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Asian Paints Limited Annual Report 2007-2008

Board of Directors
Ashwin Choksi
Chairman

Audit Committee Ms. Tarjani Vakil
Chairperson

Ashwin Dani
Vice Chairman & Managing Director

Abhay Vakil
Managing Director

Mahendra Shah Dipankar Basu

Mahendra Choksi Amar Vakil Hasit Dani Ms. Tarjani Vakil Dipankar Basu Mahendra Shah Deepak Satwalekar R.A. Shah Dr. S. Sivaram

Shareholders Grievance/ Investors Grievance Committee
Mahendra Shah
Chairman

Abhay Vakil Mahendra Choksi Hasit Dani

Remuneration Committee
Dipankar Basu
Chairman

Company Secretary
Jayesh Merchant

Ms. Tarjani Vakil Deepak Satwalekar

Share Transfer Committee
Abhay Vakil
Chairman

Auditors
Shah & Co., Chartered Accountants BSR & Associates, Chartered Accountants

Ashwin Choksi Ashwin Dani Jayesh Merchant

08 19 22 23 24 25

Directors’ Report and Management Discussion & Analysis Auditors’ Report Balance Sheet Profit and Loss Account Cash Flow Statement Schedules Auditors’ Report on Consolidated Financial Statements Consolidated Balance Sheet Consolidated Profit and Loss Account Consolidated Cash Flow Statement Schedules for Consolidated Accounts Corporate Governance Report Shareholder Information Notice

Contents

54 56 57 58 59 88 96

Chairman’s Letter
Paints-India business and the Middle East region, the group sales grew by 20.0% and crossed the USD 1 billion mark with a turnover of Rs. 4,404 crores. The profit after tax grew by 45.6% to Rs. 409 crores. Demand for the decorative products was good throughout the year and the interior and exterior emulsions continued their impressive growth. To meet the growing demand in future, your Company has decided to enhance its manufacturing capacity and for this purpose secured land at Rohtak, Haryana and it is expected to commence commercial production in the early part of the calendar year 2010. Last year, the prices of raw materials were soft, especially during the first half of the last financial year largely due to appreciating rupee and good supply situation. The strategy of reducing prices whenever possible by sharing the benefits with the consumers was effective and resulted in good growth for the Company. However, towards the later part of the year your Company was exposed to the vagaries of a globalised economic environment. The increases in global crude oil and commodity prices have started impacting inflation. It went up sharply in the fourth quarter of the financial year and is expected to remain high. The overall outlook for 2008-2009 seems positive but challenging, with factors like inflation and global financial turmoil being the key concerns. On the consumption side, the fiscal stimulus is positive on account of the recent budgetary proposals and increasing income levels coupled with the Pay Commission recommendations which are likely to offset the impact of the extended pause on rates. In an election year, when the political tolerance for even supply side inflationary pressures would be low, near term growth could get sacrificed to contain inflation. This has increased the downside risk for the economy and consequently could squeeze the margins and impact the growth of your Company. The remarkable growth of your Company has been the outcome of the immense contribution of its people at all levels, their efforts to adapt to ever-changing environment and to seek out innovation in every sphere of activity. The core values of your Company which include identifying the need of the consumers, delivering value-for-money products and services, responsible use of resources, contribution to the good of the society and maximizing longterm value for the stakeholders, continue to strengthen the foundation of your Company. These values are deeply etched in the culture of your Company, its management and people, which will stand the test of time, notwithstanding, the ever-changing outside world. Your Company will always remain a transparent Company, the key principle being “Growth with Humility”. The future holds immense potential and opportunities for growth and I assure you that we will do our best to capitalise on them. With regards,

Dear Shareholders, The last year was indeed, a remarkable year for India as well as your Company. The Indian economy is now on the fulcrum of an increasing growth curve, with the real GDP to be estimated to have grown at 8.7% with all three sectors – agriculture, industry and services doing well. The high growth rate since 2003 clearly represents structural increase rather than cyclical upturn, driven by favorable demographics, high investment and productivity growth. Inspite of the sharp appreciation in Rupee from Rs. 43.4 per USD at the beginning of the year to Rs. 39.9 by the end of the year; surprisingly, exports showed resilience in growth. Inflation was under control for most part of the year, but interest rates continued to be high. In this environment, the Indian paint industry also continued to do well, especially in the consumer segments. While some slowdown in construction activity was reported, growth was good in most parts of the country. Backed by good growth registered by all business units and specially the

Ashwin Choksi

PRODUCT PORTFOLIO

Interior Wall Paints

Exterior Wall Paints

Wood & Metal Paints

Wood Finishes

Shade selection made easy through Sampler packs

Berger Paints Trinidad Limited Plant in Trinidad

A view of Industrial Paint Plant at Taloja, Maharashtra

Berger International Limited, Singapore

Ten Year Review
(Rs. in Crores except for per share data, number of employees and ratios) 2007-2008 2006-2007 3,360.7 2,821.3 21.65 1,660.7 58.86 738.8 26.19 462.2 6.9 45.4 409.9 14.53 21.10 – 409.9 14.53 269.9 2.1 272.0 39.82 95.9 648.2 22.1 125.7 346.5 334.4 211.0 0.17: 1 7,335.9 28.4 130.0 77.6 3,868 **19.5 @ 125.0 64.9 3,681 **18.1 95.0 59.7 3,550 95.9 526.4 28.5 91.1 324.7 274.6 142.6 0.15:1 6,177.7 95.9 476.3 30.5 88.2 319.5 258.4 113.1 0.15: 1 3,751.4 95.9 435.6 48.7 70.5 344.4 242.5 63.8 0.13: 1 2,913.6 **#15.4 $ 85.0 $ 55.4 3,356 64.2 412.4 58.2 103.6 366.2 147.7 124.46 0.22:1 2,118.8 #14.8 110.0 74.3 3,327 64.2 346.4 61.2 110.8 389.5 63.3 129.7 0.27:1 2,105.6 #11.9 90.0 64.0 3,188 64.2 347.0 – 226.8 380.5 44.1 213.5 0.55:1 1,580.3 #11.0 $ 70.0 $ 64.1 3,197 40.1 317.3 – 174.4 335.2 40.5 156.1 0.49:1 1,704.9 #10.1 100.0 89.1 2,984 2,777.4 2,319.2 18.65 1,351.7 58.29 615.5 26.54 387.9 3.8 45.5 338.5 14.60 23.07 (33.6) 304.9 13.15 187.8 (1.0) 186.8 31.27 2,338.8 1,954.6 15.24 1,128.4 57.73 532.3 27.24 325.4 2.8 47.6 275.0 14.07 15.59 (4.2) 270.8 13.85 173.8 (0.3) 173.5 31.43 2,025.9 1,696.1 10.49 943.6 55.63 483.0 28.47 291.2 5.3 48.0 237.9 14.02 5.78 (6.8) 231.1 13.62 147.6 0.2 147.8 29.32 1,806.7 1,535.0 11.93 807.1 52.58 458.8 29.89 281.7 8.4 48.5 224.9 14.65 23.98 – 224.9 14.65 143.4 (1.4) 142.0 32.01 1,598.5 1,371.4 11.20 727.5 53.04 417.7 30.46 240.8 14.6 44.8 181.4 13.23 16.37 – 181.4 13.23 115.3 (1.0) 114.3 27.82 1,469.5 1,233.3 13.18 661.2 53.61 369.9 29.99 211.5 22.1 33.5 155.9 12.64 8.95 – 155.9 12.64 106.4 (0.8) 105.6 27.47 1,262.4 1,089.7 16.25 599.5 55.02 310.6 28.50 193.2 20.3 29.8 143.1 13.13 52.53 – 143.1 13.13 97.3 (0.1) 97.3 29.38 2005-2006 2004-2005 2003-2004 2002-2003 2001-2002 2000-2001 1999-2000 4,059.9 3,416.2 21.09 1,956.1 57.26 906.0 26.52 616.6 8.3 43.8 564.5 16.52 37.72 – 564.5 16.52 376.6 (1.4) 375.2 44.86 95.9 832.6 31.5 94.7 539.2 422.9 92.6 0.09: 1 11,509.9 39.1 170.0 96.8 3,924 1998-99 1,069.6 937.4 11.29 548.8 58.54 264.6 28.23 138.8 22.3 22.7 93.8 10.01 -0.20 7.07 100.9 10.76 76.9 2.6 74.3 26.3 40.1 264.4 – 216.9 301.1 49.8 170.5 0.70:1 1,014.9 **#7.7 80.0 75.9 2,869

RESULTS FOR THE FINANCIAL YEAR REVENUE ACCOUNT Gross Sales Net Sales and Operating Income Growth Rates (%) Material Cost % to Net Sales Overheads % to Net sales Operating Profit Interest Charges Depreciation Profit Before Tax and Extraordinary item % to Net Sales Growth Rate (%) Extraordinary item Profit Before Tax and after Extraordinary item % to Net Sales Profit After Tax Prior period items (net) Profit After Tax and prior period items Return on average net worth (RONW) (%)* CAPITAL ACCOUNT Share Capital Reserves and Surplus Deferred Tax Liability (Net) Loan Funds Fixed Assets Investments Net Current Assets Debt-Equity Ratio Market Capitalisation PER SHARE DATA Earnings Per Share (Rs.) Proposed Dividend (%) Book Value (Rs.) OTHER INFORMATION Number of Employees

RONW is calculated after provision for impairment on fixed assets in 2004-2005. ** EPS calculated on Net Profit after extraordinary item. EPS is calculated after adjusting for Bonus issue and the reduction of capital on account of merger of Pentasia Investments Limited in accordance with Accounting Standard (AS 20) Earnings Per Share. @ Includes one-time special dividend of 25%. $ On increased capital.

* #

4000 3500

Net Sales and Operating Income (Rs. in Crores)

50

Return on Net Worth (In %)

3,416.2

3000 2500 2000 1500 1000 500 0 1,696.1 2,319.2 2,821.3

31.4

1,954.6

20

10

2003-04

2004-05

2005-06

2006-07

2007-08

0

2003-04

29.3

2004-05

2005-06

31.3

30

2006-07

39.8

40

2007-08

600

Profit Before Tax and Extraordinary Items (Rs. in Crores) 564.5

50

Earnings Per Share Before EOI (In Rs.)

500

40
409.9 39.12

400 338.5

30
28.36

300 275.0 237.9

20
16.11 18.53

200

100

10

0

2003-04

2004-05

2005-06

2006-07

2007-08

0

2003-04
Dividend (In %)

2004-05

2005-06

22.98

2006-07

2007-08

70 60

Return on Capital Employed (In %)

200

58.9

47.8

51.0

50 40 37.7 30 20 10 0

150
130

41.4

100
85 95

50

2003-04

2004-05

2005-06

2006-07

2007-08

0

2003-04

2004-05

2005-06

125

2006-07

2007-08

6

170

44.9

Asian Paints Limited • Annual Report 2007-2008

12000

Market Capitalisation (Rs. in Crores) 11,509.9

Pay-out with dividend tax in % 80 70 62.24% 60 73.20% 59.75%

10000

52.37%

8000
7,335.9

6,177.7

6000

40 30 20 10 0

4000
2,913.6 3,751.4

2000

0

2003-04

2004-05

2005-06

2006-07

2007-08

2003-04

2004-05

2005-06

2006-07

2007-08

APL Group Net Sales (Rs. in Crores)

Percentage sales contribution of each region to overall International Operations

International 737.33 (16.7%)

Others* 104.29 (2.4%) SE Asia 13%

South Pacific 9%

Caribbean 21%

South Asia 12%

Paints India 3,562.71 (80.9%)

Middle East 45%

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

50.85%

50

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Directors’ Report and Management Discussion & Analysis
Dear Members, Your Directors have pleasure in presenting the 62nd Annual Report of your Company and the Audited Accounts for the financial year ended 31st March, 2008. FINANCIAL RESULTS (Rs. in Crores) Asian Paints Limited 2007-08 Sales and Operating Income (Net) Operating Profit Less: Interest Less: Depreciation Profit Before EOI and Tax Less: Extraordinary item (EOI) Profit Before Tax Less: Provision for current, fringe benefit and deferred Tax Profit After Tax Add/(Less): Prior period items Net Profit after prior period items Less: Minority interest Net Profit attributable to shareholders of the Company Add: Balance brought forward from the previous year DISPOSABLE PROFIT Dividend - 1st Interim - 2nd interim - Final Tax on Dividend Transfer to General Reserve Balance carried forward to Balance Sheet RESULTS OF OPERATIONS Net sales and operating income for the standalone entity increased to Rs. 3,416 crores from Rs. 2,821 crores in the previous year – a growth of 21.1%. The operating profit (PBDIT) increased by 33.5%, from Rs. 462 crores to Rs. 617 crores. The profit after tax increased to Rs. 375 crores from Rs. 272 crores, representing a growth of 37.9%. 375 150 525 62 – 101 28 134 200 272 110 382 53 62 10 18 89 150 37.9 565 188 377 (2) 375 410 140 270 2 272 37.9 39.6 37.7 3,416 617 8 44 565 2006-07 2,821 462 7 45 410 37.7 Growth (%) 21.1 33.5 Asian Paints Group Consolidated 2007-08 4,404 720 21 59 640 7 633 203 430 (2) 428 19 409 150 559 62 – 101 28 168 200 2006-07 3,670 515 19 61 435 8 427 147 280 3 283 2 281 110 391 53 62 10 18 98 150 45.6 51.2 53.6 48.2 47.1 Growth (%) 20.0 39.8

The consolidated sales and operating income net of discounts and excise duty increased to Rs. 4,404 crores from Rs. 3,670 crores – a growth of 20%. Net profit after minority interest for the group increased to Rs. 409 crores from Rs. 281 crores, representing a growth of 45.6%. The analysis on the performance of your Company is discussed in the Management’s Discussion and Analysis report.

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Asian Paints Limited • Annual Report 2007-2008

CONSOLIDATED ACCOUNTS Your Company has been granted exemption from attaching the financial statements of the subsidiary companies in India and abroad, both direct and indirect, to the balance sheet of your Company for the financial year 2007-2008, under Section 212(8) of the Companies Act, 1956 by the Ministry of Corporate Affairs (MCA). A statement of summarised financials of all subsidiaries of your Company, pursuant to the approvals under Section 212(8) of the Companies Act, 1956, forms part of this report. Any further information in respect of the annual report and the financial statements of the subsidiary companies of your Company will be made available to the members on request. In accordance with the Accounting Standard (AS 21), Consolidated Financial Statements presented by your Company include the financial information of all its subsidiaries. DIVIDEND For the financial year 2007-2008, your Company declared and paid an interim dividend of Rs. 6.50 per equity share (65%) in the month of October, 2007. In addition, your Directors recommend payment of Rs. 10.50 per equity share (105%) as the final dividend for the financial year ended 31st March, 2008. If approved by the shareholders at the Annual General Meeting, the total dividend (the interim dividend and the final dividend) for the financial year 2007-2008 will be Rs.17/per equity share (170%) as against Rs.13/- (130%) per equity share paid for the previous year. TRANSFER TO RESERVES Your Company proposes to transfer Rs. 134.42 crores to the general reserve. An amount of Rs. 200 crores is proposed to be retained in the profit and loss account. MANAGEMENT DISCUSSION AND ANALYSIS: The Indian economy continued to grow strongly in 2007-2008. GDP growth is estimated to have been 8.7%, driven by 2.6% growth in agriculture, 8.6% in manufacturing and 10.6% in services. There are concerns about the country’s ability to sustain a very high growth rate into the future without further substantive reforms. There seems to be little will to push ahead; as elections approach, there is likely to be no movement on that front. In spite of unprecedented prices for crude oil, there is no change in selling prices of the major petroleum products. Infrastructure development continued to progress slowly. The sub-prime crisis in the US snowballed and dominated the news in the second half of the year. This impacted US$ liquidity, health of the international banking sector, housing demand and consumer spending in the US and the stock markets across the globe. The US$ continued to

fall against most currencies, including the Indian Rupee during the year. The average inflation for the year was at 4.56% compared to 5.39% last year. Inflation went up sharply in the fourth quarter of the financial year and is expected to remain high on back of high crude, food and metal prices. The rising Rupee benefitted the importers though, surprisingly, export growth held its ground. On the date of this report, the Rupee has shown a weak trend against the US$. Prices of crude oil and commodities including agricultural products have been rising and are far from reaching any levels of stability. Thus, while the medium term outlook for growth is good, albeit a little lower than in the recent past, your Company will have to cope with volatile prices as many of our raw and packing materials are commodity based. The Indian paint industry continued to do well, especially in the consumer segments. While some slowdown in construction activity was reported, growth was good in most parts of the country. I. PRODUCTS AND MARkET Paints It is estimated that the market for all paints produced by all companies big and small would have been about Rs. 13,400 crores in 2007-08. This is the result of a growth of about 18% over the previous year. The industry is estimated to have grown by about 15% in volume terms during the year. Given the circumstances, your Company has done very well during 2007-08 and this is reflected in the financial results. Your Company’s business in India consists of Decorative and Industrial coatings. Decorative paints form 80% of the Company’s group sales. Decorative Paints Your Company has been the leader in the decorative paints segment for about four decades now. Decorative paints accounts for over 75% of the overall paint market in India. This segment includes Wall Finishes for interior and exterior use, Enamels, Wood Finishes and ancillary products such as Primer, Putties etc. The decorative paints market as a whole is estimated to have grown at about the same rate as the market as a whole. Turnover increase was ahead of volume growth largely due to change in the product mix. Emulsion paints for interior use have been growing much faster than the lower priced Distempers for quite some time now. Exterior emulsion paints have grown explosively over the last decade at the cost of cement paints and lime colours.

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Prices of raw materials had increased sharply in the second and third quarter of the previous year 2006-07. In the year under review, prices of raw materials were soft compared to the previous year especially during the first half. This was largely due to the strong Rupee and good supply situation which negated the impact of rising crude oil prices in the international market. Accordingly, your Company benefitted considerably. Price reductions were effected on 1st August, 2007 and on 3rd December, 2007 in exterior emulsion paints and a few other products. However, the spiraling prices of crude oil led to a sharp increase in the price of mineral turpentine and some other materials which caused your Company to raise prices of solvent based paints from 1st February, 2008. Availability of materials was good throughout the year. Market conditions were good in all parts of the country throughout most of the year. There was a temporary impact due to prolonged rains in September. The Diwali season was good all over Northern and Western India. Robust growth continued after Diwali as well and your Company was able to expand its business across all markets and product segments. Your Company has been strongly committed to growth and, to this end, moved purposefully on several fronts. Pricing was kept competitive and, when the opportunity arose due to benign material costs, selling prices were reduced so that opportunities in the market could be aggressively pursued. Your Company strengthened its range of effect finishes with the addition of Royale Metallics and variants of products launched in previous year. Thus, your Company has significantly expanded the choices available to consumers. The exterior range of products continues to grow strongly and Apex Ultima, the top of the line offering has done very well. During the year, your Company invested in upgrading the ambience of its leading dealers and provided several customer friendly services so as to improve the quality of service to customers, so that the consumer is able to experience an informative and enjoyable shopping trip. Your Company continued to aggressively increase ColourWorld installations; these were over 10,000 across the country by the end of the year. ColourWorlds are now located in many small towns and are taking to consumers in these towns the wide choice of products and shades that are now taken for granted by the urban consumer. Your Company also continued to invest in development of capability in the area of colour. ColourNext was the theme of the Annual Report last year; ColourNext 2008 was introduced to consumers early in 2008. Several Colour Guides and Décor booklets are now available to consumers at the dealers’ shops.

Your Company has the widest range of products – from the economy and value-for-money ranges to the premium range. It is committed to continually expand and improve its products and make them available in even small towns. Your Company believes that this together with continual investment in a wide variety of marketing activities will enable your Company to expand its business into the future and effectively meet the challenge from the many competitors in the market. Asian Paints Home Solutions (APHS) was extended to Chandigarh during the year. The service is now available in thirteen cities. APHS has benefitted from the introduction of the many novelty finishes and continues to add to the brand Asian Paints. The polymer plant in Sriperumbudur was commissioned in the first quarter of 2007-08. Thereafter, the further expansion of the Sriperumbudur plant was commenced; the new capacity will come on stream during the first quarter of 2008-09 raising the capacity of that plant to 100,000 KL. After reviewing the growth of the market and making projections, it was decided to expand capacity so as to keep pace with expected production needs. Accordingly, during the year under review, your Company has acquired land at Rohtak, Haryana. Environmental impact assessment was commenced and the required permissions are expected to be received during the early part of 2008-09. Your Company will then commence the construction of the sixth Decorative paints plant at Rohtak with the first phase of 150,000 KL. Your Company expects the new plant to commence commercial production from early part of the calendar year 2010. Industrial Coatings Automotive Coatings: Asian PPG Industries Limited (APPG): You Company has a 50:50 Joint Venture with PPG Industries Securities Inc., which was formed in the year 1997, for manufacturing Automotive, OEM, Refinish and certain other Industrial Coatings. APPG is the second largest automotive coatings supplier in the country catering to the automotive and industrial paint segment. The Indian automobile industry posted a good performance this year albeit at a lower rate compared to the strong growth registered in 2006-07. While the passenger vehicles recorded growth of 14% in builds, the two-wheeler industry declined by 5.2%. APPG had another outstanding year out-performing the industry with record revenues and sales volumes. The full impact of advanced refinish 2K business acquired

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Asian Paints Limited • Annual Report 2007-2008 Asian Paints Limited • Annual Report 2007-2008

from ICI (India) Limited during the fourth quarter of the previous year, was seen during the year under review as a result of successful integration. These developments have resulted in improved top line performance during the year under review. Total sales increased to Rs. 382.3 crores from Rs. 293.7 crores in the previous year – a growth of 30.2%. The profit after tax jumped to Rs. 32.9 crores from Rs. 18.9 crores, representing a rise of 74.6%. The consolidated sales were Rs. 391.9 crores and the profit after tax was Rs. 33.5 crores. The Board of Directors of APPG at their meeting held on 28th April, 2008, have recommended a dividend of Rs.1.40 (14%). Faaber Paints Private Limited (FPPL), a wholly owned subsidiary of APPG, which was acquired last year for strengthening its supply link servicing to its automotive customers, reported Profit Before Tax of Rs. 0.8 crores this year as compared to Rs. 0.1 crores for the financial year ended 31st March, 2007. The manufacturing facility at Sriperumbudur, near Chennai, was commissioned in March, 2008. At present, the installed capacity is 3,200 KL per annum. The hardening of consumer finance interest rates and tight liquidity in the second half of the last fiscal have already started to have an adverse impact on the automotive industry. Despite these trends that will make the current year challenging, your Company believes that APPG’s strategy of offering better value to its customers by providing superior products and service will enable it to further strengthen its presence in the market. Non-Auto Industrial Coatings: Your Company operates in the non-auto industrial coatings segment through its Growth Business Unit and a wholly owned subsidiary, Asian Paints Industrial Coatings Limited. This market segment is estimated to have grown by 28% as compared to the last year. Your Company has achieved significant growth in Industrial Protective Coatings. Companies involved in construction and fabrication work, provided the impetus to this business. In Road Marking Coatings, the pace of project execution was slower than expected in 2007-08, while regular maintenance demand helped maintain business growth. Input costs, which had been benign for most part of 2007-08, are showing an inflationary trend. The trend of growth in the non-auto Industrial coatings segment is expected to continue in the current year. The industrial liquid paints plant at Taloja has a capacity of 14,000 KL. This facility has helped in rationalizing the number of Contract Manufacturers and has led to

efficiencies in production and improvement in customer service through the manufacture and supply of bulk products from a single location. Asian Paints Industrial Coatings Limited: Asian Paints Industrial Coatings Limited (APICL), a wholly owned subsidiary of the Company engaged in manufacturing and selling Powder Coatings, reported Profit Before Tax of Rs. 3.2 crores in 2007-08 as compared to Rs. 0.9 crores in the previous financial year. The Powder Coatings market has witnessed robust growth in the recent past and the same trend is expected to continue. Therefore, APICL has expanded capacity at its plant at Sarigam and commissioned the new facility in March, 2008. In order to fund the expansion plans of APICL, your Company has made an investment of Rs. 5 crores in its Equity Share Capital during the financial year 2007-2008. Further, an additional investment of Rs. 2.7 crores was also made on 9th May, 2008. The growth recorded in Powder Coatings was led by excellent demand in the heavy and light electrical equipment segments. Business has also been obtained from appliance, furniture and hardware manufacturers. Demand conditions for many Original Equipment Manufacturers using Powder Coatings are expected to be good, while Powder Coatings are also replacing liquid paints in specific applications. Others Your Company’s other businesses comprises of plants manufacturing Phthalic Anhydride and Pentaerythritol, located at Ankleshwar (Gujarat) and Cuddalore (Tamil Nadu), respectively. During the year 2007-2008, the in-house consumption of Phthalic Anhydride and Pentaerythritol was 45% and 55% of the plants’ output respectively. The remaining quantity was sold in the open market. The profitability of the Phthalic Anhydride business was marginally lower compared to the previous year partly due to sluggish demand from the plasticizer industry. Price realisation in the Pentaerythritol business improved in the last quarter, resulting in higher profits compared to the previous year. Technical Instruments Manufacturers (India) Limited Technical Instruments Manufacturers (India) Limited (TIM) is a 100% subsidiary of your Company. It owns the building which houses your Company’s Corporate Office. It has no income except the rent it receives from your Company.

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International Business Unit During the year under review, the International Business Unit of your Company continued to focus on top line growth and gaining market share. This was achieved through introduction of new products, expanding the dealer network, implementing initiatives to strengthen equity with architects, builders and the trade, increasing exports and sharper focus on the protective and industrial coating segments. During the year under review, the volume of paint sold increased by 23.4% to 1,16,200 KL and the revenue from paint sales increased by 12.0% to Rs. 699 crores; adjusted for exchange rate impact, the revenue from paint sales has increased by 18.1%. New products sale in volume terms contributed approximately 7% of total paint sales of overseas subsidiaries and over 875 dealer tinting systems have been installed so far in various subsidiaries. Material prices went up and impacted input cost. However, the impact was neutralized to a large extent by global sourcing and economies of scale in purchasing, formulation engineering and reduction in material losses in manufacturing. Profit after tax for the overseas operations of the group during the year is Rs 36.7 crores as compared to Rs 2.1 crores during the previous year. It may be noted that during the second half of the year, the profit after tax is Rs. 27.1 crores as compared to Rs 0.5 crores during the corresponding period of the previous year. During the financial year 2007-2008, Asian Paints (International) Limited, your Company’s direct subsidiary divested its entire stake in Asian Paints (Queensland) Pty. Limited, Australia. The profitability of the overseas operations of the group was impacted by the following extraordinary items: • • • Loss of Rs. 6.8 crores arising from the disposal of the group’s stake in its subsidiary in Australia. Gain of Rs. 2.5 crores on sale of land/property in Trinidad, Egypt and China. Prior year tax write back of Rs 1.2 crores in Berger International Limited (BIL), a subsidiary listed on the Singapore Stock Exchange.

The group operates in five regions across the world as given here below:
Region Caribbean Middle East South Asia East Asia South Pacific Countries Barbados, Jamaica, Trinidad & Tobago Egypt, Oman, Bahrain & UAE Bangladesh, Nepal & Sri Lanka China, Malaysia, Hongkong Singapore, Thailand &

Fiji, Solomon Islands, Samoa, Tonga & Vanuatu

Caribbean Region During the year under review, the volume of paint sold in the region has increased by 9.4 % to 9,599 KL. The revenue from paint sales has decreased by 1.4% to Rs. 150.1 crores. Adjusted for exchange rate impact, the revenue from paint sales has increased by 12.0%. PBIT (Profit before Interest and Tax) for the region has increased by 80.7 % to Rs. 7.1 crores. Sales in local currency increased by 9-13% in the units in the region. However, devaluation of the respective currencies resulted in lower growth in rupee terms. The subsidiaries in Jamaica and Barbados have registered an increase in profit, while the subsidiary in Trinidad has incurred a loss and corrective steps have been taken to reduce the same. Middle East Region During the year under review, the volume of paint sold in the region has increased by 28.0% to 80,172 KL and the revenue from paint sales has increased by 22.6% to Rs. 319.4 crores. Adjusted for exchange rate impact, the revenue from paint sales has increased by 33.3%. PBIT has increased by 55.7% to Rs. 42 crores. The Middle East region is the largest operating region for the group outside India. The region now contributes 45.4% of the sales from overseas operations. All the subsidiaries in the region have performed well. Sales of the Egyptian, Oman, UAE and Bahrain subsidiaries have grown by 38.5%, 46.8%, 32.0% and 16.8% respectively in local currency. The subsidiaries in Egypt, Oman and UAE have registered good increase in profit, while the subsidiary in Bahrain continues to be profitable. The Oman subsidiary which has now migrated to ‘Berger’ as the operating brand has had good sales growth due to strong performance in the retail and wood finish segments. The region has had excellent growth in profit.

The revenue from paint sales of BIL has increased by 10.9% to S$ 141.6 million (equivalent to Rs. 388.8 crores). BIL has earned a profit after tax of S$ 2.2 million (equivalent to Rs 5.9 crores) as compared to a loss of S$ 5 million (equivalent to Rs. 14.4 crores) during the previous year.

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Asian Paints Limited • Annual Report 2007-2008 Asian Paints Limited • Annual Report 2007-2008

South Asia Region During the year under review, the volume of paint sold in the region has increased by 51.3% to 14,555 KL and revenue from paint sales has increased by 33.4% to Rs. 82.9 crores. Adjusted for exchange rate impact, the revenue from paint sales has increased by 46.2%. The PBIT for the region has increased by 210.3% to Rs. 6 crores. All subsidiaries in the region have performed well. The Sri Lanka, Bangladesh and Nepal subsidiaries have registered sales growth of 36.7%, 76.7% and 24.9% respectively in local currency. New product launches and several other sales and marketing initiatives have helped all the subsidiaries to achieve healthy sales growth. The subsidiaries in Sri Lanka and Nepal have improved profits while the subsidiary in Bangladesh has reduced losses. East Asia Region During the year under review, the volume of paint sold in the region has decreased by 2.5% to 8,975 KL. However, the revenue from paint sales has increased by 5.2% to Rs. 88.7 crores. Adjusted for exchange rate impact, the revenue from paint sales has increased by 8.5%. Loss before interest and tax has reduced to Rs. 3.6 crores from Rs. 14.3 crores during the previous year. The subsidiary in Singapore has performed well. The subsidiary in Hongkong has made a nominal profit as compared to a loss in the previous year. The other subsidiaries in Thailand, China and Malaysia have managed to reduce their losses significantly. South Pacific Region During the year under review, the volume of paint sold in the region (adjusted for sales of the Australian subsidiary which was divested during the year) decreased by 17.1 % to 2,940 KL and revenue from paint sales decreased by 7.2% to Rs. 54.8 crores. Adjusted for exchange rate impact, the revenue from paint sales has decreased by 4.3%. EBIT for the region (excluding Australia) has increased by 16.6% to Rs. 7.3 crores. The region has underperformed in sales mainly due to the largest unit in the region, Fiji, being impacted by the uncertain political climate and a slowdown in its economy which has resulted in its sales declining by 15.3% in local currency. II. SAFETY, HEALTH AND ENVIRONMENT Your Company is committed to providing a safe environment to all its employees. During the year 2007-08, the Company continued its efforts on improving the safety capability in the plants. External audits were carried out at all plants to identify further areas of improvement. Further, your Company undertook steps

to strengthen the existing safety management system at the plants. The specific generation of industrial effluents was further reduced in 2007-08 as also the specific generation of total effluents. During the year, the Company continued to focus on resource conservation and reduction in generation of hazardous wastes. Rainwater harvesting schemes continued to be in operation in all plants. Water harvested is about 7% of the total water consumed. The consumption of power and fuel was reduced in 200708. During the year, the hazardous waste incineration facilities at all plants of your Company were upgraded to ensure compliance to new guidelines issued by the Central Pollution Control Board (CPCB) in this regard. III. HUMAN RESOURCES It is the commitment of employees at all levels and their contribution to innovation and change that is essential to compete successfully in an increasingly competitive global market-place and achieve sustained growth and profitability. Attracting, retaining and motivating employees and creating an environment that nurtures them to deliver their best has been a constant challenge for your Company. Your Company continues to invest in training, refining its goal setting and performance evaluation processes through which employees can share best practices and seek support to drive change and improvement. Three year wage settlements were signed at Ankleshwar and Kasna plants. These are productivity settlements. Your Company has a thirty-year history of productivity settlements now. The employee relations continue to be cordial and productive. IV. CORPORATE SOCIAL RESPONSIBILITY Your Company continued its efforts to positively impact the environment in which it operates. In the area of healthcare, camps for cataract surgeries, audiometry, electrocardiography, diabetes detection, oral examination and immunization were organized in the vicinity of the plants at Ankleshwar, Patancheru, Kasna and Sriperumbudur. Further, mobile medical care was rendered to communities near the Patancheru, Kasna and Sriperumbudur plants with the help of Helpage India. Your Company supported needy schools near the Ankleshwar, Patancheru and Sriperumbudur plants through provision of safe drinking water facilities, infrastructure and educational aids. Your Company continues to enhance the awareness of interested parties on water conservation and Rain Water Harvesting through the Total Water Management Centre

13

installed at the Mumbai plant. It also provides expert advice on implementation of Rain Water Harvesting projects at no cost. The Total Water Management Center of your Company was conferred the “Excellence Award” in the Environmental Excellence Category at the Asian CSR Awards 2007 by the Asian Institute of Management, Philippines. Your Company was accorded this recognition from amongst 186 entries from 14 countries across the world. V. INFORMATION TECHNOLOGY During the financial year 2007-08, your Company has implemented a Sales Force Automation platform deployed on a smart phone for salesmen on the move. This has increased the agility and responsiveness of the sales force enabling the organization to respond faster to customer needs. The applications supporting the service business of your Company have been enhanced to support surveys, customer complaints and closer tracking of turn-around times of services. In the current year we have also upgraded the website to a new platform to leverage some of the emerging internet technologies. To facilitate better collaboration between employees based in various locations your Company has implemented a new mail messaging and collaboration suite which leverages the latest internet technologies. To IT enable the rapidly changing business processes, your Company is adopting tools and technology that support the Enterprise Services Oriented Architecture paradigm. Your Company has acquired skills on a leading platform in this technology area by developing and implementing applications using this approach. We are proud to report that your Company has received global innovation awards for these applications. You are aware that your Company has been an aggressive user of IT for improving business processes. The health of master data is critical to the smooth functioning of IT applications and the reporting emanating out of the same. In the current year your Company has implemented a Master Data Management platform to manage the process of introduction and updation of various master data elements like – product, customer and vendor to different IT applications. In the current year, your Company has upgraded a significant part of the IT server and data storage infrastructure. While doing so we have deployed virtualization technology which has significantly improved the uptime and scalability of applications. This technology improves percentage utilization of hardware leading to reduced cost and uses lesser energy for power and cooling and thus contributes to energy conversation.

