Annual Report 0607

THE ANSWER IS IN THEQUESTION.IT’S AMAZING HOW MUCH CAN BE ACHIEVEDBY A WILLINGNESS TO QUESTION.

AND IT IS EVEN MORE AMAZING HOW MUCHCAN BE ACHIEVED BY SIMPLY ASKING ‘WHY’.

32 > NITCO Tiles Limited Annual Report 2006-07 >

TODAY’S INDIAIS PROBABLYTHE FASTEST

GROWINGURBAN MARKETIN THE WORLD.

REFLECTED IN THEUNPRECEDENTED

SKYLINE-CHANGINGROLLOUT OF NEW HOMES,

OFFICES AND STORES.

IN TURN, THEGROWTH IN THISSECTOR WILLBENEFIT THOSEEXTENDINGFROM MEREMANUFACTURETO PROVIDINGINTEGRATEDFLOORINGSOLUTIONS. NITCO TILES FIGURES ONBOTH COUNTS. THE RESULT:IT HAS EMERGED AMONGTHE THREE LEADING INDIANCOMPANIES IN ITS SECTORIN THE COUNTRY TODAY.

THIS IS EXPECTED TOBENEFIT SELECT INDUSTRIES.

THOSE MANUFACTURINGAND MARKETING CERAMIC

AND VITRIFIED TILES FORONE.

5Annual Report 2006-07 >4 > NITCO Tiles Limited

WHO WE ARE • NITCO Tiles Limited is a

leading innovations-

driven flooring solutions

provider. Possesses over

five decades of rich

experience in India’s

infrastructure support

industry.

• The Company derives

its competitive edge from

the manufacture of

premium products that

represent boutique

appeal, attractive

profitability and low

competition.

• The Company enjoys a

favourable recall through

Rs. 27.08 cr of brand

investments in the last

three years.

WHAT WEACHIEVED IN2006-07 • Undertook a capacity

expansion in premium tiles

of 22.80 lac square metres

per annum (May 2006) at

our Alibaug factory.

• Appointed an additional

outsourcing partner for

vitrified tiles in China,

facilitating scale and de-

risking.

• Introduced innovative

products (Timberland,

Metallica, Steps and Risers,

Dholpur Series, Slate Stone

Series, Estonia, Matrix,

Pietre Del Sol, Art Stone,

Innova and African Slate).

• Extended into the real

estate business through the

setting up of Nitco Realties

Private Limited (100%

subsidiary). Land bank

value: Rs. 406 cr (as on

August 31, 2007).

• Derived revenues of

Rs. 4.43 cr from the wind

farm business within one

year of commissioning the

7.5-MW wind farm assets in

Dhule (Maharashtra).

WHAT WEDEAL IN • We provide an exotic

repertoire of flooring

preferences, comprising

ceramic tiles, vitrified

tiles, cement terrazzo

tiles, Italian marbles,

pavers, steps and

risers, etc.

• We are in the business

of manufacturing,

marketing and branding

mosaic and ceramic tiles.

We import and process

marbles. We also

outsource the

manufacture of

vitrified tiles.

• We provide an

exhaustive collection

across diverse designs

and colours for indoor,

outdoor and industrial

applications.

HOW WEPERFORMEDFINANCIALLY • 54% increase in

turnover (gross) from

Rs. 306.36 cr in 2005-06

to Rs. 470.43 cr in

2006-07.

• 65% growth in EBIDTA

from Rs. 43.01 cr in

2005-06 to Rs. 70.97 cr

in 2006-07.

• 128-basis point

expansion in EBIDTA

margin from 15.90% in

2005-06 to 17.18% in

2006-07.

• 90% surge in post-tax

profit from Rs. 20.02 cr

in 2005-06 to Rs. 38.03

cr in 2006-07.

WHERE WEARE LOCATED • Headquartered in the

financial capital of

Mumbai (India).

• Spread across 17 states

through a marketing and

distribution network of

550 direct dealers and

5,000-odd retail outlets.

• Runs 130 shop-in-shops

for promotion and

impulse buying.

• Eight exclusive

showrooms in Worli

Mumbai, Andheri

Mumbai, Nashik,

Ahmedabad, Cochin,

Coimbatore, Kolkata

and Goa.

WHO WECATER TO • Brand-enhancing

institutional clients

(property and mall

developers) like

Hiranandanis, Rahejas,

Pantaloons, Godrej

Properties, DLF, Unitech,

Oberoi Construction,

Keystone, Piramals,

Nirmal Lifestyle, Shrusti,

Runwal, RNA, etc.

• Retail individual buyers.

WHERE WE ARELISTED • Listed on the National

and Bombay stock

exchanges.

• Enjoyed a market

capitalisation of Rs. 739 cr

(as on October 24, 2007),

the highest among

industry peers.

CAPACITYALLOCATION Plant location

Alibaug, Maharashtra

Product manufactured

Ceramic tiles

Installed capacity

63.12 lac square metres

per annum

Plant location

Thane, Mumbai,

Maharashtra

Product manufactured

Mosaic tiles

Installed capacity

8.44 lac square metres

per annum

CORPORATEIDENTITY


FROM STEPPINGSTONES TO MILESTONES

1966 1984 2001 2004

2006

2007

2002 19971995

• NITCO Tiles Private Limited incorporated to

manufacture cement tiles.

• Work begins for manufacturing cement tiles

in Thane.

• Work begins for setting up a

greenfield plant to manufacture ceramic

floor tiles. Estimated cost: Rs. 900 mn.

• Strategic decision to outsource

vitrified/wall tiles from China under the

NITCO brand.

• Winning the Quality Excellence

Award for ceramic floor tiles from the

Institute of Trade and Industrial

Development.

• Infrastructure at the Alibaug facility

upgraded for manufacturing porcelain tiles.

• Production commences of ceramic

floor tiles in Alibaug (Maharashtra).

Capacity: 10,000 square metres per day.

• Marble operations begin in

Kanjurmarg (Mumbai).

• Initial public offer floated to mobilise

Rs. 168 cr at Rs. 168 per share.

• Creation of Nitco Realties Private

Limited (100% subsidiary) to engage in

the real estate business.

• Started distribution of Cement sourced

from Pakistan.

• Merged Shark Properties Private Ltd. with

Nitco Tiles Ltd. and Nitco Realties Private Ltd.

with Motivation Properties Private Ltd.


For years investors asked questions.In 2006-07 – as in other years – wedelivered enlightening answers

31.03.2003

31.03.2004

31.03.2005

31.03.2006

31.03.2007

40.32

40.32

40.32

40.32

63.12

Enhancing production capacity – Ceramic tiles

(sq. metres in lacs)

2002-03

2003-04

2004-05

2005-06

2006-07

151.10

172.38

208.81

306.36

470.43

Growing income from operations (Rs. cr)

2002-03

2003-04

2004-05

2005-06

2006-07

22.90

22.13

24.02

43.00

70.97

Strengthening EBIDTA (Rs. cr)

2002-03

2003-04

2004-05

2005-06

2006-07

17.10

14.55

12.80

15.90

17.18

Increasing EBIDTA margin (%)

2002-03

2003-04

2004-05

2005-06

2006-07

6.00

5.51

7.54

20.01

38.03

Surging post-tax profit (Rs. cr)

31.3.2003

31.3.2004

31.3.2005

31.3.2006

31.3.2007

114.95

123.21

136.05

198.98

229.25

Increasing gross block (Rs. cr)

2002-03

2003-04

2004-05

2005-06

2006-07

1.11

1.17

1.36

0.32

0.42

Strengthening debt-equity ratio

2002-03

2003-04

2004-05

2005-06

2006-07

NIL

NIL

NIL

10

20

Growing dividend (%)

2002-03

2003-04

2004-05

2005-06

2006-07

49.74

54.19

69.10

115.81

132.33

Rising book value per share (Rs.)

2002-03

2003-04

2004-05

2005-06

2006-07

4.89

4.49

6.15

15.59

16.39

Expanding earnings per share (Rs.)


Question one:Why should lifenot imitate art?

Core philosophy At NITCO, we define the balance between science

and art in one word. Innovation.

The result is products needed by people. The result

is products inspired by tradition, nature and life. The

result is products that enhance a user’s pride. The

result is products that translate into our competitive

edge.

Achievements • We are the only company in our industry space to

provide a comprehensive range of products and

flooring solutions, comprising ceramic tiles, vitrified

tiles, marble and mosaic.

• Our impressive array of products is conveniently

available under one roof.

• Our product variety fuses art, colour and design

for residential, hospitality, retail and industrial

applications.

• Our one-stop-complementary-solutions-shop

concept reinforces the prospect of cross-sale with a

scale up-scale down flexibility.

• Our product portfolio defines our presence at

each price point, reinforcing our brand.

Result Our topline generated a compounded annual

growth rate (CAGR) of 40% over the three years

ending 2006-07, higher than the industry average

of 17%.


Question two:Why can’t

global be local? Core philosophy At NITCO, we believe that all business, international

or national, are essentially just one thing. Local.

The result is extensive travel by our regional

specialists. The result is a willingness to absorb local

culture, people, habits and traditions. The result is a

liberated mindset reflected in shifting processes and

transactions to the most attractive geographies. The

result is superior customer service.

Achievements • We are the only company in our industry to

possess a dedicated contract manufacturing base for

vitrified tiles in a geography that offers lower costs

and attractive scale; we entered into a parallel

alliance in the same geography to enhance scale and

de-risk our dependence on a single partner.

• We possess an outsourcing advantage that not

only helps us channelise and strengthen our

bandwidth in front-end marketing and branding but

also helps us focus more on our core laboratory

strengths of research and innovation.

• We possess a competitive edge in a business

where asset and technology barriers are relatively

low with high competition from unorganised players.

• We enjoy a mutually rewarding association as a

result: while we provide the designs and monitor

quality, our partner turns the plan into a

commercialised product in the shortest time at

relatively low costs, leading to a quicker time-to-

market and enhanced market share.

Result Our income from the outsourced vitrified tiles

business stood at a robust 54% of our revenue

in 2006-07.


Question three:Why can’t wecapture shareof a space thatreally doesn’t

exist? Core philosophy At NITCO, we believe that the most important

battles of the marketplace are first fought and won

in a terrain more sophisticated. The mind.

The result is the making of a sale before it has

transpired. The result is a positive recall in an

environment of clutter. The result is a premium at a

time of declining margins.

Achievements• We are among the first few in our industry to

introduce branding in the flooring market.

• We enjoy a brand association with ‘innovation’

resulting in a perpetual product excitement and new

customer segments.

• We have introduced innovative products,

comprising the rustic series, wood strips, INVIZA

(dirt-free tile), leather finish tiles, Timberland (wood

finish tiles), slate stone (beauty of natural slate

stone), the Spa Collection, Pietre De Sol, African

slate, Matrix and Innova.

ResultWe invested Rs. 27.08 cr in our brand in the three

years leading to 2006-07, the highest in our

industry, and also reported one of the highest

brand-profit ratios in the business.


Question four:Why can’t wequestion the

conventional? Core philosophy At NITCO, we believe that radical, sustainable

growth can only be derived through a consistent

pursuit of a challenging ideal. The impossible.

The result is a benchmarking with the best global

standards – and then beyond them. The result is an

extension from ‘sales to the customer’ to ‘education

for the customer’.

Achievements • We are among the few in our industry to have

invested in an automatic sorting line – classifies

products based on their quality – right up to the

time they are packaged, eliminating manual

interventions and ensuring customised delivery.

• We possess the most advanced technology

imported from SACMI (Italy) to generate consistent

quality products at an affordable cost.

• We possess one of the largest bandwidths of first

quality products in our industry – at 70% –

generating higher than average realisations.

• We are the only company in our industry with a

24x7 customer helpline to serve our customers with

speed and surety.

ResultOur average realisations are nearly 30% higher than

our peer companies, a strong endorsement of our

quality.


Core philosophy At NITCO, we do more than predict or decipher the

future. We invent it.

The result is an extension from understanding the

competition to comprehending the consumer. The

result is an extension in our obsession from the

product to applications. The result is an extension

beyond products to products, solutions and services.

The result is a graduation from what is to what

can be.

Achievements • We leveraged our four decade-plus experience in

the construction sector to integrate forwards into

real estate through a 100% subsidiary (NITCO

Realties Private Limited).

• We created a land bank estimated at Rs. 406 cr

by reputed real estate consultants Knight Frank (as

on August 31, 2007).

• We embarked on eight residential/commercial

projects across Maharashtra (project gestation of 3-

4 years).

• We will concurrently scale-up our pan-Indian

presence through exclusive display showrooms: 20

Le Studio (average floor space of 2,000-4,000 sq.

ft.) Company operated outlets and 100 Le Express

franchisee outlets (average floor space of 1,500 sq.

ft.) in 2007-08.

Result The extension of NITCO Tiles to NITCO Realty will

drive growth, tap prospects arising out of both

businesses and enhance valuations over the

coming years.

Question five:Why can’t wesee far away

from up close?

21Annual Report 2006-07 >

How did the Company’senhanced focus on profitabilitythrough innovation bear fruit in2006-07? The year under review was one of the

best ever for us in many ways.

From a financial perspective, our gross

turnover surged 53.55% from

Rs. 306.36 cr in 2005-06 to Rs. 470.43

cr in 2006-07, while our post-tax profit

registered a sharper growth of 90%

from Rs. 20.02 cr to Rs. 38.03 cr. This

shows that our bottomline growth is

responding quicker than a growth in

our topline, justifying our focus on

profitability through innovation and

value-addition.

We embarked on timely initiatives to

sustain this trend: we undertook a

capacity expansion at our ceramic tiles

division to enhance our overall installed

capacity by 56%. We appointed one

more associate in China to ramp up our

vitrified tiles business in addition to

achieving higher sales across our

mosaic and marble product segments.

On the overall, a profitability growth

across each of our four businesses –

ceramic tiles, vitrified tiles, mosaic and

marble – gives me considerable

optimism that our strategy is

compatible with the needs of the

present and future.

What were some of the majorachievements of the Company in2006-07? There are quite a few achievements

such as:

• We consolidated our presence in the

attractively growing real estate sector

through the establishment of NITCO

Realties Private Limited, a 100%

subsidiary of NITCO Tiles Limited. We

will leverage our rich experience and

vast land bank (valued at Rs. 406 cr) to

execute eight residential/ commercial

projects in Maharashtra.

• We reported an income of Rs. 4.42 cr

from our wind power generation in

2006-07 through 100% sales to the

Maharashtra State Electricity Board. We

foresee considerable revenue

generation from this venture through

an attractive power purchase

agreement with the utility.

• We won the best SAP project

implementation award – SAP ACE 2007

(Award for Customer Excellence) – in

August 2007 (post-balance sheet

development) for the best consumer

products sector implementation among

mid-size enterprises in India.

What initiatives helped theCompany reinforce profitability? It is important to emphasise that our

rising profitability is not only the result

of what is happening in the

marketplace but importantly, the

philosophy that has been guiding our

business for the last four decades. So

what is this philosophy, one may ask. If

I have to condense this into a simple

line, it would be: conviction, innovation

and value-addition.

Conviction because India will need to

increase infrastructure investments to

support its ongoing economic growth.

Innovation because we invested in

assets, knowledge and practices.

Value-addition because that’s the key

to sustainable success in this

competitive environment.

How did the Company managecosts when oil prices peaked?NITCO’S cost management practices

were derived through the use of

superior technology, better negotiation

and cost control. This was reflected in a

decline in operating expenditure as a

percentage of turnover (net) by 100

basis points to 84.59% in 2006-07.

Besides, the Company’s power and fuel

expenses (the second biggest cost

component) as a proportion of total

operating expenditure declined 256 bps

to 7.08% in 2006-07, largely attributed

to income accrued by way of sale of

wind power to the Maharashtra State

Electricity Board.

Can you go into all the initiativesthat helped the Companyenhance profitability? I would like to mention two specifically:

• We invested in state-of-the-art assets

with a clear objective: tighten

efficiencies, enhance volumes, reduce

costs and improve quality. Result: our

turnover (gross) to capital employed

ratio strengthened from Rs. 0.89 in

2005-06 to Rs. 1.08 in 2006-07.

• We focused on the manufacture of

premium innovative products with

another objective: maximising market

share. Result: the Company leads the

premium market segment.

The success of these initiatives was

reflected in the 128-bps growth in our

EBIDTA margin to 17.18% in 2006-07,

one of the highest EBIDTA margin

growth rates achieved in our industry in

a difficult industry environment.

In what way did the Company drive its

quality and innovation agenda?

We have over the years come to the

conclusion that when we lead in

design, we lead the market. Let me

explain. In a business where fuel costs

are not uniform for all players, many

opt for a cheaper fuel mix, achieve

lower production costs and use the

price arbitrage to capture market share

without a corresponding focus on

quality. At NITCO Tiles, we had

predicted that customers would soon

wake up to this. We responded with a

consistent approach that has now

become our brand: we focused on

offering a pipeline of attractive

innovative designs, which helped

service niche requirements, graduate to

a wider mix and emerge as a one-stop

shop. The result was that in 2006-07,

our offering comprised the rustic series,

wood strips, INVIZA, leather finish tiles,

Timberland, slate stone, the Spa

Collection, Pietre De Sol and African

slate, among others.

What is your outlook for 2007-08?The industry environment continues to

be optimistic. The volume growth for

tiles (ceramic and vitrified) in 2006-07

was the highest in the country’s

history, while prices turned modest on

account of increasing supply and

competition. NITCO responded to this

reality through value-addition, cost

management and a focus on

institutional customers. Going ahead,

we will focus on profitability growth

through enhanced ceramic tile and

marble processing capacities on the

one hand and growth of our real estate

business, translating into accelerated

profit and margins momentum over the

foreseeable future.

20 > NITCO Tiles Limited

“Our gross turnover surged53.55% to Rs. 470.43 cr in2006-07, while our post-taxprofit registered a sharpergrowth of 90% to Rs. 38.03 cr.”

10 minutes with the Managing Director

Mr. Vivek Talwar appraises the performance of the Company in 2006-07 and shares his optimism for the future

The volume growth for tiles (ceramic and vitrified) in 2006-07 wasthe highest in the country’s history, while prices turned modest

on account of increasing supply and competition.

Indian ceramic tiles industryOverviewIndia is the second largest producer of ceramic tiles in Asia

and the seventh largest in the world. Sustained economic

growth and attractive infrastructure investments are expected

to catapult the Indian tiles industry to among the top five in

the world by 2010. The Government of India revised its

investments in infrastructure during the Eleventh Plan period

(2008-12) from US$288 billion to upwards of US$470 billion,

making a 185% leap over the proposed investments in the

Tenth Plan (2003-07), indicating attractive prospects for

domestic tile manufacturers.

Classification The Indian tiles industry is generally classified into three broad

segments:

Wall tiles: This segment is growing at a relatively slow pace.

Floor tiles: This segment is growing at a relatively fast rate.

Vitrified and porcelain tiles: These segments have

accelerated market growth, weaning it gradually market from

the conventional ceramic segment (wall and floor) on

account of lower maintenance cost and attractive aesthetics.

The great Indian realty boom Economy: Surging at a staggering 9.4% (2006-07), India

retained its position as the second fastest growing economy.

Riding on an expanding services and industrial sectors, the

economy is projected to be a bigger growth driver than any

of the six largest European Union countries by 2035. From

being the fourth largest economy in terms of purchasing

power parity, India is expected to emerge as the third major

economic power - ahead of Japan - within the next decade.

This wil translate into attractive prospects across the housing,

hospitality and commercial real estate sectors.

Income: Salaries in India – one of the principal drivers for

residential realty – sustained their uptrend during the year

under review. A projected 14.5% annual increase by end-

2007 will enable the average Indian to record the highest

salary growth across the Asia Pacific (Hewitt Associates). The

number of households with earnings above Rs. 1 million a

year is expected to grow from 0.8 million in 2002 to 3.8

million in 2010. The Indian middle-class is expected to grow

from 57 million in 2001-02 to 92 million in 2005-06 to 153

million by 2009-10 and 583 million by 2025, positioning

India as the fifth largest consuming economy in the world

(source: McKinsey).

Housing: The potent combination of liquid cash and

increasing affordability has fuelled the demand for residential

realty in India. The average real household disposable income

will grow from Rs. 113,744 in 2005 to Rs. 318,896 by 2025,

a projected CAGR of 5.3% that is significantly more rapid

than the 3.6% annual growth reported in the past 20 years.

