BOARD OF DIRECTORS Mr. M. C. Gupta Mr. C. S. Sastry Dr. Pravin P. Shah Dr. W. R. Correa Mr. Supriya Gupta Mr. B. S. Bhesania Mr. P. R. Bhansali Mr. Kenji Asakawa Mr. Jayesh B. Bhansali Mr. B. M. Bhansali - Chairman - (Resigned w.e.f. 24.06.06) - Executive Director - Additional Director (w.e.f. 24.06.06) - Managing Director MANAGEMENT TEAM Mr. B. M. Bhansali Mr. Jayesh B. Bhansali Mr. Kiran Bhansali Mr. Kenji Asakawa - Managing Director Executive Director (Corporate) Executive Director (Operations) Executive Director (Technical) AUDITORS M/s. B.L.Dasharda & Associates Chartered Accountants SOLICITORS M/s. Mulla & Mulla & Craigie Blunt & Caroe BANKERS Allahabad Bank UTI Bank Limited REGISTERED OFFICE Bhansali House, A-5, Veera Desai Road, Andheri (West), MUMBAI - 400 053. WORKS Satnoor Bhansali Nagar, Taluka : Sausar, Dist.: Chhindwara, (M.P.) Pin - 480 108. Abu Road SP-138-144, Ambaji Industrial Area, Abu Road, Dist.: Sirohi, (Rajasthan) Pin - 307 026. 1 NOTICE NOTICE is hereby given that the Twenty Second Annual General Meeting of the Members of Bhansali Engineering Polymers Limited will be held at Walchand Hirachand Hall, Indian Merchants’ Chamber, Veer Nariman Road, Mumbai 400020 on Saturday, 23rd day of September 2006, at 11.30 a.m. to transact the following business: ORDINARY BUSINESS: 1. To receive, consider and adopt the Audited Balance Sheet as at 31st March 2006 and Profit and Loss Account for the year ended on that date together with Reports of the Directors and Auditors thereon. 2. 3. To Declare dividend on Equity Shares of the Company. To appoint a Director in place of Dr. W. R. Correa, who retires by rotation at this Annual General Meeting and has shown his unwillingness to be re-appointed. 4. To appoint a Director in place of Mr. P. R. Bhansali, who retires by rotation at this Annual General Meeting and being eligible, offers himself for re-appointment. 5. To appoint a Director in place of Mr. M. C. Gupta, who retires by rotation at this Annual General Meeting and being eligible, offers himself for re-appointment. 6. To appoint Auditors of the Company to hold office from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting and to authorise the Board to fix their remuneration. SPECIAL BUSINESS : 7. To consider and if thought fit, to pass, with or without modification(s), the following resolution as an Ordinary Resolution: “RESOLVED THAT Mr. Jayesh B. Bhansali who was appointed as an Additional Director of the Company pursuant to the provisions of Section 260 of the Companies Act, 1956 read with Article 77.1 & 77.2 of the Articles of Association of the Company and who would vacate his office at the ensuing Annual General Meeting and in respect of whom the Company has received a notice under Section 257 of the Companies Act, 1956 along with necessary deposit from a shareholder proposing the candidature of Mr. Jayesh B. Bhansali as a Director of the Company, be and is hereby appointed as a Director of the Company.” 8. To consider and if thought fit, to pass, with or without modification(s), the following resolution as an Ordinary Resolution: “RESOLVED THAT as per the recommendation of the Remuneration Committee and pursuant to the provisions of Section 198, 269, 309 and 311 read with Schedule XIII to the Companies Act, 1956 and subject to such approvals as may be necessary, consent of the Members of the Company be and is hereby accorded for the appointment of Mr. Jayesh B. Bhansali as a Whole Time Director designated as Executive Director of the Company for a period of three years with effect from 24th June, 2006 subject to the terms and conditions as set out hereunder, with further liberty to the Board of Directors of the Company to alter and vary the said terms and conditions, in such manner as may be agreed to between the Directors and Mr. Jayesh B. Bhansali but subject to the provisions contained in Schedule XIII to the Companies Act, 1956, as amended from time to time : 2 REMUNERATION: (i) Salary Rs. 64,000/- per month. (ii) Perquisites & allowances (a) House Rent Allowance as per the Company’s Rules. (b) Medical facilities for Mr. Jayesh B. Bhansali and his family will be reimbursed by the Company as per the Company’s Rules. (c) Leave Travel concession for Mr. Jayesh B. Bhansali and his family once in a year in accordance with the Rules specified by the Company. (d) Provision of car including driver for use on Company’s business and telephone shall be provided at actuals. (e) Contribution to Provident Fund, Gratuity and Encashment of Leave as per Company’s Rules. (f) Contribution to Super Annuation Fund will be provided as per the Company’s Rules. (g) Professional Perquisite Allowance in accordance with the Rules specified by the Company. (h) Transportation allowance will be provided as per the Company’s Rules. (i) Bonus will be given as per the Company’s Rules. “RESOLVED FURTHER THAT in the event of absence or inadequacy of net profits in any financial year, the remuneration payable to the Executive Director shall be governed by Section II of Part II of Schedule XIII to the Companies Act, 1956 or any statutory modification thereof and the same shall be treated as the Minimum Remuneration payable to the said Executive Director.” “RESOLVED FURTHER THAT during such time as Mr. Jayesh B. Bhansali holds and continues to hold office of the Executive Director, he shall not be liable to retirement by rotation as a Director.” “RESOLVED FURTHER THAT the Board of Directors be and is hereby authorized to take such actions and do all such things as may be necessary or desirable to give effect to this resolution.” By order of the Board For Bhansali Engineering Polymers Ltd. Place : Mumbai Dated: 24th June 2006 B. M. Bhansali Managing Director NOTES: 1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND ON A POLL, TO VOTE INSTEAD OF HIMSELF/HERSELF AND THE PROXY NEED NOT BE A MEMBER. 2. Proxies, in order to be effective, must be received at the Company’s Registered Office not later than 48 (fortyeight) hours before the time fixed for holding the meeting. 3. Members desirous of obtaining any information concerning the accounts and operations of the Company are requested to send their queries to the Share Department, so as to reach the registered office of the Company at least seven days before the date of the meeting, to enable the Company to make available the required information at the meeting, to the extent possible. 4. The Register of Members and Share Transfer Books will remain closed from Saturday, 16th September 2006 to Saturday, 23 rd September 2006 (both days inclusive). 3 5. Payment of dividend, if any, declared at the Annual General Meeting, will be made to those shareholders whose names appear on the Company’s Register of Members on 23rd September 2006 or their nominees. In respect of shares in dematerialized form, dividend will be paid to the beneficial owners as at the end of business hours on 15th September 2006 as per the details to be received from Depositories for the purpose. Dividend warrants shall be dispatched within thirty days from the date of the Annual General Meeting. 6. Members are requested to notify immediately any change in their address / bank mandate to their respective Depository Participant (DP) in respect of their electronic share accounts and to the Company’s Registrar & Share Transfer Agent M/s. Intime Spectrum Registry Limited, C-13, Pannalal Silk Mills Compound, L.B.S. Marg, Bhandup (West), Mumbai- 400 078 in respect of their physical share folios. 7. Members are requested to bring their copy of Annual Report to the Meeting. 8. Members are requested to bring the Attendance Slip sent herewith duly filled for attending the Meeting. 9. Information pursuant to clause 49 of listing agreement with respect to profile of Directors seeking re-appointment is given herebelow: ADDITIONAL INFORMATION: Profile of Directors retiring by rotation and seeking re-appointment (in pursuant to clause 49 of the Listing Agreement). Particulars Mr. P. R. Bhansali Mr. M. C. Gupta Date of Birth 12.11.1946 23.07.1938 Date of Appointment 07.02.1986 30.09.2002 No. of shares held 552690 Nil Qualifications B. Com., L.L.B. M.A.(English) Expertise in specific functional areas Mr. P. R. Bhansali is an eminent Industrialist and a leading exporter of readymade garments. Mr. P. R. Bhansali was the President of the Metal & Stainless Steel Merchants Association, Mumbai and Vice President of All India Garments Exporters & Manufacturers Association. Mr. P. R. Bhansali has been associated with the Company since its incorporation. The Company has immensely benefited from Mr. P.R. Bhansali’s expertise in various fields and looks forward to continue the same. I.A.S. (1960 batch), served the Union & State Governments on various administrative posts i n c l u d i n g I n d u s t r i e s S e c r e t a r y, Govt.of India, Advisor, Industries Planning Commission. Retired as Chief Secretary, Govt.of Haryana in 1997. Currently, Advisor to United Nations Industrial Development Organization. (UNIDO) Directorship of other Companies a) Bhansali Ferromet Pvt. Ltd. b) Bhansali Bright Bars Pvt. Ltd. Vardhaman Acrylies Limited Chairman/Member of Committees of the Board of Companies of which he is a Director Nil Vardhaman Acrylies Limited - Chairman of Shareholders/Investors Grievance Committee By order of the Board For Bhansali Engineering Polymers Ltd. Place : Mumbai Dated: 24th June 2006 4 B. M. Bhansali Managing Director EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956 Item No. 7 :Mr. Jayesh B. Bhansali was appointed as an Additional Director of the Company with effect from 24 th June 2006 pursuant to the provisions of Section 260 of the Companies Act, 1956 and Article No.77.1 & 77.2 of the Articles of Association of the Company. Pursuant to the provisions of the said section, the term of the office of the said Director expires at the ensuing Annual General Meeting of the Company. In the mean time, the Company has received a notice under Section 257 of the said Act along with the necessary deposit from a shareholder proposing the candidature of Mr. Jayesh B. Bhansali for the office of Director of the Company. The details as required pursuant to clause 49 of Listing Agreement are as under: Date of Birth 25.07.1983 Date of Appointment 24.06.2006 Qualifications B. Com. Expertise in specific functional area General Management Directorship of other Companies 1. Bentley Commercial Enterprises Ltd. 2. Speedage Commercials Ltd. 3. Sheraton Properties & Finance Ltd. 4. Bhansali International Pvt. Ltd. 5. Bhansali Innovative Finance Pvt. Ltd. 6. Bhansali Engineering Industries Pvt. Ltd. 7. Bhansali Industrial Investment & Finance Pvt. Ltd. Chairman/Member of Committees of the Board of Companies of which he is Director Nil The Board recommends the appointment of Mr. Jayesh B. Bhansali as a Director of the Company. The resolution vide serial No. 7 is therefore proposed for approval of the Members. Mr. Jayesh B. Bhansali is concerned or interested in the above resolution for his appointment. Mr. Babulal M. Bhansali, being father of Mr. Jayesh B. Bhansali, is concerned or interested in the said resolution. No other Director is concerned or interested in the said resolution. Item No. 8 As per the recommendation of the Remuneration Committee, the Board of Directors have at their meeting held on 24th June, 2006 appointed Mr. Jayesh B. Bhansali as a Whole Time Director designated as the Executive Director for a period of three years w.e.f. 24th June, 2006 on terms and conditions as stated in the resolution. The appointment of Mr. Jayesh B. Bhansali as the Executive Director of the Company, would require the consent of the shareholders of the Company pursuant to Sections 198, 269, 309, 311 and other applicable provisions of the Companies Act, 1956 and subject to the limits of Schedule XIII to the said act. The said resolution is therefore, recommended for your approval. The information as furnished in the above resolution containing terms and conditions of appointment of and payment of remuneration to Mr. Jayesh B. Bhansali, Whole Time Director designated as ‘Executive Director’ shall be deemed to be abstract of the terms and conditions of such appointment and remuneration to the said Whole Time Director in terms of Section 302 of the Companies Act, 1956. Mr. Jayesh B. Bhansali is concerned or interested in the resolution vide serial no. 8 for his appointment as Whole Time Director. Mr. Babulal M. Bhansali, being father of Mr. Jayesh B. Bhansali, is concerned or interested in the said resolution. No other Director is interested or concerned in the said resolution. By order of the Board For BHANSALI ENGINEERING POLYMERS LIMITED Place: Mumbai Dated: 24th June 2006 B. M. Bhansali Managing Director REGISTERED OFFICE: Bhansali House, A-5, Veera Desai Road, Andheri (West), Mumbai- 400 053. 