VI. RESEARCH & DEVELOPMENT Your Company is executing an integrated strategy for technology development and deployment. The technology function is supporting your Company’s strategy around four missions: technology development, development of substantially new products, productivity improvement, and cost reductions. The focus for your Company in the financial year 200708 had been to lay the foundation for improving its research and development capabilities and further improve the productivity of the technology function. Your Company further continues to focus on innovation and collaboration which are essential for sustaining our market position. In keeping with environmental legislation in the developed world, your Company needs to be prepared with products that will be required in future to conform to new rules and restrictions. The Labs are giving priority to ensuring that your Company’s product range will meet these emerging requirements. Your Company has also started developing a network of partners to leverage its internal capabilities with the outside organization. Your Company would endeavour to attract, motivate and retain competent and committed people in the Technology function. Also, a state-of-art R&D Center is being built at Turbhe, Navi Mumbai for which the construction and other related activities are nearing completion. VII. FINANCIALS Net sales and operating income of the standalone entity increased to Rs. 3,416.2 crores from Rs. 2,821.3 crores recording a growth of 21.1 %. This is driven mainly on account of good paint volume sales growth of 17.5%. For the group, net sales and operating income shows an increase of 20.0% to Rs. 4,404 crores. Operating profit (PBDIT) margin of the standalone Company has increased from 16.4% to 18.0% this year. This increase is mainly on account of savings in material cost with rising rupee helping it further. Material cost as a percentage to Net sales and operating income as a result has reduced to 57.3% from 58.9% last year. Profit before tax, for the standalone entity has increased by 37.7% to Rs. 564.5 crores. For the group, Profit before tax and extraordinary items has increased by 47.1% to Rs. 639.9 crores. Net profit for the standalone entity in 2007-08 stands at Rs. 375.2 crores as against Rs. 272.1 crores in the previous year, showing an increase of 37.9%. Net profit after minority interest for the group stands at Rs. 409.2 crores, an increase of 45.6% over the corresponding figure of Rs. 281 crores in the previous year. Your Company continues to maintain tight working capital control. The net core working capital turnover ratio for the year has improved to 17 times from 12 times in the previous year.

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Asian Paints Limited • Annual Report 2007-2008 Asian Paints Limited • Annual Report 2007-2008

VIII. RISk AND OUTLOOk The overall outlook for 2008-09 appears to be positive but nevertheless challenging. The Indian economy is expected to register growth of 7.5% to 8% in 2008-09. The expected growth, albeit lower than the previous two years, is still strong to support consumer demand. In addition, recent policy initiatives like increasing the income tax exemption slabs, implementation of Sixth Pay Commission and the farmer loan waiver scheme is expected to provide further support to consumer demand. Also, with early prediction of normal monsoon in 2008-09, your Company expects the rural economy to also perform well and support paint demand in the rural areas. The market for industrial coatings is expected to maintain its growth momentum on the back of continued thrust on infrastructure development and capacity additions across industries. However, there are certain risks that can impact the performance of your Company. Disruptions in the global financial markets continue to pose threat to the world economy and its possible ripple effect on India cannot be neglected. The foreign exchange market continues to be volatile. Rising commodity prices including crude oil prices and the resulting high inflation could lead to further tightening of monetary conditions. This can have an adverse impact on demand, particularly in interest rate sensitive sectors like automobiles and housing. Adverse impact of global financial turmoil, political, economic and natural conditions in geographies where your Company has significant presence, can affect the business performance. Mineral Turpentine prices have been raised very sharply by the refineries. From Rs. 26.60 per liter in early 2007, the price went up to Rs. 34.40 by year end and is, in May 2008, at Rs. 45.40. Prices of solvent based paints were raised in January 2008 and a very large hike in prices for such products will take effect from 1st June, 2008. As there is no let up in the price of crude oil, further hikes cannot be ruled out. The impact of these unprecedented price hikes may impact demand for this class of products; these account for about a third of the decoratives’ business in India. IX. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Internal Control Structure of your Company is adequately designed to ensure the effectiveness of its operations (both domestic & overseas), propriety in the utilization of funds, safeguarding of assets against unauthorized use or disposition, true and fair reporting and compliance with all the applicable regulatory laws and company policies. Your Company has a well defined organization structure with state of the art ERP systems to connect its different business locations, dealers and vendors for real time information exchange. Clear and well defined policies governing limits on financial

authority exist at each level of hierarchy. Budgetary and other control and review mechanisms are established, whereby the management regularly reviews actual performance with reference to the plan and forecasts. The Internal Audit function ensures the adequacy of internal controls from Operating, Financial and Statutory Compliances point of view as well as adherence to management policies through a blend of process and transaction audits, on an ongoing basis. A summary of Audit Observations and Action Taken Reports are placed before the Audit Committee on a periodical basis, for review. Cautionary Statement Statements in this Management Discussion and Analysis describing the Company’s objectives, projections, estimates and expectation may be “forward looking statement” within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied. CORPORATE GOVERNANCE Pursuant to Clause 49(VII) of the Listing Agreement, a separate report on Corporate Governance forms part of the Annual Report. Your Company is compliant with the requirements of the Listing Agreement and necessary disclosures have been made in this regard in the Corporate Governance Report. The Management Discussion and Analysis and the report on Corporate Governance are included as a part of the Directors’ Report. A certificate from the Joint Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is attached to this report. DELISTING The Company has received confirmation as to the delisting of its securities from the Delhi Stock Exchange Association Limited and with this, the Company’s securities have been delisted from all the regional Stock Exchange(s). Your Company’s securities continue to be listed on the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited. FIXED DEPOSITS Your Company has not accepted any fixed deposits during the year 2007-2008 and there are no outstanding fixed deposits from the public as on 31st March, 2008. SALES TAX DEFEREMENT BENEFIT Your Company continues to avail sales tax deferment benefit for the expanded capacity at Kasna plant for which eligibility certificate for Rs. 38.2 crores has been received. A sum of Rs. 5.1 crores has been availed

15

during the year 2007-2008 and with this, the total amount of deferment availed upto 31st March, 2008 is Rs. 23.1 crores. INSURANCE All the insurable interests of your Company including inventories, buildings, plant and machinery and liabilities under legislative enactments are adequately insured. CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION Particulars in respect of conservation of energy and technology absorption by the Company as per Section 217(1) (e) of the Companies Act, 1956, are given as Annexure to this report in Form ‘A’ and ‘B’, respectively. FOREIGN EXCHANGE EARNINGS AND OUTGO Details of expenditure and earnings in foreign currencies are given under Schedule ‘M’ to the financial statements. PERSONNEL In terms of the provisions of Section 217(2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975, names and other particulars of the employees are required to be set out in the annexure to this report. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and Annual Accounts of the Company sent to the shareholders do not contain the said annexure. Any shareholders desirous of obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Company. DIRECTORS’ RESPONSIBILITY STATEMENT Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm that: • • In preparation of the annual accounts, the applicable accounting standards have been followed. The accounting policies have been selected and applied consistently and the judgements and estimates made, are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period. Proper and sufficient care has been taken 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.

The annual accounts have been prepared on a going concern basis.

DIRECTORS Ms. Tarjani Vakil, Mr. Dipankar Basu and Mr. Deepak Satwalekar are due to retire by rotation at the conclusion of the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment. Appropriate resolutions for their re-appointment are being placed before you for your approval at the ensuing Annual General Meeting. The brief resume of the aforesaid Directors and other information have been detailed in the Corporate Governance Section of this report. Your Directors recommend their re-appointment as Directors of your Company. AUDITORS Last year, your Company had sought an approval of the shareholders at the Annual General Meeting held on 26th June, 2007, as to the appointment of BSR & Associates, Chartered Accountants, as Joint Statutory Auditors of the Company. At the forthcoming Annual General Meeting, M/s. Shah & Co., Chartered Accountants and M/s. BSR & Associates, Chartered Accountants, Joint Auditors of your Company retire and are eligible for re-appointment. Your Directors recommend their re-appointment for the ensuing year. COST AUDITOR The Company has received the approval of the Central Government for appointment of Mr. Damji Keshavji Visariya as Cost Auditor to conduct the audit of the cost records of your Company for the financial year 2007-2008. APPRECIATION Your Directors wish to place on record their appreciation of the contribution made by employees at all levels to the continued growth and prosperity of your Company. Your Directors also wish to place on record their appreciation of banks and other financial institutions, shareholders, dealers and consumers for their continued support.

For and on behalf of the Board

Ashwin Choksi Chairman Mumbai: 9th May, 2008

16

Asian Paints Limited • Annual Report 2007-2008

Annexure to Directors’ Report
FORM A Disclosure of particulars with respect to Conservation of Energy : 2007-08 A. 1. Power and fuel consumption: Electricity Units (‘000 KWH) Total amount (Rs. in crores) Rate per unit (Rs.) (b) Own Generation Through diesel Generator Units (‘000 KWH) Units per ltr. of diesel oil Cost/unit(Rs.) Natural gas Units (‘000 KWH) Units per nm3 Cost/unit (Rs.) 2. Coal Quantity (in MTs) Total amount (Rs. in crores) Average rate/MT (Rs.) 3. Diesel Quantity (in KL) Total amount (Rs. in crores) Average rate/Litre (Rs.) 4. Furnace Oil Quantity (in MTs) Total amount (Rs. in crores) Average rate/kg. (Rs.) 5. Natural gas Quantity (in ‘000 cubic m.) Total amount (Rs. in crores) Average rate/cubic nm. (Rs.) 2,917 3.15 10.81 3,973 3.77 9.49 • • • B. Consumption per unit of production:
Electricity (KWH/Ton/KL) Furnace Oil (Ton/KL) Natural Gas (Ton/KL) Coal (Ton) Diesel (Ton/KL)

FORM B Disclosure of particulars with respect to Technology Absorption : Research and Development (R&D) 1. Specific area in which R&D is carried out by the Company. The R&D Unit of your Company is carrying out the following activities to support the business goals of your Company: • • 2,759 3.40 9.43 7,466 3.29 3.66 16,345 5.31 3,251 1,015 3.33 32.79 1,170 2.64 22.53 2,917 3.11 10.41 7,595 3.36 3.27 • 15,380 4.25 2,762 2. 1,005 3.10 30.78 1,085 2.05 18.87 • • • • • • Development of new products and processes related to surface coatings and intermediates. Value engineering and improving formulation efficiency of existing products. Technology support to all overseas units. Upgradation of products and processes to reduce environmental and safety concerns. Identification of alternate and new raw materials and vendors enabling product development, quality improvement, cost benefits, supply chain flexibility and crisis management. Development of analytical test methods, characterization techniques and application techniques essential for product development, bench marking, process control and customer services. All decorative range of products made free from heavy metals like Lead, Chrome and Mercury. An exterior clear coating was developed for roof tile/ Stones and commercialized. A special water based “Premium Aqua Primer” was developed for improving performance of water based semi gloss enamel/premium top coats on various substrates and commercialized. Deep shades offered in tinting system introduced in satin and premium semi gloss enamel. Royale metallic workability improved. Continuous upgrades of high end products. New shade offering with additional bases for luxury ultra gloss enamel. Royale play metallics with higher workability. New high durability exterior textures. Kids range of products Chalk Board. Fluorescent, Glow,

2006-07

(a) Purchased 29,575 13.10 4.43 27,727 12.10 4.36

Benefits derived as a result of above R&D:

• • • • •

07-08 06-07 07-08 06-07 07-08 06-07 07-08 06-07 07-08 06-07 Paints Phthalic Penta 89 16 921 94 44 959 80 13 72 3 52 51 55 107 3 3 44 63 -

Royale Glitter - Range of metallic shades.

17

Process improvements being continued for improving productivity and energy efficiencies in emulsion, colorants and enamel manufacturing. Development of high solid high build high durable aliphatic 2K polyurethane coating for industrial structures. Development of amine cured chemical resistant glossy epoxy enamel for high build application. Development of solvent free self leveling polyurethane coating for industrial flooring. Development of gun grade polysulphide sealant for vertical joints meeting BS 4254 specification Development of solvent free self leveling epoxy polyurethane floor coating. Development of cementitious epoxy based self leveling flooring as underlayment, repair coat for damp concrete. Development of solvent free EPN tank lining. Development of solvent free amine cured epoxy tank lining capable of application at 400-500 micron per coat. Development of Asian PU barrel enamel. Development of rapid recoat painting system for fabrication industries. Development of single pack, glossy, quick drying and durable PU enamel for industrial liquid paint segment. Domain expertise development e.g. Surface science and corrosion science. Application of new instrumental techniques for characterization of polymers and coatings.

4.

Expenditure on R & D during the year is as follows: (Rs. in Crores)
2007-08 Capital Recurring Total Total R&D expenditure as a percentage of turnover 34.19 17.66 51.85 1.52% 2006-07 1.83 12.90 14.73 0.52%

• • • • •

Technology absorption, adaptation and innovation: All developments were done indigenously. Foreign exchange earnings and outgo: Your Company’s exports primarily consist of Di-pentaerythritol and Monopentaerythritol to US and Europe respectively. These items are used as additives to aviation fuel and as additives for plasticizers respectively. Monopentaerythritol is also used in the manufacture of explosives. The market for both these items is increasing in the global arena and we plan to export Dipenta to Taiwan in the future. Your Company also exports items to its overseas units and licensees. Machine tinting colorants and resins form the bulk of material exported. Support is extended to overseas units through export of marketing materials and machinery parts. Export queries received in India from countries where your Company has operations is routed through respective overseas units. Details of earnings and expenditure in foreign currency have been given separately under Notes B - 14 and B - 13 in Schedule ‘M’ Notes to Accounts.

• •

• • •

• •

3.

Further plan of action: Your Company considers the development of technical capabilities to sustain its competitive position in the market place of primary importance. In order to address the needs of the customers in a rapidly changing market place, the Company is strengthening its technical programs and strengthening the skills of his technical personnel. It is aggressively developing advanced technical capabilities and technology platforms to support its product plans, improve its manufacturing and open new applications.

For and on behalf of the Board

Mumbai 9th May, 2008

Ashwin Choksi Chairman

18

Asian Paints Limited • Annual Report 2007-2008

Auditors’ Report to the Members of Asian Paints Limited
We have audited the attached Balance Sheet of AsiAN PAiNTs LimiTed (‘the Company’) as at 31 march, 2008, and also the Profit and Loss Account and the Cash Flow Statement of the Company for the year ended on that date, annexed thereto. 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. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis of our opinion. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government of india in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 (‘the Act’), we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said order to the extent applicable. 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 purpose 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, Profit and Loss Account and Cash Flow Statement referred to in 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 comply with the Accounting Standards referred to in section 211(3C) of the Act. (e) On the basis of the written representations received from the directors of the Company as at 31 march, 2008, and taken on record by the Board of directors, we report that none of the directors of the Company is disqualified as on 31 march, 2008 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act; and (f) In our opinion, and to the best of our information and according to the explanations given to us, the said financial statements give the information required by the Act, in the prescribed manner and give a true and fair view in conformity with the accounting principles generally accepted in India: (i) (ii) in the case of the Balance Sheet, of the state of affairs of the Company as on 31 march, 2008; in the case of the Profit and Loss Account, of the profit of the Company for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. For Shah & Co. Chartered Accountants Ashish shah Partner membership No. 103750 mumbai 9th may, 2008 For BSR & Associates Chartered Accountants Natrajan Ramkrishna Partner membership No. 32815

Annexure to the Auditors’ Report - 31 March, 2008 (Referred to in our report of even date) 1. (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of the fixed assets. (b) The Company has a regular programme of physical verification of fixed assets in a phased manner, over a period of three years. In our opinion, this periodicity of physical verification is reasonable, having regard to the size of the Company and the nature of fixed assets. No material discrepancies have been noticed in respect of the assets physically verified during the year. (c) The Company has not disposed off substantial part of the fixed assets during the year. 2. (a) The inventories, except goods-in-transit and stock lying with third parties, have been physically verified by the Company’s management during the year. In our opinion, the frequency of verification is reasonable. For stocks lying with third parties written confirmations at the year end, have been obtained. (b) The procedures of physical verification of stocks followed by the Company’s management are adequate in relation to the size of the Company and the nature of its business. (c) The Company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and book records were not material and have been properly dealt with in the books of account.

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3.

The Company has neither granted nor taken any loans, secured or unsecured, to or from companies, firms or other parties covered in the register required to be maintained under section 301 of the Act. In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventories and fixed assets and with regard to sale of goods and services. There is no major weakness in the internal control procedures. (a) According to the information and explanations given to us, the particulars of all contracts and arrangements referred to in section 301 of the Act, have been properly entered in the register maintained under that Section. (b) In our opinion, and according to the information and explanations given to us, the transactions made in pursuance of contracts and arrangements referred to in (a) above and exceeding the value of Rs. 5 lakhs with any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

8.

4.

We have broadly reviewed the books of accounts maintained by the Company pursuant to the rules prescribed by the Central Government for the maintenance of cost records under Section 209(1)(d) of the Act in respect of paints, resins and pentaerythritol and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the records. (a) According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/accrued in the books of account in respect of undisputed statutory dues including Provident Fund, employees’ state insurance, investor education and Protection Fund, income-Tax, sales-Tax, Wealth Tax, service Tax, Customs duty, excise duty, Cess and other material statutory dues have been generally regularly deposited during the year by the Company with the appropriate authorities and no undisputed amounts were in arrears as at 31 march, 2008 for a period of more than six months from the date they became payable. There were no dues on account of Cess under Section 441A of the Act, since the date from which the aforesaid section comes into force has not yet been notified by the Central Government. (b) According to the information and explanations given to us, the following dues have not been deposited by the Company on account of disputes. Amount Forum where (Rs. in Crores) dispute is pending 5.09 First Appellate level 0.97 Second Appellate level 0.16 Supreme Court 2.95 Tribunal 9.17 0.03 Adjudication level 8.04 First Appellate 0.30 Second Appellate

9.

5.

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 Section 58A and 58AA or any other relevant provisions of the Act and the rules framed there under.

7.

In our opinion, the Company has an internal audit system commensurate with the size and nature of its business. Name of the Nature of dues Financial Year Statute Assessment F.Y. 1993-94 to 1995-96, F.Y. 1997-98 to sales Tax dues 1999-2000, F.Y. 2001-02, 2003-04, 2004 -05 & 2007-08 F.Y. 1999-2000 to 2003-04 F.Y. 1992-93/1993-94 F.Y. 1991-92, F.Y. 1993-94, F.Y. 1996-97, F.Y. 1997-98 to 1998-99, F.Y. 2000-01 to 2001-02 & F.Y. 2003-04

Total (A) excise Central excise Act, 1944

F.Y. 2006-07 & Oct, 99 dispute relating to Cenvat Credit F.Y. 1980-81 to 1990-91, F.Y. 1992-93 to 1995-1996, F.Y. 1997 -98 to 1999-00 F.Y. 2002-03, 2004-05 & 2007-08 F.Y. 1985-86, F.Y. 1994-95 to 1995-96, F.Y. 2007-08

20

Asian Paints Limited • Annual Report 2007-2008

Name of the Statute

Nature of dues Financial Year F.Y. 1969-70 to 1972-73, F.Y. 2000-01 to 2001-02 F.Y. 1978 to 1997-98, F.Y. 2003-04 to 2004-05, F.Y. 2006-07 F.Y. 1984-85 to 1988-89, F.Y. 1993-94 F.Y. 1995-96 to 1999-2000, F.Y. 2003-04, F.Y. 2005-06 & 2007-08 F.Y. 1994-95, F.Y. 2000-01, F.Y. 2005-06 to 2007-08 F.Y. 1986-87 to 1999-2000 F.Y. 1998-99 to 2003-04, F.Y. 2005-06 to 2006-07 F.Y. 2007-08 Total (B) IT matters under dispute

Amount Forum where (Rs. In Crores) dispute is pending 0.18 High Court 4.80 Adjudication level 0.73 First Appellate 0.57 Second Appellate 0.16 Tribunal 0.76 Adjudication level 0.10 First Appellate& Second Appellate 15.67 1.07 First Appellate 1.20 High Court 4.88 Tribunal 7.15 31.99

dispute relating to excise duty

dispute relating to service Tax

income Tax

A.Y. 1999-2000 & 2004-05 A.Y. 2003-04 A.Y. 1986-87, A.Y. 1996-97 to 2004-05

Total (C) Grand Total 10. The Company does not have any accumulated losses at the end of the financial year and has not incurred cash losses in the current financial year and in the immediately preceding financial year. 11. In our opinion, and according to the information and explanations given to us, the Company has not defaulted during the year in repayment of dues to its bankers. The Company did not have any outstanding debentures or any outstanding loans from financial institutions during the year. 12. 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. in our opinion, and according to the information and explanations given to us, the Company is not a chit fund, nidhi, mutual benefit fund or society and the provisions of Clause 4(xiii) of the Companies (Auditor’s Report) Order, 2003 is not applicable to the Company. 14. In our opinion, and according to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other investments and the provisions of Clause 4(xiv) of the Companies (Auditor’s Report) Order, 2003 is not applicable to the Company. 15. The Company has given certain guarantees on behalf of its dealers and subsidiaries as mentioned in Note B - 3 of schedule ‘m’ of the accounts. in our opinion, based on the information and explanations

received, the terms and conditions of these guarantees are not prejudicial to the interest of the Company. 16. The Company has not taken any term loans during the year. 17. According to the information and explanations given to us, and on an overall examination of the Balance Sheet of the Company, we are of the opinion that funds raised on short term basis have not been used for long term investment. 18. The Company has not made any preferential allotment of shares during the year. 19. The Company has not issued any debentures during the year. 20. The Company has not raised any money by public issues during the year. 21. As per the information and explanation given to us, no material fraud on or by the Company has been noticed or reported during the course of our audit. For Shah & Co. Chartered Accountants Ashish shah Partner membership No. 103750 mumbai 9th may, 2008 For BSR & Associates Chartered Accountants Natrajan Ramkrishna Partner membership No. 32815

21

Balance Sheet as at 31st March, 2008
(Rs. in Crores) Schedules FUNDS EMPLOYED Shareholders’ Funds Share Capital Reserves and Surplus Loan Funds Secured Loans Unsecured Loans Deferred Tax Liability (Net) (Refer Note B - 21 in schedule ‘m’) Total APPLICATION OF FUNDS Fixed Assets Gross Block Less: depreciation Net Block Add: Capital Work in Progress Investments Current Assets, Loans And Advances Interest accrued on investments Inventories Sundry debtors Cash and Bank Balances Other Current Assets Loans and Advances Less: Current Liabilities and Provisions Current Liabilities Provisions e F 0.09 538.97 251.90 41.35 33.09 178.82 1,044.22 G 785.11 166.49 951.60 92.62 1,054.72 m d As at 31.03.2008 As at 31.03.2007

A B C

95.92 832.58 928.50 36.70 58.00 94.70 31.52 1,054.72

95.92 648.16 744.08 66.90 58.77 125.67 22.15 891.90

937.89 509.06 428.83 110.39 539.22 422.88

806.20 471.29 334.91 11.62 346.53 334.39 0.03 434.07 235.96 42.49 31.23 115.45 859.23 594.10 54.15 648.25 210.98 891.90

Net Current Assets Total Significant accounting policies and Notes to Financial Statements

As per our report of even date For Shah & Co. Chartered Accountants Ashish Shah Partner membership No. 103750 mumbai 9th may, 2008 For BSR & Associates Chartered Accountants Natrajan Ramkrishna Partner membership No. 32815

For and on behalf of the Board Ashwin Choksi Chairman Tarjani Vakil Chairperson of Audit Committee Ashwin Dani Vice Chairman & managing director Mahendra Shah director Abhay Vakil managing director Jayesh Merchant Chief Financial Officer & Company secretary

22

Asian Paints Limited • Annual Report 2007-2008

Profit and Loss Account for the year ended 31st March, 2008
(Rs. in Crores) Schedules INCOME sales and operating income (Net of discounts) Less: excise duty sales and operating income (Net of excise duty) Other income EXPENDITURE material Cost employee Cost manufacturing, administrative, selling and distribution expenses PROFiT BeFORe iNTeResT, dePReCiATiON ANd TAX Less: interest (Refer Note B - 17 in schedule ‘m’) Less: depreciation PROFiT BeFORe TAX Less : Provision for Taxation Current Tax deferred Tax (Refer Note B - 21 in schedule ‘m’) Fringe Benefit Tax short/(excess) tax provision for earlier years PROFiT AFTeR TAX ANd BeFORe PRiOR PeRiOd iTems (Less)/Add: Prior period items (Net) PROFiT AFTeR TAX Add : Balance brought forward from previous year Amount available for appropriation APPROPRIATIONS dividend on equity shares: - Interim dividend I - Interim dividend II - Proposed Final dividend Tax on dividend (includes tax on proposed dividend) Transfer to General Reserve Balance carried to Balance Sheet earnings per share (Rs.) Basic and diluted (Face value of Rs. 10/- each) (Refer Note B - 25 in schedule ‘m’) Significant accounting policies and Notes to Financial Statements As per our report of even date For Shah & Co. Chartered Accountants Ashish Shah Partner membership No. 103750 mumbai 9th may, 2008 For BSR & Associates Chartered Accountants Natrajan Ramkrishna Partner membership No. 32815 H Year 2007-2008 3,911.96 495.80 3,416.16 62.58 3,478.74 J K L 1,956.13 194.67 711.35 2,862.15 616.59 8.27 43.77 564.55 171.32 9.38 5.96 1.30 376.59 (1.39) 375.20 150.00 525.20 Year 2006-2007 3,244.57 423.28 2,821.29 40.45 2,861.74 1,660.71 157.11 581.71 2,399.53 462.21 6.87 45.42 409.92 137.90 (2.37) 4.46 – 269.93 2.12 272.05 110.00 382.05

i

d

62.35 – 100.71 27.72 134.42 200.00 525.20 39.12

52.76 62.35 9.59 17.77 89.58 150.00 382.05 28.36

m For and on behalf of the Board Ashwin Choksi Chairman Tarjani Vakil Chairperson of Audit Committee Ashwin Dani Vice Chairman & managing director Mahendra Shah director Abhay Vakil managing director Jayesh Merchant Chief Financial Officer & Company secretary

23

Cash Flow Statement for the year ended 31st March, 2008
(Rs. in Crores) 2007-2008 (A) Cash flow from operating activities: Profit before tax and prior period items Adjustments for : depreciation/impairment Interest income dividend income interest expense Prior period items (net) Profit on sale of long term investments Profit on sale of short term investments Profit on sale of assets Operating Profit before working capital changes Adjustments for : Trade receivables Other receivables Inventories Trade and other payables Cash generated from operations income Tax paid net of refund Net cash generated from operating activities (B) Cash flow from investing activities: Purchase of fixed assets sale of fixed assets Loans to subsidiaries Repayment of loan subsidiaries Purchase of investments Sale of investments Interest received dividend received Net Cash used in investing activities (C) Cash flow from financing activities: Proceeds from long term borrowings Proceeds from short term borrowings Repayment of long term borrowings Repayment of short term borrowings Interest paid dividend and dividend tax paid Net Cash used in financing activities (d) Net increase/(decrease) in cash Cash and cash equivalent as at 01.04.2007 * Cash and cash equivalent as at 31.03.2008 * * Refer Clause (iv) of schedule ‘F’ 5.07 – (0.94) (35.10) (8.28) (87.27) (126.52) (1.14) 42.49 41.35 (258.28) 1.57 (18.60) 2.28 (202.71) 115.18 3.64 25.01 (331.91) 4.64 30.38 (0.45) – (6.91) (214.88) (187.22) 14.10 28.39 42.49 564.55 43.77 (3.71) (25.01) 8.27 (1.39) – (0.96) (0.93) 584.59 (15.94) (31.10) (104.90) 199.86 632.51 (175.22) 457.29 (67.73) 2.09 (1.91) 1.51 (116.33) 56.86 1.41 13.17 (110.93) 2006-2007 409.92 45.42 (1.44) (13.17) 6.87 2.12 (0.31) (0.06) (1.36) 447.99 (50.85) (14.17) (84.36) 162.23 460.84 (148.59) 312.25

As per our report of even date For Shah & Co. Chartered Accountants Ashish Shah Partner membership No. 103750 mumbai 9th may, 2008 For BSR & Associates Chartered Accountants Natrajan Ramkrishna Partner membership No. 32815

For and on behalf of the Board Ashwin Choksi Chairman Tarjani Vakil Chairperson of Audit Committee Ashwin Dani Vice Chairman & managing director Mahendra Shah director Abhay Vakil managing director Jayesh Merchant Chief Financial Officer & Company secretary

24

Asian Paints Limited • Annual Report 2007-2008

Schedules Forming Part of the Accounts
(Rs. in Crores) As at 31.03.2008 As at 31.03.2007

SCHEDULE A : SHARE CAPITAL
Authorised 9,95,00,000 (Previous year 9,95,00,000) equity shares of Rs.10/- each 50,000 (Previous year 50,000) 11% Redeemable Cumulative Preference shares of Rs. 100/- each 100.00 Issued, Subscribed and Paid up capital 9,59,19,779 (Previous year 9,59,19,779) equity shares of Rs. 10/- each fully paid: a) 9,39,89,940 (Previous year 9,39,89,940) Bonus shares of Rs. 10/- each fully paid up issued on capitalisation of Share premium account (Rs. 2.19 crores) and General Reserves (Rs. 91.80 crores) b) 2,94,000 (Previous year 2,94,000) shares of Rs. 10/- each issued as fully paid up pursuant to the Scheme of Amalgamation of Pentasia Chemicals Ltd., without payment being received in cash 100.00 99.50 0.50 99.50 0.50

95.92 95.92

95.92 95.92

SCHEDULE B : RESERVES AND SURPLUS
Capital Reserve [Rs. 5,000/-, (Previous year Rs. 5,000/-)] Capital Redemption Reserve General Reserve As per last Balance Sheet Add: Transfer from Profit and Loss Account Less: Adjustment on account of adoption of As 15 (Revised) Profit and Loss Account 497.66 134.42 – 632.08 200.00 832.58 415.86 89.58 (7.78) 497.66 150.00 648.16 – 0.50 – 0.50

25

Schedules Forming Part of the Accounts
(Rs. in Crores) As at 31.03.2008 As at 31.03.2007

SCHEDULE C : SECURED AND UNSECURED LOANS
Secured Loans Long Term : Loans Financial institution (sales tax deferment scheme - state of Uttar Pradesh) (Note No. 1) Short Term : Loans from banks Cash Credit Accounts (Note No. 2) Unsecured Loans Long Term : Trade deposits - interest free sales tax deferment scheme - state of Andhra Pradesh (Note No. 3) 17.30 40.70 58.00 Notes: (1) Interest free term loan from the Pradeshiya Industrial Corporation of U.P. Limited (PiCUP) under sales Tax deferment scheme of Government of U.P. is secured by a first charge on the Company’s immovable properties pertaining to the paint plant at Kasna and by way of hypothecation of all movable properties at the above location. Amount repayable within one year. (2) Secured by hypothecation of inventories, book debts and other current assets. (3) sales tax deferment – state of Andhra Pradesh represents interest free loan availed under the sales Tax deferment scheme of the Government of Andhra Pradesh. Amount repayable within one year. 18.07 40.70 58.77 13.57 36.70 48.67 66.90 23.13 23.13 18.23 18.23

23.13 2.60 13.57

18.23 0.17 48.67

40.70 –

40.70 –

26

SCHEDULE D : FIXED ASSETS
(Rs. in Crores)
Depreciation/Amortisation As at 31.03.08 As at 31.03.07 during the deductions year and/or transfers As at deductions 01.04.07 Additions and/or transfers As at 31.03.08 As at 31.03.08 As at 31.03.08 Impairment Net Block As at 31.03.07

Gross Block

As at 01.04.07

Additions deductions during and / or the year transfers

Tangible Assets :
– – 0.06 3.48 1.93 (0.14) – 0.55 0.68 2.67 1.76 0.35 0.65 1.46 23.71 15.35 1.84 0.37 16.82 3.11 0.67 0.10 – 0.77 – 1.83 – 12.15 7.43 0.74 (0.01) 0.50 8.18 95.55 59.98 5.35 1.13 24.31 64.20 – – – – – 508.32 281.10 28.99 2.97 13.73 0.07 307.12 158.98 36.07 4.61 0.03 – – 40.65 – 0.22 0.39 – – 0.18 – 14.20 0.82 0.15 – – – – 0.97 86.07 – – – – – – – – – – 13.58 23.92 0.50 – 1.65 – 86.07 13.23 118.33 187.62 7.43 3.47 2.34 5.24 1.21 5.91 12.53 116.15 172.19 13.02 3.59 2.44 4.56 1.58

Freehold Land

5.91

80.16

Leasehold Land

13.35

0.85

Asian Paints Limited • Annual Report 2007-2008

Buildings

152.23

6.81

Plant and machinery

467.02

44.78

Assets given on Operating Lease: Tinting systems

97.31

0.17

scientific Research: equipment

11.51

0.50

Buildings

3.11

Furnitures and Office equipment

21.74

2.52

Schedules Forming Part of the Accounts

Vehicles

3.35

Intangible Assets :
– 0.08 6.64 10.57 806.20 393.89 937.89 430.92 43.70 45.06 21.21 15.82 1.57 11.92 11.92 – – 0.07 5.21 8.03 11.92 17.32 469.41 430.92 – – 40.37 41.82 – – 0.07 0.36 – – 0.79 1.81 – – 39.65 40.37 – 3.89 428.83 334.91 – 2.94 334.91 300.43

Trademark

11.92

Software

18.75

2.54

Total

806.20

138.33

Previous year

736.14

80.63

27

Schedules Forming Part of the Accounts
(Rs. in Crores) Nos. Face Value (Rs.) As at 31.03.2008 As at 31.03.2007

SCHEDULE E : INVESTMENTS
Long Term Investments Unquoted (i) in Government securities National savings Certificates, indira Vikas Patra and defence Certificates deposited with Government authorities [Rs. 34,500/- (Previous year Rs. 34,500/-)] (ii) Trade investments (Fully paid equity shares) (a) Asian PPG industries Ltd. (b) Patancheru enviro-tech Ltd. (c) siPCOT Common Utilities Ltd. (d) Bharuch eco-Acqua infrastructure Ltd. (iii) Other investments (a) equity shares of sKH metals Ltd. (iv) Subsidiary Companies (a) equity shares of Technical instruments manufacturers (india) Ltd. (b) equity shares of Asian Paints industrial Coatings Ltd. (50,00,000 shares allotted during the year) (c) Ordinary shares of Asian Paints (international) Ltd., mauritius Less: Provision for diminution (d) equity shares of Asian Paints (Nepal) Pvt. Ltd., Nepal (e) maxbhumi developers Ltd. (50,000 shares allotted during the year) 132.19 Total Long Term Unquoted Investments Quoted (Fully Paid equity shares) (i) (ii) Trade Investments iCi (india) Ltd. Other investments Housing development Finance Corporation Ltd. Apcotex industries Ltd. Total Long Term Quoted Investments Total Long Term Investments 93,000 3,418 10/10/0.12 0.01 77.38 225.22 0.12 0.01 77.38 220.17 37,60,783 10/77.25 77.25 147.84 127.14 142.79 10,84,770 NRs 10/50,000 10/0.12 0.05 0.12 2,80,45,444 Us $ 1 132.43 (33.60) 98.83 132.43 (33.60) 98.83 1,50,00,000 (1,00,00,000) 10/15.00 10.00 5,000 100/18.19 18.19 62,500 10/0.50 0.50 0.50 0.50 1,46,25,000 12,900 2,830 4,78,270 10/10/100/10/14.63 0.01 0.03 0.48 15.15 14.63 0.01 0.03 0.48 15.15 – –

28

Asian Paints Limited • Annual Report 2007-2008

Schedules Forming Part of the Accounts
(Rs. in Crores) Nos. Face Value (Rs.) 10/10/10/10/10/As at 31.03.2008 As at 31.03.2007

Current Investments (Unquoted) Birla Fixed Term Plan – series H – Growth – (1,00,00,000 units sold during the year) (1,00,00,000.000) ABN Amro Fixed Term Plan series 4 Quarterly Plan d–div. – (1,00,81,340.789 units sold during the year) (1,00,81,340.789) Kotak Fixed maturity Plan 3m series 11 – dividend – (40,24,225.464 units sold during the year) (40,24,225.464) Kotak Fixed maturity Plan 3m series 8 – dividend – (1,01,34,731.134 units sold during the year) (1,01,37,731.134) Kotak Fixed maturity Plan 6 months series 2 – dividend – (1,02,49,192.847 units sold during the year) (1,02,49,192.847) iCiCi Prudential Fixed maturity Plan series 35 – 3 months Plan B dividend – (1,00,98,497.045 units sold during the year) (1,00,98,497.045) iCiCi Prudential Fixed maturity Plan series 35 – 3 months Plan A dividend – (1,01,36,000.000 units sold during the year) (1,01,36,000.000) iCiCi Prudential Fixed maturity Plan series 35 – 3 months Plan C dividend – (40,00,000.000 units sold during the year) (40,00,000.000) Reliance Fixed Horizon Fund ii Quarterly Plan series ii institutional dividend – (50,00,000.000 units sold during the year) (50,00,000.000) sBi debt Fund series 90 days ii (dec. 06) – (50,71,565.342 units sold during the year) (50,71,565.342) sBi debt Fund series 180 days ii (Nov. 06) dividend – (51,09,500.259 units sold during the year) (51,09,500.259) standard Chartered Fixed maturity Plan Quartely series 3 – div. – (1,01,47,600 units sold during the year) (1,01,47,600.000) TATA Fixed Horizon Fund series 9 – scheme d div. inst. Plan – (1,00,64,461.323 units sold during the year) (1,00,64,461.323) UTi Fixed maturity Plan Quarterly series QFmP/0207/i div. – (1,01,00,702.400 units sold during the year) (1,01,00,702.400) ABN AmRO Flexible short Term Plan series A monthly div. 2,92,69,876.206 HdFC Quarterly interval Fund – Plan C dividend 2,89,81,451.870 ICICI Prudential Interval Fund II Qtrly Interval Plan C. 2,90,00,000.000 iNG Fixed maturity Fund – series 34 – inst. – dividend 1,00,00,000.000 iNG Fixed maturity Fund – 42 institutional dividend 1,90,00,000.000 sundaram BNP Paribas interval Fund – Qtrly. Plan C 2,92,30,884.826 TATA Fixed income Portfolio Fund scheme A2 inst. dividend 2,89,70,160.734 UTi Fixed maturity Plan QFmP (0208/ii) i inst. 2,31,60,275.996 Total Current Investments Total Investments Aggregate market value of Long term Quoted Investments : Note : 1. Figures in brackets indicate that of previous year. 2. investments in shares are fully paid-up except where indicated.

