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the wayforwardBalrampur Chini Mills Limited

Annual Report 2006-07

Balrampur Chini Mills Limitedwww.chini.com

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A PRODUCT

[email protected]

Forward-looking statement Statements in this report that describe the company’s objectives, projections, estimates, expectations or predictions of

the future may be ‘forward-looking statements’ within the meaning of the applicable securities laws and regulations.

The company cautions that such statements involve risks and uncertainty and that actual results could differ

materially from those expressed or implied. Important factors that could cause differences include raw materials’ cost

or availability, cyclical demand and pricing in the company’s principal markets, changes in government regulations,

economic developments within the countries in which the company conducts business, and other factors relating to

the company’s operations, such as litigation, labour negotiations and fiscal regimes.

ContentsChallenging environment 2 The way forward 4 MD’s review 15 Five year financial summary 18 Financial

ratios 20 Shareholder value management 22 Report of the Board of Directors 24 Corporate governance report

36 Management’s discussion and analysis 50 Auditor’s report 61 Balance Sheet 64 Profit and Loss Account

65 Cash Flow Statement 66 Schedules 67 Consolidated Accounts 87 Subsidiary Accounts 107

Chairman EmeritusKamal Nayan Saraogi

Board of DirectorsSuresh Neotia, Chairman

Vivek Saraogi, Managing Director

Meenakshi Saraogi, Joint Managing

Director

Sudhir Jalan, Director

R.K. Choudhury, Director

S.B. Budhiraja, Director

M.M. Mukherjee, Director

Naresh Chandra, Director

Kedar Nath Ranasaria, Whole-time Director

Kishor Shah, Director cum Chief Financial

Officer

Ram Nayak Misra, Whole-time Director

Secretary S.K. Agrawala

Board CommitteesAudit Committee:S.B. Budhiraja, Chairman

Naresh Chandra, Vice Chairman

Suresh Neotia

Sudhir Jalan

M.M. Mukherjee

Remuneration Committee:Naresh Chandra, Chairman

Suresh Neotia

R.K. Choudhury

Sudhir Jalan

Share Transfer Committee:Vivek Saraogi

Meenakshi Saraogi

Suresh Neotia

Sudhir Jalan

R.K. Choudhury

Shareholders’ / Investors’Grievance Committee:Sudhir Jalan, Chairman

Naresh Chandra

Vivek Saraogi

Solicitors and advocates Khaitan & Co.

1B, Old Post Office Street,

Kolkata 700 001

Bankers State Bank of India

Auditors G.P. Agrawal & Co.

Chartered Accountants

Registered office FMC Fortuna, 2nd Floor,

234/3A, A.J.C. Bose Road,

Kolkata 700 020

Sugar factories

Unit 1: Balrampur (Including Distillery, Bio-compost

and Co-generation units)

Dist: Balrampur, Uttar Pradesh

Unit 2: Babhnan (Including Distillery, Bio-compost and

Co-generation units)

Dist: Gonda, Uttar Pradesh

Unit 3: Tulsipur Dist: Balrampur, Uttar Pradesh

Unit 4: Haidergarh(Including Co-generation unit)

Dist: Barabanki, Uttar Pradesh

Unit 5: Akbarpur(Including Co-generation unit)

Dist: Ambedkar Nagar, Uttar Pradesh

Unit 6: Rauzagaon(Including Co-generation unit)


Unit 7: Mankapur(Including Distillery, Bio-compost and



Unit 8: Kumbhi (Including


Dist: Lakhimpur Kheri, Uttar Pradesh

Unit 9: Gularia (Including



(under implementation).

Corporate information

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Balrampur Chini Mills Limited (BCML).

One of the largestsugar manufacturers in India’s privatesector.The Company has nine mills spread acrosseastern and central Uttar Pradesh with anaggregate sugarcane crushing capacity of73,000 tonnes per day (TCD).

Over the years, the Company has de-risked itsbusiness through diversification into distillery(320 KLPD), power cogeneration (181 MW-saleable power 126 MW) and bio-compostmanufacture.

The Company also acquired a majority stake inIndo Gulf Industries, engaged in sugar,molasses and bagasse.

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2Balrampur Chini Mills Limited

During the sugar season 2006-07, the fortunes of the Indian sugar industryweakened. This transpired on account of a growing sugar surplus on the onehand and weaker realisations following unfavourable government policies onthe other.

The country’s consumption was estimated at 20-21 million tonnes; total production increased sharply

from 19.2 million tonnes in 2005-06 to 28.3 million tonnes. The result was a surplus of around

8 million tonnes at the end of the sugar season 2006-07.

Sugar realisations in the state of Uttar Pradesh, accounting for 30% of the total sugar

produced in the country, declined to Rs.13 per kg. Even as sugar prices declined, raw material costs for

UP-based sugar companies increased to Rs.125 per quintal (as per SAP) amounting to Rs.13.71 per kg.

Result: non-recovery of even operating costs for companies like Balrampur Chini.

As a result of this mismatch between the realisation of sugar and price of raw material, Balrampur Chini

reported an operating loss of Rs. 52.26 crore from its sugar segment, the first time ever in its history.

In the midst of this challenging environment, the integrated nature of the business model as well as scale

of economies enabled the Company to arrest the full downside of the circumstances.

Challenging environment

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Our capacities

Units Sugar crushing Distillery Cogeneration Bio-compost

capacity (in TCD) (in KLPD) (in MW) (in MT)

Balrampur 12,000 160 24.55 30,000

Babhnan 10,000 60 3.00 18,000

Tulsipur 7,000 – – –

Haidergarh 5,000 – 23.25 –

Akbarpur 7,500 – 18.00 –

Rauzagaon 7,500 – 26.75* –

Mankapur 8,000 100 34.00 10,000

Kumbhi 8,000 – 20.00 –

Gularia 8,000* – 31.30* –

Total 73,000 320 180.85 58,000

* Project under implementation and will commence operation beginning season 2007-08.

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Building block Sugar is more than just a business; it is a way of life for a large part of India.

The industry is the second largest agro-based sector in India; area under sugarcane

accounts for 2.2% of India’s total cropped area.

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The sugar industry is a large employment generator,

providing employment to over two million skilled and semi-

skilled workers in addition to those involved in ancillary

activities at 570 factories across the country. Around 45

million sugarcane farmers, their dependents and a large mass

of agricultural labourers are involved in sugarcane

cultivation, harvesting and ancillary activities, constituting

no less than 7.5% of India’s rural population.

The sugar industry acquires a rural produce, pays on time,

remunerates an increasing value per unit of purchase, invests

in larger capacities and catalyses other supporting

businesses. In turn, this development has resulted in the

creation of schools, colleges, healthcare centres and hospitals

for the benefit of India’s rural populace.

Over the years, a number of companies extended from the

singular production of sugar to downstream businesses like

distilleries, organic chemical plants, paper and board

factories as well as cogeneration units. Besides, the sugar

industry generated its own restorable biomass, used it as a

resource without depending on fossil fuels and made a

significant contribution to the economy.

From this holistic perspective, the sugar industry can be

considered as a building block of economic progress in the

regions of its presence.

Corporate pictureBalrampur’s evolution from a fledgling sugar mill into the

second largest sugar manufacturer in India has

correspondingly translated into considerable regional

growth, reflected in the improvement of roads, power,

irrigation, health and education support, influencing in turn

the lifestyles of farmers, employees and citizens.

By encouraging the planting of cane, thousands of farmers

within the Company’s command areas have graduated from

labourers into land-owners. The Company’s emphasis helped

introduce superior quality seeds leading to an enhanced

yield. The Company’s awareness programmes educated

farmers on the improved application of knowledge,

including crop rotation and irrigation.

The Company catalysed regional economic growth through

the generation of renewable power, green fuel and bio-

compost manure. In 2006-07, Balrampur generated

6,768.06 lac units of power; 4,926.17 lac units were

marketed the state electricity grid. The Company produced

10,177.78 KL of ethanol, which was sold to oil companies

for onward blending with petrol. It manufactured 25,460

MT of organic manure. Besides, the Company paid

Rs. 87.10 crore in various taxes viz. excise duty and income

tax during the year under review.

The way forwardDespite this significant local, regional and national

contribution, India’s sugar industry is presently

challenged by industry cyclicality, high raw material support

prices, inadequate working capital, partial control and an

uncertain export programme. A combination of these is

threatening not just the industry in a direct way, but the

entire social structure supported by the industry in an

indirect manner.

If the Indian sugar industry is completely de-regulated and

provided with a level playing field, it can achieve steady

production growth, feed a growing nation, deepen its retail

presence, diversify into power generation and ethanol

production and enhance its international exposure.

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ParityEven as India’s sugar industry is positioned to play a

growing role in the economy, it continues to be

shackled by ever-increasing raw material prices that

are completely decoupled from end-product

realisations. In short, the raw material prices that are

required to be paid by the industry are completely

insensitive to existing industry realities.

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This market place-industry mismatch was most visible in

Uttar Pradesh where sugar companies were compelled to

pay farmers as per the State Advised Prices (SAP) that were

higher than the Statutory Minimum Prices (SMP) set by the

Central Government.

The anomaly: while Uttar Pradesh-based Balrampur Chini

Mills was compelled to pay Rs. 125 to procure one quintal

of cane, its counterpart in Maharashtra was required to

correspondingly pay only Rs. 90, leading to significant

variations in input costs across regions and a considerable

inequity in the implementation of a government directive.

The impact• Volatile sugar prices worked against sugar manufacturers

during the downturn.

• Sugar manufacturers suffered an accumulation of arrears

payable to farmers. For instance, Uttar Pradesh mills

purchased sugarcane worth Rs. 11,000 crore in 2006-07 but

could only remunerate to the extent of Rs. 9,500 crore.

• The decoupling induced cyclicality, destabilising revenues.

Corporate pictureThrough its presence in Uttar Pradesh, Balrampur Chini was

also adversely affected. The Company suffered on account of

rising cane prices and declining sugar realisations. The

result: the Company’s sugar segment reported an operating

loss of Rs. 52.26 crore for 2006-07, the first such instance in

its existence.

As it turned out, even as sugar realisations declined to

Rs. 14.56 per kg, raw material costs at Rs. 13.71 per kg

were almost 94.17% of realisations, considerably higher than

that in the past. With a delta of only 0.85 paise per kg, the

Company was unable to recover its operating costs.

As a result, a Company that prides on timely payments to

farmers delayed payments by almost five months for the first

time in its history, entirely on account of unreasonable

business conditions created by government ruling. Its

inability to recover basic costs resulted in arrears of Rs. 125

crore, again for the first time in the Company’s existence.

The way forwardAt this challenging juncture, what is required is inclusive

growth where the farmer shares the industry upturn and

downturn with the sugar company. The government can

couple the two through a linkage between cane and sugar

realisations; it can modify the sugarcane pricing mechanism

to evolve a formula based on region-specific variations. A

uniform national cane pricing policy can supersede the State

Advised Price, removing regional disparities.

In an industry, where raw material accounts for 70% of the

total cost, linking raw material cost to sugar realisations

could lead to a lower-cost sugar economy on the one hand

and equip its manufacturers better to handle industry

downturns. In the long run, this sensitive structure promises

to protect the long-term viability of both, enhancing

industry sustainability.


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SecurityIn India, ethanol is derived from molasses, a sugar

industry by-product. This diversification helps generate

additional revenue and provides stability especially

during industry downturns when it helps protect

margins. By virtue of being a green fuel, ethanol also

promotes the case for a clean environment and

counters global warming.

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Encouraging the use of ethanol is especially relevant for

India where 70% of oil requirements are met through

imports. At a time when crude oil prices are around US$100

per barrel, the country could benefit attractively from the

enhanced blending of petrol with ethanol.

Interestingly, even as the government has mandated 5%

ethanol blending with petrol across the country, ethanol

offtake is below this ratio (at ~2%). States like Tamil Nadu

and West Bengal do not follow the blending programme

due to high state levies. So despite being economically

lucrative, oil companies are purchasing ethanol to the extent

that their requirement warrants. What is required is free

inter-state ethanol movement so that there is parity in duties

across the country. This revision is of critical importance at a

time when the government has increased the blending ratio

to a mandatory 10% across all Indian states from October

2008. At the currently mandated blending levels of 5%,

India can easily meet its ethanol demand of 550-600 mn

litres per annum.

Corporate pictureBalrampur, an integrated sugar manufacturer, has

progressively contributed towards the country’s energy

security. The Company’s three distilleries possess the

capacity to manufacture 320 KLPD of ethanol. In 2006-07,

the Company manufactured 10177.78 kl of ethanol,

fetching an average realisation of Rs. 21.88 per litre. As a

result, the Company’s distilleries generated revenues of

Rs. 134.99 crore, accounting for almost 9.11% of its total

revenues in 2006-07. Correspondingly, the distilleries

reported an operating profit of Rs. 56.57 crore, helping

offset the loss reported by the sugar segment.

During the year under review, the Company strengthened

its ethanol business by commissioning its 100 KLPD

capacity distillery at Mankapur.

This expansion is considered opportune; while 5% blending

is currently optional for individual states, the government

has recommended a mandatory 10% ethanol blending by

October 2008 (exceptions being Jammu and Kashmir,

north-eastern Indian states, Andaman and Nicobar Islands

and Lakshadweep). The government has also proposed that

sugar companies be allowed to manufacture ethanol directly

from sugarcane as against the erstwhile practice of doing so

through molasses (in line with the Brazilian model where

mills are allowed to manufacture ethanol directly from

sugarcane).

The way forwardThese two proposals will represent a significantly positive

step forward. They will result in the diversion of substantial

cane away from sugar manufacture during a glut,

strengthening sugar prices. If the new proposal is accepted,

then sugar production may not report an immediate decline

over the long term; there could be greater stability owing to

a flexibility in adjusting sugar production in line with the

demand-supply situation for sugar and ethanol.

The government has also agreed to recommend a uniform

ethanol purchase price of Rs. 21.50 per litre ex-factory across

the country for three years. The reality is that even if the

direct route of ethanol manufacture is implemented, it will

not leave adequate margins for North Indian sugar mills on

account of higher cane prices required to be paid by them

compared to sugar mills in South and West India. To make

it uniformly remunerative for sugar companies across the

country to switch to the direct route, what will also be

required is a lower and uniform raw material price

throughout India linked to end-product realisations.

It is also suggested that the import duty on industrial

ethanol be reduced from 7.5% to 5%, to prevent a shortage

of industrial alcohol arising out of a diversion of raw material

to ethanol.

The industry’s dynamics will be strengthened if the

government permits ethanol export. If export realisations for

ethanol are better than domestic realisations, sugar mills can

reduce sugar production and divert cane towards ethanol

production, strengthening margins. At a time when robust

oil prices are being predicted, the outlook for enhanced

ethanol demand appears positive.


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PotentialApart from catering to the largest sugar-consuming population in the world,

the Indian sugar industry is likely to emerge as a significant provider of

electricity through co-generation from bagasse, a primary byproduct of

sugarcane. India being a power-deficit country, cogeneration can represent an

important initiative to bridge the country’s energy gap and meet its

green-energy goals from renewable and sustainable biomass.

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As per KPMG, India’s installed power capacity is 128 giga

watts (GW); requirement is expected to increase to 306 GW

by 2016-17. Against that, the current bagasse-based

exportable power is estimated at 847 MW, which could

increase to 9,700 MW by 2017, addressing almost 6% of

the country’s additional power requirement. The sector

would also be in a position to generate 48 million carbon

credits through co-generation.

Bagasse and other renewable biomass can play a significant

role in substituting fossil fuels in power generation, leading

to a reduction in greenhouse gases. Prospective bagasse-fired

cogeneration projects can enjoy an additional revenue stream

by monetising carbon emission reductions (or carbon credits)

that they generate. Bagasse co-generation CDM projects

hold attractive potential in India with a strongly growing

electricity demand and a carbon-intense baseline.

Captive power generation also empowers mills to rationalise

power costs on the one hand, and enhance power availability

and asset utilisation on the other. It can also strengthen the

decentralised generation of power, leading to a greater

availability for rural electrification through co-generation.

Corporate pictureOver the years, Balrampur has become totally independent

of the state grid for its power requirement. On the contrary,

the Company’s power division markets surplus power to the

state electricity grid, generating assured revenues.

Balrampur strengthened this segment of the business

through the commissioning of three new power plants –

34 MW at Mankapur, 20 MW at Kumbhi and 3 MW at

Babhnan.

During the year under review, Balrampur generated

6,768.06 lac units of power and marketed 4,926.17 lac units

to the grid at an average rate of Rs. 2.94 per unit. The

Company’s revenues from the power division increased by

44.62% over the previous year to Rs. 145.97 crore,

accounting for 9.85% of the total revenues. The profit

derived from the power division continued to be attractive

due to tax incentives. Operating profits from the segment

increased by 48.11% from Rs. 75.26 crore in 2005-06 to

Rs. 111.47 crore in 2006-07.

Balrampur is now engaged in commissioning a 31.30 MW

cogeneration plant at Gularia and 26.75 MW at

Rauzagaon, beginning season 2007-08. The new units,

when commissioned, will not only strengthen the

topline but also protect margins, especially during

sectoral downturns.

The way forwardAlthough the Ministry of New and Renewable Energy has

provided subsidy to grid-interactive power generation based

on renewable energy, co-generation promotion requires

policy consistency for the business to attract large

investments. For instance, the State Electricity Boards

should be directed to adhere to the tariffs set by the

government rather than arrive at them arbitrarily. The

infrastructure for the evacuation of power to the grids needs

to be strengthened to eliminate voltage and frequency

fluctuations.

Besides, the government needs to encourage investments in

co-generation, the full requirement of which is estimated at

Rs. 37,000 crore (in 2007) based on the industry potential

(Source: KPMG report). In 2017, this estimate is expected

to increase by Rs. 16,000 crore if the country’s cogen

potential is to be fully realised.


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SupportThe domestic sugar industry received time-

critical government support in the form of

incentives and export-import policies to

protect it from cyclicality.

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IncentivesOver the years, the government announced various

incentives to support the sugar industry during sectoral

downturns, protecting the interest of farmers.

For instance,

• The government created a five million tonne buffer stock

to help reduce carrying costs and ease the working capital

requirements of sugar mills.

• The Central Government announced a subsidy on sugar

exports.

• Various state governments provided additional subsidies.

For instance, Maharashtra government announced an

additional export subsidy in addition to a transport subsidy

of Rs. 2 per tonne per km for cane crushed after 160 days of

crushing and also abolished the purchase tax. Similar

subsides were announced by the Madhya Pradesh,

Karnataka and Andhra Pradesh Government.

Even as these incentives help mills tide over a short-term

cash crunch, they do not represent a long-term solution. It is

only the alignment of sugarcane prices to sugar realisations

that will correct the industry imbalance, providing a long-

term profitability solution.

For the industry to benefit from these incentives, it is critical

that they should be respected and persisted with,

independent of political changes. For instance, the

discontinuation of the Sugar Promotion Policy, 2004,

entailed capital and operational subsides as well as local tax

exemptions to companies making investments of

Rs. 3.5 billion and above in fresh sugar capacities in Uttar

Pradesh – affecting the long-term plans of UP companies

and aggravating industry uncertainty.

ExportsInternational trade in sugar is of strategic importance as it

can help India maintain stability within the domestic

market, despite cyclicality in production. For instance, if

there is a sugar surplus, exports could help alleviate the

surfeit in the domestic market. India’s acceptability as a

credible exporter will provide it with additional markets to

divert surplus production. Similarly, in the case of deficit,

raw sugar imports could enhance availability.

The Central Government provided an export incentive of

Rs. 1,350 per mt for mills located in coastal regions and

Rs. 1,450 per mt for mills in non-coastal regions.

Additionally, the Maharashtra government announced an

additional export subsidy of Rs. 1,000 per mt for exports up

to one million tonnes.

India is the fourth most competitive sugar producer in the

world (after Australia, Brazil and Thailand). India's cost of

sugar production is a fourth of that in Europe. It is

possitioned to export to major Indian Ocean markets due to

its freight competitiveness over key competitors (Brazil and

Thailand). India is expected to export white and raw sugar

to the extent of 40 lakh tonnes during 2007-08. New global

markets have emerged following the withdrawal of EU

subsidy, which has made export from EU countries

uncompetitive.

India will need to leverage this opportunity through

productivity improvements and the alignment of cane and

sugar prices in the domestic market. India's competitiveness

can also be increased through a strengthening of the export

infrastructure like rates and port draft. The existing cost

structure of the Indian industry is uncompetitive for exports,

making it imperative for the government to offer WTO-

compliant subsidies to make exports viable, should there be

a large sugar surplus.

However, due to the increasing emergence of destination

refineries, key markets are importing a greater share of raw

sugar where India's competitiveness is relatively limited

(India's competitiveness is higher in white sugar markets).

Going forward, India will need to build a capability to

produce raw sugar and refined sugar of international quality

standard to leverage a growing export opportunity.


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Policy environmentThe Indian sugar industry needs a policy environment that protects the

interest of the farmers and consumers while enhancing mill viability.

Currently, while the end product realisations of sugar is deregulated,

the prices of sugarcane continue to be regulated. Besides, the

government also regulates the monthly release mechanism,

determination of levy sugar and assigning of command areas.

The absence of a level-playing field may lead to select growth in areas,

but at the expense of others. The result could be cyclicality and low

profitability, reducing investment attractiveness and the social

objectives for farmers, millers and consumers.

The need of the hour is a complete deregulation in raw material prices,

reflected in the following:

• The monthly release mechanism that determines the amount of stock

that each company can sell in the market in a month should be

removed. A strategic stock can be created for maintaining the sugar

price in a sustainable band. This will ensure that cane price can be

realised from the sugar price after accounting for all costs and taxes.

• A levy sugar policy that requires the mills to earmark 10% of their

production for sale to the government at levy prices (usually lower than

free sale price) needs to be discontinued. Instead, the government

should purchase sugar for PDS requirements from the free market.

• The government-mandated command area stipulation should be

respected with reviews during exceptional instances.


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Mr. Vivek Saraogi on the sugar industry and the Company’s prospects

“Today, the entire viability of the industry isin serious question – and not because of thebasic economics of the business but because ofthe arbitrary fixation of cane price.”

MD’s review

How challenging was the year underreview for your industry in general andyour Company in particular?I would like to be direct about this: the financial year

2006-07 was the worst ever year for the Uttar Pradesh sugar

industry and for Balrampur Chini that I have seen in my

two-decade career with the Company. It was also the first

time that we reported a loss despite our integrated model.

What was the reason for this dismalperformance?It would be important to state that the reason for the

dismal performance of the agro-based sugar industry was

entirely man-made; the climate and the soil had nothing to

do with it.

It would be simplistic to state that for any industry to be

profitable, it must be paid a reasonable remuneration for

converting its raw material into a finished product. When it

comes to the sugar industry, where the cost of the raw

material is regulated, much of this intervention is done by

the state government machinery, ensuring that the supplier

of raw material – the farmer – gets an higher remuneration

for his produce.

We have for the last number of years complained that raw

material prices in Uttar Pradesh were higher than the rest of

the country, resulting in a muted profitability for the

millers. This request – or you can call it appeal – fell on deaf

ears. However, what transpired during 2006-07 was

completely unprecedented; even as the country was sitting

on a large sugar surplus that caused realisations to be

depressed, the raw material prices were maintained at a

really prohibitive level of around Rs. 125 per quintal.

The result was that all the patient initiatives that we had

invested in strengthening our business model down the years

went down the tube in a flash. At one point during the

financial year under review, the Company was not even

recovering its raw material cost, forget the conversion cost,

the interest burden and overheads.

By this yardstick it must have been auniformly challenging year for the rest ofthe industry.This is precisely what was not. Even though the rest of the

sugar industry did find the scenario a bit trying, it was

nowhere near the circumstances experienced by millers in

Uttar Pradesh for a number of reasons:


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• While governments in other cane-growing states were

sympathetic towards the sugar manufacturers for the various

reasons already enunciated, Uttar Pradesh witnessed a

totally different scenario. For instance, other state

governments agreed to peg the cane price payable by the

mills at SMP, protecting the interests of millers for the

moment and the interests of the farmers for the long-term.

In Uttar Pradesh, there was no corresponding respite; the

high cane prices were maintained with complete disregard

to industry viability. The result was that companies like

Balrampur – which had always prided on paying farmers

on time, come hell or high water – were now compelled

to default on their commitments to farmers for a period

of time.

• In Maharashtra, the government announced an export

subsidy of Rs. 1,000 per mt for exports up to one million

tonnes, a transport subsidy of Rs. 2 per tonne per km for

late crushing (i.e. cane crushed after 160 days of crushing)

and abolishment of the purchase tax. Similar support

schemes were announced by states like Madhya Pradesh,

Karnataka and Andhra Pradesh to protect industry

profitability. However, it has pained us deeply that there has

been no corresponding response from the Uttar Pradesh

government. To cut the wound deeper, the UP government

issued recovery certificates to the sugar millers, empowering

it to seize and liquidate our movable and immovable assets

so that cane arrears could be paid. The upshot was that for

the first time in our history, even Balrampur was issued a

recovery certificate.

The farmers must have benefited becauseof high cane prices.This is an important point. The fact that farmers would have

benefited at the industry’s expense would be most plausible.

But this is far from reality for a simple reason: because the

industry could not remunerate farmers for their raw

material, the loss was the farmer’s. In fact, I must speak

about the widespread disenchantment across the fields of

East and West Uttar Pradesh where farmers have not been

able to recover their dues, nor fund capital expenditure and

have not been able to enhance their standard of living. So

interestingly, by pegging unrealistically high cane prices, we

have a lose-lose situation among farmers and millers in Uttar

Pradesh.

Balrampur had embarked on a number ofexpansions in the last few years. Wheredoes it leave the Company at such anuncertain industry inflection? Permit me to provide a macro perspective. For the last few

months, much of our corporate management time was

increasingly allocated to numerous litigations in the pursuit

of justice. I will also say that as a corporate we are rattled,

dismayed and despondent: if this is how one of the most

globally competitive sugar milling communities are going to

be treated by its state government, where is the confidence

to invest in asset building? Where is the optimism to take a

forward-looking view of things? And if I may be permitted

to go one step ahead, where is the balance sheet strength to

encourage my banker to provide adequate funds in a

working capital-intensive business?

The result is that today, the entire viability of the industry,

which supports not just millions of farmers but millions of

other dependants as well, is in serious question – and not

because of the basic economics of the business but because of

the arbitrary fixation of cane prices.

What is required to enhance investorconfidence to ensure sustainable growthof the industry?Two things: a uniform cane pricing policy where cane is

procured by the industry at scientifically determined SMP

rates, protecting the interests of all stakeholders; the need

for a transparent linkage between sugar realisations on the


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one hand, and sugarcane prices on the other. This in my

mind is the only way – I must stress this – the long-term

sustainability of the sugar industry can be ensured.

I have a few serious points to make here: India has

globalised across a number of industries, the sugar industry

being possibly the only glaring exception. Why? Who does

it benefit? Who are we trying to protect? I have already

explained that the mills will lose money; I have already

explained that the farmer is losing his income and if there is

a sharp decline in sugar production over the next few years,

the consumer will stand to lose as well. I am going one step

further; if cane prices are unrealistically and unsustainably

maintained at high levels, you will inevitably endanger the

food security in the state and region.

How does cane affect the food security ofthe region?When a state government arbitrarily increases sugarcane

prices, the sugarcane growers earn disproportionate returns

on their produce vis–a-vis other crops. As a result, more

farmers shift their production from alternative food crops to

sugarcane, leading to a disproportionately higher production

of sugar and a relative shortage of alternative crops. So, even

as the consumers are perceived to benefit on account of low

sugar prices, their food budget could remain unaffected

because of high prices of the alternative foods. As a result,

tinkering disproportionately with one crop could destabilise

a basket of crops within a region, affecting consumer

interests. It is ironical that the state government failed to

acknowledge something so evidently straight-forward with

the result that UP is now an economic island in a world that

is by and large aligned with free-market practices.

How is the Central Governmentcorrecting the situation?To be fair, the Central Government has done a fair amount

under its ambit in the circumstances to provide relief to

millers. It announced an export subsidy, created a five-

million tonne buffer and announced interest-free loans for

the excise paid on SMP basis. This is an interesting

admission by the Central Government that the sugar

industry is bleeding and needs to be protected from the

relatively low SMP rates; so you can imagine our condition

in UP, where we are procuring raw material at rates

considerably higher (more than 30%).

How is the Company tiding over thecrisis?While I estimate that India’s sugar consumption will rise to

22.50 million tonnes, I believe that this sugar season’s

production will not cross the levels seen in 2006-07. This,

coupled with some exports, makes me optimistic that there

will not be a sizeable increase in the country’s sugar

inventory next year. However, cane pricing continues to

remain a concern.

To tide over the immediate crisis we are raising long-term

funds to the tune of Rs. 159 crore through the preferential

allotment of 73,00,000 equity shares at Rs. 92 per share to

the promoters and 1,00,00,000 warrants convertible in the

next 18 months at the same price.

Meanwhile, we are continuing to commission the factories

that we promised as we believe in the long-term economics

of our integrated business model. So when the industry

reverses out of the trough, we will have our capacities on

stream, resulting in a sharp improvement in performance

over the coming years.


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*18-month period; year ended on 30th September, 2006


Five year operational summaryCane crushed (in lac tonnes)

Unit 2002-03 2003-04 2004-05 2005-06* 2006-07

Balrampur 17.53 23.79 15.34 22.78 21.50

Babhnan 13.32 17.24 10.41 15.65 16.60

Tulsipur 7.72 11.57 7.71 8.74 12.06

Haidergarh – 3.38 5.18 6.53 7.90

Akbarpur – – – 7.56 11.37

Rauzagaoan – – – 8.85 9.75

Mankapur – – – – 12.75

Kumbhi – – – – 0.38

Total 38.57 55.98 38.64 70.11 92.31

Sugar production (in lac tonnes)

Unit 2002-03 2003-04 2004-05 2005-06* 2006-07

Balrampur 1.82 2.30 1.57 2.34 2.10

Babhnan 1.42 1.71 1.09 1.62 1.64

Tulsipur 0.76 1.08 0.73 0.87 1.14

Haidergarh – 0.33 0.53 0.65 0.78

Akbarpur – – – 0.87 1.15

Rauzagaoan – – – 0.91 1.00

Mankapur – – – – 1.31

Kumbhi – – – – 0.03

Total 4.00 5.42 3.92 7.26 9.15

Alcohol production (in kilo litre)

2002-03 2003-04 2004-05 2005-06* 2006-07

26,611 30,900 37,735 57,279 65,292

Power production (in lac units)

2002-03 2003-04 2004-05 2005-06* 2006-07

32.33 1,820.71 2,080.81 4,398.50 6,768.06

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Value-added statement (Rs. in crore)

Five year financial summary

Parameters 2002-03 2003-04 2004-05 2005-06* 2006-07

Income from production 573.58 809.07 828.05 1,617.19 1,605.30

Add: Financial income 2.78 5.98 2.94 6.81 10.23

Corporate output 576.36 815.05 830.99 1,624.00 1,615.54

Less: Cost of raw materials 395.04 549.45 471.76 940.47 1,280.99

Less: Other manufacturing expenses 80.01 101.08 104.15 150.44 159.98

Equals gross value-added 101.31 164.53 255.08 533.09 174.57

Less: Depreciation 21.28 30.23 37.26 67.09 80.22

Equals net value-added 80.03 134.30 217.82 466.00 94.35

Allocation of net value-added

To personnel 28.59 35.14 34.98 66.60 75.29

To taxes 7.91 18.88 38.85 73.30 6.48

To creditors (via interest) 14.02 19.80 18.93 34.51 54.42

To investors (via dividend) 11.77 21.40 42.34 99.04 Nil

To the Company (retained earnings) 17.74 39.08 82.72 192.55 (41.84)

Financials (Rs. in crore)

Parameters 2002-03 2003-04 2004-05 2005-06* 2006-07

Sales 667.58 802.29 929.61 1989.77 1476.32

Non-manufacturing income 2.19 5.98 2.94 6.81 10.23

Total income (incl. stock adjustment) 678.30 917.97 970.21 1715.35 1700.14

Raw materials 395.04 549.45 471.76 940.47 1280.99

Excise duty 102.56 102.91 116.88 91.35 84.61

Gross profit 180.70 265.61 381.57 683.53 334.54

Overheads and all other expenditure 108.45 136.22 139.14 217.04 235.27

PBDIT 72.25 129.39 242.43 466.49 99.27

Interest 13.55 19.80 18.93 34.51 54.42

PBDT 58.70 109.59 223.50 431.99 44.85

Depreciation 21.28 30.23 37.26 67.09 80.22

Profit before tax and extraordinary items 37.42 79.36 186.24 364.89 (35.37)

Extraordinary items – – 22.33 – –

Pre-tax profit 37.42 79.36 163.91 364.89 (35.37)

Tax 7.91 18.88 38.85 73.30 6.48

Post-tax profit 29.51 60.48 125.06 291.59 (41.84)

Equity capital 18.97 18.97 23.18 24.82 24.82

Reserves (excluding revaluation reserves) 217.34 256.36 468.60 880.83 839.17

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Financial ratios



Key financial ratios

Financial year 2002-03 2003-04 2004-05 2005-06* 2006-07

Raw material costs/ Total turnover (%) 59.17 68.49 50.75 47.27 86.77

Overheads/ Total turnover (%) 16.03 16.74 14.32 10.62 15.72

PBDIT/ Total turnover (%) 10.82 16.13 23.68 23.44 6.72

Interest/ Total turnover (%) 2.03 2.47 2.04 1.73 3.69

Interest cover (times) 5.35 6.55 11.66 13.52 1.83

PBDT/ Total turnover (%) 8.79 13.66 21.64 21.71 3.03

Net profit/ Total turnover (%) 4.42 7.54 13.45 14.65 (2.83)

Cash profit/ Total turnover (%) 7.61 11.31 17.46 18.03 2.60

Balance sheet ratios

Financial year 2002-03 2003-04 2004-05 2005-06* 2006-07

Debt-equity ratio 0.57 0.78 0.41 0.39 1.10

Inventory turnover (days) 151 178 167 25 90

Current ratio 1.27 1.51 1.49 1.10 1.02

Quick ratio 0.31 0.31 0.38 0.79 0.51

Asset turnover [Total revenue/ total assets] 0.88 0.78 0.79 1.11 0.56

Capital output ratio (Turnover/ Average

capital employed) (%) 132.41 116.72 110.26 171.13 82.12

Growth ratios

Financial year 2002-03 2003-04 2004-05 2005-06* 2006-07

Growth in turnover (%) 21.61 20.18 15.87 114.04 (25.80)

Growth in PBDIT (%) (22.60) 79.09 70.11 111.94 (78.72)

Growth in PAT (%) (37.66) 104.96 106.76 133.15 N.A.

Growth in cash profit (%) (24.57) 78.61 78.95 120.96 (89.30)

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02-03 03-04 04-05 05-06* 06-07

10.82

16.13

23.68 23.44

6.72

PBDIT/ Total turnover (%) Cash profit/ Total turnover (%)

Debt-equity ratio • Book value per share (Rs.)

• The face value of equity shares has been reduced from Rs. 10 to Re. 1 with effect from 31st March, 2005

Per share data

Financial year 2002-03 2003-04 2004-05 2005-06* 2006-07

EPS (Rs.) 15.55 31.57 6.16 12.19 (1.69)

CEPS (Rs.) 26.77 47.34 7.99 15.00 1.55

Dividend (Rs.) 5.50 10.00 1.60 3.50 Nil

Book value (Rs.) 124.00 145.00 21.15 36.31 34.69

Dividend payout % 39.89 35.39 33.85 33.96 N.A.

Price / earnings 7.13 9.63 11.27 8.32 N.A.

Net indebtedness (Rs.) 71.01 113.34 8.63 14.28 38.32

The face value of equity shares has been reduced from Rs. 10 to Re. 1 with effect from 31st March, 2005

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Shareholdervalue managementMarket capitalisationBalrampur’s market capitalisation declined from Rs. 2,516.29 crore as on 30th September 2006 to Rs. 1,874.81 crore as on

30th September, 2007.

(Rs. in crore)

31 March 2003 31 March 2004 31 March 2005# 30 Sept 2006* 30 Sept 2007

Market capitalisation 210.50 576.66 1,608.71 2,516.29 1,874.81

* 18-month period; market capitalisation as on 30th September, 2006

# Sub-division of shares from Rs. 10 each to Re 1 per share

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Total shareholders’ return (TSR)Total shareholders’ return indicates the gain delivered to the shareholders by the Company – directly (in the form of dividends

received by them) and indirectly (in the form of capital appreciation registered by the stock during the financial year under

review). The TSR was calculated by adding the dividend to the difference between the closing and the opening market

capitalisation (equity shares multiplied by closing market price on the stock exchanges). During the year under review,

Balrampur reported a negative TSR of 24.01%.

2002-03 2003-04 2004-05 2005-06* 2006-07

Closing market price per share (Rs.) 110.95 303.95 69.40 101.40 75.55

Dividend paid (Rs.) 8.50 5.50 1.00 3.60 1.50

TSR (%) (3.98) 178.91 131.58 51.30 (24.01)

* 18-month period; data as on 30th September, 2006

Economic value-added (EVA) In 2006-07, Balrampur reported a negative EVA of Rs.

216.19 crore on account of the loss reported by the Company.

The EVA, designed by Stern, Stewart & Company, captures

growth parameters into a unique formula. Its principal

highlights comprise:

• For the cost of shareholders’ funds, the actual outgo

towards shareholders (dividend etc.) was ignored. Instead, a

market-driven cost of equity funds was considered.

• The cost of equity was arrived at using the beta-factor for

the Company scrip. The risk-free return in the economy

(6.75% in the financial year 2006-07 was taken). To this

was added the product of the beta factor and the stock

market risk premium.

• The stock market risk premium was what investors

expected to earn over the risk free return from the market.