5 DIRECTORS’ REPORT Dear Members, Your Directors take pleasure in presenting the Twenty Second Annual Report and the Audited Accounts for the year ended 31st March 2006. CHANGE IN ACCOUNTING PERIOD : The figures for the year ended on 31st March 2006 are not comparable with the figures of the previous period of nine months ended on 31st March 2005. FINANCIAL RESULTS : Current Previous Accounting Accounting Year ended Period ended 31.03.2006 31.03.2005 (12 months) (9 months) (Rs.in lacs) (Rs.in lacs) 30655.49 17551.76 —————— —————— Profit before interest, tax and depreciation 3407.96 2218.66 Profit before tax 1546.71 1228.76 946.51 967.23 1605.34 827.29 —————— —————— 2551.85 1794.52 —————— —————— 189.18 189.18 2362.67 1605.34 Sales Profit after tax Balance brought forward Proposed dividend including tax thereon Balance carried to Balance Sheet DIVIDEND: The Directors have pleasure in recommending for the consideration of the Members at the Annual General Meeting, payment of Dividend of Re.0.10 per share (10%) for the year ended 31st March, 2006 (previous period : Re.0.10). The total outgo including tax thereon will be Rs.189.18 lacs. OPERATIONS: (a) The Company was able to optimally utilise its production facilities and achieved significant growth in production and sales. A record production at 34469 MT and turnover at Rs.30655.49 lacs were achieved during the year under review, reflecting an increase by 53% and 31% respectively on an annualized basis. It is noteworthy that during the year under review, your company earned Rs. 3407.96 lacs profit before interest, tax and depreciation (EBITD), an increase of 54%. It’s net profit before tax at Rs.1546.71 lacs, cash profits before tax at Rs.2185.36 lacs against the net profit before tax at Rs.1228.76 lacs and cash profit before tax at Rs.1654.39 lacs in the previous period reflect an increase of 26% and 32% respectively. However, due to provision for taxation, net profit after tax at Rs. 946.51 lacs was marginally lower than previous period’s net profit after tax at Rs.967.23 lacs. (b) Wild fluctuation in global monomer prices continued throughout the year, perhaps as a sequel to unabated turmoil in crude and petroleum prices. However, your company is learning fast to live with such uncertainties hence could achieve some good results. Furthermore, your Company has revamped its process technology to achieve in post expansion phase cost and quality leadership and also successfully implemented ERP Programme, mySAP. 6 FUTURE PLAN: The programme of expanding current capacity from 48 KTPA to 60 KTPA has been shelved owing to the reasons, enunciated hereinafter. The incremental step to achieve 25% higher production capacity is fraught with the risk of stopping the heart of the production facility, i.e. Bulk SAN plant, for 12 to 14 weeks to carry out modification, during which production of ABS will come to a grinding halt. Owing to near optimal utilization of production facility together with the absorption of the product at the market place, it is not becoming possible to create adequate inventory of Bulk SAN to cover production schedule of ABS uninterruptedly for 12/14 weeks. Moreover, upon further in-depth examination, it is not being found so attractive from cost reduction angle, as a step preceding the mega capacity expansion to 200 KTPA. Therefore, the company’s strategy for capacity expansion is being re-engineered to implement mega expansion programme to 200 KTPA from the present level of 48 KTPA in single or two phases. The implementation strategy whether to reach 200 KTPA in single stage or implement in two stages will be finalised in the next few months because it involves intensive study presently being carried out with respect to utility engineering as your company is coming out with a novel scheme to implement co-generation power plant. Indian manufacturing scene, in general and no exception in particular to ABS business, is getting exposed to international competition in the domestic market. Therefore, the watch words are cost competitiveness globally and quality competence at par with the best in world. There is really no choice for your company than to think big and out of box to get going with it’s mega expansion project in the manner that cost wise the company is slim enough to wrestle at the market place and remain financial-healthwise robust. The strategy, therefore, is right sizing of the capacity expansion and reducing the cost of the utility at minimal level, which would be achievable through co-generation facility your company is planning to build as an integral part of 200 KTPA expansion project. The cost of energy saved will reflect directly in bottom-line improvement. Your company’s endeavour is to carry out the study intensively for achieving cost and quality leadership and equally extensively to arrive at a better understanding of the growth dynamics of Indian and transnational markets. On the one hand there is no alternative than to grow and on the other absorption, of higher volume turn out from the manufacturing outfit, by the market on value added basis posess formidable challenge. While determining the growth model your company is simultaneously formulating the financing strategy. It will be possible for your company to determine by end of the calendar year, financing programme befitting the expansion plan, blueprint whereof will be ready by September, 2006. No doubt there has been delay in working out and implementing the expansion plan but to find the right way in such densely and rapidly changing competitive environment takes some time. SAFETY AND ENVIRONMENT PROTECTION: Your Company continues to accord high priority to the areas of Safety and Environment Protection. Compliance with safety norms and regular training programs for employees for various safety measures and to increase the safety standards and awareness are an integral part of the Company’s operating system. FIXED DEPOSITS: There were no deposits remaining unpaid/ unclaimed in terms of Section 58A of the Companies Act, 1956 read with the Companies (Acceptance of Deposit) Rules, 1975 at the end of the year. DIRECTORS: Mr. Jayesh B. Bhansali has been appointed as an Additional Director of the Company w.e.f. 24th June, 2006 to hold office upto the date of the ensuing Annual General Meeting of the Company. The Company has received notice from a Shareholder pursuant to Section 257 of the said act proposing the candidature of Mr. Jayesh B. Bhansali for the office of Directorship of the Company. As per the recommendation of the Remuneration Committee, the Board of Directors have at their meeting held on 24th June, 2006 appointed Mr. Jayesh B. Bhansali as a Whole Time Director designated as the Executive Director for a period of three years w.e.f. 24th June, 2006, subject to the approval of the members of the Company. In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Dr. W. R. Correa, Mr. P. R. Bhansali and Mr. M. C. Gupta, Directors of the Company shall retire by rotation at the ensuing Annual General Meeting. Dr. W. R. Correa has shown his unwillingness to be re-appointed. Mr. P. R. Bhansali and Mr. M. C. Gupta, being eligible, have offered themselves for re-appointment. A brief profile of Directors seeking appointment / re-appointment as required by Clause 49(IV)(G) of the Listing Agreement with the Stock Exchanges is given in the Notice of the ensuing Annual General Meeting. 7 DELISTING OF SHARES: Pursuant to the application for delisting made by the Company, following two stock exchanges have delisted the Company’s equity shares. 1) Ahmedabad Stock Exchange Limited, Ahmedabad. 2) The Delhi Stock Exchange Association Limited, New Delhi. Though requisite applications have been submitted to following two stock exchanges are yet to delist Company’s equity shares: 1) The Calcutta Stock Exchange Association Limited, Kolkata. 2) Madhya Pradesh Stock Exchange Association Limited, Indore. PARTICULARS OF EMPLOYEES: A statement containing details of employees in receipt of remuneration equal to or exceeding the limits prescribed under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, is attached hereto vide Annexure-D and forms part of this report. DIRECTORS’ RESPONSIBILITY STATEMENT: Pursuant to the requirements of Section 217(2AA) of the Companies Act, 1956, your Directors confirm the followings: In the preparation of the annual accounts, the applicable accounting standards have been followed; That 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 the Company as at 31st March, 2006 and of the profit of the Company for that period; That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; That the annual accounts for the year ended 31st March, 2006 have been prepared on a going concern basis. CORPORATE GOVERNANCE: Pursuant to Clause 49 of the Listing Agreement, a report on Corporate Governance and Management Discussion and Analysis and Certificate from M/s.Rathi & Associates, Company Secretaries in Practice on compliance thereof is given in the Annexure-B and Annexure-C respectively, which form an integral part of this Report. AUDITORS: M/s B. L. Dasharda & Associates, Chartered Accountants, the Statutory Auditors of the Company retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. Members are requested to appoint auditors for the current year and to authorize the Board to fix their remuneration. AUDITORS’ REPORT: The observations made by the Auditors in their Report read with the relevant notes as given in the Notes on Accounts for the year ended 31st March, 2006 are self explanatory and therefore do not call for any further comments under Section 217(3) of the Companies Act, 1956. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO: The relevant data pursuant to Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is annexed hereto vide Annexure-A which forms part of this report. ACKNOWLEDGEMENTS: Your Directors take this opportunity to express their gratitude for the support and co-operation from the Banks, Statutory Authorities, Customers and Suppliers. Your Directors express their deep appreciation to the Company’s employees at all levels for their relentless efforts and valuable contributions during the year. For and on behalf of the Board Place : Mumbai Dated : 24th June 2006 8 M. C. GUPTA CHAIRMAN ANNEXURE – A b) Own Generation : PARTICULARS AS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES,1988. Conservation of Energy : (a) During the year under review, several Energy Conservation measures were taken which resulted in substantial reduction in power consumption per unit volume of ABS which stood at 643 KWH/Ton as against 840 KWH/Ton in the previous period. (i) Power conservation measures which were adopted are as follows: a) Balanced utilization of sectional capacities to optimize production with non liner increase in energy consumption resulting in eventual reduction in the power consumption per MT of ABS by 23.5%. b) Application of cooling water instead of chilled brine in first stage vapor condenser in SAN Plant – 2. c) Replaced energy efficient AC drives in SAN Plant and Compounding. d) Changed method and mode of PBDE batch transfer from stripper to Latex storage tank and implemented agglomeration technology for production of PBDE. e) Maintained power factor optimally. (ii) Over all LDO Consumption was reduced by improving insulation. (b) Total energy consumption and consumption of energy per unit of production are given in the prescribed Form ‘A’ hereunder. B) Technology Absorption : Details of the efforts made in