– – – – –

10.00 10.08 4.02 10.14 10.25

10/-

10.10

10/-

10.14

10/-

4.00

10/10/10/10/10/10/10/10/10/10/10/10/10/10/-

– – – – – – 29.27 29.00 29.00 10.00 19.00 29.23 29.00 23.16 197.66 422.88 254.26

5.00 5.07 5.11 10.15 10.06 10.10 – – – – – – – – 114.22 334.39 183.02

29

Schedules Forming Part of the Accounts
3. The following investments were purchased and sold during the year. Nos. Face Value (Rs.) 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 1,000.00 1,000.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 1,000.00 10.00 10.00 10.00 10.00 1,000.00 10.00 10.00 1,000.00 1,000.00 10.00 10.00 10.00 1,000.00 1,000.00 Purchase Cost (Rs. in crores) 45.00 29.00 10.00 10.00 45.01 288.31 10.00 134.05 22.00 22.00 138.00 11.00 129.03 116.02 176.26 95.00 86.01 53.05 5.00 9.00 20.00 20.00 10.00 127.02 10.00 168.12 24.00 139.00 86.01 92.00 100.06 76.00 49.00 5.00 10.00 3.00 20.00 51.02 166.05 69.00 10.00 10.00 10.00 106.03 38.01

Units in mutual Funds (1) ABN AmRO Cash Fund – institutional div. (2) ABN AmRO Flexible short Term Plan series A – Quarterly div. (3) ABN AmRO Flexible short Term Plan series C Quarterly (4) ABN AmRO FTP series 7 Quarterly PLAN C – monthly div. (5) ABN AmRO money Plus – inst. Plan div. (6) BiRLA Cash Plus–institutional Premium Plan dividend (7) BiRLA FTP Quarterly series 14 – div. (8) BiRLA sUNLiFe Liquid Plus – inst. – div. (9) dsP merrill Lynch Liquid Plus institutional Plan div. (10) dsP merrill Lynch Liquid Fund–inst. – daily dividend (11) dWs insta Cash Fund – institutional Plan – daily div. (12) dWs insta Cash Plus Fund super institutional div. (13) dWs money Plus Fund – institutional Plan – daily div. (14) HdFC Cash management Fund savings Plus – Wholesale – div. (15) HdFC Cash mGT Fund–savings Plan–daily div. Reinvestment (16) HsBC Cash Fund – institutional Plus – dividend (17) HsBC Liquid Plus – inst. Plus – daily dividend (18) iCiCi Prudential Flexible income Plan – daily div (19) iCiCi Prudential interval Fund i mnth Plan A – div. (20) Jm Fixed maturity Fund – series Vi – Qtrly Plan 4 – inst. div. (21) Jm Fixed maturity Fund – series Vi – Qtrly Plan 5 – inst. div. (22) Jm Fixed maturity Fund – series Vi – Qtrly Plan 2 – inst. div. (23) KOTAK Fixed maturity Plan 3m series 16 – div. (24) KOTAK Flexi debt scheme – daily div. (25) KOTAK FmP 3m series 17– dividend (26) KOTAK Liquid (institutional Premium – div.) (27) LiC mF Liquid Fund – dividend (28) Principal Cash management Fund Liquid Option – inst. Pre. div (29) Principal Floating Rate Fund FmP – inst. div. (30) iCiCi Prudential Liquid–super iP Plus–dividend (31) Reliance Liquid Plus Fund – institutional Option – daily (32) Reliance Liquidity Fund – daily dividend Reinv (33) Reliance monthly interval Fund – series ii – inst. div. (34) Reliance monthly interval Fund – series i – inst. div. Plan (35) Reliance Quarterly interval Fund series ii – inst. Plan (36) standard Chartered Liquidity manager Plus Fund dividend (37) Tata Fixed Horizon Fund series 11 scheme e – im – mthly div. (38) Tata Floater Fund – daily div. (39) Tata Liquid super High investment Fund – daily dividend (40) Templeton india TmA super institutional Plan (41) Templeton Quaterly interval Plan – Plan A inst. div. (42) UTi Fixed maturity Plan Quarterly series QFmP/0607/ii (43) UTi Fixed maturity Plan Quarterly series QFmP/0507/i (44) UTi Liquid Cash Plan institutional–daily income Option (45) UTi Liquid Plus Fund – inst. Plan – div. 4,50,00,000.000 2,90,00,000.000 1,00,00,000.000 1,00,00,000.000 4,50,05,768.398 28,77,46,258.512 1,00,00,000.000 13,39,54,586.957 2,19,969.200 2,19,956.008 13,77,31,423.723 1,09,78,043.912 12,89,22,021.329 11,56,58,222.333 16,57,17,482.724 9,49,46,829.775 8,59,06,584.206 5,01,70,788.348 49,62,089.635 90,00,000.000 2,00,00,000.000 2,00,00,000.000 1,00,00,000.000 12,66,26,504.131 1,00,00,000.000 13,74,84,072.013 2,18,57,724.428 13,89,90,270.681 8,59,08,793.764 9,19,97,300.126 9,99,489.873 7,59,76,447.301 4,89,78,359.560 49,96,864.557 1,00,00,000.000 29,994.001 2,00,00,000.000 5,08,36,832.557 14,89,839.265 6,89,827.543 1,00,00,000.000 1,00,00,000.000 1,00,00,000.000 10,40,076.069 3,80,018.609

30

Asian Paints Limited • Annual Report 2007-2008

Schedules Forming Part of the Accounts
(Rs. in Crores) As at 31.03.2008 As at 31.03.2007

SCHEDULE F : CURRENT ASSETS, LOANS AND ADVANCES
Current Assets (i) Interest accrued on investments (ii) inventories - valued and certified by the management (a) Raw materials (b) Packing materials (c) Finished goods (d) Work-in-process (e) Stores, spares and consumables (f) Other traded items (iii) Sundry debtors (Unsecured) (a) Outstanding for more than six months Considered good Considered doubtful (b) Other debts Considered good Considered doubtful 0.09 190.82 15.48 287.16 29.95 13.80 1.76 0.03 124.97 13.00 256.35 25.73 11.14 2.88 434.07 4.34 4.54 8.88 231.62 231.62 240.50 4.54 235.96 0.14 42.33 0.02 42.49 5.49 25.74 31.23

538.97

4.42 3.12 247.48 0.11

7.54

Less: Provision for doubtful debts (iv) Cash and Bank Balances (a) Cash on hand (b) Balances with Scheduled Banks: (i) Current Accounts (ii) Term deposits (v) Other Current Assets (a) Retirement Benefit Asset (b) Other Receivables Loans and Advances (i) Wholly owned subsidiaries (a) Interest bearing loan unsecured and considered good Asian Paints Industrial Coatings Ltd. (maximum outstanding during the year Rs. 12.75 crores Previous year Rs. 12.75 crores) (b) Interest free loan – unsecured and considered good Technical instruments manufacturers (india) Ltd. (maximum outstanding during the year Rs. 16.89 crores Previous year Rs. 15.52 crores) (c) Interest free loan – unsecured and considered good maxbhumi developers Limited (maximum outstanding during the year Rs. 14.29 crores Previous year Rs. Nil ) (ii) Other Loans and Advances : Unsecured and considered good (a) Balances with Customs, Central excise etc. (b) Sundry deposits (c) Advances/claims recoverable in cash or in kind (d) Advances to employees (e) Advances against capital expenditure (f) Amount due from subsidiaries (g) Advance payment of taxes (Net of provision for tax) 0.12 41.21 0.02 – 33.09

247.59 255.13 3.23 251.90

41.35

33.09

12.75

12.75

16.75 14.29

14.72 –

43.79 25.80 15.79 58.96 0.70 25.86 3.39 4.53

27.47 14.43 13.73 43.82 0.73 4.70 2.69 7.88 87.98 115.45 859.23

135.03 178.82 1,044.22

31

Schedules Forming Part of the Accounts
(Rs. in Crores) As at 31.03.2008 As at 31.03.2007

SCHEDULE G : CURRENT LIABILITIES AND PROVISIONS
Current Liabilities (i) Acceptances (ii) Sundry creditors – dues of micro and small enterprises (Refer Note B - 18 in schedule ‘m’) – Others 214.47 0.80 374.93 375.73 590.20 (iii) investor education and Protection Fund * (a) Unpaid/Unclaimed dividend (b) Unpaid/Unclaimed matured deposits (c) Unclaimed interest (d) Unclaimed amount of sale proceeds of fractional coupons of bonus shares (iv) Other liabilities (a) employees (including Rs. 3.81 crores due to Whole time directors – Previous year Rs. 3.24 crores) (b) Others (including Rs. 0.77 crores due to Non executive directors – Previous year Rs. 0.61 crores) 191.74 785.11 Provisions (i) Proposed dividend (ii) Provision for tax on Proposed dividend (iii) Provision for accrued leave (iv) defined benefit obligations (Refer Note B - 24 in schedule ‘m’) (v) Other provisions (Refer Note B - 20 in schedule ‘m’) 100.71 17.12 39.31 5.09 4.26 166.49 951.60
* There is no amount due and outstanding to be paid to the Investor education and Protection Fund as at 31st march, 2008. These amounts shall be paid to the fund as and when they become due.

165.09 – 267.35 267.35 432.44 6.20 0.04 0.01 0.04

3.10 0.03 – 0.04 3.17 30.33 161.41

6.29 23.15 132.22

155.37 594.10 9.59 1.63 35.93 2.74 4.26 54.15 648.25

32

Asian Paints Limited • Annual Report 2007-2008

Schedules Forming Part of the Accounts
(Rs. in Crores) Year 2007-2008 Year 2006-2007

SCHEDULE H : SALES AND OPERATING INCOME
Sales : Home market (Net of returns) exports Turnover Less: discounts sales (Net of discounts) Operating income: Processing charges Lease Rent Revenue from Home Solutions operations 4,042.63 17.30 4,059.93 170.73 3,889.20 12.38 0.59 9.79 22.76 3,911.96 3,343.42 17.27 3,360.69 136.42 3,224.27 11.52 1.73 7.05 20.30 3,244.57

SCHEDULE I : OTHER INCOME
Interest (Tds Rs. 0.23 crores - Previous year Rs. 0.27 crores) Claims received dividends received (i) From subsidiary companies [Tds Rs. 0.07 crores – (Previous year Rs. 0.03 crores)] (ii) Long term investments – Trade (iii) Long term investments – Others (iv) Short term investments Royalty (Tds Rs. 1.14 crores – Previous year Rs. 1.19 crores) sundry balances written back (Net) Profit on sale of long term investments (Net) Profit on sale of short term investments (Net) Profit on sale of assets (Net) exchange difference (Net) miscellaneous income 3.71 0.23 0.68 10.15 0.20 13.98 25.01 9.67 0.09 – 0.96 0.93 – 21.98 62.58 1.44 0.07 0.51 4.50 0.19 7.97 13.17 8.80 0.68 0.31 0.06 1.36 0.33 14.23 40.45

33

Schedules Forming Part of the Accounts
(Rs. in Crores) Year 2007-2008 Year 2006-2007

SCHEDULE J : MATERIAL COST
Raw materials Consumed Opening stock Add: Purchases Less: Closing Stock Packing materials Consumed Opening stock Add : Purchases Less: Closing Stock Cost of Paints purchased for resale Opening stock Add: Purchases (Quantity mT 17,697 - Previous year 14,511 mT) Less: Closing Stock Cost of other goods sold Opening stock Add: Purchases Less: Closing Stock 124.97 1,659.52 1,784.49 190.82 1,593.67 13.00 341.75 354.75 15.48 339.27 4.23 30.30 34.53 3.03 31.50 2.88 25.76 28.64 1.76 26.88 1,991.32 increase in finished and semi-finished stocks Opening stock Closing Stock increase in excise duty on finished goods 277.86 314.08 (36.22) 1.03 1,956.13 107.97 1,391.94 1,499.91 124.97 1,374.94 21.36 281.34 302.70 13.00 289.70 4.01 26.42 30.43 4.23 26.20 1.48 29.41 30.89 2.88 28.01 1,718.85 206.58 277.86 (71.28) 13.14 1,660.71

SCHEDULE K : EMPLOYEE COST
Salaries, wages, allowances, commission, bonus and accrued leave salary Contribution to defined contribution plans: Provident and other Funds defined Benefit Plans (Gratuity and other Plans) (Refer Note B – 24 in schedule ‘m’) staff welfare expenses (For managerial remuneration, Refer note B – 6b in schedule ‘m’)

167.66 10.09 8.14 8.78 194.67

134.49 10.04 4.84 7.74 157.11

34

Asian Paints Limited • Annual Report 2007-2008

Schedules Forming Part of the Accounts
(Rs. in Crores) Year 2007-2008 Year 2006-2007

SCHEDULE L : MANUFACTURING, ADMINISTRATIVE, SELLING AND DISTRIBUTION EXPENSES
Stores and spares Power and fuel Processing charges Repairs and maintenance: Buildings machinery Other assets Rent Rates and taxes Insurance Printing, stationery and communication expenses Travelling expenses donations Commission to Non-executive directors directors’ sitting fees Auditors’ remuneration Bank charges exchange difference (Net) information Technology expenses Legal and professional expenses Training and recruitment Freight and handling charges Advertisement and sales promotional expenses Cash and payment performance discount Commission on sales Bad and doubtful debts miscellaneous expenses 14.37 35.86 25.03 3.97 5.46 13.35 22.78 25.68 8.76 3.63 18.02 25.60 1.60 0.87 0.10 0.97 5.19 0.53 8.77 4.75 4.46 151.60 164.85 158.96 0.44 1.18 27.35 711.35 14.21 33.29 19.39 3.18 5.00 11.51 19.69 21.24 13.52 3.58 14.10 22.02 1.58 0.65 0.09 0.52 5.05 7.13 4.40 3.70 128.39 110.98 132.59 0.49 1.87 23.23 581.71

35

Schedules Forming Part of the Accounts
SCHEDULE M: NOTES ON BALANCE SHEET AND PROFIT AND LOSS ACCOUNT
A. sTATemeNT OF siGNiFiCANT ACCOUNTiNG POLiCies FOLLOWed iN THe COmPiLATiON OF ACCOUNTs 1. Basis of preparation of financial statement (a) Basis of Accounting: The financial statements have been prepared and presented under the historical cost convention on accrual basis of accounting to comply with the accounting standards prescribed in the Companies (Accounting Standards) Rules, 2006 and with the relevant provisions of the Companies Act, 1956. (b) Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) in india requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities on the date of financial statements. 2. Fixed Assets (a) Fixed assets are carried at the cost of acquisition or construction, less accumulated depreciation. The cost of fixed assets includes taxes (other than those subsequently recoverable from tax authorities), duties, freight and other incidental expenses related to the acquisition and installation of the respective assets. Interest on borrowed funds directly attributable to the qualifying assets up to the period such assets are put to use, is included in the cost. (b) Know-how related to plans, designs and drawings of buildings or plant and machinery is capitalised under relevant asset heads. (c) depreciation on all fixed assets is provided under straight Line method. The rates of depreciation prescribed in schedule XiV to the Companies Act, 1956 are considered as the minimum rates. if the management’s estimate of the useful life of a fixed asset at the time of acquisition of the asset or of the remaining useful life on a subsequent review is shorter than that envisaged in the aforesaid schedule, depreciation is provided at a higher rate based on the management’s estimate of the useful life/ remaining useful life. Pursuant to this policy, depreciation on following assets has been provided at rates which are higher than the corresponding rates prescribed in schedule XiV. Information Technology Assets scientific Research equipment Furniture and Fixtures Office equipment and Vehicles : : : : 4 years 8 years 8 years 5 years

For Phthalic Anhydride and Pentaerythritol plants, depreciation is provided on all eligible plant and machinery at rates applicable for continuous process plants and for other eligible plant and machinery depreciation is provided on triple shift basis. depreciation on tinting systems except computers leased to dealers is provided under straight Line method over the estimated useful life of nine years as per technical evaluation. depreciation on computers given on lease is provided under straight Line method and at rates specified under schedule XiV to the Companies Act, 1956. Leasehold land and major leasehold improvements are amortised over the primary period of lease. Purchase cost, User licence fees and consultancy fees for major software are amortised over a period of four years. Acquired Trade mark is amortised over a period of five years. (d) At Balance Sheet date, an assessment is done to determine whether there is any indication of impairment in the carrying amount of the Company’s fixed assets. if any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. An assessment is also done at each Balance Sheet date whether there is any indication that an impairment loss recognised for an asset in prior accounting periods may no longer exist or may have decreased. if any such indication exists the asset’s recoverable amount is estimated. The carrying

36

Asian Paints Limited • Annual Report 2007-2008

Schedules Forming Part of the Accounts
amount of the fixed asset is increased to the revised estimate of its recoverable amount but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss is recognised in the Profit and Loss Account. After recognition of impairment loss or reversal of impairment loss as applicable, the depreciation charge for the asset is adjusted in future periods to allocate the asset’s revised carrying amount, less its residual value (if any), on straight line basis over its remaining useful life. 3. Revenue Recognition Revenue from sale of goods is recognised on transfer of all significant risks and rewards of ownership to the buyer which is on dispatch of goods. The amount recognised as sale is exclusive of, sales tax / VAT and are net of returns. sales are stated gross of excise duty as well as net of excise duty; excise duty being the amount included in the amount of gross turnover. The excise duty related to the difference between the closing stock and opening stock is recognised separately as part of ‘material Cost’. Revenue from service is recognised on rendering of services to customers. dividend income is recognised when the right to receive payment is established. Interest income is recognised on the time proportion basis. 4. Lease Accounting Assets taken on lease: Lease rentals on assets taken on lease are recognised as expense in the Profit and Loss Account on an accrual basis over the lease term. Assets given on lease: The Company has provided tinting systems to dealers on an operating lease basis. Lease rentals are accounted on accrual basis in accordance with the respective lease agreements. 5. Inventory a) Raw materials, work in progress, finished goods, packing materials, stores, spares, traded goods and consumables are carried at the lower of cost and net realisable value. The comparison of cost and net realisable value is made on an item-by-item basis. damaged, unserviceable and inert stocks are suitably depreciated. In determining cost of raw materials, packing materials, traded goods, stores, spares and consumables, weighted average cost method is used. Cost of inventory comprises all costs of purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all other costs incurred in bringing the inventory to their present location and condition. Cost of finished goods and work-in-process includes the cost of raw materials, packing materials, an appropriate share of fixed and variable production overheads, excise duty as applicable and other costs incurred in bringing the inventories to their present location and condition. Fixed production overheads are allocated on the basis of normal capacity of production facilities.

b)

c)

6.

Investments Long term investments are carried at cost. Provision for diminution in the value of long term investments is made only if such a decline is not temporary in the opinion of the management. Current investments are carried at lower of cost and fair value. The comparison of cost and fair value is done separately in respect of each category of investments. Profit and loss on sale of investments is determined on a first in first out (FiFO) basis.

7.

Transactions in Foreign Exchange Transactions in foreign currency are recorded at the exchange rate prevailing on the date of the transaction. exchange differences arising on foreign exchange transactions settled during the year are recognised in the Profit and Loss Account of the year. monetary assets and liabilities denominated in foreign currencies, which are outstanding as at the year end are translated at the closing exchange rate and the resultant exchange differences are recognised in the Profit and Loss Account.

37

Schedules Forming Part of the Accounts
The premium or discount on forward exchange contracts is recognized over the period of the contracts in the Profit and Loss Account. 8. Sundry Debtors Sundry debtors are stated after writing off debts considered as bad. Adequate provision is made for debts considered doubtful. discounts due, yet to be quantified at the customer level are included under the head ‘Current Liabilities and Provisions’. 9. Employee Benefits A. short Term employee Benefits: All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits and they are recognised in the period in which the employee renders the related service. The Company recognises the undiscounted amount of short term employee benefits expected to be paid in exchange for services rendered as a liability (accrued expense) after deducting any amount already paid. B. Post-employment benefits: (a) Defined contribution plans defined contribution plans are Provident Fund scheme, employee state insurance scheme and Government administered Pension Fund scheme for all employees and superannuation scheme for eligible employees. The Company’s contribution to defined contribution plans are recognised in the Profit and Loss Account in the financial year to which they relate. The Company makes specified monthly contributions towards employee provident fund to a Trust administered by the Company. The interest payable by the trust to the beneficiaries every year is being notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return on investments of the trust and the notified interest rate. (b) Defined benefit plans (i) Defined benefit gratuity plan The Company operates a defined benefit gratuity plan for employees. The Company contributes to a separate entity (a fund), towards meeting the Gratuity obligation. (ii) Defined benefit pension plan The Company operates a defined benefit pension plan for certain specified employees and is payable upon the employee satisfying certain conditions, as approved by the Board of directors. (iii) Defined Post Retirement Medical benefit plan The Company operates a defined post retirement medical benefit plan for certain specified employees and is payable upon the employee satisfying certain conditions.

The cost of providing defined benefits is determined using the Projected Unit Credit method with actuarial valuations being carried out at each Balance Sheet date. Past service cost is recognised immediately to the extent that the benefits are already vested, else is amortised on a straight-line basis over the average period until the amended benefits become vested. The defined benefit obligations recognised in the Balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised past service costs, and as reduced by the fair value of plan assets, if applicable. Any defined benefit asset (negative defined benefit obligations resulting from this calculation) is recognised representing the unrecognised past service cost plus the present value of available refunds and reductions in future contributions to the plan. C. Other long term employee benefits entitlements to annual leave and sick leave are recognised when they accrue to employees. sick leave can only be availed while annual leave can either be availed or encashed subject to a restriction on the maximum number of accumulation of leaves. The Company determines the liability for such accumulated leaves using the Projected Accrued Benefit method with actuarial valuations being carried out at each Balance Sheet date.

38

Asian Paints Limited • Annual Report 2007-2008

Schedules Forming Part of the Accounts
10. Research and Development a) b) Capital expenditure is shown separately under respective heads of fixed assets. Revenue expenses including depreciation are charged to Profit and Loss account under the respective heads of expenses.

11. Provision for Taxation income tax expense comprises of current tax (i.e. amount of tax for the period determined in accordance with the income Tax Act, 1961), deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the period) and fringe benefit tax (computed in accordance with the relevant provisions of the income Tax Act, 1961). The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognised using the tax rates that have been enacted or substantively enacted by the Balance sheet date. deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future; however, where there is unabsorbed depreciation or carry forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of such assets. deferred tax assets are reviewed as at each Balance Sheet date to reassess realisation. 12. Provisions and Contingencies The Company creates a provision when there exists a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources. When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources is remote, no provision or disclosure is made. 13. Earnings per share The basic and diluted earnings per share (“ePs”) is computed by dividing the net profit after tax for the year by weighted average number of equity shares outstanding during the year. 14. Proposed Dividend dividend recommended by the Board of directors is provided for in the accounts, pending approval at the Annual General meeting. B. NOTES: 2007-2008 75.09 35.25 34.72 75.16 33.72 3.36 (Rs. in Crores) 2006-2007 19.07 27.96 34.83 77.32 46.09 2.92

1. estimated amount of contracts remaining to be executed on capital account and not provided for 2. Letters of Credit and Bank guarantees issued by bankers and outstanding as on 31st march, 2008. 3. Contingent Liabilities: (a) Guarantee given on behalf of Company’s dealers in respect of loans granted to them by a bank for acquiring dealer tinting systems (b) Corporate guarantees issued by the Company to certain banks on behalf of some of its subsidiaries. (c) Claims against the Company not acknowledged as debts i. Tax matters in dispute under appeal ii. Others 4. The Company has issued letters of comfort/support to banks on behalf of some of its subsidiaries from time to time and also a letter of financial support to the board of a subsidiary. The financial support/comfort based on such letters is limited to Rs. 115.69 crores as on 31st march, 2008 (Rs.126.33 crores as on 31st march, 2007). 5. Auditors’ remuneration Statutory audit fee Tax audit fees Certification fees and other services Out of pocket expenses Cost audit fees in addition, an associate firm of one of the joint statutory auditor’s firm has been paid Rs. 0.04 crores for taxation services during the year (Previous year Rs. 0.02 crores).

0.65 0.05 0.16 0.04 0.03

0.24 0.05 0.16 0.03 0.02

39

Schedules Forming Part of the Accounts
(Rs. in Crores) 2007-2008 6. (a) Computation of Profit for the year ended 31st march, 2008 under section 349 of the Companies Act, 1956. Net Profit as per Profit and Loss Account Add: Provision for tax and fringe benefit tax Provision for deferred tax Less: surplus on sale of long term investments (Net) Profit on sale of assets (Net) Profit under section 349 of the Companies Act,1956 Add: managerial remuneration Profit under section 198 of the Companies Act,1956 Commission to Non-executive directors: subject to a ceiling of 1% of profit as computed above Commission actually paid Remuneration to Whole-time directors: subject to a ceiling of 10% of profit as computed above Total Remuneration actually paid (b) details of managerial remuneration under section 198 of the Companies Act, 1956 Salaries and allowances Commission to executive directors (maximum permissible limit is 2% of the Profit as computed under section 349 in aggregate to all three executive directors as approved by the shareholders). Contribution to Provident and Superannuation funds Perquisites Sub Total sitting Fees to Non-executive directors Commission to Non-executive directors Sub Total Grand Total 2006-2007

375.20 178.58 9.38 – 0.93 562.23 6.75 568.98 5.69 0.87 56.90 5.78 1.29 3.00 1.06 0.43 5.78 0.10 0.87 0.97 6.75

272.05 142.36 (2.37) 0.31 1.36 410.37 5.66 416.03 4.16 0.65 41.60 4.92 1.10 2.55 0.90 0.37 4.92 0.09 0.65 0.74 5.66

The above remuneration does not include contribution to gratuity fund and leave encashment/entitlement as this contribution is a lump sum amount based on actuarial valuation. The Company depreciates certain fixed assets at higher rates of depreciation based on estimated useful lives which are lower or equal to the implicit estimated useful lives prescribed by schedule XiV of the Companies Act, 1956. The above higher value of depreciation has been considered as deduction for the computation of managerial remuneration in (a) above. 7. Production : Items Unit Location Installed Capacity(1) As at 31st March, 2008 3,69,150 – 1,19,380 25,200(8) 5,400(9) 3,240
(9)

Production 2007-2008 3,16,871(3) 1,29,977 70,147(4) 24,261(5) 5,270(6) 3,093 6,197 2006-2007 2,82,602(3) 1,02,960 59,671(4) 21,864(5) 5,216(6) 3,034 5,775

(a) Paints, enamels, varnishes and blacks

mT/KL

In-house(2) Contract manufacture/ Purchase In-house(2) Ankleshwar Cuddalore Cuddalore Cuddalore

As at 31st march, 2007 3,54,150 – 99,880 25,200(8) 5,400(9) 3,240
(9)

(b) Synthetic Resins (mainly for captive consumption) (c) Phthalic Anhydride (d) Pentaerythritol (e) Sodium Formate (f) Formaldehyde (100%) (7)

mT mT mT mT mT

8,100(9)

8,100(9)

40

Asian Paints Limited • Annual Report 2007-2008

Schedules Forming Part of the Accounts
(1) (2) (3) (4) (5)

(6) (7) (8) (9)

installed capacities are as certified by the management on which auditors have relied. manufacturing plants at mumbai, Ankleshwar, Patancheru, Kasna, sriperumbudur and Taloja. includes 8166 mT (Previous year 7730 mT) of products processed for third party. includes 3348 mT (Previous year 3116 mT) of resins processed for third party. includes 10860 mT (Previous year 10587 mT) Phthalic Anhydride transferred to paint plants for captive consumption. includes 2877 mT (Previous year 2751 mT) Pentaerythritol transferred to paint plants for captive consumption. mainly for internal consumption in the manufacture of Pentaerythritol. Based on rated capacity per month. Capacities have been recomputed for current as well as previous year. Opening Stock Qty. Value
(Rs. in Crores)

8. Stocks and Turnover: Unit mT/KL (a) Paints, enamels, varnishes and blacks (b) Phthalic Anhydride mT (c) Pentaerythritol (d) Sodium Formate (e) Formaldehyde (100%) (f) Others (Refer Note (ii) below) TOTAL * (i) (ii) mT mT mT Closing Stock Qty. Value
(Rs. in Crores)

Turnover * Qty. Value
(Rs. in Crores)

37,810 (29,312) 347 (655) 358 (472) 252 (278) 39 (143)

250.35 43,127 (183.48) (37,810) 2.16 965 (3.55) (347) 3.26 108 (3.46) (358) 0.49 179 (0.44) (252) 0.09 132 (0.26) (39)

279.97 4,33,318 (250.35) (3,68,920) 5.62 12,783 (2.16) (11,575) 0.93 2,642 (3.26) (2,579) 0.34 3,166 (0.49) (3,054) 0.30 368 (0.09) (142)

256.35 (191.19)

287.16 (256.35)

3,906.22 (3,218.45) 86.59 (78.72) 27.30 (23.73) 6.42 (5.48) 1.21 (0.65) 32.19 (33.66) 4,059.93 (3,360.69)

includes sale of materials processed outside, resale of finished paints and dealer tinting systems purchased. Figures in brackets are for the previous year. This comprises of resins, machinery spares, stationery items, plant and machinery, dealer tinting systems and other miscellaneous items. 2007-2008 Unit Qty. 2,07,832 26,062 7,562 65,828 26,105 29,239 27,487 7,386 1,990 13,750 19,617 Value (Rs. in Crores) 501.10 220.12 241.93 135.70 150.58 133.92 14.33 7.46 107.78 80.75 1,593.67 2006-2007 Qty. 177,228 21,032 6,961 61,141 23,193 26,912 23,821 6,900 1,984 9,566 16,919 Value (Rs. in Crores) 444.39 180.81 228.92 127.79 116.03 113.62 14.59 7.32 75.86 65.61 1,374.94

9. Raw materials consumed:

(a) Pigments, extenders, minerals etc. (b) Additives (c) Solvents (d) (e) (f) (g) (h) (I) (j) Resins Oils Ortho Xylene methanol Acetaldehyde monomers Others TOTAL

mT mT mT KL mT mT mT mT mT mT mT

}

}

}

41

Schedules Forming Part of the Accounts
10. CIF value of direct imports: 2007-2008 336.49 1.35 4.69 (Rs. in Crores) 2006-2007 222.42 1.59 1.47

(a) Raw materials (b) Stores and Spares (c) Capital goods

11. Value of imported and indigenous raw materials and spares consumed and percentage of each to total consumption: 2007-2008 (Rs. in Crores) % to Total (a) Raw materials: direct imports Others (including value of consumption of imported raw materials purchased through indigenous sources) (b) Stores and spares: direct imports Others 12. Net dividend remitted in foreign currency:
2007-2008 2006-2007 Number of Number Dividend Number of Number dividend Non-resident of Equity remitted Non-resident of equity remitted Shareholders Shares held (Rs. in Crores) Shareholders Shares held (Rs. in Crores) Final dividend 2005-2006 interim dividend i 2006-2007 interim dividend ii 2006-2007 Final dividend 2006-2007 interim dividend 2007-2008 – – – 18 18 – – – 33,598 33,598 – – – * 0.02 17 17 18 – – 33,589 33,589 33,598 – – 0.03 0.02 0.02 – –

2006-2007 (Rs. in Crores) % to Total 247.03 1,127.91 1,374.94 1.41 12.80 14.21 17.97 82.03 100.00 9.92 90.08 100.00

335.43 1,258.24 1,593.67 0.74 13.63 14.37

21.05 78.95 100.00 5.15 94.85 100.00

* dividend Rs. 33,598/13. expenditure in foreign currency: 2007-2008 0.87 0.67 5.30 6.49 1.32 14.65 (Rs. In Crores) 2006-2007 0.90 1.26 1.68 5.43 0.56 9.83 (Rs. In Crores) 2007-2008 13.48 1.02 7.75 2.04 24.29 2006-2007 13.97 2.63 6.09 1.38 24.07

(a) (b) (c) (d) (e)

Annual maintenance for software Professional fees Shade cards and other sales promotional Items Travelling and Training expenses Others Total

14. earnings in foreign currency:

(a) (b) (c) (d)

export of own products at FOB value export of traded goods at FOB value Royalty Other receipts including recoveries from subsidiaries Total

15. Sundry debtors include Rs. 1.45 crores (Previous year Rs. 1.67 crores) due from subsidiary companies.

42

Asian Paints Limited • Annual Report 2007-2008

Schedules Forming Part of the Accounts
16. The Company has incurred following expenditure on Research and development: (a) Revenue expenditure: 2007-2008 13.71 0.84 0.61 0.55 0.39 0.24 0.19 0.37 0.76 17.66 (Rs. In Crores) 2006-2007 8.96 0.88 0.36 0.37 0.55 0.34 0.24 0.34 0.86 12.90 (Rs. In Crores) 2007-2008 0.50 33.69 34.19 2006-2007 1.25 0.58 1.83

employee cost depreciation on equipment and building Traveling expenditure Testing and laboratory expenditure Power and fuel Stores and spares Repairs and maintenance materials consumed Others Total (b) Capital expenditure:

For Bhandup research and development facility For Turbhe research and development facility (included in Capital Work in Progress) Total 17. interest expense:

(Rs. In Crores) 2007-2008 0.27 7.39 0.61 8.27 2006-2007 0.18 5.95 0.74 6.87

On Bank borrowings On Bill discounting Other interest Total

18. There are no micro and small enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at 31st march, 2008. This information as required to be disclosed under the micro, small and medium enterprises development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company. 19. The Company uses forward exchange contracts to hedge against its foreign currency exposures relating to the underlying transactions and firm commitments. The Company does not enter into any derivative instruments for trading or speculative purposes. The forward exchange contracts outstanding as at 31st march, 2008 are as under: Number of Contracts 2 FY 2007-2008 Buy Amount (USD in mn.) 1.70 Indian Rupees equivalent (in Crores) 6.89 Number of Contracts 12 FY 2006-2007 Buy Amount (Usd in mn.) 4.60 Indian Rupees equivalent (in Crores) 19.91

The foreign currency exposure not hedged as at 31st march, 2008 for payables is Usd 14.2 millions (Rs. 56.66 crores)[Previous year Usd 6.30 millions (Rs. 27.38 crores)] and for receivables is Usd 3.20 millions (Rs. 12.82 crores)[Previous year Usd 2.40 millions (Rs. 10.59 crores)].