With the exception of China, this growth is quicker than the

income growth in major markets like the US (source:

McKinsey). In 2006 alone, the estimated shortfall of dwelling


Global ceramic tiles industryThe global ceramic tiles industry clocked a robust 6% growth per annum; ceramic tiles production was estimated at 6,400

million square metres in 2006, indicating an uptrend in production and consumption. Asia continued to be the most significant

geography in both. Asia enjoyed the lion’s share of 52% of global tile production, largely driven by low-cost manufacturing

destinations, comprising China, India and Vietnam, among others. Even in terms of consumption, Asia dominated the global

scenario with consumption matching production.

Asia represents nearly 52% and 53.5% of world production and consumption respectively.


INDUSTRY REVIEW

America European continent Asia

The world tile production The world tile consumption

Tiles to go… • The global tiles industry registered a CAGR of 6% per annum over the last few years.

• China is the largest tiles producer with an aggregate output of 2,500 million square

metres per annum (nearly 36% of world production).

• Spain is the second largest producer of ceramic tiles with an output of 656 million

square metres per annum followed by Italy (production 570 million square metres).

• India ranks seventh in the world in terms of output with 4.3% of the global production.

India is the second largest producer of ceramic tiles in Asia andthe seventh largest in the world. Sustained economic growth andattractive infrastructure investments are expected to catapult theIndian tiles industry to among the top five in the world by 2010.

Vitrified tiles (60 million sq. mtrs)

Ceramic tiles (Upper-end market)(140 million sq. mtrs)

Ceramic tilesLower-end market)(138 million sq. mtrs)

driven by tax incentives for users and developers alike,

strengthening the market for flooring solutions.

OutlookThe following points summarise the potential for rapid

growth of India’s flooring solutions industry:

• The aggregate demand for office space between 2005 and

2008 is estimated to be above 85 million square feet,

recording an annual growth of 14.50%.

• US$11.5-billion earmarked by the Jawaharlal Nehru Urban

Renewal Mission Plan (JNURM) over the next five years for 60

cities.

• Around 20 million new dwelling units are expected to be

commissioned every year for the next five years.

• There is a projected increase in the built-up mall area from

32.60 million square feet in 2005 to 87.80 million square

feet in 2007; the number of malls is expected to increase

from 100 to 350.

• Over 50,000 hotel rooms are expected to be added across

five years.

• A per capita use of ceramic tiles at 0.15 square metres per

annum in India compares poorly with China’s 1.89 square

metres, an anomaly that is expected to correct.


In a nutshell • Industry size pegged at Rs. 7,400 cr in March 2007.

• Production estimated at 345 million square metres (as on March 2007).

• Industry growth rate estimated at 17% in March 2007.

• Rs. 2,000 cr investments made in the last five years.

• Organised sector contributes nearly Rs. 150 cr per year.

• Industry expected to grow at 16-18% over the medium term.

US$11.5-billion earmarked by the Jawaharlal NehruUrban Renewal Mission Plan (JNURM) over the next

five years for 60 cities.

India’s IT/BPO industry is expected to account for 60-70% of itscommercial real estate demand over the next 10 years. Currently,

about 130 million square feet are acquired by IT-ITeS companies andthe demand is expected to rise to 500 million square feet by 2010.

units was 22.50 million and Confederation of Real Estate

Developers’ Association of India (CREDAI) envisages the

creation of 100 million houses by 2020.

Hospitality: A rapidly growing economy and favourable

investment and trade opportunities have strengthened India’s

hospitality sector growth at around 15% per annum. A surge

in both the business and leisure travellers arriving flocking to

India, 2006-07 witnessed a record 4.5 million foreign visitors.

The sunshine sector

2006 2010 (estimated)

Domestic tourists 60 – 70 million 80 – 90 million

International tourists 4 – 5 million 10 – 13 million

Hotel rooms 109,000 275,000

The country’s hospitality sector has not been able to catch up

with the surging demand. The current gap between supply

(61,000 rooms) and demand (90,000 rooms) is expected to

widen further with the sustained economic growth. The

current aggregate of hotel rooms across the country in the

branded category stands at 110,000. The bulk of the new

rooms is likely to be added between 2007 and 2011 (see the

following table), triggering a fresh demand for flooring

solutions.

Estimated potential in hospitality sector

Year New rooms to be added

2007 (Estimated) 6,440

2008 (Estimated) 11,043

2009 (Estimated) 20,102

2010 (Estimated) 10,502

Source: HVS International

Retail: Retail is the right industry at the right time in today’s

India. The country is set to emerge among the five largest

retail markets across the coming decade. An increasing

demand for quality retail space is being influenced by a

growth in India’s organised retail, growing preference for

shopping in malls and increase in the number of players in

the organised retail sector. Ernst & Young (E&Y) indicates that

India is witnessing a shift towards value retailing;

hypermarkets requiring large space outlays are emerging as a

preferred format. However, there are less than 50

hypermarkets in India are operated by only four-five big

retailers; E&Y says the country’s 67 cities with populations of

half a million or more have the potential to absorb a

considerably higher number of hypermarkets over the next

few years. The domestic retail industry is expecting an

investment of over Rs. 100 billion up to 2009-10 from

existing and new players. Available mall space of about 30

million square feet in the country is expected to touch 100

million square feet by 2009-10.

Corporate: The increasing demand for commercial space in

India is being triggered by a widening geographic footprint

of companies, reflected in the commissioning of

regional/sales/branch offices. Besides, government and public

sector outfits are also going in for a makeover with plug-and-

play infrastructure. UBS indicates that the domestic office

market has doubled over three years to 100 million square

feet. Much of the optimism surrounding the commercial

space segment is based on the outlook of India’s IT and IT-

enabled sectors (ITeS). India’s IT/BPO industry is expected to

account for 60-70% of its commercial real estate demand

over the next 10 years. Currently, about 130 million square

feet are acquired by IT-ITeS companies and the demand is

expected to rise to 500 million square feet by 2010. Besides,

the growth of the special economic zones (SEZs) is being


Industry risk Risk explanation

The Indian real estate industry might witness a

deceleration, slowing the demand for tiles and other

flooring products.

Risk response

The demand for flooring solutions is expected to

attractively increase over the foreseeable future on

account of the following reasons:

• The Working Group on Housing of Planning

Commission estimated an urban housing shortage at

22.44 million units during the Tenth Plan period (2002-

07). India’s real estate industry is expected to grow from

US$12 billion to US$45-50 billion over the next five years,

making it one of the country’s fastest growing sectors.

• According to a RONCS report (Opportunities in Indian

Housing Sector 2006-07), demand for housing units will

swell to a massive 400 million units by 2010. In view of

this, analysts are projecting that the country’s housing

and real estate sector will grow at 14% annually over the

foreseeable future.

• The organised retail industry in India is expected to

grow 25-30% annually and treble from US$7.7 billion in

2004-05 to US$24 billion by 2010 (CRISIL Research and

Information Services).

• The Indian hospitality industry is growing at a rate of

15% annually. The current gap between supply (61,000

rooms) and demand (90,000 rooms) is expected to widen

further as the economy opens and grows (The Economic

Times, May 29, 2007).

Risk measurement

In line with industry trends and prospects, NITCO’s gross

sales expanded at a CAGR of 39.88% over the three years,

leading to 2006-07.

RISK IS AN EXPRESSION OF THE UNCERTAINTY ABOUT EVENTS AND THEIR POSSIBLE IMPACT ON THEPERFORMANCE AND PROSPECTS OF A COMPANY. AS A RISK-CONSCIOUS ORGANISATION, NITCO TILESIS COMMITTED TO PROACTIVE AWARENESS, APPRAISAL AND COUNTER-ACTION.

Risk management is a structured, consistent and continuous process, applied across the organisation for the

identification and assessment of risks, control assessment and exposure monitoring.


MANAGING RISKSAT NITCO TILES

1

Vendor risk Risk explanation

The Company imports its entire requirement of vitrified

tiles from China. In the advent of attrition, it might yield

its industry presence.

Risk response

• The Company enjoys exclusive five-year purchasing

rights for vitrified tiles from its associate in China.

• The Company undertook a significant corporate

initiative through the addition of another associate in

China for the supply of vitrified tiles, de-risking the

Company from an overdependence on a single supplier

and enabling it to ramp its vitrified presence.

• The Company is also planning to set up a

manufacturing base for vitrified tiles in Gujarat under a

joint venture arrangement.

Risk measurement

Over the past three years, revenues from the vitrified tiles

business expanded 77.52% compared with the

Company’s turnover growth of 39.88%.

2

Brand riskRisk explanation

The flooring solutions industry is highly dependent on

recall; inefficient brand management could lead to a

decline in sales.

Risk response

• The Company routinely carries out surveys and meetings

with architects, masons, consumers, specifiers, etc. to

keep a tab on changing preferences.

• The Company appointed the vibrant Perizaad Zorabian

as its brand ambassador, enhancing visibility.

Risk measurement

The Company’s brand spends of Rs. 27.08 cr over the

three years leading to 2006-07 has been the highest

among competitors.

3

Power and fuel riskRisk explanation

Power and fuel costs comprise 5.16% of the Company’s

turnover. A sharp increase in input costs might impact

profitability.

Risk response

• The Company expects to reduce its excessive

dependence on LPG through a substitution with liquified

natural gas following the commissioning of the Dahej-

Uran gas pipeline.

• The choice of liquefied petroleum gas (LPG) as primary

fuel has translated into consistently superior quality.

• To compensate for high fuel costs, the Company

established wind farms in Dhule (Maharashtra), with

100% of the output sold to the MSEB. It earned revenues

of Rs. 4.42 cr through this venture in 2006-07. An

attractive power purchase agreement will generate

attractive revenues over the years.

• The Company expanded its presence in the premium

flooring solutions space, enabling it to effectively offset

any increase in the costs of power and fuel.

Risk measurement

The Company’s power and fuel expenses declined from

7.15% of turnover (gross) in 2005-06 to 5.16% in

2006-07.

4

In line with industry trends and prospects, NITCO’sgross sales expanded at a CAGR of 39.88% over the

three years, leading to 2006-07.


Competition riskRisk explanation

The Company might be compelled to undercut

competition to expand market share.

Risk response

The Company has uniquely positioned itself in the

premium flooring solutions space, divergent from a price-

driven volume approach. A small portion of the product

mix is price-sensitive, an adequate safeguard from the

prospect of a price slash. The Company plans to stay

ahead of competition through the following initiatives:

• Focus on brand-enhancing institutional clients: The

Company derives over 60% of its sales from institutional

clients, who provide an effective counterbalance against

an erosion of retail sales.

• Wide range of products: The Company provides a

basket of products comprising vitrified tiles, ceramic tiles,

mosaic and marble. These products are available at

various price points across the value-chain, which provide

the Company with adequate protection in the event of a

slowdown in any one product segment.

Risk measurement

The Company’s average realisation is 30% higher then

their Competitors.

5 Innovation riskRisk explanation

The Company is focused on the premium end of the

market, which requires to be fed with a constant and

wide variety of designs. An inability to do so might

impact profitability.

Risk response

• At NITCO, we sustained marketplace excitement

through an aggressive rollout of fresh and innovative

products, comprising the rustic series, wood strips, INVIZA

(dirt-free tile), leather finish tiles, timberland (wood finish

tiles), slate stone (beauty of natural slate stone), the Spa

Collection, Pietre De Sol, African slate, matrix and the

latest innova.

• The Company catered to institutional customers

through service and customisation.

Risk measurement

The Company derived an increasing proportion of its

income from products less than three years old.

8

Dealer attrition riskRisk explanation

Attrition among its dealers might impact the Company’s

sales and profitability.

Risk response

• The Company possesses a strong pan-India dealer

network, which was further strengthened during the year

under review.

• The Company has progressively spread this risk through

the rollout of a chain of exclusive display showrooms (Le

Studio), expected to touch 20 in 2007-08.

• The Company’s franchisee Le Express Outlets are

expected to increase to 100 by the end of 2007-08.

Risk measurement

Nearly 37% of the dealers have remained with the

Company over the last five years, endorsing strong

relationships with channel partners.

9

Debtors’ riskRisk explanation

An efficient recovery mechanism is essential to de-risk a

company from the possible impact of a delayed return on

its working cycle and profitability.

Risk response

• The popularity of the NITCO brand serves as an effective

insurance against defaults.

• The Company selects and appoints dealers based on

their integrity, credit history and brand equity.

• The Company imposes a specific rate of interest payable

on credit exceeding the stipulated tenure with a view to

prevent defaults.

Risk measurement

The Company’s receivables declined from 53 days of

turnover in 2004-05 to 31 days in 2006-07.

10

Customer attrition riskRisk explanation

The Company’s profitability might be impacted in the

event of customer attrition.

Risk response

• The Company enjoys strong relations with a number of

reputed institutional customers, comprising ICICI Bank,

HDFC Bank, Hiranandani Developers, Wipro, Reliance,

Tata, MSEB Holdings, BSNL, Shoppers’ Stop and Nokia,

among others.

• The Company evolved its product into a service through

a high degree of customisation, quality and just-in-time

delivery.

• The Company is the first in its industry to run a 24x7

helpline service to address customer queries and

grievances with speed and surety.

Risk measurement

The Company recorded an increase in sales from the

existing customers in 2006-07.

6

Interest rate riskRisk explanation

There was an upward trend in international and domestic

interest rates, leading to an increase in the average cost

of borrowing.

Risk response

• To counter this threat, the Company is effectively

investing in enhancing capacities which will enable it to

spread fixed costs across a larger production volume.

• As a prudent corporate initiative, a large proportion of

the Company’s borrowings are in foreign currency. This

strategy was vindicated when it reported a net gain of

Rs. 2.80 cr in 2006-07 on account of the strengthening

rupee vis-à-vis the US dollar and other currencies.

Risk measurement

Gross interest charges as a proportion of turnover has

declined from 4.32% in 2005-06 to 1.72% in 2006-07.

7

The Company’s receivables declined from 53 days ofturnover in 2004-05 to 31 days in 2006-07.

II. Raw material overview Ceramic tiles

(i) The principal raw materials used in

the manufacture of ceramic tiles

comprise clay, silica and feldspar

(body raw material). The principal

component of the cost of body raw

material is transportation. The

overall cost of body material

increased by 20% on account of

increase in freight rates and also

increased consumption due to

change in product mix.

(ii) Glazed material: Glazes or surface

finish materials provided colour and

design to the tiles. These were

partly imported from Italy and

Spain. The cost of glaze per MT

increased 6.29% from Rs. 27617

per ton to Rs. 29349 per ton.

III. FuelThe manufacture of ceramic tiles is

power and fuel intensive. The Company

uses LPG for running its kiln, a mixture

of furnace oil and C9 for running the

spray dryer and electrical energy for

operating other equipment and lighting

installations. During the year under

review, there was increase in fuel

prices. The average cost of LPG

increased 2.23% from Rs. 30.34 per kg

to Rs. 31.02 per kg; the average cost of

C9 increased 6.44% from Rs. 23.65 per

kg to Rs. 25.17 per kg while the

average cost of furnace oil increased

34.72% from Rs. 14.10 per kg to Rs.

19.00 per kg. Due to All-round

increase in fuel cost, overall power and

fuel charges for the ceramic tiles unit

increased by 30.96% from Rs. 21.94 cr

to Rs. 28.73 cr (including electricity

amounting to Rs. 4.42 cr generated

through wind mills).

IV. Vitrified tilesThe entire requirement of vitrified tiles

was outsourced from two reputed

manufacturers in China with whom

Company enjoys exclusive

arrangements. The average cost of

vitrified tiles reduced from Rs. 311 per

sq. mtrs to Rs. 293 per sq. mtrs due to

reduction in sea freight and

product mix.

V. PersonnelThe Company’s personnel cost increased

24% to Rs. 18.29 cr from Rs. 14.70 cr

due to annual increments and the

recruitment of additional man power to

sustain a substantial increase in business

volumes.

VI. Selling and distributionexpenses Selling and distribution expenses

increased by 59.53% from Rs. 57.90 cr

to Rs. 92.37 cr on account of an

increase in sales tax (due to higher

volumes), increase in freight forwarding

expenses and higher spends on

advertisement and sales promotion.

VII. InterestDuring 2006-07, interest and other

financial charges decreased from

Rs. 13.25 cr to Rs. 8.05 cr on account of

foreign exchange gain of Rs. 2.80 cr in

2006-07 as compared to foreign

exchange loss of Rs. 0.41 cr in 2005-06.

VIII. DepreciationThe Company follows the straight-line

method in the computation of

depreciation at rates provided under

Schedule XIV of The Companies Act,

1956.

IX. MarginsEBITDA for 2006-07 was Rs. 70.90 cr

as against Rs. 43.01 cr, an increase of

65%. EBITDA margins improved from

15.90% in 2005-06 to 17.18% in

2006-07, an increase of 128 basis

points on account of an increased sale

of vitrified tiles.

X. TaxDue to depreciation benefits available on

windmills, the Company was required to

pay only minimum alternate tax.

XI. Earnings per shareAs a result of higher profits, Earnings

Per Share increased from Rs. 15.59 per

share in 2005-06 to Rs. 16.39 per

share in 2006-07.


a) The Company’s ceramic tiles division

reported sales of Rs. 117.17 cr

corresponding to a sale of 0.40 cr

sq. mtrs. in 2006-07 compared with

Rs. 93.72 cr in 2005-06

corresponding to sales of 0.32 cr sq.

mtrs. The sales increased by 25%

during 2006-07 due to increase in

capacity during F.Y. 2006-07. As

capacity addition happened during

the year, increased capacity could be

utilised for part of the year. Full

effect of increased capacity would

be reflected in the performance of

2007-08 onwards.

b) Vitrified tiles: Vitrified Tiles

maintained its share of around 54%

of revenue.

The sales of vitrified tiles jumped

50% from Rs. 168.83 cr in 2005-06

to Rs. 252.88 cr in 2006-07.

Average realizations were slightly

slipped from Rs. 513 per sq. mtr. to

Rs. 487 per sq. mtr. due to product

mix. Due to substantial increase in

sales over a higher base, the

Company had to cover products at

all price points.

c) Marble: Revenues derived from the

sale of marble was increased by

135% to Rs. 76.31 cr in 2006-07

from Rs. 32.50 cr in 2005-06. Sales

of marble increased mainly due to

availability of higher license of

12816 tons as compared to 2392

tons in the previous year. Average

realizations increased from Rs. 228

per sq. ft. to Rs. 229 per sq. ft. on

account of a change in the

product mix. Being a natural

product, prices varied based on

material, colour, appearance

and other features.

d) Mosaic tiles: Following a decline in

the offtake of traditional mosaic

tiles, the Company focused on the

manufacture of cement-based paver

tiles used in roads and walkways.

This switch resulted in a 43%

increase in turnover from Rs. 11.31

cr in 2005-06 to Rs. 16.22 cr in

2006-07. Average realization

increased from Rs. 24 per sq. ft. to

Rs. 32 per sq. ft.


MANAGEMENT DISCUSSIONAND ANALYSIS

Profit & Loss Account

I. RevenuesNITCO capitalised on the favourable industry upturn in a significant way: gross revenues increased 54% from Rs.306.36 cr in

2005-06 to Rs. 470.43 cr in 2006-07 (break-up given below):

Product 2006-07 2005-06

(Rs. cr) (Rs. cr)

Ceramic tiles 117.17 93.72

Vitrified tiles 252.88 168.83

Marble 76.31 32.50

Mosaic tiles 16.22 11.31

Others 7.85 -

Total 470.43 306.36

NITCO capitalised on the favourable industry upturn in asignificant way: gross revenues increased 54% from Rs.3063.62

million in 2005-06 to Rs. 4704.33 million in 2006-07.


Balance Sheet

I. Reserves & surplusThe reserves of the Company increased

from Rs. 235.63 cr on March 31, 2006

to Rs. 268.69 cr on March 31, 2007.

II. LoansOverall loans on the balance sheet

increased by Rs. 44.85 cr during the

year under review due to increased

working capital requirement.

III. Gross blockThe Company’s gross block (including

capital work-in-process) increased from

Rs. 212.41 cr in 2005-06 to Rs. 257.86

cr in 2006-07 on account of an

infrastructure upgradation at Alibaug

and ceramic floor tile capacity

expansion. The results from this

investment has started reflecting in the

Company’s performance.

IV. InventoriesTiles must be made and presented in

various colours, designs and sizes,

requiring large inventory carrying.