• The product of the premium and the beta was what

investors expected to earn (over and above the risk-free

return of 6.75%) from the Balrampur scrip in the financial

year under review. This was the correct cost of equity funds

to consider for the EVA calculation. The beta value was

calculated at 0.8.

• This beta was multiplied by the stock market risk

premium assessed at 12% for Balrampur. The result was

added to the risk-free return in the economy to get the

Company’s cost of equity.

• The base for calculating the rupee cost of equity was the

market capitalisation as on a particular date (because the

EVA calculation uses a stock market-driven set of variables

for calculating the cost of equity).

• For the cost of debt, the post-tax marginal cost of

borrowing based on average debt during the year and actual

outflow of interest and tax were used. The cost of debt for

the Company was 5.66%.

• The weighted average cost of capital was 12.84%.

# 18-month period; year ended on 30th September, 2006

EVA summary (Rs. in crore)

PBIT 19.05

Tax 1.86

Adjusted tax 4.39

NOPAT

(net operating profit less adjusted tax) 14.66

WACC (weighted average cost of capital) 12.84%

Average capital 1797.84

Cost of capital 230.83

EVA (216.19)

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Report of the Board of Directors


For the year ended 30th September, 2007

Your Directors present their thirty second Annual Report along with the audited accounts ofthe Company for the year ended 30th September, 2007.

Operating and financial review[Rs. in Lac]

Financial results 2006-07 2005-06

(for 12 months) (for 18 months)

Gross turnover 1,47,632.44 1,98,976.71

Operating profit before interest, depreciation and tax 9,926.98 46,648.96

Interest and other financial charges 5,441.73 3,450.78

Depreciation 8,021.99 6,709.28

Provision for taxation 647.68 14,111.40 7,330.08 17,490.14

Net profit/(loss) (4,184.42) 29,158.82

Add : Balance brought forward from previous year 575.99 520.70

Profit/(loss) available for appropriation (3,608.43) 29,679.52

Appropriations :

Interim dividend on equity shares – 4,963.08

Proposed dividend on equity shares – 3,722.32

Corporate tax on dividend – 1,218.13

General reserve – 19,200.00

Leaving a balance to be carried forward to next year’s account (3,608.43) 575.99

(3,608.43) 29,679.52

Your Directors do not recommend dividend on equity shares in view of the loss incurred by the Company during the year

under review.

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Performance 2006-07The financial results for the year 2006-07 are for a period of

12 months and hence are not comparable with the results of

2005-06, which were for a period of 18 months. The

crushing and production of sugar during the season 2006-07

was substantially higher at 923.10 lac quintal and 91.50 lac

quintal as against 661.81 lac quintal and 67.66 lac quintal

respectively in 2005-06. Recovery was lower at 9.91% in

season 2006-07 as against 10.22% in the preceding season.

Lower recovery was due to extended crushing operation

particularly in May and June 2007. Higher crushing and

production are attributable to large availability of sugar cane

and also due to commencement of production at the

Company’s newly set up green field complex at Mankapur.

Record sugar production in season 2006-07 coupled with

huge carry-over opening stock of the previous year, resulted

in a steep decline in sugar price from a peak of Rs. 18 per kg

to Rs. 13 per kg during the year under review. While sugar

price declined, cost of production increased. Depressed sugar

price and higher cost of production due to lower recovery

and increased cane price from Rs. 115 per quintal to Rs. 125

per quintal resulted in losses in the Company during the

year under review. Bumper production in Brazil, Australia,

Thailand and India led to a lower international sugar price.

During the year under review, cost of other inputs like

manpower, chemicals etc. also increased. Interest cost has

also gone up during the year owing to borrowings made for

Mankapur, Akbarpur, Rauzagaon and Kumbhi units.

Interest was also high because of large inventory.

The Government of India banned export of sugar in July

2006 at which point of time the price in the global market

was conducive for export of sugar and thereby missed an

opportunity of reducing inventory. UP Government

arbitrarily increased the cane price from Rs. 115 to Rs. 125 a

quintal for season 2006-07 when it was very evident from

the planting estimates that India is expected to have a

record bumper production in season 2006-07. Other states

like Maharashtra, Tamil Nadu and Andhra Pradesh resorted

to far more rational cane pricing mechanism and also came

forward in many ways to give incentives to sugar mills and


OperationsThe operational data for the last two years are as follows:

Season 2006-07 Balrampur Babhnan Tulsipur Haidergarh Akbarpur Rauzagaon Mankapur Kumbhi Total

(2005-06)

Crushing 12000 10000 7000 5000 7500 7500 8000 8000 65000

capacity (TCD) (12000) (9000) (7000) (5000) (7000) (7500) (–) (–) (47500)

Start of 16.11.06 08.11.06 18.11.06 12.11.06 16.11.06 21.11.06 16.11.06 27.04.07 –

crushing season (17.11.05) (08.11.05) (21.11.05) (09.11.05) (30.11.05 ) (15.11.05) (–) (–) (–)

Closing of 29.05.07 19.05.07 13.06.07 29.04.07 03.05.07 03.05.07 17.05.07 13.05.07 –

crushing season (13.05.06) (04.05.06) (21.04.06) (07.04.06) (18.04.06) (19.04.06) (–) (–) (–)

Duration 194 192 208 168 169 164 183 16 –

(Days) (178) (177) (152) (150) (140) (156) (–) (–) (–)

Sugar cane 214.95 165.99 120.62 78.98 113.71 97.54 127.50 3.81 923.10

crushed (In (198.84) (146.11) (87.41) (65.29) (75.60) (88.56) (–) (–) (661.81)

lac quintal)

Recovery 9.78 9.89 9.42 9.87 10.15 10.29 10.25 7.69 9.91

(%) (10.24) (10.32) (9.92) (10.00) (10.50) (10.27) (–) (–) (10.22)

Sugar produced 21.00 16.41 11.37 7.80 11.54 10.03 13.06 0.29 91.50

(In lac quintal) (20.36) (15.08) (8.67) (6.53) ( 7.93 ) (9.09) (–) (–) (67.66)

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cane growers in their states to tide over the unparalleled

crisis created by large surplus of sugar. Incentives given were

in the form of remission of taxes, export incentive,

compensation against standing crops to farmers etc.

The Government of UP needs to rationalise cane prices

and take proactive initiatives to save the sugar industry in

the state, which is passing through an unprecedented

financial crisis.

Distillery performance Performance of distillery at Balrampur and Babhnan was

satisfactory. Distilleries produced 652.92 lac BL of industrial

alcohol. Average realisation per BL was Rs. 19.60 in

2006-07 as against Rs. 20.50 in 2005-06.

U.P. Government continues with the previous season’s

policy under which 15% molasses is to be reserved by sugar

mills for producing country liquor.

Power Cogen power plants at Balrampur, Haidergarh and

Akbarpur performed satisfactorily. There has been sufficient

availability of bagasse for running the power capacity fully.

Total supply of power from our cogen units to Uttar

Pradesh Power Corporation Ltd. under Power Purchase

Agreement [PPA] during the year was 4926.17 lac units.

During the year, Babhnan unit also started generating

power under cogen in a small way. This was made possible

by de-bottlenecking of the existing power generating facility

in the sugar unit.

Biocompost The performance of Biocompost division was satisfactory

during the year.

Greenfield complex at Mankapur As reported in the last Directors’ Report, the greenfield

integrated complex at Mankapur, having a 8000 TCD sugar

unit, commenced its operation on 16th November 2006.

The sugar unit crushed 127.50 lac quintal in season

2006-07 with a recovery of 10.25%. The 34 MW cogen

plant commissioned on September 19, 2006 performed

exceedingly well during the year under review and supplied

1521.63 lac units of power to UPPCL under the Power

Purchase Agreement. The 100-KLPD distillery was

commissioned during the year which also performed

satisfactorily. The distillery produced 30.54 lac BL of

rectified spirit and 13.55 lac BL of ethanol. The quality of

these products was well accepted in the market.

Greenfield sugar complex at Kumbhi andGularia Kumbhi greenfield integrated sugar complex in central U.P.

was set up in a record time of 12 months. The trial

production of the sugar unit with a crushing capacity of

8000 tcd commenced on 27th April, 2007. This unit has a

20 MW cogen power plant and will sell 11 MW power to

UPPCL during the season only.

The Gularia greenfield integrated sugar complex possesses

an 8000-tcd crushing capacity and 31.3 MW cogen facility.

It will supply 20 MW power to UPPCL throughout the

year. This unit is ready and will commence operations in

the season 2007-08.

Legal cases filed by Ojas Industries against setting up of

Kumbhi and Gularia units were settled.

Acquisition of Indo Gulf Industries Ltd.Pursuant to the Share Purchase Agreement and in terms of

SEBI (Substantial Acquisition of Shares and Takeover)

Regulations, 1997, the Company had acquired 45,56,663

equity shares representing 47.63% of the equity share

capital of Indo Gulf Industries Ltd. [IGIL]. 6,05,860 equity

shares representing 6.33% shares of Dr. S.K. Garg (the then

promoter of IGIL) could not be transferred due to interim

order passed by Delhi High Court on 6th September 2006.

Now the dispute has been settled and disposed off by the

court and accordingly the said 6,05,860 shares of Dr. S.K.

Garg have now been transferred in the name of the

Company on 30th August 2007 and consequently IGIL

became a subsidiary of Balrampur Chini Mills Limited,

effective from the said date. The sugar unit of the said

Company, which was closed for the last five years, started

crushing operations in April 2007.

New subsidiary companyBalrampur Overseas Pvt. Ltd. [BOPL] was incorporated in

Hong Kong with the purpose of trading activities. The paid-

up capital of the said Company is 20,00,000 equity shares of


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HK$1 each. The entire holding of BOPL is held by

Balrampur Chini Mills Ltd. which became the subsidiary of

the Company with effect from 11th October, 2007. It will

help the Company trade sugar in the international market

through its subsidiary.

The statement as required under Section 212 (3) of the

Companies Act, 1956, in respect of the subsidiary companies

is separately annexed.

Cane and Sugar PolicyThe salient features of the sugar policy for 2006-07 are as

follows:

• The ratio of levy and free-sale sugar remained unchanged

at 10: 90.

• The price of levy sugar for the season 2005-06 was not

revised and supplies continued at Rs. 1,383.41 per quintal

• The Statutory Minimum Price (SMP) of sugarcane was

fixed at Rs. 81.18 per quintal linked to a basic recovery of

9% with a premium for higher recovery, as against

Rs. 80.25 per quintal on 9% recovery in the previous year.

• The U.P. Government fixed a State Advised Price (SAP)

of Rs. 125 per quintal of sugar cane for the season 2006-07

as against Rs. 115 per quintal for the season 2005-06.

• Ethanol price has been fixed at Rs. 21.50 per litre

ex-factory.

• Reimbursement of internal transport and freight charges

subject to a ceiling of Rs. 1,350 per tonne for mills situated

in western and southern states and Rs. 1,450 per tonne for

mills situated in other states as incentive to encourage

exports.

• Fixed DEPB on export of sugar at 4%

• Creation of a sugar buffer of 50 lac tonnes for which the

government will reimburse actual interest, storage and

insurance charges to provide financial assistance to tide over

unprecedented financial crisis.

• The Central Government has announced a grant of loans

from banks to sugar mills equivalent to excise duty paid by

sugar mills in 2006-07 and to be paid during 2007-08.

The government will reimburse the interest amount on such

loans.

• The Central Government has mandated 5% ethanol

blending with petrol with immediate effect and 10%

blending from 1st October 2008.

Legal cases related to cane arrearsOn P.I.L. No. 5624 of 2007 filed by Shri V.M. Singh, the

High Court, Allahabad, Lucknow Bench, Lucknow had

passed an order for recovery of arrears of cane price by

issuing recovery certificates, and accordingly recovery

certificates have been issued by the cane commissioner to

recover the payment of arrears of cane price of 2006-07

season. These recovery certificates have been challenged by

the Company through writ petition no. 8054 of 2007 before

the High Court of Judicature at Allahabad, Lucknow Bench,

Lucknow. The High Court has passed an order on 29.10.07

for payment of 25% of the balance cane price and cane

commission within five weeks.

Legal case related to SAP The state advised price (SAP) for the season 2006-07 and

validity of Section 16 of U. P. Sugarcane (Regulation of

Supply and Purchase) Act, 1953, was challenged before

Allahabad High Court, by writ petition number 23305 of

2007 in which we are also one of the petitioners. The

hearing in this writ petition has been concluded and the

order has been reserved by the High Court.

A writ petition number 8548 (MB) of 2007 has been filed

by the east U.P. Sugar Mills Association (in which, we are

also petitioner No.4) seeking relief to stay the effect and

operation of the decision dated 31.10.2007 of the State

Government, announcing the State Advised Price for the

season 2007-08 as Rs. 130 for early variety, Rs. 125 for

general and Rs.122.50 for unsuitable varieties, and to permit

the petitioners to commence crushing operation by paying

the statutory minimum price fixed by the Central

Government. The High Court passed an interim order on

15.11.2007 and as an interim measure, the factories were

directed to pay cane price at Rs. 110 per quintal and start

cane crushing operations till the next date of hearing i.e. on

18th December, 2007.

OutlookSugar production in the country during the season 2006-07

was 283 lac tonnes as against 192 lac tonnes in the previous

season. World sugar prices were bearish during most of


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2007. The significant excess of global production over

consumption depressed sentiment, leading to a sharp

fall in domestic and international sugar prices during

the year.

Sugar production in the season 2007-08 is estimated at 286

lac tonnes. We expect growth in consumption owing to a

double digit growth in GDP and a changing pattern in

consumption. The Indian sugar industry in 2007-08 is

expected to aggressively export four to five million tonnes in

the form of raw and white sugar. Higher consumption and

aggressive exports are likely to ensure that there will not be

any sizeable increase in inventory levels. The sugar

production in 2008-09 is expected to fall as farmers in

various sugar producing states are likely to switch to the

cultivation of other crops owing to the distressed state of the

sugar industry, as well as an expected remunerative return

from other crops like wheat and rice. In view of the above

scenario, we expect the sugar prices are not likely to show

any appreciable increase from the current levels in 2007-08

and likely to show upward movement thereafter in season

2008-09. As mentioned earlier, intervention of the

Government of UP to rationalise the cane price in the state

is urgently required for the long-term sustainability of the

sugar industry in the state.

The Company constantly pursues organic growth and

setting up of a new sugar mill complex for the effective

by-product utilisation and diversifying its product range to

reduce the rigorous sugar cycles. The sugar business is

essentially cyclical and swift changes in demand-supply

disequilibrium causes a volatile change in pricing power.

Co-generation and ethanol offer a vast untapped scope for

more effective by-product utilisation. They bring synergy to

sugar, soften the inimical impact of sugar cycles and shore

up substantiality operations.

Your Company has diversified into alcohol and power for the

usage of multiple by-products leading to enhanced value

addition for every quintal of cane crushed. As a result,

cogeneration and distilleries are emerging as growth drivers,

offsetting the negative trend in revenues from sugar

activities. Ethanol is a real-world petroleum substitute which

is likely to emerge as a complete energy solution in the

coming year, especially with an increase in the cost of crude.

In India the blending of petrol with 5% ethanol has been

permitted in all states except Jammu & Kashmir, North

Eastern states and island territories. India requires an

estimated 5,500 lac litres of ethanol. The government has

already made 5% blending with petrol compulsory which

will increase to 10% from October 2008. This progressive

use of ethanol will reduce the vehicular pollution load and

migrate the vehicles to Euro IV norms. The said increase to

10% is expected to double the demand of ethanol

significantly in the long term.

The Company will be able to generate about 180.85 MW of

electricity, of which 125.5 MW will be supplied to UPPCL.

The revenue from power and alcohol will help the Company

add value.

Listing of equity sharesYour Company’s equity shares are listed on the Calcutta,

Bombay and National Stock Exchanges. An application

has been made for delisting the shares from Calcutta Stock

Exchange, which is pending. Your Company has paid the

annual listing fees to each of these stock exchanges. The

GDRs are listed on the Luxembourg Stock Exchange.

Corporate Governance As per Clause 49 of the Listing Agreement with the stock

exchanges, Management’s Discussion and Analysis, a report

on Corporate Governance together with the Auditors’

Certificate on the compliance of conditions of Corporate

Governance forms a part of the annual report.

Credit RatingCredit rating of A1+ for short-term debts (Rs.500 crore)

enjoyed by your Company for a long time was downgraded

to A1 by ICRA. Our non-convertible debenture programme

of Rs. 30 crore was downgraded from LAA to LA+. The

down grading was done by ICRA in view of the tight cash

flow and unprecedented crisis suffered by the industry.

Employee Stock Option Scheme Your Company formulated and implemented an Employee

Stock Option Scheme in accordance with the guidelines

issued by the SEBI. Pursuant to the scheme, on 27th

November, 2006, 8,83,000 stock options were granted

among eligible employees including the Wholetime

Director. The details of options granted and outstanding


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as on 30th September, 2007, along with other particulars as

required by Clause 12 of the SEBI (Employee Stock

Option Scheme and Employee Stock Purchase Scheme)

Guidelines, 1999 and the Auditor’s Certificate required to

be placed at the forthcoming AGM, pursuant to Clause

14 of the said guidelines, are set out in the annexure to

the report.

DirectorsShri K.N. Saraogi resigned as Chairman and Director of the

Company effective from 26.04.2007 due to his indifferent

health. However, the Board was conscious of the

contribution of Shri K.N. Saraogi in the growth of the

Company over the years and also that his guidance and

association will continue to be useful. Therefore, the Board

appointed Shri K.N. Saraogi as Chairman Emeritus. Shri

Suresh Neotia was appointed as chairman of the Company

effective from 26.04.2007 to fill the vacancy caused by the

resignation of Shri K.N. Saraogi.

The Board placed on record its high appreciation for the

valuable services rendered by Shri K.N. Saraogi, both

as a Director and later as a Chairman, resulting in

substantial progress.

Shri P.R. Srinivasan resigned from the directorship of the

Company. Shri P.R. Srinivasan was appointed a Nominee

Director of Citicorp International Finance Corporation

[CIFC], USA pursuant to the investment agreement entered

into between the Company and CIFC on 9th March, 2005,

for subscription by the said CIFC in the equity shares of the

Company. CIFC has disposed its entire shareholding of the

Company and Shri Srinivasan resigned from the directorship

of the Company.

The Board placed on record its high appreciation for the

valuable services rendered by Shri P.R. Srinivasan during his

tenure as a Director of the Company.

The term of office of Smt. Meenakshi Saraogi, Joint

Managing Director of the Company, expired on

30th September, 2007. The shareholders at the

Extra-ordinary General Meeting approved the

reappointment of Smt. Meenakshi Saraogi as a Joint

Managing Director for a further period of three years

effective from 1st October, 2007.

Shri R.K. Choudhury and Shri S.B. Budhiraja, Directors of

your Company, retire from the Board by rotation and are

eligible for re-election.

Directors’ Responsibility StatementAs required under Section 217 (2AA) of the Companies Act,

1956, your Directors confirm that –

i. In preparation of the annual accounts, the applicable

accounting standards have been followed.

ii. The Directors have selected such accounting policies and

applied them consistently and made judgments and

estimates that are reasonable and prudent so as to give a

true and fair view of the state of affairs of your Company

at the end of the financial year, and of the loss of your

Company for that period.

iii. The Directors have taken proper and sufficient care for

the maintenance of adequate accounting records in

accordance with the provisions of the Companies Act,

1956, for safeguarding the assets of your Company and

for preventing and detecting fraud and other

irregularities, and

iv. The Directors have prepared the annual accounts on a

‘going concern’ basis.

Particulars of employeesYour Directors wish to acknowledge the support and

valuable contributions made by the employees at all levels.

Particulars of employees as required under Section 217(2A)

of the Companies Act, 1956, are given in a separate

annexure attached hereto and forms part of this report.

Conservation of energy, etc.Particulars in respect of conservation of energy, technology

absorption and foreign exchange earnings and outgo as

required under Section 217 (1) (e) of the Companies Act,

1956, are given in a separate annexure attached hereto and

forms part of this report.

Auditors’ ReportThe observations of Auditors in their report read with the

relevant notes to accounts in schedules S and T are self

explanatory and do not require further explanation.


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A. Conservation of energya) Your Company continues to give high priority to the conservation of energy on an ongoing basis. Some of the significant

measures taken are:

i) Installation of high-efficiency spreader stocker type, travelling grates, high pressure boilers.

ii) Installation of bigger size, constant ratio mill with variable speed, DC motor drive having full auto-control, hydraulic

cane unloaders, rotary-screens, juice-flow stabilisation system, continuous sulphur burner, high-efficiency centrifugal

pumps, fluidised bed sugar drier and sugar bag conveying system, efficient and automatic centrifugal machines, semi

kesteners, etc.

iii) Installation of condensing-cum-extraction turbine, variable frequency drives with different machines, fans, heat recovery

units in boilers, pre-heaters for boiler feed water, distributed control system for centralised efficient operation.

AuditorsM/s. G.P. Agrawal & Co., Chartered Accountants, Auditors

of your Company, retire and being eligible, offers themselves

for re-appointment.

Cost Auditors Pursuant to the directives of the Central Government under

the provisions of Section 233B of the Companies Act, 1956,

M/s. N. Radhakrishnan & Co, Cost Accountants, have been

appointed to conduct cost audits relating to sugar.

AppreciationYour Directors wish to place on record their sincere

appreciation for the continued support received from the

shareholders, Central Government, Government of U.P,

financial institutions, State Bank of India and customers for

their valuable contribution to the growth of the

organisation.

For and on behalf of the Board of Directors

Kishor Shah Vivek Saraogi

Director cum Chief Financial Officer Managing Director

Kolkata

19th November, 2007


Annexure to the

Directors’ ReportInformation pursuant to the Companies (Disclosures of particulars in the reportof the Board of Directors) rules 1988 and forming part of the Directors’ Reportfor the year ended 30th September, 2007

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b) The required data with regard to conservation of energy are furnished below:

(A) Power and fuel consumption

2006-07 (12 months) 2005-06 (18 months)

1. a) Purchased units (excluding domestic units) 210683 1217817

Total amount (Rs. lacs) 11.37 67.90

Rate per unit (Rs.) 5.40 5.58

b) Own generation

i) Through Diesel Generator sets (units) 1224991 4199788

Units per ltr. of Diesel 3.48 3.41

Cost/unit (Rs.) 8.58 8.53

ii) Through Steam Turbine/Generator (units) 226519887 155671168

Unit per quintal of Bagasse cost/unit Steam produced by use of own bagasse

2. Coal (specify quality and where used quantity) Not directly consumed Not directly consumed

(tonnes) in production in production

Total amount /average cost -do- -do-

3. Furnace Oil (qty.k.ltrs.)

Total amount /average rate -do- -do-

4. Other/Internal Generation -do- -do-

Quantity total cost rate/ unit Nil Nil

(B) Consumption per unit of production

2006-07 (12 months) 2005-06 (18 months)

Sugar (lac quintal) 91.68 64.34

Electricity (Units per quintal of production) 24.86 25.04

Furnace Oil Nil Nil

Coal (specify quality) Nil Nil

Other (specify) Nil Nil

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Kolkata Kishor Shah Vivek Saraogi

19th November, 2007 Director cum Chief Financial Officer Managing Director


B. Research and development, technology absorption

Your Company has been carrying out research and development in the following specific areas:

i) Rearing of speed nurseries of new improved varieties for replacement.

ii) Heat therapy to eradicate seed-born diseases.

iii) Pest control measures to protect cane from diseases and soil testing laboratory.

iv) Ratoon crop management helping in increased yield and recovery.

v) Biological control laboratory for sugarcane pest management.

Owing to the above efforts, a higher yield of disease free cane will be available to the Company, resulting in a higher return to

the Company and the cane growers.

Future plans

i) Continuous research to generate better-yield and disease-free cane varieties.

ii) Installing a tissue culture laboratory.

iii) Installing machineries with the latest technology at different stations in the factory.

iv) Providing irrigation facilities to growers by distributing pumping sets and borings.

The Company has not imported any technology.

C. Foreign exchange earning and outgo

2006–07 (12 months) 2005–06 (18 months)

i) Activities relating to exports initiative Various export proposals Various export proposals

taken to increase exports are being examined are being examined

ii) Development of new export market for product -do- -do-

and services and export plan

iii) Total foreign exchange earnings (Rs. lacs) NIL 320.17

iv) Used (Rs. lacs) 4,613.46 2,256.95

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Particulars of employees as required under Section 217(2A) of the Companies Act, 1956,and forming part of the Director’s report for the year ended 30th September 2007.

Name Designation Remuneration Qualification Age Date of Last employer,

(Rs.) and experience (years) commencement designation

(years) of employment

A. Employed throughout the year and in receipt of the remuneration of Rs. 24 lacs or more per annum

Vivek Saraogi Managing 1,16,49,715 B.Com (Hons.), 41 3rd July None

Director (20) 1987

Meenakshi Jt. Managing 1,05,61,636 B.A. (25) 63 1st October None

Saraogi Director 1982

K.N. Wholetime 33,29,482 M.A. 72 Service transferred Secretary,

Ranasaria Director (Sahityaratna), from Balrampur Balrampur

(44) Sugar Co. Ltd. Sugar Co. Ltd.

Kishor Shah Director-cum-Chief 34,03,467 B. Com., ACA, 43 24th January, Independent

Financial Officer (19) 1994 consultancy

Prem Kumar Executive 26,14,633 B.Sc., 60 8th April New Swadeshi Sugar

Shrawat President Engineering 2004 Mills (A unit of Birla

(Mech.), (35) Sugars), Executive V.P.

N.K. Khetan Chief General 25,42,590 FCA, (23) 49 1st June Partner in a Chartered

Manager 1989 Accountant firm

P.R. Singh Executive 27,49,252 B. Com., PGDBM, 59 1st August JK Industries Limited,

President LLB (42) 2003 sugar division, CE (W)

G.L. Khetan Chief General 24,35,672 B. Com., FCA 48 1st August Hindustan Development

Manager (24) 1990 Corporation,

Manager-Accounts &

Administration

K.P. Singh Executive 25,06,721 Diploma in Mech. 50 16th September Ghaghara Sugar Ltd.

President Engineering (30) 2002 (DSCL- Ajbapur),

D.G.M. (Engg.)

B. Employed for part of the year and in receipt of the remuneration of Rs. 2 lacs or more per month

Ram Chandra Executive 8,86,264 B.E. (Mech.), 64 31st May 2007 Bajaj Hindusthan Ltd.,

Jha President (40) Sr. Vice President

Notes:

1) Remuneration includes salary, bonus, Company’s contribution to provident fund, pension and monetary value of

perquisites excluding contribuition to gratuity.

2) All appointments are contractual. Other terms and conditions are as per their respective agreement/ Board Resolution and

as per Rules of the Company.

3) Shri Vivek Saraogi (Managing Director) and Smt. Meenakshi Saraogi (Jt. Managing Director) are related to each other.

Shri K.N. Saraogi resigned to be as Chairman and Director on 26.04.2007, is also related to Shri Vivek Saraogi and

Smt. Meenakshi Saraogi.

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Annexure to the

Directors’ ReportStatement as at 30th September, 2007 pursuant to Clause 12 of the SEBI (EmployeeStock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999.

a] Description:

Year 2005 2006

No. of options granted 6,22,500 8,83,000

Date of grant 31.10.2005 27.11.2006

Exercise price per share

(Each option is equivalent

to one equity share of the

face value of Re.1 each of

the Company) Rs.74.60 Rs.104.10

b] Pricing formula: The exercise price of the options is determined by the

Remuneration Committee on the date the option is

granted. It is based on the average daily closing market

price of the equity shares of the Company during the

preceding 26 weeks, prior to the date of grant [on the

stock exchange it is traded most].

c] Options Vested : 5,03,500

d] Options Exercised : NIL

e] Total number of equity shares arising as aresult of exercise of options : N. A.

f] Options Lapsed : 2,04,500

g] Variation of Terms of Option : N. A.

h] Money realised of the Exercise of Option : NIL

i] Total no of Option in Force : 13,01,000

j] Details of Option Granted to

i] Senior Managerial Personnel:

Name Designation 2005 (On 31.10.2005) 2006 (On 27.11.2006)

1 Shri K.N. Ranasaria Wholetime Director 10,000 10,000

2 Shri Kishor Shah Director-cum-CFO 10,000 10,000

3 Shri R.N. Mishra Wholetime Director 10,000 10,000

4 Shri S.K. Agrawala Company Secretary 10,000 10,000

5 Shri P.K. Shrawat Executive President 10,000 10,000

6 Shri P.R. Singh Executive President 10,000 10,000

7 Shri K.P. Singh Executive President 10,000 10,000

ii] Any other employee who receives a grant in any one year of option amounting to 5% or more of option granted

during that year – NIL

iii] Identified employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital

(excluding outstanding warrants and conversions) of the Company at the time of grant – NIL

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Auditor’s Certificate as required under Clause 14 of the SEBI (Employee Stock OptionScheme & Employee Stock Purchase Scheme) Guidelines, 1999 We have examined the books of account and other relevant records of Balrampur Chini Mills Limited having its registered office

at ‘FMC Fortuna’, 2nd Floor, 234/3A, A.J.C. Bose Road, Kolkata – 700 020 and based on the information and explanations

given to us, we certify that in our opinion, the Company has implemented the Employee Stock Option Scheme in accordance

with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and in accordance with

the special resolution passed by the Company in the Extra-ordinary General Meeting held on 8th September, 2005.

For G. P. Agrawal & Co.


7A, Kiran Shankar Ray Road Ajay Agrawal

Kolkata - 700 001 Membership No. 17643

19th November, 2007 Partner

k] Diluted earnings per share (EPS) pursuant to the issue of

shares on exercise of options calculated in accordance

with Accounting Standard [AS] 20. Earning per share is

Rs. (1.69).

l] i) The employee compensation cost has been calculated

using the intrinsic value method of accounting for

options issued under BCML Employees’ Stock Option

Scheme. The stock-based compensation cost as per

the intrinsic value method for year ended 30th

September, 2007 is Nil.

ii) The employee compensation cost that shall have been

recognised if the Company had used the fair value of

the options is Rs.3,36,90,388. The difference between

the employee compensation cost so computed at (i)

above and the employee compensation cost that shall

have been recognised if the Company had used the

fair value of the options is Rs.3,36,90,388.

iii) Impact of this difference on profits and EPS of the

Company: The effect of adopting the fair value

method on the net income and earnings per share is

presented below:

Net Income/ (loss) Rs. in lacs

As reported (4184.42)

Add: Intrinsic value Compensation cost Nil

Less: Fair value Compensation cost

(Black Scholes model) 336.90

Adjusted Net Income/(Loss) (4521.32)

Earning Per Share Basic (Rs.) Diluted (Rs.)

- As reported (1.69) (1.69)

- As adjusted (1.82) (1.82)

m] The weighted average exercise price of the options granted

on 27.11.06 is Rs.104.10 per equity share. The weighted

average fair value of options is Rs.42.245 per option.

n] A description of the method and significant assumptions

used during the period to estimate the fair values of

options, including the following weighted-average

information is given below:

[1] Method – Black Scholes Model

[2] Risk-free interest rate – 7.4%

[3] Expected life – 9 years (including vesting period of

1 year)

[4] Expected volatility – 25.7%

[5] The price of the underlying share in market at the

time of option grant – 87.75


Kishor Shah Vivek Saraogi

Director cum Chief Financial Officer Managing Director

Kolkata

19th November, 2007

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Philosophy on Code of GovernanceThe Company firmly believes that good Corporate

Governance represents the foundation of corporate excellence.

A sound governance process consists of a combination of

business practices, which result in enhancement of

shareholders’ value and enable the Company to fulfill its

obligations to customers, employees, financiers and to the

society at large. The Company aims to increase and sustain

its corporate value through growth and innovation.

Board of DirectorsThe current policy is to have an appropriate mix of

Executive and Independent Directors to maintain the

independence of the Board. As on 30th September, 2007,

the constitution of the Board was:

• Two Promoters, Executive Directors

• Three Non-Promoters, Executive Directors

• Six Independent, Non-Executive Directors

During the year ended 30th September, 2007, four Board

meetings were held on 16th November, 2006, 30th January,

2007, 26th April, 2007 and 24th July, 2007.

The composition of the Board of Directors as on 30th

September 2007, the number of other Board of Directors

or Board Committees of which he/she is a

member/Chairperson and the attendance of each director at

these Board meetings and the last Annual General Meeting

(AGM) are as under:


CorporateGovernance Report

Name of the Director Category No. of other No. of membership/ No. of Board Attendance at

directorships* (Public chairmanship on other meetings last AGM

Limited company) Board committees attended

[1] [2] [3] [4] [5] [6]

Shri Suresh Neotia Independent, 6 (including

(Chairman) Non-executive 1 as Chairman) Nil 4 No

Shri Vivek Saraogi Promoter, 1 Nil 4 Yes

(Managing Director) Executive

Smt. Meenakshi Saraogi Promoter, Nil Nil – No

(Jt. Managing Director) Executive

Shri Kamal Nayan Saraogi, Promoter, Nil Nil – No

resigned on 26.04.2007 Non-executive

Shri Sudhir Jalan Independent, 7 (including

Non-executive 3 as Chairman) 2 1 No

Shri R.K. Choudhury -do- 8 (including 3 1 No

2 as Chairman)

Shri S.B. Budhiraja -do- 4 3 (including 1 4 Yes

as Chairman)

Shri M.M. Mukherjee -do- Nil Nil 4 Yes

Shri Naresh Chandra -do- 8 9 (including 3 No

2 as Chairman)

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Name of the Director Category No. of other No. of membership/ No. of Board Attendance at

directorships* (Public chairmanship on other meetings last AGM

Limited company) Board committees attended

[1] [2] [3] [4] [5] [6]

Shri P R Srinivasan Non-Executive 1 Nil 1 Yes

[Nominee of Citicorp Nominee

International Finance Director

Corporation, being equity

investor], resigned on

26.04.2007

Shri K.N. Ranasaria Non-promoter 1 1 4 Yes

(Wholetime Director) Executive

Shri Kishor Shah Non-promoter Nil Nil 4 Yes

[Director cum Chief Executive

Financial Officer]

Shri R.N. Misra Non-promoter

(Wholetime Director) Executive Nil Nil – No

(*) Excludes membership of the Managing Committee of various chambers/bodies and directorship in foreign companies.

Board committeesAudit Committee

CompositionThe Audit Committee of the Company comprises five

directors - all of whom are Independent, Non-Executive. All

of them are experts in corporate finance, accounts and

company law. The Chairman of the Committee is an

Independent Non-Executive Director, nominated by the

Board. The Company Secretary acts as the secretary to the

Committee. The Director-cum-Chief Financial Officer, the

Statutory Auditor, Cost Auditor and the Internal Auditor of

the Company are permanent invitees at the meetings of the

Committee.

The composition of the Audit Committee:

Sl Name of Directors Position

1 Shri S.B. Budhiraja Chairman, independent,

non-executive

2 Shri Naresh Chandra Vice-chairman, Independent,

Non-Executive

3 Shri Suresh Neotia Member, Independent,

Non-Executive

4 Shri Sudhir Jalan -do-

5 Shri M.M. Mukherjee -do-

The Audit Committee has the following powers:

1) To investigate into any matter in relation to the items,

specified in Section 292A of the Companies Act, 1956

or referred to it by the Board and shall have full access

to information contained in the records of the Company

and external professional advice, if necessary.

2) To investigate any activity within its terms of reference.

3) To seek information from any employee.

4) To obtain outside legal or other professional advice.

5) To secure attendance of outsiders with relevant

expertise, if it considers necessary.

The role of the Audit Committee includes the following:

1. Oversight of the Company’s financial reporting process

and the disclosure of its financial information to ensure

that the financial statement is correct, sufficient and

credible.

2. Recommending to the Board, the appointment, re-

appointment and, if required, the replacement or

removal of the statutory auditor and the fixation of

audit fees.

3. Approval of payment to statutory auditors for any other

services rendered by them.

4. Reviewing, with the management, the annual financial

statements before submission to the Board for approval,

with particular reference to:

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a. Matters required to be included in the Director’s

Responsibility Statement to be included in the

Board’s report in terms of Clause (2AA) of Section

217 of the Companies Act, 1956

b. Changes, if any, in accounting policies and practices

and reasons for the same

c. Major accounting entries involving estimates based

on the exercise of judgment by the management

d. Significant adjustments made in the financial

statements arising out of audit findings

e. Compliance with listing and other legal requirements

relating to financial statements

f. Disclosure of any related party transactions

g. Qualifications in the draft audit report.

5. Reviewing, with the management, the quarterly

financial statements before submission to the Board for

approval

6. Reviewing, with the management, performance of

Statutory and Internal Auditors, and adequacy of the

internal control systems.

7. Reviewing the adequacy of the internal audit function, if

any, including the structure of the internal audit

department, staffing and seniority of the official heading

the department, reporting structure coverage and

frequency of the internal audit.

8. Discussion with internal auditors, any significant

findings and follow up there on.

9. Reviewing the findings of any internal investigations by

the internal auditors into matters, where there is

suspected fraud, irregularity or a failure of the internal

control systems of a material nature and reporting the

matter to the Board.

10. Discussion with Statutory Auditors before the audit

commences, about the nature and the scope of audit as

well as the post-audit discussion to ascertain any area of

concern.

11. To look into the reasons for substantial defaults in the

payment to the depositors, debenture holders,

shareholders (in case of non payment of declared

dividends) and the creditors.

12. Reviewing the Company’s financial and risk

management policies,

13. Carrying out such other functions which, maybe, from

time to time specifically referred by the Board of

Directors.

The Audit Committee also reviews the following

information:

1. The Management’s discussion and analysis of financial

condition and results of operations;

2. Statement of significant related party transactions,

submitted by management;

3. Management letters/ letters of internal control

weaknesses issued by the statutory auditors;

4. Internal audit reports relating to internal control

weaknesses;

5. The appointment, removal and terms of remuneration of

the Chief internal auditor; and

6. Review of uses/ application of funds raised through

(public issue, right issue, preferential issue, GDR etc.)