43

Schedules Forming Part of the Accounts
20. Pursuant to the Accounting Standard (AS 29) – Provisions, Contingent Liabilities and Contingent Assets, the disclosure relating to provisions made in the accounts for the year ended 31st march, 2008 is as follows: (Rs. In Crores) Provision for excise Opening Balance Additions Utilisations Reversals Closing Balance Note: excise provision is made towards matters disputed at various appellate levels. 21. The Company has recognised deferred tax arising on account of timing differences, being the difference between the taxable income and accounting income, that originates in one period and is capable of reversal in one or more subsequent period(s) in compliance with Accounting Standard (AS 22) – Accounting for Taxes on income. The major components of deferred tax assets/(liabilities) arising on account of timing differences as at 31st march, 2008 are as follows: (Rs. in Crores) As at 31st March, 2008 13.49 1.07 0.71 1.58 16.85 (48.38) (48.38) (31.52) – (9.38) As at 31st march, 2007 10.45 1.55 1.01 1.69 14.70 (36.85) (36.85) (22.15) 3.95 2.37 2007-2008 4.26 4.26 2006-2007 4.15 0.27 0.16 4.26

Deferred tax assets expenses allowed for tax purpose on payment basis Provision for doubtful debts Voluntary Retirement scheme (VRs) expenditure debited to Profit and Loss Account but allowed in income Tax over five years Capital Losses carried forward under the income Tax Act, 1961. Total deferred tax assets Deferred tax liabilities difference between the Written down Value/Capital work in progress of assets as per books of account and income Tax Act, 1961. Total deferred tax liabilities Net deferred tax asset/(liability) deferred tax asset on employee benefit obligations, pursuant to adoption of As 15 (revised), adjusted against General Reserve Deferred tax benefit/(expense) for the year 22. I.

Pursuant to Accounting Standard (AS 19) – Leases, the following information is given: (a) The Company has provided tinting systems to its dealers on an operating lease basis. The lease period varies between six and ten years. Lease rentals are payable monthly by the dealers. A refundable security deposit is collected at the time of signing the agreement. The equipment shall be used only to tint products of the lessor. (b) Future minimum lease rentals receivable as at 31 march, 2008 as per the lease agreements: (Rs. in Crores) i) Not later than one year ii) Later than one year and not later than five years iii) Later than five years Total 2007-2008 0.54 0.47 0.00 1.01 2006-2007 0.61 1.02 0.01 1.64

44

Asian Paints Limited • Annual Report 2007-2008

Schedules Forming Part of the Accounts
The information pertaining to future minimum lease rentals receivable is based on the lease agreements entered into between the Company and the dealers and variation made thereto. Lease rentals are reviewed periodically taking into account prevailing market conditions. (c) Total amount of contingent rents recognised as income - Nil. (d) The initial direct cost relating to acquisition of tinting system is capitalised. (e) The information on gross amount of leased assets, depreciation and impairment is given in Schedule ‘d’ to the Balance sheet. II. (a) The Company has taken certain assets such as cars, computers and Systems hardware on an operating lease basis. The lease rentals are payable by the Company on a monthly or quarterly basis. (b) Future minimum lease rentals payable as at 31st march, 2008 as per the lease agreements: (Rs. in Crores) i) Not later than one year ii) Later than one year and not later than five years iii) Later than five years Total 2007-2008 3.53 5.18 8.71 2006-2007 3.05 5.15 8.20

(c) Lease payments recognised in the Profit and Loss Account for the period are Rs. 3.52 crores (Previous year Rs. 3.33 crores). 23. Pursuant to Accounting standard (As 27) - Financial Reporting of interests in Joint Venture, the disclosures relating to the Joint Venture viz., Asian PPG industries Limited (hereinafter referred to as JV) are as follows: (a) The proportion of interest of the Company in the JV is by way of equal equity participation with PPG Industries Securities Inc., U.S.A. (b) The aggregate amount of assets, liabilities, income and expenses related to the Company’s interests in the JV as at 31st march, 2008 is as follows: (Rs. In Crores) i) ii) iii) iv) Assets Liabilities Income expenses 2007-2008 135.06 69.05 197.12 180.35 2006-2007 103.67 52.03 149.88 140.40

(c) The Company’s share of capital commitments of the JV as at 31st march, 2008 is Rs. 6.29 crores (Previous year Rs. 4.72 crores). (d) The Company’s share of contingent liabilities of the JV as at 31st march, 2008 is Rs. 2.92 crores (Previous year Rs. 2.42 crores). (e) No contingent liabilities and capital commitments have been incurred as at 31st march, 2008 in relation to the Company’s interests in the JV along with the other venturer (Previous year Rs. Nil). 24. employee Benefits: (1) short term employee benefits: The liability towards short term employee benefits for the year ended 31st march, 2008 has been recognised in the Profit and Loss Account.

45

Schedules Forming Part of the Accounts
(2) Post-employment benefits: The following disclosures are made in accordance with As 15 (Revised) pertaining to defined Benefit Plans: (Rs. in Crores)
Gratuity (Funded Plan) Pension (Unfunded Plan) Post Retirement Medical Benefit (Unfunded Plan)

Amount recognised in Balance Sheet Present value of funded obligations Fair value of plan assets Present value of unfunded obligations Unrecognized past service cost Amount not recognised as an asset (limit in para 59(b) of AS 15 Net Liability/(Asset) Amounts in Balance Sheet Liability Assets Net Liability/(Asset) Expense Recognised in the Profit and Loss Account Opening defined benefit obligation less benefits paid Current service cost interest on defined benefit obligation expected return on plan assets Net actuarial losses/(gains) recognized in the year Past service cost effect of the limit in Para 59 (b) of As 15 (Revised) Losses/(gains) on "Curtailments and Settlements" Total, included in "Employee Benefit Expense" Actual return on plan assets Reconciliation of benefit obligations and plan assets for the period Change in defined benefit obligation Opening defined benefit obligation Current service cost Interest cost Actuarial losses/(gain) Liabilities extinguished on curtailment Liabilities extinguished on settlements Liabilities assumed on acquisition exchange difference on foreign plans Benefits paid Closing defined benefit obligation Change in fair value of assets Opening fair value of plan assets expected return on plan assets Actuarial gain/(losses) Assets distributed on settlements Contributions by employer Assets acquired due to acquisition exchange difference on foreign plans Benefits paid Closing fair value of plan assets

2007-08 51.73 (50.04) – – – 1.69 1.69 – 1.69 – 2.68 3.44 (3.56) 5.04 – (0.29) 7.31 4.02

2006-07 44.21 (49.99) – – 0.29 (5.49) – 5.49 (5.49) – 2.95 3.30 (3.19) (1.25) – 0.29 2.10 2.52

2007-08 – – 2.41 – – 2.41 2.41 – 2.41 – 0.02 0.22 – (0.44) – – (0.20) –

2006-07 – – 2.74 – – 2.74 2 .74 – 2.74 2.85 0.02 0.22 – (0.35) – – 2.74 –

2007-08 – – 0.92 – – 0.92 0.92 – 0.92 0.96 0.04 0.08 – (0.15) – – 0.93 –

44.21 2.68 3.44 5.49 – – – – (4.09) 51.73 49.99 3.56 0.45 – 0.13 – – (4.09) 50.04

45.71 2.96 3.31 (1.93) – – – – (5.84) 44.21 48.04 3.19 (0.67) – 5.27 – – (5.84) 49.99

2.74 0.02 0.22 (0.44) – – – – (0.13) 2.41 – – – – 0.13 – – (0.13)

2.98 0.02 0.22 (0.35) – – – – (0.13) 2.74 – – – – 0.13 – – (0.13)

0.96 0.04 0.08 (0.15) – – – – (0.02) 0.91 – – – – 0.02 – – (0.02)

46

Asian Paints Limited • Annual Report 2007-2008

Schedules Forming Part of the Accounts
Gratuity (Funded Plan) Pension (Unfunded Plan) Post Retirement Medical Benefit (Unfunded Plan)

Assets information Category of assets Government of india securities Corporate Bonds special deposit scheme equity shares of Listed Companies Property insurer managed Funds Others Grand Total Summary of the actuarial assumptions discount rate expected rate of return on assets Notes:

2007-08

2006-07

2007-08

2006-07

2007-08

50% 31% 14% – – – 5% 100% 8.55% 7.50%

52% 26% 14% – – – 8% 100% 8.25% 7.50%

– – – – – – – – 8.55% –

– – – – – – – – 8.25% –

– – – – – – – – 8.55% –

(a) The estimates of future salary increases, considered in actuarial valuation, takes into account the inflation, seniority, promotion and other relevant factors. (b) The Company estimates that the amount to be contributed to the Gratuity fund for the financial year 2008-2009 will be Rs. 1.69 crores. (c) Comparative values of defined benefit plans (Gratuity and Pension) for the past one year instead of four financial years, as required by As 15 (Revised) are provided, this being the second year of adoption of the standard. (d) Until 31st march, 2007 the liability to certain specified employees under the Company’s Post Retirement medical Benefit Plan was charged to Profit and Loss Account as and when the liability was discharged. in the current year, the Company has charged Rs. 0.93 crores to Profit and Loss Account towards accrued liability based on actuarial valuation carried out as at Balance Sheet date. Comparative value is not provided, this being the first year of actuarial valuation. (e) The guidance on implementing AS 15 (Revised) issued by Accounting Standards Board (ASB) of the institute of Chartered Accountants of india states benefit involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefits plans. Pending the issuance of the guidance note from Actuarial society of india, the Company’s actuary has expressed an inability to reliably measure provident fund liabilities. Accordingly the Company is unable to exhibit the related information. (3) Long term employee benefits: The liability towards compensated absences (annual leave and sick leave) for the year ended 31st march, 2008, based on actuarial valuation carried out using the Projected Accrued Benefit method amounting to Rs. 3.38 crores ( Previous year – Rs. 4.02 crores) has been recognised in the Profit and Loss Account. 25. earnings per share: (a) Basic and diluted earnings per share (face value – Rs. 10/- per share) (b) Profit after tax and prior period items as per Profit and Loss Account (Rs. in crores) (c) Weighted average number of equity shares outstanding 2007-2008 39.12 375.20 9,59,19,779 2006-2007 28.36 272.05 9,59,19,779

47

Schedules Forming Part of the Accounts
26. Information on related party transactions as required by Accounting Standard (AS 18) for the year ended 31st march, 2008. (Rs. In Crores)
Particulars Joint Venture Subsidiaries Key Relatives Management of Key Personnel (1) Management Personnel (2)
2007-08 2006-07 2007-08 2006-07

Companies controlled by Director/ Relatives
2007-08 2006-07

Employee benefit plans where control exists
2007-08 2006-07

Others

2007-08

2006-07

2007-08

2006-07

2007-08

2006-07

Processing of goods (Income) Sale of goods Purchase of goods Processinq of goods (expense) Royalty received deposits refunded Other recoveries Interest received on Loan given Sale of investments equity contribution Loan given Repayment of loan given Rent paid Remuneration Commission to Non-executive directors sitting fees paid to Non-executive directors Sitting fees received {from subsidiaries for nominee directors) Other services - receipts donation Sale of assets dividend received Contributions during the year Provision for doubtful debts Outstanding as at 31st march Loans deposits accepted Amount receivable Amount payable

12.34 15.14 0.20 1.91 0.06 9.18

11.25 16.97 1.00 1.71 – 6.42

– 6.28

0.31 5.35 4.50 98.16 1.02 4.37 82.94 1.93

8.07 0.84 0.89 5.05 18.60 2.28 1.95

7.57 0.99 0.89 – 12.11 1.91 1.51 1.95 5.78 4.92 1.70 0.27 0.03 1.57 0.21 0.02 5.31 – 0.02

0.22 1.05 0.20 – – 2.05 – 0.68 – – – 8.82 – – 0.07 5.24 43.79 – 4.98

0.19 0.71 1.25 0.44 0.51 (0.01) 27.47 – 5.22 – – – – – – – – – – – – – – – – 0.01 – – – – – – – (0.66) – – – – – – – – – 0.20 19.34 19.76 0.65

– (0.12)

(0.89) (3.81)

(3.24) (0.27)

(0.21) (2.24)

(2.24) (1.40)

Corporate guarantee issued by the Company on behalf of its subsidiaries amounting to Rs. 75.16 crores as at 31st march, 2008 (Previous year Rs. 77.32 crores). The Company has issued letters of comfort/support to banks on behalf of some of its subsidiaries from time to time and also a letter of financial support to the board of a subsidiary. The financial support/comfort based on such letters is limited to Rs. 115.69 crores as on 31st march, 2008 (Rs.126.33 crores as on 31st march, 2007). (1) Key management personnel and relatives of key management personnel are entitled for post employment benefits and other long term employee benefits recognised as per As 15 (Revised) employee Benefits in the financial statements. As the same is based on actuarial valuations not identifiable at an individual employee level, the same is not included above. (2) Under the employment of the Company pursuant to the necessary approvals from the shareholders and the Central Goverment under section 314 of the Companies Act, 1956. disclosure in respect of transactions which are more than 10% of the total transactions of the same type with related parties during the year. (Rs. in Crores) 2007-2008 Sale of Goods Asian PPG industries Ltd. Resins & Plastics Limited Others 15.14 4.33 6.45 25.92 2006-2007 16.97 4.29 5.43 26.69

48

Asian Paints Limited • Annual Report 2007-2008

Schedules Forming Part of the Accounts
(Rs. in Crores) Purchase of Goods Hitech Plast Ltd. Others Royalty Received sCiB Chemical s.A.e., egypt Berger International Limited Asian PPG industries Ltd. Others Contributions during the year Asian Paints Office Provident Fund Asian Paints Factory employees Provident Fund Asian Paints management Cadres superannuation scheme Others (a) Joint Venture : subsidiary of Joint Venture (b) Subsidiaries : direct subsidiaries: Asian Paints (Nepal) Pvt. Limited Asian Paints industrial Coatings Limited maxbhumi developers Limited Asian Paints (international) Limited Technical instruments manufacturers (india) Limited Asian PPG industries Limited Fabber Paints Pvt. Limited 2007-08 83.53 14.83 98.36 3.40 2.87 1.91 1.80 9.98 9.45 7.83 1.93 0.13 19.34 2006-07 68.94 15.00 83.94 2.31 1.98 1.71 3.28 9.28 8.52 7.42 2.02 1.80 19.76

subsidiaries of the wholly owned subsidiary, Asian Paints (international) Limited, mauritius Asian Paints (south Pacific) Holdings Limited Asian Paints (south Pacific) Limited Asian Paints (Tonga) Limited Asian Paints (S.I.) Limited Asian Paints (Vanuatu) Limited Asian Paints (Queensland) Pty. Limited * Asian Paints (Lanka) Limited Asian Paints (Bangladesh) Limited Asian Paints (middle east) LLC. sCiB Chemicals s.A.e., egypt Berger International Limited, Singapore * Sold during the year. subsidiary of Asian Paints (south Pacific) Limited: Taubmans Paints (Fiji) Limited* * The company ceased trading and has transferred its assets, liabilities and business to shareholder Asian Paints (south Pacific) Limited. subsidiary of Taubmans Paint (Fiji) Limited: ** Samoa Paints Limited** With the holding company Taubmans Paints (Fiji) Limited having ceased trading and transferred its assets, liabilities and business to shareholder Asian Paints (south Pacific) Limited, samoa Paints Limited has become a direct subsidiary of Asian Paints (south Pacific) Limited. Asian Paints distributors (Pvt.) Limited (In voluntary liquidation) Berger Building Services (Singapore) Pte. Limited Berger Paints (Thailand) Limited Berger Paints (Hong Kong) Limited Universal Paints Limited Berger Contractor (Singapore) Pte. Limited Nirvana investments Limited Berger Paints emirates Limited

Subsidiary of Asian Paints (Lanka) Limited:

Subsidiaries of Berger International Limited, Singapore Berger Paints Singapore Pte Limited Berger international sdn Bhd., malaysia Berger Paints (China) Co. Limited (formerly known as Berger Paints (Ningbo) Co. Limited) enterprise Paints Limited Lewis Berger (Overseas Holdings) Limited Subsidiary of Berger Building Services (Singapore) Pte Limited subsidiary of enterprise Paints Limited: subsidiary of Nirvana investments Limited

49

Schedules Forming Part of the Accounts
subsidiaries of Lewis Berger (Overseas Holdings) Limited: Berger Paints Jamaica Limited Berger Paints Barbados Limited Subsidiary of Universal Paints Limited: (c) Key management personnel: Name of the director Ashwin Choksi Ashwin dani Abhay Vakil (d) Relatives of Key management personnel: directors mahendra Choksi Amar Vakil Hasit dani employees Jalaj dani manish Choksi * employed for part of the year (e) Companies controlled by directors/Relatives :
AR intertect design Pvt. Ltd. Ashwin Holdings Pvt. Ltd. Asteroids Trading and Investments Pvt. Ltd. Castle Investments and Industries Pvt. Ltd. Centaurus Trading and Investments Pvt. Ltd. Clear Plastics Limited Coating Specialties (India) Ltd. dakshina Properties Pvt. Ltd. dani Finlease Ltd. doli Trading and investments Pvt. Ltd. elcid investments Ltd. eLF Trading and Chemical mfg. Co. Ltd. Geetanjali Trading & investments Pvt. Ltd. Gujarat Organics Ltd. Himanshu Holdings Pvt Ltd Hiren Holdings Pvt. Ltd. Hitech Plast Ltd. Jalaj Trading and investments Pvt. Ltd. Jaldhar investments and Trading Co. Pvt. Ltd. Jatayu investments Ltd. Kalica Paper industries Pvt. Ltd. Lambodar Investments & Trading Co. Ltd. Lyon Investments and Industries Pvt. Ltd. mipak Polymers Ltd. murahar investments and Trading Co. Ltd. Navbharat Packaging industries Ltd. Nehal Trading and investments Pvt. Ltd. Omega Properties Pvt. Ltd. Pragati Chemicals Ltd. Pragati marketing Pvt. Ltd. Resins and Plastics Ltd. Ricinash Oil mill Ltd. Rita Choksi Holdings Pvt. Ltd. Rupen Investments and Industries Pvt. Ltd. s.C. dani Research Foundation Ltd. Sadavani Investments and Trading Co. Pvt. Ltd. Sapan Investments Pvt. Ltd. Satyadharma Investments & Trading Co. Pvt. Ltd. Sudhanva Investments and Trading Co. Pvt. Ltd. Suprasad Investments & Trading Co. Ltd. Suptaswar Investments and Trading Co. Ltd. Tru Trading and Investments Pvt. Ltd. Ultramarine & Pigments Ltd. Unnati Trading and Investments Pvt. Ltd. Urvashi Holding Pvt. Ltd. Vikatmev Containers Ltd.

Berger Paints Trinidad Limited Berger Paints Bahrain W.L.L. designation Chairman Vice Chairman & managing director managing director

Non-executive director Non-executive director Non-executive director Nehal Vakil Vishal Choksi *

(f)

employee Benefit Funds where control exists: Asian Paints Office Provident Fund Asian Paints Factory employees’ Provident Fund Asian Paints management Cadres’ superannuation scheme Asian Paints (india) Limited employees’ Gratuity Fund

(g) Other entities over which there is a significant control: Asian Paints Charitable Trust

50

Asian Paints Limited • Annual Report 2007-2008

Schedules Forming Part of the Accounts
27. segment information for the year ended 31st march, 2008: (Rs. In Crores) 2007-2008 Paints ReVeNUe Net sales external sales (Net) Inter-Segment sales Other income Total revenue ResULT Segment result Unallocated expenses Operating Profit interest expenses Interest income dividends exchange difference Profit/(Loss) on sale of long term investments Profit/(Loss) on sale of short term investments Profit on sale of assets miscellaneous income Sundry balance written back income taxes Net Profit OTHeR iNFORmATiON Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Capital expenditure Unallocated capital expenditure Total depreciation/ impairment Unallocated depreciation/ impairment Total Others* Total Paints 2006-2007 Others* Total

3,311.87 – 23.74 3,335.61 566.47

104.29 86.41 3.82 194.52 26.06

3,416.16 86.41 27.56 3530.13 592.53 (54.74) 537.79 (8.27) 3.41 24.33 – – 0.96 0.89 5.07 0.37 (187.96) 376.59

2,728.59 – 16.57 2,745.16 422.64

92.70 82.12 3.46 178.28 24.63

2,821.29 82.12 20.03 2,923.44 447.27 (50.91) 396.36 (6.87) 0.93 12.66 0.33 0.31 0.06 0.85 4.76 0.53 (139.99) 269.93

1335.24

104.50

779.72 134.67 38.76

15.63 1.54 3.30

1439.74 581.78 2,021.52 795.35 297.67 1,093.02 136.21 2.14 138.35 42.06 1.71 43.77

1063.30

78.00

598.96 74.89 40.11

22.80 0.38 3.45

1141.30 417.53 1,558.83 621.76 192.99 814.75 75.27 5.36 80.63 43.56 1.86 45.42

* Others include Company’s business units manufacturing Phthalic Anhydride and Pentaerythritol. 28. Previous year’s figures have been regrouped, wherever necessary. signatures to schedules A to m As per our report of even date For Shah & Co. Chartered Accountants Ashish Shah Partner membership No. 103750 mumbai 9th may, 2008 For BSR & Associates Chartered Accountants Natrajan Ramkrishna Partner membership No. 32815 For and on behalf of the Board Ashwin Choksi Chairman Tarjani Vakil Chairperson of Audit Committee Ashwin Dani Vice Chairman & managing director Mahendra Shah director Abhay Vakil managing director Jayesh Merchant Chief Financial Officer & Company secretary

51

Statement
PURsUANT TO PART iV OF sCHedULe Vi TO THe COmPANies ACT, 1956 BALANCe sHeeT ABsTRACT ANd COmPANY’s GeNeRAL BUsiNess PROFiLe 1. Registration details
Registration No. Balance sheet date 0 4 5 9 8 3 1 date 0 3 month 2 0 0 8 Year Rights Issue N State Code 1 1

ii.

Capital Raised during the Year (Amount - Rs. in Thousands)
Public Issue N Bonus Issue N i i L L Cancellation of Shares N i L

i

L

Private Placement N i L

iii.

Position of mobilisation and deployment of Funds (Amount - Rs. in Thousands)
Total Liabilities 1 0 5 4 7 2 4 0 Total Assets 1 0 5 4 7 2 4 0

Sources of Funds

Paid-up Capital 9 5 9 Secured Loans 3 6 7

1 0

9 4 8

8 2 0

Reserves and Surplus 8 3 2 5 6 Unsecured Loans 5 8 0 0

8 3

9 1

deferred Tax Liability 3 1 5 2

Application of Funds
Net Fixed Assets 5 3 9 2 Net Current Assets 9 2 6 Accumulated Losses N i L 1 2 5 8 2 9

Investments 4 2

2

8

7

9

9

deferred Revenue expenditure N i L

IV.

Performance of Company (Amount - Rs. in Thousands)
Turnover 4 0 + 5 9 9 3 3 7

Total expenditure 3 4 9 5 3 + -

8

5

5

Profit/(Loss) Before Tax 5 6 4 5 4 8 2

Profit/(Loss) After Tax 3 7 5 1 9 9 8

(Please tick appropriate box + for profit, – for loss)

earnings Per share (Rs.) 3 9 . 1

2

dividend Rate % 1 7 0

V.

Generic Names of three Principal Products/services of the Company (As per monetary Terms)
item Code No. (iTC Code) 3 2 0 8 9 0 0 3 item Code No. (iTC Code) 2 9 1 7 3 5 0 0 item Code No. (iTC Code) 2 9 0 5 4 2 0 0 Product description s Y N T O T H e H e R T i C e N A m e s i d e L , C O L O U R

Product description P H T H A L i C Product description P e N T A e R Y

A N H Y d R T H R i T O L

52

Consolidated Financial Statements

53

Auditors’ Report to the Board of Directors
We have audited the attached consolidated Balance Sheet of Asian Paints Limited and its subsidiaries (collectively referred to as Asian Paints Group) as at 31 March, 2008, and also the Consolidated Profit and Loss Account and the Consolidated Cash Flow Statement for the year ended on that date annexed thereto. 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. We conducted our audit in accordance with generally accepted auditing standards in India. These standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are prepared, in all material respects, in accordance with and identified financial reporting framework and are free of material misstatements. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. We have not audited the financial statements of subsidiaries mentioned in Annexure to this report whose total assets and total revenues are mentioned in the annexure to this report. These financial statements have been audited by other auditors whose reports have been furnished to us, and our opinion, in so far as it relates to the amounts included in respect of the subsidiaries, is based solely on the reports of the other auditors. The financial statements of the subsidiaries, Asian Paints Industrial Coatings Limited, Technical Instruments Manufacturers (India) Limited and Maxbhumi Developers Limited for the year ended 31 March, 2008 have been audited by one of the joint auditors, Shah & Co., Chartered Accountants. We report that the consolidated financial statements have been prepared by the Company in accordance with the requirements of Accounting Standard (AS 21) Consolidated Financial Statements, (AS 23) - Accounting for Investments in Associates in Consolidated Financial Statements and (AS 27) - Financial reporting of interests in Joint Ventures issued by the Institute of Chartered Accountants of India and on the basis of the separate audited financial statements of the Company and its subsidiaries, associates and joint venture as listed in Note B - 4 of Schedule ‘M’ of notes on consolidated financial statements included in the consolidated financial statement. On the basis of the information and explanations given to us and on the consideration of the separate audit report/report of other auditors as explained above, on individual audited financial statements of the Company and its aforesaid subsidiaries, associates and joint venture, we are of the opinion that the attached consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India: (i) in the case of Consolidated Balance Sheet, of the consolidated state of affairs of the Asian Paints group as at 31 March, 2008; in the case of Consolidated Profit and Loss Account, of the consolidated profit for the Asian Paints group for the year ended on that date; and

(ii)

(iii) in the case of the Consolidated Cash Flow Statement, of the consolidated cash flows of the Asian Paints group for the year ended on that date. For Shah & Co. Chartered Accountants Ashish Shah Partner Membership No. 103750 Mumbai 9th May, 2008 For BSR & Associates Chartered Accountants Natrajan Ramkrishna Partner Membership No. 32815

54

Asian Paints Limited • Annual Report 2007-2008 • Consolidated Financial Statements

Annexure
Direct Subsidiaries:
Name of the Company

v)

Subsidiaries of Berger International Limited, Singapore:
Accounting period Berger Paints Singapore Pte. Limited January–December Berger Building Services (Singapore) January–December Pte. Limited Berger International Sdn. Bhd. January–December Berger Paints (Thailand) Limited January–December Berger Paints (China) Limited (formerly known as Berger Paints (Ningbo) Limited) Berger Paints (Hong Kong) Limited Enterprise Paints Limited Universal Paints Limited Lewis Berger (Overseas Holdings) Limited January–December January–December January–December January–December January–December

The subsidiary companies considered in the consolidated financial statements are: (Rs. in Crores)
Financial Year Total Assets 17 473 47 24 Total Revenues 23 725 59 2

Asian Paints (Nepal) Pvt. 15th January– Limited 14th January Asian Paints (International) Limited Asian Paints Industrial Coatings Limited Technical Instruments Manufacturers (India) Limited Maxbhumi Developers Limited* January– December April–March April–March

April–March

14

-

vi)

* Incorporated on 15th November, 2007

Subsidiary of Berger Building Services (Singapore) Pte. Ltd.;
Berger Contractor (Singapore) Pte. Limited January–December

Indirect Subsidiaries: i) Subsidiaries of the wholly owned subsidiary, Asian Paints (International) Limited, Mauritius.
Accounting period Asian Paints (South Pacific) Holdings Limited Asian Paints (South Pacific) Limited Asian Paints (Tonga) Limited Asian Paints (S.I.) Limited Asian Paints (Vanuatu) Limited Asian Paints (Queensland) Pty. Limited** Asian Paints (Lanka) Limited Asian Paints (Bangladesh) Limited Asian Paints (Middle East) LLC SCIB Chemicals S.A.E. Berger International Limited, Singapore **divested during the year on 30th June, 2007 January–December January–December January–December January–December January–December January–December January–December January–December January–December January–December January–December

vii) Subsidiary of Enterprise Paints Limited:
Nirvana Investments Limited January–December

viii) Subsidiary of Nirvana Investments Ltd.
Berger Paints Emirates Limited January–December

ix)

Subsidiaries of Lewis Berger (Overseas Holdings) Ltd.:
Berger Paints Jamaica Limited Berger Paints Trinidad Limited Berger Paints Barbados Limited January–December January–December January–December

x)

Subsidiary of Universal Paints Limited:
Berger Paints Bahrain W.L.L., January–December

Joint Venture: The Joint Venture unit considered in the consolidated financial statements is Asian PPG Industries Limited, a joint venture between the parent company and PPG Industries Securities Inc., U.S.A. wherein the parent company has equal equity participation. Subsidiary of Joint Venture: Asian PPG Industries Ltd. has a 100% stake in Faaber Paints Pvt. Ltd. The accounts of the said company are incorporated with that of the Joint Venture for the purpose of consolidation. For Shah & Co. Chartered Accountants Ashish Shah Partner Membership No. 103750 Mumbai 9th May, 2008 For BSR & Associates Chartered Accountants Natrajan Ramkrishna Partner Membership No. 32815

ii)

Subsidiary of Asian Paints (South Pacific) Limited:
Taubmans Paints (Fiji) Limited** ** January–December

The Company ceased trading and has transferred its assets, liabilities and business to shareholder Asian Paints (South Pacific) Limited

iii)

Subsidiary of Taubmans Paint (Fiji) Limited:
Samoa Paints Limited** ** January–December

With the holding company Taubmans Paints (Fiji) having ceased trading and transferred its assets, liabilities and business to shareholder Asian Paints (South Pacific) Limited, Samoa Paints Limited has become a direct subsidiary of Asian Paints (South Pacific) Limited.

iv)

Subsidiary of Asian Paints Lanka Limited:
Asian Paints Distributors (Pvt.) Limited (In voluntary liquidation) January–December

55

Consolidated Balance Sheet as at 31st March, 2008
(Rs. in Crores) Schedules FUNDS EMPLOYED Shareholders’ Funds Share Capital Reserves and Surplus Loan Funds Secured Loans Unsecured Loans Deferred Tax Liability (Net) (Refer Note B-11 in Schedule ‘M’) Minority Interest Total APPLICATION OF FUNDS Goodwill on consolidation Fixed Assets Gross Block Less: Depreciation Net Block Add : Capital Work in Progress Investments Current Assets, Loans and Advances Interest accrued on investments Inventories Sundry debtors Cash and Bank Balances Other Current Assets Loans and Advances Less: Current Liabilities and Provisions Current Liabilities Provisions Net Current Assets Total Significant accounting policies and Notes to Consolidated Financial Statements As per our report of even date For Shah & Co. Chartered Accountants Ashish Shah Partner Membership No. 103750 Mumbai 9th May, 2008 For BSR & Associates Chartered Accountants Natrajan Ramkrishna Partner Membership No. 32815 E F As at 31.03.2008 As at 31.03.2007

A B C

95.92 886.45 982.37 145.14 130.07 275.21 39.08 57.37 1,354.03

95.92 681.87 777.79 121.10 185.07 306.17 26.79 60.08 1,170.83

D

44.35 1,211.22 633.66 577.56 114.18 691.74 276.65 0.09 714.01 460.33 110.71 73.27 153.07 1,511.48 992.30 177.89 1,170.19 341.29 1,354.03

46.86 1,083.15 603.77 479.38 13.78 493.16 192.72 0.03 598.01 420.61 105.39 69.36 97.93 1,291.33 787.04 66.20 853.24 438.09 1,170.83

