661,450

4.2.8 Related Party Disclosures

The Company, has on 09-01-2004, in terms of ESOP granted 2,030,300 stock options to its employees, at the exercise price of Rs. 342 per share. The Optionsgranted are vested over a period of maximum of four years from the date of grant. As at the date of balance sheet no option has been exercised by any employee.

In terms of interpretation ASI-15 issued on Accounting Standard - 21 ('Consolidated Financial Statements') by the Institute of Chartered Accountants of India,additional information pursuant to requirements of Part II of Schedule VI to The Companies Act, 1956, which are not material, have not been disclosed in these notesto the Consolidated Financial Statements.

(figures in bracket are for the previous year) (Amount in Rupees)

a) Salaries/Allowances 1,725,600 454,800 2,910,000

(1,440,000) (420,000) (2,220,000)

b) PF contribution 115,200 36,000 180,000

(115,200) (36,000) (180,000)

c) Perquisites 95,054 103,400 107,990(357,600) (112,517) (772,068)

Previous Year (1,912,800) ( 568,517) (3,172,068)

* Key Management Personnel

Note: Provision for leave encashment and Gratuity amounting to Rs. 272,988 and Rs. 652,309 respectively made during the year has not been included above.

(Amount in Rupees)

This comprises the following, including Service Tax :

For Statutory audit ( incl. branch auditor's fee Rs Nil : Previous year Rs. 2,700) 2,088,000 1,946,700

For Limited Review 648,000 756,000

For Certification / Other Reports 1,112,400 813,000

For reimbursement of out of pocket expenses 220,120 145,750

As required by Accounting Standard AS (18) on `Related Party Disclosures' issued by the Institute of Chartered Accountants of India, since Consolidated FinancialStatements presents information about the Parent and its subsidiary as a single reporting enterprise, it is not necessary to disclose intra-group transactions.

schedules to the consolidated accountsACCOUNTING POLICIES AND NOTES ON ACCOUNTS (contd...)

In consonance with the methodology so adopted, a recomputation of deferred tax liability has been made for the year, as well as upto the preceding year end (which hasbeen considered as a prior period item and separately shown in the Profit and Loss Account).

The Break up of Net Deferred Tax Liability is as under:

(Amount in Rs.)

Depreciation -- 790,769,638 790,769,638

Unabsorbed Depreciation 443,874,000 -- (443,874,000)

Brought Forward Losses 18,464,638 -- (18,464,638)

Depreciation -- 414,501,328 414,501,328

Unabsorbed Depreciation 397,788,328 -- (397,788,328)

Particulars of Timing Differences Deferred Tax Deferred Tax Net Deferred

Assets Liability Tax Liability

(a) Upto the Financial year 2002-03

Total 462,338,638 790,769,638 328,431,000

(b) For the Financial year 2003-04

Total 397,788,328 414,501,328 16,713,000

Total Deferred Tax Liabilty 345,144,000

schedules to the consolidated accountsACCOUNTING POLICIES AND NOTES ON ACCOUNTS (contd...)

4.2.9 Earning per share

2003-04 2002-03

4.2.10 Secondary segment information (by Geographic segments)

Domestic OverseasOperations Operations Total

4.2.11

(Amount in Rupees)

a) Calculation of Weighted Average number of equity shares of Rs. 10 each

No. of Shares at the beginning of the year 48,406,472 46,406,472

Bonus Issue during the FY 2003-04 in 1:1 ratio 48,406,472 48,406,472

Equity Shares issued on 29 March, 2004 14,700,000 --

Total number of equity shares outstanding at the end of the year 111,512,944 96,812,944

Equity shares outstanding for 365 days 96,812,944 48,406,472

Equity shares outstanding for 3 days 14,700,000 --

Weighted Average number of equity shares outstanding during the year 96,933,766 96,812,944

b) Net Profit after tax available for equity shareholders 3,288,311,033 2,320,818,532

Earnings per share (face value per share Rs. 10 each)Basic and Diluted:

- Before prior period items (Rs.) 37.31 23.97

- After prior period items (Rs.) 33.92 23.97

Note: Due to the issue of bonus Shares during the year 2003-04, the Earnings Per Share for financial year 2002-03 has been recomputed/restated.

(Amount in Rupees)

Revenues-Sales (net of taxes/duties) (Current Year) 2,348,182,348 12,862,410,660 15,210,593,008

Revenues-Sales (net of taxes/duties) (Previous Year) 1,225,058,915 9,701,513,570 10,926,572,485

Carrying Amount of Segment Assets (Current Year) 130,155,808 2,929,792,508 3,059,948,316

Carrying Amount of Segment Assets (Previous Year) 139,160,146 2,569,313,528 2,708,473,674

Notes on Segment Information:

Considering the nature of the company's business, its activities and operations, the internal financial reporting and the element of risk and returns, as also that it ispredominantly engaged in the manufacture of storage media products, there are no business segments within the meaning of AS 17 - Segment Reporting,Informationhas therefore, been given as above in relation to the domestic/overseas operations, by way of geographic segments.

Pursuant to an agreement dated 25.03.2004, the Company issued 5,400,000 Share Warrants, each convertible into one equity share at an exercise price of Rs. 336per warrant. The Company has received an advance of 10% of the exercise price, amounting to Rs. 181,440,000 from Woodgreen Investment Limited (WIL). Thewarrants may be exercised at the sole option of WIL at any time before September 28, 2005. If the warrants are exercised by WIL, the Company will allot 5,400,000fully paid equity shares of Rs. 10 each on receipt of the balance consideratino of Rs. 1,632,960,000. If the warrants are not exercised by WIL, the advance will beforfeited by the Company.

a) Fixed Assets written off comprise assets discarded (Rs. 14,417,593) on redundancy due to discontinuation of manufacturing operations in respect of one ofthe product line.

b) Deferred Revenue expenditure (Schedule 17 - Administration and Other Expenses) includes Rs. 10,931,719 pertaining to a product line discontinued duringthe year.

i) Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management tomake estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

ii) Inventories

Inventories stated at the lower of cost or market, consist of optical and magnetic storage media held for resale. Cost is determined on a first-in, first-out basis.

iii) Income taxes

Deferred income tax assets and liabilities arise from temporary differences associated with differences between the financial statement and tax basis of assetsand liabilities, as measured by the enacted rates which are expected to be in effect when 'these differences reverse. Deferred tax assets and liabilities areclassified as current and non-current, depending on the classification of the asset and liabilities to which they relate. Deferred tax assets and liabilities notrelated to an assets or liabilities are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.The principle type of temporary difference between assets and liabilities for financial statements and tax returns results from a net operating losscarryforward.

European Optic Media Technology was incorporated in Erfurt, Germany on January 30, 2003. The Company has its registered office at Maiozerhofstrabe 12,99084 Erfurt, Germany.

The object of the company are the pan-European trade and production of data media. The Company may conduct all business which directly or indirectlypromotes its objects or which furthers the developments of its product.

The first financial year begun on 30th January 2003 and terminated on 31st March 2004.

Pursuant to section 316 of the German Commercial Code, no audit is required under German Law as the Company does not fulfill during the year 2003 thecriteria's specified therein.

4.2.12

5 Significant Accounting Policies and Notes of the subsidiaries:

A. Glyphics Media Inc.

B. European Optic Media Technology GmbH

i) General

The accounts are held in EURO. Assets, Liabilities, Income and expenses are recorded at the rates prevailing at the balance sheet date. Realised gainsand losses as well as unrealised losses are recorded in the Profit and Loss Account.

Project expenses represent expenses incurred during the project stage, which will be apportioned to the value of the assets capitalized.

Following are the accounting policies adopted by the associate company in preparation of their annual accounts which are not in consonance of the policies that followedby the parent company. No adjustment has been carried out in the consolidation of Financial Statements as it is not practicable to make appropriate adjustment in theassociates Financial Statements.

Traded inventory amounting to Rs. 113.20 million has been valued at First In First Out (FIFO) basis. However, as per MBIL cost is determined on WeightedAverage Cost basis.

Useful life of equipment and motor vehicles is expected to be three years. Effectively, these assets are being depreciated at rates higher than those specified inSchedule XIV to the Companies Act, 1956.