Besides, the imported vitrified tiles must

also be adequately stocked to ensure

an anytime availability, especially prior

to the customary annual shut down in

China during January and February. As

an added service, the Company holds

inventories at its end rather than force

it upon dealers with a view to shorten

receivables, resulting in a relatively

higher stock level. The average

inventory holding increased from 128

days to 140 days.

V. DebtorsEven as the Company’s sales increased

54%, debtors increased by 48%

indicative of the Company’s brand

strength as well as a tighter receivables

management. Debtors’ increased from

Rs. 32.13 cr as on March 31, 2006 to

Rs. 47.83 cr, declined from 38 days of

turnover to 31 days.

XII. Cash & bank balancesCash and bank balances comprised

fixed deposits placed with the bank by

way of margin money etc.

XIII. Sundry CreditorsSundry creditors increased from

Rs. 64.01 cr to Rs. 99.29 cr mainly on

account of an increased import of

vitrified tiles.

5-YEAR FINANCIAL SUMMARY

Balance sheet as at March 2007 March 2006 March 2005 March 2004 March 2003

Sources of funds

Equity share capital and share 25.97 22.27 12.27 12.27 12.27

capital suspence

Reserves & surplus 268.73 235.63 72.51 54.22 48.76

Net worth 294.70 257.90 84.78 66.49 61.03

Minority Interest 0.15

Deferred tax liability 12.46 4.06 3.35 12.63 9.58

Secured loans 81.07 58.09 104.52 72.75 73.43

Unsecured loans 47.16 24.77 15.43 20.18 16.03

Total loans 128.23 82.86 119.95 92.93 89.46

Total liabilities 435.54 344.82 208.08 172.05 169.72

Application of funds

Net fixed assets 211.14 170.99 109.84 100.82 97.00

Investments 37.39 74.83 0.00 0.00 0.00

Current assets 327.33 181.56 138.92 92.74 93.61

Current liabilities 140.32 82.56 40.68 21.51 20.89

Net current assets 187.01 99.00 98.24 71.23 72.72

Total assets 435.54 344.82 208.08 172.05 169.72

Profit & loss account as on March 2007 March 2006 March 2005 March 2004 March 2003

Gross sales 470.43 306.36 208.81 172.38 151.10

Less: Excise 11.06 7.97 6.46 7.75 10.56

Less: Sales tax 46.26 27.91 14.70 12.56 6.63

Net sales 413.11 270.48 187.65 152.07 133.91

Other income 1.26 0.02 0.01 0.01 0.01

Total income 414.37 270.50 187.66 152.08 133.92

EBDITA 70.97 43.00 24.02 22.13 22.90

Interest 8.11 13.25 8.56 7.62 9.79

PBDT 62.86 29.75 15.46 14.51 13.11

Depreciation 10.04 6.46 5.64 5.25 4.89

PBT 52.82 23.29 9.82 9.26 8.22

Tax 14.79 3.28 2.28 3.75 2.22

PAT 38.03 20.01 7.54 5.51 6.00

(Rs. in crores)


RATIOS

Financial performance ratios

Year ended on 31 March 2007 2006 2005 2004 2003

Domestic turnover /total sales (%) 98.22 99.76 98.39 96.15 91.22

Export turnover/total sales (%) 1.78 0.24 1.61 3.85 8.78

Other Income/total income (%) 0.30 0.01 0.01 0.01 0.01

Raw material cost/gross sales (%) 49.20 47.14 43.15 37.82 38.45

Manpower costs/total income (%) 4.42 5.43 6.19 7.11 6.71

Excise/gross sales (%) 2.35 2.60 3.09 4.50 6.99

Interest/total income (%) 1.96 4.90 4.56 5.01 7.31

Depreciation/ total income (%) 2.42 2.39 3.01 3.45 3.65

Tax/PBT (%) 28.00 14.08 23.22 40.50 27.01

Cash profit/ total income (%) 11.60 9.79 7.02 7.08 8.13

RONW (PAT/average net worth) 13.76 11.68 9.97 8.64 9.70

ROCE (PBIT/average capital employed) 15.62 13.22 9.67 9.88 10.90

Capital output ratio (total income/ avg. capital employed) 1.06 0.98 0.99 0.89 0.81

PBDIT/interest 8.75 3.25 2.81 2.90 2.34

Raw material cost/total cost (%) 67.40 63.49 55.07 50.17 52.33

Manpower cost/total cost (%) 5.34 6.46 7.10 8.33 8.09

Power cost/total cost (%) 7.08 9.64 13.19 17.02 14.90

Other costs/total cost (%) 20.19 20.41 24.64 24.48 24.68

Balance sheet ratios

(As at 31 March) 2007 2006 2005 2004 2003

Debt-equity ratio (secured loans+Unsecured loans/

net worth + deferred tax liability) 0.42 0.32 1.36 1.17 1.11

Debtors’ turnover (days) 31 38 53 70 87

Inventory turnover (days) 157 128 120 90 85

Current ratio (current assets/current liabilities + cash credit) 1.94 2.01 1.79 1.80 1.68

Quick ratio 0.66 0.95 0.80 1.02 1.14

Cash equivalents/total assets 0.04 0.05 0.02 0.02 0.01

Depreciation/gross block 0.04 0.03 0.04 0.04 0.04

Asset turnover (net sales/average total assets) 1.06 0.98 0.99 0.89 0.81

Growth ratio

Particulars 2007 2006 2005 2004 2003

Growth in total income (%) 53.19 44.14 23.40 13.56 3.79

Growth in PBDIT (%) 65.03 79.04 8.54 -3.36 -11.24

Growth in PAT (%) 90.01 165.45 36.84 -8.17 -18.26

Growth in cash profit (%) 81.57 100.87 22.49 -1.19 -9.93

Growth in gross block (%) 15.21 46.25 10.42 7.19 2.78

Per share data ratio

Particulars 2007 2006 2005 2004 2003

Earnings (Rs) 16.39 15.59 6.15 4.49 4.89

Cash earnings (Rs) 18.51 11.89 10.74 8.77 8.88

Book value (Rs) 132.33 115.81 69.10 54.19 49.74

Net indebtedness (Rs) 49.38 37.21 97.76 75.74 72.91

EPS growth (%) 5.13 153.70 36.84 -8.17 -18.26

Margins

Particulars 2007 2006 2005 2004 2003

PBDIT (%) 17.18 15.90 12.80 14.55 17.10

PBDT (%) 15.22 11.00 8.24 9.54 9.79

PAT/total income (%) 9.18 7.40 4.02 3.62 4.48

Company commissioned an increase in

its ceramic floor tile capacity. This

resulted in sales of Ceramic Tiles

increasing from Rs. 93.72 crore in

2005-06 to Rs. 117.17 crore in

2006-07.

• Higher allotment of marble import

license of 12,816 tons.

• Several innovative products such as

Timberland, Metallica, Matrix, Dholpur

Series, Slate Stone Series, Estonia, Pietre

Del Sol, Art Stone, Innova, African Slate

etc were successfully introduced during

the year.

• Consolidation of Real Estate activities

through Nitco Realties Pvt. Ltd., a

100% subsidiary.

• The Company has successfully

implemented one of the Best ERP

package SAP. Nitco Tiles was awarded

SAP ACE 2007 Award for Best SAP

Implementation Project – Consumer

Products Sector Midsize Enterprises.

ExportsThe Company's exports during the year

ended March 31, 2007 were Rs. 8.37

crore as compared to Rs. 0.72 crore in

the previous year.

DividendIn view of the Company's satisfactory

performance during the financial year

under consideration, your Board has

recommended a dividend of Rs. 2 per

share on the entire enhanced equity

shares (previous year Rs. 1 per share)

and seeks approval for the same. If

approved, the total outgo on account

of the dividend will be Rs. 6.08 cr.

(inclusive of corporate tax on dividend).

In addition, the Company has also

made a provision for dividend of

Rs. 2.11 crores (including Dividend Tax)

being dividend payable on the new

shares that may be allotted under

Qualified Institutional Placement (QIP).

Share capital The Board of Directors and

shareholders of the Company had

approved a composite scheme of

arrangement between Nitco Tiles

Limited (NTL), Nitco Realties Private

Limited (NRPL), Shark Properties Private

Limited (SPPL) and Motivation

Properties Private Limited (MPPL) and

their respective shareholders and

creditors pursuant to the provisions of

Sections 391 to 394 and other relevant

provisions of the Companies Act, 1956.

The said composite scheme was

approved by the Hon’ble High Court,

Bombay vide its order dated September

7, 2007. Pursuant to scheme of

arrangement, 37,03,703 equity shares

of Rs. 10 each of the Company were

allotted to shareholders of Shark

Properties Private Limited on October

24, 2007. Pending allotment as on

March 31, 2007, 37,03,703 equity

shares have been shown as Share

Capital Suspense.

Utilization of funds of IPOproceedsThe details of the amount spent out of

the proceeds of the public issue in

comparison with the amount as

projected in the prospectus is given

below:


Review of operationsDuring the year under review, the

Company registered a robust growth in

sales and profits driven by an increased

demand, thanks to the country's

booming infrastructure and realty

sectors.

Sales increased 54% from Rs. 306.36

crore to Rs. 470.43 crore. EBIDTA

increased 65% from Rs. 43.01 crore to

Rs. 70.90 crore while EBIDTA margin

strengthened from 15.90% to 17.16%.

Profit after tax increased 90% from

Rs. 20.02 crore to Rs. 38.02 crore.

Highlights 2006-07• The Company substantially scaled up

its vitrified business from Rs. 168.83

crore in 2005-06 to Rs. 252.88 crore in

2006-07, entirely outsourced from

manufacturers in China with whom the

Company entered into exclusive long-

term arrangement in return for price,

process, quality and supply stability.

• In first quarter of FY 2006-07, the


DIRECTORS' REPORT

Rs. in crore

Particulars Projected utilisation as per prospectus Actuals as at 31.03.2007

Expansion of ceramic capacity 20.91 21.41

Installation of wind mills 37.86 38.08

Setting up of wall tile unit 36.91 0.08

Public issue expenses 11.74 12.37

General corporate purposes 60.58 60.58

Total 168.00 132.52

Your Directors take pleasure in presenting the Annual Report with the audited statement of accounts of the Company for the

year ended March 31, 2007.

Financial resultsThe highlights of the financial results for the year ended March 31, 2007 are as follows:

Rs. in crores

For the year ended March 31, 2007 2006

Gross sales 470.43 306.36

Profit before interest depreciation and tax 70.90 43.01

Interest 8.05 13.25

Depreciation 10.04 6.46

Profit before tax 52.81 23.30

Provision for tax (including fringe benefit tax) 14.79 3.28

Profit after tax 38.02 20.02

Balance brought forward from the previous year 51.47 38.99

Profit available for appropriation 89.49 59.01

Proposed dividend 5.20 2.23

Dividend tax on proposed dividend 0.88 0.31

Provision for dividend payable on new shares to be allotted under

Qualified Institutional Placement(QIP) including dividend tax 2.11 –

Transferred to General Reserve 5.00 5.00

Balance carried forward 76.30 51.47

Consolidated financialstatementsAs required by the Listing Agreement

with the Stock Exchanges and in

accordance with the Accounting

Standards AS-21 on consolidated

financial statements, your Directors

provide the audited annual

consolidated financial statements in

this Annual Report.

DirectorsMr. Pran Nath Talwar, Director and

Chairman of the Company is due for

retirement by rotation and is eligible for

re-appointment. Required details are

given in the report on Corporate

Governance and Notice.

The tenure of Ms. Poonam Talwar,

Whole time Director, expired on March

31, 2007 and the Board of Directors

has re-appointed her as the Whole time

Director, subject to members’ approval

at the Annual General Meeting. She

will have a five-year tenure starting

April 1, 2007. Required details are

given in the report on Corporate

Governance and Notice.

Mr. Gaurav Burman was appointed as

an Additional Director at the meeting

of the Board of Directors held on

October 24, 2007 and will hold office

until the conclusion of the next Annual

General Meeting. Notices have been

received from members of the

Company for reappointing Mr. Gaurav

Burman at the ensuing Annual General

Meeting.

Employees stock optionschemeGrant of stock option to employees is a

time tested and well established

mechanism to align the interest of the

employees with those of the Company.

Towards achieving this goal, the

approval of members is being sought

at the ensuing Annual General Meeting

to grant stock options to the

employees not exceeding 5,00,000

option. The Employee Stock

Compensation Committee, constituted

in accordance with SEBI guidelines will

administer and monitor the scheme.

Directors' responsibilitystatementPursuant to Section 217 (2AA) of the

Companies Act, 1956, as amended by

the Companies (Amendment) Act,

2000, the Directors confirm that:

a) in preparation of the annual

accounts, applicable accounting

standards have been followed along

with proper explanations relating to

material departures;

b) appropriate accounting policies have

been selected and applied consistently

and have made judgments and

estimates that are reasonable and

prudent, so as to give a true and fair

view of the state of affairs of the

Company as on March 31, 2007 and of

the profit of the Company for the year

ended March 31, 2007.

c) proper and sufficient care has been

taken for maintenance of adequate

accounting records in accordance with

the provisions of the Companies Act,

1956, for safeguarding the assets of

the Company and for preventing and

detecting fraud and other irregularities;

and

d) the annual accounts have been

prepared on a going concern basis.

Corporate GovernancePursuant to Clause 49 of the Listing

Agreement with the Stock Exchanges, a

detailed report on Corporate

Governance forms a part of this Annual

Report. A certificate from the auditors

of the Company confirming compliance

with the conditions of Corporate

Governance as stipulated under Clause

49 of the Listing Agreement is attached

to this Report.

Management Discussionand AnalysisManagement Discussion and Analysis

on matters related to business

performance, as stipulated in Clause 49

of the Listing Agreement with the Stock

Exchanges, is given in a separate

statement which form part of the

Annual Report.

PersonnelRelationships with employees continued

to be cordial. The HR policies of our

Company were focused on the

development potential of each

employee. With this premise, a

comprehensive set of HR policies were

laid down, aimed at attracting,


Pending utilization of funds for the

projects as envisaged in the prospectus,

the balance amount has been invested

in term/fixed deposits with banks.

Current year's outlookThe tile industry caters primarily to

housing, infrastructure and real estate

sectors which are experiencing an

unprecedented boom. All real estate

and infrastructure-related companies

have embarked on ambitious plans,

raised funds from the capital market

and begun fresh construction. The

Company, by virtue of being one of the

leading players in India's tile industry,

expects to benefit from this boom: the

Company has outlined a number of

initiatives that will translate into

enhanced turnover and profits during

the current year.

Expansion plansThe Company has planned following

expansion programmes during the

financial year 2007-08:-

1. The Company had originally planned

to set up a Wall Tile unit with the

capacity of 5000 sq. mtrs per day at

our existing location at Alibaug. The

Company has now upgraded the scope

of the project to manufacture high end

ceramic tiles with capacity of 10,000

sq. mtrs per day. The plant will be

capable of producing high end tiles

which will have application both on

wall and floor. The Company has

already placed orders on machinery

suppliers and production is expected to

commence by April 2008.

2. The Company has planned to set up

state of art processing facilities for

marble at Silvassa. The production is

expected to commence by second

quarter of the financial year 2008-09.

3. The Company is also in discussion

for a joint venture for manufacturing of

Vitrified Tiles at Gujarat.

Company’s initiative in thereal estate business During the year, the Company took

steps to consolidate all its real estate

initiatives through its wholly-owned

subsidiary, Nitco Realties Pvt. Ltd. The

Company appointed an eminent valuer,

Knight Frank, to carry out the valuation

for some of the properties owned by

Nitco Tiles/Nitco Realties or its SPVs. For

these initial set of properties, Knight

Frank has put the net present value of

Nitco’s land bank at Rs. 406 crore.

These projects are expected to be

completed over a period of next three

years.

Nitco is vigorously pursuing its

objectives of creating value in the real

estate sector. The Company is in talks

to undertake many more projects.

As and when these projects bear fruit,

this would add significant value to

the Company.

Subsidiary companiesDuring the year, Nitco Realties Private

Limited became the wholly-owned

subsidiary of the Company to carry out

real estate activities.

Glamorous Properties Private Ltd. is a

wholly owned subsidiary of Nitco

Realties Pvt. Ltd. By virtue of the

composite scheme of arrangement,

Nitco Realties Private Limited merged

with Motivation Properties Private

Limited and Motivation Properties

Private Limited was renamed as Nitco

Realties Pvt. Ltd. The merger was

effective January 1, 2007. By virtue of

the scheme, Particle Board India Ltd.

and Opera Properties Private Ltd. which

were subsidiaries of Motivation

Properties Private Limited became

subsidiaries of the Nitco Realties Private

Limited.

The Central Government in exercise of

the power conferred by Section 212 (8)

of the Companies Act, 1956, has

accorded its approval for exemption

from attaching the account of

subsidiaries to the balance sheet of the

Company. The Company shall provide a

copy of the Annual Report of its

subsidiary companies as required under

Section 212 of the Act to members on

their request, free of cost. These

documents will also be available for

inspection by any shareholder at the

registered office of the Company on

any working day during business

hours. A statement pursuant to

section 212 of the Companies Act

1956 containing details of subsidiaries

of the Company, forms part of the

Annual Report.


Particulars as per the Companies

(Disclosure of particulars in the report

of the Board of Directors) Rules, 1988.

A. Conservation of energy:Your Company continues to be

committed to energy conservation in its

manufacturing operations. The

following are energy conservation

measures taken during the year under

review.

1. Specific consumption of LPG reduced

from 67.1 kg per MT of tile during

2005-06 to 65.7 kg per MT of tile

during 2006-07.

2. Average electrical energy

consumption reduced from 3.64 kwh

per sq. mtr during the year 2005-06 to

3.42 Kwh per sq. mtrs during 2006-07.

3. Power factor continued to be 0.999

during the entire year of operations;

the Company received a power factor

rebate of Rs. 0.25 cr during

2006-07, against a rebate of Rs. 0.16

cr during the year 2005-06

4. As a part of cost reduction, the

Company has installed two numbers of

hot air generators using coal as fuel in

the second quarter of FY 2007-08, the

benefits of which will accrue in the

subsequent years.

B. Technology absorptionThe single firing fuel efficient

technology for manufacture of ceramic

floor tiles imported from SACMI Italy

has been fully absorbed.

The Company has a full-fledged

Research and Development

department, which is constantly

engaged in product innovation,

productivity improvement, quality

improvement and cost reduction. The

production capacity of tiles of higher

sizes, namely 450x450 mm and

600x300 mm, were increased.

During the year, several innovative

products such as Timberland, Metallica,

Matrix, Dholpur Series, Slate Stone

Series, Estonia, Pietre Del Sol, Art

Stone, Innova, African Slate etc were

successfully introduced. As a part of

technology upgradation roto colour

printing machines were installed in

three numbers of glaze lines and all the

new designs were being developed

using Roto Colour. Due to several

initiatives taken by the department, the

Company successfully launched new

products which will help it to stay

ahead of competition.

C. Foreign exchangeearnings and outgoThe information on foreign exchange

earnings and outgo is furnished in the

Notes to the Accounts.


For and on behalf of the Board

Vivek Talwar Poonam Talwar

Managing Director Whole Time Director

Dated: October 24, 2007, Mumbai


Vivek Talwar Poonam Talwar

Managing Director Whole Time Director

Dated: October 24, 2007, Mumbai

retaining and motivating employees at

all levels. Information required under

Section 217(2A) of the Companies Act,

1956, read with Companies (Particulars

of Employees) Rules, 1975, is provided

in the Annexure forming part of this

Report. In terms of section 219(1)(b)(iv)

of the Act, the Report and Accounts

are being sent to the shareholders

excluding the aforesaid Annexure. Any

shareholder interested in obtaining

copy of the same may write to the

Company Secretary at the Registered

Office.

Conservation of energy,technology absorption andforeign exchangeearnings/outgoThe information required under Section

217 (1) (e) of the Companies Act,

1956, read with the Companies

(Disclosure of Particulars in the Report

of Board of Directors) Rules, 1988, with

respect to conservation of energy,

technology absorption and foreign

exchange earnings/outgo is given in

Annexure A which forms part of this

Report.

Auditors’ ReportThe Board has duly examined the

statutory auditor’s report to accounts

and clarifications, wherever necessary,

have been included in the Notes to

Accounts section of the Annual Report.