G

M For and on behalf of the Board Ashwin Choksi Chairman Tarjani Vakil Chairperson of Audit Committee Ashwin Dani Vice Chairman & Managing Director Mahendra Shah Director Abhay Vakil Managing Director Jayesh Merchant Chief Financial Officer & Company Secretary

56

Asian Paints Limited • Annual Report 2007-2008 • Consolidated Financial Statements

Consolidated Profit and Loss Account for the year ended 31st March, 2008
(Rs. in Crores) Schedules INCOME Sales and operating income (Net of discounts) Less: Excise duty Sales and operating income (Net of discounts and excise duty) Other income EXPENDITURE Material Cost Employee Cost Manufacturing, administrative, selling and distribution expenses PROFIT BEFORE INTEREST, DEPRECIATION AND TAX Less: Interest Less: Depreciation Add: Profit/(Loss) from Associate Company PROFIT BEFORE TAX AND EXTRAORDINARY ITEMS Less: Extraordinary Items (Refer Note B - 6 and Note B - 8 in Schedule ‘M’) PROFIT BEFORE TAX AND PRIOR PERIOD ITEMS Less: Provision for Taxation Current Tax Deferred Tax (Refer Note B - 11 in Schedule ‘M’) Fringe Benefit Tax Tax Provision for earlier years (Refer Note B - 15 in Schedule ‘M’) PROFIT AFTER TAX BEFORE PRIOR PERIOD ITEMS Add/(Less): Prior period items (Net) PROFIT AFTER TAX AND PRIOR PERIOD ITEMS Less: Minority Interest ATTRIBuTABLE TO SHAREHOLDERS Add: Balance brought forward from previous year Amount available for appropriation APPROPRIATIONS Dividend to shareholders of parent company Equity Shares - Interim dividend - Proposed Final dividend Tax on Dividend (includes tax on proposed dividend) Transfer to General Reserve Balance carried to Balance Sheet Earnings per share (Rs.) Basic and diluted - (Face value of Rs. 10 each) (Refer Note B - 13 in Schedule ‘M’) Significant accounting policies and Notes to Consolidated Financial Statements As per our report of even date For Shah & Co. Chartered Accountants Ashish Shah Partner Membership No. 103750 Mumbai 9th May, 2008 For BSR & Associates Chartered Accountants Natrajan Ramkrishna Partner Membership No. 32815 H Year 2007-2008 4,935.66 531.33 4,404.33 61.95 4,466.28 2,577.64 306.66 861.80 3,746.10 720.18 21.16 59.17 — 639.85 6.84 633.01 184.79 10.56 6.43 1.59 429.64 (1.59) 428.05 18.87 409.18 150.00 559.18 62.34 100.71 27.72 168.41 200.00 559.18 42.66 M As at 2006-2007 4,133.52 463.55 3,669.97 37.25 3,707.22 2,199.40 262.04 730.47 3,191.91 515.31 18.91 61.14 (0.40) 434.86 7.76 427.10 148.31 (2.88) 4.81 (3.58) 280.44 2.65 283.09 2.06 281.03 110.00 391.03 115.10 9.59 18.06 98.28 150.00 391.03 29.30

I

J K L

D

For and on behalf of the Board Ashwin Choksi Chairman Tarjani Vakil Chairperson of Audit Committee Ashwin Dani Vice Chairman & Managing Director Mahendra Shah Director Abhay Vakil Managing Director Jayesh Merchant Chief Financial Officer & Company Secretary

57

Consolidated Cash Flow Statement for the year ended 31st March, 2008
(Rs. in Crores) 2007-2008 A. Cash Flow from operating activities: Profit before tax and prior period items Adjustment for: Depreciation Prior period adjustment Profit on sale of investments (Profit)/loss on disposal of subsidiaries Share of (profit)/loss of associate (Gain)/loss on disposal of assets Loss on disposal of Associate Company Fair value adjustment on receivable from disposal of subsidiary Interest expense Interest income Dividend income Operating Profit before working capital changes (Increase)/Decrease in stocks (Increase)/Decrease in trade an other receivables (Decrease)/Increase in payables and accruals Cash generated from operations Income tax paid (Net of refund) B. Net cash generated from operating activities Cash Flows from investing activities: Purchase of fixed assets Proceeds from sale of fixed assets Purchase of investment Sale of investment Interest received Dividend received Cash inflow/(outflow) on additional stake in subsidiary Cash inflow arising on disposal of subsidiary (net of costs of disposal) Cash inflow/(outflow) on disposal of Associate Company Cash outflow on acquisitions made by Joint Venture C. Net cash used in investing activities Cash flows from financing activities Repayment of long term loans Repayment of short term loans Short term loans availed Long term loans availed Interest paid Dividend paid (including dividend paid to minority) Net cash used in financing activities Net effect of changes in exchange rate on other Balance Sheet items Net (Decrease)/Increase in cash and cash equivalents Cash and cash equivalents as at 1st April, 2007* Net effect of changes in exchange rate on cash and cash equivalents Cash and cash equivalents as at 31st March, 2008* * Refer Clause (iv) of Schedule ‘F’ For and on behalf of the Board Ashwin Choksi Chairman Tarjani Vakil Chairperson of Audit Committee Ashwin Dani Vice Chairman & Managing Director Mahendra Shah Director Abhay Vakil Managing Director Jayesh Merchant Chief Financial Officer & Company Secretary 633.01 59.17 (1.59) (1.60) 6.84 — (3.78) — — 21.16 (4.47) (24.54) 684.20 (119.43) (88.79) 212.28 688.26 (190.60) 497.66 (308.05) 26.25 (198.17) 115.83 4.41 24.54 (0.36) 0.69 — — (334.86) — (38.08) — 7.10 (21.16) (96.82) (148.96) (2.43) 11.41 105.39 (6.09) 110.71 2006-2007 427.10 61.14 2.65 (0.39) 0.69 0.40 (1.47) 7.07 0.28 18.91 (1.43) (11.53) 503.42 (104.48) (111.18) 128.67 416.43 (158.50) 257.93 (81.95) 13.37 (39.56) 5.40 1.40 11.53 — 0.55 6.73 (26.94) (109.47) (28.05) — 73.68 — (18.91) (137.49) (110.77) (4.34) 33.35 73.41 (1.37) 105.39

D. E.

As per our report of even date For Shah & Co. Chartered Accountants Ashish Shah Partner Membership No. 103750 Mumbai 9th May, 2008 For BSR & Associates Chartered Accountants Natrajan Ramkrishna Partner Membership No. 32815

58

Asian Paints Limited • Annual Report 2007-2008 • Consolidated Financial Statements

Schedules forming part of the Accounts
(Rs. in Crores) As at 31.03.2008 As at 31.03.2007

SCHEDULE A : SHARE CAPITAL
Authorised 9,95,00,000 (Previous year 9,95,00,000) Equity Shares of Rs.10/- each 50,000 (Previous year 50,000) 11% Redeemable Cumulative Preference shares of Rs. 100/- each 100.00 Issued, Subscribed and Paid up capital 9,59,19,779 (Previous year 9,59,19,779) Equity Shares of Rs. 10/- each fully paid: a) 9,39,89,940 (Previous year 9,39,89,940) Bonus Shares of Rs. 10/- each fully paid up issued on capitalisation of Share premium account (Rs. 2.19 crores) and General Reserves (Rs. 91.80 crores) b) 2,94,000 (Previous year 2,94,000) shares of Rs. 10/- each issued as fully paid up pursuant to the Scheme of Amalgamation of Pentasia Chemicals Ltd., without payment being received in cash. 100.00 99.50 0.50 99.50 0.50

95.92 95.92

95.92 95.92

SCHEDULE B : RESERVES AND SURPLUS
Capital Reserve on consolidation Capital Reserve [Rs. 5,000/- (Previous year Rs. 5,000/-)] Capital Redemption Reserve General Reserve As per last Balance Sheet Add: Transfer from Profit and Loss Account Add/(Less): Transitional provision on implementation of International Financial Reporting Standards by certain subsidiaries Less: Adjustment on account of adoption of AS 15 (Revised) 2.24 – 5.37 528.61 168.41 0.21 – 697.23 Foreign Currency Translation Reserve As per last Balance Sheet Add: Currency translation during the year (Add)/Less: Realised on disposal of Subsidiary Company Less: Realised on disposal of Associate Company 2.24 – 5.37 439.07 98.28 (0.68) (8.06) 528.61

(4.35) (13.00) (1.04) – (18.39)

(6.36) (3.85) 1.73 4.13 (4.35) 150.00 681.87

Profit and Loss Account

200.00 886.45

59

Schedules forming part of the Accounts
(Rs. in Crores) As at 31.03.2008 As at 31.03.2007

SCHEDULE C : SECURED AND UNSECURED LOANS
Secured Loans Long Term: Loans From Banks & Financial Institutions (Note No.1) Finance Lease liability Short Term: Loans from banks Cash Credit Accounts/Loans (Note No. 2) Unsecured Loans Long Term: Trade Deposits - Interest free Sales tax deferment scheme - State of Andhra Pradesh (Note No. 3) Short Term: Loans: Loan from banks (Note No. 4) Notes: (1) (a) Interest free term loan from the Pradeshiya Industrial Corporation of U.P. Ltd. (PICUP) under Sales Tax Deferment Scheme of U.P. is secured by a first charge of the Parent Company’s immovable properties pertaining to the paint plant at Kasna and by way of hypothecation of all movable properties at the above location. (b) Partially secured either by fixed/floating charge on the assets of various subsidiaries. (2) Partially secured by hypothecation of inventories, book debts and other current assets. (3) Interest free loan availed under the sales tax deferment Scheme of the Government of Andhra Pradesh by parent company. (4) Other Loans represent: Loans availed by various subsidiaries based on Guarantees/Letter of comfort from the parent company. 71.97 126.22 17.40 40.70 18.15 40.70 26.43 0.66 18.56 1.00

118.05 145.14

101.54 121.10

71.97 130.07

126.22 185.07

23.13 3.30 26.43 118.05 40.70

18.23 0.33 18.56 101.54 40.70

60

SCHEDULE D : FIXED ASSETS
Depreciation/Amortisation
Deduc- Dispostion durals of ing the Subsidiyear aries As at 31.03.08 Upto 31.03.07 Adjustment as per IFRS TransAddilation tions on Differ- Consolience dation Dur- Deduc- Disposing tions als of the Subsidiyear aries As at 31.03.08 As at 01.04.07 Translation Difference Dur- Deducing tion/ the Adjustyear ment

(Rs.in Crores) Impairment
As at 31.03.08

Gross Block

Net Block
As at 31.03.08 As at 31.03.07

Particulars

As at 01.04.07

Adjust- Translament tion as per DifferIFRS ence

AddiAdditions tions on during consolithe dation year

Tangible Assets: 0.13 2.65 0.21 13.86 4.93 0.16 – 2.67 1.83 0.45 10.35 8.53 – (0.78) – 1.08 1.58 0.23 0.61 53.95 39.33 – (1.98) – 4.26 2.33 0.37 38.91 7.02 3.11 0.67 – – 0.10 – – 0.77 – 12.16 7.56 – (0.01) – 0.76 0.13 – 8.18 0.50 – 1.83 – – 1.90 620.63 340.40 – (5.04) – 36.46 4.33 1.05 13.75 366.44 36.17 24.93 – (1.72) – 1.01 3.46 – 3.80 20.76 3.45 207.40 44.43 – (0.67) – 5.51 0.07 0.57 – – (0.16) – – – 48.63 0.82 28.62 1.37 – (0.02) – 0.22 0.54 – – – 1.03 – – 0.04 0.43 – – 0.15 0.03 – 96.38 – – – – – – – – – – – – – – 2.03 0.22 – – 0.18 – – – – 1.65 13.96 0.50 – 1.80 0.03 96.38 27.59 158.77 13.76 240.23 3.48 2.34 13.24 3.30 14.50 17.72 151.74 21.11 214.53 3.76 2.44 14.09 4.04

Freehold Land

14.50

(1.08)

83.09

Leasehold Land

19.09

(0.26)

13.26

Buildings – Owned

196.17

(2.79)

17.68

Leasehold Buildings

49.84

(3.21)

3.40

Plant and Machinery

568.67

(7.68)

66.47

Scientific Research:

Equipment

11.82

(0.01)

0.51

Buildings

3.11

Furnitures and Office Equipment

55.25

(2.71)

4.69

Vehicles

12.57

(0.97)

1.03

Assets acquired on financial lease – 0.15 1.93 10.51 39.03 25.58 3.30 1,083.15 514.56 (1.68) 0.83 7.23 1,211.22 559.58 – (10.34) – 44.48 31.03 – (0.03) – 3.35 – 95.81 60.01 – (0.01) – 5.41 – 2.03 1.19 – (0.07) – 0.35 0.08 1.13 0.09 13.74 11.87 – 0.13 0.13 – (0.01) – 0.01 – – – – – 2.22 1.86 0.13 1.39 64.28 34.26 591.80 – 58.52 0.46 59.14 559.58 – – 24.31 – 44.19 43.88 – – – – (0.16) 0.12 – – – – 0.65 2.00 2.82 1.81 – – 0.39 – – 23.92 – 41.86 44.19 – 0.64 7.61 10.22 577.56 479.38 – 0.82 13.16 21.47 479.38 418.11

Schedules forming part of the Accounts

– Furniture

0.14

(0.01)

– Vehicles

2.01

(0.12)

0.29

Assets given under operating lease

97.48

(0.02)

0.28

Asian Paints Limited • Annual Report 2007-2008 • Consolidated Financial Statements

Intangible Assets

52.50

(0.06)

2.55

TOTAL

1,083.15

(18.92)

193.25

Previous Year

976.56

(0.62)

0.72

133.81

1.56

61

Schedules forming part of the Accounts
(Rs. in Crores) Nos. Face value (Rs.) As at 31.03.2008 As at 31.03.2007

SCHEDULE E : INVESTMENTS
Long Term Investments (at cost) Unquoted (i) In Government Securities National Savings Certificates, Indira Vikas Patra and Defence Certificates deposited with Government authorities [Rs. 34,500/- (Previous year Rs. 34,500/-)] (ii) Trade Investments (Fully paid Equity shares) (a) Patancheru Enviro-tech Ltd. (b) SIPCOT Common Utilities Ltd. (c) Bharuch Eco-Acqua Infrastructure Ltd. (d) Apco Coatings (NZ) Ltd. (e) Danish for Wood Less: Provision for diminution in the value of Investments (f) Middle East Company for Sealants & Adhesives, Egypt (erstwhile Den Braven) (Rs. 35,945/- Previous year Rs. 38,914/-) Less: Provision for diminution in the value of Investments (Rs. 35,945/- Previous year Rs. 38,914/-) (g) Master Builders Technologies, Egypt (50 shares sold during the year, Previous year Rs. 38,914/-) (h) Misr Quena (1,000 shares sold during the year) (i) Master Builders Technologies for trading, Egypt (Rs. 35,945/- Previous year Rs. 38,914/-) (50) 100LE 12,900 2,830 4,78,270 23,500 2,500 10/100/10/1 NZ 10LE 0.02 0.02 500 10LE – – – – –

0.01 0.03 0.48 0.08

0.01 0.03 0.48 0.08

– –

– –

(1,000) 50

10LE 100LE

– – 0.60

0.01 – 0.61 0.50 0.50 1.11

(iii) Other investments (a) Equity shares of SKH Metals Ltd. Total Long Term Unquoted Investments

62,500

10/-

0.50 0.50 1.10

Quoted (Fully Paid Equity Shares) (i) Trade Investments ICI (India) Ltd. 37,60,783 (ii) Other Investments Housing Development Finance Corporation Ltd. 93,000 Apcotex Industries Ltd. 3,418 Total Long Term Quoted Investments Total Long Term Investments Current Investments (Unquoted)

10/10/10/-

77.25 0.12 0.01 77.38 78.48

77.25 0.12 0.01 77.38 78.49

62

Asian Paints Limited • Annual Report 2007-2008 • Consolidated Financial Statements

Schedules forming part of the Accounts
(Rs. in Crores) Nos. Birla Fixed Term Plan - Series H - Growth (1,00,00,000 units sold during the year) – (1,00,00,000) Face value (Rs.) 10/10/10/10/10/As at 31.03.2008 – – – – – As at 31.03.2007 10.00 10.08 4.02 10.14 10.25

ABN Amro Fixed Term Plan Series 4 Quarterly Plan D - Div. – (1,00,81,340.789 units sold during the year) (1,00,81,340.789) Kotak Fixed Maturity Plan 3M Series 11 - Div. (40,24,225.464 units sold during the year) Kotak Fixed Maturity Plan 3M Series 8 - Div. (1,01,34,731.134 units sold during the year) Kotak Fixed Maturity Plan 6 Months Series 2 - Div. (1,02,49,192.847 units sold during the year) ICICI Prudential Fixed Maturity Plan Series 35 3 Months Plan B Div. (1,00,98,497.045 units sold during the year) ICICI Prudential Fixed Maturity Plan Series 35 3 Months Plan A Div. (1,01,36,000.000 units sold during the year) ICICI Prudential Fixed Maturity Plan Series 35 3 Months Plan C Div. (40,00,000.000 units sold during the year) Reliance Fixed Horizon Fund II Quarterly Plan Series II Inst. Div. (50,00,000.000 units sold during the year) SBI Debt Fund Series 90 Days II (Dec. 06) (50,71,565.342 units sold during the year) SBI Debt Fund Series 180 Days II (Nov. 06) Div (5,109,500.259 units sold during the year) Standard Chartered Fixed Maturity Plan Quarterly Series 3 (1,01,47,600 units sold during the year) TATA Fixed horizon fund series 9 - Scheme D Div. Inst. Plan (1,00,64,461.323 units sold during the year) UTI Fixed Maturity Plan Quarterly Series QFMP/0207/I Div. (1,01,00,702.400 units sold during the year) ABN AMRO Flexible Short Term Plan Series A Monthly Div. HDFC Quarterly Interval Fund - Plan C Div. ICICI Prudential Interval Fund II Qtrly Interval Plan C. ING Fixed Maturity Fund - Series 34 - Inst - Div. ING Fixed Maturity Fund - 42 Inst Sundaram BNP Paribas Interval Fund - Qtrly Plan C TATA Fixed Income Portfolio Fund Scheme A2 Inst Div. UTI Fixed Maturity Plan QFMP (0208/II) I Inst. SBI Premier Liquid Fund - IP - Daily Dividend Total Current Investments Total Investments Aggregate market value of Long Term Quoted Investments: Note : 1. Figures in brackets indicate that of previous year. 2. Investments in shares are fully paid-up except where indicated. – (40,24,225.464) – (1,01,37,731.134) – (1,02,49,192.847) – (1,00,98,497.045) – (1,01,36,000.000) – (40,00,000.000) – (50,00,000.000) – (50,71,565.342) – (51,09,500.259) – (1,01,47,600.000) – (1,00,64,461.323) – (1,01,00,702.400) 2,92,69,876.206 2,89,81,451.870 2,90,00,000.000 1,00,00,000.000 1,90,00,000.000 2,92,30,884.826 2,89,70,160.734 2,31,60,275.996 4,99,329.976

10/-

10.10

10/-

10.14

10/-

4.00

10/10/10/10/10/10/10/10/10/10/10/10/10/10/10/-

– – – – – – 29.27 29.00 29.00 10.00 19.00 29.23 29.00 23.16 0.51 198.17 276.65 254.26

5.00 5.07 5.11 10.15 10.06 10.10 – – – – – – – – – 114.22 192.72 183.02

63

Schedules forming part of the Accounts
(Rs. in Crores) As at 31.03.2008 As at 31.03.2007

SCHEDULE F : CURRENT ASSETS, LOANS AND ADVANCES
Current Assets (i) Interest accrued on investments (ii) Inventories - valued and certified by the Management (a) Raw and packing materials (b) Finished goods (c) Work-in-process (d) Stores, spares, consumables and other traded goods (iii) Sundry debtors (Unsecured) (a) Outstanding for more than six months Considered good Considered doubtful (b) Other debts Considered good Considered doubtful 0.09 301.32 359.99 33.86 18.84 714.01 0.03 226.39 326.34 30.49 14.79 598.01

16.14 28.50 44.64 444.19 0.11 444.30 488.94 28.61 460.33

17.32 46.15 63.47 403.29 – 403.29 466.76 46.15 420.61 0.17 103.24 1.98 110.71 105.39 25.25 44.11 69.36

Less : Provision for doubtful debts (iv) Cash and Bank Balances (a) Cash on hand (b) Balances with Banks: (i) Current Accounts (ii) Term Deposits (v) Other Current Assets Retirement Benefit Asset (Refer Note B - 12 in Schedule ‘M’) Other Receivables Loans and Advances (i) Loans and Advances : Unsecured and considered good (a) Balances with Customs, Central Excise etc. (b) Sundry deposits (c) Advances/claims recoverable in cash or in kind (d) Advances to employees (e) Advances against capital expenditure (f) Advance payment of tax (Net of provisions) (g) Others

0.15 107.11 3.45

16.85 56.42 73.27

26.59 16.25 79.54 0.80 28.28 1.61 – 153.07 1,511.48

15.22 14.10 47.43 0.83 13.88 3.53 2.94 97.93 1,291.33

64

Asian Paints Limited • Annual Report 2007-2008 • Consolidated Financial Statements

Schedules forming part of the Accounts
(Rs. in Crores) As at 31.03.2008 As at 31.03.2007

SCHEDULE G : CURRENT LIABILITIES AND PROVISIONS
Current Liabilities (i) Acceptances (ii) Sundry creditors – Trade – Others 218.32 166.15 411.63 577.78 796.10 (iii) Investor Education and Protection Fund* (a) Unpaid/Unclaimed dividend (b) Unpaid/Unclaimed matured deposits (c) Unclaimed interest (d) Unclaimed amount of sale proceeds of fractional coupons of bonus shares (iv) Other liabilities Provisions (i) Proposed Dividend (ii) Provision for tax on Proposed Dividend (iii) Defined benefit obligations (Refer Note B - 12 in Schedule ‘M’) (iv) Provision for accrued leave (iv) Provision for Excise (Refer Note B - 16 in Schedule ‘M’) (iv) Provision for Warranties (Refer Note B - 16 in Schedule ‘M’) (v) Other provisions 3.10 0.03 – 0.04 3.17 193.03 992.30 100.71 17.12 11.49 40.68 4.26 1.04 2.59 177.89 1,170.19
* There is no amount due and outstanding to be paid to the Investor Education and Protection Fund as at 31st March, 2008. These amounts shall be paid to the fund as and when they become due.

172.93 369.28 79.25 448.53 621.46 6.20 0.04 0.01 0.04 6.29 159.29 787.04 9.59 1.63 9.35 39.29 4.26 1.44 0.64 66.20 853.24

65

Schedules forming part of the Accounts
(Rs. in Crores) Year 2007-2008 Year 2006-2007

SCHEDULE H : SALES AND OPERATING INCOME
Revenue from sales (Net of returns) Less: Discounts Sales (Net of discounts) Operating Income: Processing charges Lease Rent Revenue from Home Solutions operations Revenue from painting and related services 12.38 0.59 9.79 24.94 4,935.66 11.21 1.73 7.05 33.85 4,133.52 5,073.00 185.04 4,887.96 4,259.85 180.17 4,079.68

SCHEDULE I : OTHER INCOME
Interest received Claims received Dividends Royalty Sundry balances written back (Net) Profit on sale of long term investments Profit on sale of short term investments Profit on sale of assets (Net) Exchange difference (Net) Miscellaneous income 4.47 0.28 24.54 2.82 0.43 – 1.60 3.78 0.52 23.51 61.95 1.43 0.41 11.53 2.85 0.84 0.31 0.08 1.47 1.15 17.18 37.25

66

Asian Paints Limited • Annual Report 2007-2008 • Consolidated Financial Statements

Schedules forming part of the Accounts
(Rs. in Crores) Year 2007-2008 Year 2006-2007

SCHEDULE J : MATERIAL COST
Raw and Packing Materials consumed: Opening Stock Add: Purchases Less: Closing Stock Purchase of Paints for resale Cost of other goods sold Decrease/(Increase) in finished and semi-finished stock Opening stock Closing stock Increase/(Decrease) in Excise duty on finished goods 226.39 2,578.13 2,804.52 (301.32) 2,503.20 83.23 26.88 2,613.31 207.17 2,196.19 2,403.36 (226.39) 2,176.97 64.44 28.01 2,269.42

356.83 (393.85) (37.02) 1.35 2,577.64

272.60 (356.83) (84.23) 14.21 2,199.40

SCHEDULE K : EMPLOYEE COST
Salaries, wages, allowances, commission, bonus and accrued leave salary Contribution to Defined contribution plans: Provident and other funds Defined Benefit Plans (Gratuity and other plans) (Refer Note B - 12 in Schedule ‘M’) Staff welfare expenses 266.17 12.92 10.07 17.50 306.66 234.62 12.53 4.17 10.72 262.04

67

Schedules forming part of the Accounts
(Rs. in Crores) Year 2007-2008 Year 2006-2007

SCHEDULE L : MANUFACTURING, ADMINISTRATIVE, SELLING AND DISTRIBUTION EXPENSES
Stores and spares Power and fuel Processing charges Repairs and Maintenance: Buildings Machinery Other assets Rent Rates and taxes Insurance Printing, stationery and communication expenses Travelling expenses Donations Commission to Non-Executive Directors Directors’ fees Auditors’ remuneration Bank charges Legal and professional expenses Training and recruitment Freight and handling charges Advertisement and sales promotional expenses Cash and payment performance discount Commission on sales Bad and doubtful debts Miscellaneous expenses 4.51 9.16 16.23 29.90 30.31 14.44 6.46 24.49 37.20 1.86 0.87 0.10 2.96 5.21 5.84 5.42 172.78 198.03 162.37 2.01 1.53 67.93 861.80 4.00 7.76 15.23 26.99 27.59 18.36 6.48 20.09 32.24 1.77 0.78 0.09 2.40 5.08 5.23 3.75 145.67 129.96 134.69 0.93 7.55 75.61 730.47 24.78 41.23 26.08 24.44 39.18 21.59

68

Asian Paints Limited • Annual Report 2007-2008 • Consolidated Financial Statements

Schedules forming part of the Accounts
SCHEDULE M: NOTES ON CONSOLIDATED FINANCIAL STATEMENTS
A. STATEMENT OF SIGNIFICANT ACCOuNTING POLICIES FOLLOWED IN THE COMPILATION OF ACCOuNTS 1. Basis for preparation of consolidated financial statements a) Basis of Preparation: The financial statements have been prepared and presented under the historical cost convention on accrual basis of accounting to comply with the accounting standards prescribed in the Companies (Accounting Standards) Rules, 2006 and with the relevant provisions of the Companies Act, 1956. b) Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles (GAAP) in India requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities on the date of financial statements. 2. Fixed Assets a) Fixed assets are carried at the cost of acquisition or construction less accumulated depreciation. The cost of fixed assets includes taxes (other than those subsequently recoverable from tax authorities), duties, freight and other incidental expenses related to the acquisition and installation of the respective assets. Interest on borrowed funds directly attributable to the qualifying assets up to the period such assets are put to use is included in the cost. Know-how related to plans, designs and drawings of buildings or plant and machinery is capitalised under relevant asset heads. Depreciation on fixed assets is provided under Written Down Value / Straight Line Method as the case may be and at rates permissible under applicable local laws or at such rates so as to write off the value of assets over their useful life. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or where shorter, the term of the relevant lease. Intangible assets are capitalised and amortised over their estimated useful life. d) At Balance Sheet date, an assessment is done to determine whether there is any indication of impairment of the carrying amount of the Group’s fixed assets. If any such indication exists, an asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of asset exceeds its recoverable amount. An assessment is also done at each Balance Sheet date whether there is any indication that an impairment loss recognised for an asset in prior accounting periods may no longer exist or may have decreased. If any such indication exists the asset’s recoverable amount is estimated. The carrying amount of the fixed asset is increased to the revised estimate of its recoverable amount but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss is recognised in the Profit and Loss Account. After recognition of an impairment loss or reversal of an impairment loss as applicable, the depreciation charge for the asset is adjusted in future periods to allocate the asset’s carrying amount, less its residual value (if any), over its remaining useful life. 3. Goodwill Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying

b) c)

69

Schedules forming part of the Accounts
amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. 4. Revenue Recognition Revenue from sale of goods is recognised on transfer of all significant risks and rewards of ownership to the buyer which is on dispatch of goods. The amount recognised as sale is exclusive of sales tax/VAT, sales are stated gross of excise duty as well as net of excise duty; excise duty being the amount included in the amount of gross turnover. The excise duty related to the difference between the closing stock and opening stock is recognised separately as part of ‘Material Cost’. Revenue from rendering of services is recognised by reference to the stage of completion of the transaction at the Balance Sheet date determined by services performed to date as a percentage of total services. Revenue from processing services is recognised on rendition of services. Dividend income is recognised when the right to receive the dividend is unconditional at the Balance Sheet date. Interest income is recognised on the time proportion basis. 5. Lease Accounting Assets taken on lease: In respect of operating leases, lease rentals are accounted on accrual basis in accordance with the respective lease agreements. In respect of assets obtained on finance leases, assets are recognised at their fair value at the date of acquisition or if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the Balance Sheet as a finance lease obligation. The excess of lease payments over the recorded lease obligations are treated as finance charges which are allocated to each lease term so as to produce a constant rate of charge on the remaining balance of the obligations. The assets are depreciated as owned depreciable assets. Assets given on lease: In respect of assets provided on finance leases, amounts due from lessees are recorded as receivables at the amount of the Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases. Lease rentals on assets given on operating lease are accounted on accrual basis in accordance with the respective lease agreements. 6. Inventory a) Raw materials, work in progress, finished goods, packing materials, stores, spares, traded goods and consumables are carried at the lower of cost and net realisable value. The comparison of cost and net realisable value is made on an item-by-item basis. Damaged, unserviceable and inert stocks are suitably depreciated. In case of raw materials, packing materials, stores, spares, traded goods and consumables, the cost includes duties and taxes (net of tax credits as applicable) and is arrived at on weighted average cost basis. In respect of the joint venture, stores, spares and consumables are charged to revenue at the time of procurement. c) Cost of finished goods and work-in-process includes the cost of raw materials, packing materials, an appropriate share of fixed and variable production overheads, excise duty as applicable and other cost incurred in bringing the inventories to their present location and condition. Fixed production overheads are allocated on the basis of normal capacity of production facilities.

b)

70

Asian Paints Limited • Annual Report 2007-2008 • Consolidated Financial Statements

Schedules forming part of the Accounts
7. Investments Long term investments are carried at cost. Provision for diminution in the value of long term investments is made only if such a decline is not temporary in the opinion of the management. Current investments are carried at lower of cost and fair value. The comparison of cost and fair value is done separately in respect of each category of investments. Profit and loss on sale of investments is determined on a first in first out (FIFO) basis. 8. Transactions and Translations in Foreign Currency Transactions in foreign currency are recorded at the exchange rate prevailing on the date of the transaction. Exchange differences arising on foreign exchange transactions settled during the year are recognised in the Profit and loss account of the year. Monetary assets and liabilities denominated in foreign currencies, which are outstanding as at the year end are translated at the closing exchange rate and the resultant exchange differences are recognised in the Profit and loss account. The premium or discount on forward exchange contracts is recognized over the period of the contracts in the profit and loss account. In translating the financial statements of foreign entities for incorporation in the consolidated financial statements, the assets and liabilities are translated at the exchange rate prevailing at the Balance Sheet date of respective subsidiaries and the income and expense items are translated at the average rates of exchange for the year. The resulting exchange differences are classified as foreign currency translation reserve. 9. Sundry Debtors Sundry debtors are stated after writing off debts considered as bad. Adequate provision is made for debts considered doubtful. Discounts due, yet to be quantified at the customer level are included under the head ‘Current Liabilities and Provisions’. 10. Employee Benefits A. Short Term Employee Benefits: All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits and they are recognised in the period in which the employee renders the related service. The Group recognises the undiscounted amount of short term employee benefits expected to be paid in exchange for services rendered as a liability (accrued expense) after deducting any amount already paid. B. Post-employment benefits: (a) Defined contribution plans Defined contribution plans are post-employment benefit plans under which the parent and its subsidiary companies pay fixed contributions into separate entities (funds) or to financial institutions or state managed retirement benefit schemes. The group’s contribution to defined contribution plans are recognised in the Profit and Loss Account in the financial year to which they relate. The parent company and its Indian subsidiaries/joint venture operate defined contribution plans pertaining to Provident Fund schemes, Employee State Insurance Scheme and Government administered Pension Fund Scheme for all employees and the parent company operates a Superannuation scheme for eligible employees. (b) Defined benefit Plans (i) Defined benefit Gratuity plan The parent company and its Indian subsidiaries/joint venture operate a defined benefit gratuity plan for employees. The contribution is paid to a separate entity (a fund) or to a financial institution towards meeting the Gratuity obligation.

71

Schedules forming part of the Accounts
(ii) Defined benefit Pension plan The parent company operates a defined benefit pension plan for certain specified employees and is payable upon the employee satisfying certain conditions, as approved by the Board of Directors. (iii) Defined Post Retirement Medical benefit plan The parent company and some of its foreign subsidiaries operates a defined post retirement medical benefit plan for certain specified employees and is payable upon the employee satisfying certain conditions. The cost of providing defined benefits is determined using the Projected unit Credit Method with actuarial valuations being carried out at each Balance Sheet date. Past service cost is recognised immediately to the extent that the benefits are already vested, else is amortised on a straight-line basis over the average period until the amended benefits become vested. In case of certain foreign subsidiaries, actuarial gains and losses that exceed 10% of the greater of the present value of the subsidiary companies’ defined benefit obligation and the fair value of plan assets are amortised over the expected average remaining working lives of the participating employees. The defined benefit obligations recognised in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised past service costs and as reduced by the fair value of plan assets, if applicable. Any defined benefit asset (negative defined benefit obligations resulting from this calculation) is recognised representing the unrecognised past service cost plus the present value of available refunds and reductions in future contributions to the plan. C. Other long term employee benefits Entitlements to annual leave and sick leave are recognised when they accrue to employees. Sick leave can only be availed while annual leave can either be availed or encashed subject to a restriction on the maximum number of accumulation of leaves. The parent company and its Indian subsidiaries and joint venture determine the liability for such accumulated leave using the Projected Accrued Benefit Method with actuarial valuations being carried out at each Balance Sheet date. 11. Research and Development Capital expenditure is shown separately under respective heads of fixed assets. Revenue expenses including depreciation are charged to Profit and Loss Account under the respective heads of expense. 12. Taxes on Income Income tax expense comprises of current tax (i.e. amount of tax as per ‘Total Income’ returnable under the applicable laws taking into account deductions and exemptions), deferred tax charge or credit, and fringe benefit tax for the period. Deferred tax is recognised for all timing differences being the differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets are not recognised unless there is a virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. 13. Provisions and Contingencies The Group creates a provision when there exists a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources. When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources is remote, no provision or disclosure is made. 14. Earnings per share The basic and diluted earnings per share (“EPS”) is computed by dividing the net profit after tax for the year by weighted average number of equity shares outstanding during the year.