Goodwill is amortised using the straight line method over its estimated useful life of 10 years. Accordingly an amount of AED 281,000 (Rs. 3.5 million) has beencharged to the Profit and Loss Account during the year.

Previous years' figures of the group entities have been rearranged/ recast/ regrouped wherever considered necessary.

Schedules 1 to 19 are annexed to and form an integral part of the Consolidated Balance Sheet as at 31.3.2004 and the Consolidated Profit and Loss Account for the year ended onthat date.

ii) Summary of significant accounting policies

a) Foreign currencies

b) Project expenses

C. Global Data Media FZ LLC

i) Inventories

ii) Equipment and Motor Vehicles

iii) Goodwill

6. Previous Years' Figures

7.

schedules to the consolidated accountsACCOUNTING POLICIES AND NOTES ON ACCOUNTS (contd...)

For K. C. Khanna & Co.Chartered Accountants.

PartnerMembership No 83084

Place: New DelhiDate: June 18, 2004

Nitin K. Jain R GanesanDeepak Puri Harnam D.Wahi Minni KatariyaChairman and Managing Director Director Company Secretary General Manager Accounts

(Pursuant to Listing Agreement with Stock Exchanges)consolidated cash flow statement

For the year ended 31st March (Rupees in Million) 2004 2003

A CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments for:

Operating profit before working capital changes 6,715.53 3,965.57

Adjustments for:

Cash generated from operations 5,785.84 6,494,64

Net cash from operating activities 5,759.05 6,563.15

B CASH FLOWS FROM INVESTING ACTIVITIES

Net cash used in investing activities (7,316.49) (6,973.67)

C CASH FLOWS FROM FINANCING ACTIVITIES

Net cash from financing activities 6,812.99 2,163.84

Net profit before tax 3,676.27 2,314.44

Depreciation 2,268,87 1,175.28

Interest Expense 693.65 543.38

Interest Income (98.20) (43.25)

Income from Investments (0.59) (0.15)

Finance Lease Payments 0.35 9.93

Profit on Fixed Assets sold (0.06) --

Loss on sale of Investments (0.05) 0.01

Miscellaneous Expenditure written off 0.12 0.42

Deferred revenue expenditure written off 25.56 2.57

Bad Debts Written off 33.53 30.87

Provision for Bad & Doubtful Debts 60.68 38.85

Unclaimed Balances Written Back (8.34) (4.26)

Provision for Gratuity & Leave Encashment 7.44 3.96

Taxation on Foreign Branch 0.20 2.90

Stock Written off 1.91 50.72

Fixed Asset Written off 14.42 5.15

Unrealised foreign exchange (gain)/loss 112.39 (165.25)

Share of loss in Associate 30.77 --

Surplus on desubsidisation (103.39) --

- Trade and Other Receivables (709.94) 248.37

- Inventories (948.69) 1,365.87

- Trade and Other Payables 728.94 914.83

- Direct Taxes Paid (26.79) 4.37

- Miscellaneous Expenditure -- 64.14

Purchase of Fixed Assets (7,444.09) (9,922.97)

Capital Work in Progress (including Incidental Expenditure) (48.07) 2,906.53

Sale of fixed assets 91.93 --

Sale of investments 885.62 385.20

Purchase of investments (978.11) (385.00)

Profit on sale of long term investment (sale of subsidiary) 103.39 --

Interest Received 72.25 42.42

Income from Investments 0.59 0.15

Proceeds from Issue of Share Capital/Share Warrants 5,120.64 --

(including Share Premium)

Repayment of Preference Share Capital -- (75.00)

Proceeds from Long Term Borrowings 4,615.72 9,896.08

Repayment of Long Term Borrowings (1,836.38) (6,618.49)

Proceeds from short term borrowings (net) (232.43) (413.01)

Finance Lease Rent Payment (Principal Portion) (0.35) (9.93)

Interest Paid (709.54) (489.57)

Dividend Paid (Including Corporate Dividend Tax) (144.67) (126.24)

(Pursuant to Listing Agreement with Stock Exchanges)

For the year ended 31st March (Rupees in Million) 2004 2003

D NET INCREASE IN CASH AND CASH EQUIVALENT (A+B+C)

8,000.12 2,744.57

Cash and cash equivalents comprise:

8,000.12 2,744.57

5,255.55 1,753.32

Cash and cash equivalents at the beginning of the year 2,744.57 991.25

Cash and cash equivalents at the end of the year

Cash, Cheques / Drafts and imprest balances with employees 115.27 33.63

Fixed Deposits 6,988.23 2,122.10

Balance with Scheduled Banks 896.62 588.84

Notes:

1 The above Cash flow statement has been prepared under the indirect method set out in AS-3 'Cash Flow Statements' issued by the Institute of Chartered Accountants of India

2. Interest paid is exclusive of and purchase of Fixed Assets is inclusive of interest capitalised Rs. 21.15 Million (Previous Year Rs. 68.71 Million)3 Previous year's figures have been regrouped and recast wherever necessary to conform to the current year classification

4 Following non cash transactions have not been considered in the cash flow statement

- Tax deducted at source

- Assets acquired on credit/lease/hire purchase

5 Cash and cash equivalents include Rs. 5,709,205: Previous year Rs. 5,382,909 which are not available for use by the Company. (Refer schedule 10 in the accounts)

consolidated cash flow statement (contd.)

As per our report of even dateFor K. C. Khanna & Co.Chartered Accountants.

PartnerMembership No 83084

Place: New DelhiDate: June 18, 2004

Nitin K. Jain R GanesanDeepak Puri Harnam D.Wahi Minni KatariyaChairman and Managing Director Director Company Secretary General Manager Accounts

MOSER BAER INDIA LIMITEDRegd. Office: 43-A, Okhla Industrial Estate, New Delhi-110020

Tel: 51635201-05, 26911570-74 Fax: 51635211, 26911860

E-mail: info@moserbaer.net, moser@vsnl.com

1.

(a) -

NOTICE

ARTICLE 1

Notice is hereby given that the 21 Annual General Meeting of the company will be held on Monday, 26 July, 2004 at 9.30 A.M. at FICCI Golden Jubilee Auditorium,

Federation House, Tansen Marg, New Delhi-110001 to transact the following business: -

1. To receive, consider and adopt the audited Balance Sheet as at 31 March 2004, Profit and Loss Account for the year ended on that date and the Reports of

the Directors and Auditors thereon.

2. To declare dividend on Equity Shares of the company.

3. To appoint a Director in place of Mr. Ratul Puri, who retires by rotation and being eligible, offers himself for re-appointment.

4. To appoint a Director in place of Mr. Harnam D Wahi, who retires by rotation and being eligible, offers himself for re-appointment:

5. To consider and, if thought fit to pass with or without modification(s), the following resolution as a Special Resolution:

“RESOLVED THAT M/s. Price Waterhouse, Chartered Accountants, be and are hereby appointed Auditors of the company, in place of M/s. K.C. Khanna &

Co., Chartered Accountants, the retiring Statutory Auditors, to hold office from the conclusion of this Annual General Meeting until the conclusion of the next

Annual General Meeting and that they may be paid the remuneration which may be decided by the Board of Directors/ Audit Committee of the Board of

Directors of the company.

6. To consider and, if thought fit to pass with or without modification(s), the following resolution as an Ordinary Resolution:

“RESOLVED THAT in accordance with the provisions of Sections 198, 269 & 309 read with Schedule XIII and other applicable provisions, if any, of the

Companies Act, 1956, and Articles of Association of the company, consent of the company be and is hereby accorded to increase the remuneration of Mr.

Deepak Puri, Managing Director of the company, for the financial year 2004-05, to take on effect from 1 April, 2004, to an amount the details of which are

given in the Explanatory Statement annexed hereto.

FURTHER RESOLVED THAT where in any financial year during the currency of tenure of Mr. Deepak Puri as Managing Director, the company has no profits or

its profits are inadequate, then remuneration may be paid to him in accordance with the provisions of Section II of Part II of Schedule XIII of the Companies Act,

1956 at that time.