AuditorsThe present auditors of the Company,

M/s. A. Husein Noumanali & Co.,

Chartered Accountants, retire at the

conclusion of the Annual General

Meeting and being eligible, offer

themselves for re-appointment. Your

Directors recommend their

appointment.

AppreciationYour Directors wish to place on record

their sincere thanks to the following

stakeholders:

• Customers, who continue to be

delighted in the Company's range of

products and their quality, and who

therefore continue to patronise the

Company's products in spite of

competition

• Banks and financial institutions for

their continued support

• Employees for their sincere effort

without which the Company could not

have reported phenomenal growth

during the year under review.


TO DIRECTORS' REPORTANNEXURE A

present, she is Director of Nitco Paints

Pvt. Ltd., Nitco Tiles and Marble Ind.

(Andhra) Pvt. Ltd., Nitco Construction

Material Pvt. Ltd. and Nitco Terrazzo

Tiles Pvt. Ltd.

Mr. Dinesh H. Kanabar, aged 48 years,

is an Independent Director of the

Company. He is an eminent chartered

accountant and is an Executive Director

(Tax & Regulatory Services) at

PricewaterhouseCoopers Pvt. Ltd. After

qualifying as a chartered accountant,

Mr. Kanabar specialised in tax and

business advisory services and

international taxation. Mr. Kanabar is

an advisor to several global

organizations for providing expert

counsel on cross-border tax issues

encompassing transfer pricing

regulations applicable to multinational

corporations and the taxation of

e-commerce.

Mr. S.K. Bhardwaj, aged 62 years, is

an Independent Director of the

Company. He is a postgraduate from

Punjab University. He has held various

senior positions with the Government

of India such as Chief Commissioner

Customs – Mumbai, Chief

Commissioner - Central Excise and

Service Tax, Mumbai, Commissioner-

Customs and Central Excise, Baroda,

Commissioner of Customs, Mumbai

and Joint Secretary, Ministry of

Defence, Government of India. He has

vast experience of nearly 37 years in the

field of indirect taxation, public

administration, etc. He has dealt with

issues relating to the fiscal policy and

VAT at Harvard University, Boston, USA.

He retired as a member of the Central

Board of Excise and Customs, Ministry

of Finance, Government of India. He is

currently engaged in providing

consultancy services in the field of

Indirect Taxes to several Corporates.

Mr. Atul Sud, aged 50 years, is an

Independent Director of the Company.

Mr. Sud has completed a postgraduate

diploma in business management from

IIM Ahmedabad, and holds a master

degree in economics from the Delhi

School of Economics. After over a

decade of service in a senior position at

American Express Bank as India head

for commercial banking, treasury and

investment banking, he founded the

Strategic Group.

Mr. Gaurav Burman, aged 35 year, has

been appointed as an additional

director of the Company in the Board

meeting held on October 24, 2007.

Mr. Burman is BA with a dual degree in

Economics and history from Tufts

University, USA. He has over 10 years

experience in private equity which has

seen him invest in Europe, Asia, and

America. Mr. Burman has been a

partner at Promethean a UK listed

private equity fund, since its inception.

He participated in all of the investment

decisions of Promethean. Mr. Burman

was instrumental in the structuring and

marketing of Promethean and is

responsible for a number of investor

relationship Promethean enjoys. He

holds a Board seat for Intermediactive

Group Limited.

Mr. Burman holds 45,000 equity shares

in the Company.

2. Board procedure

To follow transparency, the Board

follows the procedure of advance

planning in matters requiring

discussion/decisions by the Board. The

Board is given presentations on finance,

sales, marketing, major business

segments and operations of the

Company and other matters as

members want. The Chairman of the

Board finalises the agenda papers for

the Board meeting in consultation with

other persons concerned. The minutes

of the proceeding of each Board

meeting are maintained in terms of

statutory provisions. Meetings of

various committee meetings are held

properly. The minutes of committee

and Board meetings of subsidiary

companies are placed regularly before

the Board for its review.

3. The names and categories of the

Directors on the Board, their

attendance at Board meetings held

during the year and the number of

directorships and committee

chairmanships/memberships held by

them in other public companies is

given below. Other directorships do not

include alternate directorships,

directorships of private limited

companies and of companies

incorporated outside India.

Chairmanship/Membership of Board

Committees include only Audit and

Shareholders’/Investors’ Grievance

Committees.


Corporate Governance pertains to the

system by which companies are

directed and controlled, keeping in

mind the long-term interests of

stakeholders. It refers to the blend of

law, regulations and voluntary

practices, which enable the Company

to attract financial and human capital,

perform efficiently and thereby

perpetually generate long-term

economic value for its shareholders,

while respecting and balancing the

interests of other stakeholders and the

society as a whole.

It aims to align the interest of the

Company with that of its shareholders

and other key stakeholders. The

incentive for companies and for those

who own and manage them to adopt

global governance standards is that

these standards will help them achieve

a long-term partnership with their

stakeholders and achieve their

corporate objectives efficiently. The

principal characteristics of Corporate

Governance are transparency,

independence, accountability,

responsibility, fairness, and social

responsibility.

In sum, Corporate Governance focuses

on treatment of all shareholders and

reinforces the belief among the

shareholders that it is "Your Company"

as it belongs to them. The Chairman

and Board of Directors are the

shareholders’ fiduciaries and trustees

pushing the business forward and

maximizing long-term value for them.

A good governance process provides

transparency of corporate policies,

strategies and the decision-making

process and also strengthens internal

control systems and helps in building

relationship with all stakeholders. We

at NITCO believe in being transparent

and we commit ourselves to adherence

to good corporate governance practices

at all times as we believe that good

governance generates goodwill among

business partners, customers and

investors and helps the Company grow.

A. Board of Directors 1. Composition of the Board and a

brief profile of Directors

During the financial year 2006-07, the

Board of Nitco consisted of three

Independent Directors, who together

constituted for 50% of the Board. The

day-to-day management of the

Company is conducted by the

Managing Director who is ably assisted

by the Whole time Director.

Mr. Pran Nath Talwar, aged 80 years,

is the Chairman of our Company. He

started his industrial venture in 1956 by

setting up a partnership firm Northern

India Tiles Corporation (Delhi) for

manufacturing mosaic tiles. He is the

founder of Nitco Group and our

Company. He has more than 50 years

of experience in the tile industry. He

has been instrumental in the growth of

the Nitco Group. In recognition of his

contribution to the industry, he

received an award from the Institute of

Trade and Industrial Development in

1999 and 2000 for excellence in

industrial performance. Mr. Talwar

holds 3,17,952 equity shares in the

Company. He retires by rotation and is

eligible for re-appointment at this

Annual General Meeting. He is Director

of Nitco Paints Pvt. Ltd., Nitco Tiles &

Marble Ind. (Andhra) Pvt. Ltd., Nitco

Construction Material Pvt. Ltd., and

Nitco Terrazzo Tiles Pvt. Ltd.

Mr. Vivek Talwar, son of Mr. Pran

Nath Talwar and aged 50 years, is the

Managing Director of our Company. He

has over 26 years of experience in the

tile industry. He joined the Company as

a Director in 1980. The operational

responsibility and day-to-day

functioning of our Company were

gradually handed over to him. He was

instrumental in setting up a plant at

Alibaug to manufacture ceramic floor

tiles and also in diversifying the business

of the Company by entering into new

activities such as marketing of imported

marble and vitrified tiles in India.

Ms. Poonam Talwar, aged 42 years,

daughter of Mr. Pran Nath Talwar

holds a bachelor’s degree in commerce

and law and is the Whole time Director

of the Company. She joined the

Company as a Director in 2002. She is

in charge of the mosaic tile unit of our

Company. Under her leadership, the

mosaic tile division has witnessed

growth. The Board of Directors has re-

appointed Ms. Poonam Talwar as

Whole time Director for five years with

effect from April 1, 2007 subject to

approval of members in the Annual

General Meeting. She holds 62,562

equity shares in the Company. At


REPORT ON CORPORATE GOVERNANCE

The Company’s shares are listed for

trading on the Bombay Stock Exchange

and National Stock Exchange. During

the year, 229 investor complaints were

received and all were resolved. There

were no pending investor complaints as

at March 31, 2007.

Mr. B.G. Borkar, CFO and Company

Secretary has been appointed as

compliance officer.

3. Remuneration Committee

The Board, on the recommendation of

the Remuneration Committee,

determines the remuneration payable

to Managing Director and Whole time

Director. The remuneration of the non-

executive Directors is restricted only to

sitting fees for attending the

Board/Committee meetings. The

members of the Remuneration

Committee are all independent

Directors. They are:

Mr. Atul Sud Member

Mr. Dinesh H. Kanabar Member

Mr. S.K. Bhardwaj Member

The members elect chairman of the

Committee from amongst themselves.

The Committee met once during the

year to recommend the re-appointment

and remuneration of the Whole time

Director Ms. Poonam Talwar which was

attended by all the members

mentioned above.

(b) Investigation of any activity within

its terms of reference

(c) Overseeing of the Company’s

financial reporting process and

disclosure of its financial information to

ensure that the financial statement is

correct, sufficient and credible

(d) Reviewing of the annual financial

statement with the management

(e) Reviewing of the adequacy of

internal control systems with the

management and the external and

internal auditors

(f) Reviewing of the adequacy of

internal audit function, including the

structure of the internal audit

department, staffing and seniority of

the official heading the department,

reporting structure coverage and

frequency of internal audit

(g) Reviewing of the Company’s

financial and risk management policies

(h) Periodic discussion with the auditor

about the internal control system,

scope of audit including observations

of auditors and review the quarterly,

half-yearly, and annual financial

statement before submissions to the

Board.

2. Shareholders’/Investors’

Grievance Committee

The Company has constituted a

Shareholders’/Investors’ Grievance and

Share Transfer Committee to look into

various issues relating to shareholders

including transfer and transmission of

shares as well as non-receipt of

dividend, annual report, and shares

after transfers and delay in transfer of

shares. In addition, the Committee

looks into other issues including status

of dematerialisation/rematerialisation of

shares as well as systems and

procedures followed to track investor

complaints and suggest measures for

improvement from time to time.

The composition of the

Shareholders’/Investors’ Grievance

Committee and the details of meetings

attended by its members are given

below:


Five Board meetings were held during

the year and the gap between two

meetings did not exceed four months.

The dates on which the Board meetings

were held are:

May 16, 2006; July 27, 2006; October

19, 2006; January 23, 2007; and

March 2, 2007.

4. Code of conduct

The Board has laid down a code of

conduct for all Board members and

senior management of the Company.

The same is posted on the website of

the Company.

None of the Non-Executive Directors

have any material pecuniary

relationship or transactions with the

Company.

Necessary information pursuant to

Clause 49 of the Listing Agreement has

been placed before the Board.

B. Committees of the Board1. Audit Committee

The Company has an Audit Committee

in accordance with the requirement of

Section 292A of the Companies Act,

1956, and the terms of reference are in

conformity with Clause 49 of the

Listing Agreement entered into with

the stock exchanges. The composition

of the Audit Committee and the

attendance of each member at the

meetings are as follows:


Name Category No. of Board No. of No. of committee Whether

meetings held directorships positions held in attended the

during the held in other other public last AGM

year 2006-07 public companies companies

Held Attended Chairman Member Chairman Member

Mr. Pran Nath Talwar Non-Executive Chairman 5 – – – – – No

Mr. Vivek Talwar Executive/Managing Director 5 5 – – – – Yes

Ms. Poonam Talwar Executive/Whole time Director 5 4 – – – - Yes

Mr. Dinesh H. Kanabar Independent 5 5 – – – – Yes

Mr. S.K. Bhardwaj Independent 5 5 – 1 – – Yes

Mr. Atul Sud Independent 5 5 – 1 – – Yes

Name of Director Category No. of Committee meetings

Held Attended

Mr. Dinesh H. Kanabar, Chairman Independent 4 4

Mr. S.K. Bhardwaj Independent 4 4

Mr. Vivek Talwar Managing Director 4 4

The Chairman of the Audit Committee has attended the Annual General Meeting held on August 24, 2006.

Mr. B.G. Borkar, CFO and Company Secretary of the Company is secretary to the Committee.

Terms of reference of the Audit Committee, inter alia, are:

(a) Authority to investigate any matter pertaining to the items specified in Section 292A of the Companies Act or referred to it

by the Board

Name of Director Category No. of Committee meetings

Held Attended

Mr. S.K. Bhardwaj, Chairman Independent 8 8

Mr. Atul Sud Independent 8 8

Mr. Vivek Talwar Non-independent 8 6

entered into with the stock exchanges

as well as SEBI Regulations and

Guidelines, wherever applicable. No

penalties have been imposed or

strictures issued by SEBI, the stock

exchanges or any statutory authority on

matters relating to capital markets in

the last three years.

c) The Company has complied with

non-mandatory requirements relating

to the Remuneration Committee and

financial statements of the Company

are unqualified.

d) Secretarial audit: A qualified

practising Company Secretary carried

out a secretarial audit to reconcile the

total admitted capital with National

Securities Depository Limited (NSDL)

and Central Depository Services (India)

Limited (CDSL), total issued and listed

capital. The secretarial audit report

confirms that the total issued/paid up

capital is in agreement with the total

number of shares in physical form and

number of dematerialised shares held

with NSDL and CDSL.

e) Proceeds from public issues: Out of

the issue proceeds of Rs. 16800 lac, the

Company has utilised Rs. 13,252 lac

towards objects of the issue and

pending utilization, balance funds as at

March 31, 2007 have been invested in

term/fixed deposits with banks.

F. Means of communication

• The quarterly, half-yearly and annual

results of the Company are published in

leading newspapers in India like The

Economic Times, Business Standard,

Free Press Journal, Navshakti, and

Maharashtra Times. The results are also

displayed on the Company’s website

www.nitcotiles.com. Press releases

made by the Company from time to

time are also displayed on the website.

Presentations made to institutional

investors and analysts after the

declaration of quarterly, half-yearly and

annual results are displayed on the

Company’s website.

• The Company also informs by way of

intimation to the stock exchanges all

price-sensitive matters or such other

matters which in its opinion are

material and relevant to shareholders

and subsequently issues a press release

on those matters.

• All data/reports required to be filed

electronically on EDIFAR site pursuant

to Clause 51 of the Listing Agreement

with the Stock Exchanges have been

regularly filed in addition to their

physical filing with the stock

exchanges.

• Management Discussion and

Analysis: a report on Management

Discussion and Analysis is appended

and forms part of this Annual Report.

G. Shareholders’ information

a) The Annual General Meeting is

scheduled to be held on December 11,

2007, at 11:30 am at MC Ghia Hall,

Bhogilal Hargovindas Building, 2nd

Floor, 18/20, Kaikhusru Dubhash Marg,

Mumbai - 400 001

b) Financial year: The Company

follows April-March as its financial year.

The results for every quarter beginning

from April are declared in the month

following the quarter.

c) Date of book closure: December 5,

2007 to December 11, 2007 (both days

inclusive)

d) Dividend payment date: December

15, 2007

e) Listing on stock exchanges: The

Company's equity shares are listed on

the National Stock Exchange of India

Ltd. and Bombay Stock Exchange Ltd.

The Company has paid listing fees to

the stock exchanges for the financial

year 2007-08.

f) Stock code/symbol: BSE 532722.

NSE- NITCO. ISIN-INE858F01012


None of the resolutions passed by the

Company required resolution to be

passed through postal ballots. The

Company shall comply with the

requirements relating to postal ballot as

and when it will require compliance.

E. Disclosures

a) Disclosure on materially significant

related-party transactions:

Related-party transactions have been

disclosed in the Notes to Accounts in

the financial statements as on March

31, 2007. However the Company did

not have any related-party transactions,

which may have potential conflict with

the interests of the Company at large.

b) The Company has complied with all

the provisions of the Listing Agreement

Tenure of MD is for five years from

March 31, 2006

Tenure of Whole time Director is for

five years from April 1, 2007

None of the Directors hold any

instrument convertible to shares.

Criteria for payment to independent

Director: At present, the Company pays

sitting fees to independent Directors for

the Board/Committee meetings they

attend.

C. Details of shares of the

Company held by Directors as on

March 31, 2007 are as follows:

Directors No. of equity shares held

Mr. Pran Nath Talwar 3,17,952Mr. Vivek Talwar 31,24,487Ms. Poonam Talwar 62,562Mr. Dinesh H. Kanabar 7,584Mr. Atul Sud –Mr. S.K. Bhardwaj –


Details of remuneration paid to Directors during the financial year ended March 31, 2007 are as under:

Rs. in lacs

Name of Directors Category Salary Perquisites and Commission Sitting fees Total

other benefits

Mr. Pran Nath Talwar Chairman – – – – –

Mr. Vivek Talwar MD 38.40 10.25 53.71 – 102.36

Ms. Poonam Talwar Whole time Director 8.40 2.45 – – 10.85

Mr. Dinesh H. Kanabar Independent Director – – – 2.00 2.00

Mr. S.K. Bhardwaj Independent Director – – – 2.16 2.16

Mr. Atul Sud Independent Director – – – 1.36 1.36

D. General Body Meetings

The last three Annual General Meetings were held as per details given below:

Year Date Time Venue Special Resolution passed

2005-06 24th August 2006 3.30 pm Patkar Hall, Nathibai Thakersey Road, Appointing Mr. Vivek Talwar as

Mumbai 400 020 Managing Director

2004-05 23rd September 2005 4.30 pm Registered office of the Company –

2003-04 29th September 2004 4.30 pm Registered office of the Company –


i) Shareholding pattern as on March 31, 2007

Category No. of shares held % of total

Promoters’ holding

Indian promoters 70,20,182 31.52

Promoters’ group 36,47,180 16.38

Sub-total 1,06,67,362 47.90

Public shareholding

Mutual funds and UTI 27,14,622 12.19

Financial institutions/banks 18,000 0.08

FIIs 30,54,367 13.71

Independent Director 7,584 0.03

Private corporate bodies 31,30,382 14.06

NRIs/OCBs 13,03,998 5.86

Other 13,75,015 6.17

Sub-total 1,16,03,968 52.10

Grand total 2,22,71,330 100.00

j) Distribution of shareholding as on March 31, 2007

No. of equity shares No. of share holders % of share holders No. of shares held % of share holding

1 – 500 8593 96.21 778140 3.50

501 – 1000 107 1.19 87857 0.40

1001 – 2000 82 0.91 127077 0.57

2001 – 3000 23 0.26 58466 0.27

3001 – 4000 9 0.11 34094 0.15

4001 – 5000 11 0.12 50930 0.23

5001 - 10000 23 0.26 159712 0.71

10001 and above 84 0.94 20975054 94.17

8932 100.00 22271330 100.00

Note : 2,22,71,330 equity shares does not include 37,03,703 equity shares allotted pursuant to scheme of arrangement which

was approved by Bombay High Court order dated September 7, 2007.

g) Market price data: The monthly high and low price of shares traded on the National Stock Exchange of India Ltd. and the

Bombay Stock Exchange Ltd. are as follows:

Month NSE BSE

High Low High Low

April 06 214.00 176.55 214.40 175.55

May 06 237.40 141.25 236.70 158.00

June 06 188.70 112.00 189.00 112.00

July 06 169.70 138.00 167.95 123.20

August 06 200.95 125.00 200.75 131.65

September 06 221.00 195.00 223.10 195.10

October 06 223.00 176.50 224.00 176.50

November 06 237.40 175.10 236.95 175.35

December 06 265.00 217.00 267.00 215.00

January 07 260.00 225.25 258.35 225.15

February 07 272.40 195.00 273.00 198.75

March 07 272.40 172.65 217.95 172.22

h) Performance of the Company’s stock price vis-à-vis NSE Nifty

11003.04.06 19.05.06 30.06.06 14.08.06

Nitco Tiles

Historic graph 01.04.2006 to 31.03.07

Nifty

27.09.06 13.11.06 27.12.06 13.02.07 30.03.07

143

176

208

241

274

To

The members

Nitco Tiles Limited

We have examined the compliance with conditions of Corporate Governance procedures implemented by Nitco Tiles Limited for

the year ended March 31, 2007, as stipulated in Clause 49 of the Listing Agreement of the said Company with the stock

exchanges of India.

The compliance with conditions of Corporate Governance is the responsibility of the management. Our examination was limited

to a review of procedures and implementation thereof, adopted by the Company for ensuring compliance with the conditions

of Corporate Governance. It is neither an audit nor an expression of opinion of the financial statements of the Company.