Meetings and attendanceDuring the year ended 30th September 2007 four Audit

Committee meetings were held on 16th November, 2006,

30th January, 2007, 26th April, 2007 and 24th July, 2007.

Name of Directors No. of meetings attended

Shri S.B. Budhiraja 4

Shri Naresh Chandra 3

Shri Suresh Neotia 4

Shri Sudhir Jalan 1

Shri M.M. Mukherjee 4

Shri S.B. Budhiraja, Chairman attended the AGM held on

11th January, 2007 and replied to the queries related to

accounts to the satisfaction of the shareholders.

Remuneration CommitteeThe Remuneration Committee recommends to the Board of

Directors regarding the remuneration payable to the

Executive Directors of the Company. The Remuneration

Committee comprises four Directors, all of whom are Non-

Executive, Independent Directors. The members of the

committee are Shri Naresh Chandra, Shri Suresh Neotia,

Shri R.K. Choudhury and Shri Sudhir Jalan. Shri Naresh

Chandra is the Chairman of the Committee.

The Remuneration Committee also administers the

Employee Stock Option Scheme, which was approved by a

resolution of shareholders at the Extra-ordinary General

Meeting of the Company held on 8th September, 2005.

During the year ended 30th September, 2007, two

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Remuneration Committee meetings were held on 27th

November, 2006 and 24th July, 2007. The attendance of

the members at the meetings was as follows:

Name of Directors No. of meetings attended

Shri Naresh Chandra 2

Shri Suresh Neotia 2

Shri R.K. Choudhury 2

Shri Sudhir Jalan 2

Remuneration policyRemuneration of employees largely consists of base

remuneration, perquisites, bonus, exgratia, etc. The

components of the total remuneration vary for different

cadres/grades and are governed by industry pattern,

qualification and experience of the employee, responsibilities

handled by him, individual performance, etc.

The objectives of the remuneration policy are to motivate

employees to excel in their performance, recognise their

contribution, retain talent in the organisation and reward

merits.

The Company pays remuneration by way of salary and

perquisites to the Managing Director, Joint Managing

Director and the Wholetime Directors. The Managing

Director and the Joint Managing Director are also entitled

to receive an annual commission. The Director-cum-Chief

Financial Officer is also entitled to receive a commission

w.e.f. 01.04.2007. The salary and the commission is

recommended by the Remuneration Committee to the

Board of Directors and placed before the shareholders’

meeting for approval. The commission payments to the

Managing Director, Joint Managing Director and Director-

cum-Chief Financial Officer are at the rate of one per cent of

the net profits of the Company, subject to a ceiling of Rs. 90

lacs p.a. each in case of Managing Director, Joint Managing

Director and Rs.30 lacs p.a. in case of Director-cum-Chief

Financial Officer.

The Non-executive Directors are remunerated by way of

commission and sitting fees of Rs. 10,000 for each Board of

Directors’ meeting and committee meeting. In accordance

with the shareholders’ resolution passed at the Annual

General Meeting held on 29th July, 2003, the aggregate

commission payable to the Non-Executive Directors is up to

one per cent of the net profits of the Company, which is

subject to the overall ceiling as fixed by the Board of

Directors from time to time.

Details of remuneration to the Directors for the year ended 30th September, 2007:

Name of Salary Benefits Bonus Commission Sitting Total No. of Stock Service Contract/

the Directors Fees Options Notice period/

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) granted* Severance Fees

Shri Suresh – – – – 110,000 110,000 – Retire by

Neotia rotation

Shri Vivek 9,000,000 2,649,715 – – – 11,649,715 – Term of office valid

Saraogi up to 31.03.2011.

No notice period and

no severance fees.

Smt. Meenakshi 9,000,000 1,561,636 – – – 10,561,636 – Term of office valid

Saraogi up to 30.09.2010. No

notice period and no

severance fees.

Shri Kamal – – – – 20,000 20,000 – Retire by rotation

Nayan Saraogi

resigned on

26.04.2007

Shri Sudhir Jalan - - - - 140,000 140,000 - -do-

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* Employee Stock Options (each option equivalent to one

equity share of the face value of Re.1 each of the Company)

were granted on 31.10.2005 at an exercise price of Rs.74.60

per equity share and on 27.11.2006 at an exercise price of

Rs.104.10 per equity share. These options shall vest after

one year from the date of grant and may be exercised within

a period of 96 months from the date of their vesting.

Note: (i) Approval of Central Government for the

remuneration paid to the Managing Director and Jt.

Managing Director during the year 2006-07 pursuant to

resolution passed in EGM held on 29.09.2007 is awaited. (ii)

The payment of remuneration to Shri K.N. Ranasaria is

subject to the approval of the shareholders in the

forthcoming AGM. (iii) The amount of gratuity has not

been shown in the above table, as the Managing Directors &

Wholetime Directors are entitled to receive gratuity at the

end of their tenure.

Shareholders’ Committeei) Share Transfer Committee A share transfer committee was constituted to deal with

various matters relating to share transfer/transmission, issue

of duplicate share certificates, approving the split and

consolidation requests and other matters relating to transfer

and registration of shares.

The members of the committee are Shri Vivek Saraogi, Smt.

Meenakshi Saraogi, Shri Suresh Neotia, Shri Sudhir Jalan

and Shri R.K. Choudhury. Shri K.N. Saraogi has ceased


Name of Salary Benefits Bonus Commission Sitting Total No. of Stock Service Contract/

the Directors Fees Options Notice period/

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) granted* Severance Fees

Shri R.K. – – – – 110,000 110,000 – Retire by rotation

Choudhury

Shri S.B. – – – – 80,000 80,000 – -do-

Budhiraja

Shri M.M. – – – – 80,000 80,000 – -do-

Mukherjee

Shri Naresh – – – – 100,000 100,000 – -do-

Chandra

Shri PR Srinivasan – – – – – – – -do-

resigned on

26.04.2007

Shri R.N. Misra 688,500 86,718 – – – 775,218 20,000 Terms of office valid

up to 30.06.2009.


no severance fee.

Shri K.N. 2,493,333 356,149 480,000 – – 3,329,482 20,000 Terms of office valid

Ranasaria up to 11.05.2009.


no severance fee.

Shri Kishor Shah 2,631,667 261,800 510,000 – – 3,403,467 20,000 Terms of office valid

up to 30.01.2011

subject to re-appoint-

ment after retirement

by rotation. No notice

period, no severance

fees.

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from membership of the Share Transfer Committee on 26th

April 2007. During the year ended 30th September 2007,

11 Share Transfer Committee Meetings were held.

ii) Shareholders’/Investors’ Grievance CommitteeThe Company constituted the Shareholders’/Investors’

Grievance Committee to oversee the redressal of

shareholders’ and investors’ grievances in relation to the

transfer of shares, non-receipt of annual report, non-receipt

of dividend etc. The constitution of the Committee is as

follows:

Shri Sudhir Jalan, Chairman, Independent Non-executive

Shri Naresh Chandra, Member, Independent Non-executive

Shri Vivek Saraogi, Member, Promoter, Executive

During the year ended 30th September 2007 two

Shareholders’/Investors’ Grievance Committee meetings were

held.

Compliance OfficerThe Board has designated Shri S.K. Agrawala, Company

Secretary as the Compliance Officer.

Details of shareholders’ complaintsreceived The total 312 number of complaints/correspondence

received and replied to the satisfaction of the shareholders

during the year ended 30th September, 2007. There were no

outstanding complaints as on 30th September, 2007. No

shares were pending for transfer as on 30th September, 2007.


General Body MeetingLocation and time, where last three Annual General Meetings were held are given below:

Accounting Date Location of the Meeting Time Special Resolution passed

Year

2003-04 29.07.2004 Kalakunj, 48, Shakespeare Sarani, 11.00 a.m NIL

Kolkata – 700 017

2004-05 22.07.2005 Gorky Sadan, 3, Gorky Terrace, 3.00 p.m 1. Delisting of equity shares from

Kolkata-700017 The Calcutta Stock Exchange

Association Ltd. and The Delhi Stock

Exchange Association Ltd.

2. Alteration of Articles of Association.

2005-06 11.01.2007 Kala Mandir, 48, Shakespeare Sarani, 10.30 a.m. 1. Re-appointment of Shri Vivek

Kolkata – 700 017 Saraogi as the Managing Director.

2. Payment of enhanced remuneration

to Smt. Meenakshi Saraogi,

Jt. Managing Director.

3. Appointment of Shri Kishor Shah as

the Director-cum-chief financial officer.

4. Re-appointment of Shri K.N.

Ranasaria as the Wholetime Director.

5. Re-appointment of Shri R.N. Misra

as the Wholetime Director.

6. Investment by FIIs up to 60% of

the paid up equity share capital of the

Company.

No special resolution was passed through ballot at the last AGM and no special resolution is proposed to be conducted

through postal ballot at the forthcoming AGM to be held on 18th February, 2008.

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Disclosurei) The Company does not have any related party

transactions, which may have potential conflict with the

interests of the Company at large.

ii) The Company has complied with the requirements of

regulatory authorities on capital markets and no

penalties/strictures were imposed against it during the

last three years.

iii) The following Non-Executive Director hold equity shares

of the Company as stated below as on 30th September,

2007:

Name of the Director No. of Shares

Shri R.K. Choudhury 56000

Means of communicationi) A half-yearly report was not sent to each household of

shareholders. Shareholders were intimated through the

press and the Company’s website www.chini.com about the

quarterly performance and financial results of the

Company.

ii) The quarterly and half-yearly results were published in

the leading English and Bengali newspapers such as The

Business Standard, The Economic Times, Dainik Jagran and

Dainik Lipi.

iii) As per Clause 51 of the Listing Agreement with stock

exchanges, certain documents/information such as

quarterly/annual financial results, shareholding pattern

and corporate governance are accessible on the website

www.sebiedifar.nic.in.

iv) Presentations were also made to the media, analysts,

institutional investors, fund managers, etc. from time to

time. Such presentations are also posted on the

Company’s website.

v) The management’s discussion and analysis forms part of

the Annual Report, which is posted to the shareholders of

the Company.

General Shareholders’ Information

Annual General Meeting

Date and Time : 18th February, 2008 at 4.00 pm

Venue : Kalakunj, 48, Shakespeare Sarani,

Kolkata 700 017


Details of Extra-ordinary General Meeting held during the year 2006-07 are given below:

Accounting Date Location of the Meeting Time Special Resolution passed

Year

2006-07 29.09.2007 Kalakunj, 48, Shakespeare 11.00 a.m 1. Payment of existing remuneration

Sarani, Kolkata – 700 017 to Shri Vivek Saraogi, Managing

Director.

2. Payment of existing remuneration to

Smt. Meenakshi Saraogi and her re-

appointment as Jt. Managing Director.

3. Payment of Enhanced remuneration

to Shri Kishor Shah.

4. Alteration of Articles of Association.

Profiles of Directors retiring by rotation

Shri R.K. Choudhury

Date of birth : 26.01.1936

Qualifications : A leading Advocate

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Expertise and experience in : He has vast experience in the matters of taxation, corporate planning and international

specific functional areas arbitration. He is on the Board of Directors of several companies. He is also a member of

the International Bar Association, Supreme Court Bar Association, Bar Council of India

and Indian Council of Arbitration. He is also connected with several social and

philanthropic organisations.

Directorship held in : Upper Ganges Sugar and Industries Ltd., Reliance Bengal Industries Ltd., Lynx

other Companies Machinery and Commercial Ltd., Birla VXL Ltd., Puja Corporation Ltd., Khaitan

Consultants Ltd., Suryakiran Apartment Services Pvt. Ltd., Elpro International Ltd.,

Travel Hub Pvt. Ltd., Super Diamond Nirman Ltd. and Rajratan Impex Pvt. Ltd.

Membership in other : Member, Audit Committee of Upper Ganges Sugar and Industries Ltd., Member,

Board Committees Audit Committee of Elpro International Ltd., Member, Committee of Directors and

Share Transfer and Shareholders’/ Investors’ Grievance Committee of Birla VXL Ltd.

Shareholding in the

Company as on 30.09.07 : 56,000 equity shares

Shri S.B. Budhiraja

Date of Birth : 23.03.1931

Qualifications : Gold Medallist in Mechanical Engineering from the University of Roorkee.

Expertise and Experience in : He is an independent management consultant. He was the youngest-ever Managing

specific functional areas Director of Indian Oil Corporation in 1974-78 and was also the Managing Director of

IBP, Balmer Lawrie, and Indian Oxygen. He was the Overseas Director in Al Futtaim

Group, U.A.E. He is a fellow of the All India Management Association, and the Institute

of Management Consultants of India. He was also the president of the Indian Chamber of

Commerce, Kolkata in 1989-90 and Chairman, CII Eastern Region in 1988-89.

Directorships held in : Hindustan Sanitaryware and Industries Ltd., JCL International Ltd., Neuland

other companies Laboratories Ltd., Sushramika Pvt. Ltd. and Kumar Housing and Land Development Ltd.

Membership in other : Chairman, Share Transfer and Grievance Committee, Member, Audit Committee

Board Committees of Hindustan Sanitaryware and Industries Ltd. and Member, Audit Committee, Neuland

Laboratories Ltd. Member, Audit Committee - Kumar Housing and Land Development Ltd.

Shareholding in the

Company as on 30.09.07 : Nil

Financial yearThe financial year 2005-06 of the Company was extended upto 30th September 2006. Thereafter, the financial year of the

Company is from 1st October to 30th September every year.

Financial year calendar for 2007–08 (Tentative)Results for the quarter ending 31st December 2007 - Fourth week of January 2008

Results for the quarter ending 31st March 2008 - Fourth week of April 2008

Results for the quarter ending 30th June 2008 - Fourth week of July 2008

Results for the quarter ending 30th September 2008 - Second week of November 2008

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Book closure date13th February 2008 to 18th February 2008 (both days

inclusive) on account of AGM.

DividendThe Board has not recommended any dividend for the year

ended 30th September 2007.

Listing of equity shares on stockexchanges at i) National Stock Exchange of India Ltd.

Exchange Plaza, 5th Floor

Plot No. C/1, G Block

Bandra – Kurla Complex, Bandra (E)

Mumbai 400 051

ii) Bombay Stock Exchange Ltd.

The Corporate Relationship Department

Rotunda Building, PJ. Towers, Dalal Street

Fort, Mumbai 400 001.

iii) The Calcutta Stock Exchange Association Ltd.

7 Lyons Range, Kolkata 700 001 [Application for

delisting has been made].

iv] GDRs listed at Luxembourg Stock Exchange

SOCIETE DE LA BOURSE DE LUXEMBOURG

11 av de la Porte-Neuve, L-2227 Luxembourg

Listing feesListing fee for the year 2007–08 has been paid to the above

stock exchanges.

Depositories i) National Securities Depository Ltd.

Trade World, 4th Floor, Kamala Mills Compound

Senapati Bapat Marg, Lower Parel

Mumbai 400 003

ii) Central Depository Services (India) Ltd.

Phiroze Jeejeebhoy Towers, 17th Floor,

Dalal Street, Mumbai 400 023

Stock code• NSE symbol for BCML is BALRAMCHIN

• BSE code for BCML is 500038

• CSE code for BCML is 12012

• ISIN number for BCML is INE119A01028

• Regulation S GDR code for BCML is US0587882095

• Rule 144A GDR code for BCML is US0587881006

Reuters codeNSE – BACH.NS and BSE – BACH.BO

Stock Market data (Face value of Re.1 each)


Month’s National Stock Exchange (NSE) Bombay Stock Exchange (BSE)

Month’s Month’s Volume Month’s Month’s Volume

high price Low Price high price Low Price

(Rs.) (Rs.) (Nos) (Rs.) (Rs.) (Nos)

Oct. 2006 115.45 98.05 84139139 115.45 97.90 27080295

Nov. 2006 107.00 82.05 65667138 107.00 82.00 21535900

Dec. 2006 94.35 76.30 65461441 94.50 76.50 21758697

Jan. 2007 92.00 67.00 56083520 90.00 67.05 17289351

Feb. 2007 69.50 50.00 91652085 69.70 53.50 31019850

Mar. 2007 68.20 52.50 68591053 68.20 57.35 22498041

Apr. 2007 75.65 61.20 64880455 75.80 61.25 20575928

May 2007 87.40 60.60 73820408 81.35 61.10 21279253

Jun. 2007 82.00 65.55 71356589 78.10 65.85 21005051

Jul. 2007 81.55 64.75 66482887 77.90 65.00 18751145

Aug. 2007 67.70 49.80 36552045 70.05 49.90 10750567

Sept. 2007 87.50 59.05 140947521 89.45 59.10 42509036

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Share price performance

BSE Sensex NSE S&P CNX Nifty

Accounting year % Change in % Change in % Change in % Change in

BCML share price Sensex BCML share price Nifty

2006 – 07 - 25.71 + 38.84 - 25.54 + 39.93

Share Transfer SystemPresently, the share transfers which are received in physical form are normally put into effect within a maximum period of 30

days from the date of receipt and demat requests are confirmed within a maximum period of 15 days. The Company provides

investor and depository services in-house through its secretarial department.

Distribution of shareholding as on 30th September, 2007 (Face Value: Re. 1 each)

Shareholding Range No. of shareholders % of shareholders No. of shares % of shareholding

Up to 10,000 140005 99.46 44339595 17.87

10,001-50,000 587 0.42 12317513 4.96

50,001-100,000 75 0.05 5237080 2.11

100,001-500,000 63 0.04 12523762 5.05

500,001-1,000,000 11 0.01 8357745 3.37

1,000,001 and above 25 0.02 165378965 66.64

Total 140766 100.00 248154660 100.00

Pattern of shareholding as on 30th September, 2007 (Face Value: Re.1 each)

No. of Shares % of Holding

Promoters’ Group 78950890 31.82

Financial Institutions, Insurance Companies, Banks and Mutual Funds etc. 27575948 11.11

Foreign Institutional Investors 66634690 26.85

Foreign Corporate Bodies through FDI NIL NIL

Private Corporate Bodies 21727932 8.76

NRIs 831509 0.33

Foreign Nationals 1000 0.00

Indian Public 52414891 21.12

Outstanding GDRs 17800 0.01

Total 248154660 100.00

Dematerialisation of shares98.34% of the share capital is held in dematerialised form with the National Securities Depository Limited (NSDL) and the

Central Depository Services (India) Ltd. (CDSL) as on 30th September, 2007.

Outstanding GDR/ADR/or any convertible instruments, etc.1,63,52,000 Global Depository Receipts [GDRs] (each GDR represents one underlying equity share of the face value of Re.1

Global Reports LLC

Pursuant to Clause 49 of the Listing Agreement with stock exchanges, I, Vivek Saraogi, Managing Director of Balrampur

Chini Mills Limited, declare that all the Board Members and Senior Executives of the Company have affirmed their compliance

with the Code of Conduct during the year ended 30th September, 2007.

Kolkata Vivek Saraogi

19th November 2007 Managing Director

Declaration by the ManagingDirector on the Code of Conduct

each of the Company) were issued by the Company on

27.01.2006 and listed on the Luxembourg Stock Exchange.

Outstanding GDRs as on 30.09.2007 represents 17800

equity shares constituting 0.01 % of the paid up equity

capital of the Company.

Plant LocationUnit 1 : Balrampur (Sugar, Cogeneration, Distillery

and Bio-compost units), Dist: Balrampur,

Uttar Pradesh.

Unit 2 : Babhnan (Sugar, Cogeneration, Distillery &

Bio-compost units), Dist: Gonda,

Uttar Pradesh

Unit 3 : Tulsipur (Sugar Unit), Dist: Balrampur,

Uttar Pradesh

Unit 4 : Haidergarh (Sugar and Cogeneration units),

Dist. Barabanki, Uttar Pradesh.

Unit 5 : Akbarpur (Sugar and Co-generation units),

Dist. Ambedkarnagar, Uttar Pradesh.

Unit 6 : Mankapur (Sugar, Co-generation, Distillery

and Bio-compost units), Dist: Gonda,

Uttar Pradesh.

Unit 7 : Rauzagaon (Sugar and Co-generation units)

Dist: Barabanki, Uttar Pradesh.

Unit 8 : Kumbhi (Sugar and Co-generation units),

Dist: Lakhimpur-Kheri, Uttar Pradesh.

Unit 9 : Gularia (Sugar & Co-generation units),

Dist: Lakhimpur – Kheri, Uttar Pradesh


Investors’ Correspondence Mr. S.K. Agrawala, Company Secretary

Balrampur Chini Mills Ltd.

"FMC Fortuna", 2nd Floor, 234/3A, A.J.C. Bose Road

Kolkata – 700 020

Phone : 2287 4749 • Email – [email protected]

Non-Mandatory Requirements:i) The Company shall take a decision on the maximum

tenure of Independent Directors on the Board of the

Company at an appropriate time.

ii] The Company has set up a Remuneration Committee in

May 2005. The Remuneration Committee recommends

to the Board of Directors regarding remuneration

payable to the Executive Directors and also administers

the Employee Stock Option Scheme [ESOS].

iii) The quarterly/half-yearly results are published in the

newspapers and hosted on the Company’s website

www.chini.com and EDIFAR website

www.sebiedifar.nic.in.

iv] The Company is always striving towards ensuring the

unqualified financial statements.

v] The Company has not yet adopted any system of

training for its Board members or performance

evaluation of its non-executive directors.

vi] No resolution by postal ballot was passed during the

last year.

Code of ConductThe Company has adopted a code of conduct for its Board of

Directors and Senior Management personnel and the same

has been posted on the Company’s website.


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CEO/CFO CertificationThe Board of Directors

Balrampur Chini Mills Limited

Kolkata.

Re : Financial Statements for the year ended 30th September, 2007 -

Certification by Managing Director and Director-cum-Chief Financial Officer.

We, Vivek Saraogi, Managing Director and Kishor Shah, Director-cum-Chief Financial Officer, of Balrampur Chini Mills

Limited, on the basis of the review of the financial statements and the cash flow statement for the year ended 30th September

2007 and to the best of our knowledge and belief, hereby certify that :-

1. These statements do not contain any materially untrue statements or omit any material fact or contain statements that

might be misleading;

2. These statements together present a true and fair view of the Company’s affairs and are in compliance with existing

accounting standards, applicable laws and regulations.

3. There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year ended

30th September 2007 which, are fraudulent, illegal or violative of the Company’s Code of Conduct.

4. We accept responsibility for establishing and maintaining internal controls for financial reporting. We have evaluated the

effectiveness of the internal control systems of the Company pertaining to financial reporting and we have disclosed to the

auditors and the Audit Committee those deficiencies in the design or operation of such internal controls of which, we are

aware and the steps we have taken or propose to take to rectify these deficiencies.

5. We have indicated to the Auditors and the Audit Committee:

(a) there have been no significant changes in internal control over financial reporting during this year.

(b) there have been no significant changes in accounting policies during this year.

(c) there have been no instances of significant fraud of which we have become aware and the involvement therein, of

management or an employee having significant role in the Company’s internal control systems over financial reporting.


Kolkata Kishor Shah Vivek Saraogi

19th November, 2007 Director cum Chief Financial Officer Managing Director

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To the members of


We have examined the compliance of the conditions of Corporate Governance by Balrampur Chini Mills Limited for the year

ended 30th September, 2007, as stipulated in Clause 49 of the Listing Agreement of the said company with the Stock

Exchanges.

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

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

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

In our opinion and to the best of our information and according to the explanations given to us, and the representation made

by the directors and the management, we certify that the Company has complied with the conditions of corporate governance

as stipulated in the above-mentioned Listing Agreement.

As required by the guidance note issued by the Institute of Chartered Accountants of India, we have to state that as per the

records maintained, there were no investor’s grievances remaining unattended/pending for more than 30 days as at 30th

September, 2007.

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

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



7A, Kiran Shankar Ray Road, (Ajay Agrawal)

Kolkata – 700 001. Membership No. 17643

19th November 2007. Partner


Auditor’s Certificateon Corporate Governance

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Statement pursuant to Section 212 of the Companies Act, 1956, relating to the Company’s interest insubsidiary company for the year ended 30th September, 2007

1 Name of the subsidiary company : Indo Gulf Industries Ltd.

2 The financial year of the subsidiary company ends on : 30th September, 2007

3 Date from which they became subsidiary company : 30th August, 2007

4 Holding company’s interest : 4353365 equity shares of Rs.10 each fully paid-up

and 809158 equity shares of Rs.10 each partly

paid-up (Rs.5 paid-up per share)

5 Extent of holding : 53.96 %

6 The net aggregate amount of the subsidiary company

profit/ loss so far as it concerns the members of

the holding company

a Not dealt with in the holding company’s accounts :

i) For the financial year ended 30th September, 2007 : (Rs.88.04 lacs)

ii) For the previous financial years of the subsidiary

company since they became the holding

company’s subsidiary : Not applicable

b Dealt with in the holding company’s accounts:

i) For the financial year ended 30th September, 2007 : Nil

ii) For the previous financial years of the subsidiary

company since they became the holding

company’s subsidiary : Not applicable


Section 212

Kolkata S. K. Agrawala Kishor Shah Vivek Saraogi19th November, 2007 Secretary Director cum Chief Financial Officer Managing Director

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Management’sdiscussion andanalysis

Industry structure and developmentIndia is the world’s largest consumer and the second largest producer of

sugar. Sugarcane is primarily grown in nine Indian states: Andhra

Pradesh, Bihar, Gujarat, Haryana, Karnataka, Maharashtra, Punjab,

Uttar Pradesh and Tamil Nadu. More than 45 million farmers and their

families are dependent on sugarcane for their livelihood, while around

0.5 million workers are directly employed as agricultural labourers.

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Besides contributing to the rural economy, the sugar

industry has a significant impact on the environment. At

one end, sugar can be potentially polluting if adequate

safeguards are not taken; at the other end, sugar can be a

responsible green business, self-sufficient in energy needs

through the prudent utilisation of bagasse. The sugar

industry is also the primary source of raw material for the

production of ethanol and alcohol.

ProductionA record sugar production of 28.3 mn tonnes in 2006-07,

translated into an over-supply, pulling down sugar

realisations.

With an individual yield of more than one mn tonne, six out

of the nine sugar producing states in the country accounted

for around 94% of the total production during the year

under review. Uttar Pradesh and Maharashtra were the top

producers, accounting for 30% and 27% of the national

production.

State-wise production of sugar in India (in lakh tonnes)

State 2005-06 2006-07 2007-08

(Final) (Revised) (Forecast)

Andhra Pradesh 12.4 16.8 17.0

Bihar 4.2 4.5 4.5

Gujarat 11.7 14.2 14.3

Haryana 4.1 6.5 6.5

Karnataka 19.4 26.6 26.7

Maharashtra 52.0 90.9 92.0

Punjab 3.4 4.9 5.0

Tamil Nadu 21.4 25.7 26.0

Uttar Pradesh 57.8 84.8 85.5

Others 6.3 8.1 8.5

Total 192.6 283.0 286.0

Source: A USFDA report

The sugar industry is cyclical, influenced by climatic

variations, water availability and pest attack; each cycle runs

for around four to six years in India.

India’s sugar manufacturing mills are of three types – public,

private and cooperative. Public mills account for around 6%

of the total Indian mills in operation, private mills for 41%

and cooperative mills for 53%.

ConsumptionA primary indicator for sugar consumption in any country is

the measure of GDP growth. Following India’s 9.4% GDP

growth in 2006-07, sugar consumption appears to be on a

high growth path. The country’s sugar consumption has

grown steadily at 3.5% over the last decade, touching a

cumulative 20 mn tonnes during the year under review.

While population recorded a CAGR of 1.4% since 1996, the

per capita consumption of sugar averaged 2.1% growth

during the same period.

Traditionally, gur and khandsari have been the major

alternatives to sugar in India. The country is finally at a

stage when growth in sugar consumption is at the

expense of these alternatives, suggesting a shift in

consumption trends.

The drawal rate – indicating the use of sugarcane for sugar

production as a percent of total sugarcane production – was

68%, an all-time high. This has been a reversal in trend

from the 1960s, when the drawal rate was a low

30%.

Of the total sugar sold in the free market, around 61% is

accounted for by the industrial and small business segments,

also referred to as indirect consumption. The household

segment, which consumes sugar directly, accounts for an

estimated 39% of the total free sale (non-levy) sugar

consumption. The total non-levy consumption is estimated

at 17.52 mn tonnes [Source: KPMG report].

Low income households – with a monthly earning of less

than Rs. 5,000 – consume around 4.51 mn tonnes of sugar

every year or 25.8% of the total non-levy sugar

consumption. High income households, with a monthly

income of above Rs. 5,000, account for an estimated 2.24

mn tonnes of annual consumption with a share of

12.8%.

The industrial consumer segment consumed around 5.26 mn

tonnes of sugar in 2006-07, claiming a 30% share of the

total non-levy sugar consumption. The small business

segment accounts for an estimated 5.51 mn tonnes with a

31.5% share.

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While dairy, confectionery, bakery and beverages account

for around 75% of industrial consumption, amounting to

1.27 mn tonnes (in 2006-07), sweetmeat manufacturers

claim around 58% share of sugar requirements by small

businesses.

Price trendsWhile excessive government regulations have led to

unabated rise in sugarcane prices, they have succeeded partly

in smoothening price volatility for sugar.

Following stock correction in 2003-04, domestic sugar prices

looked up until mid-2006. Consequently, ex-factory

realisations in Uttar Pradesh increased from around

Rs. 11,500 per tonne in 2002-03 to around Rs. 18,000 per

tonne by June 2006. However, sugar prices plunged from

October 2006 onwards due to surplus production, pulling

realisations down to around Rs. 16,000 per tonne in the first

quarter of 2006-07 and then to around Rs. 14,500 per

tonne in the second quarter, touching a low of Rs. 12,500 in

the third quarter. It strengthened thereafter to a firmer

Rs. 13,500 per tonne following the government’s

announcement of creating a 5 mn tonne buffer stock.

TradeDomestic trade: Sugar is consumed widely across the

country. The nine sugar-producing states supply to the rest

of India. The movement of sugar has always been from the

surplus states to the nearby deficient once. For instance,

while Karnataka and Tamil Nadu supply sugar to Kerala,

Maharashtra and Gujarat, Uttar Pradesh supplies to western

and central states. Uttar Pradesh, Punjab and Haryana

supply sugar to the entire North India, while Uttar Pradesh,

Karnataka, Andhra Pradesh and Tamil Nadu supply sugar

to the eastern and north eastern regions of the country.

International trade: The Indian sugar industry has been

both, an importer and exporter. In times of deficit, India

imported sugar from Brazil, Australia and South Africa. In

times of surplus, India exported to EU, Persian Gulf,

Somalia, Sri Lanka, Indonesia and Bangladesh; there have

also been instances of India exporting and importing sugar

from Pakistan. Owing to an excessive production, domestic

prices were relatively low; with a high tariff placed on

low-priced imports by the government, international trade

was the lowest in 2006-07.

The global sugar industry also witnessed a downturn

during the year under review, thanks to a bumper cane crop

in Brazil, Thailand and other major sugar producing

countries. Sugar prices across the globe weakened, making

exports from India unviable. As a result, only 5% of the

country’s total sugar production was shipped abroad

in 2006-07.

Global perspectiveAccording to International Sugar Organisation predictions,

India is poised to outstrip Brazil as the world's biggest

sugar producer in 2007-08. While India's production in

2007-08 is pegged at 28.6 mn tonnes in raw value, it is

anticipated that Brazil, too, will enjoy a record production,

though global industry expansion is expected to be sluggish

in 2008.

The 2006-07 sugar year (October to September) saw

the international sugar markets driven by complex

dynamic trends of demand and supply as well as policy

forces. With sugar stocks being built up, prices remained

under pressure.

World sugar stock estimates

World sugar balance (million tonne, raw value)

2006/07 2005/06 Change

in in

mn tonne %

Production 162.621 152.079 10.542 6.93

Consumption 153.506 149.859 3.647 2.43

Surplus / Deficit 9.115 2.220

Import demand 44.438 46.676 -2.238 -4.79

Export availability 47.492 46.689 0.803 1.72

End stocks 65.825 59.764 6.061 10.14

Stocks/Consumption

ratio in% 42.88 39.88

Source: ISMA

The global sugar landscape continued to be highly

influenced by Brazil, thanks to its status as the lowest-cost

producer and largest exporter. Apart from this, change in

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the perception of ethanol from a downstream by-product to

a mainstream product had a significant influence on the

global sugar market. Worldwide, the sugar industry is

highly regulated and this is largely due to the perishable

nature of cane, the need to influence domestic prices and the

landholding structure. There is however, a difference in the

instruments of regulation, which vary across geographies.

ProductionDuring the sugar year 2006-07, global sugar production was

pegged at 150 mn tonnes with a CAGR of 1.5%. While

Brazil, China and the US continued to be the major sugar

producers, accounting for nearly 45% of the total sugar

production, the European Union collectively produced

around 14%. The year under review saw Brazil retaining its

status as the largest producer of sugar, successfully raising its

production at a CAGR of 5.7% since the deregulation in

1999-2000. India kept up the second spot during the

tenure, except in years of natural adversity.

ConsumptionDuring the year under review, global sugar consumption

was 149 mn tonnes. While India continued to remain the

largest consumer, it was closely followed by China, Brazil,

the US and the Russian Federation. Since the sugar

consumption in China, India

and Brazil is outgrowing the global average of 2.2%, these

geographies are expected to play a larger role in

the global sugar trade. Overall, Asia looks the most

promising in consumption growth (nine-year CAGR)

at 3.05%, followed by Africa at 3.01% (indicated below):

Growth in global sugar consumption

Source – KPMG report

This rise in sugar consumption has been particularly aided

by high growth in domestic economies and an increasing

population. The growth in developed economies like North

America and Europe were the lowest at 0.76% and 0.62%.

Given that the largest producers of sugar, except for the EU,

are also in these regions, it is expected that these

geographies will play a major role in the future.

TradeIn a dynamic trading environment, the major sugar

producers are also the leading exporters. The world sugar

trade accounts for around 36% of the global sugar

production, with India a marginal player. In 2006-07, the

average volume of preferential trade was estimated at 10 mn

tonnes. The major players in the sugar trade are Brazil, the

EU, Australia and Thailand.

Major sugar exporters

Source – KPMG report


Asia looks the mostpromising in terms ofconsumption growth(nine-year CAGR) at3.05%, followed byAfrica at 3.01%.

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Price trendsGlobal raw and refined sugar prices usually move in sync

with an average differential of USD 60 between raw and

refined realisations. The world sugar realisations were highly

influenced by Brazil.

Driven by a combination of factors which included high

crude oil prices (resulting in a diversion of cane crop to

ethanol, phase out of export subsidies by the European

Union, increased consumption and lower production in key

countries like India, white sugar prices firmed up to around

USD 480 per tonne by June 2006. However, since the

beginning of sugar year 2006-07, international prices

reversed. Higher production in major sugar producing

countries, especially Brazil and India, resulted in white sugar

prices declining to around USD 325 by 2007.

Large sugar exporters typically generate higher margins

from domestic sales compared with exports. Government

interventions and regulations help maintain high domestic

prices in these countries compared with global prices, a key

feature of global sugar trade. India is unique in this respect–

thanks to its low reliance on exports, it maintains one of the

lowest retail prices among the key geographies.

Going forward, weather conditions and international crude

oil price trends (which will influence the extent of cane

diversion to ethanol) will remain key determinants of the

global sugar stock and price trends.

Global sugar outlook Recent sugar reforms in the European Union could turn the

EU into a net importer with compensation paid to its

farmers and displaced processing facilities. High oil prices

and related ethanol boom places Brazil at the epicentre of

market developments. As for the US, corn sweetener and

sugar markets are being integrated with Mexico under

NAFTA. Among developing countries, low-cost producers

will benefit from a liberalised trading environment, while

others are likely to be affected by the loss of preferential

markets.

By-productsThe sugar industry in India has diversified into multiple

products with the objective to enhance realisations at every

stage of cane crushing. While molasses, bagasse and

pressmud continue to be primary by-products, ethanol and

exportable power are emerging as mainstream sources of

revenue.

The significant increase in cane production during 2006-07

adversely affected the pricing of by-products like molasses

and bagasse. In this scenario, integration became critical for

mill profitability as power and alcohol (including ethanol)

prices were relatively less variable, partly because of

government and regulatory support. For instance, power

tariffs remained at Rs. 3 per unit in the major sugar

producing states, while ethanol cost Rs. 21.5 per litre.

In adverse years, co-generation and ethanol contributed

significantly to the bottomline of sugar companies.

Co-generation A visible industry trend is bagasse-based co-generation

(exportable power) after meeting a company’s captive power

and steam requirements. The realisations from exportable

power are influenced by long-term power purchase

agreements with the respective state governments and

power companies. Currently, the cumulative exportable

power generated by the Indian sugar industry has been


Currently, the cumulativeexportable power generatedby the Indian sugar industryhas been established at 847MW with co-generation,clearly enjoying a provenrevenue potential under theClean DevelopmentMechanism (CDM)-basedcarbon credits.

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established at 847 MW enjoying a proven revenue potential

under the Clean Development Mechanism (CDM)-based

carbon credits.

Indian co-generation status

States Per cent

Tamil Nadu 29

Karnataka 25

Uttar Pradesh 27

Andhra Pradesh 18

Punjab 1

Source: KPMG report

AlcoholPotable alcohol and fuel ethanol are by-products

manufactured from molasses. Fuel ethanol is generally used

as a substitute for gasoline; its corresponding realisations are

dependant on the government-mandated price which, in

turn, is paid by oil marketers. Fuel ethanol is eco-friendly

like bio-diesel and enjoys the potential to generate revenues

through carbon credits.

Another positive development on the ethanol front was a

5% doping of petrol with ethanol, made mandatory from

October 2006. Oil marketing companies started sourcing

ethanol from distilleries to counter various operating and

legal hurdles like inter-state movements of alcohol and

molasses and sales tax disputes.