Technology Absorption are given in the prescribed Form ‘B’ hereunder. C) Foreign Exchange Earnings and Outgo : a) Activities relating to exports, initiatives taken to increase export, development of new export market for products and services and export plans: Total export during the period under review was 2163 MT valued at US$ 3.27 millions i.e. Rs.1440.22 lacs. b) Total foreign exchange used and earned: (Rs. in lacs) Total foreign exchange used 13871.54 Total foreign exchange earned (FOB Value) 1440.22 FORM – A (See Rule 2) FORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY. Year Ended Period Ended 31.03.2006 31.03.2005 (12 Months) (9 Months) A) Power and Fuel Consumption : 1) Electricity a) Purchased : Units (KWH) in lacs 215.51 135.53 Total Amount (Rs. in lacs) 966.94 631.33 Rate per KWH (Rs.) 4.49 4.66 Through Diesel Generator Units (KWH) in lacs Unit per litre of diesel oil A) 5.97 3.15 6.95 2.86 8.57 6.64 5318 118.81 3503 59.48 2234.11 1697.95 967352 539554 267.26 27.63 124.21 23.02 Cost per unit (Rs.) 2) Coal used in Boiler : Quantity (MT) Total cost (Rs.in lacs) Rate per MT (Rs.) 3) L.D.O. : Quantity (Ltrs.) Total Amount (Rs.in lacs) Average Rate (per Ltr.) B) Consumption per unit of Production : Electricity (KWH/MT of ABS & SAN Resins) 642.55 Coal (MT/MT of ABS Resin) 0.16 L.D.O. (Ltrs/MT of SAN Resins) 46.09 840.58 0.21 46.41 FORM – B (See Rule – 2) Form for disclosure of particulars with respect to technology absorption. A) RESEARCH AND DEVELOPMENT (R & D) :1. Specific areas in which R & D has been carried out by the Company and benefits derived as a result of the above R & D. a. Productivity increased by 2.38% by increasing load factor of PBDE batch. b. A stable antioxidant emulsion package has been successfully implemented resulting in substantial cost saving. A new resin called KU 633 has been developed to increase productivity and processibility of super heat resistant grades. c. d. 2. Increased in throughout of HRG was achieved by improving in morphology of the rubber. Expenditure on R & D : (Rs.in lacs) A. Capital B. Recurring C. Total D. Total R & D Expenditure as a percentage of total turnover. B) 13.42 1.99 15.41 0.05% TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION : 1) Efforts, in brief, made towards technology absorption, adaptation, innovation and benefits derived : N.A. 2) Information regarding technology imported during the last five years: N.A. 9 ANNEXURE – B REPORT ON CORPORATE GOVERNANCE (A) Company’s philosophy on code of Corporate Governance: The Company is fully committed to and continues to practice good Corporate Governance. The Company believes that proper Corporate Governance generates goodwill among business partners, customers and investors, facilitates effective management and control of business and generates competitive returns for the investors. In addition to the basic governance issues, the Company lays significant emphasis on the principles of trusteeship, transparency, empowerment, accountability and integrity. During the period under review, the Board continued its pursuit by adopting appropriate corporate strategies and prudent business plans. Adequate monitoring system was followed to safeguard against major risk and to ensure implementation of policies and procedures to satisfy its social, legal and ethical responsibilities. (B) Board of Directors: In terms of the Company’s Corporate Governance Policy, all statutory and other significant and material information is placed before the Board to enable it to discharge its responsibilities of closely monitoring the activities of the Company. Composition of the Board i) As on 31st March, 2006 the Board consisted of 7 Non-Executive Independent Directors (including Chairman) and 2 Whole-Time Directors, who are professionals and/or have expertise in their respective functional areas and capable of bringing in a wide range of managerial skills and business acumen. The composition, category of Directors and their other Directorships and Membership/ Chairmanship of Committees as on 31st March, 2006 is as under: Number of other Companies ii) Sr. No. Name of Directors Category Directorships Committee Memberships Committee Chairmanships 1 Mr. M. C. Gupta Chairman Non-Executive, Independent Director 1 - 1 2 Mr. Babulal M. Bhansali Managing Director Promoter, Executive 7 - - 3 Mr. P. R. Bhansali Non-Executive, Independent Director 2 - - 4 Mr. C.S. Sastry - do - 1 - - 5 Dr. Pravin P. Shah - do - 10 4 - 6 Dr. W. R. Correa - do - 2 2 - 7 Mr. Supriya Gupta - do - 11 5 5 8 Mr. B. S. Bhesania - do - 6 4 - 9 Mr. Kenji Asakawa Whole-Time Director with a designation of “Executive Director” Non-Promoter, Executive - - - Board Meetings and attendance of Directors : The Board meets at least once in a quarter to consider amongst other business the performance of the Company and quarterly financial results. When necessary, additional meetings are held. Agenda for each meeting along with explanatory notes are drafted and distributed well in advance to the Directors. Every Board Member is free to suggest the inclusion of items on the agenda. 10 During the year under review, 5 Board Meetings were held on 17th May 2005, 13th June 2005, 22nd July 2005, 26th November 2005 and 28th January 2006. The Twenty First Annual General Meeting was held on 23rd July 2005. Attendance of each Director at Board Meetings and Annual General Meeting (AGM) was as follows: Sr. Name of the Directors No. No. of Board Meetings Attendance at AGM Attended held on 23.07.2005 4 5 Yes Yes 1 2 Mr. M.C.Gupta Mr. Babulal M. Bhansali 3 Mr. P.R. Bhansali 4 Yes 4 Mr. C.S. Sastry 4 Yes 5 Dr. Pravin P. Shah 1 Yes 6 Dr. W.R. Correa 4 No 7 Mr. Supriya Gupta 2 Yes 8 Mr. B.S. Bhesania 4 No 9 Mr. Kenji Asakawa 2 No (C) Details of Remuneration paid to the Directors during the year ended 31st March 2006: The Non-executive Directors are paid sitting fees for attending each meeting of the Board of Directors and Committees thereof. The details of the sitting fees paid during the year under review to the Non-executive Directors and the remuneration paid to the Executive Directors are given below: (Rs. in lacs) Sr. Name of the Directors No. 1 Mr. M.C.Gupta 2 Mr. Babulal M. Bhansali 3 Sitting fees Salaries & Contributions (including Committee Meetings) Allowances, etc. to Provident and Superannuation Funds 0.16 - - - 21.00 1.42 Mr. P.R. Bhansali 0.16 - - 4 Mr. C.S. Sastry 0.08 - - 5 6 Dr. Pravin P. Shah Dr. W.R. Correa 0.06 0.08 - - 7 Mr. Supriya Gupta 0.04 - - 8 Mr. B.S. Bhesania 0.10 - - 9 Mr. Kenji Asakawa - 72.00 - No. of Equity Shares held by Non-Executive Director as on 31st March 2006: Sr. No. Name of the Directors No. of Shares 1 Mr. M.C.Gupta Nil 2 Mr. P.R. Bhansali 3 Mr. C.S. Sastry 4 Dr. Pravin P. Shah 5 Dr. W.R. Correa Nil 6 Mr. Supriya Gupta Nil 7 Mr. B.S. Bhesania Nil 552690 5000 161500 (D) Committees of the Board: Currently, the Board has three Committees – the Audit Committee, the Shareholders Grievance Committee and the Remuneration Committee. The Board is responsible for the constitution, co-opting and fixing the terms of reference for Committee members of the said Committees. (i) Audit Committee: During the year under review, the Board of Directors at their meeting held on 28th January 2006 reconstituted the Audit Committee by inducting Mr. B. S. Bhesania as a member of the Committee. 11 The following Directors are members of the Audit Committee: Name of the Directors 1 Mr. M. C. Gupta Chairman, Non-Executive, Independent Director 2 Dr. Pravin P. Shah Non-Executive, Independent Director 3 Mr. P. R. Bhansali Non-Executive, Independent Director 4 Mr. B. S. Bhesania Non-Executive, Independent Director All members of the Committee are Independent Directors. The Managing Director, Statutory Auditors and Internal Auditors are permanent invitee of the Audit Committee Meetings. The role, powers and functions of the Audit Committee are as stated in clause 49 of the Listing Agreement and Section 292A of the Companies Act, 1956. The Committee reviews the financial statements before they are placed before the Board. During the year under review, four meetings of the Audit Committee were held on 17th May 2005, 22nd July 2005, 26th November 2005 and 28th January 2006. The details of attendance of the Audit Committee Members are as under: Sr. No. Name of the Directors No. of meetings held No. of Meetings Attended 1 Mr. M.C. Gupta 4 4 2 Dr. Pravin P. Shah 4 1 3 Mr. P.R. Bhansali 4 4 4 Mr. B. S. Bhesania (appointed w.e.f. 28 th January, 2006) Nil Nil (ii) Remuneration Committee: The broad terms of reference of the Remuneration Committee is to ensure that the remuneration practices of the Company in respect of the Senior Executives including the Executive Directors are competitive keeping in view prevalent compensation packages so as to recruit and retain suitable individual(s) in such capacity. The following Directors are members of the Remuneration Committee: Name of the Directors 1 Mr. B. S. Bhesania Chairman, Non-Executive, Independent Director 2 Dr. Pravin P. Shah Non-Executive, Independent Director 3 Mr. P. R. Bhansali Non-Executive, Independent Director During the year under review, the Remuneration Committee met once on 22 nd November 2005 in which Mr. B.S. Bhesania and Dr. Pravin P. Shah were present. Remuneration Policy: Non-Executive Directors are paid sitting fees for each meeting of the Board and the Committees thereof attended by them. The appointment and remuneration of the Managing Director and Whole Time Directors is governed by resolutions passed by the Board of Directors and Shareholders of the Company, which covers terms of such appointments read with the service rules of the Company. Remunerations paid to the Managing Director and Whole Time Directors are recommended by the Remuneration Committee, approved by the Board and are within the limits set by the shareholders at the General Meetings. Presently, the Company does not have any stock option plan or performance linked incentives for its Directors. (iii) Shareholders Grievance Committee: The following Directors are members of Shareholders Grievance Committee: Sr. No. Name of the Directors 1 Mr. P. R. Bhansali – Chairman, Non-Executive, Independent Director 2 Mr. Babulal M. Bhansali – Promoter, Executive Mr. P. R. Bhansali is the Chairman of the Shareholders Grievance Committee. The Committee is authorised to approve the transfer of shares, review & records shareholders grievances, if any, and monitor the work of the Registrar and Transfer Agents. In total, 41 meetings of Shareholders Grievance Committee were held during the year under review. Mr. P. M. Parakh, A.V.P. (Finance), of the Company acts as the Compliance Officer. 12 (E) General Body Meetings : Details of last three Annual General Meetings are given hereunder : AGM For the year Venue Date Time 21 st 2004-2005 Walchand Hirachand Hall, Indian Merchants’ Chamber, Veer Nariman Road, Mumbai- 400 020. 