FURTHER RESOLVED THAT the Board of Directors of the company or any committee thereof be and is hereby authorized to do all such acts, deeds and

things as in its absolute discretion it may think necessary, expedient or desirable and to settle any question or doubt that may arise in relation thereto in order

to give effect to the foregoing resolution and to amend, alter or otherwise vary the terms and conditions of appointment of Mr. Deepak Puri, including his

remuneration provided such remuneration does not exceed limits prescribed under the provisions of the Companies Act, 1956 and any statutory

modifications or re-enactment thereof or any other guidelines relating to managerial remuneration as may be notified by the Government of India from time to

time as may be considered by it to be in the best interest of the company.”

7. To consider and, if thought fit to pass with or without modification(s), the following resolution as an Ordinary Resolution:

“RESOLVED THAT in accordance with the provisions of Sections 198, 269 & 309 read with Schedule XIII and other applicable provisions, if any, of the

Companies Act, 1956, and Articles of Association of the company, consent of the company be and is hereby accorded to increase the remuneration of Mr.

Ratul Puri, Executive Director of the company, for the financial year 2004-05, to take on effect from 1 April, 2004, to an amount the details of which are given in

the Explanatory Statement annexed hereto.

FURTHER RESOLVED THAT where in any financial year during the currency of tenure of Mr. Ratul Puri as Executive Director, the company has no profits or itsprofits are inadequate, then remuneration may be paid to him on the basis of effective capital of the company calculated in accordance with the provisions of

Section II of Part II of Schedule XIII of the Companies Act, 1956 at that time.

FURTHER RESOLVED THAT the Board of Directors of the company or any committee thereof be and is hereby authorized to do all such acts, deeds and

things as in its absolute discretion it may think necessary, expedient or desirable and to settle any question or doubt that may arise in relation thereto in order

to give effect to the foregoing resolution and to amend, alter or otherwise vary the terms and conditions of appointment of Mr. Ratul Puri, including his

remuneration provided such remuneration does not exceed limits prescribed under the provisions of the Companies Act, 1956 and any statutory

modifications or re-enactment thereof or any other guidelines relating to managerial remuneration as may be notified by the Government of India from time to

time as may be considered by it to be in the best interest of the company.”

8. To consider and, if thought fit, to pass with or without modifications, the following resolution as a Special Resolution:

“RESOLVED THAT pursuant to Section 31 and other applicable provisions, if any, of the Companies Act, 1956, the following existing Articles of Association of

the company be and are hereby amended by addition/deletion/substitution of the following Articles at suitable places as mentioned hereinafter:

The definition of “Shares” in Clause 1 of Article 1 shall be amended to read as follows:

“ ” means the equity and voting share capital of the company, including Global Depository Receipts, American Depository Receipts or such

other similar instruments and the underlying Equity Shares in relation thereto, at a par value of Rs. 10 per share, and shall, for the avoidance of

doubt, include the Warrants provided that in relation to Articles71-73, 75 and 82-85, the term “Shares” shall not include Global Depository

Receipts, American Depository Receipts or such other similar instruments or Warrants, to the extent these instruments do not carry, or the holders

of these instruments do not enjoy, the right to vote.”

st th

st

st

st

Shares

(b) :The following definitions shall be inserted after the definition of “Debt” in the Article 1 titled “Further Definitions"

(i) with respect to a specified Person, means, any other Person (a) directly or indirectly Controlling, Controlled by or under commonControl with such specified Person.

(ii) “ shall have the meaning ascribed to it in Article 39B(a).

(iii) “ shall have the meaning ascribed to it in Article 39A(e).

(iv) or with respect to any Person, means the possession, directly or indirectly, of the power to direct or

cause the direction of the management, business or policies of such Person, whether through the ownership of voting securities, by contract

or otherwise, or the power to elect or appoint at least 50% of the directors, managers, partners or other individuals exercising similar authority

with respect to such Person

(v) shall have the meaning ascribed to it in Article 39A(d).

(vi) “ shall have the meaning ascribed to it in Article 91A(b).

means collectively BIL, EIL, RIL and WIL and each one of them shall individually be referred to as an “ ”. It is hereby clarified

that the term “Investors” or “Investor” shall include:

(a) at the option of the Investors (which shall be exercisable in writing), any of the Affiliates of the Investors holding Equity Shares in the

Company,

(b) all the Affiliates of BIL, EIL, RIL or WIL to whom, BIL, EIL, RIL or WIL has assigned or transferred (without notice or consent) part or whole of

its rights and obligations under these Articles and other rights accruing in relation to ownership of the Shares, and

(c) all third parties (other than Affiliates of BIL, EIL, RIL or WIL) to whom BIL, EIL, RIL or WIL has assigned or transferred part or whole of its

rights and obligations under or pursuant to these Articles and other rights accruing in relation to the ownership of Shares, provided that

such assignment or transfer: (a) relates to more than 5% shareholding in the Company, and (b) has been consented to in writing by the

Promoters.

(viii) “ shall have the meaning ascribed to it in Article 39B(b).

(ix) “ shall have the meaning ascribed to it in Article 39B(b).

(x) shall mean the entities as agreed from time to time between the Investors, the Promoters and the Company.

(xi) shall have the meaning ascribed to it in Article 39B(b).

(xii) “ ” means (a) key managerial personnel of the rank of general manager or above employed or retained by the Company or

(b) any employee of the Company whose annual compensation (inclusive of all benefits) exceeds Rs. 1,000,000;

(xiii) “ shall have the meaning ascribed to it in Article 157.

(xiv) “ ” means a subsidiary of the Company (whether existing as on 25 March, 2004 or established in the future) and shall have the

meaning as set forth in Section 4 of the Companies Act, 1956 as may be amended from time to time.

(xv) “ shall have the meaning ascribed to it in Article 39B(b).

(xvi) means Woodgreen Investment Ltd.”

(c) The following definitions in Article 1 shall be deleted:

(i) The definition of “Electra Partners Mauritius Limited”

(ii) The definition of “ ” or “ ”

(d) All references to the “Auditor” in the Articles shall be amended to “Statutory Auditor”.

(e) Except for the references in Article 1 (vii), all other references to BIL, EIL and RIL (collectively) in the Articles shall be amended to the “Investors” and

all references to each of BIL, EIL, RIL shall be referred to individually as an “Investor”.

(f) All references to “Electra Partners” shall be deleted.

2.

Article 39(ii) shall be deleted

3.

Article 39 (iii) shall be amended to read as follows:-

“In the event the collective shareholding of the Investors or the shareholding of the Promoters is reduced below 7.5% of the issued and outstanding

Shares, their respective rights as stated in these Articles shall stand terminated (except as a result of breach of these Articles by the Company or the

Promoters). The obligations and liabilities of the Promoters under these Articles shall continue regardless of the extent of their shareholding in the

Company.”

4.

Article 39 A shall be amended to read as follows: -

“(a) Subject to Article 39A(b), the Investors shall have the unrestricted freedom, and right (without notice or consent to any Person) at any time, to

transfer any or all of the Shares held by them to any Person. If in the case of such transfer or attempted transfer of Shares held by any Investor(s) is

restricted by the Company or any Promoter (or their nominee Directors on the Board), then the Company or the Promoters, as the case may be,

shall be liable to indemnify and hold harmless each of such Investor(s) in respect of all costs, liabilities and damages that may incur (including,

attorneys' fees and expenses) as a result of such restriction on transfer or attempted restriction on transfer and efforts to enforce the indemnity

granted hereby.

“Affiliate”

Capital Restructuring”

Commission”

“Controlling”, “Controlled by”, “Control”,

“Further Securities”

Independent Directors”

(vii) “Investors” Investor

Offered Shares”

Purchaser”

“Restricted Party”

“Selling Promoter”

Senior Management

Statutory Auditor”

Subsidiary

Tag Along Shares”

“WIL”

The Auditor Auditor

th

ARTICLE 39(ii)

ARTICLE 39(iii)

ARTICLE 39A

(b) The Investors shall not transfer all or any of the Shares held by them to any of the , save and except if: (x) such transfer occurs

through a sale of the Shares on any recognised stock exchange only if the Investors are unaware that a proposed transferee is a Restricted Party; or

(y) such Transfer occurs to private equity funds, or mutual funds or other institutional investors only if the Investors are unaware that a proposed

transferee is a Restricted Party, or (z) such Transfer is effected after the written consent of any of: (i) Mr. Deepak Puri, or (ii) Mr. Ratul Puri, or (iii) any of

their heirs. The Parties may add to or delete from the list of Restricted Parties from time to time by mutual agreement.