While 5% blending was only implemented in selective

states, the government increased the blending ratio to 10%

across all states (barring Jammu and Kashmir, North-east

India, Andaman and Nicobar Islands and Lakshadweep)

from October 2008. A uniform purchase price of Rs. 21.50

per litre, ex-factory, is recommended for the supply of

ethanol, to be implemented all over the country in three

years.

Ethanol Sugarcane is the primary raw material for ethanol; the major

sugar producing countries are also major ethanol producers.

Consider this: Brazil and the US together produce more

than 68% of the global ethanol production.

World ethanol production

Country Per cent share

Brazil 36

USA 32

China 9

India 5

EU 6

Russia 2

South Africa 1

Saudi Arabia 1

Others 8

Source: KPMG report

Among the by-products of sugar – ethanol and bagasse

(power) – ethanol has the most encouraging impact on sugar

trade. Ethanol represents an alternative use for cane; it can

be manufactured from cane directly or as a by-product of

sugar manufacture. Major sugar producing countries like

Brazil adopted a dynamic and balanced product mix

between sugar and ethanol, which enabled it to respond to

global shifts in the demand and supply, fuelling changes in

the perception of ethanol from a downstream product to a

mainstream product.

Countries like Brazil, the US, Canada and France are

producing ethanol and formulating ethanol programmes.

The impact of ethanol on sugar is set to intensify with key

geographies like Japan, South Korea, Australia, EU nations,

India and Argentina on the path to ethanol adoption. These

programmes address environmental concerns by reducing an

overdependence on the highly price-volatile crude oil.

Opportunities and Threats Sugar mills in India were able to crush higher quantities

of sugarcane in 2006-07, optimising the utilisation of

sugarcane crushing capacities.

The production — far exceeding the demand — created

excess inventory in the sugar industry and reduced sugar

prices substantially, leading to losses for manufacturers.

During the year, the central government mandated a

compulsory 5% blending of ethanol with petrol. This is

expected to go up to 10% by 1st October, 2008.

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This move will provide value-addition to its by-product

molasses. A higher availability of sugarcane would provide

higher quantity of bagasse and molasses for higher

production of power and alcohol.

Any restriction on export of sugar as was done by the

government in July 2006, may result in a decrease in the

prices of sugar.

Segment-wise performance Sugar: Sugar represented the largest income source for

BCML, contributing 80.98% to the turnover in

2006-07# (88.12% in 2005-06).

Alcohol: Alcohol contributed 9.11% to the Company’s

turnover in 2006-07# (6.77% in 2005-06).

Power: Power contributed 9.85% to the Company’s

turnover in 2006-07# (5.06% in 2005-06).

Bio-fertilisers: Bio-fertilisers contributed 0.05%

to the Company’s turnover in 2006-07# (0.06%

in 2005-06).

Segment-wise revenues (Rs. in crore)

Products 2003-04 2004-05 2005-06# 2006-07

Sugar 647.37 692.56 1757.71 1199.83

Alcohol 119.34 191.20 134.96 134.99

Power 40.30 48.02 100.93 145.97

Others 1.26 0.77 1.17 0.78

Total 808.27 932.55 1994.77 1481.57

#18-month period; year ended on 30th September, 2006

OutlookThis section has been discussed in detail in the Directors’

Report.

Risks and Concerns Demand RiskA decline in the domestic demand for sugar, ethanol and

power might pose a threat for Indian sugar manufacturers.

Risk Response

• According to estimates by FAPRI, domestic consumption

in India is expected to witness a CAGR of 1.9% over the

next 10 years while the Planning Commission estimates that

the demand for sugarcane will record a CAGR of 3.6%

between 2006 and 2011. Assuming a growth rate of 4%,

the projected domestic sugar consumption is estimated at

28.5 million MT in 2017.

• Ethanol being a green fuel, the government has made the

blending of petrol with ethanol mandatory. The blend ratio

has been increased from 5% to 10% across most states,

which is likely to double the demand for ethanol from the

present 50 crore litres.

• The government is actively encouraging the generation of

renewable power through co-generation in line with its

‘Power for all by 2012’ policy. Considering that the peak

deficit in Uttar Pradesh is around 9%, there exists a big

opportunity for UP-based sugar companies to supply power

to the State Grid.

Cyclicality RiskIndian sugar companies are prone to induced cyclicality,

with higher cane prices, in spite of falling sugar realisations,

adversely affecting profitability.

Risk response

To minimise the cyclicality risk, the Company has

progressively invested in business integration for the last

four years. This has helped to diversify its product portfolio

and has generated steady revenues from additional streams

like distillery and co-generation apart from sugar. Besides,

the implementation of a uniform cane policy, linking cane

prices to sugar prices, will diminish the risk of induced

cyclicality.

Industry RiskThe downturn in the Indian sugar industry may continue.

Risk response

A uniform cane pricing policy linking the cane price to the

end-product price, when implemented, will substantially

improve the health of sugar companies.

An excess inventory owing to surplus production and

corresponding price risks can also be managed by hedging,

which calls for managing a VaR of Rs. 3,000 crore as well as

a greater use of commodity exchanges like NCDEX and

MCX, leading to a lower variability in cash flows and price

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risk. This is particularly effective for sugar as sugar contracts

are actively traded on the commodity exchanges, which have

adopted various checks and controls to ensure a completely

fair market.

Regulatory RiskThe policies of the government may not be conducive to the

growth and development of the Indian sugar industry,

particularly in a difficult year.

Risk response

• The government has decided to assemble buffer stocks of

five million tonnes of sugar, responding to industry demands

to reduce excess supply.

• The government has also provided an export incentive

between Rs. 1,350 and Rs. 1,450 per tonne of sugar to mills

to be paid out of the government’s Sugarcane Development

Fund (SDF).

• Some state governments have announced tax relief

measures and subsidies to mills to encourage timely

payments to cane farmers and for late-season crushing. In

addition, transport subsidies are also declared for each metric

tonne of sugar transported from the fields to the sugar mills,

which is paid from the state government funds.

Export Risk Exports are primarily used to manage the surplus and deficit

in the domestic markets of countries where internal

consumption is equally high. Adverse national or foreign

policies and the location of the country might pose a

disadvantage to sugar exports in India.

Risk response

India is a major white sugar producer and exporter, being

close to the under-provided markets of Indonesia,

Bangladesh, Sri Lanka, and Pakistan. The WTO

enforcement has resulted in a decline in sugar exports from

the EU, vacating around 4.5 million MT of exports from the

world market and creating export opportunities for countries

like India. Moreover, the country is situated in a favourable

location resulting in a comparative freight advantage while

exporting raw sugar to the sugar-deficient countries of the

Middle East like Saudi Arabia, the UAE and some East

African countries.

In 2006-07, nearly 5% of the total sugar production in

India was exported. At present, nearly 2.5 million tonnes are

exported under advanced licensing scheme and open general

scheme with effect from January 2007. Moreover, the

Government of India has also announced an export incentive

scheme to encourage exports.

Business Model RiskThe Company’s business model may not be effective in a

year of sugar downturn.

Risk response

Balrampur follows an integrated model which mitigates the

inherent risk of cyclicality in the sugar business. The success

of its business model was evident in 2006-07, a year of

industry recession. The loss in the sugar business was offset

to a certain extent through stable revenues from the

cogeneration and distillery businesses.

Riding on the favourable scenario in the ethanol and power

segments, the Company commissioned new distilleries and

cogen plants during the year under review. These will

significantly contribute to the bottomline and margins in the

years to come.

Working Capital RiskThe sugar sector is working-capital intensive. The continued


According to estimatesby FAPRI, domesticconsumption in India isexpected to witness aCAGR of 1.9% over thenext 10 years

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slump in the industry may adversely affect the Company’s

ability to manage its working capital requirements.

Risk response

The Company will manage the enhanced requirement of

working capital by means of expected increase in working

capital limits from banks. Apart from this it is also raising

long-term funds to the tune of Rs. 159.16 crore through the

issue of equity shares to promoters on preferential basis.

Financial Performance Capital StructureThe Company’s equity capital stood at Rs. 24.81 crore

comprising 24,81,54,660 equity shares of Re. 1 each (fully

paid up). There was no fresh equity dilution during the year

under review.

Reserves and SurplusAt BCML, reserves and surplus declined from Rs. 881.00

crore in 2005-06 to Rs. 839.35 crore in 2006-07, on

account of a loss of Rs. 41.84 crore.

The loss reported by the Company was primarily on account

of higher sugarcane price under the SAP regime and low

sugar price owing to large production in the country.

During the year under review, there was no change in the

capital reserve, security premium reserve, capital redemption

reserve and revaluation reserve.

The free reserves of the Company at the end of 2006-07

stood at Rs. 837.14 crore and comprised nearly 99.74% of

the total reserves and surplus.

Loan ProfileThe borrowed funds of the Company increased by 134.96%,

from Rs. 547.40 crore in 2005-06 to Rs. 1286.15 crore in

2006-07. Secured loans comprising 94.12% of the total

loans, increased from Rs. 416.52 crore in 2005-06 to

Rs. 1,210.59 crore in 2006-07, while unsecured loans

declined from Rs. 130.88 crore to Rs. 75.56 crore during the

same period.

The Company took term loans primarily to finance the

setting up of greenfield sugar complexes at Kumbhi and

Gularia and for expansion at other units during the year

under review. During 2006-07, BCML raised external

commercial borrowings from DBS Bank Ltd (Rs. 66.51cr),

Standard Chartered Bank (Rs. 43.72 crore), UCO Bank

(Rs. 41.21 crore), Coopertive Centrale Raiffesisen

Boerenleenbank, B.A (Rs. 89.28 crore), International

Finance Corporation, Washington (Rs. 162.12 crore), State

Bank of India (Rs. 141.70 crore), ABN Amro Bank

(Rs.60.01 crore) and Citi Bank (Rs. 44.20 crore).

ICRA revised the Company’s rating of the Company from

A1+ to A1, keeping the industry scenario and the

prevailing financials in mind.

Capital EmployedThe capital employed by the Company in the business

increased by 48.22% from Rs. 1,448.58 crore in 2005-06 to

Rs. 2,147.10 crore in 2006-07, mainly on account of

investments in fixed assets. The Company’s fixed assets (net)

as a proportion of total capital employed was at 89.42% at

the end of the year. During the year under review, the

Company’s ROCE declined significantly from 40.12% to

5.52%.

Gross Block and DepreciationThe gross block of the Company increased in absolute terms

from Rs. 1,338.59 crore in 2005-06 to Rs. 1,970.32 crore


Of the total debtors ofthe Company, Rs. 42.32crore of debt(comprising 91.64% oftotal debts) was lessthan six months old.

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in 2006-07, a growth of nearly 47.19%. This can be

attributed to the installation of a new plant and machinery

at Kumbhi, Gularia and Rauzagaon during the year. The

Company continued to upgrade infrastructure and

technology across all its manufacturing facilities. The

Company provided Rs. 80.21 crore on account of

depreciation in line with the Straight Line Method during

the year under review.

InvestmentsCumulative investments at BCML increased from Rs. 0.21

crore in 2005-06 to Rs. 3.43 crore in 2006-07, mainly on

account of a 53.96% stake acquired in Indo-Gulf Industries

for Rs. 3.21 crore.

Sundry Debtors Owing to improved receivables management, the debtors at

BCML declined from Rs. 55.68 crore in 2005-06 to Rs.

46.18 crore in 2006-07. Of the total debtors of the

Company, Rs. 42.32 crore of debt (comprising 91.64% of

total debts) was less than six months old.

Loans and Advances Loans and advances comprised 32.61% of the Company’s

current assets. Loans and advances made by the Company

increased from Rs. 203.06 crore in 2005-06 to Rs. 239.90

crore in 2006-07. The increase was primarily due to an

increase in payments made towards excise duty and cane

purchase tax advances to the extent of Rs. 29.21 crore over

the previous year and loan to subsidiary company amounting

to Rs.70.33 crore.

Internal Control Systems The Company has stringent as well as comprehensive

internal control systems and procedures in place to prevent

the unauthorised use of its products and to ensure optimal

and efficient utilisation of resources. The internal controls

are evident right from the selection of crops, the purchase,

storage and logistics to the sale of the final product. The

Company conducts both regular and extensive checks at

every stage of its production and dispatch cycle to ensure

strict operational and quality compliance. An audit

committee, headed by a Non-Executive Independent

Director, periodically reviews the audit observations

Human Resources Balrampur believes that people represent its primary asset.

The Company strives to provide a fair, empowered and

merit-based workplace with scope for continuous learning,

enriching competencies among employees and accelerating

corporate growth. During the year under review, the

Company had total employee strength of 4967 people across

its plants and offices.

The Company was also actively engaged in imparting

functional and attitudinal training to all levels of employees

to ensure maximum productivity. The other initiatives taken

to manage the growing human resource base include a

regularised recruitment process, a fair and unbiased

performance appraisal system along with an in-built

feedback system. During the year under review, the

Company created a compensation structure that provides

members with both tangible and intangible benefits.

Cautionary Statement Statements in this Management Discussion and Analysis

Report may be "forward looking statements" within the

meaning of applicable securities laws and regulations. These

statements are based on certain assumptions and

expectations of future events. Actual results could differ

materially from those expressed or implied. Important facts

that could make a difference to the Company’s operations

include economic conditions affecting global and domestic

demand-supply, raw-material costs and availability, changes

in Government regulations, tax regimes, economic

developments within India and other factors such as

litigation and industrial relations, the Company assumes no

responsibility to publicly amend, modify or revise any

forward looking statement, on the basis of any subsequent

developments, information or events.


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Financial section

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To the members of Balrampur Chini Mills Limited

1. We have audited the attached Balance Sheet of

BALRAMPUR CHINI MILLS LIMITED as at 30th

September, 2007 and the relative Profit and Loss

Account and the Cash Flow Statement for the year

ended on that date, all of which we have signed

under reference to this report. These financial

statements are the responsibility of the management

of the Company. Our responsibility is to express an

opinion on these financial statements based on our

audit.

2. We have conducted our audit in accordance with

auditing standards generally accepted in India. Those

Standards require that we plan and perform the audit

to obtain reasonable assurance about whether the

financial statements are free of material misstatement.

An audit includes examining, on a test basis,

evidence supporting the amounts and disclosures in

the financial statements. An audit also includes

assessing the accounting principles used and

significant estimates made by management, as well as

evaluating the overall financial statement

presentation. We believe that our audit provides a

reasonable basis for our opinion.

3. As required by the Companies (Auditor's Report)

Order, 2003 (as amended), issued by the Central

Government of India in terms of section 227(4A) of

the Companies Act, 1956 (the ‘Act’) and on the basis

of such checks as we considered appropriate and

according to the information and explanations given

to us, we set out in the Annexure, a statement on the

matters specified in paragraphs 4 and 5 of the said

Order.

4. Further to our comments in the Annexure referred to

in paragraph 3 above, we report that:

a) We have obtained all the information and

explanations which to the best of our knowledge

and belief were necessary for the purposes of our

audit.

b) In our opinion, proper books of account as

required by law have been kept by the Company

so far as appears from our examination of those

books.

c) The Balance Sheet, the Profit and Loss Account

and the Cash Flow Statement dealt with by this

report are in agreement with the books of

account.

d) In our opinion, the Balance Sheet, the Profit and

Loss Account and the Cash Flow Statement dealt

with by this report have been prepared in

compliance with the applicable accounting

standards referred to in Section 211 (3C) of the

Act.

e) On the basis of written representations received

from the Directors, as on 30th September, 2007

and taken on record by the Board of Directors of

the Company, none of the Directors is

disqualified as on 30th September, 2007 from

being appointed as a Director in terms of clause

(g) of sub-section (1) of section 274 of the Act;

f) In our opinion and to the best of our information

and according to the explanations given to us, the

Balance Sheet, the Profit and Loss Account and

the Cash Flow Statement together with the Notes

thereon and attached thereto, give in the

prescribed manner the information required by

the Act and give a true and fair view in

conformity with the accounting principles

generally accepted in India:

i) in the case of the Balance Sheet, of the state

of affairs of the Company as at 30th

September, 2007,

ii) in the case of the Profit & Loss Account, of

the LOSS for the year ended on that date, and

iii) in the case of the Cash Flow Statement, of the

Cash Flows for the year ended on that date.



7A, Kiran Shankar Ray Road, Ajay Agrawal

Kolkata – 700 001 Membership No. 17643


Auditor’s Report

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Annexure to the Auditor’s Report

i) a) The Company has maintained proper recordsshowing full particulars including quantitativedetails and situation of its fixed assets.

b) As explained to us, the Company has aprogramme of physically verifying all its fixedassets once in a period of three years, and inaccordance therewith, major portion of fixedassets were physically verified by themanagement during the year. In our opinion,the frequency of verification is reasonablehaving regard to the size of the Company andnature of its assets. The discrepancies noticedon such verification were not material and havebeen properly dealt with in the books ofaccount.

c) During the year, the Company has not disposedof substantial part of its fixed assets.

ii) a) The inventories have been physically verifiedduring the year by the management atreasonable intervals except stock lying withoutside parties for which confirmation has beenobtained.

b) In our opinion and according to the informationand explanations given to us, the procedure ofphysical verification of stocks followed by themanagement are reasonable and adequate inrelation to the size of the Company and natureof its business.

c) On the basis of our examination, we are of theopinion that the Company is maintaining properrecords of inventory. No material discrepancieswere noticed on verification between thephysical stocks and the book records.

iii) a) The Company has not granted any loan, securedor unsecured, to companies, firms or otherparties covered in the register maintained undersection 301 of the Act.

b) As the Company has not granted any loan,secured or unsecured, to companies, firms orother parties covered in the register maintainedunder section 301 of the Act, clauses (iii) (b) to(iii)(d) of paragraph 4 of the said order are notapplicable to the Company.

c) The Company has not taken any loan, securedor unsecured, from companies, firms or otherparties covered in the register maintained underSection 301 of the Act.

d) As the Company has not taken any loan,secured or unsecured, from companies, firms orother parties covered in the register maintainedunder section 301 of the Act, clauses (iii) (f) and(iii) (g) of paragraph 4 of the said order are notapplicable to the Company.

iv) On the basis of information and explanation givento us, we are of the opinion that the Company hasan adequate internal control system commensuratewith the size of the Company and the nature of itsbusiness for the purchase of inventory and fixedassets and for the sale of goods and services.

v) a) Based on the audit procedure applied by us andaccording to information and explanationsgiven to us, the particulars of contracts orarrangements referred to in section 301 of theAct have been entered in the register required tobe maintained under that section.

b) In our opinion and according to informationand explanation given to us, the transactionsmade in pursuance of such contracts have beenmade at prices which are reasonable havingregard to prevailing market prices at therelevant time.

vi) The Company has not accepted any deposit withinthe meaning of section 58A, 58AA or any otherrelevant provisions of the Act and the rules framedthere under.

vii) In our opinion, the internal audit system of theCompany is commensurate with the size of theCompany and nature of its business.

viii) We have broadly reviewed the books of accountmaintained by the Company in respect of productswhere pursuant to the rules made by the CentralGovernment, the maintenance of cost records hasbeen prescribed under section 209(1)(d) of the Actand are of the opinion that, prima facie, theprescribed accounts and records have been madeand maintained. We, however, as not required,have not made a detailed examination of suchrecords.

ix) a) On the basis of our examination, the Company isregular in depositing undisputed statutory duesincluding Provident Fund, Income Tax, Sales Tax,Service Tax, Custom Duty, Excise Duty, Cess,Investor Education and Protection Fund, WealthTax and other statutory dues with appropriateauthorities and no undisputed amounts payablein respect of the aforesaid dues were outstandingas at 30th September, 2007 for a period of morethan six months from the date of becomingpayable. On the basis of our information, theprovisions of Employees’ State Insurance Act arenot applicable to the Company.

b) The disputed statutory dues aggregating to Rs.1052.65 lacs that have not been deposited onaccount of matters pending before appropriateauthorities are as under:

Statement referred to in our report of even date to the members of BALRAMPUR CHINI MILLS LIMITED on theaccounts for the year ended 30th September, 2007.

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Sl. Name of the Nature of dues Period to which Amount Forum (Where theNo. statute pertain (Rs. Lacs) dispute is pending)

1. Central Excise Act, 1944 Excise Duty 1995 – 1996 7.96 Commissioner of Central Excise.2. Central Excise Act, 1944 Excise Duty 1998 to 2000 1.82 Joint Commissioner of

Central Excise.3. Central Excise Act, 1944 Excise Duty 2005 – 2006 4.80 Assistant Commissioner of

Central Excise.4. Central Excise Act, 1944 Excise Duty 2003 – 2004 6.57 Tribunal.5. Central Excise Act, 1944 Excise Duty 2000 to 2003 20.20 Supreme Court. 6. Central Excise Act, 1944 Excise Duty 2003 – 2004 1.03 Commissioner of Central Excise.7. Central Excise Act, 1944 Excise Duty 2005 – 2006 2.82 Commissioner of Central Excise.8. Central Excise Act, 1944 Excise Duty 2005 – 2006 20.88 CESTAT.9. U.P. Sheera Niyantran Adm. Charges 1996 to 2007 971.19 High Court.

Adhiniyam, 1964 on Molasses10. U P Trade Tax Act, 1948 Sales Tax 1990 – 1991 0.22 High Court.11. U P Trade Tax Act, 1948 Sales Tax 1998 – 1999 1.26 Joint Commissioner (Appeals).12. U P Trade Tax Act, 1948 Sales Tax 1999 – 2000 1.39 Joint Commissioner (Appeals). 13. U P Trade Tax Act, 1948 Sales Tax 1999 – 2000 2.04 High Court.14. U P Trade Tax Act, 1948 Sales Tax 1999 – 2000 0.34 High Court.15. U P Trade Tax Act, 1948 Sales Tax 2000 to 2003 0.65 Joint Commissioner (Appeals).16. Tax on Entry of Goods Entry Tax 2001 – 2002 9.48 Tribunal.

Act, 1999Total 1052.65

x) The Company has no accumulated losses and hasnot incurred any cash loss during the year coveredby our audit or in the immediately precedingfinancial period.

xi) The Company has not defaulted in payment of duesto a financial institution or bank or debenture-holders.

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

xiii) The provisions of any special statue applicable toChit Fund, Nidhi or Mutual Benefit Society are notapplicable to this Company.

(xiv) The Company is not dealing or trading in shares,securities, debentures or other investments.However, the investments made by the Company inshares and other securities are held by the Companyin its own name.

xv) According to the records of the Company andaccording to the information and explanations givento us, the Company has not given any guarantee forloans taken by others from bank or financialinstitutions.

xvi) On the basis of our examination and according tothe information and explanation given to us, theterm loans have been applied for the purpose forwhich the loans were obtained.

xvii) According to the information and explanation givento us and on and overall examination of the BalanceSheet of the Company, we report that no fundsraised on short term basis have been used for longterm purposes.

xviii) The Company has not made any preferentialallotment of shares to parties and companiescovered in the register maintained under section301 of the Act.

xix) The Company has not issued any secureddebentures.

xx) The Company has not raised any moneys by publicissue during the year covered by our audit report.

xxi) In our opinion and according to the informationand explanation given to us, no fraud on or by theCompany has been noticed or reported during theyear that causes the financial statements materiallymisstated.

For G. P. Agrawal & Co.Chartered Accountants

7A, Kiran Shankar Ray Road, Ajay AgrawalKolkata – 700 001 Membership No. 1764319th November, 2007 Partner

Global Reports LLC


Balance Sheet As at 30th September, 2007

(Rupees in Lacs)

Schedule As at 30th As at 30th

September, 2007 September, 2006

I. SOURCES OF FUNDS

1. Shareholders' Funds

a) Share Capital A 2481.55 2481.55

b) Reserves & Surplus B 83935.00 86416.55 88100.96 90582.51

2. Loan Funds

a) Secured Loans C 121059.36 41651.75

b) Unsecured Loans D 7556.00 128615.36 13088.24 54739.99

3. Deferred Tax Liability (Net) E 12324.45 11926.77

227356.36 157249.27

II. APPLICATION OF FUNDS

1. Fixed Assets

a) Gross Block 197031.69 133859.12

b) Less: Depreciation 38252.48 30192.29

c) Net Block 158779.21 103666.83

d) Capital Work-in-progress 33218.00 29525.32

Net Fixed Assets F 191997.21 133192.15

2. Investments G 343.01 21.14

3. Current Assets, Loans & Advances

a) Current Assets H 49566.05 26972.49

b) Loans & Advances I 23989.66 20305.58

73555.71 47278.07

c) Less: Current Liabilities & Provisions J 38860.76 23706.37

Net Current Assets 34694.95 23571.70

4. Miscellaneous Expenditure & Losses K 321.19 464.28

(To the extent not written off or adjusted)

227356.36 157249.27

Significant Accounting Policies S

Notes on Accounts T

Schedules 'A' to 'K', 'S' & 'T' referred to above form an integral part of the Balance Sheet.

This is the Balance Sheet referred to in our report of even date.


Ajay Agrawal S. K. Agrawala Kishor Shah Vivek SaraogiMembership No. 17643 Secretary Director cum Managing DirectorPartner Chief Financial Officer

7A, Kiran Shankar Ray RoadKolkata - 700 00119th November, 2007

Global Reports LLC


Profit and Loss Account For the year ended 30th September, 2007

(Rupees in Lacs)

Schedule Year ended 30th 18 Months ended 30thSeptember, 2007 September, 2006

I INCOMEGross Turnover 147632.44 198976.71 Less: Excise Duty 8460.54 9134.77 Net Turnover 139171.90 189841.94 Other Income L 1022.86 681.02 Increase/ (Decrease) in Stock M 21360.32 (28124.14)Profit/ (Loss) from Farm Account N (2.07) 0.58

161553.01 162399.40 II EXPENDITURE

Cost of Raw Materials Consumed 128099.05 82731.55 Purchase of Finished Goods – 11315.11 Salaries, Wages & other Employees' Benefits O 7528.63 6659.82 Other Manufacturing & Administrative Expenses P 14744.35 13447.47 Selling Expenses Q 872.00 1044.13 Managerial Remuneration 359.54 533.03 Interest & Other Financial Charges R 5441.73 3450.78 Depreciation 8021.99 6709.28 Transfer to Storage Fund for Molasses 22.46 19.33

165089.75 125910.50 III Profit/ (Loss) before Tax (3536.74) 36488.90

(Add)/Less: Provision for TaxCurrent Tax (186.00) 5491.00 Fringe Benefit Tax (64.00) 86.00 Deferred Tax (397.68) (647.68) 1753.08 7330.08

IV Profit/ (Loss) after Tax (4184.42) 29158.82 Balance brought forward 575.99 520.70

V Profit/ (Loss) available for appropriation (3608.43) 29679.52 VI APPROPRIATIONS

Interim Dividend on Equity Shares – 4963.08 Proposed Final Dividend on Equity Shares – 3722.32 Corporate Tax on Dividend – 1218.13 General Reserve – 19200.00 Balance Carried to Balance Sheet (3608.43) 575.99

(3608.43) 29679.52 Basic and diluted earnings per share of Re. 1/- each (1.69) 12.19(Refer Note - 14 of schedule- "T" )Significant Accounting Policies SNotes on Accounts T

Schedules 'L' to 'T' form an integral part of the Profit and Loss Account.

This is the Profit and Loss Account referred to in our report of even date.




Global Reports LLC


Cash Flow Statement For the year ended 30th September, 2007(Rupees in Lacs)

(Rupees in Lacs)

Year ended 30th 18 Months ended 30th September, 2007 September, 2006

A CASH FLOW FROM OPERATING ACTIVITIESNet Profit before tax and extra ordinary items (3536.74) 36488.90Adjustments for:Depreciation 8021.99 6709.28Share Issue Expenses written off 143.09 214.64Interest (Net) 5441.73 3450.78Dividend received (1.44) (32.86)Profit on sale of Investments (Net) – (1.24)Loss on sale/discard/impairment of Fixed Assets 51.60 164.73Exchange Rate Fluctuation (Net) (306.66) 43.33Employee Stock Option Expense (4.00) 36.72Provision for liabilities – 263.77Transferred to Storage Fund for Molasses 22.46 13368.77 19.33 10868.48Operating Profit before working capital changes 9832.03 47357.38Adjustments for:Trade and other receivables 3940.05 (16482.77)Inventories (23464.23) 26862.01Trade payable 16012.69 (3511.49) 2903.97 13283.21 Cash generated from operations 6320.54 60640.59Direct Taxes (paid) /received 3358.42 (4869.23)Cash Flow before extra ordinary items 9678.96 55771.36Extra ordinary items – –Net Cash Generated/(used) - operating activities 9678.96 55771.36

B CASH FLOW FROM INVESTING ACTIVITIESPurchase of Fixed Assets (67097.56) (85000.22)Sale of Fixed Assets 218.92 254.44Purchase of Investments (8928.00) (43509.09)Sale of Investments 8606.13 48015.80Loan given to a Subsidiary (7033.68) –Dividend received 1.44 32.86Interest received 441.59 34.28Net cash Generated/(used) - investing activities (73791.03) (80171.93)

C CASH FLOW FROM FINANCING ACTIVITIESProceeds from Issuance of Equity Share capital (Net) – 21542.16Proceeds from long term borrowings 66723.36 23857.94Repayment of long term borrowings (6757.45) (8473.85)Proceeds from other borrowings 14216.10 672.44 Interest paid (5815.47) (3577.69)Dividend paid (4244.38) (9888.15)Net cash Generated/(used) - Financing Activities 64122.16 24132.85 Net Increase/(Decrease) in Cash & Cash Equivalents (A+B+C) 9.96 (267.72)Opening Cash and Cash Equivalents 1348.37 1616.09Closing Cash and Cash Equivalents 1358.33 1348.37

Year ended 30th 18 Months ended 30th September, 2007 September, 2006

a) Cash and Cheques in hand 559.86 816.08 b) Balances with banks in Current Accounts 798.01 531.83 c) Balances with Post office in Saving Bank Accounts 0.46 0.46

1358.33 1348.37

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

2) Figures in bracket represent cash outflow.3) Cash and Cash equivalents at the end of the year consist of:

This is the Cash Flow Statement referred to in our report of even date.For G. P. Agrawal & Co.Chartered Accountants

Ajay Agrawal S. K. Agrawala Kishor Shah Vivek SaraogiMembership No. 17643 Secretary Director cum Managing DirectorPartner Chief Financial Officer7A, Kiran Shankar Ray RoadKolkata - 700 00119th November, 2007

Global Reports LLC


Schedules forming part of the accounts(Rupees in Lacs)

Authorised40,00,00,000 Equity Shares of Re. 1/- each 4000.00 4000.00

25,00,000 Preference shares of Rs. 100/- each 2500.00 2500.00 6500.00 6500.00

Issued, Subscribed and Paid up24,81,54,660 Equity Shares of Re. 1/- each fully paid up 2481.55 2481.55

2481.55 2481.55

Notes:1) 15,55,39,650 Equity Shares have been issued and allotted as fully paid up Bonus Shares by capitalisation of Security

Premium, Capital Redemption Reserve and General Reserve.

2) 2,37,55,600 Equity Shares have been issued to the members of erstwhile Babhnan Sugar Mills Limited pursuant toScheme of Amalgamation.

3) 21,15,400 Equity Shares have been issued to the members of erstwhile Tulsipur Sugar Company Limited pursuantto Scheme of Amalgamation.

4) Out of 2,27,66,780 Equity Shares of Re. 1/- each offered to the shareholders on right basis, issue of 17,270 (PreviousPeriod 17,270) Equity Shares have been kept in abeyance as per the direction of court.

5) 1,63,52,000 fully paid up Equity Shares of Re.1/- each were allotted in January, 2006 at a price of Rs. 135/- per share,ranking pari passu with the existing Equity Shares, each of which is represented by one Global Depository Receipt(GDR) issued @ US$ 3.0577 each for an aggregate amount of US $ 50 million.

Notes: Deductions in Employees Stock Option Adjustment Account represents forfeited Options.

As at 30th As at 30thSeptember, 2007 September, 2006

A SHARE CAPITAL

(Rupees in Lacs)

Capital Reserve 86.42 – – 86.42

Security Premium 42050.56 – – 42050.56

Capital Redemption Reserve 2500.00 – – 2500.00

Revaluation Reserve 18.24 – – 18.24

Storage Fund for Molasses 60.84 22.46 – 83.30

General Reserve 42772.19 – – 42772.19

Less: Debit Balance of

Profit & Loss Account (As per Contra) – – 3608.43 (3608.43)

42772.19 39163.76

Employees Stock Option

Adjustment Account 36.72 – 4.00 32.72

Surplus as per Profit & Loss Account 575.99 – 575.99 –

88100.96 22.46 4188.42 83935.00

As at 1st As at 30thOctober, 2006 Additions Deductions September, 2007

B RESERVES AND SURPLUS

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A. Term LoansI. Rupee Loans

a) ICICI Limited (ICICI) – 625.00b) State Bank of India (SBI) 2500.00 2500.00c) Government of India, Sugar Development Fund (SDF) 5454.01 4329.33d) Government of India (GOI) (Free of Interest) 160.50 186.18

II. External Commercial Borrowings (ECB)a) International Finance Corporation, Washington (IFC) 19395.50 4899.30b) ABN Amro Bank, NV (ABN) 10110.73 5136.44c) State Bank of India (SBI) 21993.12 9239.00d) DBS Bank Ltd. (DBS) 6651.00 –e) Standard Chartered Bank (SCB) 4372.00 –f) Coopertive Centrale Raiffeisen Boerenleenbank, B.A (CCRB) 8928.16 1531.00g) BNP Paribas (BNP) 6982.50 6982.50h) UCO Bank (UCO) 4120.50 –i) CITI Bank (CITI) 4420.00 –

B. Cash Credit AccountState Bank of India (SBI) 25971.34 6223.00

121059.36 41651.75


C SECURED LOANS

Notes:1) Term Loan from ICICI was secured by way of first equitable mortgage on immovable properties and hypothecation

of movable properties, both present and future, pertaining to the Company's cogeneration unit at Balrampur, subjectto charge on current assets (including book debts) created in favour of SBI to secure the working capital limits (duewithin a year Rs. Nil, previous period Rs. 625.00 Lacs).

2) Term loan from SBI is secured by way of first pari passu equitable mortgage on immovable properties and hypothecationof moveable properties, both present and future, pertaining to Company's sugar and co-generation units at Akbarpurand also guaranteed by a Director of the Company (due within a year Rs. 625.00 Lacs, previous period Nil).

3) Term Loans from SDF are secured by an exclusive second charge by way of equitable mortgage on immovableproperties and hypothecation of movable properties (excluding current assets and book debts), both present andfuture, pertaining to Company's sugar and cogeneration units at Balrampur, sugar unit at Babhnan, sugar andcogeneration units at Haidergarh, sugar and cogeneration units at Akbarpur and sugar unit at Tulsipur (due withina year Rs 882.70 Lacs, previous period Rs.723.69 Lacs).

4) Term Loan from GOI is secured by way of equitable mortgage on immovable properties and hypothecation ofmovable properties, both present and future, pertaining to Company’s sugar unit at Babhnan, subject to charge oncurrent assets (including book debts) created in favour of SBI to secure the working capital limits and also guaranteedby some of the Directors of the Company (due within a year Rs.40.13 Lacs, previous period Rs.25.68 Lacs).

5) a) ECB from IFC amounting to Rs. 3499.50 Lacs is secured, by way of first equitable mortgage on immovableproperties and hypothecation of movable properties and second charge on current assets, both present andfuture, pertaining to Company's sugar and cogeneration units at Haidergarh, exclusive first charge by way ofequitable mortgage on immovable properties and hypothecation of movable properties and second charge oncurrent assets, both present and future, pertaining to Company's distillery and bio compost units at Babhnan andfurther guaranteed by some of the Directors of the Company (due within a year Rs.1399.80 Lacs, previous periodRs.1399.80 Lacs).

b)ECB from IFC amounting to Rs. 15896.00 Lacs is to be secured, by way of first equitable mortgage on immovableproperties and hypothecation of movable properties and second charge on current assets, both present andfuture, pertaining to Company's sugar and cogeneration unit at Haidergarh, equitable mortgage on immovableproperties and hypothecation of movable properties and second charge on current assets, both present andfuture, pertaining to Company's sugar and cogeneration unit at Rauzagaon and further guaranteed by some ofthe Directors of the Company (due within a year Rs.Nil, previous period Nil).

6) ECBs from ABN are secured by way of exclusive first equitable mortgage on immovable properties and hypothecation

Global Reports LLC


Schedules forming part of the accountsof movable properties (excluding current assets and book debts), both present and future, pertaining to Company'ssugar and cogeneration units at Mankapur (due within a year Rs.1027.29 Lacs, previous period Rs. 1027.29 Lacs).

7) a) ECB from SBI amounting to Rs. 8084.12 Lacs is secured by way of first pari passu equitable mortgage on immovableproperties and hypothecation of movable properties, both present and future, pertaining to Company's sugar andcogeneration units at Akbarpur (due within a year Rs. 2309.76 Lacs, previous period Rs. 1154.88 Lacs).

b)ECB from SBI amounting to Rs. 13909.00 Lacs is secured by way of first pari passu equitable mortgage onimmovable properties and hypothecation of movable properties (excluding current assets and book debts), bothpresent and future, pertaining to Company's sugar and cogeneration units at Kumbhi and Gularia (due within ayear Nil, previous period Nil).

8) ECB from DBS is secured by way of hypothecation of movable properties (excluding current assets and bookdebts), both present and future, and to be further secured by equitable mortgage on immoveable propertiespertaining to Company's sugar unit at Balrampur (due within a year Nil, previous period Nil).

9) ECB from SCB is secured by way of hypothecation of movable properties (excluding current assets and book debts), bothpresent and future, pertaining to Company's cogeneration unit at Balrampur (due within a year Nil, previous period Nil).