23.07.2005 11.30 a.m. 20 th 2003 - 2004 -do- 16.10.2004 11.30 a.m. th 2002 - 2003 -do- 26.07.2003 4.30 p.m. 19 Special Resolution: No Special Resolution was passed at the 19th and 21st Annual General Meetings. At the 20th Annual General Meeting held on 16th October 2004, the following Special Resolutions were passed: - For appointment of Mr. Kenji Asakawa as the Whole Time Director with a designation of “Executive Director”. - For obtaining consent of the members to delist the equity shares of the Company from (i) Ahmedabad Stock Exchange Limited, Ahmedabad (ii) The Delhi Stock Exchange Association Limited, New Delhi; (iii) The Calcutta Stock Exchange Association Limited, Kolkata; (iv) Madhya Pradesh Stock Exchange, Indore. Postal ballots: No Special Resolution requiring postal ballot was placed before the last Annual General Meeting. No Special Resolution requiring postal ballot is being proposed at the ensuing Annual General Meeting. (F) Disclosures regarding appointment or re-appointment of Directors: Pursuant to the provisions of Sections 255 and 256 of the Companies Act, 1956, Dr. W. R. Correa, Mr. P. R. Bhansali and Mr. M. C. Gupta, retire by rotation at the ensuing Annual General Meeting. Dr. W. R. Correa has shown his unwillingness to be re-appointed. Mr. P. R. Bhansali and Mr. M. C. Gupta, being eligible, have offered themselves for re-appointment. The required details of Mr. P. R. Bhansali and Mr. M. C. Gupta are provided alongwith Notice of the Annual General Meeting. Mr. Jayesh B. Bhansali who has been appointed as an Additional Director w.e.f. 24th June 2006 would vacate his office on the date of the ensuing Annual General Meeting of the Company. The Company has received Notice under Section 257 of the Companies Act, 1956 from a shareholder proposing the candidature of the said Additional Director for the office of Director of the Company. (G) Disclosures: (i) Related Party Transactions: There are no transactions of material nature with Directors/Promoters or any related entity, which will have any potential conflict with the interests of the Company at large. (ii) Compliances by the Company: There is no non-compliance by the Company. Further, there is no penalties, strictures imposed by the Stock Exchange, SEBI or any other statutory authority on any matter related to capital markets, during the last three years/period. (iii) Whistle Blower Policy and Access of personnel to the Audit Committee: The Company has not established the non-mandatory requirement of Whistle Blower Policy. However, the Company’s personnel have access to the Chairman of the Audit Committee in cases such as concerns about unethical behaviour, frauds and other grievances. No personnel of the Company have been denied access to the Audit Committee. (iv) Compliance with the Mandatory requirements and Implementation of the Non-mandatory requirements: The Company has complied with the mandatory requirements of the Corporate Governance Clause of Listing Agreement. The Company has not implemented the non-mandatory requirements enlisted by way of annexure to Clause 49 of the listing agreement excepting the constitution of Remuneration Committee. (H) Means of Communication: Financial Results (i) The quarterly unaudited financial results and annual audited financial results were published in Economic Times – All editions, Nav Bharat Times – All editions, Maharashtra Times – Mumbai, Business Standard – All editions. These results were also placed on the Company’s website www.bhansaliabs.com 13 (ii) Pursuant to clause 51 of the Listing Agreement, all data related to quarterly financial results, shareholding pattern etc. have been hosted on the Electronic Data Information Filing and Retrieval System (EDIFAR) website at www.sebiedifar.nic.in within the time frame prescribed in this regard. (iii) No presentations were made to the institutional investors or to analysts during the year under review. (iv) The Management Discussion and Analysis Report forms a part of this Annual Report. (I) Certificate on Corporate Governance : As required by Clause 49 of the Listing Agreement, a certificate issued by M/s. Rathi & Associates, practising Company Secretaries, regarding compliance of conditions of Corprorate Goveranance certificate is given as an annexure to the Directors’ Report. (J) CEO Certification : As required by Clause 49 of the Listing Agreement, the CEO i.e. the Managing Director’s declaration on compliance of the Company’s code of conduct is provided as an annexure to this report. (K) General Shareholders Information: (i) Annual General Meeting: Day, Date and Time Saturday, 23rd September, 2006 at 11.30 a.m. Venue Walchand Hirachand Hall, Indian Merchants’ Chamber, Veer Nariman Road, Mumbai – 400 020. (ii) Financial Calendar: Calendar of events for the year ending 31 st March 2007: Unaudited Financial Results for the quarter ending 30th June 2006 By 31st July 2006 Unaudited Financial Results for the quarter ending 30th September 2006 By 31st October 2006 Unaudited Financial Results for the quarter ending 31st December 2006 By 31st January 2007 Audited Financial Results for the year ending 31st March 2007 By 30th June 2007 Annual General Meeting for the year ending 31st March 2007 By 30th September 2007 (iii) Date of Book Closure: The Company’s Register of Members and Share Transfer Books shall remain closed from Saturday, 16 th September, 2006 to Saturday, 23 rd September, 2006 (both days inclusive). (iv) Payment of Dividend: Payment of dividend, if any, declared at the Annual General Meeting, will be made to those shareholders whose names appear on the Company’s Register of Members as on 15th September, 2006 or their nominees. In respect of shares in dematerialized form, dividend will be paid to the beneficial owners as at the end of business hours on 15th September, 2006 as per the details to be received from Depositories for the purpose. Dividend warrants shall be dispatched within thirty days from the date of the Annual General Meeting. (v) Share Transfer System: Shares lodged for transfer at the Registrar’s address are normally processed within 21 days from the date of lodgement, if the documents are clear in all respects. All requests for dematerialisation of shares are processed and the confirmation is given to the depositories within 15 days. Shareholders Grievance Committee of the Board of Directors of the Company is empowered to approve transfer of shares and other investor related matters. Grievances received from investors and other miscellaneous correspondence on change of address, mandates etc. are processed by the Registrars within 15 days. Total number of shares transferred in physical form for the year from 1st April 2005 to 31st March 2006. 14 Number of Transfer Deed 612 Number of Shares Transferred 646300 (vi) Investor Services - queries/complaints during the year ended 31st March 2006: The correspondence identified as Investor complaints are letters received through statutory/regulatory bodies and those related to loss of shares, court/consumer forum matters and other matters identified as complaints for reporting under clause 41 of the Listing Agreement. The details of complaints received and attended during the period from 1st April 2005 to 31st March 2006 are as under: Total no. of complaints received 177 Total no. of complaints attended 177 No complaints were unresolved at the end of the year under review. (vii) Listing on Stock Exchanges: The Equity Shares of the Company are listed at following stock exchanges: Sr. No. Name of the Stock Exchange 1. Bombay Stock Exchange Limited (BSE) 2. National Stock Exchange of India Limited (NSE) 3. The Calcutta Stock Exchange Association Ltd., Kolkata 4. Madhya Pradesh Stock Exchange Ltd., Indore The Listing Fees for the Stock Exchanges, where the Company’s equity shares are listed have been paid. The Company has filed necessary application for delisting its equity shares from Stock Exchanges at Kolkata and Indore. Stock Codes: Name of the Stock Exchange Codes Bombay Stock Exchange Ltd. (BSE) 500052 National Stock Exchange of India Ltd. (NSE) BEPL – EQ The Calcutta Stock Exchange Association Ltd. 12007 The Madhya Pradesh Stock Exchange Ltd. INE026701016 viii) Market Price Data (At BSE): As per BSE Quote Month High (Rs.) Low (Rs.) Volume (in no.of shares) April – 2005 47.80 30.00 3353186 May – 2005 41.25 34.60 2058758 June – 2005 41.65 34.90 2066646 July – 2005 44.90 39.20 1324819 August – 2005 40.50 35.80 558362 September – 2005 37.00 30.00 1172941 October – 2005 32.65 23.00 627346 November – 2005 31.90 25.10 351547 December – 2005 30.40 23.85 792491 January – 2006 36.05 24.00 895372 February – 2006 36.50 29.00 506344 March – 2006 37.00 31.25 444526 15 (ix) Performance in comparison to BSE Sensex: MONTHLY HIGH-LOW BEPL SHARE PRICE/BSE SENSEX BEPL LOW BEPL HIGH BSE LOW BSE HIGH 50.00 12000 45.00 11000 10000 9000 35.00 8000 30.00 7000 25.00 6000 20.00 5000 BSE SENSEX BEPL QUOTE 40.00 4000 15.00 3000 10.00 2000 Mar-06 Feb-06 Jan-06 Dec-05 Nov-05 Oct-05 Jul-05 Jun-05 Apr-05 Sep-05 0 Aug-05 1000 0.00 May-05 5.00 PERIOD x) Market Price Data (At NSE Nifty): As per NSE Quote Month April –2005 May –2005 June –2005 July –2005 August –2005 September –2005 October –2005 November –2005 December –2005 January –2006 February –2006 March –2006 Volume High (Rs.) Low (Rs.) 48.90 40.25 41.80 44.00 41.00 38.00 33.30 31.50 30.50 36.40 36.25 36.40 28.60 34.50 35.00 39.75 36.05 30.00 23.25 25.15 24.00 24.00 29.40 30.50 (in no.of shares) 5942943 5655043 3303695 2802117 287444 806841 1163686 1247071 3424145 834502 1010760 646958 xi) Performance in comparison to NSE Nifty: M O N TH L Y H IG H -L O W B E P L S H AR E P R IC E / N S E N IF T Y B E P L LO W B E P L H IG H N S E LO W N S E H IG H 50 .00 40 00.0 0 45 .00 35 00.0 0 40 .00 30 .00 25 00.0 0 25 .00 20 00.0 0 20 .00 15 00.0 0 15 .00 10 00.0 0 10 .00 P E R IO D 16 M ar-06 F e b-0 6 J an -06 D ec -05 N ov-05 O c t-05 S ep -05 A ug -05 J ul-05 0.0 0 J un -05 0.0 0 M ay -05 50 0.00 A pr-05 5.0 0 NSE NIFTY BEPL QUOTE 30 00.0 0 35 .00 (xii) Distribution of Share holding (As on 31st March 2006): No. of Equity Shares held 2500 Shareholders Shares Number % to total Shareholders Number % to total Capital 13352 92.38 10730067 6.47 1 - 2501 - 5000 610 4.22 2368039 1.43 5001 - 10000 187 1.29 1443210 0.87 10001 - 20000 81 0.56 1216134 0.73 20001 - 30000 24 0.17 622405 0.38 30001 - 40000 28 0.19 995183 0.60 40001 - 50000 16 0.11 766163 0.46 50001 - 100000 40 0.28 3073370 1.85 & above 115 0.80 144691069 87.21 14453 100.00 165905640 100.00 100001 Total (xiii) Categories of Share holding (As on 31st March 2006): Category Promoters Banks, Financial Institutions, FIIs, Mutual Funds, Insurance Companies Private Corporate Bodies Indian Public Total Shareholders Number % to total Shareholders 28 0.18 07 0.05 251 14167 14453 1.74 98.03 100.00 Shares Number % to total Capital 70439900 42.46 398180 0.24 52137655 42929905 165905640 31.43 25.87 100.00 (xiv) Dematerialisation of Shares: The Company has established connectivity with Central Depository Services (India) Limited and National Securities Depository Limited for dematerialisation of shares and the same are available in electronic segment under ISIN No. INE922A01025. As on 31 st March 2006, 15,59,39,920 Equity Shares representing 93.99% had been dematerialized. (xv) Outstanding GDRs/ADRs/Warrants or any Convertible Instruments, conversion date and likely impact on equity: There are no GDR/ADR/Warrant or any Convertible Instruments pending conversion or any other instrument likely to impact the equity share capital of the Company. (xvi) Plant Locations: (i) Works - Satnoor : Bhansali Nagar, Taluka Sausar, Dist.: Chhindwara, Madhya Pradesh-480108. (ii) Works - Abu Road : SP-138-144, Ambaji Industrial Area, Abu Road, Dist.: Sirohi, Rajasthan-307026. (xvii) Address for Correspondence for Shareholders/Registrar & Share Transfer Agent: Intime Spectrum Registry Limited, Unit: Bhansali Engineering Polymers Limited, C-13, Pannalal Silk Mills Compound, L.B.S.Marg, Bhandup (West), Mumbai - 400 078. Tel.: 2596 3838, Fax : 2594 6969 Web Site : www.intimespectrum.com Email : [email protected] Investors of the Company shall also be attended to from the following office of the Registrar & Share Transfer Agent: Intime Spectrum Registry Limited, Unit: Bhansali Engineering Polymers Limited, 203, Daver House, 197/199, D.N.Road, Mumbai – 400 001. Tel : 2269 4127 17 MANAGEMENT DISCUSSION AND ANALYSIS REPORT :(a) Industry structure ABS consumption in India has grown from 12362 MT during 1992-93 to 79828 MT during 2004-05, an increase of about 545% in a span of 12 years, i.e. CARG 17%. ABS exhibits wide range of properties, which allows the use of ABS for diverse applications, viz. Home Appliances, Automobiles, Telecom Industry, Electrical, Electronics goods, Business machines, Luggage, bus body and lots of other applications such as helmets, novelties, stationery items, etc. In a special study report on “Demand Forecast for Polymers in India till 2009-10”, published by Petrochemicals Data Service, Vadodara reflect demand for ABS is expected to continue it’s growth @ 17% CARG in future too. The choice of ABS polymer for a particular application is dictated by the quality/performance requirement as varied range of composition is available with wide spectrum of properties. (b) Industry development With the passage of time the reality reinvents itself but the core truth never changes. The only difference is