(c) The Promoter(s) and the company agree that they shall provide and extend all assistance requested by any Investor in procuring any approval from

any governmental authority in the exercise of its rights under this Article 39A, including providing any documents required for such purpose.

(d) (i) Subject to applicable laws and the execution of confidentiality agreements (as are customary in such transactions), the Promoters and the

company agree and undertake to provide all reasonably necessary assistance to enable any potential purchaser, identified by the Investors

to purchase all or part of the Shares held by the Investors, to carry out a due diligence review of the company as may be generally required or

reasonably requested by any such potential purchaser.

(ii) The company and the Promoters agree and undertake that upon receipt of a written request from the Investors informing the company of the

Investors' decision to sell whole or part of the Shares then held by the Investors (including by way of one or more privately negotiated

transaction(s) or by way of public offer(s) of securities to be listed on a stock exchange in India or abroad, or a combination thereof, at the

Investors' sole option), the company and the Promoters shall, within four months of receiving such a request, make reasonable efforts,

subject to applicable laws, to facilitate the sale, including but not limited to preparing and signing the relevant offer documents, conducting

road shows, entering into such documents, providing all necessary information and documents necessary for preparing the offer document,

obtaining such regulatory or other approvals and doing such further reasonable acts or deeds as may be necessary to effect such a sale by

the Investors. Further, the company agrees to comply with all the procedures and execute documents in each case as are customary in

transactions of such nature.

(iii) The company and the Promoters agree that the Investors shall be entitled to make one or more requests for sale of their Shares under this

Article 39A(d), either in whole or in part, and the company and the Promoters shall comply with the requirements of this Article 39A(d) in

respect of each such request.

(iv) For the purpose of this Article 39A(d), the Investors shall have the sole right to determine the nature of securities to be offered and the price for

such offering. The stock exchange(s) on which the securities shall be listed and the appointment of an investment bank as book runner for the

offering shall be mutually agreed between the Promoters, Investors and the company. In the event that the company, the Promoters and the

Investors do not reach an agreement with regard to the choice of stock exchange(s) on which the securities are to be listed and/or the choice

of investment banker to be appointed as book runner for the offering, the Investors shall have the option, at their sole discretion, to (a) require

the listing of the securities on any one of the following stock exchanges: Singapore Stock Exchange, London Stock Exchange or Luxembourg

Stock Exchange, and (b) appoint any one or more of the following investment banks as book runner(s) for the offering: (i) Credit Lyonnais,

Merrill Lynch, Citigroup, Morgan Stanley, Kotak Mahindra, or UBS Warburg, or (ii) the Affiliates or joint ventures, in India or abroad, of the

aforesaid entities. It is hereby clarified that the Investors shall have the right to appoint, at their sole discretion, any investment bank(s) as a

member(s) of the syndicate, co-lead manager(s) or other advisor(s) to the offering. The costs and expenses in respect of such sale of

securities shall be borne by the Investors in the same proportion that the securities sold by the Investors bears to the total securities that are

sold in the offering under this Article 39A(d). Where the securities sold in such offering consist solely of Shares sold by the Investors, then the

Investors shall bear all the expenses and costs related to such offering.

(v) In the event that the company issues American Depository Receipts, Global Depository Receipts or such other similar instruments (the

“ ”) that are listed or are to be listed on any stock exchange, then subject to applicable laws, upon written request by the

Investors, the company shall re-classify, as may be required, and list the Shares held by the Investors on the same date (or at a future date, if

requested in writing by the Investors) and on the same stock exchange(s) on which listing of the Further Securities occurs. The company's

obligations to list the Shares held by the Investors under this Article 39A(d)(v) shall exist irrespective of whether the Investors sell their Shares

pursuant to such listing or not.

(e) In the event that the company files with the United States Securities and Exchange Commission (“ ”), a registration statement for the

company's securities:

(i) at the Investors' written request, the company shall cover in such registration transfers of all Shares and Warrants (including by means of any

distribution to the limited or general partners of any Affiliates of the Investors) on behalf of the Investors and any permitted transferees. The

expenses of preparation and filing of such registration statement and the fees/commission payable to the underwriters appointed shall be

borne by the Investors in the same proportion that the securities transferred by the Investors under this Article 39A(e) bears to the total

securities that are registered with the Commission as part of the offering. Upon filing the registration statement, the company will use its best

efforts to cause the registration statement to be declared effective by the Commission and to keep the registration statement effective with the

Commission so long as necessary under applicable law to permit the transfer of the securities by the Investors;

(ii) if the Investors choose not to effect registration of the Shares and/or Warrants held by the Investors at the time of registration by the company

of its securities, then the company shall be obligated to register the Shares and/or warrants held by the Investors at any later date upon written

request of the Investors. If the Investors choose to register their Shares and/or warrants at a later date and at such date: (x) no other securities

of the company are being registered, then the expenses of such registration shall be borne solely by the Investors, or (y) if other securities of

the company are being registered, then the expenses for such registration shall be borne by the Investors in the same proportion that the

securities registered by the Investors bears to the total securities that are registered at such date.

(iii) if the company lists its securities on NASDAQ, the New York Stock Exchange or such other exchange, upon written request by the Investors,

the company shall be obligated to list the Shares held by the Investors on the same date (or at a future date, if requested in writing by the

Investors) and on the same stock exchange(s) on which listing of the securities takes place; and

Restricted Parties

Further Securities

Commission

(iv) the company's obligations as regards listing/registration under this Article 39A (e) shall exist irrespective of whether the Investors sell their

Shares pursuant to such listing/registration or not.”

5.

Article 39B (a) shall be substituted with the following:

“(i) The Promoters may freely transfer, in whole or in part, without any restriction including without complying with the provisions of Article 39B (a)(ii)

below or Article 39B (b), such number of Shares held by them that are in excess of 17,000,000 Shares, and provided that the Promoters continue tohold 17,000,000 or more Shares following any such transfer. For the avoidance of doubt, it is clarified that the transfer of any Shares

amongst the Promoters shall be exempt from any restriction provided that the Promoters give written notice to the Investors within 30 days of any

such Transfer.

(ii) In the event that the Promoters wish to effect any transfer of their Shares where either (x) such transfer would result in their aggregate shareholding

in the company falling below 17,000,000 Shares, or (y) their aggregate shareholding in the company is already below 17,000,000 Shares, then

each Promoter hereby covenants, undertakes and agrees that they shall not transfer any Shares held by them, without for each such transfer:

(x) the prior written consent of the Investors, and (y) complying with the provisions of Article 39B (b).

(iii) In the event that the company undertakes any form of restructuring of its share capital (“ ”), including, but not limited to: (i)

consolidation or subdivision or splitting of its Shares; (ii) issue of bonus Shares; (iii) issue of Shares in a scheme of arrangement (including

amalgamation or de-merger); (iv) reclassification of Shares or variation of rights, into other kinds of securities, then the number of Shares of

17,000,000 referred to in Article 39B(a)(i) and (ii)above and Article 39B(b), or the number of Shares of 10,000,000 referred to in Article 39B(b) , as

the case may be, shall be proportionately adjusted to ensure that the aggregate shareholding of the Promoters relative to the other shareholders of

the company after the occurrence of such Capital Restructuring is not different from their aggregate shareholding relative to the other shareholders

of the company as it existed prior to the occurrence of such Capital Restructuring.”

6.

Article 39B (b) shall be substituted with the following new clause:-

“(i) If any Promoter(s) (such Promoter(s), the “ ”) desire to sell any number of Shares held by such Person to any other Person, then

the Selling Promoter(s) shall, prior to completing such sale send a written notice to each Investor setting out all relevant details of the proposed sale

including but not limited to the (1) number of Shares proposed to be transferred (the “ ”), (2) the name and address of the proposed

transferee, (3) the proposed purchase price and (4) the material terms of the transfer.