In our opinion and to the best of our information and explanations given to us, we hereby certify that the Company has

complied in all respects with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.

On the basis of representations received from the Registrar and Share Transfer Agents and as per the records maintained by the

Company which are presented to the Shareholders/Investor Grievance Committee, we state that as on March 31, 2007, no

investor grievances are pending against the Company for a period exceeding one month.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or the

effectiveness with which the management has conducted the affairs of the Company.

For A. Husein Noumanali & Co.

Chartered accountants

Mr. A. Husein Noumanali

Proprietor

Place: Mumbai M. No. 14757

Date: October 24, 2007


DECLARATIONIn accordance with Clause 49 of the Listing Agreement with the Stock Exchanges, I hereby confirm and declare that all the

Directors and the senior management personnel of the Company have affirmed compliance with the code of conduct of the

Company laid down for them for the financial year ended March 31, 2007.

For Nitco Tiles Limited

Mr. Vivek Talwar

Dated: October 24, 2007 Mumbai Managing Director

k) Address for communication:

Nitco Tiles Ltd., Recondo compound,

Inside Municipal Asphalt compound,

S. K. Ahire Marg, Worli,

Mumbai 400 030

Tel: 022 66164555

Fax: 022 6660 8248

Email: [email protected]

Website: www.nitcotiles.com

l) Plant locations:

Our existing production facilities are

located at Thane for Mosaic Tiles and

Poynad (Alibaug) for ceramic/porcelain

tiles. Our marble processing facilities

are located at Kanjurmarg (Mumbai)

and Silvassa.

m) Registrars and Transfer Agents:

Intime Spectrum Registry Limited,

C 13 Panalal Silk Mills Compound,

LBS Marg, Bhandup (W)

Mumbai 400 078.

Tel: 022 2596 3838/2596 3838

Fax: 022 2596 0329

E-mail: [email protected]

Website: www.intimespectrum.com

n) Share transfer system

All the shares of the Company issued

during the IPO are in dematerialised

form. Transfers of these shares are

done through a depository where there

is no involvement of the Company. The

transfer of shares in physical form as

and when received are normally

processed within 15 days from the date

of receipt of documents complete in all

respects.

As on March 31, 2007, 71.27% of the

equity shares have been dematerialised.

We have no GDR/ADR or any

convertible instrument.

o) Nomination facility:

Shareholders holding shares in the

physical form and desirous of making a

nomination in respect of their holding

in the Company, as permitted under

Section 109A of the Companies Act,

1956, are requested to submit to the

Company the prescribed Form 2B for

this purpose.


Mr. Vivek Talwar

Managing Director

Dated: October 24, 2007 Mumbai


AUDITORS’ CERTIFICATE ONCORPORATE GOVERNANCE


FINANCIAL SECTION


We have audited the attached Balance Sheet of M/s NITCOTILES LIMITED as on March 31, 2007 and also the Profit & LossAccount of the Company for the year ended on that date,annexed thereto. These Financial Statements are theresponsibility of the management. Our responsibility is toexpress an opinion on these financial statements based on ouraudit.

We conducted our audit in accordance with auditing standardsgenerally accepted in India. Those Standards require that weplan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing theaccounting principles used and significant estimates made bymanagement, as well as evaluating the overall financialstatement presentation. We believe that our audit provides areasonable basis for our opinion.

As required by the Companies (Auditors’ Report) Order, 2003issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, weenclose in the Annexure, a statement on the matters specifiedin paragraph 4 of the said Order.

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

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

2) In our opinion proper books of accounts as required by lawhave been kept by the Company, so far as appears from ourexamination of the books;

3) The Balance Sheet and Profit & Loss Account dealt with bythis report are in agreement with the books of accounts;

4) In our opinion, the Balance Sheet and Profit & Loss Accountdealt with by this report comply with the accountingstandards referred to in sub-section (3C) of Section 211 ofthe Companies Act, 1956 to the extent applicable.

5) On the basis of written representations received from thedirectors of the Company, as on 31st March 2007, andtaken on record by the Board of Directors, we report thatnone of the directors is disqualified as on 31st Mar 2007from being appointed as a director in terms of clause (g) ofsub-section (1) of section 274 of the Companies Act, 1956.

6) In our opinion and to the best of our information andaccording to the explanation given to us, the said accountsgive the information as required by the Companies Act,1956 in the manner so required and give a true and fairview in conformity with the accounting principles generallyaccepted in India subject to (i) giving effect to the schemeof arrangement between Nitco Tiles Limited ‘NTL’, NitcoRealties Private Limited ‘NRPL’, Shark Properties PrivateLimited ‘SPPL’ and Motivation Properties Private Limited‘MPPL’:

a) In the case of the Balance Sheet of the state of affair ofthe Company as at 31 March 2007 and

b) In the case of Profit & Loss account of the Profit for theyear ended on that date.

c) In the case of the Cash Flow Statement of the cash flowfor the year ended on that date.

For A. Husein Noumanali & Co.Chartered Accountants

(A. Husein Noumanali)Place: Mumbai ProprietorDate : October 24, 2007 Membership No. 14757

To the members ofNITCO TILES LIMITED

Auditors Report

Annexure to the Auditors’ Report


1 (a) The Company has maintained proper records showing

full particulars including quantitative details and

situation of fixed assets;

(b) As per the information and explanations given to us,

physical verification of fixed assets has been carried

out in terms of the phased programme of verification

of its fixed assets adopted by the Company and no

material discrepancies were noticed on such

verification. In our opinion, the frequency of

verification is reasonable, having regard to the size of

the Company and nature of its business.

(c) During the year, the Company has not disposed of any

substantial / major part of fixed assets.

2 (a) Physical verification of inventory has been conducted

during the year by the management at reasonable

intervals.

(b) In our opinion and according to the information and

explanations given to us, procedures of physical

verification of inventory followed by the management

are reasonable and adequate in relation to the size of

the Company and the nature of its business.

(c) The Company has maintained proper records of

inventories and discrepancies noticed on physical

verification of inventories as compared to book

records were not material.

3 The Company has not granted any loans to companies,

firms or other parties covered in the Register, maintained

under Section 301 of the Companies Act, 1956.

Accordingly sub clauses b, c & d in relation to rate of

interest & terms & conditions, regularity in repayment &

overdue amounts are not applicable.

4 The Company has taken loan from one party covered in

the Register maintained under Section 301 of the

Companies Act, 1956. The rate of interest and terms and

conditions on these loans are not prejudicial to the interest

of the Company. The Company is regular in repayment, as

per terms, and there are no overdue amount.

5 In our opinion and according to the information and

explanations given to us, there are adequate internal

control procedures commensurate with the size of the

Company and the nature of its business with regard to

purchase of inventory and fixed assets and for the sale of

goods. During the course of our audit, no major weakness

has been noticed in the internal controls.

6 (a) In our opinion and according to the information and

explanations given to us, transactions that need to be

entered into the Register in pursuance of Section 301

of the Companies Act, 1956 have been so entered.

(b) In our opinion and according to the information and

explanations given to us, the transactions exceeding

Rupees Five Lacs in respect of each party made in

pursuance of contracts or arrangements entered in

the register maintained under Section 301 of the

Companies Act, 1956 have been made at prices,

which are reasonable having regard to prevailing

market prices at the relevant time.

7 The Company has not accepted any deposits during the

year from the public within the meaning of the provisions

of Section 58A and 58AA of the Companies Act, 1956 and

rules made thereunder. Hence, the Clause (vi) of the order

is not applicable.

8 In our opinion, the Company has an internal audit system

commensurate with the size of the Company and the

nature of its business.

9. Paragraph 4(viii) is not applicable as the Company is not

required to maintain cost records u/s 209(1)(d) of the

Companies Act, 1956.

10 (a) According to the records of the Company, the

Company is regular in depositing undisputed

statutory dues including Employees’ State Insurance,

Income tax, Sales tax, Wealth-tax, Customs Duty,

Excise Duty, Cess and other statutory dues with

appropriate authorities. According to the information

and explanations given to us, there are no undisputed

amounts payable in respect of such statutory dues

which have remained outstanding as at 31st March,

2007 for a period more than six months from the date

they became payable.

(b) According to the records of the Company, the dues of

sales tax, income-tax, customs, wealth-tax, excise

duty, cess which have not been deposited on account

of disputes and the forum where the dispute is

pending are as under:-

Name of Nature of Amount Forum

Statute the dues (Rs./lacs)

Central Excise duty 8.30 Customs Excise &

Excise demand/ Service Tax

Act penalty Appellate

Tribunal, Mumbai

Central Excise duty 6.50 Commissioner

Excise demand/ Central Excise

Act penalty (Appeals)

Customs Duty 10.80 Customs Excise &

Act demand/ Service Tax

penalty Appellate

Tribunal, Mumbai

11 The Company has no accumulated losses as per books of

accounts at the end of the financial year and it has not

incurred cash losses in the financial year under report and

the immediately preceding financial year.

12 The Company has not defaulted in repayment of its dues

to financial institutions and banks.

13 The Company has not granted any loans or advances on

the basis of security by way of pledge of shares,

debentures or other securities.

14 The provisions of any Special Statute applicable to Chit

Fund, Nidhi or Mutual benefit Fund / Societies are not

applicable to the Company.

15 In our opinion and according to the information and

explanations given to us, 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


16 According to the information and explanations given to

us, the company has not given any guarantee for loans

taken by others from banks and financial institutions.

17 According to the information and explanations given to

us, the term loans raised during the year have been

applied for the purpose for which they were raised.

18 According to the cash flow statement and other records

examined by us and the information and explanations

given to us, on an overall basis, funds raised on short term

basis have, prima facie, not been used during the year for

long term investment.

19 The Company has not made any preferential allotment of

shares to parties and companies covered in the Register

maintained under Section 301 of the Companies Act, 1956.

20 The Company has not issued any security debentures

during the year. Hence, provisions of Clause 4 (xix) of the

Companies (Auditor’s Report) Order, 2003 are not


21 We have verified that the end use of money raised by

public issues is as disclosed in the notes to the financial

statements.

22 During the course of our examination of the books and

records of the Company, carried out in accordance with

the generally accepted auditing principles in India, and

according to the information and explanation given to us,

we have neither come across any instances of material

fraud on or by the company, noticed or reported during

the year, nor have been informed of such case by the

management.

For A. Husein Noumanali & Co.

Chartered Accountants

(A. Husein Noumanali)

Place: Mumbai Proprietor

Date : October 24, 2007 Membership No. 14757

Profit and Loss Account For the year ended 31st March, 2007Balance Sheet As at 31st March, 2007


(Rupees in Lacs)

Schedules 31.03.2007 31.03.2006

I SOURCES OF FUNDS

Shareholders Funds

Share Capital I 2227.13 2227.13

Share Capital Suspense (Refer Note 2, Schedule XX) 370.37

Reserves & Surplus II 26868.60 23563.18

29466.10 25790.31

Deferred Tax Liabilities 1246.05 406.30

Loan Funds

Secured Loans III 8106.63 5808.68

Unsecured Loans IV 4664.98 2477.52

12771.61 8286.20

Total 43483.76 34482.81

II APPLICATION OF FUNDS

Fixed Assets V

Gross Block 22482.38 19897.71

Less: Depreciation 5113.95 4141.80

Net Block 17368.43 15755.91

Capital Work-in-progress 3303.29 1343.13

20671.72 17099.04

Investments VI 4301.59 7483.00

Current Assets, Loans and Advances

Inventories VII 18256.41 9566.55

Sundry Debtors VIII 4782.85 3213.24

Cash and Bank Balances IX 1388.45 1582.52

Loans and Advances X 7509.89 3794.43

31937.60 18156.74

Less: Current Liabilities and Provisions

Current Liabilities XI 11513.79 7527.74

Provisions XII 1913.36 728.23

13427.15 8255.97

Net Current Assets 18510.45 9900.77

Total 43483.76 34482.81

Statement of significant accounting policies and Notes to the Accounts XX

Schedules referred to above form an integral part of the Financial Statements

Per our report attached For and on Behalf of the Board For A. Husein Noumanali & Co. Chartered Accountants

A. Husein Noumanali B G Borkar Poonam Talwar Vivek Talwar Proprietor CFO & Company Secretary Wholetime Director Managing DirectorMembership No. 14757Mumbai, October 24, 2007

(Rupees in Lacs)

Schedules 31.03.2007 31.03.2006

SALES AND OTHER INCOME

Gross Sales XIII 47043.30 30636.21

Less : Excise Duty 1105.95 796.98

Net Sales 45937.35 29839.23

Other Income XIV 117.51 2.34

46054.86 29841.57

EXPENDITURE

Materials Consumed XV 23143.26 14442.82

Stores Consumed 416.74 295.21

Power and Fuel 2430.64 2193.51

Personnel XVI 1828.70 1470.12

Administrative Expenses XVII 1908.56 1349.01

Selling & Distribution Expenses XVIII 9236.99 5790.25

38964.89 25540.92

Profit Before Interest, Depreciation & Tax 7089.97 4300.65

Interest and Other Financial Charges XIX 804.93 1324.90

Depreciation V 1004.03 645.79

Profit Before Taxation 5281.01 2329.96

Provision for Current Tax 588.47 196.07

Provision for Fringe Benefit Tax 50.78 60.00

Provision for Deferred Tax 839.75 71.45

Profit After Taxation 3802.01 2002.44

Add : Balance brought forward from previous year 5146.54 3898.05

Amount Available For Appropriation 8948.55 5900.49

Less : Proposed Dividend 519.50 222.71

Less : Dividend Tax on Proposed Dividend 88.29 31.24

Less : Provision for Dividend payable on new shares, to be

allotted under Qualified Institutional Placement (QIP) 180.00 0.00

Less: Dividend Tax on above 30.59 0.00

Less: Transferred to General Reserve 500.00 500.00

Balance Carried To Balance Sheet 7630.17 5146.54

Earning Per Share - basic & diluted (face value per share Rs.10/- each) XX(18) 16.39 15.59





Schedule to the Accounts As at 31st March, 2007Schedule to the Accounts As at 31st March, 2007


(Rupees in Lacs)

31.03.2007 31.03.2006

Authorised50,000,000 Equity Shares of Rs. 10 each 5000.00 2750.00(Previous year - 27,500,000 Equity Shares of Rs. 10 each)

5000.00 2750.00Issued and Subscribed22,271,330 Equity Shares of Rs. 10 each fully paid-up 2227.13 2227.13

2227.13 2227.13

Notes:1 In respect of the above Equity Shares, 16 Equity Shares of the face value of Rs. 10/- each have been allotted as fully paid up

and issued to the shareholders of the erstwhile Mahalakshmi Tiles & Marble Co. Pvt. Ltd. and Cospar Impex Pvt. Ltd. onamalgamation with the Company without payment being received in cash.

2 On 11th March 2006, Company allotted 10,000,000 Equity shares of Rs. 10/- each at a premium of Rs. 158 per Share throughInitial Public Offer.

Capital Reserve 0.57 0.57Capital Redemption Reserve 965.00 965.00Share Premium Account Opening Balance 16916.23 2352.92Add: Additions 0.00 15800.00Less: Public Issue Expenses 0.00 1236.69

16916.23 16916.23General ReserveOpening Balance 534.84 34.84Add: Additions 500.00 500.00Add: On account of Merger 321.79

1356.63 534.84Profit & Loss Account Balance 7630.17 5146.54

26868.60 23563.18

Note : Premium on issue of Equity Shares represents premium of Rs. 158 per share on issue of 10,000,000 equity shares underan initial public offer.

(Rupees in Lacs)

Term LoansFrom Banks 5156.31 4804.78From Financial Institutions 0.00 121.29

Cash Credit from Banks 2824.00 762.73Hire Purchase Arrangements 126.32 119.88

8106.63 5808.68

Raw Materials 2205.15 1060.15Process Stock 363.60 236.95Finished Products 15079.61 7778.78Stores, Spares and Consumables 603.55 442.67Goods in Transit 4.50 48.00

18256.41 9566.55

VII INVENTORIES

Outstanding over six months Considered good 280.25 213.10Considered doubtful 128.63 103.27

408.88 316.37Less: Provision for Doubtful Debts 128.63 103.27

280.25 213.10Other debts considered good 4502.60 3000.14

4782.85 3213.24

VIII SUNDRY DEBTORS (Unsecured)

V FIXED ASSETS

I SHARE CAPITAL

II RESERVES AND SURPLUS

III SECURED LOANS

Short Term Loans From Banks 4599.99 2377.11Inter corporate Deposits 64.99 100.41

4664.98 2477.52

IV UNSECURED LOANS

VI INVESTMENTS (At Cost, Non-Trade, Current)

Fixed Deposit with Scheduled Bank (Refer Note No. 21) 3606.00 5503.00Liquidity Fund of Reliance Mutual Fund18,974,011.383 Units of Rs. 10 each of Reliance Mutual Fund sold during the year 0.00 1980.00(Previous year - 33,521,693.324 units purchased & 14,547,681.942 units sold during the year)(Market Value as on 31st March, 2007 - Rs. NIL, previous year - Rs. 1,984.32 Lacs)Equity Investments in 100% Subsidiary (Nitco Realties Pvt Ltd)200000 Equity Shares of Re. 1/- each fully paid up in NRPL 694.59 0.0010000 Preference Shares of Rs. 10/- each fully paid up in NRPL (Refer note below) 1.00 0.00

4301.59 7483.00

Note : Pursuant to the merger , the name of Motivation Properties Pvt. Ltd. has been changed to Nitco Realties Pvt. Ltd. Thecompany is in the process of filing necessary forms with the ROC.