that those who dare to dream turn out as achievers more so in a competitive environment. ABS market growth though impressive presents a chicken and egg story, i.e. the demand will grow if the product is available at a competitive price level even after considering the phenomenon of inter polymer shift. It is pertinent to cite the example of Chimei who started their journey of ABS manufacturing with 5000 TPA capacity in early 1990 and now have a capacity of 1.25 million TPA. Chimei is a global leader in terms of capacity build up, cost and quality in general purpose ABS market. They could convert a coveted engineering polymer (ABS) into a bulk polymer and compete well against several bulk polymers viz. PP co-polymer and HIPS. Your company is inspired by such glorious achievement especially because the consumption of ABS in Taiwan is insignificance and Chimei’s success story relates itself to the growing demand of ABS in China who today consume 3.5 million tons of ABS while a decade and half ago when your Company began manufacturing ABS they were at 0.1 million tonne consumption level. In India your Company and another manufacturer both are no doubt growing but at a snail pace because so far none has dared to set up the plant at international competitive level, i.e. 200 KTPA. Your company is indeed working seriously to launch a mega expansion project to achieve 200 KTPA capacity in the manner that cost wise it is competitive even against Chimei (because of low utility cost being aimed through power co-generation concept) and quality-wise at par with them and other respectable players viz. Lanxess, LG and Cheil. India presents the growth opportunity because consuming segment of ABS from automobile and telecommunication industries is likely to present phenomenal growth opportunity (a) because of telecommunication revolution in the domestic market and (b) because India in the next 10 years time will become global hub for automobile manufacturing. In these two market segments, India can boast of higher growth rate than China, though highest consuming segment of ABS in China is toy manufacturing for export especially to USA and Europe. In this segment Indian ABS market has practically not awakened at all. While implementing the growth plan your Company will direct efforts as to how to act as a stimulant in the toy industry in India who must slice out a share of global market, which is practically monopolised by China. (c) Outlook & Opportunities: The opportunity scene has already been presented in the foregoing and the realization has dawned upon your Company that there is no survival without growth. The growth in a highly competitive environment especially when international players are itching to enter Indian market, establishing the technology process to produce the best at a least cost has been the priority area for your Company in last two years. As already reported in the foregoing your Company has revamped its technology with which it is confident to manufacture quality at par with best in the world. Moreover, with implementation of the growth strategy in terms of capacity and lower operating cost to be enjoyed owing to innovative utility engineering scheme of power co-generation, your Company will be able to intimidate entry of any foreign player in Indian ABS manufacturing scene. It is expedient for your Company to expand its capacity with the approach laconically covered in the text herein. (d) Segment-wise or product-wise performance The Company has only one business segment covering ABS and SAN polymers. The figures of production and sales for both ABS and SAN are furnished in the Notes to Accounts. (e) Risks and concerns The Company knows it has to grow and it is gearing up to imaginatively plan and implement 200 KTPA capacity expansion programme. The major threat is delay that it may occur for Indian ABS market to grow and in the intervening period the Company will have to focus on transnational markets. With the unpredictable and widely fluctuating monomer market selling ABS in the spot market many a times presents risk of poor EVA (Economic Value Addition). Challenge, therefore, is to withstand uncertainty like trading with a coin depicting different denomination on either side, since relationship between ABS price and monomer price on standard EVA basis does not get established in sequel. Therefore, with economics of scale your Company’s growth strategy would also be focused on accentuating the growth of ABS market in India by directing efforts towards application research and development. 18 (f) Internal Control Systems and their adequacy The Company has an elaborate system of internal controls to ensure optimal utilization of Company’s resources and protection thereof, facilitating accurate and speedy compilation of accounts, management information reports and compliance with statutes, laws and regulations. The Company has a well defined organization structure, authority levels and internal guidelines and rules for conducting business. The Internal Auditors’ conduct regular audits to ensure adequacy of internal control systems, adherence to management instructions and compliance with laws and regulations of the country. (g) Discussions on financial performance with respect to operational performance There has been substantive growth in the business of the Company, resulting in improved profitability. (h) Human Resources The Company is conscious of the fact that it has to step up its efforts to foster human resource development work in the manner befitting the requirement which may arise out of implementing mega expansion project. Presently your Company is rationalizing human resource deployment in the manner that right man is on the right job. It is working in the direction of reducing multiplicity of supervision layer and developing a flat structure following Japanese philosophy of building manufacturing business organization. In order to remain competitive the entire human resource policy, plan and development strategy focuses on staying slim and empowering its employees much more with matching accountability. Therefore, greater stress is being laid on skill formation through on the job training for enhancing performance at all levels. Annexure ‘C’ PRACTICING COMPANY SECRETARIES’ CERTIFICATE ON CORPORATE GOVERNANCE To, The Members of Bhansali Engineering Polymers Limited. We have examined the compliance of conditions of Corporate Governance by Bhansali Engineering Polymers Limited (the Company) for the year ended March 31, 2006, 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 examinations were 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 opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreements. As per the records of the Company, there were no investor grievances remaining unattended for a period exceeding one month against the Company. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company. For and on behalf of M/s. Rathi & Associates Company Secretaries Place: Mumbai Date: 24th June 2006 Narayan Rathi Partner FCS No.: 1433 CODE OF CONDUCT DECLARATION Pursuant to Clause 49 (I) (D) of the Listing Agreement entered into with the Stock Exchanges, I hereby declare that all the board members and senior management personnel of the Company have affirmed compliances with the Code of Conduct for the current year. For Bhansali Engineering Polymers Ltd. Place: Mumbai Date : 24th June 2006 B.M.Bhansali Managing Director 19 Annexure - D Particulars of Employees as required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 and forming part of the Directors’ Report for the year ended 31st March 2006. Sr. No. Name of the Employee 1 Mr. Kenji Asakawa Designation / Nature of Duties Gross Remuneration (Rupees) Qualification 7,200,000 B.E., M.E Age Total (Years) Experience (Years) Date of Last employment commen- and Designation cement of employment Employed for full financial year Executive Director (Technical) 2 Mr. Suryakant Ladi Executive Director 60 35 (Chemical Engineering) 2,552,008 B. Tech (IIT), Ltd. - Manager Technology 49 23 MBA - IIM(A) 3 Mr. Kiran Bhansali 4 Mr. Sunil Tandon Executive Director 2,412,585 06/11/03 Nippon A & L Co. 01/06/00 Perstorp Aegis Chemicals Ltd. Vice President (Marketing) B.E.(Mechanical), DBM 30 7 Master in Political Sc. 48 24 01/08/04 Bhansali Bright Bars Pvt. Ltd. Executive Director (Operations) Employed for part of the financial year Chief Executive Officer 12,308,259 (Allahabad), MBA (UK) 04/11/04 Capital Partner - Chairman Notes 1 2 Gross remuneration includes Salary, House Rent Allowance, Special Allowance, Company’s contribution to Provident fund, Leave encashment, Leave Travel Concession, Medical Reimbursement and Taxable value of perquisites. All appointments are contractual. Other terms & conditions are as per the Company Rules. For and on behalf of the Board M. C. Gupta Chairman P. R. Bhansali Director Place : Mumbai Dated : 24th June 2006 20 B. M. Bhansali Managing Director AUDITORS’ REPORT To, The Members of Bhansali Engineering Polymers Limited 1 We have audited the attached Balance Sheet of Bhansali Engineering Polymers Limited as at 31st March, 2006 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. 2 We conducted our audit in accordance with auditing standards generally accepted in India. Those 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 statement. 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 issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956 (hereinafter referred to as the Act), we enclose in the Annexure a statement on the matters specified in paragraphs 4 & 5 of the said Order. 4 Further to our comments in the Annexure referred to 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 and Profit and Loss Account dealt with by this report are in agreement with the books of account; d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in compliance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956; e) On the basis of written representations received from the directors as on 31st March, 2006 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2006 from being appointed as a director in terms of clause (g) of sub section (1) of Section 274 of the Companies Act, 1956; f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with notes thereon, give the information required by the Companies Act, 1956 in the manner so required 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 31st March, 2006; ii. in the case of the Profit and Loss Account, of the profit for the year ended on that date; and iii. in the case of Cash Flow Statement, of the cash flows for the year ended on that date. For and on behalf of B. L Dasharda & Associates Chartered Accountants Place : Mumbai Dated : 24th June 2006. B. L. Dasharda Partner Membership No. : 13708. 21 ANNEXURE TO THE AUDITORS’ REPORT Statement referred to in paragraph 3 of our report of even date on the accounts for the year ended 31st March, 2006 of Bhansali Engineering Polymers Limited. 1 a) The Company has maintained proper records showing full particulars including quantitative details and situation of Fixed assets. b) Fixed Assets have been physically verified by the Management according to the regular program of periodical verification in a phased manner which in our opinion is reasonable having regards to the size of the Company and the nature of its Fixed Assets. The discrepancies noticed on such physical verification were not material. c) No substantial part of Fixed Assets has been disposed off during the year, which has bearing on the going concern assumption. 2 a) The stocks of finished goods, raw materials, work-in-process, stores and spare parts of the Company have been physically verified by the management during the year. b) The procedures of physical verification of the above stocks followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business. c) The Company is maintaining proper records of inventory. The discrepancies between the physical stocks and the book stocks were not material and have been properly dealt with in the books of account. 