72

Asian Paints Limited • Annual Report 2007-2008 • Consolidated Financial Statements

Schedules forming part of the Accounts
15. Proposed Dividend Dividend proposed by the Board of Directors is provided for in the accounts, pending approval at the Annual General Meeting. B. NOTES: (Rs. in Crores) 2007-2008 1. 2. 3. Estimated amount of contracts remaining to be executed on capital account and not provided for. Letters of credit issued by bankers and outstanding as at the Balance Sheet date. Contingent Liabilities: (i) Guarantees given a. to a bank on behalf of Parent Company’s dealers in respect of loans granted to them by a bank for acquiring dealer tinting systems b. to others (ii) Claims against the Group not acknowledged as debts 84.21 39.35 2006-2007 24.86 31.96

34.72 9.88

34.83 8.70

37.87 48.76 a. Tax matters in dispute under appeal 3.36 2.92 b. Others (iii) Berger International Limited and its subsidiary, Berger Paints Trinidad Limited, are engaged in litigation initiated by its former Regional Managing Director. The Company upon discontinuing his services has paid him compensation as per his contract of employment and the same has been charged to income statement. This matter is subject to Trinidad and Tobago’s High Court Action No.3085 of 2004. Based on the information presently available, the likely outcome of this trial cannot be determined with any reasonable certainty. Therefore, no further provision has been made in these financial statements for this matter. 4. Details of Subsidiaries and Joint Venture: Subsidiaries: The subsidiary companies considered in the consolidated financial statements are: Direct Subsidiaries: Name of the Company Asian Paints (Nepal) Pvt. Limited Asian Paints (International) Limited Asian Paints Industrial Coatings Limited Technical Instruments Manufacturers (India) Limited Maxbhumi Developers Limited* *Incorporated on 15th November, 2007 Country of Incorporation Nepal Mauritius India India India % of voting Financial Year power 51% 15th Jan-14th Jan 100% 100% 100% 100% 1st Jan - 31st Dec 1st Apr - 31st Mar 1st Apr - 31st Mar 1st Apr - 31st Mar

73

Schedules forming part of the Accounts
Indirect Subsidiaries: i) Subsidiaries of the wholly owned subsidiary, Asian Paints (International) Limited, Mauritius: Subsidiaries of Asian Paints (International) Limited, Mauritius Asian Paints (South Pacific) Holdings Limited Asian Paints (South Pacific) Limited Asian Paints (Tonga) Limited Asian Paints (S.I.) Limited Asian Paints (Vanuatu) Limited Asian Paints (Queensland) Pty. Limited** Asian Paints (Lanka) Limited Asian Paints (Bangladesh) Limited Asian Paints (Middle East) LLC SCIB Chemicals S.A.E. Berger International Limited ** divested during the year on 30th June, 2007 ii) Subsidiary of Asian Paints (South Pacific) Limited: Taubmans Paints (Fiji) Limited** ** iii) Fiji Islands 100% 1st Jan - 31st Dec Country of Incorporation Vanuatu Fiji Islands Kingdom of Tonga Solomon Islands Republic of Vanuatu Australia Sri Lanka Bangladesh Sultanate of Oman Egypt Singapore % holding Accounting period 100% 51.3% 51% 75% 60% 88.57% 98.74% 89.78% 49% 60% 50.10% 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec

The company ceased trading and has transferred its assets, liabilities and business to shareholder Asian Paints (South Pacific) Limited.

Subsidiary of Taubmans Paints (Fiji) Limited: Samoa Paints Limited ** ** Samoa 80% 1st Jan - 31st Dec

With the holding company Taubmans Paints (Fiji) Limited having ceased trading and transferred its assets, liabilities and business to shareholder Asian Paints (South Pacific) Limited, Samoa Paints Limited has become a direct subsidiary of Asian Paints (South Pacific) Limited.

iv)

Subsidiary of Asian Paints (Lanka) Limited: Asian Paints Distributors (Pvt.) Limited (Under voluntary liquidation) Sri Lanka 100% 1st Jan - 31st Dec

v)

Subsidiaries of Berger International Limited, Singapore: Subsidiaries of Berger International Limited, Singapore Berger Paints Singapore Pte. Limited Berger Building Services (Singapore) Pte. Limited Berger International Sdn. Bhd. Berger Paints (Thailand) Limited Berger Paints (China) Limited Berger Paints (Hong Kong) Limited Enterprise Paints Limited Universal Paints Limited Lewis Berger (Overseas Holdings) Limited Country of Incorporation Singapore Singapore Malaysia Thailand % holding Accounting period 100% 100% 100% 88.6% 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec

People’s Republic of 100% China Hongkong 100% Isle of Man, u.K. 100% Isle of Man, u.K. 100% u.K. 100%

vi)

Subsidiary of Berger Building Services (Singapore) Pte. Limited: Berger Contractor (Singapore) Pte. Limited Singapore 100% 1st Jan - 31st Dec

vii) Subsidiary of Enterprise Paints Limited: Nirvana Investments Limited Isle of Man, u.K. 100% 1st Jan - 31st Dec

74

Asian Paints Limited • Annual Report 2007-2008 • Consolidated Financial Statements

Schedules forming part of the Accounts
viii) Subsidiary of Nirvana Investments Limited: Berger Paints Emirates Limited ix) U.A.E. 100% 1st Jan - 31st Dec

Subsidiaries of Lewis Berger (Overseas Holdings) Limited: Berger Paints Jamaica Limited Berger Paints Trinidad Limited Berger Paints Barbados Limited Jamaica Trinidad Barbados 51% 70% 100% 1st Jan - 31st Dec 1st Jan - 31st Dec 1st Jan - 31st Dec

x)

Subsidiary of Universal Paints Limited: Berger Paints Bahrain W.L.L. Bahrain 100% 1st Jan - 31st Dec

xi)

Joint Venture: Asian PPG Industries Limited, a joint venture between the parent company and PPG Industries Securities Inc., U.S.A., wherein the parent company has 50% equity participation.

xi)

Direct subsidiary of the Joint Venture: Faaber Paints Pvt. Limited India 100% 1st Apr - 31st Mar

The accounts of the said company are incorporated with that of the Joint Venture for the purpose of consolidation. 5. Principles of consolidation: i) The consolidated financial statements are based on the audited financial statements of the subsidiaries for their respective financial years. In respect of indirect subsidiaries of Asian Paints (International) Limited, the audited consolidated financial statements of Asian Paints (International) Limited have been considered for the purpose of consolidation. The financial statements of the parent company and its subsidiaries have been combined to the extent possible on a line by line basis by adding together like items of assets, liabilities, income and expenses. The results of subsidiaries acquired or disposed off during the year are included in the Consolidated Profit and Loss Account from the effective date of acquisition or upto the effective date of disposal, as appropriate. All significant intra group balances and transactions have been eliminated on consolidation. The amounts shown in respect of reserves comprise the amount of the relevant reserves as per the Balance Sheet of the parent company and its share in the post – acquisition increase in the relevant reserves of the subsidiaries. The consolidated financial statements have been prepared using uniform accounting policies for like transactions and other events in similar circumstances and are presented to the extent possible, in the same manner as the parent company’s financial statements. Minority interest in the net income and net assets of the consolidated financial statements are computed and shown separately. Losses applicable to minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the group. The unamortised carrying value of goodwill is tested for impairment as at each Balance Sheet date.

ii)

iii)

iv)

v) 6.

In the previous year, the investment in the associate company, Dutch Boy Philippines Inc., where Berger International Limited, Singapore held a 30% stake was disposed off on 28th November, 2006. The consideration received on sale was Rs. 6.73 crores. The loss on disposal recognised in the Profit and Loss Account was Rs. 7.07 crores for the year ended 31st March, 2007 and is included under extraordinary item. As required under Accounting Standard (AS 27) - Financial Reporting of Interests in Joint Venture, the audited consolidated financial statements of Asian PPG Industries Limited (hereinafter referred to as JV), the Joint Venture between the parent company and PPG Industries Securities Inc., U.S.A. have been consolidated using proportionate consolidation method. • • The financial year of the JV is April to March. The parent company's share of each of the assets, liabilities, income and expenses of JV has been included in the consolidated financial statements. The parent company's share of capital commitments in the JV as at 31st March, 2008 is Rs. 6.29 crores. (Previous year Rs.4.72 crores).

7.

75

Schedules forming part of the Accounts
• • 8. The parent company's share of contingent liabilities of the JV as at 31st March, 2008 is Rs. 2.92 crores (Previous year Rs. 2.42 crores). No contingent liabilities and capital commitments have been incurred as at 31st March, 2008 in relation to the parent company's interests in the JV along with the other venturer. (Previous year Rs. NIL).

During the year, the group disposed off its stake in its subsidiary, Asian Paints Queensland Pty Ltd. on 30th June, 2007. In the previous year, the group disposed its 60% stake in subsidiary, Berger Paints Manufacturing Limited, Myanmar on 31st December, 2006. The net assets of Asian Paints Queensland Pty Ltd. and Berger Paints Manufacturing Limited as at their dates of disposal were as follows: (Rs. in Crores) 2007-2008 Asian Paints Queensland Pty. Ltd. 0.98 3.43 1.55 0.62 5.01 2.44 (4.16) (9.53) 0.34 (1.04) 9.55 (6.84) 2.01 2006-2007 Berger Paints Manufacturing Ltd. 0.03 0.86 1.40 0.08 1.44 – (0.39) (4.32) (0.90) 3.45 (0.69) 1.86

Cash and cash Equivalents Inventories Trade receivables Other receivables and prepayments Fixed assets Other assets Trade payables and accrued liabilities Overdraft and loans Foreign exchange translation reserve Costs of disposal (including liabilities of subsidiary taken over) Loss on disposal (accounted as extra-ordinary item) Total Consideration Satisfied by: Cash consideration Deferred consideration

2.01 – 2.01

0.55 1.31 1.86

Net cash inflow on disposal: Cash consideration Cash (in hand)/overdrawn disposed off Net cash inflow 9.

2.01 (0.98) 1.03

0.55 1.32 1.87

In the previous year on 30th August, 2006, Joint Venture Company, Asian PPG Industries Limited acquired 100% stake in Faaber Paints Private Limited. The Goodwill arising on acquisition of Faaber Paints Private Limited has been recognised in the consolidated financial statements using proportionate consolidation method. In the previous year, the Joint Venture Company, Asian PPG Industries Limited acquired the ‘2K Business’ from ICI (India) Limited (hereinafter referred to as ‘ICI India’). This business of purchase and sale of “advanced refinish” paints was acquired as a going concern, on a slump sale basis at an aggregate consideration of Rs. 51.80 crores (excluding stamp duty), this consideration was subject to final determination of certain amounts in respect of fixed/net current assets. Consequent to the final determination which was effected in the current year, the revised consideration for the transaction is Rs. 48.81 crores, this includes an amount of Rs. 35.02 crores allocated to various intangible assets based on valuation report obtained from approved valuers. Imperial Chemical Industries Plc., the holding company of ICI India was acquired by Akzo Nobel NV on 2nd January, 2008. Consequently, in accordance with the ‘change in control’ clause in the ‘Agreement for Purchase of Business’ with the Joint Venture, the Joint Venture is entitled to recover from ICI India, an amount of Rs. 1.10 crores per month from 2nd January, 2008 till 30th July, 2009 aggregating to

10. a)

b)

76

Asian Paints Limited • Annual Report 2007-2008 • Consolidated Financial Statements

Schedules forming part of the Accounts
Rs.20.83 crores. Accordingly, the entire amount has been accounted by the Joint Venture as a receivable from ICI India with the corresponding credit to the written down value of intangible assets as at 1st January, 2008, whereby the value of Goodwill and Non-compete fees has been reduced to NIL while the balance amount has been allocated to other intangible assets in the proportion of their written down values as on 1st January, 2008. 11. The group recognises deferred tax arising on account of timing differences, being the difference between the taxable income and accounting income, that originates in one period and is capable of reversal in one or more subsequent periods in compliance with the applicable accounting standards. The major components of Deferred tax assets/(liabilities) arising on account of timing differences as at 31st March, 2008 are as follows: (Rs. in Crores) As at 31st March, 2008 As at 31st March, 2007

Deferred tax liabilities Difference between the Written Down Value of assets as per books of account and Income Tax Accelerated capital allowances and unremitted income Deferred tax liability on account of income on retirement assets Preconstruction interest capitalised in accounts, deductions for the same claimed in Income Tax over a period of 5 years Others Total Deferred tax assets Expenses allowed for tax purpose on payment basis Provision for doubtful debts Expenditure debited to Profit and Loss Account but allowed in Income Tax over a longer period. Losses carried forward under Income Tax Total Net deferred tax asset/(liability) Deferred Tax asset on employee benefit obligations, pursuant to adoption of AS 15 (Revised), adjusted against General Reserve Adjustment on account of adoption of IFRS by certain subsidiaries Foreign exchange fluctuation Under provision of deferred tax expense Deferred tax benefit/(expense) for the year

(50.69) (4.77) (4.69) (0.69) (0.04) (60.88)

(38.78) (4.65) (5.52) (0.70) – (49.65)

13.49 1.47 4.05 2.79 21.80 (39.08) – – (1.43) (0.30) (10.56)

10.80 1.91 4.54 5.61 22.86 (26.79) 4.09 0.03 0.28 – 2.88

77

Schedules forming part of the Accounts
12. Employee Benefits: (1) Short term employee benefits: The liability towards short term employee benefit obligations is recognised as an expense for the year in the Profit and Loss Account. Post-employment benefits: The following disclosures are made in accordance with AS 15 (Revised) pertaining to Defined Benefit Plans: (Rs. in Crores) Gratuity (Funded) 2007-08 95.09 (111.27) – 2006-07 89.20 (116.12) – Pension and Medical Plan (Unfunded) 2007-08 2006-07 – – 10.05 – – 10.08

Amount Recognised in Balance Sheet Present value of funded obligations Fair value of plan assets Present value of unfunded obligations Unrecognised past service cost Amount not recognised as an asset, because of the limitation as per AS 15 (Revised) and unrecognised actuarial gains/losses Net Liability/(Asset) Amounts in Balance Sheet Liability Assets Net Liability/(Asset) Expense recognised in the Profit and Loss Account Opening defined benefit obligation less benefits paid Current service cost Interest on defined benefit obligation Expected return on plan assets Net actuarial losses/(gains) recognized in the year Past service cost Effect of the limit in Para 59(b) of AS 15 (Revised) Losses/(Gains) on “Curtailments and Settlements” Total, included in “Employee Benefit Expense” Actual return on plan assets Movement in the asset recognised in the Balance Sheet: Opening Net (Asset)/Liability Currency translation difference Total charge as above Contribution Closing Net (Asset)/Liability

1.02 (15.16) 1.69 16.85 (15.16)

1.67 (25.25) – 25.25 (25.25)

(0.33) 9.72 9.72 – 9.72

(0.73) 9.35 9.35 – 9.35

– 5.05 7.10 (9.86) 6.12 – (0.29) – 8.12 10.93

– 5.50 5.06 (8.56) (3.99) – 2.46 – 0.47 5.20

0.96 0.59 0.83 – (0.54) – – – 1.84 –

2.85 0.57 0.63 – (0.35) – – – 3.70 –

(25.25) 2.68 8.12 (0.71) (15.16)

(20.14) 0.50 0.47 (6.08) (25.25)

9.35 (1.13) 1.84 (0.34) 9.72

6.23 (0.10) 3.82 (0.60) 9.35

78

Asian Paints Limited • Annual Report 2007-2008 • Consolidated Financial Statements

Schedules forming part of the Accounts
Reconciliation of Benefit Obligations & Plan Assets for the Period Gratuity (Funded) 2007-08 89.20 4.40 7.10 7.69 – – – (5.60) (7.70) 95.09 (Rs. in Crores) Pension and Medical Plan (Unfunded) 2006-07 2007-08 2006-07 89.25 4.81 7.21 (3.78) – – – (0.28) (8.01) 89.20 10.08 1.55 0.83 (0.74) – – – (1.71) 0.04 10.05 9.17 0.57 0.63 0.42 – – – (0.10) (0.61) 10.08

Change in defined benefit obligation: Opening defined benefit obligation as at 1st April, 2007 Current service cost Interest cost Actuarial losses/(gain) Liabilities extinguished on curtailment Liabilities extinguished on settlements Liabilities assumed on acquisition Exchange difference on foreign plans Benefits paid Closing defined benefit obligation as at 31st March, 2008 Change in fair value of assets: Opening fair value of plan assets as at 1st April, 2007 Expected return on plan assets Actuarial gain/(losses) Assets distributed on settlements Contributions by employer Assets acquired due to acquisition Exchange difference on foreign plans Benefits paid Closing fair value of plan assets as at 31st March, 2008 Note: 1) 2)

116.12 9.86 1.48 – 0.71 (9.20) (7.70) 111.27

113.21 9.43 (3.96) – 6.08 (0.63) (8.01) 116.12

– – – – 0.15 – – (0.15) –

– – – – – – – – –

The estimates of future salary increases, considered in actuarial valuation, take into account the inflation, seniority, promotion and other relevant factors. Comparative values of defined benefit plans (Gratuity and Pension) for the past one year instead of four financial years, as required by AS 15 (Revised) are provided, this being the second year of adoption of the standard. until 31st March, 2007 the liability to certain specified employees under the Parent Company’s Post Retirement Medical Benefit Plan was charged to Profit and Loss Account as and when the liability was discharged. In the current year, the Parent Company has charged Rs. 0.93 crores to Profit and Loss Account towards accrued liability based on actuarial valuation carried out as at Balance Sheet date. The guidance on implementing AS 15 (Revised) issued by Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India states benefit involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefits plans. Pending the issuance of the guidance note from Actuarial Society of India, the parent company’s actuary has expressed an inability to reliably measure provident fund liabilities. Accordingly the parent company is unable to exhibit the related information.

3)

4)

13. Earnings per share: a. b. c. Basic and diluted earnings per share in rupees (face value - Rs.10/per share) Profit after tax as per Profit and Loss Account (Rs. in crores) Weighted average number of equity shares outstanding 2007-2008 42.66 409.18 9,59,19,779 2006-2007 29.30 281.03 9,59,19,779

79

Schedules forming part of the Accounts
14. Pursuant to the Accounting Standard (AS 19) – Leases, the following information is given: I. a) The parent company has provided tinting systems to its dealers on an operating lease basis. The lease period varies between six to ten years. The lease rentals are payable by dealers monthly. A refundable security deposit is collected at the time of signing the agreement. The equipment shall be used only to tint the products of the lessor. The initial direct cost relating to acquisition of tinting system is capitalised. In addition, the Joint Venture has given certain ‘mixing racks’ on non-cancellable operating lease to its dealers. Initial direct costs are recognised as expenses in the Profit and Loss Account. Certain subsidiaries provide tinting systems to their dealers on an operating lease basis. The lease normally ranges for a five year period. A security deposit is collected at the time of signing the agreement. Future minimum lease rentals receivable as at 31st March, 2008 as per the lease agreements: (Rs. in Crores) i) ii) iii) Not later than one year Later than one year and not later than five years Later than five years Total 2007-2008 0.92 0.71 – 1.63 2006-2007 0.90 1.33 0.01 2.24

b) c)

d)

The information pertaining to future minimum lease rentals receivable is based on the lease agreements entered into between the respective companies and the dealers and variation made thereto in the current year. The lease rentals are reviewed periodically taking into account prevailing market conditions. e) f) II. a) Total amount of contingent rents recognised as income – Rs. NIL. The information on gross amount of leased assets and depreciation is given in Schedule ‘D’ to the Balance Sheet. The parent company has taken cars, computers and other systems hardware on an operating lease basis for a period of 48 (forty eight) months. The lease rentals are payable by the parent company on a monthly and quarterly basis respectively. In addition, the Joint Venture has entered into an arrangement to obtain computer equipments, mixing racks etc, on non-cancellable operating lease for 36 (thirty six) months. As per the lease agreement the Joint Venture does not have an option to purchase the assets. In addition, certain overseas subsidiaries have also taken certain assets on operating lease. Future minimum lease rentals payable as at 31st March, 2008 as per the lease agreements: (Rs. in Crores) i) ii) iii) e) f) III. a) Not later than one year Later than one year and not later than five years Later than five years Total 2007-2008 8.81 16.61 5.38 30.80 2006-2007 7.99 14.00 7.37 29.36

b)

c) d)

Operating Lease payments recognised in the Profit and Loss Account for the period is Rs. 8.49 crores (Previous year Rs. 7.27 crores). Total amount of contingent rents recognised as expense – Rs. NIL. Certain subsidiaries have taken property, plant and equipment on finance lease which effectively transferred to the respective subsidiaries substantially all of the risks and benefits incidental to the ownership.

80

Asian Paints Limited • Annual Report 2007-2008 • Consolidated Financial Statements

Schedules forming part of the Accounts
b) Future minimum lease rentals payable as at 31st March, 2008 as per the lease agreements: (Rs. in Crores) 2007-2008 2006-2007 Minimum Finance Present Minimum Finance Present lease charge value lease charge value payments allocated to payments allocated to future periods future periods i) Not later than one year ii) Later than one year and not later than five years iii) Later than five years 0.29 0.49 – 0.78 c) IV. a) b) 0.06 0.06 – 0.12 0.23 0.43 – 0.66 0.51 0.63 – 1.14 0.06 0.08 – 0.14 0.45 0.55 – 1.00

The information on gross amount of leased assets and depreciation is given in Schedule ‘D’ to the Balance Sheet. Certain subsidiaries have leased certain of its plant and equipment on finance lease which effectively transferred substantially all of the risks and benefits incidental to the ownership. Future minimum lease rentals receivable as at 31st March, 2008 as per the lease agreements: (Rs. in Crores) Minimum lease payments i) ii) iii) Not later than one year Later than one year and not later than five years Later than five years 0.34 0.13 – 0.47 2007-2008 Unearned finance income 0.16 0.04 – 0.20 Present value Minimum lease payments 0.37 0.20 – 0.57 2006-2007 Unearned finance income 0.17 0.06 – 0.23 Present value

0.18 0.09 – 0.27

0.20 0.14 – 0.34

15. For the financial year ended 31st March, 2007, the provision for taxation of previous year includes write back of tax provision of Rs.3.00 crores made in respect of notice for additional assessment received for the assessment years 2000 to 2004 by the Company’s subsidiary Berger International Ltd (BIL), Singapore. BIL had made a total tax provision of Rs.4.52 crores in the financial year ended 31st December, 2005. 16. Pursuant to the Accounting Standard (AS 29) – Provisions, Contingent Liabilities and Contingent Assets, the disclosure relating to provisions made in the accounts for the year ended 31st March, 2008 is as follows: (Rs. in Crores) Provision for Excise (1) Opening Balance Additions Utilisations Reversals Currency translation Closing Balance 1. 2. 2007-2008 4.26 – – – – 4.26 2006-2007 4.15 0.27 – (0.16) – 4.26 Provision for Warranties (2) 2007-2008 1.44 – (0.08) (0.24) (0.08) 1.04 2006-2007 1.21 0.34 (0.07) – (0.04) 1.44

Excise provision is made towards matters disputed at various appellate levels. Provision for warranties represents management’s best estimate of the liability for warranties granted on paints by some of the subsidiaries based on past experience of claims.

81

Schedules forming part of the Accounts
17. Information on related party transactions as required by Accounting Standard (AS 18) for the year ended 31st March, 2008.
Particulars Key Management Personnel (1) Relatives of Key Management Personnel (2)(*) Companies controlled by Directors/ Relatives 4.50 103.75 1.02 3.23 1.02 10.61 9.45 1.70 1.57 4.37 86.58 1.93 2.89 0.02 Employee benefit plans where control exists (Rs. in Crores) Others

2007–08 2006–07 2007–08 2006–07 2007–08 2006–07 2007–08 2006–07 2007–08 2006–07 Sale of goods Purchase of goods Processing of goods (Expense) Royalty Paid Other recoveries Remuneration Commission to Non-Executive Directors Sitting Fees Paid to Non-Executive Directors Other services Donation Dividend received Contributions during the year Deposits accepted Amount receivable Amount payable – – (3.81) – – (3.24) – – (0.27) – – (0.21) – 2.33 (4.29) 0.01 – (2.24) 2.05 2.24 19.34 – – (1.40) 19.76 – – (0.66) – – – – – –

0.27 0.03

0.21 0.02 0.09 0.33 1.25 0.65

* Under the employment of the Parent Company pursuant to the necessary approvals from the shareholders and the Central Govt. under Section 314 of the Companies Act, 1956. 1. Key Management Personnel: • • Directors of parent company: Mr. Ashwin Choksi - Chairman, Mr. Ashwin Dani - Vice Chairman and Managing Director and Mr. Abhay Vakil - Managing Director. Directors/key management personnel of subsidiaries/joint venture: Mr. V. S. Ram, Mr. Jagdish Acharya, Mr. J. N. Shahani (Retired on 12th April, 2007), Mr. I. K. Jaiswal, Mr. Warren McDonald, Mr. Vivek Subramanian. 2. Relatives of Key Management Personnel: Mr. Jalaj Dani*, Mr. Manish Choksi, Ms. Nehal Vakil, Mr. Vishal Choksi**, Mr. Mahendra Choksi - Non-Executive Director, Mr. Amar Vakil - Non-Executive Director and Mr. Hasit Dani - Non-Executive Director. * ** Mr. Jalaj Dani, a relative of Parent Company’s Vice Chairman and Managing Director is also Chairman of Berger International Limited and director on most of the subsidiary companies. Mr. Vishal Choksi was employed for part of the year.

82

Asian Paints Limited • Annual Report 2007-2008 • Consolidated Financial Statements

Schedules forming part of the Accounts
3. a) Companies over which the Directors have significant influence or control :
Hi-tech Plast Ltd. Jalaj Trading and Investments Pvt. Ltd. Jatayu Investments Ltd. Kalica Paper Industries Pvt. Ltd. Lambodar Investments & Trading Co. Ltd. Lyon Investments and Industries Pvt. Ltd. Mipak Polymers Ltd. Murahar Investments and Trading Co. Ltd. Navbharat Packaging Industries Ltd. Nehal Trading and Investments Pvt. Ltd. Omega Properties Pvt. Ltd. Pragati Chemicals Ltd. Pragati Marketing Pvt. Ltd. Resins and Plastics Ltd. Ricinash Oil Mill Ltd. Rita Choksi Holdings Pvt. Ltd. S.C. Dani Research Foundation Ltd. Sadavani Investments and Trading Co. Pvt. Ltd. Sapan Investments Pvt. Ltd. Satyadharma Investments & Trading Co. Pvt. Ltd. Sudhanva Investments and Trading Co. Pvt. Ltd. Suprasad Investments & Trading Co. Ltd. Suptaswar Investments and Trading Co. Ltd. Tru Trading and Investments Pvt. Ltd. Ultramarine & Pigments Ltd. Unnati Trading and Investments Pvt. Ltd. urvashi Holding Pvt. Ltd. Vikatmev Containers Ltd. AR Intertect Design Pvt. Ltd. Ashwin Holdings Pvt. Ltd. Asteroids Trading and Investments Pvt. Ltd. Castle Investments and Industries Pvt. Ltd. Centaurus Trading and Investments Pvt. Ltd. Clear Plastics Limited Coating Specialties (India) Ltd. Dakshina Properties Pvt. Ltd. Dani Finlease Ltd. Doli Trading and Investments Pvt. Ltd. Elcid Investments Ltd. ELF Trading and Chemical Mfg. Co. Ltd. Geetanjali Trading & Investments Pvt. Ltd. Gujarat Organics Ltd. Himanshu Holdings Pvt. Ltd. Hiren Holdings Pvt. Ltd.

Jaldhar Investments and Trading Co. Pvt. Ltd. Rupen Investments and Industries Pvt. Ltd.

b)

Associates, promoters and affiliates of subsidiary companies/joint venture: PPG Industries Securities Inc. PPG Industries Inc. Ariza Holdings Limited Al - Hassan Group, Oman

LKP Hardware, Solomon Islands Sultan Bin Sulayem, UAE ABM Santo Asset Management Unit Port Vila Hardware Aladdin Investments Limited 4. Employee Benefit Funds where control exists:

Asian Paints Office Provident Fund Asian Paints Factory Employees’ Provident Fund Asian Paints Management Cadres’ Superannuation Scheme Asian Paints (India) Limited Employees’ Gratuity Fund 5. Other entities over which there is a significant control: Asian Paints Charitable Trust

83

Schedules forming part of the Accounts
18. Segment Information for the year end 31st March, 2008 i) Primary segment information: Business Segment: (Rs. in Crores) 2007-2008 REVENUE External sales (Net) Inter-segment sales Other income Total Revenue RESULT Segment result Unallocated expenses Operating Profit Interest expenses Interest income Dividends Profit/(Loss) on sale of investments Profit/(Loss) on sale of fixed assets Profit/(Loss) on sale of subsidiaries Miscellaneous income Income taxes Net Profit before prior period items OTHER INFORMATION Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Capital expenditure Unallocated capital expenditure Total Depreciation/Impairment Una1located depreciation/impairment Total 1,958.50 104.50 2,063.00 461.23 2,524.23 911.55 630.31 1,541.86 191.12 2.13 193.25 57.26 1.91 59.17 1,641.96 78.00 1,719.96 304.11 2,024.07 630.22 616.06 1,246.28 128.45 5.36 133.81 59.08 2.06 61.14 Paints 4,300.04 58.13 4,358.17 660.80 Others* 104.29 86.41 3.82 194.52 26.06 Total 4,404.33 86.41 61.95 4,552.69 686.86 63.71 623.15 (21.16) 4.47 24.54 3.78 (6.84) 5.07 (203.37) 429.64 Paints 3,577.27 33.80 3,611.07 470.07 2006-2007 Others* 92.70 82.12 3.46 178.28 24.63 Total 3,669.97 82.12 37.26 3,789.35 494.70 60.49 434.21 (18.91) 1.43 11.53 0.39 1.47 (7.76) 4.76 (146.68) 280.44

895.92

15.63

607.42

22.80

189.58

1.54

128.07

0.38

53.96

3.30

55.63

3.45

* Others include the parent company’s business units manufacturing Phthalic Anhydride and Pentaerythritol.

84

Asian Paints Limited • Annual Report 2007-2008 • Consolidated Financial Statements

Schedules forming part of the Accounts
ii) Secondary segment information: Geographical Segment: 2007-2008 Domestic International operations operations Segment revenue Carrying cost of segment assets Additions to fixed and intangible assets 3,718.72 2,074.38 174.50 Total 2006-2007 Domestic International operations operations 3,042.40 1,570.85 108.68 Total

747.56 4,466.28 449.85 2,524.23 18.75 193.25

664.82 3,707.22 453.22 2,024.07 25.13 133.81

19. Previous year’s figures have been regrouped, wherever necessary. Signatures to Schedules A to M As per our report of even date For Shah & Co. Chartered Accountants Ashish Shah Partner Membership No. 103750 Mumbai 9th May, 2008 For BSR & Associates Chartered Accountants Natrajan Ramkrishna Partner Membership No. 32815 For and on behalf of the Board Ashwin Choksi Chairman Tarjani Vakil Chairperson of Audit Committee Ashwin Dani Vice Chairman & Managing Director Mahendra Shah Director Abhay Vakil Managing Director Jayesh Merchant Chief Financial Officer & Company Secretary

85

86
All figures in INR Crores
PAT Dividend Capital Current Period 23.19 113.84 6.39 1.33 – 0.36 1.21 0.23 1.32 15.00 17.37 0.00 2.73 12.27 100.24 28.57 0.86 31.64 10.23 4.47 3.76 1.07 8.10 39.67 3.79 1.15 14.73 0.05 0.00 0.14 12.94 0.43 0.05 3.38 3.71 19.35 13.11 – 0.05 6.39 5.38 17.44 0.43 5.25 4.78 1.53 14.01 21.93 14.16 31.64 32.55 2.53 15.43 – 0.14 2.20 2.12 0.85 1.14 0.00 (0.09) (0.09) 0.70 0.77 0.61 3.19 66.50 7.21 23.88 22.73 – (0.01) – 14.29 – 14.32 16.16 17.17 20.96 0.36 0.78 32.26 1.26 (1.17) (1.09) 16.67 10.16 16.65 10.33 37.90 – 0.67 3.41 60.72 7.74 20.85 16.82 4.24 13.12 15.42 14.09 12.59 31.00 32.25 41.84 (26.82) (28.73) 13.79 16.13 26.63 29.23 40.69 33.72 – – – – 4.11 150.43 9.90 – 9.85 16.66 19.63 28.84 27.46 53.61 56.95 92.10 1.20 (9.12) (12.52) 71.09 65.53 63.04 54.21 125.38 4.21 8.25 11.98 11.28 11.31 23.30 27.51 32.27 30.69 98.48 90.16 55.19 32.72 – – – – 3.44 114.07 10.20 – – 4.90 16.31 17.45 13.48 5.40 34.26 27.75 47.01 42.63 7.11 (21.30) (16.66) 23.14 19.80 12.06 10.25 16.29 13.81 0.17 0.27 – 0.53 0.06 16.36 1.07 – 7.27 – – 0.07 2.10 1.14 1.97 7.77 33.12 (34.60) (33.05) 14.72 14.10 11.75 14.16 12.45 7.34 0.02 0.96 (0.57) (0.65) 0.56 0.75 0.84 1.06 3.57 4.11 0.00 30.01 (39.31) (40.51) 23.67 25.31 12.93 14.81 19.67 21.78 – – 0.03 – 0.17 0.25 0.06 0.44 – 0.08 – 0.02 7.13 – 0.03 0.11 0.90 1.05 1.95 7.61 105.73 (85.82) (97.60) 69.90 109.38 84.32 117.51 – – 19.83 11.19 12.95 (12.35) (13.02) 0.07 0.08 – 0.00 – – – 0.01 (0.00) 6.81 (0.77) 0.01 (4.38) (3.36) 6.67 1.84 2.20 4.85 1.97 (0.44) (0.19) 2.39 (0.01) – 1.12 31.07 1.37 1.38 7.77 2.88 (2.76) (2.91) 0.05 0.06 0.02 0.02 – – – 0.01 (0.00) 5.77 1.03 1.27 5.38 0.13 6.41 7.17 – – 0.01 0.15 (0.04) 13.76 (8.43) (10.06) 11.10 16.50 20.04 20.20 29.97 24.26 0.68 0.60 0.51 0.10 0.02 0.01 0.01 4.08 (2.13) (0.42) (5.64) (9.27) 6.76 0.72 1.59 3.72 1.63 (1.06) (0.75) 2.75 – 0.03 0.91 16.51 2.02 1.36 7.41 10.00 3.11 0.81 29.25 29.57 47.36 40.38 58.75 47.72 0.60 0.39 3.17 0.98 1.34 2.80 2.43 1.06 0.91 5.18 4.68 5.77 4.70 0.08 0.04 1.14 0.49 – (1.23) – – – – 0.09 – – – – – (0.23) – (1.85) (0.17) 0.28 – (0.52) – – (0.30) (0.40) (0.31) (0.36) – – (0.27) (0.29) (0.59) (0.36) – 0.26 3.71 4.27 0.42 0.66 4.36 5.19 2.59 2.86 0.08 0.14 (0.13) (0.11) 0.02 1.14 20.83 23.00 10.50 7.60 32.54 31.74 30.10 32.01 3.09 3.07 2.10 1.94 (0.33) (0.18) 0.05 – (0.41) – – – – 1.00 – – – – – (0.23) – (1.02) 1.61 0.05 – (0.43) 0.40 5.91 5.73 2.15 1.68 8.43 7.80 6.73 5.89 0.75 0.10 1.66 0.90 (0.15) (0.10) 8.29 – (7.41) – 13.44 – 14.31 7.09 15.49 0.03 0.23 (0.53) (1.18) – 0.21 (0.53) 1.50 1.77 (0.11) 1.14 1.94 0.51 (0.04) (0.00) (0.00) 6.89 (0.77) 0.01 (4.38) (3.36) 6.67 1.61 2.20 3.00 1.80 (0.16) (0.19) 1.87 (0.01) – 0.82 30.66 1.06 1.02 7.77 0.03 0.64 16.23 1.44 0.99 7.41 1.40 6.97 7.13 8.72 5.39 17.03 13.92 23.99 19.69 0.36 0.35 2.70 2.20 (0.57) (0.63) 2.13 7.15 (0.34) (3.31) 13.14 12.87 19.19 16.72 26.78 19.44 0.26 0.18 2.77 1.11 – – 2.77 127.37 (35.57) (42.61) 7.61 4.92 85.88 89.67 – – 12.17 4.51 2.75 3.96 (0.11) (0.12) 2.64 3.83 1.11 1.57 (0.97) 0.80 1.75 (0.06) 0.49 0.58 0.10 0.02 0.01 0.01 5.08 (2.13) (0.42) (5.64) (9.27) 6.76 0.49 1.59 2.70 3.24 (1.01) (0.75) 2.33 26.09 (16.68) (17.32) 16.21 10.60 22.72 19.37 32.65 19.83 0.04 0.04 (1.21) (3.58) (0.15) (0.32) (1.36) (3.90) – – – 1.36 – 0.66 2.82 – 0.72 – – 0.08 – – – – – – – 6.26 0.64 – 2.44 1.38 0.67 – 3.90 – – 0.72 21.45 0.96 – 0.01 Previous Period Current Period Previous Period Current Period Previous Period Current Previous Current Previous Current Previous Current Period Period Period Period Period Period Period Reserves Total Liabilities Total Assets Sales Other Income PBT Tax provision Previous Current Previous Current Previous Current Previous Period Period Period Period Period Period Period – – – 1.05 – 0.61 0.19 0.05 – – – 0.12 – – – – – – – 7.12 0.57 0.05 3.00 0.89 0.71 – 0.76 – – 0.74 6.44 1.26 – 0.08

SUMMARY OF FINANCIAL STATEMENTS OF SUBSIDIARY COMPANIES PURSUANT TO THE APPROVAL UNDER SECTION 212 (8) OF THE COMPANIES ACT, 1956

Subsidiary Name

Currency

Accounting period

Asian Paints (Bangladesh) Ltd.