(ii) Within a period of thirty (30) days from the date of receipt of the notice mentioned in Article 39B(b)(i) above, the Investors, by way of written notice to,

the Purchaser, Selling Promoter(s) and Mr. Deepak Puri, shall have the right to require the Selling Promoter(s) to cause the Person to whom the

Selling Promoter(s) intends to sell the Shares (such Person, the “ ”) to purchase from the Investors the Shares (excluding any global

depository receipts and American depository receipts or any similar instrument unless these have been converted to the underlying shares in the

company, in the event that the Purchaser is a resident of India) owned by the Investors as a condition precedent to the completion of the sale and

purchase between the Selling Promoter(s) and the Purchaser. The Investors shall provide notice to the Selling Promoter(s) setting out the number

of Shares (the “ ”) in respect of which they propose to exercise the tag along rights as set out in this Article 39B(b).

(iii) Subject to the provisions of Articles 39B (b)(iv) and 39B(b) (v) below, within a period of thirty (30) days from the date of receipt of the notice from the

Investors, the Selling Promoter(s) shall cause the Purchaser to acquire the Tag Along Shares offered for sale by the Investors. The Investors shall be

paid the same price per Tag Along Share and the sale shall be effected upon the same terms and conditions as are received by the Selling

Promoter(s), provided that the only representation that the Investors may in this case be required to provide shall be limited to the title of the Shares

being sold. The Selling Promoter(s) shall not complete the sale of any of their Shares unless the Purchaser has purchased the Tag Along Shares

from the Investors in accordance with the provisions of this Article 39B(b).

(iv) Where (A) the Promoters' aggregate shareholding in the company is equal to or less than 17,000,000 Shares but equal to or greater than

10,000,000 Shares as on the date that the Selling Promoter(s) provides notice in Article 39B(b) (i) above, and (B) any proposed Transfer of Shares

would not result in the Promoters' aggregate shareholding in the company falling below 10,000,000 Shares, then in the event the Purchaser is

unwilling or unable to acquire all the Shares proposed to be sold by the Selling Promoter(s) and the Tag Along Shares, then the number of Shares to

be sold by the Selling Promoter(s) and the Investors to the Purchaser shall be calculated as follows:

(a) the Shares to be sold by the Selling Promoter(s) to the Purchaser shall be:

= x ZY

where:

X = Total number of Shares held by the Promoters as on the date that the Selling Promoter(s) provides notice in Article 39B(b) (i) above

Y = Total number of Shares held in the aggregate by the Promoters and the Investors as on the date that the Selling Promoter(s) provides

notice in Article 39B(b) (i) above

Z = Offered Shares

(b) The Shares to be sold by the Investors to the Purchaser shall be the difference between the Offered Shares and the Shares to be sold by the

Selling Promoter(s) to the Purchaser calculated in accordance with Article 39B(b)(iv)(a) above.

For the purpose of this Article 39B(b)(iv), the Investors agree that Global Depository Receipts, American Depository Receipts or such similar

instruments shall be included in the Tag Along Shares only if the Purchaser is desirous of purchasing the Global Depository Receipts, American

Depository Receipts or such similar instruments, failing which such instruments may be included in the Tag Along Shares only if they are converted

into Equity Shares of the company.

ARTICLE 39B (a)

ARTICLE 39B (b)

X

inter-se

Capital Restructuring

Selling Promoter(s)

Offered Shares

Purchaser

Tag Along Shares

(v) Where the Selling Promoter(s) wish to effect any transfer of their Shares where either (A) such transfer would result in their shareholding in the

company falling below 10,000,000 Shares, or (B) the Promoters' shareholding in the company is already less than 10,000,000 Shares as on the

date that the Selling Promoter(s) provide notice in Article 39B(b) (i) above, then the Investors shall have the right to transfer all of the Tag Along

Shares (subject to a maximum of the number of Offered Shares) and the Selling Promoter(s) shall ensure that all such Tag Along Shares are

purchased from the Investors."

7.

Article 39B (c) and (d) shall be deleted

8.

Article 67A(a) shall be substituted with the following new clause :

“The quorum for a general meeting of the shareholders of the company shall be the presence in person of at least 5 members; provided, however, noobligation of the company or any of its Subsidiaries will be entered into, no decision or determination will be made and no action will be taken by or with

respect to the company or any of its Subsidiaries in respect of any of the matters listed in Article 117C(b), unless at least one representative of the

Investors (collectively) and one representative of the Promoters (collectively) is either: (A) present and at a properly constituted general meeting of the

company gives his/ her approval and authorization to such action, or (B) gives his/ her consent in writing to the company prior to the general meeting at

which such action is to be considered.”

9.

Article 67A(b) shall be deleted

10.

Article 90A shall be deleted

11.

Article 91A(b) shall be substituted with the following new clause:

“(i) In addition to the existing independent Directors, the company agrees to appoint three (3) new independent directors (the “

”) on the Board by September 30, 2005 in accordance with the following schedule:

(a) the first such director shall be appointed not later than September 30, 2004;

(b) the second such director shall be appointed not later than March 31, 2005; and

(c) the third such director shall be appointed not later than September 30, 2005.

(ii) All the Independent Directors shall be nominated by the Promoters and appointed after due consultation with, and after obtaining the prior written

consent of, the Investors. The Promoters shall provide, in writing, the names of three individuals for each Independent Director to be appointed. The

Investors shall exercise their rights of (i) choosing an Independent Director from the names suggested, or (ii) disapproving all the names

suggested, within 30 days from the date of intimation of the names by the Promoters. In the event the Investors do not approve of the persons

identified by the Promoters, the Promoters shall, within 6 weeks from the date of intimation of such disapproval by the Investors, identify and

provide the names of three other persons to the Investors for their consent. This process shall be followed until the Investors provide their consent

to the persons identified by the Promoters. The process, as provided in this Article 91A(b)(ii), shall be followed separately for the appointment of

each Independent Director in accordance with Article 91A(b)(i)(A)-(C). The Promoters and the Investors shall vote the Shares held by them to elect

and appoint the Independent Directors that are chosen pursuant to this Article 91A(b)(ii).

(iii) In the event that any or all of the Independent Director(s) appointed as aforesaid, cease for any reason, to be a Director of the company, the

company shall immediately appoint such number of Independent Director(s) in accordance with this Article, with the prior written consent of the

Investors and the Promoters, as is required to replace such number of Independent Director(s), within 6 (six) months of the Independent Director(s)

ceasing to be a Director.

(iv) For the purpose of these Articles, it is hereby expressly stated that the term “ ” shall have the same meaning as under the

applicable law in force from time to time.

(v) In the event that the Independent Directors cannot be appointed in the manner specified in Article 91A(b)(i) above, on account of the failure of the

Promoters and the Investors to agree to the nominees suggested, it shall not be deemed to be a breach of this Article 91A(b) by the Promoters

and/or the company, provided that the Promoters/company have duly complied with their obligations under Article 91A(b).”

12.

Article 91A(c) shall be substituted with the following new clause:

“The (i) Investors shall collectively have the right to appoint at least 1 (one) member, and (ii) Promoters shall collectively have the right to appoint at least

1 (one) member, on every committee of the Board of the company which is in existence as on 25 March, 2004 and which may be constituted by the

Board from time to time.”

13.

A new Article 91A(e) shall be added:

“All the rights of the Investors and the Promoters in Article 91A with respect to appointment of Directors on the Board and each committee shall apply to

each of the Subsidiaries in the same manner as such rights apply to the company.”

14.

Article 105A shall be deleted.

ARTICLE 39B (c) and (d)

ARTICLE 67A(a)

ARTICLE 67A(b)

ARTICLE 90A

ARTICLE 91A(b)

ARTICLE 91A(c)

ARTICLE 91A(e)

ARTICLE 105A

Independent

Directors

Independent Director

th

15.

Article 107A(a) shall be renumbered as Article 107A and Article 107A(b) shall be deleted.

16.