GROSS BLOCK DEPRECIATION NET BLOCK

Description of Assets As at As at As at For the As at As at As at

1.04.2006 Additions Deductions 31.03.2007 1.04.2006 Period Deductions 31.03.2007 31.03.2007 31.03.2006

Freehold Land 1435.44 0.00 0.00 1435.44 0.00 0.00 0.00 0.00 1435.44 1435.44

Leasehold Land 145.88 0.00 0.00 145.88 0.00 0.00 0.00 0.00 145.88 145.88

Buildings 4590.67 70.72 0.00 4661.38 772.92 154.33 0.00 927.25 3734.13 3817.75

Office Equipment 592.16 141.51 0.00 733.67 156.91 69.33 0.00 226.23 507.43 435.25

Plant & Machinery 8309.54 2134.05 0.00 10443.60 2827.77 503.40 0.00 3331.17 7112.43 5481.77

Electrical Installations 452.34 7.08 0.00 459.42 149.25 21.52 0.00 170.77 288.65 303.09

Furniture & Fixtures 270.87 175.88 0.00 446.75 79.14 21.26 0.00 100.40 346.36 191.73

Motor Vehicles 420.28 135.94 80.52 475.70 123.46 39.86 31.88 131.45 344.25 296.81

Windmill 3680.54 0.00 0.00 3680.54 32.34 194.33 0.00 226.67 3453.86 3648.20

Total 19897.71 2665.19 80.52 22482.38 4141.80 1004.03 31.88 5113.95 17368.43 15755.91

Previous Year 13605.48 6299.57 7.34 19897.71 3498.81 645.78 2.79 4141.80 15755.91

Schedule to the Accounts For the year ended 31st March, 2007Schedule to the Accounts As at 31st March, 2007


(Rupees in Lacs)

31.03.2007 31.03.2006

Cash on Hand 93.54 74.89Balance with Scheduled Bank

Current Account 1006.25 1026.42Margin Money Account 288.66 481.21

1388.45 1582.52

(Rupees in Lacs)

31.03.2007 31.03.2006

Salaries, Wages, Bonus etc 1609.11 1241.14Contribution to Provident & Other Funds 105.05 110.95Welfare Expenses 114.54 118.03

1828.70 1470.12

Advances recoverable in cash or in kind or for value to be received 2373.06 2979.47Advance to Subsidiary Company 3078.75 0.00Balances with Customs & Excise 1066.30 397.22Income-tax payments 991.78 417.74

7509.89 3794.43

Sundry Creditors 9929.27 6401.13Dealer Deposit 239.84 213.39Other Liabilities 1164.97 761.98Interest accrued but not due on Loans 0.55 1.91Excise Duty 179.16 149.33

11513.79 7527.74

For Taxation 1094.98 474.28For Proposed Dividend 818.38 253.95

1913.36 728.23

Rent received 3.93 0.00Dividend received etc. 113.58 2.34

117.51 2.34

Increase/Decrease in StockOpening Stock

Finished Stock 7778.78 5782.66Process Stock 236.95 158.43

8015.73 5941.09Less: Closing Stock

Finished Stock 15079.61 7778.78Process Stock 363.60 236.95

15443.21 8015.73(Increase)/Decrease in Stock (A) (7427.48) (2074.64)Consumption of Raw MaterialsOpening Stock 1060.15 1052.90Add: Purchases 10005.74 4577.67

11065.89 5630.57Less: Closing Stock 2205.15 1060.15Total Raw Material Consumed (B) 8860.74 4570.42Purchase of Finished Goods for Sale (C) 21710.00 11947.04Total Materials Consumed (A+B+C) 23143.26 14442.82

IX CASH AND BANK BALANCES

X LOANS AND ADVANCES (Unsecured, Considered Good)

XI CURRENT LIABILITIES

XII PROVISIONS

XIV OTHER INCOME

XV MATERIAL CONSUMED

XVI PERSONNEL COST

Sales 47038.05 30635.17Labour Charges 5.25 1.04

47043.30 30636.21

XIII SALES

Schedule to the Accounts For the year ended 31st March, 2007

Rent Rates and Taxes 297.75 201.34Processing Charges 122.67 102.33Water Charges 46.14 34.10Postage and Telephone 144.29 113.67Printing and Stationery 44.98 31.81Insurance 104.05 45.63Legal and Professional Fees 123.67 96.84Travelling & Conveyance Expenses 340.22 328.44Audit Fees 15.76 12.00Hire Charges 327.64 170.47Security Charges 24.23 19.20Donations 3.48 0.70Repairs and Maintenance

Buildings 38.83 40.66Machinery 38.60 37.55Others 58.26 57.57

Miscellaneous Expenses 177.99 56.701908.56 1349.01

XVII ADMINISTRATIVE EXPENSES

Schedule to the AccountsSchedule to the Accounts For the year ended 31st March, 2007


(Rupees in Lacs)

31.03.2007 31.03.2006

Advertisement & Sales Promotion 1506.52 1289.82Sales Tax 4626.37 2791.24Freight Forwarding & Distribution & Other Exp 3072.42 1684.25Bad Debts 6.32 5.79Provision for Doubtful Debts 25.36 19.15

9236.99 5790.25

XVIII SELLING & DISTRIBUTION EXPENSES

XIX INTEREST AND OTHER FINANCIAL CHARGES

Term Loans 323.92 494.26Cash Credit 449.88 265.97Others 31.13 564.67

804.93 1324.90

XX STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS

1. Significant Accounting PoliciesA. Basis of Preparation of Financial Statements

i) The financial statements are prepared under the Historical Cost convention in accordance with generally applicableaccounting principles and relevant provisions of the Companies Act, 1956, as adopted consistently by the Company.The same are prepared on a going concern basis.

ii) The Company follows mercantile system of accounting and recognises significant items of income and expenditure onaccrual basis.

B. Fixed Assets and Depreciationi) Fixed assets are stated at cost / professional valuation less accumulated depreciation and impairment loss, if any.

ii) Depreciation on fixed assets is provided in the books of accounts on straight line method in accordance with and at therates and manner prescribed under Schedule XIV to the Companies Act, 1956.

iii) Modvat Credit availed on capital goods is accounted for by credit to respective assets, and no depreciation is availedthereon.

C. Inventoriesi. Stores and spare parts are stated at or below cost.

ii. Inventories other than stores and spare parts are valued “At cost or Net Realizable Value, whichever is lower”. Cost isgenerally determined on weighted average cost basis and whenever required, appropriate overheads are taken intoaccount. Net Realizable Value is the estimated selling price in the ordinary course of business less the estimated cost ofcompletion and the estimated costs necessary to make the sale.

iii. Cost of raw materials, stores, spare parts and consumables is net of applicable Modvat credit wherever applicable.

D. Impairment of AssetsThe carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based oninternal / external factors. An impairment loss will be recognized wherever the carrying amount of an asset exceeds itsestimated recoverable amount. The recoverable amount is greater of the asset’s net selling price and value in use. Inassessing the value in use, the estimated future cash flows are discounted to the present value using the weighted averagecost of capital. Previously recognized impairment loss is further provided or reversed depending on change incircumstances.

E. Expenditure during construction periodIn case of new projects and substantial expansion of existing factories, expenditure incurred, including trial productionexpenses net of revenue earned and attributable interest and financing costs, prior to commencement of commercialproduction are capitalized.

XX STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS (Contd.)

F. InvestmentsLong-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline, otherthan temporary. Current investments are stated at cost or fair value whichever is lower. Cost is determined on a weightedaverage basis.

G. Customs & Excise DutyCustoms Duty and Excise Duty have been accounted on the basis of both payments made in respect of goods cleared asalso provision made for goods lying in bonded warehouses.

H. SalesSales are inclusive of excise duty and sales tax as applicable.

I. Foreign Currency Transactionsi) All loans repayable in foreign currency and outstanding at the close of the year are expressed in Indian Currency at the

appropriate rates of exchange prevailing on the date of the Balance Sheet. Any increase or decrease in these liabilities,to the extent they relate to borrowings for financing fixed assets, is shown as an addition to or deduction from the costof the assets acquired out of such borrowings.

ii) Balances in the form of Current Assets and Current Liabilities in foreign currency, outstanding at the close of the year,are converted in Indian Currency at the appropriate rates of exchange prevailing on the date of the Balance Sheet.Resultant gain or loss is accounted as income or expense as the case may be.

iii) All other incomes or expenditure in foreign currency, are recorded at the rates of exchange prevailing on the date ofthe transaction. The difference between the rate prevailing on the date of the transaction and on the date of thesettlement is recognised as income or expense as the case may be.

iv) In respect of forward exchange contracts the difference between the forward rate and the exchange rate at theinception of the contract is recognised as income or expense over the period of the contract, except in respect of fixedassets where it is adjusted to the cost of the acquisition thereof.

v) Gains or losses on cancellation of forward exchange contracts are recognised as income or expense, except in respectof fixed assets where respective adjustment is made to the cost of acquisition thereof.

J. Employment / Retirement Benefitsi) Company’s contribution to Provident Fund, Superannuation Fund and other Funds for the year is accounted for on

accrual basis and charged to the Profit & Loss Account of the year.

ii) Liability for Leave encashment benefits has been provided on last salary drawn by employees.

iii) The Company has taken a Group Gratuity cum Life Insurance Policy with the Life Insurance Corporation of India for alleligible employees. The liability is actuarially assessed by LIC and accounted for on accrual basis.

K. TaxationCurrent TaxCurrent tax is provided on the basis of tax payable on estimated taxable income computed in accordance with theapplicable provisions of Income tax Act, 1961 after considering the benefits available under the said Act.

Deferred TaxesIn accordance with Accounting Standard 22 – Accounting for Taxes on Income, issued by the Institute of CharteredAccountants of India, the deferred tax for timing difference between the book and tax profits for the year is accounted forusing the tax rates and laws that have been enacted or substantially enacted as of the balance sheet date.

Deferred Tax Assets arising from temporary timing differences are recognized to the extent there is reasonable certaintythat the assets can be realized in future.

2. Merger (The Composite Scheme of Arrangement)I) A Composite Scheme of Arrangement under Section 391 to 394 read with Sections 78 and 100 to 103 of the Companies

Act, 1956 (the Scheme) between Nitco Tiles Limited (”NTL”), Nitco Realties Private Limited (“NRPL”), Shark Properties PrivateLimited (“SPPL”) and Motivation Properties Private Limited (“MPPL”) and their respective shareholders and creditors hasbeen sanctioned by Hon’ble High Courts of at Mumbai. Upon necessary filings with the Registrar of Companies, the schemehas become effective on October 2,2007. Consequently, in terms of the Scheme:a) The entire business and undertaking of SPPL including all assets and liabilities, as a going concern, will stand transferred

to and vested in NTL with effect from January 1, 2007 being the Appointed Date.

Schedule to the AccountsSchedule to the Accounts


b) SPPL stand dissolved without being wound up. Consequently,

II) In consideration of the merger, NTL will issue 10 (Ten) Equity Shares of Rs. 10 each/- fully paid up for every 27 (TwentySeven) Equity Shares of Re 1 each held in the SPPL on October 2,2007. Hence, NTL has issued 37,03,703 equity shares.

Pursuant to merger of SPPL into NTL, both NRPL and MPPL will be wholly owned subsidiaries of NTL. MPPL shall, without anyfurther application or deed, issue and allot to NTL or its heirs, executors, administrators or the successors-in-title, as the casemay be 10,000 fully paid up Preference Shares of Rs. 10 each for 10,000 equity shares of Rs. 10 each held by NTL in NRPL.

III) Accounting for Amalgamationa) With effect from the Appointed Date, all the assets including investments and liabilities appearing in the books of

accounts of SPPL and NRPL stands transferred to and vested in NTL or MPPL, as the case may be pursuant to the Schemeand have been recorded by NTL and MPPL at their book values.

b) 37,03,703 Equity Shares of Rs. 10/- each to be issued as fully paid up to the Equity Shareholders of Shark PropertiesPvt. Ltd. persuant to the scheme of Amalgamation for consideration other than cash. Pending allotment, the face valueof such shares has been shown as “Equity Share Suspense”.

c) Rs. 321.79 Lacs being difference between the value of the net assets of SPPL transferred to NTL pursuant to High CourtOrder at their book values and the value of shares allotted by NTL, under this Scheme, is credited to General ReserveAccount of NTL.

IV) All costs, charges, taxes including duties, levies and all other expenses, if any (save as expressly otherwise agreed), incurredin carrying out and implementing this Scheme and matters incidentals thereto, is being borne by NTL

3. Secured LoansA. Term Loans from Banks / Financial Institutions have been secured by a first charge on pari passu basis on all movable and

immovable fixed assets of the Ceramics Tiles factory at Alibaug. It has been additionally secured by an irrevocable andunconditional personal guarantee from Mr. Vivek Talwar, Managing Director of the Company.

B. Cash Credit from banks has been secured by hypothecation of the whole of the current assets of the Company includinginventories, book debts, consumable stores & spares (not relating to Plant & Machinery), bills receivable and all othermovables, both present and future wheresoever situated. It is further secured by a first charge on the Fixed Assets of thecompany’s mosaic tiles division at Thane and Second charge on the Fixed Assets of the ceramic tiles division at Alibaug andis also guaranteed by Mr. Vivek Talwar the Managing Director of the Company.

C. Hire Purchases have been secured by hypothecation of specific assets.

4. Unsecured LoansUnsecured Loans from Banks are secured by personal guarantee of Mr. Vivek Talwar, Managing Director.

5. The Company had imported certain equipments at concessional duty under various licenses pursuant to the Export PromotionCapital Goods Scheme. The export obligation under individual licenses have to be fulfilled within a period of 8 years from thedate of the licence or such extended period as may be allowed from time to time.

6. Excise Duty of Rs. 179.16 Lacs (Previous year Rs. 149.33 Lacs) has been provided on goods held in bond and consequentlyincluded in the valuation of inventories.

7. Balances of Sundry Debtors, Sundry Creditors, Loans and Advances, and Deposits are subject to confirmation. In the opinionof the Board, the Current Assets, Loans and Advances are of the value stated as realisable in the ordinary course of the business.Accounts receivable is net of advances. The provisions for depreciation and all the known liabilities are not in excess of theamount reasonably necessary.

8. Interest and other financial charges include loss / gain on exchange fluctuations on revenue account.

9. Provision for Taxationa) Current year charge

The Income Tax Provision of Rs. 588.47 Lacs (Previous year Rs. 196.07 Lacs) has been made pursuant to section 115JB ofthe Income Tax Act (MAT). No tax is payable on regular income for the year. Rs. 50.78 Lacs (Previous year Rs. 60.00 Lacs)has been provided towards fringe benefit tax.

b) Deferred TaxThe Company has been recognising in the financial statements the deferred tax assets / liabilities, in accordance with


Accounting Standard 22 “Accounting for Taxes on Income” issued by the Institute of Chartered Accountants of India.During the year, the Company has debited the Profit and Loss Account with Deferred Tax Liability of Rs. 839.75 Lacs(Previous year Rs. 71.45 Lacs). The position of Deferred Tax Assets and Liabilities during the year is as follows:


Tax effect of timing difference on account of depreciation of windmills has been ignored as the same is reversed duringthe tax holiday period available under Section 80IA of the Income Tax Act.

10.Sundry Creditors in Schedule VI to the accounts includes: -a) Rs. 17.08 Lacs (previous year Rs. 10.44 Lacs) due to Small Scale Industrial Undertakings.

b) Rs. 9912.19 Lacs (previous year Rs. 6390.69 Lacs) due to other creditors.The disclosure is based on the information available with the Company regarding the status of suppliers under theIndustries Development & Regulation Act, 1951. Names of small scale industrial undertakings to whom an amount ofRs. 1 lac or more was payable and outstanding for more than 30 days is as follows:-

i) Praveen Pulverizers. Rs. 17.08 Lacs

11.Previous year’s figures have been regrouped wherever necessary to make them comparable with those of the current year

Upto During the Carried 31.03.2006 Year as at

2006-07 31.03.2007

Deferred Tax Liabilities1) Difference between accounting and Tax Depreciation (Cumulative) 1574.00 32.44 1606.44Deferred Tax Assets1) Unabsorbed Losses and Depreciation 1050.58 (807.31) 243.272) Others 117.12 NIL 117.12Net Deferred Tax Liabilities 406.30 839.75 1246.05

(Rupees in Lacs)

12.Capacity, Production, Purchases, Turnover and Stock (Figures in Lacs)

Particulars 31.03.2007 31.03.2006

A. Licenced, Installed Capacity and Actual Production Mosaic TilesLicenced Capacity N.A. N.A.Installed Capacity (Sq.ft.) 90.88 90.88Actual Production (Sq.ft.) 48.29 49.82Ceramic Tiles / Pavers Licenced Capacity N.A. N.A.Installed Capacity (Sq.mts.) 63.12 40.32Actual Production (Sq.mts.) 42.17 32.86

Installed capacity of the plant has been estimated on the basis of standard size of Ceramic Tiles of 300 mm x 300 mm. Thecapacity of the plant gets reduced with production of tiles of higher sizes.

(Figures in Lacs)

Particulars 31.03.2007 31.03.2006Quantity Rs. Quantity Rs.

B. PurchasesVitrified (Sq.mts.) 71.36 20,932.84 38.41 11,945.12Mosaic Tiles / Pavers (Sq. ft. ) 0.36 6.95 0.08 1.92Others 0.00 770.21 0.00 0.00Total 21,710.00 11,947.04



XX STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS (Contd.) XX STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS (Contd.)

Particulars 31.03.2007 31.03.2006Rs. Lacs % Rs. Lacs %

G. Value of Raw Materials, Spares Componentsconsumed during the yearRaw MaterialsImported 4361.07 49.22% 1933.27 42.30%Indigenous 4499.67 50.78% 2637.15 57.70%Total 8860.74 100.00% 4570.42 100.00%Spares & ComponentsImported 68.36 16.40% 45.85 15.53%Indigenous 348.38 83.60% 249.36 84.47%Total 416.74 100.00% 295.21 100.00%

(Figures in Lacs)

Particulars 31.03.2007 31.03.2006Quantity Rs. Quantity Rs.

C. TurnoverCeramic Floor Tiles (Sq.mts.) 40.18 11,717.42 32.11 9,372.44Vitrified (Sq.mts.) 51.90 25,288.15 32.92 16,883.22Marble (Sq.ft.) 33.35 7,630.75 14.26 3,249.90Mosaic Tiles / Pavers (Sq.ft.) 50.91 1,621.71 47.11 1,130.65Others 785.27Total 47043.30 30,636.21

D. Opening StockCeramic Floor Tiles (Sq.mts.) 11.23 1,972.55 10.48 1,873.54Vitrified (Sq.mts.) 14.85 4,999.17 9.36 2,887.25Marble (Sq.ft.) 5.11 700.39 6.78 968.22Mosaic Tiles / Pavers (Sq.ft.) 7.94 106.67 5.15 53.65Total 7,778.78 5,782.66

E. Closing StockCeramic Floor Tiles (Sq.mts.) 13.23 2,546.19 11.23 1,972.55Vitrified (Sq.mts.) 34.32 11,186.57 14.85 4,999.17Marble (Sq.ft.) 8.67 1,204.64 5.11 700.39Mosaic Tiles / Pavers (Sq.ft.) 5.68 142.21 7.94 106.67Total 15079.61 7,778.78

F. Raw Materials Consumed:Body Material MT 0.80 1,740.17 0.63 1,145.24Glaze Material MT 0.05 1,467.44 0.04 1,104.66Rough marble Blocks / Slabs Sq.ft 36.91 4,375.39 12.59 1,571.68Packing Material 483.57 326.79Others 794.17 422.05Total 8860.74 4570.42

13.Earnings in Foreign Exchange (Exports) (Rupees in Lacs)

Particulars 31.03.2007 31.03.2006

FOB Value of Exports 837.09 72.44

31.03.2007 31.03.2006

Profit before tax as per profit & loss Account 5,281.01 2,329.96 Add :- Provision for depreciation as per profit & loss Account 1,004.03 645.79 Assets written off as per profit & loss account 0.00 3.83 Remuneration to Directors 65.02 53.95 Provision for Doubtful Debts 25.36 19.15

6,375.42 3,052.69 Less :- Depreciation under Section 350 of the Companies Act, 1956 (1,004.03) (645.79)Profit as per section 349 of the companies Act , 1956 5,371.39 2,406.90 1% commission payable to Managing Director 53.71 24.00

14.Value of imports calculated on CIF basis

Goods for Resale 14366.23 8603.01 Raw Material 3141.96 1038.85 Capital Goods 554.22 803.33 Spare Parts & Components 115.98 28.30 Total 18178.39 10473.49

17.Directors Remuneration

Salary 46.80 42.70 Contribution to PF and other Funds 9.54 7.63 Perquisites 3.16 2.33 Commission 53.71 24.00 Directors sitting fees 5.52 1.29

118.73 77.95

15. Expenditure in Foreign Currency

Interest 1.62 273.56 Foreign Travel etc. 126.65 178.08

128.27 451.64

16. Auditors Remuneration

Audit Fees 15.61 12.00Out of Pocket expenses 0.15 0.00

15.76 12.00

Computation of Net Profit in accordance with Section 349 of the Companies Act, 1956 for calculation of commission payableto Managing Director

18.Earnings per share - (EPS)

31.03.2007 31.03.2006

i. Profit computation for Earnings Per Share of Rs. 10 each 3802.01 2,002.44ii. Weighted average number of equity shares for Earnings Per Share 23197256 12846672iii. Earnings Per Share (Weighted Average) Basic & Diluted EPS. (Rs.) 16.39 15.59iv. Face Value per Share (Rs.) 10.00 10.00




20. Information on related party transactions as required by Accounting Standard – 18 for the year ended 31.03.2007The related parties with whom there were transactions during the year are listed below:

1. DirectorsMr.P.N.Talwar ChairmanMr.Vivek Talwar Managing DirectorMs.Poonam Talwar W/T DirectorMr.Dinesh Kanabar Independent DirectorMr. S.K. Bhardwaj Independent DirectorMr. Atul Sud Independent Director

2. Relatives of Directors : Ms.Anjali Talwar Ms.Savitri TalwarMr.Lovraj Talwar Ms.Sanjana TalwarMs.Dolly Talwar Mrs.Rajeshwari TalwarMr. Rohan Talwar

3. List of Related Parties over which the Directors have significant influence or control : Anandshree (Bombay) Holding Pvt.Ltd. Nitco Tiles & Marble Industries (A) Pvt.Ltd.Cosmos Realtors Pvt.Ltd. Norita Investments Pvt.Ltd.Delicious properties Pvt.Ltd. Opera Properties Pvt.Ltd.Eden Garden Builders Pvt.Ltd. Orchid Realtors Pvt.Ltd.Enjoy Builders Pvt.Ltd. Particle Boards India LimitedFerocity Properties Pvt.Ltd. Prakalp properties Pvt.Ltd.Lavender Properties Pvt.Ltd. Rangmandir Builders Pvt.Ltd.Merino Realtors Pvt.Ltd. Rhythm Real Estates Pvt.LtdNitco Construction Materials Pvt.Ltd. Strength Properties Pvt.Ltd.Nitco Consultants & Exports Pvt.Ltd. Ushakiran Builders Pvt.Ltd.Nitco Paints Pvt.Ltd Watco Engineering Co.Pvt.Ltd.Nitco Terrazzo Tiles Pvt.Ltd Watco Real Estate Pvt. Ltd.Glamorous Properties Pvt.Ltd. Watco Trading Pvt. Ltd.Motivation Properties Pvt. Ltd. Nitco Realties Pvt. Ltd.Watco Properties Pvt. Ltd.Mahalakshmi Tiles Corporation Nitco TilesMaharashtra Marble Co. Nitco Tiles Sales Corporation (Bombay)Nitco Exports Northern India Tiles (Sales) CorporationNitco Sales Corporation (Delhi) The Northern India Tiles Corporation (Delhi)


19.Contingent Liabilities

31.03.2007 31.03.2006

Guarantees / Counter Guartantees given by the company / by banks on behalf of company 215.91 383.07 Letter of credits opened for which the company is contingently liable 5,515.16 1,488.19 Export Bills discounted / purchased with the banks 99.46 161.01 Estimated amount of contracts remaining to be executed on capital account andnot provided for ( net of advances ) 391.95 231.95 Demands against the company not acknowledged as debts and not provided foragainst which the company is in appealExcise Duty 98.80 249.00 Custom Duty 398.30 908.00

Related Party Transactions FY 2007

Directors Company controlledby Directors/Relatives

Purchase Goods & services 0.00 43.46

Rent Paid 3.00 62.00Remuneration / Sitting Fees 5.52 0.00Interest on loans paid 3.69 5.49Rent Deposit 200.00 1300.00Advances made as on 31.03.2007 0.00 3078.75Loans taken outstanding as on 31.03.2007 0.00 44.65

21.Details of utilization of IPO proceeds are stated below

Utilisation as projected Actuals as onin the prospectus 31.03.2007

Expansion of Ceramic Tiles capacity 2091 2141Setting up of Wall Tile Unit 3691 8Installation of wind Mills 3786 3808Public Issue Expenses 1174 1237General Corporate Purposes 6058 6058

16800 13252

Note: Pending utilization, as on 31.03.2007 balance funds have been invested in Fixed Deposits with Banks.