10) a) ECB from CCRB amounting to Rs. Nil (Previous period Rs. 1531.00 Lacs) was secured by way of hypothecation ofmovable properties (excluding current assets and book debts), both present and future, pertaining to Company'ssugar unit at Balrampur, Babhnan and Tulsipur (due within a year Nil, previous period Rs. 1531.00 Lacs).

b)ECB from CCRB amounting to Rs. 8928.16 Lacs is secured by way of first pari passu equitable mortgage onimmovable properties and hypothecation of movable properties (excluding current assets and book debts), bothpresent and future, pertaining to Company's sugar and cogeneration units at Kumbhi and Gularia (due within ayear Nil, previous period Nil).

11) ECB from BNP and UCO are secured by way of first pari passu equitable mortgage on immovable properties andhypothecation of movable properties (excluding current assets and book debts), both present and future, pertaining toCompany's sugar and cogeneration units at Kumbhi and Gularia (due within a year Rs. 2327.50 lacs, previous period Nil).

12) ECB from CITI is secured by way of first pari passu hypothecation of movable properties (excluding current assetsand book debts), both present and future, pertaining to Company's sugar and cogeneration units at Kumbhi andGularia (due within a year Nil, previous period Nil).

13) Cash Credit with SBI is secured / to be secured by way of hypothecation of stock of sugar, sugar in process andother current assets including book debts (excluding current assets of cogeneration & distillery units), both presentand future, and 3rd charge by way of joint equitable mortgage on Company's immovable properties andhypothecation of movable properties (excluding cogeneration & distillery units) and also guaranteed by some ofthe Directors of the Company.

(Rupees in Lacs)

From Banks 4056.00 13088.24

Others 3500.00 –

7556.00 13088.24


D UNSECURED LOANS

(Rupees in Lacs)

Deferred Tax Liability

Depreciation on Fixed Assets 17145.33 13098.46

Deferred Tax Assets

MAT Credit (1559.90) (539.39)

Carried Forward Losses (1446.31) –

Expenses allowable for tax purposes when paid (1814.67) (4820.88) (632.30) (1171.69)

12324.45 11926.77


E DEFERRED TAX LIABILITY (NET)

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Global Reports LLC



Long Term

In Government Securities :

(Deposited with Government authorities)

National Plan Certificates 0.04 0.04

Post Office National Saving Certificates 1.55 1.40

In Shares of Joint Stock Companies :

Trade Investments :

Quoted :

Subsidiary Company :

4353365 (Previous period Nil) Equity Shares of Rs.10/- each fully 305.39 @ –

paid up in Indo Gulf Industries Ltd.

809158 (Previous period Nil) Equity Shares of Rs.10/- each partly 16.33 @ –

paid up in Indo Gulf Industries Ltd. (Rs.5/- per Share paid up)

Unquoted, Fully Paid Up :

196600 Equity Shares of Rs.10/- each in Avantika Ganna Pvt. Ltd. 19.66 19.66

35 Ordinary Shares of Rs.100/- each in Balrampur Sugar 0.03 0.03

Co. Consumers Co-operative Society Ltd.

110 Ordinary Shares of Rs.10/- each in Co-oprative Development 0.01 0.01

Union Ltd.

1 Ordinary Share of Rs.10/- each in Co-operative Stores Ltd. – * – *

Other than Trade :


48 Ordinary Shares of Re.1/- each in Fortuna Services Ltd. – * – *

343.01 21.14

@ Market Value not available.

* Book Value Re.1/-, hence shown as Nil.

The Following units were purchased and sold during the year :

1) 49272772.587 Units of Reliance Liquidity Fund,

2) 358956.153 Units of Tata Liquid Super High Investment Fund.


G INVESTMENTS

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Interest accrued on Investments 4.95 4.19 Stock(As taken, valued & certified by the Management)i) Stores & Spare Parts 6538.14 6083.41 ii) Loose Tools & Equipments 365.14 261.85 iii) Scrap 42.60 6945.88 65.64 6410.90 Stock-in-Trade

Raw Materials 10.64 19.32 Finished Goods i) Sugar 34421.68 11980.69 ii) Industrial Alcohol 307.35 180.72 iii) Bio-compost 73.67 56.32 iv) Banked Power 26.18 34828.88 13.27 12231.00 Work-in-Processi) Sugar 83.18 82.85 ii) Molasses 1.89 2.89 iii) Bio-compost 13.31 98.38 4.26 90.00 Molasses 893.36 455.22 Bagasse 509.76 622.68 Pressmud 11.18 3.45 Standing Crop 0.86 2.15 Sundry Debtors (Unsecured, considered good)i) Debts outstanding for a period exceeding six months 385.97 309.83 ii) Other debts 4231.91 4617.88 5257.67 5567.50 Cash & Bank Balances Cash and cheques in hand (As certified)i) Cash in hand 156.84 187.28 ii) Cheques in hand 403.02 559.86 628.80 816.08 With Scheduled Banks i) In Current Accounts 798.01 531.83 ii) In Fixed Deposit Accounts 167.11 126.30 iii) In Unclaimed Dividend Accounts 118.84 1083.96 91.41 749.54 With Post Office In Saving Bank Accounts 0.46 0.46

49566.05 26972.49


H CURRENT ASSETS

Notes: i) Sundry debtors include Rs. 45.59 lacs (Previous period Rs. 44.93 lacs) under litigation.ii) Stock in transit included in Stock of Stores & Spare Parts Rs. 133.45 lacs (Previous period Rs. 247.58 lacs).

Notes: Loans & Advances include Rs. 13.36 lacs (Previous period Rs. 13.86 lacs) under litigation.

(Rupees in Lacs)

Loans (Secured)To Subsidiary Company 7033.68 –Advances (Unsecured)Advances recoverable in cash or in kind or forvalue to be received or pending adjustment 5242.41 4225.87 Advances against Capital Assets 3874.97 10850.95Advance Payment of Tax 6105.40 9978.26Less: Provision for Tax 6105.40 – 9659.90 318.36Excise Duty & Cane Purchase Tax Advance 7771.21 4849.88Security Deposits 67.39 60.52

23989.66 20305.58


I LOANS AND ADVANCES (Considered good)

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Schedules forming part of the accounts

(Rupees in Lacs)

Share Issue Expenses 464.28 678.92

Less : Written off during the year 143.09 321.19 214.64 464.28

Debit Balance of Profit & Loss Account 3608.43 –

(As per Annexed Account)

Less: General Reserve (As per contra) 3608.43 – –

321.19 464.28


K MISCELLANEOUS EXPENDITURE & LOSSES

(Rupees in Lacs)

Current Liabilities

Sundry Creditors (Refer Note 4 of Schedule - "T") 32225.52 16910.99

Interest accrued but not due 2652.10 2158.66

Excess Price of Levy Sugar (Refer Note -3 of Schedule -"T") 43.15 43.15

Investor Education & Protection Fund :

Unclaimed Dividend 118.84 35039.61 91.41 19204.21

Provisions

Provision for Tax 9631.89 9659.90

Less: Advance Payment of Tax 6105.40 3526.49 9659.90 –

Proposed Final Dividend – 3722.32

Provision for Corporate Tax on Dividend – 522.06

Provision for Retirement Benefits of Employees 279.66 250.38

Provision for Liabilities (Refer Note -16 of Schedule -"T") 15.00 7.40

38860.76 23706.37


J CURRENT LIABILITIES AND PROVISIONS

* Includes Rent received (Gross) Rs. 100.03 lacs (Previous period Rs. 53.53 lacs), TDS Rs. 4.83 lacs (Previous period

Rs. 0.79 lac).

(Rupees in Lacs)

Dividend on Current Investments (other than trade) 1.44 32.86

Profit from Sugar Trading 4.69 53.64

Insurance Claims Received 233.71 266.87

Liabilities no longer required written back 55.58 185.00

Provision against Investments written back (Net) – 1.07

Profit on sale of Current Investments (other than trade) – 0.17

Miscellaneous Income * 262.45 133.25

Exchange Rate Fluctuation (Net) 464.99 –

Adjustment relating to earlier years (Net) – 8.16

1022.86 681.02

Year ended 30th 18 Months ended 30thSeptember, 2007 September, 2006

L OTHER INCOME

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* Represents differential Excise duty & Education Cess on opening & closing stock of finished goods /by products.

(Rupees in Lacs)

Opening StockFinished Goods 12231.00 40211.05 Molasses 455.22 1923.81 Bagasse 622.68 763.67 Pressmud 3.45 13.63 Work in Process 90.00 13402.35 759.25 43671.41 Add : Acquired on TakeoverFinished Goods – 21.81 Bagasse – – 5.78 27.59 Closing StockFinished Goods 34828.88 12231.00 Molasses 893.36 455.22 Bagasse 509.76 622.68 Pressmud 11.18 3.45 Work in Process 98.38 36341.56 90.00 13402.35

22939.21 (30296.65)Add/Less : Excise Duty & Education Cess on Stock* (1578.89) 2172.51

21360.32 (28124.14)


M INCREASE/(DECREASE) IN STOCK

(Rupees in Lacs)

Sales 3.94 3.53 Closing Stock of Standing Crop 2.82 4.58 Net Loss/ (Profit) transferred to Profit & Loss Account 2.07 (0.58)

8.83 7.53 Opening Stock of Standing Crop 4.58 2.02 Cane Seed Purchase 0.06 0.16 Fertiliser & Manures 0.49 0.32 Salary & Wages 0.95 1.38 Power & Fuel 0.25 0.30 Rent 1.00 1.50 Irrigation & Cultivation Expenses 0.50 0.91 Repairs & Maintenance - Others 0.26 0.88 Miscellaneous Expenses 0.10 0.06 Adjustment relating to earlier years 0.64 –

8.83 7.53


N FARM ACCOUNT

(Rupees in Lacs)

Salaries, Wages, Bonus etc. 6550.82 5745.50

Contribution to Provident Fund,

Gratuity & Other Funds (Including provisions) 660.06 634.57

Workmen & Staff Welfare Expenses 317.75 279.75

7528.63 6659.82


O SALARIES, WAGES & OTHER EMPLOYEES’ BENEFITS

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Stores & Spare Parts consumed 7388.68 5119.23 Power & Fuel 402.32 616.90 Filling and Packing Expenses 216.41 157.33 Rent 55.74 32.66 Rates & Taxes 152.15 132.25 Repairs & Maintenance Plant & Machinery 2834.46 2999.79 Buildings 301.52 490.67 Others 214.16 3350.14 256.43 3746.89 Payment to AuditorsAs Audit Fees 12.50 7.50 ForOther Services 6.74 19.14 " Certification Work 1.33 0.69 " Expenses 1.45 22.02 1.54 28.87 Miscellaneous Expenses 2333.00 2254.64 Insurance 514.96 680.54 Charity & Donation 90.49 167.70 Directors' Fees 6.40 11.65 Loss on sale/discard of Fixed Assets (Net) 51.60 164.73 Exchange Rate Fluctuation (Net) – 119.42 Provision for Liabilities (Refer Note - 16 of Schedule -"T") 7.60 0.02 Adjustment Relating to earlier years (Net) 9.75 –Share Issue Expenses written off 143.09 214.64

14744.35 13447.47


P OTHER MANUFACTURING & ADMINISTRATIVE EXPENSES

(Rupees in Lacs)

On Fixed Loans 2792.79 3050.78 On Other Loans (Including Financial Charges) 3516.12 6308.91 435.39 3486.17 Interest Received (Gross)*On Long Term Investments 1.40 1.01 On Loan to Subsidiary 430.90 – On Income Tax Refund 424.83 – On Others 10.05 867.18 34.38 35.39

5441.73 3450.78


R INTEREST AND OTHER FINANCIAL CHARGES

* Tax deducted at Source Rs. 14.94 lacs (Previous period Rs. 5.55 lacs).

(Rupees in Lacs)

Brokerage 378.34 601.89 Despatching and Forwarding Expenses 262.33 242.31 Cash Discount 181.19 152.52 Others 50.14 47.41

872.00 1044.13


Q SELLING EXPENSES

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The accounts are prepared under the historical cost convention and are in accordance with the generally acceptedaccounting principles in India and provisions of the Companies Act, 1956. The significant accounting policies followedby the Company are stated below:

1. Fixed Assetsa) Fixed Assets are stated at their original cost adjusted by revaluation of Land, Building, Plant & Machinery,

Railway Siding and Tube well of the Balrampur Unit as on 30th June, 1988 and Land, Building and Plant &Machinery of Tulsipur Unit as on 31st March, 1999. Cost includes acquisition price, attributable expenses andpre operational expenses including finance charges, wherever applicable.

b) Depreciation on Fixed Assets is provided on Straight Line method in accordance with the rates as specified inSchedule XIV to the Companies Act, 1956 (as amended).

c) Expenditure during construction period :

Expenditure (including financing cost relating to borrowed funds for construction or acquisition of fixed assets)incurred on projects under implementation are being treated as Pre-operative expenses pending allocation tothe assets and are shown under "Capital work in progress".

d) Lease hold land in the nature of perpetual lease are not depreciated.

2. InvestmentsLong Term Investments are carried at cost. Provision for diminution is made to recognise a decline, other thantemporary, in the value of long term investments, script wise. Current Investments are valued at lower of cost orfair value, category wise. Cost of investments includes acquisition cost such as brokerage, stamp duty, etc.

3. Inventoriesa) Inventories (other than By-products, Scrap and Standing crop) are valued at lower of cost or net realisable value.

The cost of Inventories is computed on weighted average basis. The cost of Finished goods and work-in-processinclude cost of conversion and other cost incurred in bringing the Inventories to their present location andcondition.

b) By-products (Molasses & Bagasse), Scrap and Standing Crop are valued at net realisable value.

4. Revenue Recognitiona) Sale of goods is recognised at the time of transfer of substantial risk and rewards of ownership to the buyer for

a consideration.

b) Gross turnover is net of sales tax and inclusive of excise duty.

c) Dividend income is accounted for in the year it is declared.

d) All other income are accounted for on accrual basis.

5. ExpensesAll the expenses are accounted for on accrual basis.

6. Retirement BenefitsCompany's contribution to Provident Fund and Pension Fund are charged to Profit and Loss Account.

Gratuity and Leave encashment benefit is accounted for on the basis of actuarial valuation carried out as at theBalance Sheet date.

7. Borrowing CostsBorrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part ofthe cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready forintended use. All other borrowing costs are charged to revenue.

8. Share Issue expensesThese are equally amortised over five years.

9. Insurance ClaimsAccounted for on settlement of claims.

10. Government Grantsa) Government grants related to fixed assets are adjusted with the value of the fixed asset/ credited to Capital

Reserve..

b) Government grants related to revenue items are adjusted with the related expenditure/ taken as income.

11. Foreign Currency Transactionsa) Transactions in Foreign currency are initially recorded at the exchange rate at which the transaction is carried out.

b) Monetary Assets and Liabilities related to foreign currency transactions remaining outstanding at the year endare translated at the year end rate. The effect of Exchange Rate fluctuations in respect of fixed assets is adjusted

S SIGNIFICANT ACCOUNTING POLICIES

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with the cost of the respective Asset, whereas in respect of Monetary Assets the same is taken to Profit and LossAccount.

c) Forward exchange contracts entered into for hedging purposes are accounted for separately from the underlyingtransactions. The premium or discount on forward exchange contracts is amortised over the period of therespective contract. Exchange difference on such contracts at the year-end/upon termination is taken to Profitand Loss Account.

d) Transactions covered by cross currency swap contracts are marked to market at the Balance Sheet date and thegain or loss is taken to Profit and Loss Account.

12. Taxes on IncomeCurrent tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax isrecognised, subject to the consideration of prudence, in respect of deferred tax assets, on timing differences, beingthe difference between taxable income and accounting income that originate in one period and are capable ofreversal in one or more subsequent periods.

13. Impairment of AssetsImpairment losses, if any, are recognised in accordance with the accounting standard issued in this regard by TheInstitute of Chartered Accountants of India.

14. Provisions, Contingent Liabilities and Contingent AssetsProvisions are recognised in respect of obligations where, based on the evidence available, their existence at theBalance Sheet date is considered probable.

Contingent Liabilities are shown by way of notes to the Accounts in respect of obligations where, based on theevidence available, their existence at the Balance Sheet date is considered not probable.

A Contingent Asset is not recognised in the Accounts.

15. Employee Stock Option SchemeIn respect of stock options granted pursuant to the company's Employee Stock Option Scheme, the intrinsic valueof the options (excess of market price of the share over the exercise price of the option) is treated as discount andaccounted for as employee compensation cost over the vesting period.

S SIGNIFICANT ACCOUNTING POLICIES (Contd.)

T NOTES ON ACCOUNTS

(Rupees in Lacs)

1. a) Estimated amount of contracts remaining to beexecuted on Capital Account and not provided for 8603.06 50806.67

b) Advances paid against above 3874.97 10850.952. Contingent Liabilities not provided for in respect of:

a) Calls in arrear in respect of partly paid up shares 40.46 –b) Differential cane price for the sugar seasons 1978-79 and 1979-80

pending disposal of the Writs filed by the Company in Hon'ble Calcutta High Court 32.93 32.93

c) No provision has been made for interest on excess amount of levy sugar for sugar season 1982-83 realised as per Court Order against which TDR of Rs. 25.54 Lacs has been deposited with a Bank 25.54 25.54

d) Claims for acquisition of 12.82 acres of land for the Chemical unit at Balrampur and compensation there against is under Amount not Amount notdispute and the matter is subjudice ascertainable ascertainable

e) Claims against the Company not acknowledged as debts :i) Excise duty Demand-under appeal 233.09 257.18ii) Sales Tax Demand- under appeal 18.53 18.90iii) Others - under appeal/litigation 189.05 185.73

f) Bank Guarantee furnished in respect of excise duty rebate 20.39 20.393. Excess amount of levy sugar received to date for various sugar

seasons as per Orders of the Hon'ble High Court has not been credited to the Profit and Loss Account as the matter is sub-judice 43.15 43.15

4. a) Amount due to Small Scale Industrial undertakingsbased on information furnished by the creditors 299.30 174.92


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b) List of Small Scale Industrial undertakings to whom outstanding is over 30 days (as per terms of order):M/s Alpha Controls Instruments Pvt. Ltd., M/s Amrec Cooling Tower Pvt. Ltd.,M/s Atul Electroformers Pvt. Ltd., M/s Baba Vishwakarma Engg. Co. Pvt. Ltd.,M/s Biodeg Chemicals and Allied Industries, M/s Bharat Engineering & Casting,M/s Chemical Systems Technologies, M/s Calsens Private Ltd.,M/s Centrifugal Systems, M/s Chemical Systems Tech. (I) Pvt. Ltd.,M/s Dembla Valves Pvt. Ltd., M/s G.S. Rollers,M/s Hi-Tech Systems & Services, M/s High Tech Engineers,M/s Instruments & Systems, M/s Kay Kay Industries,M/s K.S. Projects Process Engineers, M/s Kohli Enterprises,M/s Khanna Engineering Works, M/s Lord Krishna Poly Plast, M/s Mangla Rubber Industries, M/s M.R.Kalia Industries,M/s Nu-Plast Pipes & Plastics, M/s New Pumps India,M/s P.G.Goyal Industries, M/s Pelican Valves & Engineering Works,M/s Puri Industries, M/s Pancy Industrial Corporation,M/s Pathak Machines Tools Pvt. Ltd., M/s R.C. Engineers Works Pvt. Ltd.,M/s Raj Chemical & Minerals, M/s Sangam Refractories,M/s Stichwell Qualitex, M/s Shiva Engineers,M/s Sintech Precision Products Ltd., M/s S.J. Industries,M/s Sunderson Engineers Pvt. Ltd., M/s Swajit Engineering Pvt. Ltd.,M/s Three Star Engineering Works, M/s Universal Heavy Engineering Company,M/s Uttam Industrial Engineering Pvt. Ltd., M/s Vishal Engineering Works

c) In the absence of necessary information from the suppliers relating to their registration status under the Micro,Small and Medium Enterprises Development Act, 2006, the information required under the said act could notbe compiled and disclosed.

5. The levy sugar price for the seasons 2004-05, 2005-06 and 2006-07 is yet to be announced by the Government ofIndia. Pending such announcement, the sale of levy sugar has been accounted for at the 2003-04 season's levy price.

6. a) Land, Building and Plant & Machinery of Tulsipur unit were revalued as at 31st March, 1999 on net replacementvalue as per the report of Lodha & Co. and the cost of the respective asset was substituted by the revalued costand credited to Revaluation Reserve in the books of erstwhile Tulsipur Sugar Company Limited.

b) Land, Building, Plant & Machinery, Railway Siding and Tubewell and Water Supply Machinery of Balrampurunit were revalued as at 30th June, 1988 on net replacement value as per the report of S.R. Batliboi ConsultantsPrivate Ltd. and the cost of the respective asset was substituted by the revalued cost and credited to RevaluationReserve..

7. During the year the Company has acquired Promoters' Shares representing 27.28% of the total Equity Share Capitalof Indo Gulf Industries Limited (IGIL) and 26.68% of the Share Capital of IGIL pursuant to an open offer made incompliance with the provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

By virtue of the above acquisition, IGIL became a subsidiary of the Company w.e.f. 30th August, 2007. No provisionagainst diminution in value of investment in shares of the subsidiary has been made as such diminution isconsidered as temporary in nature.

8. The Employee Stock Option Scheme was approved by the Board of Directors and the shareholders in 2005. Underthis scheme, the remuneration committee granted 622500 options in 2005 and 883000 options in 2006 having avesting period of one year and a maximum exercise period of eight years. The exercise price of the options is basedon the average daily closing market price of the company's shares during the preceding twenty six weeks prior tothe date of grant on the stock exchange, where the shares are traded most.

Out of the above, 204500 options have lapsed and balance 1301000 options were outstanding as on 30th September,2007.

9. The company has been granted eligibility certificate dated 23rd February, 2007 under New Sugar Industry PromotionPolicy, 2004 of the Government of Uttar Pradesh. Accordingly, incentives aggregating to Rs.1757.08 lacs allowableunder the above policy have been accounted for during the year.

The above policy which was applicable to units to be set up till 31st March, 2008 has been terminated by the

T NOTES ON ACCOUNTS (Contd.)

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Government vide order dated 4th June, 2007 wherein the Government expressed its intention to introduce anotherpolicy. The company has been legally advised that it continues to be eligible to receive the incentives under theabove policy as the eligibility certificate was issued to the company before termination of the above policy.

10. a) Approval of Central Government for the remuneration paid/payable to the Managing / Joint Managing directorspursuant to Resolution passed in the Extra Ordinary General Meeting of the Share holders of the company isawaited.

b) The remuneration paid/payable to Shri K.N. Ranasaria, a wholetime Director, is subject to approval of theshareholders in the ensuing Annual General Meeting.

c) Computation of Net Profit for the purpose of calculating directors remuneration has not been made asremuneration paid/payable to the directors is the minimum remuneration.

d) Details of remuneration paid/payable to Directors :


i) Salary 248.04 240.74

ii) Commission – 195.00

iii) Contribution to Provident Fund, Gratuity and other Funds 100.63 101.12

iv) Perquisites (including monetary value of perquisites) 21.20 14.53

369.87 551.39

2006-07 2005-06

11. Segment information as per Accounting Standard - 17 on 'Segment Reporting' :The Company has identified four business segments viz. Sugar, Distillery, Co-generation and others. Segments havebeen identified and reported taking into account the nature of the products, the differing risks and returns, theorganisational structure and internal business reporting system.

a) Revenue and expenses have been identified to a segment on the basis of relationship to operating activities ofthe segment. Revenue and expenses which relate to enterprise as a whole and are not allocable to a segmenton reasonable basis have been disclosed as “Unallocable”.

b) Segment Assets and Segment Liabilities represent assets and liabilities of respective segment. Investments, taxrelated assets and other assets and liabilities that cannot be allocated to a segment on reasonable basis havebeen disclosed as “Unallocable”.

c) Information about Primary Business Segments:

Sugar Distillery Co-generation Others Unallocated Total

Revenue

Gross Revenue 128697.64 15491.50 18844.89 184.07 – 163218.10

(182431.86) (14686.74) (12724.83) (299.20) – (210142.63)

Less: Inter/ Intra 8714.38 1992.39 4247.60 106.49 – 15060.86

Segment Revenue (6661.14) (1190.27) (2631.47) (182.47) – (10665.35)

Total Revenue 119983.26 13499.11 14597.29 77.58 – 148157.24

(175770.72) (13496.47) (10093.36) (116.73) – (199477.28)

Result

Segment Result (–) 10110.60 5061.36 8717.98 (–) 55.03 – 3613.71

(32449.41) (3856.36) (5861.53) (–) (22.62) – (42144.68)

Less:

Unallocated 1708.72 1708.72

expenditure net of (2205.00) (2205.00)

unallocated income

Interest 5441.73 5441.73

(3450.78) (3450.78)

Profit / (Loss) (–) 3536.74

before Tax (36488.90)

(Rupees in Lacs)

(Rupees in Lacs)

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TaxCurrent Tax 186.00

(5491.00)Fringe Benefit Tax 64.00

(86.00)Deferred Tax 397.68

(1753.08)Profit /(Loss) after Tax (–) 4184.42

(29158.82)Other InformationSegment Assets 177304.90 17782.65 60287.70 1419.72 9422.15 266217.12

(123221.10) (12117.30) (42339.12) (820.99) (2457.13) (180955.64)Segment Liabilities 29284.29 2350.83 298.12 22.14 147845.19 179800.57

(13966.25) (1675.22) (455.11) (41.43) (74235.12) (90373.13)Capital expenditure 38865.88 6273.28 21299.43 560.80 98.73 67098.12

(50862.92) (4088.91) (29057.89) (243.88) (746.62) (85000.22)Depreciation 4884.32 596.39 2429.76 53.71 57.81 8021.99

(4432.66) (510.57) (1664.07) (42.68) (59.30) (6709.28)Non cash expenses 3.05 (–) 6.71 0.69 – 173.65 170.68other than depreciation (55.50) (274.77) (–) (–) (287.68) (617.95)

(Rupees in Lacs)

Notes:a) Transactions between segments are primarily for materials which are transferred at market determined

prices. Common costs are apportioned on a reasonable basis. b) Since the Company’s activities/operations are primarily within the country, there is only one geographical

segment.

12. Related party disclosures as per Accounting Standard - 18 for the year ended 30th September, 2007 are given below:a) Name of the related parties and description of relationship :

i) Subsidiary : Indo Gulf Industries Ltd.

ii) Associate : Avantika Ganna Pvt. Ltd.

iii) Key Managerial Personnel (KMP): Mr. Vivek Saraogi - Managing DirectorMrs. Meenakshi Saraogi - Joint Managing DirectorMr. K.N. Ranasaria - Whole Time DirectorMr. Kishor Shah - Whole Time DirectorMr. R.N.Mishra - Whole Time Director.

iv) Relative of KMP : Mr. K.N. Saraogi - Chairman (Non Executive) upto 26th April, 2007and relative of Managing Director and Joint Managing Director.

v) Enterprise in which KMP and their relatives have substantial interest : Kamal Nayan & Co.

b) Transactions with Related parties :

Nature of Transaction/ Enterprise in

Name of the party which KMP and Key

their relatives Managerial

have substantial Personnel Relative of

Subsidiary Associates interest (KMP) KMP Total

i) Purchase of Goods

Kamal Nayan & Co. – – 1.00 – – 1.00(–) (–) (0.95) (–) (–) (0.95)

ii) Interest Paid/Payable

Avantika Ganna – – – – – –Pvt. Ltd. (–) (5.80) (–) (–) (–) (5.80)

(Rupees in Lacs)

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Subsidiary Associates interest (KMP) KMP Totaliii) Intercorporate Loan

TakenAvantika Ganna – – – – – –Pvt. Ltd. ( – ) (134.00) ( – ) ( – ) ( – ) (134.00)

iv) Interest Received/ReceivableIndo Gulf Industries 430.90 – – – – 430.90Ltd. @ ( – ) ( – ) ( – ) ( – ) ( – ) ( – )

v) Intercorporate Loan GivenIndo Gulf Industries 6616.92 – – – – 6616.92Ltd. @ ( – ) ( – ) ( – ) ( – ) ( – ) ( – )

vi) Rendering of ServicesAvantika Ganna Pvt. Ltd. – 2.90 – – – 2.90

( – ) (4.35) ( – ) ( – ) ( – ) (4.35)Mr. K.N.Saraogi – – – – 0.20 0.20

( – ) ( – ) ( – ) ( – ) (3.99) (3.99)Mrs. Meenakshi Saraogi – – – 135.02 – 135.02

( – ) ( – ) ( – ) (223.88) ( – ) (223.88)Mr. Vivek Saraogi – – – 135.55 – 135.55

( – ) ( – ) ( – ) (211.02) ( – ) (211.02)Mr. K.N. Ranasaria – – – 50.29 – 50.29

( – ) ( – ) ( – ) (56.24) ( – ) (56.24)Mr. Kishor Shah – – – 39.93 – 39.93

( – ) ( – ) ( – ) (18.06) ( – ) (18.06)Mr. R.N. Mishra – – – 7.75 – 7.75

( – ) ( – ) ( – ) (8.84) ( – ) (8.84)Amount due to / from related partiesi) Accounts payable

Mr. K.N. Saraogi – – – – – –( – ) ( – ) ( – ) ( – ) (2.02) (2.02)

Mrs. Meenakshi Saraogi – – – – – –( – ) ( – ) ( – ) (90.00) ( – ) (90.00)

Mr. Vivek Saraogi – – – – – –( – ) ( – ) ( – ) (90.00) ( – ) (90.00)

Mr. K.N. Ranasaria – – – 2.40 – 2.40( – ) ( – ) ( – ) (1.51) ( – ) (1.51)

Mr. Kishor Shah – – – 6.96 – 6.96 ( – ) ( – ) ( – ) (2.10) ( – ) (2.10)

ii) Accounts receivableIndo Gulf Industries Ltd. 7033.68 – – – – 7033.68

( – ) ( – ) ( – ) ( – ) ( – ) ( – )

(Rupees in Lacs)

@ Also represents maximum amount outstanding during the year.

13. Disclosure under clause 32 of the Listing Agreement :There are no transactions (other than loan transactions with subsidiary as given in para12 (b) (v) above) which arerequired to be disclosed under clause 32 of Listing Agreement.

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14. Earnings per Share

The numerators and denominators used to calculate Basic/Diluted Earnings per Share :

15. Intangible Assets

The unamortised amount of Share Issue Expenses Rs.54.79 lacs and Rs.266.40 lacs are to be amortised equally in

the next 1 year & 6 months and 2 years & 6 months respectively.

16. Disclosure in terms of Accounting Standard -29 on Provisions, Contingent Liabilities and Contingent Assets:

a) Movement for Provision for Liabilities:

b) The Contingent Liabilities & Liabilities mentioned at Sl. No. 2 & 16 (a) respectively are dependent upon Court

decision /out of court settlement/disposal of appeals etc.

c) No reimbursement is expected in the case of Contingent Liabilities & Liabilities shown respectively under

Sl. No. 2 & 16 (a) above.

17. Additional information pursuant to the provisions of paragraphs 3 & 4 of Part - II of Schedule VI to the Companies

Act, 1956:

A QUANTITATIVE INFORMATION:


a) Amount used as the numerator (Rs. Lacs)

Profit / (Loss) after Tax (4184.42) 29158.82

Total - (A) (4184.42) 29158.82

b) Weighted average number of Equity Shares used as the

denominator for Basic Earnings per Share - (B) 248154660 239172357

Add : Weighted average number of Equity Shares on

account of Employees Stock Option Scheme 40355 45284

c) Weighted average number of Equity Shares used as the

denominator for Diluted Earnings per Share - (C) 248195015 239217641

d) Nominal value of Equity Shares (Re.) 1.00 1.00

e) Basic Earnings per Share - (Rs.) (1.69) 12.19

f) Diluted Earnings per Share - (Rs.) (1.69) 12.19

2006-07 2005-06

Balance as at 1st October, 2006 7.40

Provided during the year 7.60

Amount used during the year –

Reversed during the year –

Balance as at 30th September, 2007 15.00

Timing of outflow/uncertainities Outflow on settlement/crystallization

Particulars Legal cases

i) Licensed Capacity

Sugar Not applicable Not applicable

Distillery 320 KLPD 320 KLPD

Bio-compost Not applicable Not applicable

Power Not applicable Not applicable

ii) Installed capacity (As certified by the Management)

Sugar 65000 TCD 47500 TCD

Distillery 320 KLPD 160 KLPD

Bio-compost 58000 M.T. 48000 M.T.

Power 134.30 MW 93.80 MW

(Rupees in Lacs)

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iii) Particulars of Goods Manufactured

^ Includes 561 Qtls. (3124 Qtls.) process/storage loss.

# Includes 114997 Qtls. (116423 Qtls.) auto combustion/storage loss and 2780970 Qtls. (2515317 Qtls.) inter

unit transfers taken at nil value.

* Includes 909786 B.L. (422730 B.L.) storage loss, 6278689 B.L. (5362729 B.L.) inter unit transfers and 10000

B.L. (previous period Nil) captive consumption taken at nil value.

@ Includes Nil (24545 B.L.) storage loss and Nil (15812 B.L.) inter unit transfers taken at nil value.

$ Includes 69271106 KW (37978864 KW) captive consumption, 11350654 KW (2998442 KW) transmission loss

and 102563450 KW (51914205 KW) inter unit transfers taken at nil value.

& Includes 2187 M.T. (7693 M.T.) issued as sample / loss and 1448 M.T. (1692 M.T.) inter unit transfers taken

at nil value.

§ Includes 12326093 Qtls. (9116247 Qtls.) captive consumption and 16738148 Qtls. (10876326 Qtls.) inter unit

transfers taken at nil value.


Unit Quantity Quantity Amount

(Rs. in Lacs)

a) Sugar Qtls. 9148718 ^ 7536409 115894.44

(6439826) (9260105) (170953.19)

b) Molasses Qtls. 4866521 # 4288459 3201.29

(3155540) (4059657) (4160.98)

c) Industrial Alcohol B.L. 71571202 * 70100041 13487.24

(62678662) (66941990) (13312.65)

d) Potable Alcohol B.L. – @ – –

(-) (108335) (102.15)

e) Power Kw. 676806039 $ 675802276 14491.29

(439850120) (440178047) (10023.82)

f) Bio-compost M.T. 25460 & 19564 186.75

(34014) (34113) (269.43)

g) Bagasse Qtls. 30318175 § 30127071 268.97

(19507279) (20250098) (122.60)

h) Miscellaneous 102.46

(31.89)

Total 147632.44

(198976.71)

Class of Goods Production Sales

Unit Quantity Amount

Class of Goods (Rs. in Lacs)

Sugar Qtls. – –

(792250) (11315.11)

Purchase of Trading Goods

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Unit Quantity Amount Quantity Amount

(Rs. in Lacs) (Rs. in Lacs)

a) Sugar Qtls. 784155 11980.69 2396464 34421.68

(2812184) (39348.81) (784155) (11980.69)

b) Molasses Qtls 258417 455.22 836479 893.36

# (184088) – – –

(978446) (1923.81) (258417) (455.22)

c) Industrial Alcohol B.L. 1147166 180.72 2618327 307.35

(5410494) (682.05) (1147166) (180.72)

d) Potable Alcohol B.L. – – – –

(108335) (136.64) (-) (-)

e) Power - Banked Kw. 759357 13.27 1763120 26.18

# (762596) (21.81) – –

(324688) (4.36) (759357) (13.27)

f) Bio-compost M.T. 5477 56.32 11373 73.67

(5576) (39.19) (5477) (56.32)

g) Bagasse Qtls. 1672385 622.68 1863488 509.76

# (126794) (5.78) – –

(2288410) (763.67) (1672385) (622.68)

Total 13308.90 36232.00

(42926.12) (13308.90)

Class of Goods Opening Stock Closing Stock

# Acquired on Takeover.

* Includes 2780970 Qtls. (2515317 Qtls.) consumed out of inter unit transfers taken at nil value.

@ Includes 6278689 B.L. (5362729 B.L.) consumed out of inter unit transfers taken at nil value.

# Consumed out of inter unit transfers taken at nil value.

^ Includes 16738148 Qtls. (9743517 Qtls.) consumed out of inter unit transfers taken at nil value.

Unit Quantity Amount

(Rs. in Lacs)

a) Sugar Cane Qtls. 92310134 125492.08

(62208034) (79860.63)

b) Molasses Qtls. * 2868377 1422.40

(2565872) (1500.82)

c) Industrial Alcohol B.L. @ 6278689 –

(6075346) (94.37)

d) Pressmud M.T. # 88724 30.69

(122628) (34.38)

e) Bagasse Qtls. ^ 16738148 1070.53

(9743517) (1129.49)

f) Others 83.35

(111.86)

Total 128099.05

(82731.55)

A RAW MATERIALS CONSUMED

Global Reports LLC



Imported – –

(0.10) (79.94)

Indigenous 100.00 128099.05

(99.90) (82651.61)

100.00 128099.05

(100.00) (82731.55)

Percentage Amount (Rs. in lacs)

Imported 0.03 2.14

(0.03) (1.61)

Indigenous 99.97 7386.54

(99.97) (5117.62)

100.00 7388.68

(100.00) (5119.23)

Percentage Amount (Rs. in lacs)

C) CONSUMPTION OF RAW MATERIALS

D) CONSUMPTION OF STORES & SPARE PARTS

On Professional & Consultancy 16.58

(122.94)

On Travelling 26.50

(55.96)

On Interest 3516.04

(1189.68)

On Others –

(141.51)

Amount (Rs. in lacs)

E) EXPENDITURE IN FOREIGN CURRENCY

FOB Value of exports (through an export house) –

(–)

Others –

(320.17)


F) EARNINGS IN FOREIGN CURRENCY

Components and Spare Parts –

(47.06)

Capital Goods 1054.34

(699.80)


G) C.I.F. VALUE OF IMPORTS


Note : Figures in brackets pertain to previous year.