First paragraph of Article 117C (b) shall be amended to read as follows:

“Notwithstanding any other provisions of these Articles to the contrary, (and notwithstanding that any such matter may be adopted by the Board by

passing of resolutions by circulation), no obligation of the company or any of its Subsidiaries will be entered into, no decision or determination will be

made and no action will be taken by or with respect to the company or any of its Subsidiaries in respect of any of the following matters, unless at least

one Director nominated by the Investors and a Director nominated by the Promoters (A) is present and at a properly constituted meeting of the Board

gives his/her approval and authorisation to such action (or, in the case of resolutions by circulation, at least one Director nominated by the Investors and

a Director nominated by the Promoters has approved and authorised such resolutions in writing) or (B) has given his/her consent in writing to the Board

prior to the Board meeting at which such action is to be considered:

(i) the entering into of, an amalgamation, merger or consolidation with any other body corporate, or Person or a de-merger, arrangement or

compromise;

(ii) the taking of any steps to wind-up or terminate the corporate existence, filing for bankruptcy or as a “sick” company or entering into any

arrangement with the creditors;

(iii) acquisition of any business, creation of or entering into of any joint venture or partnership and the creation of or investment in any Subsidiary of the

company or other forms of investments.

(iv) the transfer (including any lease or exchange) of assets of the company to any Person of a value and amount aggregating more than Rs.200 million

on a cumulative basis in any Financial Year;

(v) incurring or committing to incur any capital expenditure from acquisition of assets or otherwise of a value and amount aggregating more than

Rs.300 million on a cumulative basis in any Financial Year, except if a nominee Director of any Investor had accorded their consent on the resolution

approving the Capital Expenditure Budget for such Financial Year;

(vi) any increase, reduction, buy back, modification or alteration of the authorized or issued share capital of the company, including the issue of

Shares, convertible preference shares, non-voting shares, warrants, options, convertible debentures or other instruments or securities which may

be converted into Shares and or which accord the holder voting rights in the company;

(vii) any agreement with or commitment to or any transaction with any Promoter or any Investor or any associate, relative or Affiliate of any Promoter or

of any Investor;

(viii) any amendments to the company's Memorandum of Association or Articles of Association, including any increase in the number of Directors on

the Board;

(ix) appointment of the Chief Financial Officer of the company;

(x) appointment or removal of Senior Management;

(xi) the appointment or removal of the Statutory Auditor or internal auditor of the company;

(xii) the appointment or removal of the Managing Director (other than Mr. Deepak Puri or Mr. Ratul Puri) or the CEO/COO;

(xiii) approval or amendment of the Business Plan;

(xiv) commencement of any business other than the Business or any other business conducted by the company as of June 1, 2000;

(xv) any action or commitment whereby the ratio of the company's Debt to the Equity of the Company's shareholders exceeds 1.5:1 at any time;

(xvi) settlement of any litigation or dispute between the company or any Person arising out of the same cause of action where the settlement amount

exceeds Rs.20 million in the aggregate value;

(xvii) changes in the material accounting or taxation policies of the company;

(xviii) giving of any security or guarantee to any Person of an amount aggregating more than Rs.10 million on a cumulative basis in any Financial Year;

(xix) declaration or payment of any dividend in a Financial Year in excess of the lower of (a) Rs.3 per Share or (b) 20% of the profits of the company after

deduction of all taxes payable;

(xx) any investment by the company by way of a loan, advance, deposit or otherwise given by the company to any Person of a value and amount

aggregating more than Rs.100 million on a cumulative basis in any Financial Year, or any such investment by the company of a value and amount

aggregating more than Rs.50 million on a cumulative basis in any Financial Year which is made in favour of any one Person (including its Affiliates).

For avoidance of doubt, such investment excludes:

(a) deposits made by the company with any one or more of the banks agreed between the Promoters and the Investors, provided that the

aggregate deposits with certain banks, as may be agreed upon by the Promoters, company and the Investors, shall not exceed either

Rs. 500 million or Rs. 200 million, as may be specified;

(b) purchase of Government of India securities;

(xxi) giving of or agreeing to give any loan, advance or debt of a value or amount aggregating more than Rs.50 million on a cumulative basis in any

Financial Year, except if an advance was given in connection with a capital expenditure which was approved by a nominee Director of any Investor

on a resolution approving the Capital Expenditure Budget;

(xxii) agreeing to any swap agreement, cap agreement, collar agreement, futures contract, forward contract, derivative transaction or similar

arrangement with respect to interest rates, currencies and securities, except the hedging contracts entered into in the ordinary course of business

consistent with past practice of the company;

ARTICLE 107A(a)

ARTICLE 117C (b)

( )

(xxiii) trading, or agreeing to trade, in securities of any nature and kind whatsoever;

(xxiv) calling or convening a general meeting of the shareholders of the company to consider any matter, directly or indirectly, relating to any of theforegoing;

(xxiv) any agreement or commitment to do any of the foregoing.”

17.

A new Article 117C (c) shall be inserted after Article 117C (b):

“(i) It is hereby clarified that if any of the matters specified in Article 117C(b) require the approval of the shareholders of the company at a general

meeting, then no obligation of the company or any of its Subsidiaries will be entered into, no decision or determination will be made and no action

will be taken with respect to the company or any of the Subsidiaries in respect of any of the matters specified in Article 117C(b) unless: (A) the

authorised representative of both the Investors and the Promoters at the general meeting vote in favour of such resolution, or (B) the Investors andthe Promoters give their consent in writing prior to such general meeting.

(ii) It is further clarified that the matters specified in Article 117C(b) shall refer not only to matters pertaining to the company but also to such matters as

are applicable to any of its Subsidiaries. In case of financial limits specified in Article 117C(b), such limits shall apply to the company and all of its

Subsidiaries in the aggregate and not only to the company.”

18.

Article 157 shall be substituted with the following new Article:

“(i) The company shall, in accordance with all applicable laws, keep true and accurate books and records of account in accordance with generally

accepted accounting principles consistently applied. All such books and records (and any supporting documents relating thereto) shall be kept atthe company's registered office or such other mutually acceptable place as appropriate under applicable law, and shall be available at all

reasonable hours for inspection and review by the Investors or their authorised representatives. At the end of each Financial Year, the books and

records of the company shall be audited, and requisite financial and income statements and balance sheets prepared and certified, by the

Statutory Auditor.

(ii) The company's statutory audit shall be undertaken by one of the four internationally recognised firms of chartered accountants or their

representatives in India (the “ ”), either individually or jointly, with any other firm of chartered accountants appointed by the

company. The company and the Promoters undertake to appoint the Statutory Auditor no later than June 30, 2004. The Statutory Auditor so

appointed, along with any other firm of chartered accountants that may be appointed, shall be responsible for undertaking the statutory audit for

the period commencing with the financial year ending March 31, 2005.”

19.

Articles 172 and 173 shall be deleted.

20.

The first paragraph of Article 175 shall be substituted with the following paragraph:

“Subject to applicable laws, the company shall provide the Investors and the Promoters, unless otherwise instructed in writing by the Investors or the

Promoters, as the case may be, the following on a regular basis in relation to: (i) the company and (ii) its Subsidiaries, and (iii) such other entities as may

be agreed from time to time between the Investors, the Promoters and the company.”

21. ARTICLE 175

A new Article 175 (j) shall be added at the end of Article 175 (i):

“(j) Within 15 days from the end of each calendar quarter, the following information shall be provided to the Board of Directors of the company for the

relevant quarter then ended:

i. A statement on profitability of each unit and key products of the company, containing details as agreed in writing amongst the Promoters, the

Investors and the company;

ii. A statement summarizing the age-wise analysis of receivables outstanding at the end of each quarter, and the extent to which these

receivables are credit-insured;

iii. Quarterly reports on operating and capital expenditure, including a comparison of actual expenditure against budgets;

iv. Minutes of the Board meetings held during the quarter;

v. Minutes of shareholder meetings held during the quarter;

vi. Minutes of meetings of committees of the Board held during the quarter.

Provided that the rights/information set out in Articles 175(e), 175(g) and 175(i) shall be provided only in respect of the company and its

Subsidiaries.”

22.

A new Article shall be inserted after Article 175 and shall be numbered as Article 176.