Taka

Jan to Dec

Asian Paints (International) Ltd.

US $

Jan to Dec

Asian Paints (Middle East) LLC

Oman OR

Jan to Dec

Asian Paints (Nepal) Pvt. Ltd.

Nepal Rs

15th Jan to 14th Jan

Asian Paints (Queensland) Pty. Ltd.

Aus $

Jan to Dec

Asian Paints (S.I.) Ltd.

SI $

Jan to Dec

Asian Paints (South Pacific) Fiji Ltd.

Fiji $

Jan to Dec

Asian Paints (Tonga) Ltd.

$ Top

Jan to Dec

Asian Paints (Vanuatu) Ltd.

Vatu

Jan to Dec

Asian Paints Industrial Coatings Ltd.

INR

Apr to Mar

Asian Paints Lanka Ltd.

SL Rs

Jan to Dec

Asian Paints South Pacific Holdings Ltd.

US $

Jan to Dec

Berger Building Services (Singapore) Pte Ltd.

SG$

Jan to Dec

Berger Contractor (Singapore) Pte. Ltd.

SG$

Jan to Dec

Berger International Ltd.

SG$

Jan to Dec

Berger International Sdn. Bhd.

MYR (Malaysia)

Jan to Dec

Berger Paints (Hong Kong) Ltd.

HK $

Jan to Dec

Berger Paints (China) Co. Ltd.

CNY

Jan to Dec

Berger Paints (Thailand) Ltd.

THB

Jan to Dec

Berger Paints Bahrain W.L.L.

BHD

Jan to Dec

Berger Paints Barbados Ltd

Barbados $

Jan to Dec

Berger Paints Emirates Ltd.

AED

Jan to Dec

Berger Paints Jamaica Ltd.

Jamaican $

Jan to Dec

Berger Paints Singapore Pte. Ltd.

SG$

Jan to Dec

Berger Paints Trinidad Ltd.

Trinidad $

Jan to Dec

Enterprise Paints Ltd.

GBP

Jan to Dec

Lewis Berger (Overseas Holdings) Ltd.

GBP

Jan to Dec

Maxbhumi Developers Limited

INR

Apr to Mar

Nirvana Investments Ltd.

GBP

Jan to Dec

Samoa Paints Ltd.

WST $ (Samoa)

Jan to Dec

SCIB Chemicals S.A.E.

Egyptian pound

Jan to Dec

Taubmans Paints Fiji Ltd.

Fiji $

Jan to Dec

Technical Instruments Manufacturers (India) Ltd.

INR

Apr to Mar

Universal Paints Ltd.

GBP

Jan to Dec

Notes :

1.

Asian Paints (International) Limited disposed of the entire stake in subsidiary, Asian Paints (Queensland) Pty. Ltd. on 30th June, 2007

2.

Maxbhumi Developers Limited was incorporated on 15th November, 2007.

3.

Capital, reserves, total assets and total liabilities have been translated at the rates prevailing at the end of the respective financial years.

4.

Sales, other income, profit before tax, profit after tax and proposed dividend has been translated at average rates prevailing during the respective financial years.

Asian Paints Limited • Annual Report 2007-2008

Corporate Governance Report • Shareholder Information • Annual General Meeting (AGM) Notice

87

Report on Corporate Governance
CoMpANy’S phIloSophy oN CoRpoRAte GoveRNANCe: With the globalization of the economy, corporatisation of enterprises and institutionalization of the capital markets, the freedom and the liberty of the corporate(s) and business institutions have increased manifold together with the responsibility towards the stakeholders. Corporate Governance which encompasses the moral, ethical and legal framework within which an organisation functions has become imperative, today. Your Company has a very strong foundation of the above principles which is reflected in the culture and mindset of the management and its employees. Your Company continues to strengthen on an ongoing basis, its principles of transparency, fairness, integrity and accountability to generate long-term wealth and value for its stakeholders. Your Company is in compliance with all the regulations stipulated by Securities Exchange Board of India (SEBI) in the Listing Agreement. This chapter, along with chapters on Management Discussion and Analysis and Additional Shareholders’ Information, constitutes Asian Paints’ compliance with Clause 49 of the Listing Agreement. BoARd of dIReCtoRS: Composition: The composition of the Board of your Company consists of three (3) Executive Directors and nine (9) NonExecutive Directors, out of which six (6) are Independent Directors. All the Directors, except the three Executive Directors, are liable to retire by rotation and one third of the Directors who are liable to retire by rotation, are eligible for re-election. Number of Board Meetings: During the financial year ended 31st March, 2008, the Board of Directors met 9 times, on the following days:

date(s) on which the meeting(s) were held: 10th May, 2007 26th May, 2007 30th July, 2007 19th October, 2007 3rd November, 2007 29th January, 2008 3rd February, 2008 24th March, 2008 29th March, 2008

The Board of Directors meet at least once in every four months and the maximum time gap between two meetings does not exceed four months. The date(s) on which the quarterly and annual results are proposed to be declared in the next financial year are determined in advance and published elsewhere in the Annual Report. Additional meetings are convened as and when necessitated.

Composition, nature of directorship, the number of meetings attended and the directorships in other companies, of the Board of directors as on 31st March, 2008:
Name of the director Nature of directorship date of joining the Board Attendance directorship in other Companies (*) Membership and Chairmanship of the Committees of the Board of other Companies (**) Committee Member – 6 3 3 3 4 5 9 6 14 3 4 – 2 2 2 – – 5 4 3 10 1 – Committee Chairman – 1 1 – – – 3 3 2 5 – –

At the Board At the Meetings last AGM Ashwin Choksi Ashwin Dani Abhay Vakil Mahendra Choksi Amar Vakil Hasit Dani Tarjani Vakil Dipankar Basu Deepak Satwalekar R. A. Shah S. Sivaram Mahendra Shah Executive Chairman/Promoter Executive Vice Chairman & Managing Director/Promoter Managing Director/Promoter Non-Executive/Promoter Non-Executive/Promoter Non-Executive/Promoter Non-Executive/Independent Non-Executive/Independent Non-Executive/Independent Non-Executive/Independent Non-Executive/Independent Non-Executive/Independent 18.10.1970 (***) 18.10.1970 (***) 01.03.1983 (***) 27.11.1992 01.10.1995 23.07.2001 01.12.1998 15.04.2000 30.05.2000 07.04.2001 07.04.2001 06.06.2001 9 9 9 9 8 9 9 8 8 8 6 9 Yes Yes Yes Yes No Yes Yes Yes No Yes Yes Yes

Note: * Excludes directorship in Asian Paints Limited. Also excludes directorship in Indian Private Limited Companies, Foreign Companies and Alternate Directorships. As per the disclosure(s) received from the Directors, the Directors do not hold directorship in more than 15 Companies. ** For the purpose of considering the limit of the committee memberships and chairmanships of a Director, the Audit Committee and the Shareholders’ Grievance Committee of public listed committees have been considered. As per disclosure(s) received from the Directors, the Directors do not hold Memberships in more than 10 Committees and Chairmanship in more than 5 Committees. *** The Executive Directors are appointed under a service contract which is renewable after five years of appointment, as governed by the agreement(s) entered into with the Company. They were last re-appointed on 18th December, 2003.

88

Asian Paints Limited • Annual Report 2007-2008

BoARd pRoCeduReS: Agenda papers consisting of all the necessary information and material for ensuring effective deliberations and discussions at the meetings of the Board are circulated in advance to all the Directors. The proceedings of every meeting are recorded and minutes are prepared accordingly. The draft minutes is circulated to the members of the Board, for their noting and approval, after which the same is signed by the Chairman. The Board has complete access to all the information and data, relevant to understand the business of the Company in general as well as the agenda items circulated are comprehensive in nature. Following information inter-alia is supplied to the Board on a periodical basis: • • Annual budgets, operating plans and budgets, capital budgets, Quarterly, half yearly and annual results of the Company and its operating divisions or business segments along with the consolidated results of the group, Minutes of meetings of the audit committee and other committee(s) of the Board, Information on recruitment and remuneration of senior officers just below the Board level, Materially important show cause, prosecution and penalty notices, Fatal or serious occurrences, accidents or demand, dangerous

• •

Investment of funds of the Company, Quarterly details of foreign exchange exposure and the steps taken by management to limit the risks of adverse exchange rate movement, Status on legal cases, Proposals for investments, divestments, guarantees, mergers and acquisitions, Approval of related party transactions, Compliance reports of all laws applicable to the Company, Minutes of the meetings of the Board of Directors of unlisted subsidiary companies and statement of all significant transactions and arrangements entered into by the unlisted subsidiary companies, Disclosures made by the senior management personnel as to all material financial and commercial transactions, where they have personal interest. All other information which is relevant for decisionmaking by the Board. loans,

• • • • •

• • • • • •

CoMMItteeS of the BoARd: Currently, there are four Committee(s) of the Board: Audit Committee, Remuneration Committee, Shareholders/ Investors Grievance Committee and Share Transfer Committee. The terms of reference of the Committee(s) detailing their scope of work are determined by the Board from time to time. The Board periodically reviews the minutes of the meetings of Audit Committee, Remuneration Committee and Shareholders/Investors Grievance Committee. Composition, terms of reference, number of meetings and related attendance, etc., of these Committees are detailed. AudIt CoMMIttee: The Audit Committee plays a key role, standing at the intersection of management, independent auditors, internal auditors and the Board of Directors. Audit Committees need to ensure accountability on the part of management and internal and external auditors; make all groups involved in the financial reporting and internal controls process and understand their roles; gain input from the internal auditors, external auditors, and outside experts when needed; and safeguard the overall objectivity of the financial reporting and internal controls process. The Audit Committee of your Company comprises of 3 (Three) Independent Directors. The members of the Audit Committee as on 31st March, 2008, are Ms. Tarjani Vakil (Chairperson), Mr. Dipankar Basu and Mr. Mahendra Shah, all of whom are financially literate.

Any materially significant effluent or pollution problems, Any materially relevant defaults in financial obligations to and by the Company or substantial non-payment for goods sold by the Company, Any issue which involves possible public or product liability claims of a substantial nature, Details of any joint venture or collaboration agreement, Transactions that involve substantial payment towards goodwill, brand equity or intellectual property, Significant labour problems and their proposed solutions, Significant initiatives and developments on the human resource and industrial relations fronts, Sale of a material nature of investments, subsidiaries and assets, which are not in the normal course of business,

• • •

• • •

89

Details as to the date(s) on which the meetings were held and the attendance details of the members of the Committee during the financial year ended 31st March, 2008:
date(s) on which the meeting(s) were held during the financial year 2007-2008 8th May, 2007 26th May, 2007 28th July, 2007 21st September, 2007 17th October, 2007 28th January, 2008
Meeting details Name held during the year 6 6 6 Attended 5 6 5 % of total 83.6% 100% 83.6% Whether attended last AGM (y/N)

Reviewing adequacy of internal audit systems and the internal audit department including the structure, staffing, reporting structure and frequency of internal audit. Discussion with the internal auditors on any significant findings and follow up thereon. Reviewing the Company’s management policies. financial and risk

• • •

Reviewing the internal investigations by the internal auditors into matters where there is a suspected fraud or irregularity or failure of internal control systems of a material nature and reporting the matter to the Board. Discussion with the statutory auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern. Reviewing reports furnished by the internal auditors and statutory auditors and ensuring suitable follow up thereon. Looking into reasons for substantial defaults in payment to the depositors, debenture holders, shareholders and creditors. Reviewing the appointment and terms of remuneration of the Chief Internal Auditor of the Company.

Tarjani Vakil (Chairperson) Mahendra Shah Dipankar Basu

Y Y Y

The role of the Audit Committee inter-alia includes the following: • Overseeing the Company’s financial reporting process and the disclosure of its financial information to ensure that the financial statements are correct, sufficient and credible. Recommending to the Board, the appointment, reappointment and, if required, the replacement or removal of the statutory auditor, fixing of audit fees and approving payments for any other service. Reviewing, with the management, the annual financial statements before submission to the Board for approval, with particular reference to: • Matters required to be included in the Directors’ Responsibility Statement to be included in the Board’s report as per Section 217(2AA) of the Companies Act, 1956; Changes in the Accounting policies and practices and the reasons for the same, major accounting entries and significant adjustments made in the financial statements arising out of audit findings; Compliance with listing and other legal requirements relating to financial statements; Disclosure of any related party transactions; and Qualifications in the draft audit report, if any.

Apart from the above, the Committee also reviews the Management Discussion and Analysis of the financial condition and results of operations, the financial statements and investments made by the unlisted subsidiary companies and any other matter which may be a part of its terms of reference or referred to by the Board of Directors. The Executive Chairman, Vice-Chairman and Managing Director, Chief Financial Officer & Company Secretary, General Manager – Accounts and Taxation, Financial Controller, Statutory Auditor(s) and Chief Internal Auditor are special invitees to the meetings of the Audit Committee. The Chief Financial Officer & Company Secretary acts as Secretary to the Committee. The composition, procedures, role, powers and the terms of reference of the Audit Committee are as stipulated in Section 292A of the Companies Act, 1956 and the Clause 49 of the Listing Agreement. ReMuNeRAtIoN CoMMIttee: Composition and terms of reference: The Committee, comprising of Independent Directors, determines and recommends to the Board, the remuneration payable to the Executive Directors of the Company. The members of the Committee are Mr. Dipankar Basu (Chairman), Ms. Tarjani Vakil and

• • • •

Reviewing with management quarterly and halfyearly financial statements before submission to the Board for approval. Reviewing with the management performance of statutory and internal auditors.

90

Asian Paints Limited • Annual Report 2007-2008

Mr. Deepak Satwalekar. The Committee met once during the financial year 2007-2008 on 10th May, 2007, wherein all the members except Mr. Dipankar Basu were present. The terms of reference of the Remuneration Committee are as follows: • To review and recommend to the Board, the salaries, commission, other benefits, service agreements and employment conditions of Executive Directors. To approve the selection, appointment and remuneration of relatives of Directors for holding an office of profit pursuant to Section 314 of the Companies Act, 1956.

five years and in accordance with the terms of their agreements, their appointments can be terminated by giving six months notice in writing. Their remuneration structure comprises of salary, house rent allowance, commission, perquisites, etc. No severance is payable to the Directors on termination of employment. Non-Executive Directors: The Non-Executive/Independent Directors of the Company play a crucial role for ensuring the quality of corporate governance in a Company. They constitute a necessary component of a balanced Board structure where the indepth knowledge of the Executive Directors is blended with the wider experience, unbiased opinions and knowledge of the Independent Directors. The contribution of the NonExecutive Directors is rewarded by paying commission on the basis of their performance and their commitment towards attending the meetings of the Board. The commission paid to the Non-Executive Directors of the Company is within the limits set under Section 309 of the Companies Act, 1956 and the limits approved by the shareholders at their meeting held on 28th June, 2004. The commission payable is determined as a percentage to the profits (as determined under Section 349 and 350 of the Companies Act, 1956) of the Company. Apart, from commission the Non-Executive Directors are also paid sitting fees of Rs. 10,000 per meeting, for attending the meeting(s) of the Board of Directors and Committees thereof, except for attending the meeting(s) of the Share Transfer Committee. The Company has not granted any Stock Options to any of its Directors. The table below signifies the relationship of the Directors with each other as required to be disclosed in terms of the amendment to Clause 49 of the Listing Agreement vide a circular of the Securities Exchange Board of India dated 8th April, 2008.

ReMuNeRAtIoN polICy: The remuneration policy of the Company is based on the fundamental rule of rewarding performance as against benchmarked objectives. The policy is revised from time to time to make it commensurate with the Industry standards. The objective of the Company is to attract, retain, develop and motivate talent within the organisation. details of the remuneration paid to the directors of the Company are as follows: executive directors: The three Executive Directors of the Company are paid remuneration on the basis of the recommendation of the Remuneration Committee to the Board. Their position in the Company is bound by agreements entered into with the Company, which are approved by the Board of Directors as well as the shareholders of the Company, containing the terms and conditions of their employment and their remuneration. The Executive Directors were re-appointed on 18th December, 2003, for a period of

Remuneration paid to the directors and their relationship with each other
Name of the director Ashwin Choksi Ashwin Dani Abhay Vakil Mahendra Choksi Amar Vakil Hasit Dani Tarjani Vakil Dipankar Basu Deepak Satwalekar R. A. Shah S. Sivaram Mahendra Shah Relationship with each other Brother of Mahendra Choksi Father of Hasit Dani Brother of Amar Vakil Brother of Ashwin Choksi Brother of Abhay Vakil Son of Ashwin Dani ** ** ** ** ** ** Salary 30,79,800 30,79,800 30,79,800 – – – – – – – – – hRA 12,31,920 12,31,920 12,31,920 – – – – – – – – – perquisites* 48,50,160 51,34,166 48,59,400 – – – – – – – – – Sitting fees – – – 1,00,000 80,000 1,00,000 1,50,000 1,30,000 90,000 80,000 60,000 1,60,000 Commission 1,00,00,000 1,00,00,000 1,00,00,000 9,00,000 9,00,000 9,00,000 11,00,000 11,00,000 9,00,000 9,00,000 9,00,000 11,00,000

(Figures in Rs.)
total 1,91,61,880 1,94,45,886 1,91,71,120 10,00,000 9,80,000 10,00,000 12,50,000 12,30,000 9,90,000 9,80,000 9,60,000 12,60,000

Note: * Perquisites include Company’s contribution to provident and superannuation fund, medical and leave travel allowance etc., as well as monetary value of perquisites as per Income Tax rules. ** There is no relationship between any of the Independent Directors

91

Directors with materially significant, pecuniary or business relationship with the Company: The transactions with related parties are furnished under Schedule ‘M’ of the Notes to the Accounts as stipulated under Accounting Standard 18 (AS-18). There are no transactions of material nature with the Promoter Directors or their relatives etc., which may have a potential conflict with the interest of the Company. Disclosures have also been received from the Directors and the Senior Managerial Personnel relating to the financial transactions in which they or their relatives may have a personal interest. However, none of these transactions have a potential conflict with the interest of the Company. The Register of Contracts required to be maintained under Section 301 of the Companies Act, 1956, containing the contracts in which the Directors are concerned and interested is placed at the meeting of Board of Directors of the Company for their approval and noting, on a periodical basis. No pecuniary or business relationship exists between the Non-Executive Directors and the Company, except for the commission payable to them annually. Mr. R. A. Shah, Independent Director of the Company, is a senior partner of M/s. Crawford Bayley & Co., Solicitors & Advocates, of the Company, which renders professional services to the Company. The quantum of fees paid to M/s. Crawford Bayley & Co, is an insignificant portion of their total revenue, thus, M/s. Crawford Bayley & Co, is not be construed to have any material association with the Company. Employees holding an office or place of profit in the Company pursuant to Section 314 of the Companies Act, 1956, who are relatives of the directors: Mr. Jalaj Dani, son of Mr. Ashwin Dani, Vice Chairman & Managing Director, holds the position of President – International Business Unit and had drawn a gross remuneration of Rs. 76,90,602/- p.a. (Rupees Seventy Six Lakhs Ninety Thousand Six Hundred and Two only), during the financial year 2007-2008. Mr. Manish Choksi, son of Mr. Mahendra Choksi, Non-Executive Director, holds the position of Chief – Corporate Strategy & CIO and had drawn a gross remuneration of Rs. 77,03,468/p.a. (Rupees Seventy Seven Lakhs Three Thousand Four Hundred and Sixty Eight only), during the financial year 2007-2008. Ms. Nehal Vakil, daughter of Mr. Abhay Vakil, Managing Director, holds the position of a Manager – Business Process Renovation and had drawn a gross remuneration of Rs. 12,19,218/- p.a. (Rupees Twelve Lakhs Nineteen Thousand Two Hundred and Eighteen only), during the financial year 2007-2008. The appointment and the terms and conditions as to remuneration payable to Mr. Jalaj Dani, Mr. Manish Choksi and Ms. Nehal Vakil were approved by the shareholders at the Annual General Meeting held on 27th June, 2005, as well as the Central Government.

During the financial year ended 31st March, 2008, Mr. Vishal Choksi, son of Mr. Shailesh Choksi, a relative of Company’s Directors Mr. Ashwin Choksi and Mr. Mahendra Choksi, held the position of a Management Trainee for part of the year and drew a remuneration for an amount not exceeding Rs. 4,24,610/- p.a. (Rupees Four Lakhs Twenty Four Thousand Six Hundred and Ten only). He separated from the Company on 5th February, 2008. The Company at the Annual General Meeting held on 26th June, 2007, had approved his appointment in terms of Section 314(1)(b) of the Companies Act, 1956, and Directors’ Relatives (Office or Place of Profit) Rules, 2003. Your Directors have proposed, based on the recommendation of the Remuneration Committee, revision in remuneration payable to Mr. Jalaj Dani, President – International Business Unit, Mr. Manish Choksi, Chief – Corporate Strategy & CIO and Ms. Nehal Vakil, Manager – Business Process Renovation, with effect from 1st April, 2008, in accordance with Section 314 and any other applicable provisions of the Companies Act, 1956, subject to approval of the shareholders at the ensuing Annual General Meeting and approval of the Central Government.
Shareholding of the Non-Executive/Independent Directors of the Company as on 31st March, 2008
Name of the director Mahendra Choksi Amar Vakil Hasit Dani Tarjani Vakil Dipankar Basu Nature of directorship Non-executive/ Promoter Non-executive/ Promoter Non-executive/ Promoter Non-executive/ Independent Non-executive/ Independent No of shares held* 1,65,638 10,64,021 5,15,560 Nil Nil Nil Nil Nil Nil 17,45,219 percentage to the paid up capital 0.173 1.109 0.537 Nil Nil Nil Nil Nil Nil 1.819

Deepak Satwalekar Non-executive/ Independent R. A. Shah S. Sivaram Mahendra Shah Total Non-executive/ Independent Non-executive/ Independent Non-executive/ Independent

* As per the declarations made to the Company by the Directors as to the shares held in their own name.

ShAReholdeRS/INveStoRS GRIevANCe CoMMIttee: The Board has constituted Shareholders/Investors Grievance Committee, chaired by a Non-Executive Director/Independent Director to specifically look into the redressal of shareholders complaints. The members of the Committee are Mr. Mahendra Shah, Chairman, Mr. Abhay Vakil, Mr. Mahendra Choksi and Mr. Hasit Dani.

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Asian Paints Limited • Annual Report 2007-2008

During the financial year ended 31st March, 2008, the Committee met once on 17th October, 2007 and all the members of the Committee were present in the meeting. The terms of reference of the Committee include the following: • • • To specifically look into complaints received from the shareholders of the Company. To oversee the performance of the Registrar and Transfer Agent of the Company. To recommend measures for overall improvement in the quality of services to the investors.

• • • •

To effect transfer of shares; To effect transmission or deletion of shares; To issue duplicate share certificates as and when required; To approve the register of members as on the record date(s) and/or book closure dates for receiving dividends and other corporate benefits; To review correspondence with the shareholders and take appropriate decisions in that regard; and To redress complaints from shareholders from time to time.

• •

Mr. Jayesh Merchant, Chief Financial Officer & Company Secretary is the Compliance Officer of the Company as per the Listing Agreement. Details pertaining to the number of complaints received and resolved and the status thereof during the financial year ended 31st March, 2008 are given as follows:
Nature of Complaints Received during the year 1 5 4 9 5 24 Addressed during the year 1 5 4 9 5 24

The Committee, in accordance with Clause 49 (IV) (G), attends to the share transfer and other formalities once in a fortnight and has met 26 times during the financial year 2007-2008. SuBSIdIARy CoMpANIeS: Your Company In terms of Clause 49 (III) of the Listing Agreement, does not have a material non-listed Indian subsidiary company, whose turnover or net worth exceeds 20% of the consolidated turnover or networth respectively, of the Company and its subsidiaries in the immediately preceding accounting year. The Audit Committee reviews the financial statements including investments by the unlisted subsidiary Companies of the Company. Also, copies of the minutes of the subsidiary companies of the Company are placed before the Board of the Company on a periodical basis. Ceo /Cfo CeRtIfICAtIoN: As required by Clause 49(V) of the Listing Agreement, the CEO/CFO Certificate signed by Mr. Ashwin Choksi, Chairman and Mr. Jayesh Merchant, Chief Financial Officer & Company Secretary was placed before the Board of Directors at their meeting held on 9th May, 2008. GeNeRAl Body MeetINGS:
venue and the time of the last three Annual General Meetings of the Company
year location Meeting time date No. of Special Resolutions set out at the AGM 2

Non receipt of Share Certificates lodged for transfer Non receipt of Dividend warrants Non receipt Share Certificate(s) lodged for split/Bonus shares Letters received from Stock Exchange(s) Others/miscellaneous Total

All the complaints as at the end of financial year 31st March, 2008, were duly addressed and no complaints are pending for redressal except where they are constrained by dispute or legal impediments or due to incomplete or non submission of documents by the shareholders. Certain Court cases are pending in the Courts/Consumer Forums, relating to disputes over the titles to the shares of the Company in which either the Company has been made a party or necessary intimation thereof has been received by the Company. The Company shall comply with the decrees or orders of the Hon’ble Courts pertaining to these cases as when the same are received by the Company. ShARe tRANSfeR CoMMIttee: The Share Transfer Committee, comprising of the three Executive Directors and the Company Secretary, is constituted to facilitate processing of transfers, transmissions, deletion, etc., more expeditiously by the Company in co-ordination with Sharepro Services (India) Private Limited, the Company’s Registrar and Transfer Agent. The Share Transfer Committee has been delegated powers to administer the following:

2006-2007 Yashwantrao Chavan 26th Pratisthan Auditorium, June, Y.B. Chavan Centre, 2007 General Jagannath Bhosle Marg, Next to Sachivalaya Gymkhana, Mumbai 400021 2005-2006 Patkar Hall, Nathibai Thackersey Road, New Marine Lines, Mumbai 400 020 2004-2005 Patkar Hall, Nathibai Thackersey Road, New Marine Lines, Mumbai 400 020 26th June, 2006 27th June, 2005

3.00 p.m.

3.00 p.m.

NIL

3.00 p.m.

7

All special resolutions set out in the notices for the AGMs were passed by the shareholders at the respective

93

meetings with requisite majority. There were no resolutions passed through postal ballot during the financial year ended 31st March, 2008. dISCloSuReS: • Disclosures on materially significant related party transactions: The Company has not entered into any other transaction of a material nature with the Promoters, Directors or the Management, their subsidiaries or relatives etc. that may have potential conflict with the interest of the Company at large. All transactions were carried out on an arms length basis and were not prejudicial to the interest of the Company. • Details of non-compliance(s) by the company: The Company has complied with all the requirements of the Stock Exchange(s) or Securities Exchange Board of India on matters related to Capital Markets, as applicable from time to time. There were no penalties imposed or strictures passed against the Company by the statutory authorities in this regard. • Disclosure of Accounting Treatment: The Company follows Accounting Standards prescribed by the Companies (Accounting Standards) Rules, 2006 and relevant provisions of the Companies Act, 1956 and in preparation of financial statements, the Company has not adopted a treatment different from that prescribed in the Accounting Standard(s). • Details of compliance with mandatory and nonmandatory requirements of Clause 49 of the Listing Agreement: Your Company has complied with all the mandatory requirements of the revised Clause 49 of the Listing Agreement. Following is the status of the compliance with the Non-Mandatory requirements of the Clause 49 of the Listing Agreement: • The Company has constituted a Remuneration Committee. The Remuneration Committee determines the remuneration payable to the Executive Directors of the Company. The Chairman of the Committee was present at the Annual General Meeting of the Company held on 26th June, 2007. Half-yearly results of the Company are sent to all shareholders. During the year under review, there was no audit qualification in the Company’s financial statements. The Company continues to adopt best practices to ensure a regime of unqualified financial statements.

The Board of Directors at their meeting held on 25th March, 2005, had adopted a Code of Conduct for all the Board Members and senior management personnel of the Company in consonance with the requirement under Clause 49(I)(D) of the Listing Agreement. The code of conduct has been posted on the website of the Company. All the Board members and the senior management personnel have affirmed their compliance with the said code of conduct for the financial year ended 31st March, 2008. The declaration to this effect signed by Mr. Ashwin Choksi, Chairman of the Company forms part of the report. • Code of Conduct for Prevention of Insider Trading. Your Company has adopted a Code of Conduct for Prevention of Insider Trading, in accordance with the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992. Mr. Jayesh Merchant, Chief Financial Officer & Company Secretary is the Compliance Officer. All the Directors, senior management personnel and such other designated employees of the Company who are expected to have access to unpublished price sensitive information relating to the Company are covered under the said code. The Directors, their relatives, senior management personnel, designated employees etc. are restricted in purchasing, selling and dealing in the shares while possession of unpublished price sensitive information about the Company as well as during certain periods known as “Quiet Period”. • Management Discussion and Analysis. This annual report has a detailed section on Management Discussion and Analysis. MeANS of CoMMuNICAtIoN: The quarterly results of Company are published in all India editions of Business Standard and Mumbai editions of Free Press Journal and Navshakti. The results of the Company are also put up on the Company’s corporate website: www.asianpaints.com. The Company’s official news releases and presentations made to the institutional investors and analysts are also available on the Company’s website. All important information pertaining to the Company is also mentioned in the Annual Report of the Company containing inter-alia Audited Accounts, Consolidated Financial Statements, Directors’ Report, Auditors’ Report and the Corporate Governance Section which is circulated to the members and others entitled thereto for each financial year. As per the Securities and Exchange Board of India circular No. SEBI/CFD/DIL/LA/4/2007/27/12 dated 27th December, 2007 pertaining to the Amendments in the Listing Agreement, Clause 51 relating to EDIFAR filing has been removed and a new Clause 52, which

• •

Code of Conduct for the Board of Directors and senior management personnel.

94

Asian Paints Limited • Annual Report 2007-2008

deals with filing of the Annual Report, quarterly results, shareholding pattern etc. through Corporate Filing and Dissemination System (CFDS) with the Stock Exchanges, has been introduced. The necessary filings as required have been made through CFDS by the Company and are posted on the website: www.corpfiling.co.in.
Ms. tarjani vakil Ms. Tarjani Vakil has contributed immensely for almost 40 years in the field of Development Banking. She retired in October 1996 as Chairperson and Managing Director of Export - Import Bank of India (‘EXIM Bank”). Ms. Vakil was actively involved in extensive interaction with multilateral agencies for initiation of an informed annual dialogue among heads of Export Credit Agencies in Asia and Australia. Ms. Vakil has been a member consultant for carrying a study of the feasibility for establishment of an Export Credit Guarantee facility for GCC Countries for establishment of Export-Import Bank of Malaysia and other developing countries of Asia and Africa. Ms. Vakil has won several awards including Mahila Shiromani, CEO of the Year, Woman of the Year, etc. She was also ranked as the highest woman official in Banking in Asia and named in the 50 world - class women executives in the 1996 Survey conducted by KPMG Peat Marwick, USA. After retirement, Ms. Vakil, is serving as a Director on a number of Body Corporate(s). 1st December, 1998 date of joining the Board • i-flex Solutions Limited directorships and Member - Audit Committee Committee Chairperson - Shareholder Memberships Grievance Committee in other • Idea Cellular Limited Companies Member – Audit Committee • Mahindra Intertrade Limited Chairperson - Audit Committee • Aditya Birla Nuvo Limited Chairperson – Audit Committee • Alkyl Amines Chemicals Limited profile of the director

DISCloSurES rEgarDINg rE-appoINtMENt of DIrECtorS: As per the Companies Act, 1956, at least two-thirds of the Board should consist of retiring Directors. Of these, one-third of the retiring Directors are required to retire every year. All the Directors, excepting the three Executive Directors are liable to retire by rotation.
Mr. dipankar Basu Mr. deepak Satwalekar Mr. Deepak Satwalekar is a B.Tech. from the Indian Institute of Technology (IIT), Bombay and has completed his post graduation in business administration from the American University, Washington DC. He was appointed as a Dy. Managing Director of HDFC in 1990 and became Managing Director in 1993. Presently he holds the position of Managing Director & CEO of HDFC Standard Life Insurance Co. Ltd. Has been a consultant to the World Bank, the Asian Development Bank, United States Agency for International Development (USAID) and the United Nations Centre for Human Settlement (HABITAT). He was involved in policy work as a member of the Steering Committee on Urban Infrastructure and Housing for the Ninth Five Year Plan of the Govt. of India and Chairman of the Working Group on avoidance of conflict of interest in the financial services sector set up by the Reserve Bank of India.