Global Reports LLC



a) Registration details :

Company Identification No. L15421WB1975PLC030118State Code 21Balance Sheet Date 30th September, 2007

b) Capital raised during the year

Public Issue NilRights Issue NilBonus Issue NilPrivate Placement Nil

c) Position of mobilisation and deployment of funds

Total Liabilities 227356.36Total Assets 227356.36SOURCES OF FUNDS

Paid up Capital 2481.55Reserve & Surplus 83935.00Secured Loans 121059.36Unsecured Loans 7556.00Deferred Tax Liability (Net) 12324.45

227356.36

APPLICATION OF FUNDS

Net Fixed Assets 191997.21Investments 343.01Net Current Assets 34694.95Miscellaneous Expenditure 321.19

227356.36

d) Performance of the Company

Turnover (including Other Income) 140192.69Total Expenditure 143729.43Profit / (Loss) before Taxation (3536.74)Profit / (Loss) after Tax (4184.42)Earnings per Share (Rs.) (1.69)Dividend Rate (%) Nil

e) Generic names of principal products of the Company

Product Description Item Code No. (ITC Code)

Sugar 170111.09Industrial Alcohol 220720.00

18. Balance Sheet Abstract & Company's General Business Profile

19. Previous period’s figures have been re-grouped / re-arranged wherever found necessary and are not comparable

with current year's figures which are for 12 months.


(Rupees in Lacs)

Signatories to all foregoing Schedules 'A' to 'T' forming part of the Accounts.




Global Reports LLC


Auditor’s Report on Consolidated Financial Statements

1. We have examined the attached Consolidated

Balance Sheet of BALRAMPUR CHINI MILLS

LIMITED, its subsidiary and its associate as at 30th

September, 2007 and the Consolidated Profit and Loss

Account for the year ended on that date annexed

thereto.

2. These financial statements are the responsibility of

the management of the company and have been

prepared by the management on the basis of separate

financial statements and other financial information

regarding components. Our responsibility is to

express an opinion on these financial statements

based on our audit.

3. We conducted our audit in accordance with auditing

standards generally accepted in India. Those

Standards require that we plan and perform the audit

to obtain reasonable assurance about whether the

financial statements are free of material misstatement.

An audit includes examining, on a test basis,

evidence supporting the amounts and disclosures in

the financial statements. An audit also includes

assessing the accounting principles used and

significant estimates made by management, as well as

evaluating the overall financial statement

presentation. We believe that our audit provides a

reasonable basis for our opinion.

4. The Financial Statements for the year ended 30th

September, 2007 of Indo Gulf Industries Limited, the

subsidiary company whose total assets of Rs.11782.97

lacs and total revenue of Rs.346.62 lacs have been

proportionately consolidated, have been audited by

another auditor whose report has been furnished to

us and our opinion, so far it relates to the amount

included in respect of the subsidiary, is based solely

on the report of the other auditor.

5. The financial statements of Avantika Ganna Private

Limited (Associate Company) which have been

proportionately consolidated, have been audited by

another auditor for the year ended 31st March, 2007

whose report has been furnished to us and our

opinion, so far it relates to the amount included in

respect of the associate, is based solely on the report

of the other auditor.

6. We report that the consolidated financial statements

have been prepared by the management of

Balrampur Chini Mills Limited in accordance with

Accounting Standard 21, “Consolidated Financial

Statements” and Accounting Standard 23, “Accounting

for investment in Associates in Consolidated Financial

Statements” issued by the Institute of Chartered

Accountants of India on the basis of separate audited

financial statements of Balrampur Chini Mills Limited,

its subsidiary and associate.

7. Attention is drawn to the following in respect of the

subsidiary company :

i) Note No. II (vi) of Schedule ‘S’ regarding Gratuity

provision made on estimated basis instead of

actuarial basis - quantum unascertained.

ii) Note No. 9 (ii) of Schedule ‘T’ regarding non-

availability of Bank Statement for non-

operative bank accounts and its reconciliation.

iii) Note No. 9 (iv) of Schedule ‘T’ regarding non-

provision of interest on Deferred Sales Tax

Liability – quantum unascertained.

iv) Note No. 9 (v) of Schedule ‘T’ regarding non-

provision of interest and penalty on statutory

liabilities - quantum unascertained.

8. Subject to the above and on the basis of the

information and explanations given to us and based

on our audit and on consideration of the separate

audit reports on the individual financial statements of

the company, its subsidiary and associate read

together with significant accounting policies and

notes thereon, we are of the opinion that the attached

Consolidated Financial statements give a true and fair

view in conformity with the accounting principles

generally accepted in India:

i) in the case of the Consolidated Balance Sheet, of

the consolidated state of affairs of Balrampur

Chini Mills Limited, its subsidiary, and its

associate as at 30th September, 2007; and

ii) in the case of the Consolidated Profit & Loss

Account, of the consolidated result of operation

of Balrampur Chini Mills Limited its subsidiary,

and its associate for the year ended on that date.



7A, Kiran Shankar Ray Road, Ajay Agrawal

Kolkata – 700 001 Membership No. 17643

19th November, 2007. Partner

To the Board of Directors of


Global Reports LLC


Consolidated Balance Sheet As at 30th September, 2007

(Rupees in Lacs)

I SOURCES OF FUNDS

1. Shareholders' Funds

a) Share Capital A 2481.55

b) Reserves & Surplus B 83428.71 85910.26

2. Loan Funds

a) Secured Loans C 121059.36

b) Unsecured Loans D 7900.56 128959.92

3. Deferred Tax Liability (Net) E 12324.45

227194.63

II APPLICATION OF FUNDS

1. Fixed Assets

a) Gross Block 208203.64

b) Less: Depreciation 42787.33

c) Net Block 165416.31

d) Capital Work-in-progress 33371.52

Net Fixed Assets F 198787.83

2. Investments G 63.60

3. Current Assets, Loans & Advances

a) Current Assets H 50571.00

b) Loans & Advances I 17459.28

68030.28

c) Less: Current Liabilities & Provisions J 40008.27

Net Current Assets 28022.01

4. Miscellaneous Expenditure & Losses K 321.19


227194.63

Basis of Consolidation and Significant Accounting Policies S

Consolidated Notes on Accounts T

Schedules 'A' to 'K', 'S' & 'T' referred to above form an integral part of the Balance Sheet.

Schedule As at 30thSeptember, 2007

This is the Consolidated Balance Sheet referred to in our report of even date.




Global Reports LLC


Consolidated Profit and Loss Account For the year ended 30th September, 2007

(Rupees in Lacs)

I INCOMEGross Turnover 147987.25Less: Excise Duty 8506.48Net Turnover 139480.77Other Income L 1061.64Increase in Stock M 21839.82Profit/(Loss) from Farm Account N (3.11)

162379.12II Expenditure

Cost of Raw Materials Consumed 128886.96Salaries, Wages & other Employees' Benefits O 7723.57Other Manufacturing & Administrative Expenses P 15829.86Selling Expenses Q 872.73Managerial Remuneration 359.54Interest & Other Financial Charges R 6004.28Depreciation 8383.66Transfer to Storage Fund for Molasses 22.46

168083.06III Profit/(Loss) before Tax (5703.94)

(Add)/Less: Provision for TaxCurrent Tax (186.00)Fringe Benefit Tax (65.63)Deferred Tax (397.68) (649.31)

IV Profit/(Loss) after Tax but before Adjustment of (6353.25)Minority Interest & Share of AssociateLess: Loss for the period before the date of becoming subsidiary 1624.31Less: Profit/ (Loss) attributable to Minority Shareholders' –Add: Share of Profit in Associate 0.89

V Profit/(Loss) after adjustment of Minority Interest & Share of Associate (4728.05)Balance brought forward 575.99Profit/(Loss) available for Appropriation (4152.06)

VI AppropriationsBalance Carried to Balance Sheet (4152.06)Earnings per share of Re. 1/- each (Refer Note - 12 of schedule- "T")Basic (Rs.) (1.91)Diluted (Rs.) (1.90)

Basis of Consolidation and Significant Accounting Policies SNotes on Accounts TSchedules 'L' to 'T' referred to above form an integral part of the Consolidated Profit and Loss Account.

Schedule Year ended 30thSeptember, 2007

This is the Consolidated Profit and Loss Account referred to in our report of even date.




Global Reports LLC


Schedules forming part of the Consolidated accounts(Rupees in Lacs)

Authorised

40,00,00,000 Equity Shares of Re. 1/- each 4000.00

25,00,000 Preference Shares of Rs. 100/- each 2500.00

6500.00

Issued, Subscribed and Paid up :

24,81,54,660 Equity Shares of Re. 1/- each fully paid up 2481.55

2481.55

Notes:

1) 15,55,39,650 Equity Shares have been issued and allotted as fully paid up Bonus Shares by capitalisation of Security

Premium, Capital Redemption Reserve and General Reserve.

2) 2,37,55,600 Equity Shares have been issued to the members of erstwhile Babhnan Sugar Mills Limited pursuant to

Scheme of Amalgamation.

3) 21,15,400 Equity Shares have been issued to the members of erstwhile Tulsipur Sugar Company Limited pursuant

to Scheme of Amalgamation.

4) Out of 2,27,66,780 Equity Shares of Re. 1/- each offered to the shareholders on right basis, issue of 17,270 (Previous

Period 17,270) Equity Shares have been kept in abeyance as per the direction of court.

5) 1,63,52,000 fully paid up Equity Shares of Re.1/- each were allotted in January, 2006 at a price of Rs. 135/- per share,

ranking pari passu with the existing Equity Shares, each of which is represented by one Global Depository Receipt

(GDR) issued @ US$ 3.0577 each for an aggregate amount of US $ 50 million.

Notes: Deductions in Employees Stock Option Adjustment Account represents forfeited Options.

As at 30thSeptember, 2007

A SHARE CAPITAL

(Rupees in Lacs)

Capital Reserve 86.42 – – 86.42

Capital Reserve (Arising on Consolidation) – 11.57 – 11.57


Capital Redemption Reserve 2500.00 – – 2500.00

Revaluation Reserve 18.24 – – 18.24

Storage Fund for Molasses 60.84 22.46 – 83.30

General Reserve 42772.19 25.77 – 42797.96

Less: Debit Balance of Profit & Loss

Account (As per Contra) – – 4152.06 (4152.06)

42772.19 38645.90

Employees Stock Option Adjustment

Account 36.72 – 4.00 32.72

Surplus as per Profit & Loss Account 575.99 – 575.99 –

88100.96 59.80 4732.05 83428.71



Global Reports LLC



A. Term Loans

I. Rupee Loans

a) State Bank of India (SBI) 2500.00

b) Government of India, Sugar Development Fund (SDF) 5454.01

c) Government of India (GOI) (Free of Interest) 160.50

II. External Commercial Borrowings (ECB)

a) International Finance Corporation, Washington (IFC) 19395.50

b) ABN Amro Bank, NV (ABN) 10110.73

c) State Bank of India (SBI) 21993.12

d) DBS Bank Ltd. (DBS) 6651.00

e) Standard Chartered Bank (SCB) 4372.00

f) Coopertive Centrale Raiffeisen Boerenleenbank, B.A (CCRB) 8928.16

g) BNP Paribas (BNP) 6982.50

h) UCO Bank (UCO) 4120.50

i) CITI Bank (CITI) 4420.00

B. Cash Credit Account

State Bank of India (SBI) 25971.34

121059.36

Notes:1) Term loan from SBI is secured by way of first pari passu equitable mortgage on immovable properties and

hypothecation of movable properties, both present and future, pertaining to Company's sugar and co-generationunits at Akbarpur and also guaranteed by a Director of the Company (due within a year Rs. 625.00 Lacs).

2) Term Loans from SDF are secured by an exclusive second charge by way of equitable mortgage on immovableproperties and hypothecation of movable properties (excluding current assets and book debts), both present andfuture, pertaining to Company's sugar and cogeneration units at Balrampur, sugar unit at Babhnan, sugar andcogeneration units at Haidergarh, sugar and cogeneration units at Akbarpur and sugar unit at Tulsipur (due withina year Rs 882.70 Lacs).

3) Term Loan from GOI is secured by way of equitable mortgage on immovable properties and hypothecation ofmovable properties, both present and future, pertaining to Company’s sugar unit at Babhnan, subject to charge oncurrent assets (including book debts) created in favour of SBI to secure the working capital limits and alsoguaranteed by some of the Directors of the Company (due within a year Rs.40.13 Lacs).

4) a) ECB from IFC amounting to Rs. 3499.50 Lacs is secured, by way of first equitable mortgage on immovableproperties and hypothecation of movable properties and second charge on current assets, both present andfuture, pertaining to Company's sugar and cogeneration units at Haidergarh, exclusive first charge by way ofequitable mortgage on immovable properties and hypothecation of movable properties and second charge oncurrent assets, both present and future, pertaining to Company's distillery and bio compost units at Babhnanand further guaranteed by some of the Directors of the Company (due within a year Rs.1399.80 Lacs).

b) ECB from IFC amounting to Rs. 15896.00 Lacs is to be secured, by way of first equitable mortgage on immovableproperties and hypothecation of movable properties and second charge on current assets, both present andfuture, pertaining to Company's sugar and cogeneration unit at Haidergarh, equitable mortgage on immovableproperties and hypothecation of movable properties and second charge on current assets, both present andfuture, pertaining to Company's sugar and cogeneration units at Rauzagaon and further guaranteed by some ofthe Directors of the Company (due within a year Nil).

5) ECBs from ABN are secured by way of exclusive first equitable mortgage on immovable properties andhypothecation of movable properties (excluding current assets and book debts), both present and future, pertainingto Company's sugar and cogeneration units at Mankapur (due within a year Rs.1027.29 Lacs).

6) a) ECB from SBI amounting to Rs. 8084.12 Lacs is secured by way of first pari passu equitable mortgage on


C SECURED LOANS

Global Reports LLC


Schedules forming part of the Consolidated accountsimmovable properties and hypothecation of movable properties, both present and future, pertaining toCompany's sugar and cogeneration units at Akbarpur (due within a year Rs. 2309.76 Lacs).

b) ECB from SBI amounting to Rs. 13909.00 Lacs is secured by way of first pari passu equitable mortgage onimmovable properties and hypothecation of movable properties (excluding current assets and book debts), bothpresent and future, pertaining to Company's sugar and cogeneration units at Kumbhi and Gularia (due withina year Nil).

7) ECB from DBS is secured by way of hypothecation of movable properties (excluding current assets and bookdebts), both present and future, and to be further secured by equitable mortgage on immoveable propertiespertaining to Company's sugar unit at Balrampur (due within a year Nil).

8) ECB from SCB is secured by way of hypothecation of movable properties (excluding current assets and book debts),both present and future, pertaining to Company's cogeneration unit at Balrampur (due within a year Nil).

9) ECB from CCRB amounting to Rs. 8928.16 Lacs is secured by way of first pari passu equitable mortgage onimmovable properties and hypothecation of movable properties (excluding current assets and book debts), bothpresent and future, pertaining to Company's sugar and cogeneration units at Kumbhi and Gularia (due within a yearNil).

10) ECB from BNP and UCO are secured by way of first pari passu equitable mortgage on immovable properties andhypothecation of movable properties (excluding current assets and book debts), both present and future, pertainingto Company's sugar and cogeneration units at Kumbhi and Gularia (due within a year Rs. 2327.50 lacs).

11) ECB from CITI is secured by way of first pari passu hypothecation of movable properties (excluding current assetsand book debts), both present and future, pertaining to Company's sugar and cogeneration units at Kumbhi andGularia (due within a year Nil).

12) Cash Credit with SBI is secured / to be secured by way of hypothecation of stock of sugar, sugar in process andother current assets including book debts (excluding current assets of cogeneration & distillery units), both presentand future, and 3rd charge by way of joint equitable mortgage on Company's immovable properties andhypothecation of movable properties (excluding cogeneration & distillery units) and also guaranteed by some ofthe Directors of the Company.

(Rupees in Lacs)

From Director 36.17

From Banks 4056.00

From Others 3500.01

Deferred Sales Tax 308.38

7900.56


D UNSECURED LOANS

(Rupees in Lacs)

Deferred Tax Liability

Depreciation on Fixed Assets 17145.33

Deferred Tax Assets

MAT Credit (1559.90)

Carried Forward Losses (1446.31)

Expenses allowable for tax purposes when paid (1814.67) (4820.88)

12324.45


E DEFERRED TAX LIABILITY (NET)

Global Reports LLC


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Global Reports LLC



Long Term

In Government Securities :

(Deposited with Government authorities)

National Plan Certificates 0.04

Kishan Vikash Patra 0.01

Post Office National Saving Certificates 2.63

In Shares of Joint Stock Companies :

Trade Investments :

Quoted :

Fully Paid Up :

200000 American Paints (India) Ltd. 20.00

8400 Classic Global Security Ltd. 1.64

60100 Damania Capital Markets Ltd. 18.08

1000 Easter India Ltd. 0.37

23000 Eastern Sugar Mills Ltd. 2.30

52000 Inland Printers Ltd. 31.24

16500 KM Capital Ltd. 2.14

135320 Ram Gopal Poly Ltd. 22.32

10300 VLS Finance Ltd. 38.43


196600 Equity Shares of Rs.10/- each in Avantika Ganna Pvt Ltd. 57.88

(Including Capital Reserve Rs. 11.57 lacs arising on

acquisition of the Associate)

35 Ordinary Shares of Rs.100/- each in Balrampur Sugar 0.03

Co. Consumers Co-operative Society Ltd.

110 Ordinary Shares of Rs.10/- each in Co-operative 0.01

Development Union Ltd., Babhnan

1 Ordinary Share of Rs.10/- each in Co-operative – *

Stores Ltd., Babhnan.

Other than Trade :


48 Ordinary Shares of Re.1/- each in Fortuna Services Ltd. – *

197.12

Less:

Provision for Diminution in value of Investments 133.52

63.60

* Book Value Re.1/-, hence shown as Nil.

The Following units were purchased and sold during the year :

1) 49272772.587 Units of Reliance Liquidity Fund,

2) 358956.153 Units of Tata Liquid Super High Investment Fund.


G INVESTMENTS

Global Reports LLC



Interest accrued on Investments 4.95

Stock (As taken, valued & certified by the Management)

i) Stores & Spare Parts 6810.70

ii) Loose Tools & Equipments 381.94

iii) Scrap 42.60 7235.24

Stock-in-Trade

Raw Materials 10.64

Finished Goods

i) Sugar 34925.84

ii) Industrial Alcohol 307.35

iii) Bio-compost 73.68

iv) Banked Power 26.18 35333.05

Work-in-Process

i) Sugar 84.25

ii) Molasses 1.89

iii) Bio-compost 13.31 99.45

Molasses 893.36

Bagasse 513.14

Pressmud 11.17

Standing Crop 3.30

Sundry Debtors (Unsecured, Considered good)

i) Debts outstanding for a period exceeding six months 385.97

ii) Other debts 4282.76 4668.73

Cash & Bank Balances

Cash and cheques in hand (As certified)

i) Cash in hand 157.44

ii) Cheques in hand 403.02 560.46

With Scheduled Banks

i) In Current Accounts 945.08

ii) In Fixed Deposit Accounts 173.13

iii) In Unclaimed Dividend Accounts 118.84 1237.05

With Post Office

In Saving Bank Accounts 0.46

50571.00


H CURRENT ASSETS

Notes: 1) Sundry debtors include Rs. 45.59 lacs under litigation.

2) Stock in transit included in Stock of Stores & Spare Parts Rs. 133.45 lacs.

Global Reports LLC



(Unsecured, Considered good)

Advances

Advances recoverable in cash or in kind or for value

to be received or pending adjustment 5613.88

Advances Considered Doubtful 491.61

Less : Provision for Doubtful Advance (491.61) –

Advances against Capital Assets 3874.97

Advance Payment of Tax 6105.40

Less: Provision for Tax (6105.40) –

Excise Duty & Cane Purchase Tax Advance 7902.68

Security Deposits 67.75

17459.28


I LOANS AND ADVANCES

Note: Loans & Advances include Rs. 13.36 lacs under litigation.

(Rupees in Lacs)

Sundry Creditors (Refer Note 4 of Schedule - "T") 33024.33

Interest accrued but not due 2652.10

Excess Price of Levy Sugar (Refer Note -3 of Schedule -"T") 43.16

Investor Education & Protection Fund

Unclaimed Dividend 118.83 35838.42

Provisions

Provision for Tax 9631.89

Less: Advance Payment of Tax (6105.40) 3526.49

Provision for Retirement Benefits of Employees 338.68

Provision for Liabilities (Refer Note -13 of Schedule -"T") 304.68

40008.27


J CURRENT LIABILITIES

(Rupees in Lacs)


Share Issue Expenses 464.28

Less : Written off during the year (143.09) 321.19

Debit Balance of Profit & Loss Account (As per Annexed Account) 4152.06

Less: General Reserve (As per contra) (4152.06) –

321.19


K MISCELLANEOUS EXPENDITURE & LOSSES

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Schedules forming part of the Consolidated accounts

(Rupees in Lacs)

Opening Stock

Finished Goods 12231.00 Molasses 455.22 Bagasse 622.68 Pressmud 3.45 Work in Process 90.00 13402.35 Closing Stock

Finished Goods 35333.05 Molasses 893.36 Bagasse 513.14 Pressmud 11.17 Work in Process 99.45 36850.17

23447.82

Add/Less : Excise Duty & Education Cess on Stock* (1608.00)21839.82

Year ended 30thSeptember, 2007

M INCREASE IN STOCK

* Includes Rent received (Gross) Rs. 100.03 lacs, TDS Rs. 4.83 lacs.

* Represents differential Excise duty & Education Cess on opening & closing stock of finished goods /by products.

(Rupees in Lacs)

Dividend on Current Investments (other than trade) 1.44 Profit from Sugar Trading 4.69 Insurance Claims Received 233.71 Liabilities no longer required written back 83.29 Miscellaneous Income * 273.52 Exchange Rate Fluctuation (Net) 464.99

1061.64


L OTHER INCOME

(Rupees in Lacs)

Sales 3.94 Closing Stock of Standing Crop 5.26 Net Loss transferred to Profit & Loss Account 3.11

12.31

Opening Stock of Standing Crop 4.58 Cane Seed Purchase 0.67 Fertiliser & Manures 1.18 Salary & Wages 1.52 Power & Fuel 0.25 Rent 1.00Irrigation & Cultivation Expenses 1.84 Repairs & Maintenance - Others 0.53 Miscellaneous Expenses 0.10 Adjustment relating to earlier years 0.64

12.31


N FARM ACCOUNT

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Salaries, Wages, Bonus etc. 6717.56

Contribution to Provident Fund, Gratuity & Other Funds (Including provisions) 683.77

Workmen & Staff Welfare Expenses 322.24

7723.57


O SALARIES, WAGES AND OTHER EMPLOYEES’ BENEFITS

(Rupees in Lacs)

Brokerage 379.07

Despatching and Forwarding Expenses 262.33

Cash Discount 181.19

Others 50.14

872.73


Q SELLING EXPENSES

(Rupees in Lacs)

Stores & Spare Parts consumed 7449.54

Power & Fuel 423.93

Filling and Packing Expenses 219.51

Rent 60.34

Rates & Taxes 152.84

Repairs & Maintenance

Plant & Machinery 2945.16

Buildings 315.18

Others 220.20 3480.54

Payment to Auditors

As Audit Fees 14.35

For Tax Audit 0.84

For Other Services 7.53

For Certification Work 1.33

For Expenses 1.45 25.50

Miscellaneous Expenses 2468.92

Insurance 519.67

Charity & Donation 90.49

Directors' Fees 6.40

Bad Debts 30.73

Loss on sale/discard of Fixed Assets (Net) 51.61

Provision for Liabilities (Refer Note - 13 of Schedule -"T") 7.60

Adjustment relating to earlier year (Net) 317.80

Share Issue Expenses written off 143.09

Goodwill written off 381.35

15829.86


P OTHER MANUFACTURING AND ADMINISTRATIVE EXPENSES

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On Fixed Loans 2792.79

On Other Loans (Including Financial Charges) 3647.77 6440.56

Less: Interest Received (Gross)*

On Long Term Investments (Other than trade) 1.40

On Income Tax Refund 424.83

On Others 10.05 436.28

6004.28


R INTEREST AND OTHER FINANCIAL CHARGES

* Tax deducted at Source Rs. 14.94 lacs.

I. Basis of Consolidation :The consolidated financial statements relate to Balrampur Chini Mills Limited ("Company"), its subsidiary companyand associate. The Company and its subsidiary constitute the Group.

a) Basis of Accounting:i) The financial statements of the subsidiary company used in the consolidation is drawn upto the same

reporting date as of the Company i.e. 30th September, 2007.

ii) The financial statement of the Group have been prepared in accordance with the Accounting Standardsissued by the Institute of Chartered Accountants of India, and other generally accepted accountingprinciples.

b) Principles of Consolidation :The consolidated financial statements have been prepared on the following basis:i) The financial statements of the Company and its subsidiary company have been combined on a line-by-

line basis by adding together like items of assets, liabilities, income and expenses. The intra-groupbalances and intra-group transactions and unrealised profits or losses have been fully eliminated.

ii) The Consolidated Financial Statements include the Share of Profit / Loss of the Associate Company whichhas been accounted as per the "Equity method"; and accordingly the Share of Profit / Loss of the AssociateCompany has been added to / deducted from the cost of investments.

An Associate is an enterprise in which the investor has significant influence and which is neither aSubsidiary nor a Joint Venture of the investor.

iii) The excess of cost to the Company of its investments in the subsidiary company over its share of equityof the subsidiary company, at the date on which the investment in the subsidiary company is made, isrecognised as "Goodwill" being an asset in the consolidated financial statements. The Goodwill so arisingis amortised in 5 years.

iv) The minority interest in the net assets of the subsidiary as on the date of Balance Sheet is nil as the networth of the subsidiary has been fully eroded. Accordingly, the minority share in the loss has beenadjusted with the share of majority and shown as goodwill.

c) Companies considered in the consolidated financial statements are :

S BASIS OF CONSOLIDATION AND SIGNIFICANT ACCOUNTING POLICIES

Subsidiary

Indo Gulf Industries Ltd. 53.96% 30th September, 2007

Associate

Avantika Ganna Pvt. Ltd. 39.34% 31st March, 2007

Name of the Company Holding as on 30th Financial yearSeptember, 2007 ended on

II. Significant Accounting PoliciesThe accounts are prepared under the historical cost convention and are in accordance with the generally acceptedaccounting principles in India and provisions of the Companies Act, 1956. The significant accounting policiesfollowed by the Company and the subsidiary company are stated below:

i) Fixed Assetsa) Fixed Assets are stated at their original cost adjusted by revaluation of Land, Building, Plant & Machinery,

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S BASIS OF CONSOLIDATION AND SIGNIFICANT ACCOUNTING POLICIES (Contd.)

Railway Siding and Tubewell of the Balrampur Unit as on 30th June, 1988 and Land, Building and Plant& Machinery of Tulsipur unit as on 31st March, 1999. Cost includes acquisition price, attributable expensesand pre operational expenses including finance charges, wherever applicable.

b) Depreciation on Fixed Assets is provided on Straight Line method in accordance with the rates as specifiedin Schedule XIV to the Companies Act,1956 (as amended).

c) Expenditure during construction period :Expenditure (including financing cost relating to borrowed funds for construction or acquisition of fixedassets) incurred on projects under implementation are being treated as Pre-operative expenses pendingallocation to the assets and are shown under "Capital work in progress".

d) Lease hold land in the nature of perpetual lease are not depreciated.

ii) InvestmentsLong Term Investments are carried at cost. Provision for diminution is made to recognise a decline, other thantemporary, in the value of long term investments, script wise. Current Investments are valued at lower of costor fair value, category wise. Cost of investments includes acquisition cost such as brokerage, stamp duty, etc.

iii) Inventoriesa) Inventories (other than By-products, Scrap and Standing crop) are valued at lower of cost or net realisable value.

The cost of Inventories is computed on weighted average basis. The cost of Finished goods and work-in-process include cost of conversion and other cost incurred in bringing the Inventories to their presentlocation and condition.

In respect of subsidiary company , the cost of Stores & Spare parts, Raw Materials and Finished Goods aredetermined on FIFO basis.

b) By-products (Molasses & Bagasse), Scrap and Standing Crop are valued at net realisable value.

iv) Revenue Recognitiona) Sale of goods is recognised at the time of transfer of substantial risk and rewards of ownership to the buyer

for a consideration.

b) Gross turnover is net of sales tax and inclusive of excise duty.

c) Dividend income is accounted for in the year it is declared.

d) All other income are accounted for on accrual basis.

v) ExpensesAll the expenses are accounted for on accrual basis.

vi) Retirement BenefitsCompany's contribution to Provident Fund and Pension Fund are charged to Profit and Loss Account. Gratuityand Leave encashment benefit is accounted for on the basis of actuarial valuation carried out as at the BalanceSheet date.

In respect of subsidiary company, provision for gratuity and leave encashment is made on estimated basis.

vii) Borrowing CostsBorrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised aspart of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time toget ready for intended use. All other borrowing costs are charged to revenue.

viii) Share Issue expensesThese are equally amortised over five years.

In respect of subsidiary company, these are amortised over a period of ten years.

ix) Insurance ClaimsAccounted for on settlement of claims.

x) Government Grantsa) Government grants related to fixed assets are adjusted with the value of the fixed asset/ credited to Capital

Reserve.

b) Government grants related to revenue items are adjusted with the related expenditure/ taken as income.

xi) Foreign Currency Transactionsa) Transactions in Foreign currency are initially recorded at the exchange rate at which the transaction is

carried out.

b) Monetary Assets and Liabilities related to foreign currency transactions remaining outstanding at the yearend are translated at the year end rate. The effect of Exchange Rate fluctuations in respect of fixed assets

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S BASIS OF CONSOLIDATION AND SIGNIFICANT ACCOUNTING POLICIES (Contd.)

is adjusted with the cost of the respective Asset, whereas in respect of Monetary Assets the same is takento Profit and Loss Account.

c) Forward exchange contracts entered into for hedging purposes are accounted for separately from theunderlying transactions. The premium or discount on forward exchange contracts is amortised over theperiod of the respective contract. Exchange difference on such contracts at the year-end / upontermination is taken to Profit and Loss Account.

d) Transactions covered by cross currency swap contracts are marked to market at the Balance Sheet dateand the gain or loss is taken to Profit and Loss Account.

xii) Taxes on IncomeCurrent tax is determined as the amount of tax payable in respect of taxable income for the year. Deferredtax is recognised, subject to the consideration of prudence, in respect of deferred tax assets, on timingdifferences, being the difference between taxable income and accounting income that originate in one periodand are capable of reversal in one or more subsequent periods.

xiii) Impairment of AssetsImpairment losses, if any, are recognised in accordance with the accounting standard issued in this regard byThe Institute of Chartered Accountants of India.

xiv) Provisions, Contingent Liabilities and Contingent AssetsProvisions are recognised in respect of obligations where, based on the evidence available, their existence atthe Balance Sheet date is considered probable.

Contingent Liabilities are shown by way of notes to the Accounts in respect of obligations where, based onthe evidence available, their existence at the Balance Sheet date is considered not probable.

A Contingent Asset is not recognised in the Accounts.

xv) Employee Stock Option SchemeIn respect of stock options granted pursuant to the company's Employee Stock Option Scheme, the intrinsicvalue of the options (excess of market price of the share over the exercise price of the option) is treated asdiscount and accounted for as employee compensation cost over the vesting period.

T NOTES ON CONSOLIDATED ACCOUNTS

(Rupees in Lacs)

1. a) Estimated amount of contracts remaining to beexecuted on Capital Account and not provided for 8669.33

b) Advances paid against above 3874.972. Contingent Liabilities not provided for in respect of:

a) Differential cane price for the sugar seasons 1978-79 and 1979-80 pending disposal of the writs filed by the Company in Hon'ble Calcutta High Court 32.93

b) No provision has been made for interest on excess amount of levy sugar for sugar season 1982-83 realised as per Court Order against which TDR of Rs. 25.54 Lacs has been deposited with a Bank 25.54

c) Claims for acquisition of 12.82 acres of land for the Chemical unit at Balrampur and Amount not compensation there against is under dispute and the matter is subjudice ascertainable

d) Claims against the Company not acknowledged as debts :i) Excise duty Demand-under appeal 233.09ii) Sales Tax Demand- under appeal 18.53iii) Others - under appeal/litigation 189.05

e) Bank Guarantee furnished in respect of excise duty rebate etc. 21.39f) The supplier of the Plant & Machinery of the sugar division of the subsidiary

company has gone into arbitration regarding certain claims and Company has Amount notalso filed counter claim.The case is pending with the arbitrator. ascertainable

3. Excess amount of levy sugar received to date for various sugar seasons as per Orders of the Hon'ble High Court has not been credited to the Profit and Loss Account as the matter is sub-judice 43.15

4. a) Amount due to Small Scale Industrial undertakings based on information furnished by the creditors 304.25


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T NOTES ON CONSOLIDATED ACCOUNTS (Contd.)

b) List of Small Scale Industrial undertakings to whom outstanding is over 30 days (as per terms of order):M/s Alpha Controls Instruments Pvt. Ltd., M/s Amrec Cooling Tower Pvt. Ltd.,M/s Atul Electroformers Pvt. Ltd., M/s Bharat Engineering & Casting,M/s Baba Vishwakarma Engg. Co. Pvt. Ltd., M/s Biodeg Chemicals and Allied Industries,M/s Chemical Systems Technologies, M/s Calsens Private Ltd.,M/s Chemical Systems Tech. (I) Pvt. Ltd., M/s Dembla Valves Pvt. Ltd.,M/s Centrifugal Systems, M/s G.S.Rollers,M/s Hi-Tech Systems & Services, M/s High Tech Engineers,M/s Instruments & Systems, M/s Kohli Enterprises,M/s Kay Kay Industries, M/s K.S.Projects Process Engineers,M/s Khanna Engineering Works, M/s Lord Krishna Poly Plast, M/s Mangla Rubber Industries, M/s New Pumps India,M/s M.R.Kalia Industries, M/s Nu-Plast Pipes & Plastics,M/s P.G.Goyal Industries, M/s Pelican Valves & Engineering Works,M/s Pancy Industrial Corporation, M/s Pathak Machines Tools Pvt. Ltd.,M/s Puri Industries, M/s R.C.Engineers Works Pvt. Ltd.,M/s Raj Chemical & Minerals, M/s Sangam Refractories,M/s Shiva Engineers, M/s Sintech Precision Products Ltd., M/s Sunderson Engineers Pvt. Ltd., M/s Swajit Engineering Pvt. Ltd.,M/s Stichwell Qualitex, M/s S.J.Industries,M/s Three Star Engineering Works, M/s Universal Heavy Engineering Company,M/s Uttam Industrial Engineering Pvt. Ltd., M/s Vishal Engineering works,M/s Waaree Instrument Ltd.

c) In the absence of necessary information from the suppliers relating to their registration status under the Micro,Small and Medium Enterprises Development Act, 2006, the information required under the said act could notbe compiled and disclosed.

5. The levy sugar price for the seasons 2004-05, 2005-06 and 2006-07 is yet to be announced by the Government ofIndia. Pending such announcement, the sale of levy sugar has been accounted for at the 2003-04 season's levy price.

6. The Employee Stock Option Scheme was approved by the Board of Directors and the shareholders in 2005. Underthis scheme, the remuneration committee granted 622500 options in 2005 and 883000 options in 2006 having avesting period of one year and a maximum exercise period of eight years. The exercise price of the options is basedon the average daily closing market price of the company's shares during the preceding twenty six weeks prior tothe date of grant on the stock exchange, where the shares are traded most.

Out of the above, 204500 options were lapsed till the Balance Sheet date and balance 1301000 options wereoutstanding as on 30th September, 2007.

7. The company has been granted eligibility certificate dated 23rd February, 2007 under New Sugar Industry PromotionPolicy, 2004 of the Government of Uttar Pradesh. Accordingly, incentives aggregating to Rs.1757.08 lacs allowableunder the above policy have been accounted for during the year.

The above policy which was applicable to units to be set up till 31st March, 2008 has been terminated by theGovernment vide order dated 4th June, 2007 wherein the Government expressed its intention to introduce anotherpolicy. The company has been legally advised that it continues to be eligible to receive the incentives under theabove policy as the eligibility certificate was issued to the company before termination of the above policy.

8. Details of remuneration paid to Directors :

i) Salary 248.04

ii) Contribution to Provident Fund, Gratuity and other Funds 100.63

iii) Perquisites (including monetary value of perquisites) 21.20

369.87

2006-07

(Rupees in Lacs)

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9 Other notes in respect of subsidiary companyi) a) The Government of Uttar Pradesh has initiated recovery proceedings for recovery of Sales Tax dues related

to Explosive unit at Jhansi pursuant to which the factory at Jhansi has been seized by the Governmentauthorities. All the assets located at factory including records there at remain seized till the year end.

Out of the above assets, certain assets pertaining to the said unit have been auctioned by the office of theLabour Commissioner, Jhansi against which a sum of Rs.8.03 lacs is lying with them. Pending availabilityof relevant information, no adjustment in this respect has been carried out in these accounts.

b) Pursuant to recovery proceedings initiated by U.P. State Government for the recovery of pending dues ofcane growers and for giving effect to the Recovery Certificates amounting to Rs.1561.00 lacs, all themovable & immovables assets of the sugar unit located at Maizapur, District Gonda (U.P.) were seized bythe District Administration on August 12, 2002. Towards the said recovery certificates, DistrictAdministration sold the entire stocks belonging to the Company and deposited the sale proceedsamounting to Rs.1250.41 lacs with Registrar, Allahabad High Court. The Company has also deposited asum of Rs.323.31 lacs with the Hon'ble High Court towards the said recovery and other cane dues. Out ofthe said amount, Rs.1493.31 lacs has been released by the Court to the Cane Commissioner leaving abalance of Rs.80.41 lacs in the Court, which is being reflected under the head “Loans and Advances”.

c) During the auction of sugar as per the directive of Hon'ble High Court of Allahabad, 49128 quintals ofsugar was found short for which investigation proceedings have been initiated by the Hon'ble High Court.Pending completion of such inestivation, the value including excise duty on above stock of sugar ofRs.700.07 lacs (as valued on 30.06.2002) has been considered at Nil value in these accounts.

ii) The Company is in the process of obtaining bank statements / balance confirmation certificates of non-operative accounts from banks at various locations without which the bank accounts could not be reconciled.The rest of the bank accounts having balances of Rs.31.37 lacs have been reconciled.