“In the event that there is any change in the shareholding of any one or more Investor(s) and/or their Affiliates holding Shares in the company (“

”) such that the Investors and/or their Affiliates and/or other Affiliates of Warburg Pincus LLC own in aggregate less than 76% of the equity

shares or common voting stock of the Relevant Shareholder(s), or the Relevant Shareholder(s) ceases to be Controlled by the Investors and/or their

Affiliates and/or other Affiliates of Warburg Pincus LLC (“ ”) then such Relevant Shareholder(s) shall not thereafter be

entitled to any rights nor be subject to any of the obligations under or pursuant to these Articles with effect from the date of closing of the transactions

that results in a Material Change in Shareholding of the Investor(s). Subject to Article 39(iii), such Material Change in Shareholding of a Relevant

ARTICLE 117C

ARTICLE 157

ARTICLES 172 AND 173

ARTICLE 175

NEW ARTICLE NUMBER 176

Statutory Auditor

Relevant

Shareholder(s)

Material Change in Shareholding

Shareholder shall not affect the rights and obligations of the other Investors under these Articles. The Investor(s) shall, within 30 days of occurrence of

any Material Change in Shareholding of a Relevant Shareholder inform the company and the Promoters of such an occurrence. The rights and

obligations of the Relevant Shareholder(s) under or pursuant to these Articles shall be re-instated if at any time the Investors and/or their Affiliates and/or

other Affiliates of Warburg Pincus LLC re-acquire in aggregate more than 76% of the equity shares or common voting stock or re-acquire Control of the

Relevant Shareholder(s) unless the rights of the other Investors under these Articles have already ceased pursuant to Article 39(iii).”

Regd. Office: By order of the Board of Directors

43-A, Okhla Industrial Estate, for MOSER BAER INDIA LTD

New Delhi - 110 020. Sd/-

Date: 29th June, 2004 COMPANY SECRETARY

1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE ON POLL ON HIS BEHALF. A

PROXY NEED NOT BE A MEMBER OF THE COMPANY. A PROXY, IN ORDER TO BE EFFECTIVE, MUST BE RECEIVED AT THE OFFICE OF THE COMPANY'S

REGISTRAR AND SHARE TRANSFER AGENT- MCS LIMITED LOCATED AT W-40, OKHLA INDUSTRIAL AREA, PHASE-II, NEW DELHI-110020 NOT LESSTHAN 48 HOURS BEFORE THE COMMENCEMENT OF THE MEETING. A BLANK PROXY FORM IS ENCLOSED

The Explanatory Statement under Section 173 (2) of the Companies Act, 1956 is annexed hereto.

3. The Register of Members and Share Transfer Books of the company will remain closed from Thursday, 22 July, 2004 to Monday, 26 July, 2004 (both days

inclusive).

4. The dividend for the year 2003-2004 as recommended by the Directors and if declared at the Annual General Meeting will be paid on or before Tuesday, 24

August, 2004, to those members whose names appear:

a) as beneficial owners as at the closure of business hours on Monday, 26 July, 2004 as per the list being furnished by National Securities Depository

Limited and Central Depository Services (India) Limited in respect of the shares held in electronic form, and

b) as members in the Register of Members of the company as at the closure of business hours on Monday, 26 July, 2004.

5. Members holding shares in physical form are requested to notify their change of address/ residential status, if any, under their signatures and quoting

respective folio nos. to the Registrar and Share Transfer Agent of the company- MCS Limited, whose office is located at W-40, Okhla Industrial Area, Phase-II,

New Delhi-110020, on or before Wednesday, 21 July, 2004. Members holding shares in electronic form may update such details with their respectiveDepository Participants.

6. The company will transfer the amount remaining unpaid in its dividend account for the year 1996-97 to the Investor Education and Protection Fund by Friday,

10 December, 2004. Those members who have not yet encashed their dividend warrants for the said year may refer the matter along with relevant details to

the Company Secretary at the Registered Office of the company located at 43-A, Okhla Industrial Estate, New Delhi - 110020 latest by Monday,

15 November, 2004 to claim their unpaid dividend.

7. Members are requested to bring their Client ID and DP ID or Folio Numbers, as may be applicable, for easy identification of attendance at the meeting.

8. Members / Proxies should bring the Attendance Slips duly filled in for attending the meeting.

9. Members desirous of getting any information about the Accounts and operations of the company are requested to submit their queries addressed to theCompany Secretary at least 7 days in advance of the meeting so that the information called for can be made available at the meeting.

10. Particulars of Directors to be appointed / re-appointed at the 21 Annual General Meeting: -

a.

Mr. Ratul Puri, who holds a Bachelor's degree in Maths and Computer Science from Carnegie Mellon University, is the Executive Director of the

company. It is due to the efforts of the team led by him that your Company's optical and magnetic media are exported to 82 countries across six

continents and the company has strong tie-ups with all major technology brands in the world. Mr. Ratul Puri does not hold any other Directorship.

Mr. Ratul Puri retires by rotation at this Annual General Meeting and, being eligible, offers himself for re-appointment. The Board of Directors

recommends this resolution for approval by the shareholders. None of the Directors except Mr. Ratul Puri himself, Mr. Deepak Puri, Managing Directorand Mrs. Nita Puri, Director are concerned or interested in the resolution.

b.

Mr. Harnam D Wahi is a renowned management expert. He has been associated with the company since May, 1992 and has been instrumental in the

phenomenal growth of the company. Mr. Harnam D Wahi brings with him a wealth of experience and global expertise to Moser Baer India Limited,having worked in several senior positions in prestigious Indian and international organizations such as the Inchcape Group, London, where he was

Chairman/ Managing Director/ Director of many highly diversified and reputed companies.

Apart from being a senior committee member of a number of Trade & Industries Associations, e.g. Indian Tea Association; Port Commissioners,

Calcutta; Deputy Chairman of Associated Chambers of Commerce & Industry and Deputy Chairman of Employers' Federation of India, Mr. Wahi was

also President of Bengal Chamber of Commerce, Indian Jute Mills Association and Indian Rope Manufacturers Association.

Mr. Wahi is a recipient of “Padma Shri” awarded by the President of India.

Mr. Harnam D Wahi retires by rotation at this Annual General Meeting and, being eligible, offers himself for re-appointment. The Board of Directors

recommends his re-appointment. Mr. Harnam D Wahi does not hold any other Directorship. He is a member of the following committees of your

company:-

NOTES

Mr. Ratul Puri

Mr. Harnam D Wahi

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a) Compensation Committee - Chairman b) Investors' Grievances Committee - Chairman

c) Audit Committee - Chairman d) Capex Committee - Chairman

e) Banking and Finance Committee - Member

11. Kindly bring your copies of the Annual Report to the meeting.

12. Memorandum and Articles of Association and all the statutory records and registers required to be kept open for inspection in terms of the provisions of the

Companies Act, 1956 and the rules made thereunder, are available for inspection by the members of the company at its Registered Office between 11.00

A.M. and 1.00 P.M. on each working day upto the meeting date and also at the place of the meeting on the meeting day.

13. The investors may contact the Company Secretary for redressal of their grievances/queries. For this purpose, they may either write to her at the following

address: -

Moser Baer India Ltd

43-A, Okhla Industrial Estate,

New Delhi -110020.

Tel. Nos. 51635201-51635205, 26911570-26911574

Fax Nos. 51635211, 26911860

or e-mail their grievances / queries to the Company Secretary at the following e-mail address: -

The term of M/s. K. C. Khanna & Co., Chartered Accountants is due to expire at the forthcoming Annual General Meeting. Pursuant to a resolution of the Board of

Directors of the company, it has been resolved that, subject to the approval of the members in a general meeting by Special Resolution, M/s. Price Waterhouse,

Chartered Accountants, be appointed as Statutory Auditors of the company, in their place.

Mr. Deepak Puri is a co-promoter and Managing Director of the company. At the Annual General Meeting of the company held on 28 September, 2001, the

shareholders had re-appointed him as the Managing Director for a period of five years at a monthly remuneration of Rs. 1,50,000 with effect from 1 September,

2001. Now, the Board of Directors is of the opinion that keeping in view his technical qualifications, thorough knowledge of various laws relating to the company's

affairs and excellent administrative capabilities and experience in handling various kinds of situations and the progress made by the Company, his remuneration

may be increased.

Following are the details of the annual salary (payable monthly) proposed to be paid to Mr. Deepak Puri, Managing Director: -

Consolidated Salary, Perquisites and Performance Bonus etc.: Rs. 4,00,00,000 (Rupees Four Hundred Lacs Only) per annum.