3 a) The Company has not granted any loans, secured or unsecured to companies, firms or other parties listed in the register maintained under Section 301 of the Companies Act, 1956. b) The Company had taken an interest free unsecured loan from the Managing Director listed in the register maintained under Section 301 of the Companies Act, 1956.The maximum balance outstanding during the year was of Rs 20.00 lacs which was repaid during the year. c) The terms and conditions of the loan taken were not prima facie prejudicial to the interests of the company. 4 In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensurate with the size of the Company and the nature of its business with regard to purchase of inventory, fixed assets and for the sale of goods. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control systems. 5 a) According to the information and explanations given to us ,we are of the opinion that the particulars of contracts or arrangements that needs to be entered in the register maintained under section 301 of the Companies Act, 1956 have been so entered. b) In our opinion and according to the information and explanations given to us, having regard to the explanation that many of the items are of a special nature and their prices cannot be compared with alternative quotations, the transactions made in pursuance of contract or arrangement entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of five lakh rupees in respect of any party during the year have been reasonable having regard to the prevailing market prices at the relevant time. 6 In our opinion and according to the information and explanations given to us, the Company has complied with the directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under to the extent applicable with regards to the deposit accepted from the public. 7 In our opinion, the Company has an internal audit system commensurate with its size and nature of business. 8 On the basis of the records produced, we are of the opinion that, prima facie, the cost records and accounts prescribed by the Central Government u/s 209(1)(d) of the Companies Act,1956 have been maintained by the Company. However, we are not required to carry out and have not carried out any detailed examination of such accounts and records. 9 a) In our opinion and according to the information and explanations given to us, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Custom Duty, Excise Duty, Cess, Service Tax and any other statutory dues have been generally regularly deposited in time during the year with the appropriate authorities and there are no undisputed statutory dues payable for a year of more than six months from the date they became payable as at 31st March, 2006. 22 b) In our opinion and according to the information and explanations given to us, there are no dues outstanding in respect of Income Tax, Wealth Tax, Sales Tax, Custom Duty, Excise Duty and Service Tax on account of any dispute other than the following:Name of the Statute Nature of the Dues Amount (Rs in lacs) Period to which the amount relates Forum where Dispute is Pending The Central Excise Act, 1944 Classification of ABS polymers 77.62 1996-1997 & 1998-2000 Supreme Court The Central Excise Act, 1944 Cenvat Credit on Material dispatched u/s.173 H 4.80 1997-1998 Assistant Commissioner (Chhindwara) The Central Excise Act, 1944 Reprocessed Granules cleared under notification. 33.92 1999-2000 Assistant Commissioner (Chhindwara) The Income Tax Act,1961 Income Tax 1.10 A.Y.2002-03 The Commissioner of Income Tax (Appeals) The Income Tax Act,1961 Income Tax 0.66 A.Y.2003-04 The Commissioner of Income Tax (Appeals) 10 The Company does not have accumulated losses as at the end of the financial year and has not incurred cash losses in the current financial year and in the immediately preceding financial period. 11 The Company has not defaulted in repayment of any dues to financial institutions or banks. 12 According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13 The Company is not a chit fund or a nidhi/mutual benefit fund/society, therefore, the clause 4 (xiii) of the Order is not applicable to the Company. 14 In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. 15 In our opinion and according to the information and explanations given to us, the Company has not given any guarantees for loans taken by others from banks or financial institutions. 16 In our opinion, on the basis of information and explanations given to us, the Company has not raised any term loans during the year. 17 On the basis of an overall examination of the Balance Sheet of the Company, we report that the Company has not utilised funds raised on short term basis for long term investment. 18 The Company has not made any preferential allotment of shares during the year to any parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956. 19 The Company has not issued any debentures during the year. 20 The Company has not raised any money through a public issue during the year. 21 Based upon the audit procedures performed and on the basis of information and explanations provided 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 and on behalf of B. L. Dasharda & Associates Chartered Accountants B. L. Dasharda Place : Mumbai Partner Dated : 24th June 2006. Membership No.: 13708. 23 BALANCE SHEET AS AT 31 ST MARCH 2006 As At 31.03.2006 (Rs.in lacs) —————— Schedule —————— I SOURCES OF FUNDS Shareholders’ Funds : Share Capital Reserves and Surplus A B 1659.06 21877.57 —————— 23536.63 1659.06 22382.77 —————— 24041.83 Loan Funds: Secured Loans Unsecured Loans C D 7905.62 2000.00 —————— 9905.62 3888.52 2100.00 —————— 5988.52 Deferred Tax Liability II As At 31.03.2005 (Rs.in lacs) —————— APPLICATION OF FUNDS Fixed Assets : Gross Block Less: Depreciation E Net Block Add : Capital-Work-In-Progress Current Assets, Loans & Advances: Inventories Sundry Debtors Cash & Bank Balances Loans & Advances Less: Current Liabilities & Provisions : Current Liabilities Provisions F G H I 208.11 —————— 30238.46 —————— 30828.22 7963.93 —————— 22864.29 376.26 —————— 23240.55 30473.96 6110.58 —————— 24363.38 0.00 —————— 24363.38 19682.87 —————— 4897.98 5601.32 967.26 695.72 12162.28 —————— J 8262.41 902.33 —————— Net Current Assets TOTAL Notes on Accounts 4158.59 13255.32 1046.35 1222.61 316.43 —————— 33758.68 —————— 9164.74 —————— 10518.13 —————— 33758.68 —————— 5819.36 467.84 —————— 6287.20 —————— 5875.08 —————— 30238.46 —————— O ————————————————————————————————————————————————————————————————————— As per our report of even date attached For and on behalf of B. L. Dasharda & Associates Chartered Accountants B. L. Dasharda Partner M. No. 13708 Place : Mumbai Dated : 24 th June 2006 24 M. C. Gupta Chairman P. R. Bhansali Director B. M. Bhansali Managing Director PROFIT AND LOSS ACCOUNT PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2006 Schedule —————— I II INCOME Sales Increase/(Decrease) in Stocks Other Income EXPENDITURE Raw Materials Consumed Excise Duty Manufacturing, Administrative & Selling Expenses Interest Depreciation Less: Transferred from Revaluation Reserve III Profit before Tax Provision for Taxation - Fringe Benefit - Current Year - Earlier Years K L M N 1884.57 1245.92 —————— 25.98 465.90 0.00 ————— Profit after Tax Less: Deferred Tax IV Profit after Deferred Tax Add:Profit brought forward from Previous period V Appropriations Proposed Dividend Tax on Proposed Dividend Balance carried to Balance Sheet 165.91 23.27 ————— Year Ended 31.03.2006 12 Months (Rs.in lacs) —————— Period Ended 31.03.2005 9 Months (Rs.in lacs) —————— 30655.49 (1094.67) 219.52 —————— 29780.34 —————— 17551.76 764.85 196.31 —————— 18512.92 —————— 18139.39 4135.80 11509.46 2363.33 4097.19 1222.60 2421.47 564.27 638.65 —————— 28233.63 —————— 1546.71 491.88 ————— 1054.83 (108.32) 946.51 1605.34 —————— 2551.85 —————— 189.18 2362.67 —————— 2551.85 —————— 0.57 1441.30 1015.67 —————— 0.00 101.05 6.22 ————— 165.91 23.27 ————— 425.63 —————— 17284.16 —————— 1228.76 107.27 ————— 1121.49 (154.26) 967.23 827.29 —————— 1794.52 —————— 189.18 1605.34 —————— 1794.52 —————— 0.58 VI Earning Per Share (Basic & Diluted) Face Value Re.1/-per share VII Notes on Accounts O ————————————————————————————————————————————————————————————————————— As per our report of even date attached For and on behalf of B. L. Dasharda & Associates Chartered Accountants B. L. Dasharda Partner M. No. 13708 M. C. Gupta Chairman P. R. Bhansali Director B. M. Bhansali Managing Director Place : Mumbai Dated : 24 th June 2006 25 CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH 2006 Year Ended 31.03.2006 (12 months) (Rs in lacs) ——————— Period Ended 31.03.2005 (9 months) (Rs in lacs) ——————— 1546.71 1228.76 638.65 1222.60 (48.20) (113.10) 11.50 —————— 3258.16 425.63 564.27 (21.97) (40.28) 0.39 —————— 2156.80 (8045.35) 739.39 2521.77 —————— (1526.03) (3982.24) (1624.88) 3787.09 —————— 336.77 (60.03) 0.00 —————— 276.74 Cash flow from operating activities : Net profit/(Loss) before tax : Adjustment for : Depreciation Interest paid Interest received from bank Unrealised foreign exchange gain (Profit) / Loss on sale of Assets Operating profit before working capital changes Adjustment for : Trade and other receivables Inventories Trade payables Cash Generated from Operations Taxes paid Income Tax Paid Fringe Benefit Tax Paid Net cash from operating activities Cash flow from investing activities Purchase of Fixed Assets Interest paid Sale of Fixed Assets A (135.54) (23.00) —————— (1684.57) Net cash used in investing activities Cash flow from Financing Activities Proceeds from borrowings Interest paid Dividend paid including dividend tax thereon B (803.20) 48.20 13.33 —————— (741.67) (935.26) 21.97 1.98 —————— (911.31) Net cash used in financing activities C 3917.11 (1222.60) (189.18) —————— 2505.33 —————— 79.09 1869.67 (564.27) 0.00 —————— 1305.40 —————— 670.83 Net increase/(decrease) in cash and cash equivalents (A+B+C) Cash and Cash equivalents (Opening Balance) 967.26 296.43 —————— —————— Cash and Cash equivalents (Closing Balance) 1046.35 967.26 —————— —————— ————————————————————————————————————————————————————————————————————— As and on behalf of B. L. DASHARDA & ASSOCIATES M. C. Gupta Chairman Chartered Accountants B. L. Dasharda Partner M. No. 13708 P. R. Bhansali Director Place : Mumbai Dated : 24th June 2006 B. M. Bhansali Managing Director 26 SCHEDULES FROM ‘A’ TO ‘O’ FORMING PART OF THE ACCOUNTS As At 31.03.2006 (Rs.in lacs) —————— As At 31.03.2005 (Rs.in lacs) —————— 2000.00 2000.00 —————— —————— SCHEDULE ‘A’ - SHARE CAPITAL Authorised: 20,00,00,000 Equity Shares of Re.1/- each Issued, Subscribed and Paid-up: 16,59,05,640 Equity Shares of Re. 1/- each fully paid up 1659.06 1659.06 —————— —————— SCHEDULE ‘B’ - RESERVES & SURPLUS Revaluation Reserve : Opening Balance 17530.53 18551.34 16.61 5.14 Less : Adjustment towards assets sold / discarded Less: Transferred to Depreciation Account 1245.92 16268.00 —————— Capital Reserve: Capital Subsidy Share Premium Account : General Reserve Balance as per Profit & Loss Account 1015.67 17530.53 —————— 44.90 44.90 2977.00 225.00 2977.00 225.00 2362.67 1605.34 —————— —————— 21877.57 22382.77 —————— —————— Cash Credit Limit from Bank 6302.54 3304.05 Corporate Loan from Bank (The above Cash Credit Limit & Corporate Loan are secured 1517.84 0.00 18.82 28.73 0.00 461.80 SCHEDULE ‘C’ - SECURED LOANS by a first charge on all the immovable assets of the Company and hypothecation of all movable properties, both present and future). Finance Lease Liability (Secured by an exclusive charge on the assets acquired. Factored Liability (To the extent secured by Sundry Debtors) Loan against purchase of Vehicles From Corporate Bodies From Banks (Secured by hypothecation of vehicles) SCHEDULE ‘D’ - UNSECURED LOANS Inter Corporate Deposits Others 7.17 3.29 59.25 66.42 90.65 93.94 —————— —————— —————— —————— 7905.62 3888.52 —————— —————— 1900.00 1900.00 100.00 200.00 —————— —————— 2000.00 2100.00 —————— —————— 27 SCHEDULE ‘E’ - FIXED ASSETS DESCRIPTION (Rs in lacs) GROSS BLOCK (AT COST) DEPRECIATION As at 01.04.2005 Additions Deductions As at 31.03.2006 As at 01.04.2005 For the year on Revalued Assets Land [Free hold] 125.80 0.00 0.00 125.80 0.00 0.00 Land [Lease hold] 133.62 0.00 0.00 133.62 0.00 0.00 0.00 3050.09 215.46 36.07 