The amount of Rs.147.07 lacs shown in "Balance with Schedule Banks" under "Cash & Bank Balances" includesRs.15.45 lacs realised from the auction of molasses in the previous year, kept with Gonda DistrictAdministration and Allahabad Bank, Gonda Branch in a No-Lien account subject to disposal as per the orderof Hon'ble Allahabad High Court, Lucknow Bench, but does not include Rs.49.46 lacs being negative balancewith schedule banks shown in "Current Liabilities" as book overdraft.

iii) Share application money given Rs.112.60 lacs and included in “Loans and Advances” against which shares areyet to be issued by the concerned companies are considered to be good, there by no provision has been madefor the same.

iv) a) Calls in arrears and Deferred Sales Tax Liabilities are under reconciliation. Necessary adjustments, if any,will be made after reconciliation.

b) The installments for payment of Deferred Sales Tax converted into unsecured loan by Sales TaxDepartment are overdue. The same have not been paid and the interest thereon, if any, has not beenprovided in the accounts as the quantum thereof is not ascertainable.

v) Pending final settlement, Interest on statutory liabilities outstanding for a long period has not been providedas the quantum thereof is not ascertainable.

vi) Investment in Shares are in the name of the company except those which are in the process of transfer.

vii) Balances shown under “Sundry Creditors and Advances” are subject to confirmation and reconciliation withthe parties.

viii) Lease deed for 50 Acres of Land (Out of total land of 705 acres) for Jhansi Plant has not been executed. Inrespect of some other land, the registration formalities are under progress.

ix) Disclosure pursuant to AS-28 on "Impairment of Assets" :Due to seizure of company's explosive plant at Jhansi, the condition of the Plant & Machineries and otherfixed assets there at and the impairment loss, if any, in respect thereof could not be determined, pendingwhich no provision for such loss, if any, could be made in the accounts.

10. Segment information as per Accounting Standard - 17 on 'Segment Reporting' :The Company and its subsidiary has identified four business segments viz. Sugar, Distillery, Co-generation andothers. Segments have been identified and reported taking into account the nature of the products, the differingrisks and returns, the organisational structure and internal business reporting system.

a) Revenue and expenses have been identified to a segment on the basis of relationship to operating activities of

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the segment. Revenue and expenses which relate to enterprise as a whole and are not allocable to a segmenton reasonable basis have been disclosed as “Unallocable”.

b) Segment Assets and Segment Liabilities represent assets and liabilities of respective segments. Investments, taxrelated assets and other assets and liabilities that cannot be allocated to a segment on reasonable basis havebeen disclosed as “Unallocable”.

c) Information about Primary Business Segments:



Revenue

Gross Revenue 129090.20 15491.50 18844.89 184.07 – 163610.66

Less: Inter/ Intra

Segment Revenue 8714.38 1992.39 4247.60 106.49 – 15060.86

Total Revenue 120375.82 13499.11 14597.29 77.58 – 148549.80

Result

Segment Result (–) 11715.25 5061.36 8717.98 (–) 55.03 – 2009.06

Less:

Unallocated expenditure

net of unallocated income 1708.72 1708.72

Interest 6004.28 6004.28

Profit / (Loss) before Tax (–) 5703.94

Tax

Current Tax 186.00

Fringe Benefit Tax 65.63

Deferred Tax 397.68

Profit /(Loss) after Tax (–) 6353.25

Other Information

Segment Assets 184078.39 17782.65 60287.70 1419.72 3634.43 267202.89

Segment Liabilities 30431.80 2350.83 298.12 22.14 148189.74 181292.63

Capital expenditure 42916.52 6273.28 21299.43 560.80 98.73 71148.76

Depreciation 5245.99 596.39 2429.76 53.71 57.81 8383.66

Non cash expenses

other than depreciation 3.05 (–) 6.71 0.69 – 584.77 581.80

(Rupees in Lacs)

Notes: a) Transactions between segments are primarily for materials which are transferred at marketdetermined prices. Common costs are apportioned on a reasonable basis.

b) Since the Company’s activities/operations are primarily within the country, there is only onegeographical segment.

11. Related party disclosures as per Accounting Standard - 18 for the year ended 30th September, 2007 are given below:a) Name of the related parties and description of relationship :

i) Associate : Avantika Ganna Pvt. Ltd.

ii) Key Managerial Personnel (KMP): Mr. Vivek Saraogi - Managing DirectorMrs. Meenakshi Saraogi - Joint Managing DirectorMr. K.N. Ranasaria - Whole Time DirectorMr. Kishor Shah - Whole Time DirectorMr. R. N. Mishra - Whole Time Director.

iii) Relative of KMP : Mr. K.N. Saraogi - Chairman (Non Executive) upto 26th April, 2007 and relative of Managing Director and Joint Managing Director.

iv) Enterprise in which KMP and their relatives have substantial interest : Kamal Nayan & Co.

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b) Transactions with Related parties :






Associate interest (KMP) KMP Total

i) Purchase of Goods

Kamal Nayan & Co. – 1.00 – – 1.00

ii) Rendering of Services

Avantika Ganna Pvt. Ltd. 2.90 – – – 2.90

Mr. K.N. Saraogi – – – 0.20 0.20

Mrs. Meenakshi Saraogi – – 135.02 – 135.02

Mr. Vivek Saraogi – – 135.55 – 135.55

Mr. K.N. Ranasaria – – 50.29 – 50.29

Mr. Kishor Shah – – 39.93 – 39.93

Mr. R.N. Mishra – – 7.75 – 7.75

Amount due to/from related parties

i) Accounts payable

Mr. K.N. Ranasaria – – 2.40 – 2.40

Mr. Kishor Shah – – 6.96 – 6.96

(Rupees in Lacs)

12. Earnings per Share - The numerators and denominators used to calculate Basic/Diluted Earnings per Share :

a) Amount used as the numerator (Rs. Lacs)

Loss after Tax but before adjustment of Minority Interest and Share of Associate (4728.05)

Total - (A) (4728.05)

b) Weighted average number of Equity Shares used as the denominator for

Basic Earnings per Share - (B) 248154660

Add : Weighted average number of Equity Shares on account of

Employees Stock Option Scheme 40355

c) Weighted average number of Equity Shares used as the

denominator for Diluted Earnings per Share - (C) 248195015

d) Nominal value of Equity Shares (Re.) 1.00

e) Basic Earnings per Share - (Rs.) (1.91)

f) Diluted Earnings per Share - (Rs.) (1.90)

2006-07

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13. Disclosure in terms of Accounting Standard -29 on Provisions, Contingent Liabilities and Contingent Assets:

a) Movement for Provision for Liabilities:

b) The Contingent Liabilities & Liabilities mentioned at Sl. No. 2 & 13 (a) respectively are dependent upon Courtdecision /out of court settlement/disposal of appeals etc.

c) No reimbursement is expected in the case of Contingent Liabilities & Liabilities shown respectively under Sl.No.2 & 13 (a) above.

14. This being first year of consolidation, (a) the cash flow statement could not be prepared under the indirect methodin the absence of previous year comparatives, and (b) previous year figures have not been given.

(Rupees in Lacs)


Provided during the year 7.60




Timing of outflow/uncertainties Outflow on settlement/crystallization

Particulars Legal cases

Signatories to all foregoing Schedules 'A' to 'T' forming part of the Accounts.




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107Indo Gulf Industries Limited

Directors’ Report

INDO GULF INDUSTRIES LIMITED

Your Directors have pleasure in presenting the Twenty-

Fifth Annual Report and Audited Accounts of the

Company for the year ended 30th September, 2007.

(Rs. in thousands)

Particulars Year ended Year ended

30.09.2007 30.09.2006

Sales and other Income 34766.09 16834.52

Profit/(Loss) before

Depreciation, Interest and

Taxation (86160.13) (2267.45)

Less: Interest 56255.57 13077.65

Less: Depreciation 36167.75 32086.60

Profit/(Loss) before Tax (17883.45) (47431.70)

Provision for Tax (163.44) (35.96)

Net Profit/(Loss) (178746.89) (47467.66)

Add: Balance brought

forward from previous year (435625.93) (388158.27)

Loss Carried over to

Balance Sheet (614372.82) (435625.93)

Operations

The Maizapur unit of the Company commenced Crushing

operations for the season 2006-2007 w.e.f 7th April, 2007.

The quantitative performance results of Season 2006-07

were as under:

Duration of Sugar season : From 7th April, 2007 to 4th

May 2007

Cane Crushed (Qtls.) : 595400

Recovery(%) : 9.22

Production of Sugar (Qtls) : 54814

None of the Explosive Units of the Company is in

operation during the year.

The dispute with respect to the transfer of shares of

Dr. S.K. Garg has been resolved. Pursuant to Share

Purchase Agreement and in accordance with (Substantial

Acquisition of Shares and Takeover) Regulation 1997,

Balrampur Chini Mills Ltd. as on date had acquired

53.96% of Equity Shares of the Company and had become

its holding Company.

Future Outlook and Prospects

The Company had a successful trial run of its sugar unit

during the season 2006-07.

It is expected that the plant will run at its rated capacity

during the ensuing sugar season.

Dividend

In view of Losses, the directors regret their inability to

recommend dividend for the year under review.

Public Deposits

During the year under report, the Company has not

accepted any deposits within the purview of Section 58A

of the Companies Act, 1956.

Directors

Mr Vimal Kumar Jain will retire from the Board by

rotation at this Annual General Meeting and being

eligible, offers himself for reappointment. Your Directors

recommend his re-appointment.

Mr Gauri Shankar Agarwala will retire from the Board by

rotation at this Annual General Meeting and being

eligible, offers himself for reappointment. Your Directors

recommend his re-appointment.

Directors’ Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of

the Companies Act, 1956 with respect to Directors’

Responsibility Statement, your directors hereby confirm:

i) that in the preparation of the annual accounts for the

financial year ended 30th September, 2007, the

applicable accounting standards have been followed

along with proper explanation relating to material

departures;

ii) that the directors had selected such accounting

policies and applied them consistently and made

judgments and estimates that were reasonable and

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

of affairs of the Company at the end of the financial

year and of the Profit or Loss of the Company for the

year under review;

iii) that the directors had taken proper and sufficient care

for the maintenance of adequate accounting records

in accordance with the provisions of the Companies

Act, 1956 for safeguarding the assets of the Company

and for preventing and detecting fraud and other

irregularities;

iv) that the directors had prepared the accounts for the

financial year ended 30th September, 2007 on a

‘going concern’ basis.

Auditors’ Report

As required under Section 217 of the Companies Act,

1956, the observation of auditors in their report on

various issues are explained as follows :

• The Company had commenced the production and it

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is expected that sugar plant will run at its rated

capacity. Based on the rehabilitation measures

undertaken by the Company, accounts have been

prepared on a ‘Going Concern’ Basis.

• The account statements (Non-operative accounts)

from the Banks from the year 2002 onwards at

various locations have been called for, which have

not been provided by the bank. Without this the

reconciliation process (Non-operative accounts)

cannot be made. The bank accounts currently in

operation have been reconciled. In view of this

practical difficulty the amounts of bank accounts have

been shown as per books.

• The overdue instalments of deferred sales tax has not

been paid and the interest thereon, if any, has not

been provided in the accounts, as the quantum

thereof is not ascertainable. The same will be

provided on final settlement.

• Interest on outstanding statutory liabilities will be

provided upon final settlement as at present the

amount is not ascertained.

• Due to the seizure of the units of the Company,

requisite records of employees are not available. The

provision of gratuity on accrual basis will be

completed after compilation of records.

Auditors

M/s Vipin Aggarwal & Associates, Chartered Accountants,

Statutory Auditors of the Company retire and being

eligible, offer themselves for reappointment. The

Company has received a certificate from the Auditors to

the effect that their reappointment, if made, would be in

accordance with section 224 of the Companies Act, 1956.

Corporate Governance

As per clause 49 of the Listing Agreement with the Stock

Exchanges, Managements Discussion and Analysis, a

report on Corporate Governance together with the

Certificate from Practicing Company Secretary’s on the

compliance of conditions of the Corporate Governance

forms part of the Annual Report.

Particulars of Conservation of Energy, Technology

Absorption, Foreign Exchange Earnings and Outgo

In accordance with the requirement of Section 217(1)(e)

of the Companies Act, 1956 read with Companies

(Disclosure of Particulars in the Report of the Board of

Directors) Rules, 1988, the statement showing particulars

with respect to conservation of Energy, Technology

Absorption and Foreign Exchange Earnings and Outgo is

annexed hereto and form a part of this report.

Particulars of Employees

During the year under review there were no employees

who were drawing remuneration as prescribed in section

217(2A) of the Companies Act, 1956 read with Companies

(Particulars of Employees) Rules, 1975 either for full year

or for a part of the year under review.

Acknowledgements

Your directors wish to place on records their appreciation

for co-operation and support extended by the Bankers,

other Financial Agencies and employees of the company.

By order of the Board

For Indo Gulf Industries Limited

Sd/- Sd/-

Anup Kumar Acharya Dr. Arvind Krishna Saxena

Director Director

New Delhi

14th November, 2007

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Annexure to the Directors’ ReportInformation Pursuant to the Companies [Disclosure of Particulars in the Report of the Board of Directors] Rules 1988 andforming part of the Directors’ Report for the year ended 30th September, 2007

A. Conservation of Energya) Your Company continues to give high priority to the conservation of energy on an ongoing basis, some of the

significant measures taken are:i) Installation of dumping grates, high pressure boilers, high efficiency swing type fiberisor, milling control

system, flash vapour system.

ii) Installation of bigger size, constant ratio mill with variable speed, DC motor drive having full auto control,hydraulic cane unloaders, rotary-screens, continuous sulphur burner, high efficiency centrifugal pumps,Sugar bag conveying system, efficient & fully automatic centrifugal, semi kestner etc.

iii) Installation of compressors & fans, heat recovery units in boiler, feed water heaters, distributed controlsystem for centralized efficient operation.

b) The required data with regard to conservation of energy are furnished below:2006-07 2005-06

A) Power and fuel consumption

1. a) Purchased Units Nil Nilb) Own generation

i) Through Diesel Generator sets (Units) 381495 NilUnits per ltr. of Diesel 3.21 NilCost/ Units (Rs.) 10.49 Nil

ii) Through Steam Turbine/ Generator (Units) 2539413.70 NilUnit per quintal of Bagasse Cost/Unit Steam produced by use of own bagasse

2. Coal (specify quality and where used quantity) Not directly consumed in production (Tonnes)Total amount/average cost - do - –

3. Furnace Oil (K.Ltrs.) - do - –4. Other/Internal Generation - do - –

Quantity total cost rate/Unit Nil NilB) Consumption per Unit of production

Sugar (lac quintal) 0.55 NilElectricity (Units per qtl. of production) 46.33 NilFurnace Oil Nil NilCoal (specify quality) Nil NilOther (specify quality) Nil Nil

B. Research and development technology absorptionYour Company has been carrying out research and development in the following specific areas:i) Rearing of seed nurseries of new improved varieties for varietal replacement.ii) Pest control measures to protect cane from disease.iii) Ratoon crop management helping increase yield and recovery.

Owing to the efforts, a higher yield of disease free cane will be available to the Company, resulting in a higherreturn to the Company and to the cane growers.

Future plansi) continuing research to generate better-yielding and disease free cane varieties.ii) Installing machineries with the latest technology at different stations in the factory.iii) Providing irrigation facilities to growers by distributing pumping sets and boring.

C. Foreign exchange earnings and outgoi) Activities relating to exports initiative taken to increase exports Nil Nilii) development of new export market for product and services and export plan Nil Nil

iii) Total foreign exchange earnings (Rs. Lacs) Nil Niliv) Used (Rs. Lacs) Nil Nil


Sd/- Sd/-New Delhi Anup Kumar Acharya Dr. Arvind Krishna Saxena14th November, 2007 Director Director

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Corporate Governance ReportCompany’s Philosophy on Code of Corporate GovernanceThe company firmly believes that Corporate Governanceis a continuous process to attain high standards ofefficiency, transparency, integrity and ethical behaviorwith a view to maximize benefits from the business for allconstituents with due regards to and compliance withlaws.

Your company has adopted a ‘Code of Business Conductand Ethics’, which lays down the standards of valuesethics and business principles for Board Members andSenior Management of the Company.

Board of DirectorsThe Composition of Board of Directors as on 30th

September, 2007 is as follows:

1. Non-independent Non-executive Directorsi) Dr. Arvind Krishna Saxena

2. Independent Non-executive Directorsi) Mr. Vimal Kumar Jainii) Mr. Gauri Shankar Agarwala iii) Mr. Shiv Bhagwan Khowala iv) Mr. Anup Kumar Acharya

The composition of the Board of Directors, number ofother Directorship or Board Committees of which he is aMember and the attendance of each Director at the BoardMeeting and the last Annual General Meeting (AGM) areas under:-

**Dr. S.K. Garg resigned from the Board on 31st January,2007.

*Dr. Avinash Garg, Mr. Deepak Garg and Mr. M. K. Gargresigned from the Board on 27th January, 2007 effectivefrom 28th January, 2007. Mr. N. K. Agarwal was alternateDirector to Dr. Avinash Garg, hence ceased to be theDirector.

Mr. Vimal Kumar Jain, Mr. Gauri Shankar Agarwala, Mr.Shiv Bhagwan Khowala and Mr. Anup Kumar Acharyawere appointed as the Additional Directors on December20, 2006.

During the year ended 30th September, 2007, 9 BoardMeetings were held i.e. on 12th October, 2006, 20thNovember, 2006, 20th December, 2006, 27th January,2007, 31st January, 2007, 1st March, 2007, 30th April,2007, 30th July, 2007 and 30th August, 2007.

Board Committees:Audit CommitteeThe Board of Directors on 20th December, 2006reconstituted the Audit Committee, empowering it withnecessary powers and defining its duties to comply withthe provision of the Listing Agreement and CompaniesAct, 1956.

The Audit Committee constituted by the Board of

Directors consists of the following Directors as members:1. Mr. Vimal Kumar Jain : Chairman, Independent,

Non-executive

2. Dr Arvind Krishna : Non-independent Saxena Non-executive

3. Mr. Shiv Bhagwan : Independent, Khowala Non-executive

4. Mr. Anup Kumar : Independent, Acharya Non-executive

All these Directors possess Knowledge of corporatefinance, accounts and Company Law. The Chairman ofthe Committee is an Independent Non-executive Directornominated by the Board. The Company Secretary acts asa Secretary to the Committee.

The Audit Committee have following powers :1. To investigate into any matter in relation to the items

specified in Sections 292A of the Companies Act,1956 or referred to it by the Board and shall have fullaccess to information contained in the records of theCompany and external professional advice, ifnecessary.

2. To investigate any activity within its terms ofreference.

3. To seek information from any employee.

Sl. Name of Director Number of other Number of Number of AttendanceNo. Directorship (Public membership/ Board meetings at last AGM

Ltd. Company) Chairmanship attendedof other Board

Committee

1 Dr. S.K. Garg** Nil Nil 2 NA2 Dr. Avinash Garg* Nil Nil – NA3 Mr. Deepak Garg* Nil Nil – NA4 Mr. M.K. Garg* 2 Nil 1 NA5 Mr. N.K. Agarwal*

(Alternate to Avinash Garg) Nil Nil 3 NA6 Dr. Arvind Krishna Saxena Nil Nil 6 Yes7 Mr. Vimal Kumar Jain Nil Nil 6 Yes8 Mr. Gauri Shankar Agarwal 1 Nil 5 Yes9 Mr. Shiv Bhagwan Khowala Nil Nil 6 No10 Mr. Anup Kumar Acharya Nil Nil 5 Yes

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4. To obtain outside legal or other professional advice.

5. To secure attendance of outsiders with relevantexpertise, if it considers necessary.

The Role of the Audit Committee includes following:1) Oversight of the company’s financial reporting

process and the disclosure of its financial informationto ensure that the financial statement is correct,sufficient and credible.

2) Recommending to the Board, the appointment, re-appointment and, if required, the replacement orremoval of the statutory auditor and the fixation ofaudit fees.

3) Approval of payment to statutory auditors for anyother services rendered by the statutory auditors.

4) Reviewing, with the management, the annualfinancial statements before submission to the boardfor approval, with particular reference to:

a) Matters required to be included in the Director’sResponsibility Statement to be included in theBoard’s report in terms of clause (2AA) of section217 of the Companies Act, 1956.

b) Changes, if any, in accounting policies andpractices and reasons for the same.

c) Major accounting entries involving estimatesbased on the exercise of judgment bymanagement.

d) Significant adjustments made in the financialstatements arising out of audit findings.

e) Compliance with listing and other legalrequirements relating to financial statements.

f) Disclosure of any related party transactions.

g) Qualifications in the draft audit report.

5) Reviewing, with the management, the quarterlyfinancial statements before submission to the boardfor approval.

6) Reviewing, with the management, performance ofstatutory and internal auditors, and adequacy of theinternal control systems.

7) Reviewing the adequacy of internal audit function, ifany, including the structure of the internal auditdepartment, staffing and seniority of the officialheading the department, reporting structure coverageand frequency of internal audit.

8) Discussion with internal auditors any significantfindings and follow up there on.

9) Reviewing the findings of any internal investigationsby the internal auditors into matters where there issuspected fraud or irregularity or a failure of internalcontrol systems of a material nature and reporting thematter to the board.

10) Discussion with statutory auditors before the auditcommences, about the nature and scope of audit as

well as post-audit discussion to ascertain any area ofconcern.

11) To look into the reasons for substantial defaults in thepayment to the depositors, debenture holders,shareholders (in case of non payment of declareddividends) and creditors.

12) Reviewing Company’s financial and risk managementpolicies.

13) Carrying out such other function as may be time totime specifically referred by the Board of Directors.

The Audit Committee also reviews the followinginformation:1) The Management discussion and analysis of financial

condition and results of operations;

2) Statement of significant related party transactions,submitted by management;

3) Management letters / letters of internal controlweaknesses issued by the statutory auditors;

4) Internal audit reports relating to internal controlweaknesses;

5) The appointment, removal and terms of remunerationof the Chief internal auditor; and

6) Review of uses/ application of funds raised through(public issue, right issue, preferential issue, etc.).

Meetings and attendanceDuring the financial year ended 30th September, 2007,Audit Committee meetings were held on 27th January,2007, 28th February, 2007, 30th April, 2007 and 30th July,2007

Name of Directors No. of Meetings attended

Mr. Vimal Kumar Jain 4Dr. Arvind Krishna Saxena 4Mr. Shiv Bhagwan Khowala 4Mr. Anup Kumar Acharya 3

Remuneration CommitteeThe Remuneration Committee was constituted on 20thDecember, 2006. Prior to the constitution of theRemuneration Committee, compensation for ExecutiveDirectors was fixed by the Board of Directors andapproved by the Shareholders.

As on the date of this report, Remuneration Committeecomprises of 3 Directors, all of whom are non-executive,independent Directors. The members of the Committeeare:-1. Mr. Anup Kumar Acharya : Chairman

2. Mr. Shiv Bhagwan Khowala

3. Mr. Vimal Kumar Jain

During the financial year ended 30th September, 2007,Remuneration Committee meeting was held on 29thJanuary, 2007.

The details of payment to Non-Executive Directors during

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the year 2006-07 are as under:

Non –Executive Directors Sitting Fees (Rs)

Dr. Arvind Krishna Saxena 6000Mr. Vimal Kumar Jain 6000Mr. Gauri Shankar Agarwal 5000Mr. Shiv Bhagwan Khowala 6000Mr. Anup Kumar Acharya 5000Mr. N.K. Agarwal 1000Mr. M.K. Garg 1000

Shareholders’ Committeei) Share Transfer Committee

A Share Transfer Committee was reconstituted on20th December, 2006 to deal with various mattersrelating to share transfer / transmission, issue ofduplicate share certificates, approving the split andconsolidation requests and other matters relating totransfer and registration of shares.

At present the members in Share Transfer Committeeare as below:1. Mr. Vimal Kumar Jain


3. Mr. Anup Kumar Acharya

During the financial year ended 30th September,2007, 7 Share Transfer Committee meetings whichwere held on 2nd April, 2007, 10th May, 2007, 25thMay, 2007, 11th June, 2007, 29th June, 2007, 23rdJuly, 2007, 27th September, 2007.

No shares were pending for transfer as on 30thSeptember, 2007.

ii) Shareholder Investors’ Grievance CommitteeThe Company constituted the Shareholder / InvestorGrievance Committee on 20th December, 2006 tooversee the redressal of shareholders and investorgrievances in relation to transfer of shares, non-receipt of Annual Report, non- receipt of dividendetc. The constitution of the Committee is as follows:-1. Mr. Anup Kumar Acharya : Chairman

2. Mr. Vimal Kumar Jain


During the financial year ended 30th September,2007, Shareholder Investors’ Grievance Committeewere held on 2nd April, 2007 and 30th July, 2007.

The Company attends the shareholders’/investors’grievances/correspondence expeditiously. During theyear under review, 64 investor complaints werereceived and all of them have been resolved. Noshares were pending for transfer as on 30thSeptember, 2007.

Compliance OfficerMs. Neha Kejriwal, Company Secretary is the ComplianceOfficer of the Company.

General Body MeetingThe last three Annual General Meetings were held asgiven below:-

No special resolution was put through ballot at the lastAGM and no special resolution is proposed to beconducted through postal ballot at the forthcoming AGM.

Disclosuresi) The company does not have any related party

transactions which may have potential conflict withthe interests of the company at large.

ii) The Company has fulfilled all statutory compliancesexcept the payment of listing fees to “AhmedabadStock Exchange Limited”.

Means of communicationThe Company usually published its Quarterly, Half YearlyUn-audited Financial Results and Audited FinancialResults in the prescribed form in Financial Express andJansatta. The results were also sent to Stock Exchangeswhere the securities of the Company are listed.

The Management’s discussion and analysis forms a partof the Annual Report, which is posted to the shareholdersof the Company.

General Shareholders’ InformationAnnual General Meeting.

Date and Time : 29th January, 2008 at 11.00 A.MVenue : The Little Theatre Group,

Copernicus Marg, New Delhi - 110001

Financial year calendar : October, 2007 to September, 2008. (Tentative)

Results for the quarter ending 31st December, 2007 –fourth week of January, 2008

Results for the quarter ending 31st March, 2008 –fourth week of April, 2008.

Results for the quarter ending 30th June, 2008 – fourthweek of July, 2008.

Results for the quarter ending 30th September, 2008 -fourth week of October, 2008.

Book closure date21st January, 2008 to 29th January, 2008 (both daysinclusive).

Financial year Date Location of the Meeting Time Special resolution passed

2003-04 31.01.2006 422,Okhla Industrial Estate, 10.00 A.M. Reappointment of Dr. S.K. Garg asNew Delhi Chairman-cum-Managing Director

2004-05 15.11.2006 422,Okhla Industrial Estate, 10.00 A.M. NilNew Delhi

2005-06 30.03.2007 The Little Theatre Group, Copernicus 10.00 A.M. NilMarg, New Delhi 110001

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DividendConsidering the Losses, the Board of Directors have notrecommended any dividend for the year.

Listing of Equity shares on Stock Exchanges :i) Bombay Stock Exchange Ltd. – The Corporate

Relationship Department, Rotunda Building, P.J.Towers, Dalal Street, Fort, Mumbai – 400 001.

ii) The Stock Exchange (Ahmedabad) Ltd. – KamdhenuComplex, opposite. Sahajanand College, Panjara Pole,Ambawadi, Ahmedabad - 380 015.

Listing FeeListing fee for the year 2006-07 has been paid to theBombay Stock Exchange.

Listing fee of ASE is in arrear.

Stock CodeBSE Code for Indo Gulf Industries Ltd. - 506945

ASE Code for Indo Gulf Industries Ltd. - 26110

Trading of SharesPresently, the trading of the shares of the Company issuspended on the above Stock Exchanges.

Share Transfer System :Shares lodged for transfer are normally effected with in amaximum period of 30 days from the date of receipt.Shares for transfer should be lodged at the RegisteredOffice of the Company i.e. 104, Buildcon Apartment, 70,Ber Sarai, New Delhi – 110 016.

Distribution of shareholding as on 30th September, 2007(face value of Rs. 10 each).

Dematerialisation of sharesDue to the closure of the operations of the Companyfrom last four years, the company has not received theISIN number and the shares of the company are not indematerialised form.

Plant locationExplosive DivisionUnit 1: Babina, Jhansi (U.P.)Unit 2: Singrauli, (M.P.)Unit 3: Korba, (Chattisgarh)Unit 4: I.B Valley, (Orissa)Unit 5: Talchar, (Orissa)

Sugar Division: Maizapur, Gonda (U.P.)

Investor correspondenceIndo Gulf Industries Ltd., Flat No. 104, BuildconApartment, 70, Ber Sarai, New Delhi – 110 016 (India).

Non Mandatory RequirementThe Company has set up a Remuneration Committee on20th December, 2006. The Remuneration Committeemakes/ recommends to the Board of Directors regardingremuneration payable to the Managerial Personnel.

Code of ConductThe company has adopted a Code of Conduct for itsBoard of Directors and Senior Management Personnel.

Declaration on the Code of ConductThe company has adopted a Code of Conduct in itsmeeting held on 20th December, 2006. All the BoardMembers and Senior Executives of the Company haveaffirmed and assured their Compliance with the Code ofConduct of the Company in future.

Sd/-New Delhi Dr. Gopi Krishna Gupta14th November, 2007 Manager

Pattern of shareholding as on 30th September, 2007 (face value of Rs 10 each).

Shareholding range No. of Shares % of Shareholding No. of Shareholders % of shareholders

Upto 5000 2780996 29.07 18064 99.775001-10000 131834 1.38 18 0.1010001-20000 109398 1.14 7 0.0420001-30000 23650 0.25 1 0.0130001-40000 69500 0.73 2 0.0140001-50000 50000 0.52 1 0.0150001-100000 470050 4.91 6 0.03100001 and above 5931842 62.00 6 0.03Total 9567270 100.00 18105 100.00

No. of Shares % of Holding

Promoter’s Group 5162523 53.96Financial Institution, Insurance Companies, Banks and Mutual Funds etc. 175548 1.83Foreign Institutional Investors 1298 0.01Private Corporate Bodies 898686 9.39NRIs 97508 1.02Indian Public 3231707 33.78Total 9567270 100.00

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CEO / CFO CertificationThe Board of Directors,Indo Gulf Industries Limited,New Delhi.

Re: Financial Statements for the financial year 2006-07 – Certification by Manager and Manager (Accounts)

To the Members ofIndo Gulf Industries Limited,

We, Gopi Krishna Gupta, Manager and Mr. Sanjay KumarAgarwal, Manager (Accounts) of Indo Gulf IndustriesLimited, on the basis of the review of the financialstatements and the cash flow statement for the financialyear ending 30th September, 2007 and to the best of ourknowledge and belief, hereby certify that:-

1. These statements do not contain any materiallyuntrue statements or omit any material fact or containstatements that might be misleading.

2. These statements together present a true and fairview of the Company’s affairs and are in compliancewith existing accounting standards, applicable lawsand regulations.

3. There are, to the best of our knowledge and belief,no transactions entered into by the Company duringthe financial year ended 30th September, 2007 whichare fraudulent, illegal or violative of the Company’sCode of Conduct.

4. We accept responsibility for establishing andmaintaining internal controls for financial reporting,we have evaluated the effectiveness of the internalcontrol systems of the company pertaining tofinancial reporting and we have disclosed to theauditors and the Audit Committee those deficiencies

in the design or operation of such internal controls ofwhich we are aware and the steps we have taken orpropose to take to rectify these deficiencies.

5. We have indicated to the Auditors & the AuditCommittee:-

a) there have been no significant changes in internalcontrol over financial reporting during thisperiod.

b) there have been no significant changes inaccounting policies during this period.

c) there have been no instances of significant fraudof which we have become aware and theinvolvement therein, of management or anemployee having significant role in theCompany’s internal control systems over financialreporting.

Sd/- Sd/-Sanjay Kumar Agarwal Gopi Krishna GuptaManager (Accounts) Manager

New Delhi14th November, 2007

We have reviewed the compliance of conditions ofcorporate governance by Indo Gulf Industries Limited forthe year ended 30th September, 2007, as stipulated in theClause 49 of the Listing Agreement of the said Companywith Stock Exchanges, with the relevant records anddocuments maintained by the Company and furnished tous.

The compliance of conditions of Corporate Governanceis the responsibility of the management. Our examinationis limited to procedures and implementation thereof,adopted by the Company for ensuring the compliance ofconditions of corporate governance. It is neither an auditnor an expression of opinion on the financial statementsof the Company.

In our opinion and to the best of our information andaccording to explanations given to us, we certify that thecompany has complied with the conditions of corporategovernance as stipulated in the abovementioned ‘ListingAgreement’.

We further state that such compliance is neither anassurance to the future viability of the Company nor theefficiency of effectiveness with which the managementhas conducted the affairs of the Company.

We have been explained that no investor grievances arepending as on 30th September, 2007 for a periodexceeding one month against the Company as per therecords maintained by the Company.

For Anjali Yadav & AssociatesCompany Secretaries

Sd/-New Delhi (Anjali Yadav)14th November, 2007 Membership No. 15353

Certificate on Corporate Governance

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Auditors’ ReportTo the Members ofIndo Gulf Industries Limited

1. We have audited the attached Balance Sheet of INDOGULF INDUSTRIES LIMITED as at 30th September2007 and also the Profit and Loss Account and theCash Flow Statement for the year ended on that date,annexed thereto. These Financial Statements are theresponsibility of Company’s management. Ourresponsibility is to express an opinion on thesefinancial statements based on our audit.

2. We conducted our audit in accordance with theauditing standards generally accepted in India. Thosestandards require that we plan and perform the auditto obtain reasonable assurance about whether thefinancial statements are free of material misstatements.An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in financialstatements. An audit also includes assessing theaccounting principles used and significant estimatesmade by the management, as well as evaluating theoverall financial statements presentation. We believethat our audit provides a reasonable basis for ouropinion.

3. As required by the Companies, (Auditor’s Report)Order, 2003, issued by the Central Government ofIndia in terms of section 227 (4A) of the CompaniesAct, 1956, we enclose in the Annexure hereto, astatement on the matters specified in Paragraphs 4 and5 of the said Order.

4. Further to our comments in the Annexure referred toin paragraph 3 above; we report that: -

I. we have obtained all the information andexplanations, which to the best of our knowledgeand belief were necessary for the purposes of ouraudit except non availability of non-operative bankaccount statements and its reconciliation.

II. in our opinion, proper books of account, asrequired by law, have been kept by the Companyso far as appears from our examination of thebooks;

III. the Balance Sheet, Profit and Loss Account andCash Flow Statement dealt with by this report arein agreement with the books of account;

IV. in our opinion, the Balance Sheet, Profit and LossAccount and Cash Flow Statement dealt with bythis report comply with the Accounting Standardsreferred to in sub-section (3C) of section 211 of theCompanies Act, 1956;

V. in our opinion and to the best of our informationand according to the explanations given to us, thesaid accounts read with significant accountingpolicies and notes thereon, subject to matters statedin paragraphs herein below:

i. Your attention is drawn on Note No. 2(c) inSchedule R of the Financial Statement regardingerosion of net-worth of the Company. Though,the company has incurred a net loss of Rs. 17.87crores for the year ended 30.09.2007 & as ofdate accumulated losses of Rs. 61.44 crores ofthe Company has exceeded the shareholders’fund of Rs. 44.05 crores subject to amountspresently un-ascertainable as mentioned inunder noted para (ii) and (iii) ; yet in view ofthe factors as mentioned in para 2(c) of theNotes on Accounts, the accounts have beenmade on the presumption of going concern.

ii a. Regarding non-availability of bankStatements for non-operative bank accounts& its reconciliation. (Note No. 7(a) ofSchedule R).

b. Regarding non-provision of interest onDeferred Sales Tax Liability under the headUnsecured Loans, amount being unascertained.(Note No. 7 (b) of schedule R).

c. Regarding non-provision of interest andpenalty on statutory liabilities the amountbeing unascertained. (Note No. 8 of scheduleR).

iii. The provision for Gratuity has been made onestimated basis instead of actuarial basis. (NoteNo. IX (b) of Schedule Q)

give the information required by the CompaniesAct, 1956 in the manner so required and westate that the accounts present a true and fairview in conformity with the accountingprinciples generally accepted in India:

i) in the case of the Balance Sheet of the stateof affairs of the Company as at 30thSeptember, 2007 ;

ii) in the case of the Profit and Loss Account, ofthe LOSS for the year ended on that date;and

iii) in the case of the Cash Flow Statement, ofthe cash flows for the year ended on thatdate.

For Vipin Aggarwal & AssociatesChartered Accountants

Sd/-New Delhi (Vipin Aggarwal)14th November, 2007 Partner

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Annexure to the Auditors’ Report

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

i) a) We have been informed that, the Company is

again under process of preparing the records of

fixed assets.

b) According to explanation given to us, fixed

assets acquired during the year for the Sugar

unit at Gonda (U.P.) have been physically

verified by the management. However, in

respect of the fixed assets acquired during the

previous years, the management is in the

process of its reconciliation.