22.Remittance in foreign currency on account of dividendThe Company has paid dividend in respect of shares held by Non Residents on repatriation basis. This inter-alia includesportfolio investment and direct investment, where the amount is also credited to Non Resident External Account (NRE A/c). Theexact amount of dividend remitted in foreign currency cannot be ascertained. The total amount remittable in this respect isgiven herein below:

Final Dividend 2006-07 2005-06

a) Number of Non Resident Shareholders 1 –b) Number of Equity Share held by them 825281 –c) (i) Amount of Dividend Paid (Gross) (Rs. in lacs) 8.25 –

(ii) Year to which dividend relates 2005-06

23.Segment Reporting for the year ended 31st March 2007The Management has identified that the company’s products, ceramic tiles, mosaic tiles, vitrified tiles and marble are products,which serve the flooring requirements of its customers. These products are interchangeable since the ultimate use of the saidproducts is the same. As such the company has only one segment, i.e., flooring products segment and as such no separatedetails on segment reporting required under AS17 (Segment Reporting) issued by the Institute of Chartered Accountants ofIndia, is being furnished.



(Rupees in Lacs)(Rupees in Lacs)

Cash Flow Statement For the year ended 31st March, 2007


(Rupees in Lacs)

31.03.2007 31.03.2006

A. CASH FLOW FROM OPERATING ACTIVITIESNet Profit as restated before Tax and Extraordinary items 5281.01 2329.96 Adjusted forDepreciation 1004.03 645.79 Provision for Bad and Doubtful Debts 25.36 19.15 (Profit)/Loss on sale of assets 24.41 3.83 (Profit)/Loss on sale of Investments ( Net ) (68.09) 0.00 Interest and Financial Charges (Net) 804.93 1324.90 Operating Profit before Working Capital Changes 7071.65 4323.64 Adjusted for changes in Working Capital :(Increase)/Decrease in Sundry Debtors (1594.97) 16.69 (Increase)/Decrease in Inventories (8689.86) (1854.29)(Increase)/Decrease in Other Receivables (62.67) (1127.83)Change in Current Liabilities 3986.05 3677.45 Cash Generated from Operations 710.20 5035.65 Income Taxes Paid (592.59) (181.79)Net Cash from Operating activities 117.61 4853.86

B. CASH FLOW FROM INVESTING ACTIVITYPurchase of Fixed Assets ( Net ) (4625.35) (6765.09)Sale of Fixed Assets 24.22 0.71 Sale/(purchase) of Investments 3942.66 (7483.00)Purchase of Investments in Subsidiary Company (1.00) 0.00 Net Cash from in Investing Activity (659.47) (14247.38)

C. CASH FLOW FROM FINANCING ACTIVITIESAdvance to Subsidiary Companies (3078.75) 0.00 Proceeds from / (Repayment) of Long Term / Short Term Borrowings, net 4485.42 (3708.83)Issue of shares at par 0.00 1000.00 Share premium on fresh issue received (net of Issue Expenses) 0.00 14563.31 Interest Paid (804.93) (1324.90)Pyt. Of Proposed Dividend & CDT (253.95) 0.00 Net Cash from / (used in) Financing Activities 347.79 10529.58 Net Increase / (Decrease) in Cash & Cash Equivalents (194.07) 1136.06 Opening Balance of Cash and Cash Equivalents 1582.52 446.46 Closing Balance of Cash and Cash Equivalents 1388.45 1582.52


A. Husein Noumanali B G Borkar Poonam Talwar Vivek TalwarProprietor CFO & Company Secretary Wholetime Director Managing DirectorMembership No. 14757Mumbai, October 24, 2007

Notes:1 The Cash Flow Statement has been prepared under the Indirect method as set out in Accounting Standard - 3(AS-3) on

Cash Flow Statement issued by The Institute of Chartered Accountants of India.

2 Cash and Cash Equivalent consists of Cash on hand Rs. 93.54 Lacs (Previous Year Rs. 74.89 Lacs), Balance in CurrentAccount - Rs. 1006.25 Lacs (Previous Year - Rs. 1026.42 Lacs) and Balance in Margin Money - Rs. 288.66 Lacs (PreviousYear - Rs. 481.21 Lacs).

Balance Sheet Abstract and Company’s Business Profile

For and on Behalf of the Board

B G Borkar Poonam Talwar Vivek TalwarMumbai, October 24, 2007 CFO & Company Secretary Wholetime Director Managing Director

Public Issue

Bonus Issue

3 1 0 3

Registration No.

Balance Sheet Date

I. Registration Details

II. Capital Raised during the year (Rs. in Lacs)

Total Liabilities (IncludingShareholders Funds)

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

2 0 0 7

Date Month Year

Private Placement

Paid-up Capital (including share application money)

Sources of Funds

Total Assets

Reserves & Surplus

IV. Performance of the Company (Rs. in Lacs)

Product Description Item Code No. (ITC Code)

V. Generic Names of Three Principal Products/Services of Company (As per monetary terms)

Net Fixed Assets (includingCapital Work-in-Progress)

Investments

Turnover (Sales and other income)

Profit/Loss before Tax

Total Expenditure

Application of Funds (Rs. in Lacs)

4 3 4 8 3 . 7 6

Glazed Ceramic, Vitrified Tiles

Cement Tiles of Mosaic

Marble Blocks, Slabs, Tiles

1 6 5 4 7

2 5 9 7 . 5 0

4 6 0 5 4 . 8 6 4 0 7 7 3 . 8 5

Earnings Per Share in Rs. Dividend Rate%1 6 . 3 9 2 0

2 0 6 7 1 . 7 2 4 3 0 1 . 5 9

Net Current Assets Misc. Expenditure1 8 5 1 0 . 4 5 N I L

Accumulated Losses N I L

N I L

Rights Issue N I L

State Code 1 1

N I L

N I L

4 3 4 8 3 . 7 6

2 6 8 6 8 . 6 0

Deferred Tax Liability Unsecured Loans1 2 4 6 . 0 5 4 6 6 4 . 9 8

Secured Loans 8 1 0 6 . 6 3

+ – Profit/ Loss after Tax 3 8 0 2 . 0 1+ –

Additional Information pursuant to the Provisions of Part IV of Schedule VI to the Companies Act, 1956

6 9 0 7

6 8 1 0

6 8 0 2

5 2 8 1 . 0 1


Statement pursuant to Section 212 of the Companies Act, 1956,Relating to subsidiary Companies Name of Nitco Realties Glamorous Particle Boards Opera PropertiesSubsidiary Company Pvt. Ltd. Properties Pvt. Ltd. India Ltd. Pvt. Ltd.

(MotivationProperties Pvt. Ltd)

1. Financial year of the subsidiary ended on 31/03/2007 31/03/2007 31/03/2007 31/03/2007 2. Shares of the subsidiary held by the

Company directly or through it subsidiarycompanies on March 31, 2007a. Number and face value of 200000 Equity 10000 Equity 214860 Equity 5000 Equity Shares

Equity Shares Shares of Re. 1 each Shares of Rs. 10 Shares of Rs. 100 of Rs. 100 eachfully paid up each fully paid up each fully paid up fully paid up

b. Extent of holding (%) 100 100 95.49 1003. Net aggregate amount of profit / (loss)

of the subsidiary for the financial year ofthe subsidiary so far as they concernmembers of the Companya. Dealt with in the accounts of the

Company for the year endedMarch 31, 2007 NIL NIL NIL NIL

b. Not dealt with in the accountsof the Company for the yearended March 31, 2007 1.51 NIL (0.57) NIL

4. Net aggregate amount of profits/ (Losses) for previous financialyears of the subsidiary, since itbecame a subsidiary so far as theyconcern members of the Company. a. Dealt with in the accounts of

the Company for the yearended March 31, 2007 NIL NIL NIL NIL

b. Not dealt with in the accounts of theCompany for the year ended March 31, 2007 NIL NIL NIL NIL

Name of Motivation Glamorous Opera ParticleSubsidiary Company Properties Properties Properties Board

Pvt. Ltd. Pvt. Ltd. Pvt. Ltd. India Ltd.

Paid up Capital 3.00 1.00 5.00 230.00 Reserves 697.30 0.00 0.00 1.25 Total Assets 4,052.49 93.86 251.28 874.48 Total Liabilities 3,352.19 92.86 246.28 643.24 Investments (except investment in subsidiary companies) 132.75 NIL NIL 0.10 Turnover 8.66 NIL NIL 68.00 Profit before taxation 2.28 NIL NIL 18.06 Provision for taxation 0.77 NIL NIL 3.66 Profit after taxation 1.51 NIL NIL 14.40 Proposed dividend NIL NIL NIL NIL

Information of Subsidiary Companies for the year ended March 31, 2007

We have audited the attached Consolidated Balance Sheet ofNitco Tiles Limited (the company) and its Subsidiaries as at 31st March 2007, and also the Consolidated Profit & lossAccount and consolidated cash flow statement for the yearended on that date annexed thereto. These financial statementare the responsibility of the Companies management and havebeen prepared by the management on the basis of separatefinancial statements and other financial information regardingcomponents. Our responsibility is to express an opinion onthese financial statement based on our audit.

We conducted our audit in accordance with the auditingstandards generally accepted in India. Those Standards requirethat we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in thefinancial statement. An audit also includes assessing theaccounting principles used and significant estimates made bythe Management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides areasonable basis for our opinion.

1. We did not audit the financial statement of the subsidiarycompanies whose, financial statements reflect total asset ofRs. 5272.11 Lacs. as at 31st March, 2007, the total revenueof Rs. 76.66 Lacs for the year then ended. These financialstatement and other financial information have beenaudited by other auditors whose report has been furnishedto us, and our opinion is based solely on report of otherauditors.

2. We report that the consolidated financial statement havebeen prepared by the company’s management in

accordance with the requirement of Accounting standard(AS) 21, consolidated financial statement and accountingstandard (AS) 23, Accounting for investment in Associatesin consolidated financial statement and issued by Instituteof Chartered Accountants of India.

3. Based on audit as aforesaid, and on consideration ofreports of other auditors on the separate financialstatement and on the other financial information of thecomponent and accounts approved by the Board ofDirectors and to the best of

our information and according to the information given tous, we are of the opinion that the attached consolidatedfinancial statement give true and fair view in conformitywith the accounting principles generally accepted in India:

i) in the case of the Consolidated Balance Sheet, of thestate of affair of the Group as at 31st march 2007;

ii) in the case of the Consolidated Profit and loss Account,of the Profit of the Group for the year ended on thatdate; and

iii) in the case of the Consolidated Cash Flow statement, ofthe state of the Cash Flows of the Group for the yearended on that date.

For A. Husein Noumanali & Co.Chartered Accountants

A. Husein NoumanaliPlace: Mumbai ProprietorDate : October 24, 2007 Membership No. 14757

To the Board ofNITCO TILES LIMITED

Consolidated Auditors Report


Consolidated Profit and Loss Account For the year ended March 31, 2007Consolidated Balance Sheet As at March 31, 2007


(Rupees in Lacs)

Schedules 31.03.2007

I SOURCES OF FUNDS

Shareholders Funds

Share Capital I 2227.13

Share Capital Suspense (Refer Note 3, Schedule XX) 370.37

Reserves & Surplus II 26872.74

29470.24

Minority Interest 14.81

Deferred Tax Liabilities 1246.05

Loan Funds

Secured Loans III 8106.63

Unsecured Loans IV 4716.31

12822.94

Total 43554.04

II APPLICATION OF FUNDS

Fixed Assets V

Gross Block 22924.97

Less: Depreciation 5113.95

Net Block 17811.02

Capital Work-in-progress 3303.29

21114.31

Investments VI 3738.85

Current Assets, Loans and Advances

Inventories VII 21578.60

Sundry Debtors VIII 4782.85

Cash and Bank Balances IX 1693.39

Loans and Advances X 4677.68

32732.52

Less: Current Liabilities and Provisions

Current Liabilities XI 12108.66

Provisions XII 1922.98

14031.64

Net Current Assets 18700.88

Total 43554.04





(Rupees in Lacs)

Schedules 31.03.2007

SALES AND OTHER INCOME

Gross Sales XIV 47043.30

Less: Excise Duty 1105.95

Net Sales 45937.35

Other Income XV 126.17

46063.52

EXPENDITURE

Materials XVI 23143.26

Stores 416.74

Power and Fuel 2430.64

Personnel XVII 1831.85

Administrative Expenses XVIII 1906.52

Selling & Distribution Expenses XIX 9237.07

38966.08

Profit Before Interest, Depreciation & Tax 7097.44

Interest and Other Financial Charges XX 811.33

Depreciation V 1004.03

Profit Before Taxation 5282.08

Provision for Current Tax 588.63

Provision for Fringe Benefit Tax 50.78

Provision for Deferred Tax 839.75

Profit after Taxation (Before Adjustment for Minority Interest) 3802.92

Add: Share of Loss transferred to Minority 0.03

Profit after Taxation (After Adjustment for Minority Interest) 3802.95

Add: Balance brought forward from previous year 5146.54

Amount available for appropriation 8949.49

Less: Proposed Dividend 519.50

Less: Dividend Tax on Proposed Dividend 88.29

Less: Provision for Dividend payable on new shares, to be allotted under Qualified Institutional Placement (QIP) 180.00

Less: Dividend Tax on above 30.59

Less: Transferred to General Reserve 500.00

Balance Carried to Balance Sheet 7631.11

Earning per share-Basic & Diluted (Face value per share Rs. 10/- each) XX(18) 16.39





Schedule to the Consolidated Accounts As at March 31, 2007Schedule to the Consolidated Accounts As at March 31, 2007


(Rupees in Lacs)

31.03.2007

Authorised50,000,000 Equity Shares of Rs. 10 each 5000.00

5000.00Issued and Subscribed22,271,330 Equity Shares of Rs.10 each fully paid-up 2227.13

2,227.13

Notes:1. In respect of the above Equity Shares, 16 Equity Shares of the face value of Rs.10/- each have been allotted as fully paid up

and issued to the shareholders of the erstwhile Mahalakshmi Tiles & Marble Co. Pvt. Ltd. and Cospar Impex Pvt. Ltd. onamalgamation with the Company without payment being received in cash.

2. On March 11, 2006, Company allotted 10,000,000 Equity shares of Rs.10/- each at a premium of Rs.158 per Share throughInitial Public Offer

Premium on issue of Shares represents premium of Rs. 150 per Share on issue of 10,000,000 Equity Shares under Initial Publicoffer.

Capital Reserve 0.57Capital Reserve on consolidation 3.20Capital Redemption Reserve 965.00Share Premium Account 16916.23 General ReserveOpening Balance 534.84Add: Additions 500.00Add: On account of Merger 321.79

1356.63Profit & Loss Account Balance 7631.11

26872.74

(Rupees in Lacs)

31.03.2007

Short Term Loans From Banks 4599.99Inter Corporate Deposits 116.32

4716.31

Term Loans From Banks 5156.31Cash Credit from Banks 2824.00Hire Purchase Arrangements 126.32

8106.63

Raw Materials 2205.15Process Stock 3685.79Finished Products 15079.61Stores, Spares and Consumables 603.55Goods in Transit 4.50

21578.60

VII INVENTORIES

V CONSOLIDATED FIXED ASSETS

IV UNSECURED LOANSI SHARE CAPITAL

II RESERVES AND SURPLUS

III SECURED LOANS

VI INVESTMENTS (At Cost, Non-Trade, Current)

Fixed Deposit with Scheduled Bank (Refer Note No. 21) 3606.00Investments in National Defence Certificates 0.10 Investment Property 132.33 4200 Equity Shares of Rs. 10/- each fully paid up in Saumya Buildcon Pvt. Ltd. 0.42

3738.85

GROSS BLOCK DEPRECIATION NET BLOCK

Description of Assets As at As at As at For the As at As at

1.04.2006 Additions Deductions 31.03.2007 1.04.2006 Period Deductions 31.03.2007 31.03.2007

Goodwill 0.00 422.89 0.00 422.89 0.00 0.00 0.00 0.00 422.89

Freehold Land 1435.44 0.00 0.00 1435.44 0.00 0.00 0.00 0.00 1435.44

Leasehold Land 165.58 0.00 0.00 165.58 0.00 0.00 0.00 0.00 165.58

Buildings 4590.67 70.72 0.00 4661.38 772.92 154.33 0.00 927.25 3734.13

Office Equipment 592.16 141.51 0.00 733.67 156.91 69.33 0.00 226.23 507.43

Plant & Machinery 8309.54 2134.05 0.00 10443.60 2827.77 503.40 0.00 3331.17 7112.43

Electrical Installations 452.34 7.08 0.00 459.42 149.25 21.52 0.00 170.77 288.65

Furniture & Fixtures 270.87 175.88 0.00 446.75 79.14 21.26 0.00 100.40 346.36

Motor Vehicles 420.28 135.94 80.52 475.70 123.46 39.86 31.88 131.45 344.25

Windmill 3680.54 0.00 0.00 3680.54 32.34 194.33 0.00 226.67 3453.86

Total 19917.41 3088.08 80.52 22924.97 4141.80 1004.03 31.88 5113.95 17811.02

Note: Balance as on 1.4.2006 includes opening balance of Nitco Tiles Ltd., Nitco Realties Pvt. Ltd., became subsidiary during the year.