25.72 26366.31 5545.07 Buildings NET BLOCK As at 31.03.2006 0.00 Adjustment in respect of assets sold / discarded 0.00 As at As at 31.03.2006 31.03.2005 0.00 125.80 125.80 0.00 0.00 0.00 133.62 133.62 55.86 0.00 307.38 2742.71 2705.76 482.38 1190.57 2.07 2921.22 128.87 26285.63 106.40 Office Equipments* 716.23 155.86 0.66 871.43 271.20 90.27 0.00 0.58 360.89 510.53 445.03 Vehicles 291.46 35.82 46.31 280.97 78.85 29.93 0.00 29.08 79.70 201.26 212.61 Plant & Machinery 7215.95 19150.36 20740.56 Furniture, Fixtures & TOTAL 30473.96 426.95 72.69 30828.22 6110.58 638.66 1246.43 31.73 PREVIOUS PERIOD 29541.84 948.19 16.07 30473.96 4677.85 425.63 1015.67 8.57 7963.93 22864.28 24363.38 6110.58 24363.38 * includes Computer Equipments costing Rs.31.65 lacs (previous period Rs.31.65 lacs) acquired under finance lease. Note : Refer note no.1(c) of Schedule ‘O’. SCHEDULE ‘F’ - INVENTORIES (As certified and valued by the Management) Finished Goods Work-in-Process Raw Materials (including Goods in Transit) Packing Materials Stores & Spares (Refer note no 1 (d) of schedule “O” SCHEDULE ‘G’ - SUNDRY DEBTORS (Unsecured, Considered Good) Over six months Others SCHEDULE ‘H’ - CASH & BANK BALANCES Cash in Hand Balances with Scheduled Banks: On Current Accounts On Margin Accounts Unclaimed Dividend Account SCHEDULE ‘I’ - LOANS & ADVANCES (Unsecured, Considered Good) Deposits Advances Recoverable in Cash or in Kind or for value to be received Balances with Customs & Excise Advance Income Tax 28 As At 31.03.2006 (Rs.in lacs) —————— As At 31.03.2005 (Rs.in lacs) —————— 482.14 1671.94 1747.85 12.79 243.87 —————— 4158.59 —————— 429.24 2819.51 1385.73 28.65 234.85 —————— 4897.98 —————— 42.03 13213.29 —————— 13255.32 —————— 5.63 5595.69 —————— 5601.32 —————— 9.85 13.16 205.57 827.32 3.61 —————— 1046.35 —————— 122.40 831.70 0.00 —————— 967.26 —————— 168.11 152.87 722.75 110.74 221.01 —————— 1222.61 —————— 457.38 0.00 85.47 —————— 695.72 —————— As At 31.03.2006 (Rs.in lacs) —————— SCHEDULE ‘J’ - CURRENT LIABILITIES & PROVISIONS Current Liabilities: Sundry Creditors - Small Scale Industries/ Undertakings - Others - Unclaimed Dividend* Advance from Customers Other Liabilities Provisions for: Gratuity Leave Encashment Taxation Fringe Benefit Tax Proposed Dividend Tax on Proposed Dividend 6.35 8188.78 3.61 0.25 63.42 —————— 104.14 26.86 579.17 2.98 165.91 23.27 —————— 8262.41 —————— 902.33 —————— 9164.74 —————— As At 31.03.2005 (Rs.in lacs) —————— 72.10 5646.41 0.00 1.27 99.58 —————— 129.70 35.68 113.28 0.00 165.91 23.27 —————— 5819.36 —————— 467.84 —————— 6287.20 —————— * There is no amount due and outstanding to be credited to Investor Education and Protection Fund SCHEDULE ‘K’ - INCREASE/(DECREASE) IN STOCKS Closing Stocks: Finished Goods Work-in-Process Less: Opening Stocks: Finished Goods Work-in-Process SCHEDULE ‘L’ - OTHER INCOME Profit on Sale of Assets Interest Income From Debtors (T.D.S Rs 0.14 lac Previous Period Rs.14.44 lacs) From Banks (T.D.S Rs 8.68 lacs Previous Period Rs. 3.49 lacs) Others (T.D.S. Rs 1.42 Lacs Previous Period Rs. NIL ) Miscellaneous Income (T.D.S. Rs. Nil Previous Period Rs.0.53 lac) Bad debts Recovered Exchange Rate Difference (Net) 482.14 1671.94 —————— 429.24 2819.51 2154.08 3248.75 —————— (1094.67) —————— 429.24 2819.51 —————— 987.36 1496.54 0.00 79.28 48.20 21.97 104.33 2483.90 —————— 764.85 —————— 0.50 48.14 7.99 —————— 3248.75 1.92 —————— 103.17 115.19 51.57 0.00 0.00 —————— 219.52 —————— 0.79 40.28 —————— 196.31 —————— 29 Year Ended 31.03.2006 (Rs.in lacs) —————— Period Ended 31.03.2005 (Rs.in lacs) —————— SCHEDULE ‘M’ - MANUFACTURING, ADMINISTRATIVE & SELLING EXPENSES Salaries & Wages Contributions to Provident Fund etc. Employees Welfare Expenses 823.34 508.77 51.27 32.61 58.74 933.35 —————— 68.29 609.67 —————— Stores and Spares Consumed 217.22 41.68 Packing Materials Consumed 205.71 102.86 1404.18 861.18 29.27 24.92 Power & Fuel Rent, Rates & Taxes Insurance Travelling & Conveyance 88.01 39.28 173.19 119.04 Repairs & Maintenance : Buildings 14.59 13.82 Machinery 95.63 110.96 Others 48.50 158.72 —————— 12.97 137.75 —————— Printing & Stationery 17.25 14.05 Postage, Telephone, Fax etc. 58.49 38.95 237.34 133.42 50.03 10.11 Miscellaneous Expenses Legal & Professional Charges Auditors’ Remuneration : Audit Fees 2.00 1.75 Tax Audit Fees 0.25 0.28 Taxation Matters 0.18 0.67 Review Audit Fees and Certifications 0.29 0.42 Out of Pocket Expenses 0.06 2.78 —————— Directors’ Sitting Fees Managerial Remuneration 0.00 3.12 —————— 0.68 0.31 22.42 14.47 Loss on Sale of Assets 11.50 0.89 Commission 27.72 72.04 Freight & Forwarding 265.73 144.25 Exchange Rate Difference (Net) 193.60 0.00 Bad Debts 0.00 53.48 —————— —————— 4097.19 2421.47 —————— —————— SCHEDULE ‘N’ - INTEREST On Corporate Loan to Bank 154.02 0.00 On Cash Credit Limits to Bank 616.46 304.13 On Others 30 452.12 260.14 —————— —————— 1222.60 564.27 —————— —————— SCHEDULE ‘O’ NOTES FORMING PART OF THE ACCOUNTS 1. Significant Accounting Policies: (a) Basis of Accounting The financial statements are prepared under historical cost convention modified by revaluation of fixed assets and in accordance with the requirements of the Companies Act, 1956 and comply with the Accounting Standards issued by the Institute of Chartered Accountants of India to the extent applicable. For recognition of Income and Expenses, mercantile system of accounting is followed. (b) Revenue Recognition (i) The Company recognises sale at the point of despatch of goods to the customers. (ii) Customs duty benefits in the form of advance license entitlements are recognised on export of goods and are set off from material costs. (c) Fixed Assets & Depreciation (i) The Fixed Assets are stated at cost of acquisition / construction and includes amounts added on revaluation less accumulated depreciation. All cost including financing cost attributable to the fixed assets to bring the assets to their intended use are capitalised. (ii) Depreciation on plant and machinery (other than continuous process plant) has been calculated on the written down value method at the rates specified in schedule XIV to the Companies Act, 1956. (iii) Depreciation on all other assets, other than leasehold land including continuous process plant, has been calculated on the straight line method at the rates specified in schedule XIV to the Companies Act, 1956. (iv) Cost of leasehold land is not amortised over the lease period. (v) Depreciation on the assets purchased/ sold during the year has been provided on a pro-rata basis. (d) Valuation of Inventories (i) Inventories are valued at cost except for finished goods which are valued at lower of cost or net estimated realisable value. (ii) Cost of inventories is computed on Weighted Average basis. (iii) Finished goods and work-in-progress include cost of conversion and other costs incurred in bringing the inventories to their present location and condition. (e) Retirement benefits (i) The Company’s contributions to Provident Fund and Superannuation Fund are charged to the Profit & Loss Account. (ii) Provisions for Gratuity and Leave encashment have been charged to Profit and Loss Account on the basis of actuarial valuation. (f) Foreign Currency Transactions (i) Foreign currency transactions are recorded at the exchange rate prevailing at the time of the transaction and exchange difference, if any, on settlement of transaction is recognised in the Profit & Loss Account. (ii) Amounts of foreign currency transactions remaining pending at the year end are recorded at the exchange rate prevailing at that time. (iii) All exchange differences arising on settlement/conversion on foreign currency transactions are included in the Profit and Loss Account. (iv) In respect of transactions covered by forward exchange contracts, the difference between the forward rate and the exchange rate at the date of transaction is recognized as income or expense over the life of the contract. (g) Borrowing Cost Borrowing costs attributable to acquisition and / or construction of qualifying assets are capitalised as a part of the cost of these capitalised assets, upto the date when such assets is ready for its intended use. Borrowing costs on working capital is charged to Profit and Loss Account for the year. (h) Excise Duty Cenvat is accounted as per exclusive method of accounting in terms of Accounting Standard – 2 on Valuation of Inventories, issued by the Institute of Chartered Accountants of India. 31 (i) Taxation (i) The provision for taxation is made at the current rate of tax as applicable for the income of the relevant year as per Income Tax Act, 1961. (ii) Deferred tax is recognised, subject to consideration of prudence on timing difference, being the difference between the taxable and accounting income/expenditure that originate in one period and are capable of reversal in one or more subsequent period(s). Deferred tax assets are not recognised unless there is virtual certainty that sufficient future taxable income will be available, against which such deferred tax asset will realise. (j) Leased Assets Assets acquired under finance lease, which effectively transfer to the company all the risks and benefits are disclosed as leased assets. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. (k) Provision, Contingent Liabilities and Contingent Assets Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be outflow of resources. Contingent Liabilities are not recognized but are disclosed in the notes. Contingent assets are neither recognized nor disclosed in the financial statements. 2. The Freehold Land, Building and Plant & Machinery of the Company as on 30th June 2002 and as on 30th June 2004 were revalued by the approved valuer and the surplus arising thereon has been transferred to Revaluation Reserve. Depreciation on revalued assets, amounting to Rs.1245.92 lacs (Previous Period Rs. 1015.67 lacs) has been appropriated from the Revaluation Reserve. 3. Sundry Creditors include amounts due to small scale industrial undertakings Rs. 6.35 lacs (Previous Period Rs. 72.10 lacs). Party to whom the amounts are outstanding for more than 30 days is as per attached annexure. 4. Managerial Remuneration: Year Ended 31.03.2006 (12 Months) (Rs. in lacs) ———————— Period Ended 31.03.2005 (9 Months) (Rs. in lacs) ———————— 21.00 13.50 1.42 ———————— 22.42 ———————— 0.97 ———————— 14.47 ———————— (a) Remuneration to Managing Director: (i) Salaries & Allowances etc. (ii) Contributions to Provident Fund and Superannuation Fund Total (b) Remuneration to Executive Director: Salaries Less: Capitalised (c) Directors’ Sitting Fees 5. (i) 72.00 50.48 72.00 ———————— 50.48 ———————— Nil ———————— Nil ———————— 0.68 ———————— 0.31 ———————— The Income Tax Assessments have been completed upto Assessment Year 2003-04.The total demand raised by the Income Tax Authorities upto the said Assessment Year is Rs. 1.76 lacs which is disputed. Based on the decisions of the Appellate Authorities and other relevant provisions, the Company has been legally advised that the demand is likely to be deleted. (ii) As required by the Accounting Standard 22 “Accounting for Taxes on Income” issued by the Institute of Chartered Accountants of India, which is mandatory in nature, the Company has recognised Deferred Taxes, which result from the timing difference between the Book Profits and Tax Profits, for the year aggregating to Rs.108.32 lacs (Previous period 154.26 lacs) in the Profit and Loss Account. 32 6. Related party disclosures and transactions with related party: Name of the related party and nature of relationship Nature of transactions Year Ended 31.03.2006 (12 Months) (Rs. in lacs) Transaction Value Period Ended 31.03.2005 (9 Months) (Rs. in lacs) Outstanding Transaction amounts Value carried in the Balance Sheet Outstanding amounts carried in the Balance Sheet (i) Associates: Bhansali Ferromet Pvt. Ltd. Unsecured Loan 50.00 Nil Nil Nil (ii) Relative of Key Managerial Person: Mrs. Dhudidevi B. Bhansali Rent Deposit Rent paid Nil 18.00 Nil 18.00 12.24 Nil 9.18 Nil Mr. Jayesh B. Bhansali Salary 1.20 0.10 0.80 0.10 Mr. Vimal Bhansali Salary 1.08 Nil Nil Nil 22.42 20.00 3.28 0.00 14.47 0.00 0.39 0.00 72.00 4.03 50.48 4.00 123.08 Nil 81.81 8.02 24.13 1.14 16.17 1.03 (iii) Key Managerial Personnel Mr. B.M. Bhansali Managerial (Managing Director) Remuneration Unsecured Loan Mr. Kenji Asakawa (Executive Director - Technical) Remuneration Mr. Sunil Tandon Remunerations (C.E.O.) & Perquisites Mr. Kiran Bhansali Remunerations (Executive Director -Corporate) & Perquisites 7. The Company has only one reportable business segment and geographical segment and hence no further disclosure is required under Accounting Standard – 17 on Segment Reporting. 