In addition to the above, he shall be entitled to receive the following: -

i) Company's contribution towards Provident Fund, Superannuation Fund or Annuity Fund will not be included in the computation of ceiling on perquisites to the

extent these singly or put together are not taxable under the Income Tax Act, 1961.

ii) Gratuity as per the rules of the company, but not exceeding half a month's salary for each completed year of service.

iii) Encashment of leave at the end of tenure.

iv) Provision of car for use on company's business.

v) Free landline telephone facility at residence along with free mobile telephone facility. Long distance personal calls to be recovered by the company.

vi) The Managing Director shall also be entitled to reimbursement of entertainment expenses actually and properly incurred in the course of business of the

company.

The increased remuneration would be paid only after the approval of shareholders in the Annual General Meeting.

None of the Directors, except Mr. Deepak Puri himself, Mrs. Nita Puri, Director and Mr. Ratul Puri, Executive Director are concerned or interested in the resolution.

This may be treated as an abstract pursuant to the provisions of Section 302 of the Companies Act, 1956.

Mr. Ratul Puri is the Executive Director of the Company. At the Annual General Meeting of the company held on 28 September, 2001, the shareholders had

appointed him as the Executive Director for a period of five years at a monthly remuneration of Rs. 2,50,000 with effect from 1 October, 2001. Now, the Board of

Directors is of the opinion that keeping in view the efforts put in by him for expansion and diversification of your company's business, his remuneration may be

increased.

Following are the details of the annual salary (payable monthly) proposed to be paid to Mr. Ratul Puri, Executive Director: -

Consolidated Salary, Perquisites and Performance Bonus etc.: Rs. 2,40,00,000 (Rupees Two Hundred Forty Lacs Only) per annum.

In addition to the above, he shall be entitled to receive the following: -

i) Company's contribution towards Provident Fund, Superannuation Fund or Annuity Fund will not be included in the computation of ceiling on perquisites to the

extent these singly or put together are not taxable under the Income Tax Act, 1961.

ii) Gratuity as per the rules of the company, but not exceeding half a month's salary for each completed year of service.

iii) Encashment of leave at the end of tenure.

EXPLANATORY STATEMENT PURSUANT TO THE PROVISIONS OF SECTION 173(2) OF THE COMPANIES ACT, 1956

ITEM NO. 5

ITEM NO. 6

ITEM NO. 7

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shares@moserbaer.net

iv) Provision of car for use on company's business.

v) Free landline telephone facility at residence along with free mobile telephone facility. Long distance personal calls to be recovered by the company.

vi) The Executive Director shall also be entitled to reimbursement of entertainment expenses actually and properly incurred in the course of business of the

company.

The increased remuneration would be paid only after the approval of shareholders in the Annual General Meeting.

None of the Directors, except Mr. Ratul Puri himself, Mr. Deepak Puri, Managing Director and Mrs. Nita Puri, Director are concerned or interested in the resolution.

This may be treated as an abstract pursuant to the provisions of Section 302 of the Companies Act, 1956.

Pursuant to the execution of First Amendment to the Shareholders Agreement between your company, the Promoters of your Company and Bloom Investments

Limited, Ealing Investments Limited, Randall Investments Limited and Woodgreen Investment Ltd. on 25 March, 2004, it has become necessary to

add/delete/substitute some of the Articles of Association of the company with the ones mentioned in the aforesaid resolution. As per the provisions of Section 31 of

the Companies Act, 1956, a company may alter its Articles of Association by passing a Special Resolution to this effect. The Board recommends this resolution for

approval of the shareholders. None of the Directors, except Mr. Deepak Puri, Managing Director, Mrs. Nita Puri, Director, Mr. Ratul Puri, Executive Director and Mr.

Rajesh Khanna, Nominee Director of Bloom Investments Limited (BIL), Ealing Investments Limited (EIL), Randall Investments Limited (RIL) and Woodgreen

Investment Ltd. (WIL) (BIL, EIL, RIL and WIL are affiliates of Warburg Pincus LLC) are concerned or interested in this resolution.

The Equity Shares of the company are listed at the following Stock Exchanges and the Company has paid the Annual Listing Fees for the year 2004-05 to all of

these Stock Exchanges:-

1. The Stock Exchange, Mumbai

Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai- 400001

2. National Stock Exchange of India Limited

“Exchange Plaza”, Bandra- Kurla Complex,

Bandra (East), Mumbai- 400 051.

The company had applied for delisting of its shares from the Calcutta Stock Exchange Association Limited located at 7, Lyons Range, Kolkata- 700001 and has

completed all the formalities in this regard. However, the Calcutta Stock Exchange Association Limited has not yet given its approval for the same.

ITEM NO. 8

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Regd. Office: By order of the Board of Directors

43-A, Okhla Industrial Estate, for MOSER BAER INDIA LTD

New Delhi - 110 020. Sd/-

Date: 29th June, 2004 COMPANY SECRETARY

LISTING AT STOCK EXCHANGES

REWRITING THE FUTURE

MOSER BAER INDIA LIMITEDRegd. Office: 43-A, Okhla Industrial Estate, New Delhi-110020

Tel: 51635201-05, 26911570-74 Fax: 51635211, 26911860E-mail: info@moserbaer.net, moser@vsnl.com

ATTENDANCE SLIPAnnual General Meeting - Monday, 26th July, 2004

Name _________________________________________________ Name of Proxy ____________________________________________

Joint holder's name _____________________________________ Address of the member with Pin Code ________________________

_________________________________________________________________________________________________________________

Father's/husband's name (of first holder) _____________________________

Number of shares held in physical mode ____________________ Number of shares held in demat mode _______________________

Regd. Folio number* ____________________________ DP ID No**______________________ Client ID Number** ______________

* (Please note that folio no. must be provided) **(Please note that DP ID and Client ID No. must be provided)

(To be filled in by the Member)

I certify that I am a registered Member/Proxy of the registered Member of the company.

I hereby record my presence at the Annual General Meeting of the company held on Monday, 26th July, 2004 at 9.30 AM at FICCIGolden Jubilee Auditorium, Federation house, Tansen Marg, New Delhi - 110 001.

______________________________________________ _________________________________________

Meber's/Proxy's name in BLOCK LETTERS Member's/Proxy's Signature

Note: Please fill in this attendance slip and sign at the time of handing it over for registration at the meeting place.

PROXY FORMAnnual General Meeting - Monday, 26th July, 2004

Number of shares held in physical mode ____________________ Number of shares held in demat mode _______________________

Regd. Folio number* ____________________________ DP ID No** _______________ Client ID Number**____________

* (Please note that folio no. must be provided) **(Please note that DP ID and Client ID No. must be provided)

(To be filled in by the Member)

I/We ________________________________________ of _____________________________ in the district of ______________________

being member/members of above named company, hereby appoint _________________________ of __________________________

in the disctrict of ________________________________ or failing him ________________________ of ___________________________

in the disctrict of ______________________________________________ as my/our proxy to attend and vote for me/us in my/our behalf atthe Annual General Meeting of the company to he held on Monday, 26th July, 2004 at 9.30 AM at FICCI Golden Jubilee Auditorium,Federation House, Tansen Marg, New Delhi - 110 001 and at any adjournment thereof.

Signed this ........................................ day of .......................... 2004 Signature _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

NOTE: THIS FORM IN ORDER TO BE EFFECTIVE MUST BE DULY STAMPED, COMPLETED AND SIGNED AND MUST BE DEPOSITEDAT THE OFFICE OF THE COMPANY'S REGISTRAR AND SHARE TRANSFER AGENT- MCS LIMITED, W-40, OKHLA INDUSTRIAL AREA,PHASE II, NEW DELHI - 110 020, NOT LESS THAN 48 HOURS BEFORE THEMEETING.

NO GIFTS OR COUPONS WILL BE DISTRIBUTED

AffixRe. 1

RevenueStamp

43-A, Okhla Industrial Estate, New Delhi 110 020, India.Tel: + 91 11 51635201 - 07Fax: + 91 11 51635211Email: info@moserbaer.net

REWRITING THE FUTURE