Schedule to the Consolidated Accounts For the year ended March 31, 2007Schedule to the Consolidated Accounts As at March 31, 2007


(Rupees in Lacs)

31.03.2007

Outstanding over six months Considered good 280.25Considered doubtful 128.63

408.88Less: Provision for Doubtful Debts 128.63

280.25Other debts considered good 4502.60

4782.85

(Rupees in Lacs)

31.03.2007

Sales 47038.05Labour Charges 5.25

47043.30

Cash on Hand 93.54Balance with Scheduled Bank

Current Account 1311.19Margin Money Account 288.66

1693.39

Salaries, Wages, Bonus etc 1612.26Contribution to Provident & Other Funds 105.05Welfare Expenses 114.54

1831.85

Advances recoverable in cash or in kind or for value to be received 2619.60Balances with Customs & Excise 1066.30Income-tax payments 991.78

4677.68

Sundry Creditors 9962.62Dealer Deposit 239.84Other Liabilities 1726.49Interest accrued but not due on Loans 0.55Excise Duty 179.16

12108.66

For Taxation 1104.60For Proposed Dividend 818.38

1922.98

Rent received 12.59Dividend received etc. 113.58

126.17

Increase/Decrease in StockOpening Stock

Finished Stock 7778.78Process Stock 236.95

8015.73Less: Closing Stock

Finished Stock 15079.61Process Stock 363.60

15443.21(Increase)/Decrease in Stock (A) (7427.48)Consumption of Raw MaterialsOpening Stock 1060.15Add: Purchases 10005.74

11065.89Less: Closing Stock 2205.15Total Raw Material Consumed (B) 8860.74Purchase of Finished Goods for Sale (C) 21710.00Total Materials Consumed (A+B+C) 23143.26

VIII SUNDRY DEBTORS (Unsecured)

IX CASH AND BANK BALANCES

X LOANS AND ADVANCES (Unsecured, Considered Good)

XI CURRENT LIABILITIES

XII PROVISIONS

XIV SALES

XV OTHER INCOME

XVI MATERIAL CONSUMED

XVII PERSONNEL COST

1. Principles of ConsolidationThese accounts represent consolidated accounts of the Group and its majority owned subsidiaries as follows:

* Note - Pursuant to the merger of Nitco Realties Pvt. Ltd. with Motivation Properties Pvt. Ltd., the name of MotivationProperties Pvt. Ltd . has been changed to Nitco Realties Pvt. Ltd. The company is in the process of filing necessary forms withthe ROC.

For the purpose of this consolidation, jointly owned entities, where Nitco Tiles Ltd. or its subsidiaries own directly or indirectlymore than 50 percent of voting right of a company’s share capital, have been accounted for as subsidiaries.

The equity and net income attributable to minority shareholders’ interest are shown separately in the Balance Sheets and Profitand Loss Account, respectively.

2. Other significant accounting policiesThese are set out under “ Significant Accounting Polices” as given in the standalone Financial Statement of Nitco Tiles Limited

3. Merger (The Composite Scheme of Arrangement)I) A Composite Scheme of Arrangement under Section 391 to 394 read with Sections 78 and 100 to 103 of the Companies

Act, 1956 (the Scheme) between Nitco Tiles Limited (”NTL”), Nitco Realties Private Limited (“NRPL”), Shark Properties PrivateLimited (“SPPL”) and Motivation Properties Private Limited (“MPPL”) and their respective shareholders and creditors hasbeen sanctioned by Hon’ble High Court of Mumbai. Upon necessary filings with the Registrar of Companies, the schemehas become effective on October 2,2007. Consequently, in terms of the Scheme:

a) The entire business and undertaking of SPPL including all assets and liabilities, as a going concern, will stand transferredto and vested in NTL with effect from January 1, 2007 being the Appointed Date.

b) SPPL stand dissolved without being wound up. Consequently,

II) In consideration of the merger, NTL will issue 10 (Ten) Equity Shares of Rs. 10 each/- fully paid up for every 27 (TwentySeven) Equity Shares of Re 1 each held in the SPPL on October 2,2007. Hence, NTL has issued 37,03,703 equity shares.

Pursuant to merger of SPPL into NTL, both NRPL and MPPL will be wholly owned subsidiaries of NTL. MPPL shall, withoutany further application or deed, issue and allot to NTL or its heirs, executors, administrators or the successors-in-title, asthe case may be 10,000 fully paid up Preference Shares of Rs. 10 each for 10,000 equity shares of Rs. 10 each held by NTLin NRPL.

III) Accounting for Amalgamation

a) With effect from the Appointed Date, all the assets including investments and liabilities appearing in the books ofaccounts of SPPL and NRPL stands transferred to and vested in NTL or MPPL, as the case may be pursuant to the Schemeand have been recorded by NTL and MPPL at their book values.

b) 37,03,703 Equity Shares of Rs.10/- each to be issued as fully paid up to the Equity Shareholders of Shark Properties Pvt.Ltd. persuant to the scheme of Amalgamation for consideration other than cash. Pending allotment, the face value ofsuch shares has been shown as “Equity Share Suspense”.

Schedule to the Consolidated Accounts For the year ended March 31, 2007Schedule to the Consolidated Accounts For the year ended March 31, 2007


(Rupees in Lacs)

31.03.2007

Rent Rates and Taxes 296.54 Processing Charges 119.00 Water Charges 46.14 Postage and Telephone 144.29 Printing and Stationery 45.00 Insurance 104.33 Legal and Professional Fees 126.09 Travelling & Conveyance Expenses 340.24 Audit Fees 15.86 Hire Charges 327.64 Security Charges 24.23 Donations 3.48 Repairs and Maintenance

Buildings 38.83 Machinery 38.60 Others 58.26

Miscellaneous Expenses 177.99 1906.52

XVIII ADMINISTRATIVE EXPENSES

XIX SELLING & DISTRIBUTION EXPENSES

Advertisement & Sales Promotion 1506.60Sales Tax 4626.37Freight Forwarding & Distribution & Other Exp 3072.42Bad Debts 6.32Provision for Doubtful Debts 25.36

9237.07

XX INTEREST AND OTHER FINANCIAL CHARGES

Term Loans 323.92Cash Credit 449.88Others 37.53

811.33

XX STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS TO THE CONSOLIDATED ACCOUNTS.

Entity Country of Nature of Business Relationship ShareholdingIncorporation as at March

31, 2007Nitco Realities Pvt Ltd.(*) India Real Estate Development Subsidiary 100%Particle Boards India Ltd India Real Estate Development & Subsidiary 95.49%

Service providerGlamorous Properties Pvt Ltd India Real Estate Development Subsidiary 100%Opera Properties Pvt Ltd India Real Estate Development Subsidiary 100%



c) Rs. 321.79 Lacs being difference between the value of the net assets of SPPL transferred to NTL pursuant to High CourtOrder at their book values and the value of shares allotted by NTL, under this Scheme, is credited to General ReserveAccount of NTL.

IV) All costs, charges, taxes including duties, levies and all other expenses, if any (save as expressly otherwise agreed), incurredin carrying out and implementing this Scheme and matters incidentals thereto, is being borne by NTL.

4. Secured LoansA. Term Loans from Banks / Financial Institutions have been secured by a first charge on pari passu basis on all movable and

immovable fixed assets of the Ceramics Tiles factory at Alibaug. It has been additionally secured by an irrevocable andunconditional personal guarantee from Mr. Vivek Talwar, Managing Director of the Company.

B. Cash Credit from banks have been secured by hypothecation of the whole of the current assets of the Company includinginventories, book debts, consumable stores & spares (not relating to Plant & Machinery), bills receivable and all othermovables, both present and future wheresoever situated. It is further secured by a first charge on the Fixed Assets of thecompany’s mosaic tiles division at Thane and Second charge on the Fixed Assets of the ceramic tiles division at Alibaug andis also guaranteed by Mr. Vivek Talwar, Managing Director of the Company.

C. Hire Purchases have been secured by hypothecation of specific assets.

5. Unsecured LoansUnsecured Loans from Banks are secured by personal guarantee of Mr. Vivek Talwar, Managing Director.

6. The Company had imported certain equipments at concessional duty under various licenses pursuant to the Export PromotionCapital Goods Scheme. The export obligation under individual licenses have to be fulfilled within a period of 8 years from thedate of the licence or such extended period as may be allowed from time to time.

7. Excise Duty of Rs.179.16 Lacs (Previous year Rs.149.33 Lacs) has been provided on goods held in bond and consequentlyincluded in the valuation of inventories.

8. Balances of Sundry Debtors, Sundry Creditors, Loans and Advances, and Deposits are subject to confirmation. In the opinionof the Board, the Current Assets, Loans and Advances are of the value stated as realisable in the ordinary course of the business.Accounts receivable is net of advances. The provisions for depreciation and all the known liabilities are not in excess of theamount reasonably necessary.

9. Interest and other financial charges include loss / gain on exchange fluctuations on revenue account.

10.Deferred Tax

The Company has been recognising in the financial statements the deferred tax assets / liabilities, in accordance withAccounting Standard 22 “Accounting for Taxes on Income” issued by the Institute of Chartered Accountants of India. Duringthe year, the Company has debited the Profit and Loss Account with Deferred Tax Liability of Rs. 839.75 Lacs (Previous yearRs.71.45 Lacs). The position of Deferred Tax Assets and Liabilities during the year is as follows:

XX STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS TO THE CONSOLIDATED ACCOUNTS. (Contd.)

Tax effect of timing difference on account of depreciation of windmills has been ignored as the same is reversed during thetax holiday period available under Section 80IA of the Income Tax Act.

11.Sundry Creditors in Schedule VI to the accounts includes: a) Rs.17.08 Lacs (previous year Rs.10.44 Lacs) due to Small Scale Industrial Undertakings.

b) Rs. 9945.54 Lacs (previous year Rs. 6390.69 Lacs ) due to other creditors.The disclosure is based on the information available with the Company regarding the status of suppliers under theIndustries Development & Regulation Act, 1951. Names of small scale industrial undertakings to whom an amount of Rs. 1 lac or more was payable and outstanding for more than 30 days is as follows:-

i) Praveen Pulverizers. Rs.17.08 Lacs

12.Capacity, Production, Purchases, Turnover & Stock

Installed capacity of the plant has been estimated on the basis of standard size of Ceramic Tiles of 300 mm x 300 mm. Thecapacity of the plant gets reduced with production of tiles of higher sizes.


Upto During the Year Carried as at31.03.2006 2006-07 31.03.2007

Deferred Tax Liabilities1) Difference between accounting and

Tax Depreciation (Cumulative) 1574.00 32.44 1606.44Deferred Tax Assets1. Unabsorbed Losses and Depreciation 1050.58 (807.31) 243.272. Others 117.12 NIL 117.12Net Deferred Tax Liabilities 406.30 839.75 1246.05

(Rupees in Lacs)

Particulars 31.03.2007A. Licenced, Installed Capacity and Actual Production

Mosaic TilesLicenced Capacity N.A.Installed Capacity (Sq.ft.) 90.88Actual Production (Sq.ft.) 48.29Ceramic Tiles / PaversLicenced Capacity N.A.Installed Capacity (Sq.mts.) 63.12Actual Production (Sq.mts.) 42.17

(Figures in Lacs)

Particulars 31.03.2007Quantity Rs.

B. PurchasesVitrified (Sq.mts.) 71.36 20,932.84Mosaic Tiles / Pavers ( Sq. ft. ) 0.36 6.95Others 0.00 770.21Total 21,710.00

(Figures in Lacs)

C. TurnoverCeramic Floor Tiles (Sq.mts.) 40.18 11,717.42Vitrified (Sq.mts.) 51.90 25,288.15Marble (Sq.ft.) 33.35 7,630.75Mosaic Tiles / Pavers (Sq.ft.) 50.91 1,621.71Others 785.27Total 47043.30





Particulars 31.03.2007Quantity Rs.

D. Opening StockCeramic Floor Tiles (Sq.mts.) 11.23 1,972.55Vitrified (Sq.mts.) 14.85 4,999.17Marble (Sq.ft.) 5.11 700.39Mosaic Tiles / Pavers (Sq.ft.) 7.94 106.67Total 7,778.78

(Figures in Lacs)

(Rupees in Lacs)

E. Closing StockCeramic Floor Tiles (Sq.mts.) 13.23 2,546.19Vitrified (Sq.mts.) 34.32 11,186.57Marble (Sq.ft.) 8.67 1,204.64Mosaic Tiles / Pavers (Sq.ft.) 5.68 142.21Total 15079.61

F. Raw Materials ConsumedBody Material MT 0.80 1,740.17Glaze Material MT 0.05 1,467.44Rough marble Blocks / Slabs Sq.ft 36.91 4,375.39Packing Material 483.57Others 794.17Total 8860.74

Particulars 31.03.2007Rs. Lacs %

G. Value of Raw Materials, Spares Components consumed during the year Raw MaterialsImported 4361.07 49.22%Indigenous 4499.67 50.78%Total 8860.74 100.00%Spares & ComponentsImported 68.36 16.40%Indigenous 348.38 83.60%Total 416.74 100.00%

Particulars 31.03.2007FOB Value of Exports 837.09

13.Earnings in Foreign Exchange (Exports)

(Rupees in Lacs)

Particulars 31.03.2007Goods for Resale 14366.23 Raw Material 3141.96 Capital Goods 554.22 Spare Parts & Components 115.98 Total 18178.40

14.Value of imports calculated on CIF basis:

Interest 1.62 Foreign Travel etc. 126.65

128.27

15.Expenditure in Foreign Currency

Audit Fees 15.71Out of Pocket expenses 0.15

15.86

16.Auditors Remuneration

Salary 46.80 Contribution to PF and other Funds 9.54 Perquisites 3.16 Commission 53.71 Directors sitting fees 5.52

118.73

17.Directors Remuneration

Profit before tax as per profit & loss Account 5,281.01 Add :- Provision for depreciation as per profit & loss Account 1,004.03 Remuneration to Directors 65.02 Provision for Doubtful Debts 25.36

6,375.42Less :- Depreciation under Section 350 of the Companies Act, 1956 (1,004.03)Profit as per section 349 of the companies Act, 1956 5,371.39 1% commission payable to Managing Director 53.71

Computation of Net Profit in accordance with Section 349 of the Companies Act, 1956 for calculation of commission payableto Managing Director

Note: As no commission is payable to subsidiaries, the aforesaid computation of commission to MD is related to Nitco TilesLimited.

Particulars 31.03.2007i. Profit computation for Earnings Per Share of Rs. 10 each 3802.95ii. Weighted average number of equity shares for Earnings Per Share 23197256iii. Earnings Per Share (Weighted Average)

Basic & Diluted EPS (Rs.) 16.39iv. Face Value per Share (Rs.) 10.00

18.Earnings per share - (EPS)




(Rupees in Lacs)

Particulars 31.03.2007Guarantees / Counter Guartantees given by the company / by banks on behalf of company 215.91 Letter of credits opened for which the company is contingently liable 5,515.16Export Bills discounted / purchased with the banks 99.46 Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) 391.95 Demands against the company not acknowledged as debts and not provided for against which the company is in appeal– Excise Duty 98.80– Custom Duty 398.30

19.Contingent Liabilities


(Rupees in Lacs)

Company controlledDirectors by Directors / Relatives

Purchase Goods & services 0.00 0.46Rent Paid 3.00 38.00Remuneration / Sitting Fees 5.52 0.00Interest on loans paid 3.69 5.49Rent Deposit 200.00 700.00Loans taken outstanding as on 31.03.2007 0.00 44.65

Related party Transaction of FY 2006-07

20. Information on related party transactions as required by Accounting Standard – 18 for the year ended 31.03.2007

The related parties with whom there were transactions during the year are listed below:

1. Directors

Mr. P. N. Talwar Chairman

Mr. Vivek Talwar Managing Director

Ms. Poonam Talwar W/T Director

Mr. Dinesh Kanabar Independent Director

Mr. S. K. Bhardwaj Independent Director

Mr. Atul Sud Independent Director

2. Relatives of Directors

Ms. Anjali Talwar Ms. Savitri Talwar

Mr. Lovraj Talwar Ms. Sanjana Talwar

Ms. Dolly Talwar Mrs. Rajeshwari Talwar

Mr. Rohan Talwar

3. List of Related Parties over which the Directors have significant influence or control

Anandshree (Bombay) Holding Pvt. Ltd. Nitco Tiles & Marble Industries (A) Pvt. Ltd.

Cosmos Realtors Pvt. Ltd. Norita Investments Pvt. Ltd.

Delicious properties Pvt. Ltd. Orchid Realtors Pvt. Ltd.

Eden Garden Builders Pvt. Ltd. Prakalp Properties Pvt. Ltd.

Enjoy Builders Pvt. Ltd. Rangmandir Builders Pvt. Ltd.

Ferocity Properties Pvt. Ltd. Rhythm Real Estates Pvt. Ltd.

Lavender Properties Pvt. Ltd. Strength Properties Pvt. Ltd.

Merino Realtors Pvt. Ltd. Ushakiran Builders Pvt. Ltd.

Nitco Construction Materials Pvt. Ltd. Watco Engineering Co. Pvt. Ltd.

Nitco Consultants & Exports Pvt. Ltd. Watco Properties Pvt. Ltd.

Nitco Paints Pvt. Ltd. Watco Real Estate Pvt. Ltd.

Nitco Terrazzo Tiles Pvt. Ltd. Watco Trading Pvt. Ltd.

Mahalakshmi Tiles Corporation Nitco Tiles

Maharashtra Marble Co. Nitco Tiles Sales Corporation (Bombay)

Nitco Exports Northern India Tiles (Sales) Corporation

Nitco Sales Corporation (Delhi) The Northern India Tiles Corporation (Delhi)

Utilisation as projected Actuals as onin the prospectus 31.03.2007

Expansion of Ceramic Tiles capacity 2091 2141Setting up of Wall Tile Unit 3691 8Installation of wind Mills 3786 3808Public Issue Expenses 1174 1237General Corporate Purposes 6058 6058

16800 13252

21.Details of utilization of IPO proceeds are stated below

Note: Pending utilization, as on 31.03.2007 balance funds have been invested in Fixed Deposits with Banks.

22.Since the consolidated financial statements are required to be presented for the first time, comparative figures for the previousyear are not given.



24.Segment Reporting for the year ended March 31, 2007The Management has identified that the company’s products, ceramic tiles, mosaic tiles, vitrified tiles and marble are products,which serve the flooring requirements of its customers. These products are interchangeable since the ultimate use of the saidproducts is the same. As such the company has only one segment, i.e., flooring products segment and as such no separatedetails on segment reporting required under AS17 (Segment Reporting) issued by the Institute of Chartered Accountants ofIndia, is being furnished.

23.Remittance in foreign currency on account of dividendThe Company has paid dividend in respect of shares held by Non Residents on repatriation basis. This inter-alia includesportfolio investment and direct investment, where the amount is also credited to Non Resident External Account (NRE A/c). Theexact amount of dividend remitted in foreign currency cannot be ascertained. The total amount remittable in this respect isgiven herein below:

Final Dividend 2006-07 2005-06

a) Number of Non Resident Shareholders 1 –b) Number of Equity Share held by them 825281 –c) (i) Amount of Dividend Paid (Gross) (Rs. in Lacs) 8.25 –

(ii) Year to which dividend relates 2005-06

Consolidated Cash Flow Statements For the year ended March 31, 2007


(Rupees in Lacs)

31.03.2007A. CASH FLOW FROM OPERATING ACTIVITIES

Net Profit as restated before Tax and Extraordinary items 5,282.08 Adjusted forDepreciation 1004.03 Provision for Bad and Doubtful Debts 25.36 (Profit)/Loss on sale of assets 24.41 (Profit)/Loss on sale of Investments (Net) (68.09)Interest and Financial Charges (Net) 811.33 Operating Profit before Working Capital Changes 7079.12 Adjusted for changes in Working Capital:(Increase)/Decrease in Sundry Debtors (1594.97)(Increase)/Decrease in Inventories (12012.05)(Increase)/Decrease in Other Receivables (309.21)Change in Current Liabilities 4580.92 Cash Generated from / (used in) Operations (2256.19)Income Taxes Paid (583.13)Net Cash from / (used in) Operating activities (2839.32)

B. CASH FLOW FROM INVESTING ACTIVITYPurchase of Fixed Assets (Net) (5067.93)Sale of Fixed Assets 24.22Sale/(purchase) of Investments 4507.59 Net Cash from / (used in) Investing Activity (536.12)

C. CASH FLOW FROM FINANCING ACTIVITIESMinority Interest 14.84 Proceeds from / (Repayment) of Long Term / Short Term Borrowings, net 4536.75 Interest Paid (811.33)Pyt. Of Proposed Dividend & CDT (253.95)Net Cash from / (used in) Financing Activities 3486.31 Net Increase / (Decrease) in Cash & Cash Equivalents 110.87 Opening Balance of Cash and Cash Equivalents 1582.52 Closing Balance of Cash and Cash Equivalents 1693.39




Notes:1. The Cash Flow Statement has been prepared under the Indirect method as set out in Accounting Standard - 3 (AS-3) on

Cash Flow Statement issued by The Institute of Chartered Accountants of India.

2. Cash and Cash Equivalent consists of Cash on hand Rs. 93.54 Lacs, Balance in Current Account Rs. 1311.19 Lacs andBalance in Margin Money - Rs. 288.66 Lacs

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