8. Earning per share is calculated as shown below: Year Ended 31.03.2006 (12 Months) (Rs. in lacs) ___________________ Period Ended 31.03.2005 (9 Months) (Rs. in lacs) ___________________ 946.51 967.23 16,59,05,640 16,59,05,640 0.57 0.58 Net profit as per Profit & Loss Account after tax available for equity shareholders Weighted Average Number of Equity Shares (Nos.) Earning per share (Rs.) - Basic & Diluted (Face Value Re.1/- per share) 33 9. Lease Commitments : The company had acquired certain items of computer equipments on finance lease amounting to Rs. 31.65 lacs during the financial year 2004-05. The minimum future lease rental outstanding as on 31st March 2006 in respect of these assets is as follows: (Rs. in lacs) Due Within one year Later than one year but not later then five years Later than five years Total Total Minimum Lease Payments Outstandings Future Interest on Lease payments Outstandings Present value of Minimum Lease Payments As on 31.03.2006 As on 31.03.2005 As on 31.03.2006 As on 31.03.2005 As on 31.03.2006 As on 31.03.2005 12.27 12.26 1.45 2.36 10.82 9.90 8.43 20.70 0.43 1.87 8.00 18.83 Nil Nil Nil Nil Nil Nil 20.70 32.96 1.88 4.23 18.82 28.73 Lease payments recognised during the year in the profit and loss account is Rs. 2.36 lacs (Previous period Rs. 0.91 lac). 10. Borrowing cost capitalised during the year is Rs. 56.47 lacs (Previous period Rs. 51.27 lacs). 11. Details of foreign currency exposures that are not hedged by derivative instruments or otherwise. Particulars Amount in foreign currency Currency Equivalent Indian currency (Rs. in lacs) Liabilities Payable 17475.00 EURO 9.53 15186330.82 USD 6812.59 Assets Receivable 83348.59 USD 37.39 12. Information given under Clause 3(i) (a), 3(ii), 4-C, 4-D of Part II of Schedule VI to the Companies Act, 1956. Year Ended Period Ended 31.03.2006 31.03.2005 (12 Months) (9 Months) (a) Installed Capacity: Acrylonitrile Butadiene Styrene (ABS) Resins / 48000 TPA 48000 TPA Styrene Acrylonitrile (SAN) Resins (As certified by the Management & relied upon by the auditors, being a technical matter) (b) Actual Production (i) For Captive Consumption SAN Resins (ii) Meant for Sale ABS Resins SAN Resins (c) Sales ABS Resins SAN Resins Trading Sales (ACN) (d) Return for Production SAN Resins 34 Qty Value (MT) —————— (Rs. in lacs) —————— Qty Value (MT) (Rs. in lacs) —————— —————— 19350 - 11602 - —————— —————— —————— —————— 32830 1639 - 16926 23 - —————— —————— —————— —————— 34469 - 16949 - —————— —————— —————— —————— 32783 1639 - 29651.34 1004.15 - 17290 23 290 17395.56 3.82 152.38 —————— —————— —————— —————— 34422 30655.49 17603 17551.76 —————— —————— —————— —————— - - 430 - —————— —————— —————— —————— - - 430 - —————— —————— —————— —————— Qty Value (MT) (Rs. in lacs) —————— —————— Qty Value (MT) (Rs. in lacs) —————— —————— (e) Opening Stock of Finished Goods (f) ABS Resins 443 429.24 807 SAN Resins - - 430 662.66 324.70 —————— —————— —————— —————— 443 429.24 1237 987.36 —————— —————— —————— —————— ABS Resins 490 482.14 443 429.24 SAN Resins - - - - —————— —————— —————— —————— Closing Stock of Finished Goods 490 482.14 443 429.24 —————— —————— —————— —————— (g) Value of Import on CIF Basis Components & Spare Parts 18.70 14.25 Capital Goods - - Raw Materials 13837.75 6243.47 15.09 15.41 1440.21 56.90 Year Ended 31.03.2006 (12 Months) Qty Value (MT) (Rs. in lacs) Period Ended 31.03.2005 (9 Months) Qty Value (MT) (Rs. in lacs) (h) Expenditure in Foreign currency - Others (i) (j) Earnings in Foreign Exchange Exports on F.O.B. Basis Raw Material Consumed Acrylonitrile 6616 4100.03 3820 2172.67 Butadiene 4295 2584.93 2665 1581.54 18025 9708.38 1746.05 10460 6341.01 1281.51 Styrene Sub-Raw Material —————— —————— 18139.39 ACN (Trading Activity) (k) Value of Raw Materials, Stores & Spares and Components consumed (i) Raw materials: Imported Indigenous 0.00 11376.73 290 132.73 18139.39 11509.46 —————— —————— (Rs.in lacs) % (Rs.in lacs) % —————— —————— —————— —————— 14647.45 80.75 5466.18 47.49 3491.94 19.25 6043.28 52.51 —————— —————— —————— —————— 18139.39 100.00 11509.46 100.00 —————— —————— —————— —————— 34.19 (ii) Stores & Spare parts & Components Imported Indigenous 18.70 8.61 14.25 198.52 91.39 27.43 65.81 —————— —————— —————— —————— 217.22 100.00 41.68 100.00 —————— —————— —————— —————— 35 As at 31.03.2006 (12 Months) (Rs. in lacs) As at 31.03.2005 (9 Months) (Rs. in lacs) 20.32 94.44 33.92 33.92 82.42 83.38 ——————— ——————— 13. Contingent Liabilities in respect of : (a) Estimated amount of contracts remaining to be executed on capital accounts and not provided for (net of advances). (b) Show Cause Notices issued in respect of payment of Excise Duty: The matters are subjudice and not provided for. (c) Demand raised by Excise Authorities against which appeals have been filed for which the Company has been legally advised that these are good cases and the demand is likely to be deleted. 14. (a) Figures for the Previous Period have been regrouped & rearranged wherever necessary to conform to the Current Year’s classification. (b) The current financial year is consisting of 12 months from 1st April 2005 to 31 st March 2006 and hence the figures st are not comparable with the previous financial period of 9 months from 1st July 2004 to 31 March 2005. —————————————————————————————————————————————————————————————————————————————————————————————————— SIGNATURES TO SCHEDULES ‘A’ TO ‘O’ As per our report of even date attached For and on behalf of B. L. DASHARDA & ASSOCIATES Chartered Accountants M. C. Gupta Chairman B. L. Dasharda Partner M. No. 13708 P. R. Bhansali Director Place : Mumbai Dated : 24th June 2006 B. M. Bhansali Managing Director —————————————————————————————————————————————————————————————————————————————————————————————————— Annexure to “Schedule ‘O’ – Notes to Accounts” Name of Small Scale Industrial undertakings to whom the Company owes amounts which are outstanding for more than 30 days as at 31.03.2006 - Sunshine Organics Pvt. Ltd. 36 SCHEDULE - VI PART - IV BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE (Inserted by Notification No.GSR 388 (E), dated 15.05.1995) I. Registration Details IV. Performance of Company (Amount in Rs. Thousands) Registration No. 3 2 6 3 7 Balance Sheet Date 3 1 Date State Code 1 1 (Refer Code List) 0 3 Month II. Capital raised during the year (Amount in Rs. Thousands) Public Issue - - - - - - - - Bonus Issue - - - - - - - - - 2 0 0 6 Year Profit/Loss before tax 1 5 4 6 7 1 Earning per Share in Rs. 0 . 5 7 Right Issue - - - - - - - - Private Placement - - - - - - - - - III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities - - 3 3 7 5 8 7 0 Turnover & Other Income 2 9 7 8 0 3 4 Total Assets - - 3 3 7 5 8 7 0 Total Expenditure 2 8 2 3 3 6 3 Profit/Loss after tax 9 4 6 5 1 Dividend rate % 1 0 V. Generic Names of Three Principal Products/ Services of Company (As per monetary terms) Item Code No. (ITC Code) 39 0 3 3 0 . 0 0 Product Description AC R Y L O N I TR I L E BU T AD I EN E S T YR E N ER E S I N S - - - - - - - - - Source of Funds Paid-up Capital - - - 1 6 5 9 0 6 Reserves & Surplus - - 2 1 8 7 7 5 8 Secured Loans - - - 7 9 0 5 6 3 Unsecured Loans - - - 2 0 0 0 0 0 Deferred Tax Liability - - - - 3 1 6 4 3 Item Code No. (ITC Code) 3 9 03 2 0 . 00 Product Description S T YR E N E AC R Y L O N I T R I L E RE S I NS - - - - - - - - - - - - - - - Application of Funds Net Fixed Assets - - 2 3 2 4 0 5 4 Investments - - - - - - - - - Net Current Assets - - 1 0 5 1 8 1 6 Misc. Expenditure - - - - - - - - - Accumulated Losses - - - - - - - - - Item Code No. (ITC Code) 4 0 02 1 9 . 02 Product Description S T YR E N E RU BB ER BU T AD I EN E LAT EX - - - - - ————————————————————————————————————————————————————————————————————— As per our report of even date attached For and on behalf of B. L. DASHARDA & ASSOCIATES Chartered Accountants M. C. Gupta Chairman B. L. Dasharda Partner M. No. 13708 P. R. Bhansali Director Place : Mumbai Dated : 24th June 2006 B. M. Bhansali Managing Director 37 PERFORMANCE HIGHLIGHTS (10 Years) Financial Installed Sales Year/Period Capacity Volume Sales Profit/ Net Worth (Loss) (12 Months Book Value Per Share after Tax basis) (MT) (MT) Rs. In lacs Rs. In lacs Rs. In lacs Rs. 1996-97 15000 8161 5995 2.99 2501.76 18.75 1997-98 15000 8669 5756 146.58 2648.34 19.85 1998-99 15000 11307 6710 244.92 2893.26 21.69 1999-00 15000 12147 8435 198.49 3056.55 22.91 2000-01 15000 12159 9197 (442.66) 2477.71 18.62 2001-02 27000 20048 12638 326.80 2558.06 (*) 19.18 (*) 30000 10221 8386 207.33 2765.39 (*) 20.73 (*) 2003-04 (15 Months) 48000 11443 9379 (282.14) 5733.25 (*) 3.46 (**) 2004-05 48000 17313(#) 17399(#) 967.23 6511.30(*) 3.92(**) 48000 34422 30655.49 946.51 7269.57(*) 4.38(**) (15 Months) 2002-03 (9 Months) (9 Months) 2005-06 (12 Months) (*) Excluding Revaluation Reserve. (**) Face Value of Shares sub-divided from Rs.10/- to Re.1/- w.e.f. 23.02.2004. (#) Excluding Trading Sales. 38 Registered Office : Bhansali House, A-5, Veera Desai Road, Andheri (W), Mumbai-400 053. ATTENDANCE SLIP PLEASE COMPLETE THIS ATTENDANCE SLIP AND HAND IT OVER AT THE ENTRANCE OF THE HALL. I hereby record my presence at the 22 nd Annual General Meeting to be held on Saturday, 23 rd day of September 2006 at 11.30 a.m. at Walchand Hirachand Hall, Indian Merchants’ Chamber, Veer Nariman Road, Mumbai - 400 020. Name of the Member (in capital letters) Demat Particulars (Name of the Proxy/Representative, if any) DP ID NO I N Signature of the Member or Proxy Client ID No. Folio no. .................................... No. of Shares .......................................... .............................................................................. TEAR HERE .............................................................................. Registered Office : Bhansali House, A-5, Veera Desai Road, Andheri (W), Mumbai-400 053. PROXY FORM I/We ..................................................................................................................................................................................... of ...................................................................................................................................... being a Member/Members of BHANSALI ENGINEERING POLYMERS LIMITED hereby appoint Shri / Smt. ............................................................................................... of ...................................................................... (or failing him/her) ................................................................................... of ...................................................................... (or failing him/her) ................................................................................... of ..................................................................... as my/our proxy to attend and vote for me/us on my/our behalf at the 22 nd Annual General Meeting of the Company to be held on Saturday, 23rd day of September, 2006 at 11.30 a.m. and at any adjournment thereof. AS WITNESS my hand / our hands this .................................................................. day of .................................. 2006. Signed by the said .............................................................................................................. Affix a Re.1/Revenue Stamp NOTE : The proxy must be deposited at the Registered Office of the Company not less than 48 hours before the time for holding the meeting. Proxy need not be a member of the Company. DP ID ............................. Client ID ............................. No.of Shares ............................. Folio No. .............................
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