Further, in respect of the fixed assets of the

explosive units, we have been informed that the

same could not be physically verified due to

seizure of the plants.

c) There was no disposal of fixed assets during the

year.

ii) a) The inventories have been physically verified

during the period by the management at

reasonable intervals for the sugar unit at

Maizapur, Gonda (U.P). Further, there is no

inventory at Explosive unit, Jhansi as the same

has been written off during the year.

b) In our opinion and according to the information

and explanations given to us, the procedure of

physically verifying the inventory followed by

the management is reasonable and adequate in

relation to the size of the Company and nature

of its business.

c) On the basis of our examination, we are of the

opinion that the Company is maintaining proper

records of inventory. No material discrepancies

were noticed on verification between the

physical stocks and the book records.

iii) The Company has neither granted nor taken any

loans secured or unsecured to/from Companies,

firm or other parties listed in the register maintained

under section 301 and/or to the Companies Act,

1956.

iv) On the basis of information and explanations given

to us, we are of the opinion that the Company has

an adequate internal control system commensurate

with the size of the Company and the nature of its

business for the purchase of inventory and fixed

assets and for the sale of goods.

v) Based on the audit procedures applied by us and

according to the information and explanations

provided by the management, we are of the opinion

that there are no transactions that need to be

entered into the register maintained under Section

301 of the Companies Act. Accordingly, clause 4(v)

of the Order is not applicable to the Company.

vi) The Company has not accepted any deposits from

the public within the meaning of Section 58A, 58AA

or any other relevant provisions of the Act and rules

framed there under.

vii) In our opinion, the Company has an internal audit

system commensurate with its size and the nature of

its business.

viii) To the best of our knowledge and as explained, the

Central Government has not prescribed the

maintenance of cost records under clause (d) of sub

section (1) of Section 209 of the Companies Act,

1956 for the products of the Company.

ix) a) There are no such undisputed statutory dues

during the year. However, due to non

availability of records on account of seizure of

sugar factory at Maizapur, Gonda (U.P.) and

explosive units, we are unable to comment

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whether in respect of earlier years any

undisputed statutory dues were outstanding at

the year end.

x) The accumulated losses are Rs. 6143.73 lakhs

(without including unascertained amounts as

mentioned in para V ii (a to c) & iii of our report

against the shareholders’ fund of Rs. 4404.74 lakhs,

which exceeds its net worth.

Further, it has incurred cash losses of Rs. 1125.31

lakhs during the year under consideration and Rs.

117.85 lakhs in the immediately preceding financial

year without considering the effect as mentioned

above.

xi) According to the information and explanations

given to us, Paragraph 4(xi) of the order regarding

default in payment of dues to a financial institution

or bank or debenture-holders, is not applicable.

xii) According to the information and explanations

given to us, and based on the documents and

records produced to us, the company has not

granted loans and advances on the basis of security

by way of pledge of shares, debentures and other

securities.

xiii) In our opinion and according to the information

and explanations given to us, the nature of activities

of the Company does not attract any special statute

applicable to chit fund and Nidhi / mutual benefit

fund/societies.

xiv) The Company does not deal or trade in shares,

securities, and debentures other than the

investments made by it.

xv) During the year, since the Company has not given

any guarantee for loans taken by others, paragraph

4 (xv) of the order is not applicable.

xvi) During the year, since the Company has not taken

any term loans, paragraph 4 (xvi) of the order is not

applicable.

xvii) According to the information and explanations

given to us, and an overall examination of the

Balance Sheet of the Company, we report that no

funds raised on short-term basis have been used for

long-term investment by the Company and vice-

versa.

xviii) The Company has not made any preferential

allotment of shares to parties or Companies covered

in the register maintained under section 301 of the

Companies Act, 1956.

xix) During the year, since the company has not issued

any debentures, paragraph 4 (xix) of the order is

not applicable.

xx) The Company has not raised any money through a

public issue during the year. Hence paragraph 4

(xx) of the order is not applicable.

xxi) Based upon the audit procedures performed and

information and explanations given by the

management, we report that no fraud on or by the

Company has been noticed or reported during the

course of our audit.

For Vipin Aggarwal & Associates


Sd/-

New Delhi (Vipin Aggarwal)


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Balance Sheet As at 30th September, 2007

(Rs. in thousands)

Schedule As at 30th As at 30thSeptember, 2007 September, 2006

I. SOURCES OF FUNDS1. Shareholders' Funds

a) Share Capital A 88179.90 88179.90 b) Reserves & Surplus B 352293.44 440473.34 352293.44 440473.34

2. Loan Funds a) Secured Loans C 703368.12 221337.07 b) Unsecured Loans D 34455.35 737823.47 93952.12 315289.19

1178296.81 755762.53 II. APPLICATION OF FUNDS

1. Fixed Assetsa) Gross Block 926522.24 732247.29 b) Less: Depreciation 415349.48 379014.85 c) Net Block 511172.76 353232.44 d) Capital Work-in-progress 15352.36 7095.45 Net Fixed Assets E 526525.12 360327.89

2. Investments F 408.18 243.44 3. Current Assets, Loans & Advances

a) Current Assets G i) Inventories 80041.36 643.76 ii) Sundry Debtors 5084.32 –iii)Cash and Bank Balances 15368.07 18181.77

b) Loans & Advances H 50329.04 97605.72 150822.79 116431.25

c) Less: Current Liabilities & Provisions I 114750.87 159689.23 Net Current Assets 36071.92 (43257.98)

4. Miscellaneous Expenditure(To the extent not written off or adjusted) Share Issue Expenses 2823.25 4727.73Less: Written off during the period 1904.48 918.77 1904.48 2823.25

5. Profit and Loss Account 614372.82 435625.931178296.81 755762.53

Significant Accounting Policies Q Notes on Accounts R

Schedules 'A' to 'I', 'Q' & 'R' referred to above form an integral part of the Balance Sheet.

This is the Balance Sheet referred to in our report of even date.


Sd/- Sd/- Sd/- Sd/-Vipin Aggarwal Neha Kejriwal Anup Kumar Acharya Arvind Krishna SaxenaPartner Secretary Director Director


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Profit and Loss Account For the year ended 30th September, 2007

(Rs. in thousands)

Schedule Year ended 30th Year ended 30th

September, 2007 September, 2006

I. INCOME

Gross Turnover

Sales 35482.24

Less : Excise Duty 4594.18 –

Net Turnover 30888.06 –

Other Income J 3878.03 16834.52

Increase/(Decrease) in Stock K 47950.14 –

Loss transferred from Farm Account L (103.94) –

82612.29 16834.52

II. EXPENDITURE

Cost of Raw Materials Consumed 78789.97 –

Salaries, Wages & other Employees' Benefits M 18510.99 752.37

Other Manufacturing & Administrative Expenses N 38689.27 12886.67

Selling Expenses O 72.85 –

Interest & Other Financial Charges P 56255.57 13077.65

Depreciation 36167.75 32086.60

Share Issue Expenses written off 1904.48 1904.47

Adjustment Pertaining to Previous year (Net) 30804.86 3558.46

261195.74 64266.22

III. LOSS BEFORE TAX (178583.45) (47431.70)

Less: Provision for Fringe Benefit Tax 163.44 35.96

IV. LOSS AFTER TAX (178746.89) (47467.66)

Balance brought forward (435625.93) (388158.27)

V. Balance Carried to Balance Sheet (614372.82) (435625.93)

Significant Accounting Policies Q

Notes on Accounts R

Schedules 'J' to 'R' form an integral part of the Profit and Loss Account.

This is the Profit and Loss Account referred to in our report of even date.




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Cash Flow Statement For the year ended 30th September, 2007(Rs. in thousands)

(Rs. in thousands)

Year ended 30th Year ended 30thSeptember, 2007 September, 2006

A CASH FLOW FROM OPERATING ACTIVITIESNet Profit before tax and extra ordinary items (147778.60) (43873.24)Adjustment for:Depreciation 36167.75 32086.60Share Issue Expenses written off 1904.48 1904.47Provision for dimunition in value of Investments (162.74) 63.00Other Provisions 836.56 –Prior period items (30804.85) (3558.46)Interest Paid 56255.57 13077.65Inventories written off (177.22) –Provision for doubtful debts (2343.71) (8418.36)Bad Debts Written off 3073.09 7725.85Balances written back (2771.57) (8415.58)Operating Profit before working capital changes (85801.24) (9408.07)Adjustment for:Trade and other receivables 41462.99 53620.00Inventories (79220.38) –Trade Payable (43166.79) (80924.18) (97480.00) (43860.00)Cash Generated from operations (166725.42) (53268.07)Direct Taxes paid/refund – –Cash Flow before extra ordinary items (166725.42) (53268.07)Extra Ordinary Items – –Net Cash from Operating Activities (166725.42) (53268.07)

B CASH FLOW FROM INVESTING ACTIVITIESPurchase of Investments (2.00) –Capital work-in-progress (8256.92) –Purchase of Fixed Asset (194108.07) (31.90)Net Cash from Investing Activities (202366.99) (31.90)

C CASH FLOW FROM FINANCING ACTIVITIESProceeds from other borrowings 482031.05 280834.00Interest paid (56255.57) (13077.65)Loans repaid (59496.77) (209100.00)Net Cash from Financing Activities 366278.71 58656.35Net Increase/ (decrease) in Cash & Cash Equivalent (2813.70) 5356.38Opening Cash and Cash Equivalents 18181.77 12825.39Closing Cash and Cash Equivalents 15368.07 18181.77

Year ended 30th Year ended 30th September, 2007 September, 2006

a) Cash and Cheque in hand 59.31 1142.23b) Balances with banks:

Current Accounts 14706.89 16930.64Fixed Deposits 601.87 108.90

Total 15368.07 18181.77

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

2) Figures in bracket represent cash outflow.3) Cash and Cash equivalents at the end of the year consist of:

As per our report of even date.




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Schedules to the accounts(Rs. in thousands)

Authorised1,97,50,000 Equity Shares of Rs. 10/- each 197500.00 197500.00

25,000 10% Convertible Cumulative Preference Shares of Rs.100/- each 2500.00 2500.00 200000.00 200000.00

Issued, Subscribed & Paid up95,67,270 Equity Shares of Rs. 10/- each 95672.70 95672.70

Less: Call unpaid (Allotment money) 7492.80 7492.80 88179.90 88179.90


A SHARE CAPITAL

(Rs. in thousands)

From Holding Company 703368.12 221337.07 703368.12 221337.07

Note: Loan from Body Corporate is secured by 1st Charge on entire Current Assets and Moveable Fixed Assets of theCompany.


C SECURED LOANS

(Rs. in thousands)

From Bodies Corporate – 59496.77 From Others (Ex-Director) 3617.11 3617.11 Deferred Sales Tax 30838.24 30838.24

34455.35 93952.12


D UNSECURED LOANS

(Rs. in thousands)

Subsidy 3985.68 – – 3985.68


Less: Calls in Arrears (39450.47) – – (39450.47)

338593.61 – – 338593.61

Investment Allowance Reserve (Utilised) 9614.15 – – 9614.15

Debenture Redemption Reserve 100.00 – – 100.00

352293.44 – – 352293.44



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Schedules to the accounts

GROSS BLOCK DEPRECIATION NET BLOCK

Additions Total Total

As at during the As at Up to For the up to As at As at

Particulars 01.10.2006 year 30.09.2007 30.09.2006 year 30.09.2007 30.09.2007 30.09.2006

Land and Site Development 15281.94 2360.70 17642.64 – – – 17642.64 15281.94

Buildings 144168.42 18720.85 162889.27 41618.12 5014.34 46632.46 116256.81 102550.30

Staff Quarters 1106.01 – 1106.01 248.79 18.03 266.82 839.19 857.22

Tubewell & Water Supply 120.64 – 120.64 70.44 5.73 76.17 44.47 50.20

Plant & Machinery 539334.11 167632.88 706966.99 306065.85 29931.43 335997.28 370969.71 233268.25

Electric Installation 10798.64 – 10798.64 10307.30 491.34 10798.64 – 491.34

Furniture & Fixtures 3172.54 2755.43 5927.97 3156.77 376.24 3533.01 2394.96 15.77

Office Equipments 3299.02 – 3299.02 2658.08 164.57 2822.65 476.37 640.94

Computers 3703.40 2559.78 6263.18 3626.92 319.05 3945.97 2317.21 76.48

Motor Vehicles 11262.57 245.31 11507.88 11262.58 13.90 11276.48 231.40 –

Total 732247.29 194274.95 926522.24 379014.85 36334.63 415349.48 511172.76 353232.44

Capital Work-in-Progress 15352.36 7095.45

Total - Current Year 732247.29 194274.95 926522.24 379014.85 36334.63 415349.48 526525.12 360327.89

Total - Previous Year 732215.39 31.90 732247.29 346928.25 32086.60 379014.85 353232.44

E FIXED ASSETS

Notes: Depreciation amounting to Rs. 166880/- during the year have been capitalised.

(Rs. in thousands)

Market Value of quoted investment Current year - Rs. 299215/- (Previous year Rs. 136475/-)

(Rs. in thousands)

Long Term a) In Government Securities :

(Deposited with Government authorities) Kisan Vikas Patra 1.00 1.00 Post Office National Saving Certificates 107.96 105.96

108.96 106.96 b) In Shares of Joint Stock Companies

No. of No. ofEquity EquityShares Shares

Trade Investments Quoted, Fully Paid Up American Paints (India) Ltd. 200000 2000.00 200000 2000.00 Classic Global Security Ltd. 8400 164.00 8400 164.00 Damania Capital Markets Ltd. 60100 1808.00 60100 1808.00 Easter India Ltd. 1000 37.00 1000 37.00 Eastern Sugar Mills Ltd. 23000 230.00 23000 230.00 Inland Printers Ltd. 52000 3124.11 52000 3124.11 KM Capital Ltd. 16500 214.00 16500 214.00 Ram Gopal Poly Ltd. 135320 2232.00 135320 2232.00 VLS Finance Ltd. 10300 3842.00 10300 3842.00

13651.11 13651.11 Less : Provision for dimunition in value of investments 13351.89 13514.63

299.22 136.48 Total 408.18 243.44


F INVESTMENTS

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a) Inventories (As taken, valued & certified by the Management) i) Stores & Spare Parts 27256.00 643.76 ii) Loose Tools & Equipments 1680.21 28936.21 – 643.76 Finished Goods

Sugar 50416.51 –Work-in-Process

Sugar 107.14 –Bagasse 337.50 –Standing Crop 244.00 –

80041.36 643.76 b) Sundry Debtors (Unsecured, Considered Good)

i) Debts outstanding for a period exceeding six months – –ii) Other debts 5084.32 –

5084.32 – c) Cash & Bank Balances

Cash In Hand 59.31 1142.23 With Scheduled Banks i) In Current Accounts 14706.89 16558.88 ii) In Fixed Deposit Accounts 601.87 15308.76 480.66 17039.54

15368.07 18181.77


G CURRENT ASSETS

(Rs. in thousands)

(Unsecured, considered good unless stated otherwise) AdvancesAdvances recoverable in cash or in kind or forvalue to be received or pending adjustment

Considered Good 37146.67 97605.72 Considered Doubtful 36559.79 38903.50 Less: Provision for Doubtful Debts 36559.79 – 38903.50 – Deposits 12601.00 12601.00 Less: Provision made for Doubtful Deposits 12601.00 – 12601.00 –

Excise Duty & Cane Purchase Tax Advance Considered Good 13147.37 – Considered Doubtful 2922.79 2922.79 Less: Provision made 2922.79 – 2922.79 – Security Deposit 35.00 –

50329.04 97605.72


H LOANS & ADVANCES

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a) Current LiabilitiesSundry Creditors 79880.74 124529.65 Share Application Refund Account – 79880.74 1191.95 125721.60

b) ProvisionsProvision for Retirement Benefits of Employees 5902.50 5000.00 Provision for liabilities 28967.63 28967.63

114750.87 159689.23


I CURRENT LIABILITIES & PROVISIONS

(Rs. in thousands)

Opening StockFinished Goods – –Bagasse – –Work- in- Process – – – –Closing Stock Finished Goods 50416.51 –Bagasse 337.49 –Work- in- Process 107.14 50861.14 – –

50861.14 –Less: Excise Duty and Education Cess on Stock 2911.00 –

47950.14 –Increase in Stock 47950.14 –


K INCREASE / (DECREASE) IN STOCK

(Rs. in thousands)

Liabilities no longer required written back 2771.57 16833.95 Miscellaneous Income (Net) 1106.46 0.57

3878.03 16834.52


J OTHER INCOME

(Rs. in thousands)

Sales – –Closing Stock of Standing Crop 244.00 –

244.00 –Opening Stock of Standing Crop – –Cane Seed Purchase 61.24 –Fertiliser & Manures 69.60 –Salary & Wages (labour) 56.56 –Irrigation & Cultivation Expenses 133.76 –Repairs & Maintenance - Others 26.78 –

347.94 –Net Loss transferred to Profit & Loss Account (103.94) –


L FARM ACCOUNT

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(Rs. in thousands)

Stores & Spare Parts Consumed 6086.36 – Power & Fuel 2160.62 – Filling & Packing Expenses 309.85 – Rent 459.85 354.39 Rates & Taxes 69.09 17.87 Repairs & Maintenance

Plant & Machinery 11069.86 – Buildings 1365.61 – Others 604.00 13039.47 – –

Payment to Auditors As Audit Fees 185.39 185.20 Tax Audit 84.27 84.18 Other matters 78.76 348.42 196.42 465.80

Travelling and Conveyance 2317.99 221.75 Legal and Professional 6324.34 1397.71 AGM Expenses 413.13 198.62 Security Expenses 983.32 1352.88 Miscellaneous Expenses 2092.65 1083.02 Insurance 470.93 5.78 Conservancy and Upkeep 540.16 – Bad debts 3073.09 7725.85 Provision for Diminution in value of Investment – 63.00

38689.27 12886.67


N OTHER MANUFACTURING & ADMINISTRATIVE EXPENSES

(Rs. in thousands)

Salaries, Wages, Bonus, etc. 15690.30 664.24 Contribution to Provident Fund, Gratuity & Other Funds (including Provisions) 2371.55 65.86 Workmen & Staff Welfare Expenses 449.14 22.27

18510.99 752.37


M SALARIES, WAGES & OTHER EMPLOYEES’ BENEFITS

(Rs. in thousands)

Brokerage 72.85 –72.85 –


O SELLING EXPENSES

(Rs. in thousands)

On Inter Corporate Deposits 56255.57 13077.65 56255.57 13077.65


P INTEREST & OTHER FINANCIAL CHARGES

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i) Basis of accountingThe financial statements are prepared under the historical cost convention, in compliance with the AccountingStandards issued by The Institute of Chartered Accountants of India and relevant presentational requirements ofthe Companies Act, 1956.

The accounts for the year have been prepared on the assumption that the company is a going concern.

ii) Fixed Assets and Depreciation Fixed Assets are stated at cost less accumulated depreciation. Cost of Acquisition or construction is inclusive offreight, duties, taxes, financial costs and other related expenses up to the date of commissioning of the assets.

The Company is following the straight-line method of depreciation in respect of all assets at the rates specified inSchedule XIV to the Companies Act, 1956.

Depreciation is not provided on assets sold, discarded etc. in the year of sale.

Leasehold land value is not amortized in view of the long-term nature of the lease.

iii) InventoriesThe basis of valuation of various categories of inventories is as follows:

iv) SalesSales are net of sales return, sales tax and inclusive of excise duty, trade tax and entry tax.

v) Excise DutyExcise Duty is paid on clearance of goods from the factory, however liability for the same is provided on thefinished goods stock lying in the factory.

vi) Material in transitAll the materials which are purchased before the closing date of the financial year but are not received by theCompany, are accounted for as material in transit. The CENVAT on such material in transit is also accounted foras CENVAT receivable.

vii) InvestmentsLong term investments are carried at cost. Provision for diminution is made to recognise a decline, other thantemporary, in the value of long term investments, script wise. Current investments are valued at lower of cost orfair value, category wise. Cost of investment includes acquisition cost such as brokerage, stamp duty etc.

viii) Expenses incurred during construction/erection/commissioning of Plant a) All the expenses including interest incurred during the construction/ major renovation period, which are

directly allocable to specific assets, are capitalised to the respective assets. Expenses in the nature of overheadsboth direct and indirect are allocated to Building, Plant & Machinery & Electrical Installations in the ratio oftheir balance appearing before the commissioning of the plant.

b) Depreciation is not charged on assets before a plant is commissioned/ re-commissioned.

c) Any income arising out of trial production before the commissioning of the plant is reduced from the pre-operative expenditure.

ix) Share Issue expensesIssue expenses incurred by the Company is amortised over a period of ten years.

x) Recognition of Revenue & ExpenditureAll expenses and income are recognised on accrual basis except interest on Calls- in- Arrears which is accountedfor on receipt basis.

xi) Retirement Benefitsa) Company’s contribution to Provident fund and pension fund is charged to Profit & Loss Account.

b) Provision for Gratuity and leave encashment is made on estimated basis.

Q SIGNIFICANT ACCOUNTING POLICIES

Stores & Spares, At lower of cost or net realizable value. Cost is determined by using FIFO (firstRaw Material & in first out) method and does not include recoverable taxes and duties incurredFinished goods (in the period under reference, there was no stock of finished goods which in

the previous years were valued at selling price including excise duty butexcluding sales tax).

Process stocks At Estimated Realisable value. By Products At Net Realisable value. Standing Crop At net Realisable value

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xii) Borrowing CostBorrowing costs that are attributable to the acquisition, construction or major renovation of qualifying assets arecapitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial periodof time to get ready for intended use. All other borrowing costs are charged to revenue.

xiii) Insurance ClaimInsurance claims are accounted for on settlement of claims.

xiv) Government Granta) Government grant related to fixed assets are adjusted with the value of the fixed assets / credited to capital

reserve.

b) Government grants related to revenue items are adjusted with the related expenditure / taken in revenue.

xv) Research & Development ExpensesRevenue expenditure incurred on cane development is charged of in the year it is incurred.

xvi) Taxes on IncomeCurrent taxes are determined as the amount of tax payable in respect of taxable income for the period. Deferredtax is recognised, subject to the consideration of prudence in respect of deferred tax assets, on timing differences,being the difference between taxation income and accounting income that originate in one period and are capableof reversal in one or more subsequent period.

xvii) Impairment of AssetsImpairment losses, if any are recognised in accordance with the accounting standard issued in this regard by theInstitute of Chartered Accountants of India.

xviii) Provisions, Contingent Liabilities and Contingent AssetsProvisions are recognised in respect of obligations where, based on the evidence available, their existence atbalance sheet date is considered probable.

Contingent liabilities are shown by way of notes to the accounts in respect of obligations where, based on theevidence available, their existence at the balance sheet date is considered not probable.

A contingent asset is not recognised in the Accounts.

Q SIGNIFICANT ACCOUNTING POLICIES (Contd.)

1. Contingent Liabilities not provided for:a) Bank guarantee for Rs. 1.00 Lac provided to U.P. Pollution Control Board for granting consent of Air and Water

is backed by FDRs of the same amount.

b) Estimated amount of contracts remaining to be executed on capital account Rs. 66.27 lakhs (Previous Year Nil).

c) The supplier of the Plant & Machinery of the sugar division has gone into arbitration regarding certain claimsand Company has also filed counter claim. The case is pending with the arbitrator. No effect has been taken inthe books of account, as ultimate effect is not ascertainable.

2. a) The Government of Uttar Pradesh has initiated recovery proceedings for recovery of Sales Tax dues related toExplosive unit at Jhansi, pursuant to which, the factory at Jhansi has been seized by the Government authorities.All the assets located at factory including records there at remain seized till the year end.

Out of the above assets, certain assets pertaining to the said unit have been auctioned by the office of the labourcommissioner, Jhansi, against which a sum of Rs. 8.03 lakh is lying with them. Pending availability of relevantinformation, no adjustment in this respect has been carried out in these accounts.

b) Pursuant to recovery proceedings initiated by U.P. State Government for the recovery of pending dues of CaneGrowers and for giving effect to the Recovery Certificates amounting to Rs. 1561 lakhs, all the moveable &immoveable assets of the sugar unit located at Maizapur, District Gonda (U.P.) were seized by the DistrictAdministration on August 12, 2002. Towards the said recovery Certificate Distt. Administration sold the entirestocks belonging to the Company and deposited the sale proceeds amounting to Rs. 1250.41 lakhs with RegistrarAllahabad High Court. The Company has also deposited a sum of the Rs. 323.31 lakhs with the Hon’ble HighCourt towards the said recovery and other cane dues. Out of the said amount Rs. 1493.31 lakhs had beenreleased by the Court to the Cane Commissioner leaving a balance of Rs. 80.41 lakhs in the Court, which isbeing reflected under the head loan and advances.

c) The Company’s net worth has been fully eroded as the accumulated loss of Rs. 61.44 Crores has exceeded its

R NOTES ON ACCOUNTS

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shareholders’ fund of Rs. 44.04 Crore. It was felt that the status of the Company will be improved in thefollowing years, as the production has already commenced and plant will run on a continuous basis. Furtherthe holding Company has provided the necessary funds for the operations. Accordingly the Company hasconsidered that it will be able to continue as a Going Concern entity.

d) During the auction of sugar as per the directive of Hon’ble High Court of Allahabad, 49128 quintals of sugarwas found short for which investigation proceedings have been initiated by the Hon’ble High Court. Pendingcompletion of such investigation, the value including excise duty on above stock of sugar of Rs. 700.07 lakhs(as valued on 30.06.2002) has been considered at NIL value in these accounts.

3. The Company has made one time settlement with the Financial Institutions and Banks in the year ending 31stMarch, 2006 and Rs. 1917.06 lakhs were written back due to the said one time settlement. However the said amountwas over written back by Rs. 308 lakhs, which has been written off as prior period expenses during the year.

4. The inventories at Maizapur Unit have been verified and the same have been stated at cost. However theinventories of Explosive Division stated earlier at the valuation taken on 30th September, 2005 for Rs. 1.80 Lacs havebeen written off during the year.

5. a) The Company is in the process of obtaining bank statements/ balance confirmation certificates of non-operativeaccounts from banks at various locations, without which the bank accounts could not be reconciled. The restof the bank accounts having balances of Rs. 31.37 lakhs have been reconciled.

The amount of Rs. 147.07 Lakhs shown in “Balance with Schedule Banks” under “Cash & Bank Balances”includes Rs. 15.45 lakhs realised from the auction of molasses in the previous year, kept with Gonda DistrictAdministration and Allahabad Bank, Gonda Branch in a no-lien account subject to disposal as per the order ofHon’ble Allahabad High Court, Lucknow Bench, Lucknow but does not include Rs. 49.46 lakhs being negativebalance with schedule banks shown in “Current Liabilities” as book overdraft.

b) Due to seizure of factory and records, cash in hand which included Rs. 4.87 Lakhs of Cash Balance lying at thetime of seizure have become irrecoverable and hence have been written off during the year.

6. a) In the opinion of management, the “Loans and Advances” have a value on realisation in the ordinary course ofbusiness at least equal to the amount at which they are stated in the Balance Sheet. Further, in respect of certainitems which were long outstanding, necessary provision has been made.

b) i) Rs. 112.60 lakhs given as share application money and included in “Loans and Advances” against whichshares are yet to be issued by the concerned companies are still considered to be good, there by noprovision has been made for the same.

ii) “Loans and Advances” includes Rs. 71.35 lakhs paid under protest with Sales Tax Authorities towards SalesTax dues, against which liability for Rs. 289.68 lakhs have been provided.

7. a) Calls in arrears and Deferred Sales Tax Liabilities are under reconciliation. Necessary adjustment, if any, will bemade after reconciliation.

b) The installments for payment of Deferred Sales Tax converted into unsecured loan by Sales Tax Department areoverdue. The same has not been paid and the interest thereon, if any, has not been provided in the accounts,as the quantum thereof is not ascertainable.

8. Pending final settlement, Interest on statutory liabilities outstanding for a long period has not been provided, as thequantum thereof is not ascertainable.

9. Interest receivable (net of interest payable) on allotment money remaining unpaid in respect of Equity Shares issuedon conversion of 12% Convertible Debentures will be accounted for on receipt basis.

10. Investments in Shares are in the name of the company except those, which are in the process of transfer.

11. a) Amount due to Small Scale Industrial undertakings to whom outstanding is over 30 days is Rs. 4.95 lakhs (asper terms of order).

b) List of small scale industries is as under:i) M/s Bharat Engineering and Castings ii) M/s Dembla Valves Pvt. Ltd.iii) M/s Kay Kay Industries iv) M/s Mangla Rubber Industriesv) M/s S. J. Industries vi) M/s Shiva Engineersvii) M/s Waaree Instrument Ltd.

12. Balances shown under Sundry Creditors and advances are subject to confirmation and reconciliation with theparties.

R NOTES ON ACCOUNTS (Contd.)

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13. Lease deed for 50 Acres of Land (Out of total land of 705 acres) for Jhansi Plant has not been executed. In respectof some other land, the registration formalities are under process.

14. No provision for taxation has been made since there are no taxable profits as per the provisions of Income Tax Act,1961.

15. In accordance with Accounting Standard 22 “Accounting for taxes on Income Tax”, issued by The Institute ofChartered Accountants of India, the company has not accounted for deferred tax during the year. The Companyhas significant amount of carried forward losses and unabsorbed depreciation under the Income Tax Act, 1961.However, as a matter of prudence deferred tax assets have not been recognised.

16. Earnings per Share:a) The numerators and denominators used to calculate basic / diluted earnings per share:

17. Disclosure pursuant to AS – 28 on “impairment of Assets”Due to seizure of company’s explosive plant at Jhansi, the condition of the Plant & Machineries and other fixedassets there at and the impairment loss, if any, in respect thereof could not be determined, pending which noprovision for such loss, if any, could be made in the accounts.

18. Disclosure in terms of Accounting Standards – 29 on Provisions, Contingent Liabilities and Contingent Assets:a) Movement for Provision for Liabilities:

b) The Liabilities mentioned above depend upon Court decision/ out of court settlement/disposal of appeals etc.

c) No reimbursement is expected in the case of Contingent liabilities and liabilities shown respectively under Sl. No. 2 & 18(a) above.

19. There are no related party transactions during the current period. The Company has taken Rs. 70.34 Crore as loanfrom the Holding Company including interest of Rs. 4.31 Crore on the said loan.

20. Previous year figures have been regrouped/ rearranged wherever found necessary.

21. Additional information pursuant to the provisions of Para 3 & 4 of Part -II of Schedule VI of the Companies Act,1956 to the extent applicable to the Company:

R NOTES ON ACCOUNTS (Contd.)

Amount used as the numerator

A Profit / (loss) after tax (Rs. in thousands) (178746.89) (47467.66)

B Basic / weighted average number of equity shares

used as denominator 8817990 8817990

C Nominal value of equity shares (Rs.) 10 10

D Basic/Diluted earning per share–(A/B)(Rs.) (not annualised) (20.27) (5.38)

Sl. No. Particulars 2006-07 2005-06


Provided during the year (included under prior period adjustment) –




Timing of outflow/uncertainties Outflow on settlement/Crystallization

Particulars Statutory Dues

(Rupees in Lacs)

Licensed Installed* Licensed Installed*

Slurry Explosive (MT) 10000 10000 10000 10000

Blasting Agents (MT) 35000 35000 35000 35000

Cast Booster (MT) 20 20 20 20

Detonating Fuse (million meters) 5 5 5 5

Sugar (TCD) 3000 3000 3000 3000

a) Capacity 2006-07 2005-06

* As certified by the Management

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R NOTES ON ACCOUNTS

Unit Qty. Value Qty. Value


Explosives

Opening Balance MT – – 146.97 31.54

Production MT – – – –

Sales MT – – – –

Obsolete/Damaged MT – – 146.97 31.54

Closing Balance MT – – – –

Cast Booster

Opening Balance Kgs. – – 4250 7.65

Production Kgs. – – – –

Sales Kgs. – – – –

Obsolete/Damaged Kgs. – – 4250 7.65

Closing Balance Kgs. – – – –

Detonating Fuse

Opening Balance Mtrs. – – 37500 1.52

Production Mtrs. – – – –

Sales Mtrs. – – – –

Obsolete/Damaged Mtrs. – – 37500 1.52

Closing Balance Mtrs. – – – –

Sugar

Opening Balance Qtls. – – 49128 860.62

Production Qtls. 54814 – – –

Sales Qtls. 20213 278.19 – –

Shortage (under investigation) Qtls. – – 49128 860.62

Closing Balance Qtls. 34601 475.06 – –

Molasses



Sales Qtls. 37444 63.39 – –

Damaged/wastage Qtls. 408 57170 110.06

Closing Balance Qtls. – – – –

Bagasse



Sales Qtls. 68565 12.80 – –

Obsolete/Damaged Qtls. – – 189810 56.94

Captive Consumption Qtls. 148850 – – –

Closing Balance Qtls. 15000 3.38 – –

b) Other Details 2006-07 2005-06

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d) Expenditure in Foreign Currency

R NOTES ON ACCOUNTS

Unit Qty. Amount Qty. Amount


Raw Material – – – –

Ammonium Nitrate MT – – – –

Hexamine MT – – – –

Sugarcane Lakh/Qtls 5.95 787.90 – –

Others – – – –

c) Raw Material Consumed 2006-07 2005-06

Foreign Travel Expenses Nil Nil

Remittance in Foreign Currency on account of Dividend Nil Nil

The year to which Dividend relates – –

Particulars 2006-07 2005-06





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Balance Sheet Abstract and Company’s General Business Profile

I. Registration details :

a. Registration No. 11425b. State Code 55c. Balance Sheet Date 30.09.2007

II. Capital raised during the year

a. Public Issue and Rights Issue –b. Bonus Issue –c. Private Placement (Preferential Issue) –d. Others (Conversion of Debenture into equity) –

III. Position of Mobilisation and Deployment of Funds

a. Total Liabilities 1,178,296.81 b. Total Assets 1,178,296.81 c. Source of Funds

Paid up Capital 88,179.90 Reserve and Surplus 352,293.44 Secured Loans 703,368.12 Unsecured Loans 34,455.35

d. Application of fundsNet Fixed Assets( Including Capital Work in Progress) 526,525.13 Investment 408.18 Net Current Assets 36,071.92 Miscellaneous Expenditure and Losses 615,291.59

IV. Performance of Company

a. Turnover and other Incomes 82,612.29 b. Total Expenditure 261,195.74 c. Profit/(Loss) before Tax (178,583.45)d. Profit/(Loss) after Tax (178,746.89)e. Earning per Share (20.27)f. Dividend Rate –

V. General Names of Three Principal Products/Services of Company’s

(As per monetary terms)a. Item Code No. (ITC Code) 36020009

Product Description Industrial Explosiveb. Item Code No. ( ITC Code) 170111.09

Product Description White Crystal Sugar

(Rs. in Thousands)





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A PRODUCT

[email protected]

Forward-looking statement Statements in this report that describe the company’s objectives, projections, estimates, expectations or predictions of

the future may be ‘forward-looking statements’ within the meaning of the applicable securities laws and regulations.

The company cautions that such statements involve risks and uncertainty and that actual results could differ

materially from those expressed or implied. Important factors that could cause differences include raw materials’ cost

or availability, cyclical demand and pricing in the company’s principal markets, changes in government regulations,

economic developments within the countries in which the company conducts business, and other factors relating to

the company’s operations, such as litigation, labour negotiations and fiscal regimes.

ContentsChallenging environment 2 The way forward 4 MD’s review 15 Five year financial summary 18 Financial

ratios 20 Shareholder value management 22 Report of the Board of Directors 24 Corporate governance report

36 Management’s discussion and analysis 50 Auditor’s report 61 Balance Sheet 64 Profit and Loss Account

65 Cash Flow Statement 66 Schedules 67 Consolidated Accounts 87 Subsidiary Accounts 107

Chairman EmeritusKamal Nayan Saraogi

Board of DirectorsSuresh Neotia, Chairman

Vivek Saraogi, Managing Director

Meenakshi Saraogi, Joint Managing

Director

Sudhir Jalan, Director

R.K. Choudhury, Director

S.B. Budhiraja, Director

M.M. Mukherjee, Director

Naresh Chandra, Director

Kedar Nath Ranasaria, Whole-time Director

Kishor Shah, Director cum Chief Financial

Officer

Ram Nayak Misra, Whole-time Director

Secretary S.K. Agrawala

Board CommitteesAudit Committee:S.B. Budhiraja, Chairman

Naresh Chandra, Vice Chairman

Suresh Neotia

Sudhir Jalan

M.M. Mukherjee

Remuneration Committee:Naresh Chandra, Chairman

Suresh Neotia

R.K. Choudhury

Sudhir Jalan

Share Transfer Committee:Vivek Saraogi

Meenakshi Saraogi

Suresh Neotia

Sudhir Jalan

R.K. Choudhury

Shareholders’ / Investors’Grievance Committee:Sudhir Jalan, Chairman

Naresh Chandra

Vivek Saraogi

Solicitors and advocates Khaitan & Co.

1B, Old Post Office Street,

Kolkata 700 001

Bankers State Bank of India

Auditors G.P. Agrawal & Co.


Registered office FMC Fortuna, 2nd Floor,

234/3A, A.J.C. Bose Road,

Kolkata 700 020

Sugar factories

Unit 1: Balrampur (Including Distillery, Bio-compost

and Co-generation units)

Dist: Balrampur, Uttar Pradesh

Unit 2: Babhnan (Including Distillery, Bio-compost and



Unit 3: Tulsipur Dist: Balrampur, Uttar Pradesh

Unit 4: Haidergarh(Including Co-generation unit)


Unit 5: Akbarpur(Including Co-generation unit)

Dist: Ambedkar Nagar, Uttar Pradesh

Unit 6: Rauzagaon(Including Co-generation unit)


Unit 7: Mankapur(Including Distillery, Bio-compost and



Unit 8: Kumbhi (Including



Unit 9: Gularia (Including




Corporate information

Global Reports LLC

the wayforwardBalrampur Chini Mills Limited

Annual Report 2006-07

Balrampur Chini Mills Limitedwww.chini.com

Global Reports LLC

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