Details of the Directors retiring by rotation at the ensuing annual general Meeting, as required pursuant to Clause 49(IV): Mr. Dipankar Basu retired as Chairman, State Bank of India (SBI) in August 1995. As Chairman of India’s largest Bank, he concurrently chaired the Boards of 10 commercial banking subsidiaries of SBI (seven in India and one each in UK, Canada and USA) and three nonbanking subsidiaries. Joining SBI in 1956, after obtaining a Master’s degree in Economics from Delhi University, Mr. Basu spent his entire professional career with SBI, serving in India as well as in the U K. In India, he spearheaded the Bank’s entry into investment banking and mutual fund businesses and was responsible for setting up SBI Capital Markets Limited, and SBI Mutual Fund. While serving as Chairman, SBI, Mr. Basu served on the Boards of several apex financial institutions of India (e.g. IDBI, Export Import Bank of India, General Insurance Corp. of India Ltd., National Bank for Agriculture and Rural Development, etc.) as also on the Governing Boards of national level Banking Association and Institutes. After retirement Mr. Basu, has been serving on the Board of several Body Corporate(s). 15th April, 2000 • Securities Trading Corporation of India Limited Chairman – Audit Committee • Deepak Fertilizers & Petrochemicals Corporation Limited Chairman – Shareholders Grievance Committee • Rain CII Carbon (India) Limited Member – Audit Committee • Peerless Securities Limited Chairman – Audit Committee • Peerless General Finance & Investment Company Limited • Saregama India Limited • STCI Primary Dealer Limited • Chambal Fertilizers & Chemicals Limited • Standard Chartered - Capital STCI Capital Markets Limited

30th May, 2000 • Housing Development Finance Corporation Limited Member - Investors Grievance Committee • Infosys Technologies Limited Chairman - Audit Committee • Nicholas Piramal India Limited Chairman – Investors Grievance Committee • HDFC Standard Life Insurance Company Limited • Entertainment Network (India) Limited • Tata Power Company Limited

95

GeNeRAl ShAReholdeR INfoRMAtIoN Annual General Meeting:
date venue time Tuesday, 24th June, 2008 Patkar Hall, Nathibai Thackersey Road New Marine Lines Mumbai 400 020 3.00 p.m

listing: The Company’s shares are listed on: • Bombay Stock Exchange Limited (BSE) Phiroze Jeejeebhoy Towers, 25th Floor, Dalal Street, Mumbai 400 023. National Stock Exchange of India Limited (NSE) Exchange Plaza, 5th Floor, Plot No. C/1 “G” Block, Bandra-Kurla Complex, Bandra (East), Mumbai 400 051

financial calendar: Financial year: 1st April to 31st March. For the year ended 31st March, 2008, results were announced on:
30th July, 2007 19th October, 2007 29th January, 2008 9th May, 2008 First Quarter Half Yearly Third Quarter Fourth Quarter and Annual

For the year ending 31st March 2009, results will be announced:
On or around 22nd July, 2008 On or around 24th October, 2008 On or around 23rd January, 2009 On or around 10th May, 2009 First Quarter Half Yearly Third Quarter Fourth Quarter and Annual

The Company has paid the listing fees for the financial year 2007-2008 to the Stock Exchange(s) on which Company’s shares are listed. The Company has also paid custodial fees for the year 2007-2008 to National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). The International Security Identification Number (ISIN) allocated to the Company by NSDL and CDSL is INE021A01018. The stock exchange codes assigned to your Company’s shares are as follows:
Stock exchange codes: Name of the Stock exchange BSE NSE Code 500820 ASIANPAINT

Book Closure: The dates of book closure are from 14th June, 2008 to 24th June, 2008, inclusive of both days. dividend: An interim dividend of Rs. 6.50 per share (65 per cent dividend) was declared on 19th October, 2007 and paid on 30th October, 2007. A final dividend of Rs.10.50 (Rupees Ten and Fifty Paise only) (105 per cent) per share has been recommended on 9th May, 2008 and subject to the approval from the shareholders at the AGM, will be paid after 24th June, 2008, as follows: • to those members whose names appear on the Company’s Register of Members, after giving effect to all valid share transfers in physical form lodged on or before 13th June, 2008. in respect of shares held in electronic form, to those members whose names appear in the statement of beneficial ownership furnished by NSDL and CDSL as at the closing hours of 13th June, 2008.

Stock price data: The monthly high and low prices and volumes of your Company’s shares at Bombay Stock Exchange Limited (BSE) for the year ended 31st March, 2008 are given as follows:
High, low and volumes of asian paints’ shares for 2007-2008
Month high (Rupees) low (Rupees) volume (No of shares) date on which it touched the high date on which it touched the low

April May June July August September October November December January February March

819.90 869.20 900.00 899.25 995.00 1000.05 1120.00 1095.00 1125.00 1319.95 1255.00 1205.00

731.10 751.00 800.00 803.10 860.00 921.65 900.00 953.00 981.00 875.00 1047.10 1072.00

1,67,956 2,84,193 8,07,430 1,30,076 2,86,137 9,46,221 2,80,036 2,83,020 5,94,617 21,60,077 1,69,942 17,73,197

16.04.2007 28.05.2007 04.06.2007 24.07.2007 13.08.2007 26.09.2007 26.10.2007 01.11.2007 31.12.2007 31.01.2008 01.02.2008 19.03.2008

03.04.2007 11.05.2007 29.06.2007 16.07.2007 01.08.2007 21.09.2006 22.10.2007 12.11.2007 03.12.2007 22.01.2008 21.02.2008 03.03.2008

Dividend declared and paid during last five years by the Company: year 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 (interim) * On increased capital percentage 110 85* 95* 125* 130* 65* proportion to capital (in crores) 70.6 81.5 91.1 119.9 124.7 62.3

Note: High and low are in rupees per traded share. Volume is the total monthly volume of trade in Asian Paints shares on BSE.

96

Asian Paints Limited • Annual Report 2007-2008

Chart A shows the comparison of your Company’s share price movement on BSE vis-à-vis the movement of the BSE Sensex for the year 2007-2008: Chart A
Asian Paints Share Price Movement
1500 1350 1200 1050 16500 900 750 600 15000 13500 Dec 07 Oct 07 Jul 07 May 07 Nov 07 Aug 07 Jun 07 Sep 07 Jan 08 Feb 08 Mar 08 Apr 07 12000 22500 21000 19500
Sensex

distribution pattern of Shareholdings as on 31st March, 2008:
Others 24.46% Promoters 49.47%

FIIs 15.04%

18000

Banks, Other Financial Institutions and Insurance Companies 9.06%

Asian Paints

Mutual Funds/UTI 1.96

distribution of Shareholder holdings: The distribution pattern of shareholding of your Company as on 31st March, 2008 by ownership and size class, respectively, is given as follows:
Distribution of shareholding by ownership Category of shareholder total No. of shares percentage of total no. of shares

Asian Paints

Sensex

performance of the Company’s share price as at the beginning and end of the financial year 2007-2008:
performance of the Company’s share price on BSE and NSE (In rs.) Name of the Stock Exchange Price as on 2nd April, 2007 Price as on 31st March, 2008 Change in value % Change BSE 740.65 1199.95 + 459.30 + 62.01% NSE 740.25 1199.90 + 459.65 + 62.09%

(A) (a) (b) (c)

Shareholding of promoter and promoter Group Individuals/Hindu Undivided Family Bodies Corporate Trust total Shareholding of promoter and promoter Group (A) 94,40,770 3,67,71,586 12,41,806 4,74,54,162 9.84 38.34 1.29 49.47

(B) 1) (a) (b) (c) (d) 2) (a) (b)

public shareholding Institutions Mutual Funds/UTI Financial Institutions/Banks Insurance Companies Foreign Institutional Investors Sub-Total(B) (1) Non-Institutions Bodies Corporate Individuals i) Individual shareholders holding nominal share Capital up to Rs. 1 lakh ii) Individual shareholders holding nominal share capital in excess of Rs.1 lakh 1,34,66,894 14.04 68,14,169 7.10 18,76,625 60,127 86,36,852 1,44,30,168 2,50,03,772 1.96 0.06 9.00 15.04 26.07

ShARe tRANSfeR SySteM: The applications and requests received by your Company for transfer of shares held in physical form are processed and the share certificates for the same are sent to the transferee within the stipulated period under the Companies Act, 1956 and the Listing Agreement. A summary of all the transfers, transmissions, deletion requests, etc., approved by the Share Transfer Committee is placed before the Board of Directors from time to time for their review. The Committee ordinarily meets once every fortnight.
Distribution of shareholding of the Company by number of shares held as on 31st March, 2008:
Shareholders Rs. Upto 501 1001 2001 3001 4001 5001 10001 Total Rs. 500 1000 2000 3000 4000 5000 10000 and above Number % to total 39332 5215 1564 471 215 182 219 375 47573 82.68 10.96 3.29 0.99 0.45 0.38 0.46 0.79 100.00 Amount in Rupees 4,76,96,290 4,15,59,370 2,29,83,120 1,18,29,880 76,21,700 82,80,300 1,61,90,390 80,30,36,740 95,91,97,790 % to total

12,36,670

1.29

c) 4.97 4.33 2.40 1.23 0.8 0.86 1.69 83.72 100.00

Individual (Non-Resident individuals) Sub-Total (B) (2) total public Shareholding (B)=(B)(1)+(B)(2) total (A)+(B)

19,44,112 2,34,61,845 4,84,65,617 9,59,19,779

2.03 24.46 50.53 100.00

Details about Company’s dematerialised shares: Number of shares 69384604 % of total shares 72.34% Number of shareholders 32873 % of total shareholders 69.10%

97

Shareholders, who still continue to hold shares in physical form, are requested to dematerialise their shares at the earliest and avail of the various benefits of dealing in securities in electronic/dematerialised form. For any clarification, assistance or information, please contact the Registrar and Transfer Agent of the Company. The shareholders have the option to hold Company’s shares in demat form through the National Securities Depository Limited (NSDL) or Central Depository Securities Limited (CDSL).
Break up of shares in physical and demat form as on 31st March, 2008: No. of Shares Physical Segment Demat Segment NSDL CDSL Total 2,65,35,175 6,82,89,125 10,95,479 9,59,19,779 percentage of shares 27.66 71.20 1.14 100.00

out the Secretarial Audit to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and the total issued and listed capital. This audit is carried out every quarter and the report thereon is submitted to the Stock Exchanges and is also placed before the Board of Directors. The audit, interalia, confirms that the total listed and paid up capital of the Company is in agreement with the aggregate of the total number of shares in dematerialised form (held with NSDL and CDSL) and total number of shares in physical form. electronic Clearing Scheme (eCS) for dividend: The Reserve Bank of India (RBI) has provided an Electronic Clearing Scheme (ECS) to the investors as an option to receive dividend directly through their bank accounts rather than receiving the same in the form of Dividend Warrants. Under this option, an investor’s bank account is directly credited and intimation thereof is sent by the Company to the shareholder. This service provides instantaneous credit to the shareholders account and protects against fraudulent interception and encashment of dividend warrants but also eliminates dependence on the postal system, loss/damage of dividend warrants in transit and correspondence relating to revalidation/issue of duplicate warrants. Shareholders holding shares in physical form: Investors who would like to avail this facility and are holding shares in physical form may send in their ECS Mandate Form, duly filled in to the Company’s Registrar and Transfer Agent, Sharepro Services (India) Private Limited, Satam Estate, Cardinal Gracious Road, Chakala, Andheri (East), Mumbai 400 099 or Sharepro Services (India) Private Limited, 912, Raheja Centre, Free Press Journal Road, Nariman Point, Mumbai 400 021. The ECS mandate form is annexed at the end of the Annual Report. The ECS Mandate instruction should be under the signature of the shareholder(s) as per the specimen signature records lodged with the Company. Shareholders holding shares in electronic/demat form: Investors holding shares in demat or electronic form may send in their ECS mandate to the concerned Depository Participant (DP) directly, in the format prescribed by the DP. Pursuant to the Depository Regulations, the Company is obliged to pay dividend on dematerialised shares as per the details furnished by the concerned DP. The Company or the Registrar and Transfer Agent cannot make any change in such records received from the Depository. SMS alert facility: National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) have announced the launch of SMS alert facility for demat

outstanding GdRs / AdRs / Warrants / Convertible Instruments and their impact on equity: The Company does not have any outstanding GDRs/ADRs/ Warrants/Convertible Instruments as on 31st March, 2008. Details of public funding obtained in the last three years: Your Company has not obtained any public funding in the last three years. other Information: Corporate Identification Number (CIN No.): L24220MH1945PLC004598 History of Ipo/Bonus Issue/allotment of shares of the Company:
Build up of the Company’s share capital:
type of issue year of issue 1982 1982 1985 1987 1992 1996 1996 3:5 1:2 3:5 1:25 Ratio No. of shares – 16,85,185 31,11,111 41,48,148 74,66,666 2,94,000 total cumulative shares (No.) 35,00,000 51,85,185 82,96,296 1,24,44,444 1,99,11,110 3,98,22,220 4,01,16,220

Paid up Capital (Pre-IPO) IPO Bonus issue Bonus issue Bonus issue Bonus issue Issue of shares pursuant to merger with Pentasia Chemicals Limited Bonus issue Bonus issue Cancellation of shares pursuant to merger of Pentasia Investments Limited with the Company

1:1 1,99,11,110

2000 2003 2003

3:5 2,40,69,732 1:2 3,20,92,976 3,59,149

6,41,85,952 9,62,78,928 9,59,19,779

Total paid up capital as on 31st March, 2008

9,59,19,779

Secretarial Audit Report: As stipulated by the Securities and Exchange Board of India, a qualified Practicing Company Secretary carries

98

Asian Paints Limited • Annual Report 2007-2008

account holders whereby investors will receive alerts for debits/credits (transfers) to their demat accounts a day after the debit. These alerts will be sent to those account holders who have provided their mobile numbers to their Depository Participants (DPs). No charge will be levied by NSDL/CDSL on DPs for providing this facility to investors. This facility will be available to investors who request for the same and provide their mobile numbers to the DPs. Further information is available vide NSDL Circular No: NSDL/POLICY/2007/0046 dated August 10, 2007 and on the website of CDSL. Nomination facility: Pursuant to the provision of Section 109A of the Companies Act, 1956, members are entitled to make a nomination in respect of the shares held by them. Members holding shares in physical form and desirous of making a nomination are requested to send their requests in Form 2B (A format is given at the end of the annual report), to the Company’s Registrar and Transfer Agent, Sharepro Services (India) Private Limited, Satam Estate, Cardinal Gracious Road, Chakala, Andheri (East), Mumbai 400 099 or Sharepro Services (India) Private Limited, 912, Raheja Centre, Free Press Journal Road, Nariman Point, Mumbai 400 021. Members holding shares in electronic form are requested to give the nomination request to their respective Depository Participants directly. Consolidation of folios: Members holding shares of the Company in physical form through multiple folios are requested to consolidate their shareholding into single folio, by sending their original share certificates along with a request letter to consolidate their shareholding into a single folio, to the Registrar & Transfer Agent of the Company. unpaid/unclaimed dividend: In terms of Sections 205A and 205C of the Companies Act, 1956, the Company is required to transfer the amount of dividend remaining unclaimed for a period of seven years from the date of transfer to the unpaid dividend account to the Investor Education and Protection Fund (IEPF). Shareholders are requested to ensure that they claim the dividend(s) from the Company before transfer to the Investor Education and Protection Fund.
due dates for transfer of dividend unclaimed to Iepf: financial year unclaimed dividend amount as on 31.3.2008 (Rupees in lakhs) 13.57 12.48 16.42 13.63 22.97 15.26 19.42 due date for transfer to Iepf 27.09.2008 29.11.2008 25.08.2009 22.11.2009 17.08.2010 29.11.2010 27.07.2011

financial year

unclaimed dividend amount as on 31.3.2008 (Rupees in lakhs) 21.05 24.15 22.28 34.34 25.31 28.94 6.49 33.70

due date for transfer to Iepf 26.11.2011 26.07.2012 25.11.2012 25.07.2013 29.11.2013 12.04.2014 25.07.2014 18.11.2014

2004-2005 Interim 2004-2005 Final 2005-2006 Interim 2005-2006 Final 2006-2007 1st interim 2006-2007 2nd interim 2006-2007 Final 2007-2008 Interim

Registrar & transfer Agent: Sharepro Services (India) Pvt. Ltd. is the Registrar & Transfer Agent of the Company. Shareholders, beneficial owners and depository participants (DPs) are requested to send/deliver the documents/correspondence relating to the Company’s share transfer activity etc. to Sharepro Services (India) Pvt. Ltd., Registrar and Transfer Agent of the Company at the following addresses: Sharepro Services (India) pvt. ltd. Unit: Asian Paints Limited Satam Estate, 3rd Floor, Above Bank of Baroda, Cardinal Gracious Road, Chakala, Andheri (E), Mumbai 400 099. Tel. No. 67720300/67720351/67720353 Fax No. 2837 5646 Email: sharepro@vsnl.com Sharepro Services (India) pvt. ltd. Unit: Asian Paints Limited 912, Raheja Centre, Free Press Journal Road, Nariman Point, Mumbai 400 021. Tel. No: 2288 1568, 2288 1569, 2282 5163, 2288 4527 Fax No. 2282 5484 Email: sharepro_services@roltanet.com For the benefit of shareholders, documents will also continue to be accepted at the following office of the Company: Asian paints limited 6A Shantinagar, Santacruz (E) Mumbai - 400 055 Email: investor.relations@asianpaints.com Members are requested to quote their e-mail address, telephone number and full address for prompt reply to their communication. Website: www.asianpaints.com E-mail Id for Investor’s grievances: The e-mail address for investor grievance is investor.relations@asianpaints.com The above e-mail id is disclosed by the Company on its websites and all the various materials, correspondence, publications and communication to the shareholders at large.

2000-2001 Final 2001-2002 Interim 2001-2002 Final 2002-2003 Interim 2002-2003 Final 2003-2004 Interim 2003-2004 Final

99

plant locations: paint plants: Lal Bahadur Shastri Marg, Bhandup, Mumbai 400 078, Maharashtra. Plot No. 2602, GIDC Industrial Area, Ankleshwar 393 002, Gujarat. Plot Nos. 50-55, Industrial Development Area, Phase II, Patancheru 502 309 Dist. Medak, Andhra Pradesh. A-1, UPSIDC Industrial Area, Kasna - II, Kasna Village, Tehsil Sikandarabad, Dist. Bulandshahr 203 207, Uttar Pradesh. SIPCOT Industrial Park, Plot No. E6-F13, Sriperumbudur 602 105, Kancheepuram District, Tamil Nadu. phthalic plant: Plot No. 2702, GIDC Industrial Area, Ankleshwar 393 002, Gujarat. penta plant: B5-B10, Sipcot Industrial Complex, Cuddalore 607 005, Tamil Nadu. taloja plant: Plot No. 3/2, MIDC, Taloja, Raigad 410 208 Maharashtra Address for Correspondence: registered office: Asian Paints Limited 6A, Shantinagar, Santacruz (East), Mumbai 400 055. Tel: +91-(0)22-3981 8000 Fax: +91-(0)22-3981 8888 deClARAtIoN of CoMplIANCe WIth the Code of CoNduCt I hereby confirm that the Company has obtained from all the members of the Board and Senior Management Personnel, affirmation that they have complied with the Code of Conduct for Board Members and Senior Management Personnel in respect of the financial year ended 31st March, 2008.

AudItoRS’ CeRtIfICAte oN CoRpoRAte GoveRNANCe TO THE MEMBERS OF ASIAN PAINTS LIMITED We have examined the compliance of conditions of Corporate Governance by Asian Paints Limited (‘the Company’) for the year ended 31 March, 2008 as stipulated in Clause 49 of the Listing Agreement of the Company entered into with the stock exchanges in India. The compliance of conditions of Corporate Governance is the responsibility of the Company’s management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, and the representations made by the Directors and the Management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement. We state that no investor grievances are pending for a period exceeding one month against the Company as per the records maintained by the Shareholders/Investors Grievance Committee. 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 Shah & Co. Chartered Accountants Ashish Shah Partner Membership No. 103750 Mumbai 9th May, 2008

For BSR & Associates Chartered Accountants Natrajan Ramkrishna Partner Membership No. 32815

Ashwin Choksi Chairman Mumbai 9th May, 2008

100

Registered Office: 6 A, Shanti Nagar, Santacruz (E), Mumbai - 400 055. E-mail: investor.relations@asianpaints.com PAYMENT OF DIVIDEND THROUGH ELECTRONIC CLEARING SERVICE (ECS) Securities and Exchange Board of India (SEBI) has made it mandatory for all the companies to use the bank account details furnished by the investors for distributing dividends through Electronic Clearing Service (ECS) to the investors wherever ECS and bank details are available. In the absence of ECS facility, the companies are required to print the bank account details, if available, on the payment instrument, for the distribution of dividends to the investors. Sailent features of the scheme: • Instant Credit This facility provides instant credit of dividend amount to your bank account electronically at no cost. ECS also eliminates the delay in postal transit and fraudulent encashment of warrants. • Coverage ECS through RBI clearing is presently available at Mumbai, New Delhi, Kolkata, Chennai, Ahmedabad, Bangalore, Hyderabad, Kanpur, Nagpur, Jaipur, Chandigarh, Patna, Bhubaneshwar, Guwahati and Thiruvananthapuram. • Procedure for Credit Under this facility, the amount of dividend payable to you would be directly credited to your bank account. Your bank branch will credit your account and indicate the credit entry as ‘ECS transaction’ in your passbook/statement of account. In case ECS facility is not made available to you by the Company/their Bankers at a particular centre the dividend amount due to you would be remitted by means of a dividend warrant which would be posted to your address with the particulars of the bank branch and account number furnished by you duly incorporated on it. If you wish to avail of this facility and hold shares in physical form, kindly fill in the Form printed overleaf and return the same alongwith a xerox copy of the cancelled cheque pertaining to the Bank Account where you would like the amount to be credited to the following address: Sharepro Services (India) Pvt. Ltd. Unit: Asian Paints Limited Satam Estate, 3rd Floor, Above Bank of Baroda, Cardinal Gracious Road, Chakala, Andheri (E), Mumbai 400 099. Tel. No. : 6772 0300, 6772 0351, 6772 0353 Please send the same to the above mentioned address to enable us to credit the future dividend entitlements to your account through ECS. This arrangement is subject to the RBI guidelines issued from time to time. Bank particulars to be incorporated on warrants If you do not wish to opt for ECS facility, we request you to provide us your bank details for printing the same on the dividend warrants which will be mailed to you in future, in the space provided overleaf. In case you have already furnished these particulars and if there is any change/correction in the same, kindly fill up the required details. In case you have dematerialised your shares and hold shares in electronic form, kindly convey necessary bank details to your Depository Participant. All queries to be addressed to the Company’s Registrar & Transfer Agent: SHAREPRO SERVICES (INDIA) PVT. LTD. Unit: Asian Paints Limited Satam Estate, 3rd Floor, Above Bank of Baroda, Cardinal Gracious Road, Chakala, Andheri (E), Mumbai 400 099. Tel. No. : 6772 0300, 6772 0351, 6772 0353 Fax No. : 2837 5646 E-mail : sharepro@vsnl.com SHAREPRO SERVICES (INDIA) PVT. LTD. Unit: Asian Paints Limited 912, Raheja Centre, Free Press Journal Road, Nariman Point, Mumbai 400 021. Tel. No. : 2288 1568, 2288 1569, 2282 5163, 2288 4527 Fax No. : 2282 5484 E-mail : sharepro_services@roltanet.com

Asian Paints Limited

E-mail Id Telephone No.: Sharepro Services (India) Pvt. Ltd. Unit : Asian Paints Limited Satam Estate, 3rd Floor, Above Bank of Baroda, Cardinal Gracious Road, Chakala, Andheri (E), Mumbai 400 099. Dear Sirs, I request you to register the bank details against my account as given below: FOLIO NO. NAME(S) OF THE HOLDERS ACCOUNT TYPE ACCOUNT NO. : : : : SAVINGS CURRENT CASH CREDIT STD Code Tel. No.

(PLEASE TICK FOR THE FACILITY YOU OPT) 1. 2. 3*. Mail the warrant directly to the bank. Mail the warrant at my registered address with the bank particulars incorporated. Directly credit to the account through Electronic Clearing System (ECS).

* If opted for ECS, kindly provide the following information: 9 DIGIT CODE NUMBER OF THE BANK AND BRANCH AS APPEARING ON THE MICR CHEQUE ISSUED BY THE BANK LEDGER FOLIO NO. (IF ANY) OF YOUR ACCOUNT. (in case if you have opted for ECS, affix photocopy of your cancelled cheque here)

I hereby declare that the particulars given are correct and complete. If the payment transaction through ECS is delayed or not effected at all for any reasons, I would not hold the Company or the Registrar & Transfer Agent responsible.

Date: ________________

_________________ Signature

FORM 2B
[Rule 5 D of Companies (Central Govt.’s) Rules & Forms)]

NOMINATION FORM
(To be filled in by individual applying singly or jointly) I/We ______________________________________________________________________________ the holder(s) of Equity Shares bearing Folio Number and accruals thereon of Asian Paints Limited wish to make a nomination and do hereby nominate the following person in whom all rights of transfer and/or amount payable in respect of shares shall vest in the event of my/our death. Name and Address of the nominee Name : ______________________________________________________________________________________________________ Address : ______________________________________________________________________________________________________ ____________________________________________________________________ Phone : __________________________ Date of Birth* : ______________________ (to be furnished in case the nominee is minor) * The nominee is a minor whose guardian is – Name and address of the guardian _____________________________________________________________________________ ________________________________________________________________________________________________________________ ________________________________________________________________________________________________________________ Signature(s) of Holder(s) Signature : ______________________________________ (1st Holder) Name Address Date : ______________________________________ : ______________________________________ ______________________________________ : ______________________________________ Name and Address 1. 2. Instructions : 1. The nomination can be made by individuals only applying/ holding shares/ on their own behalf singly or jointly upto two persons. Non-individuals including society, trust, body corporate, partnership firm, Karta of Hindu Undivided Family, holder of Power of Attorney cannot nominate. If the securities are held jointly, all joint holders will sign the nomination form. 2. A minor can be nominated by holders of shares/and in that event the name and address of the Guardian shall be given by the holders. 3. The nominee shall not be a trust, society, body corporate, partnership firm, karta of Hindu Undivided Family or a power of attorney holder. A non-resident Indian can be a nominee on repatriable basis, provided RBI approval granted to the nominee is registered with the Company. 4. Nomination shall stand rescinded upon transfer of shares. 5. Transfer of shares/in favour of a nominee and repayment of amount of deposits to nominee shall be valid discharge by a Company against the legal heir. FOR OFFICE USE ONLY Nomination Regn. No. : __________________________ Date of Registration : __________________________ Checked by :____________________________ Signature : ___________________________ Date Signature of two witnesses Signature and date Signature : __________________________________________ (1st Joint Holder, if any) Name Address : __________________________________________ : __________________________________________ __________________________________________ : __________________________________________ ________________________ Signature of Nominee

INSTRUCTIONS
1. Nomination per Folio Nomination for only one folio can be made on this Form. In case you have many folios, then you may take a photocopy of this Form and nominate separately. 2. Signatures The sole/joint holders should sign as per the specimen signature recorded with the Company. Otherwise, the Form is liable to be rejected. 3. Change in Composition of the Account Nomination stand rescinded upon transfer of shares. Whenever the shares in the given folio are transferred/ transposed/ transmitted/ dematerialised/ amalgamated with some other folio, then this nomination stands void. A new Nomination Form will have to be filled in by the person(s) in whose name(s) the shares have been transferred/ transposed/ transmitted/ amalgamated. 4. Electronic Holding The nomination given in the Form would be considered for the physical holding only. In case securities are held in electronic form, then the holder(s) have to approach the Depository Participant for registering their nomination. 5. Accruals and Acquisitions Once a nomination is registered by a Company for a given folio, the same is valid for all future accruals and acquisitions made by the holder(s) in that folio unless notified to the contrary by the holder(s). 6. Validity of Nomination The nomination made through Form 2B will be considered valid and recognised by the Company if the nomination made by the holder(s) of the shares/is registered with the Company before the death of the holder(s) of the shares. 7. Entitlement of Nominee The nominee will be entitled to all the rights in the shares of the Company only in the event of death of the Sole/ all holders in the account. The nominee will be required to approach the Company for transmitting the securities in his/her name and will be required to produce the death certificate of the holder(s), the share certificates and proof of identity as required by the Company. 8. Date of Execution Kindly note that nomination being a legal document should be dated by the nominator and the witnesses certifying that the Form has been signed by the nominator in their presence. Furthermore the date of execution on the Nomination Form should match with the date of witnesses witnessing the document. All queries to be addressed to the Company’s Registrar & Transfer Agent:

SHAREPRO SERVICES (INDIA) PVT. LTD.
Unit: Asian Paints Limited Satam Estate, 3rd Floor, Above Bank of Baroda, Cardinal Gracious Road, Chakala, Andheri (E), Mumbai 400 099. Tel. No. : 6772 0300, 6772 0351, 6772 0353 Fax No. : 2837 5646 E-mail : sharepro@vsnl.com

SHAREPRO SERVICES (INDIA) PVT. LTD.
Unit: Asian Paints Limited 912, Raheja Centre, Free Press Journal Road, Nariman Point, Mumbai 400 021. Tel. No. : 2288 1568, 2288 1569, 2282 5163, 2288 4527 Fax No. : 2282 5484 E-mail : sharepro_services@roltanet.com

Notice
NOTICE is hereby given that the SIXTY-SECOND ANNUAL GENERAL MEETING Of ASIAN PAINTS LIMITED will be held at Patkar Hall, Nathibai Thackersey Road, New Marine Lines, Mumbai 400 020, on Tuesday, 24th June, 2008, at 3.00 p.m. to transact the following business: Ordinary Business: 1. To receive, consider and adopt the accounts for the year ended 31st March, 2008 together with the Reports of the Board of Directors and Auditors’ thereon. To consider and declare payment of final dividend and confirm the interim dividend of Rs. 6.50 per equity share, declared and paid during the financial year ended 31st March, 2008. To appoint a Director in place of Ms. Tarjani Vakil, who retires by rotation and, being eligible, offers herself for re-appointment. To appoint a Director in place of Mr. Dipankar Basu, who retires by rotation and, being eligible, offers himself for re-appointment. To appoint a Director in place of Mr. Deepak Satwalekar, who retires by rotation and, being eligible, offers himself for re-appointment. To appoint Auditors of the Company and to fix their remuneration and in this regard to consider and if thought fit, to pass with or without modification(s), the following resolution as an Ordinary Resolution: “RESOLVED THAT M/s. Shah & Co., Chartered Accountants and M/s. BSR & Associates, Chartered Accountants, be and are hereby appointed as Joint Statutory Auditors of the Company, to hold office from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting of the Company on such remuneration as shall be fixed by the Board of Directors.” Special Business: 7. To consider and if thought fit, to pass with or without modification(s), the following resolution as a Special Resolution: “RESOLVED THAT pursuant to the provisions of Section 31 and all other applicable provisions, if any, of the Companies Act, 1956 or any rules or regulations thereunder (including any statutory modification(s) or re-enactment thereof, for the time being in force), and subject to such approvals as may be necessary, the Articles of Association (“AOA”) of the Company be and is hereby amended, altered and/or substituted in the manner and to the extent as is set out herein below: i. Under the existing Article 2 of the AOA of the Company, the definition of the term Board or Board of Directors be and is hereby substituted as follows: “Board” or “Board of Directors” means a meeting of the Directors of the Board of the Company or any Committee(s) constituted thereof for any purpose duly called and Asian Paints Limited ....... iii. constituted, or as the case may be, the Directors or any Committee(s) thereof, assembled at the Board collectively. ii. After the existing Article 9, the following new Article to be numbered Article 9A be and is hereby inserted as follows: Issue of further pari passu shares not to affect the right of shares already issued The rights conferred upon the holders of the shares of any class, issued with preferred or other rights shall not unless otherwise expressly provided by the terms of the issue of the shares of that class be deemed to be varied by the creation or issue of further shares ranking pari passu therewith. The existing Article 21A be and is hereby substituted as under. Power of Board of Directors to regulate subdivision or consolidation Notwithstanding anything contained in Article 21, the Board of Directors may in its absolute discretion refuse any application for subdivision or consolidation of share certificate(s) or debenture certificate(s) in denominations of less than the marketable lot except when such subdivision or consolidation is required to be made to comply with a statutory provision or an order of a competent Court or Law. iv. The existing Article 53A be and is hereby deleted. v. The existing Article 56 be and is hereby substituted as follows: Board may refuse to register transfer and notice of such refusal The Board may at its own, absolute and uncontrolled discretion, decline to register or acknowledge any transfer of shares in any cases in which the Company has a lien upon the shares or any of them, or whilst any moneys in respect of the shares desired to be transferred or any of them remain unpaid and such refusal shall not be affected by the fact that the refused transferee is already a member. If the Company refuses to register a transfer of any share or transmission of any right therein, the Company shall within two months from the date on which the instrument of transfer or intimation of transmission was lodged with the Company, send notice of refusal to the transferee and transferor or to the person giving intimation, as the case may be. vi. The existing Article 60 be and is hereby deleted. vii. The existing Article 64 be and is hereby deleted. viii. After the existing Article 65, the following new Article(s) to be numbered Articles 65A to 65F be and are hereby inserted as follows: 65A. Notwithstanding anything contained in these Articles, the Company shall be entitled to dematerialise its securities and to offer securities in a dematerialised form pursuant to the Depositories Act, 1996.

2.

3.

4.

5.

6.

i

65B. Option for investors. Every person subscribing to securities offered by the Company shall have the option to receive the security certificates or to hold the securities with a depository. Such a person who is a beneficial owner of the securities can at any time opt out of the depository, if permitted by the law, in respect of any security in the manner provided by the Depositories Act and the Company shall in the manner and within the time prescribed, issue to the beneficial owner the required certificates of the securities. If a person opts to hold his security with a depository, the Company shall intimate such depository the details of allotment of the security, and on the receipt of the information, the depository shall enter in its record the name of the allottee as the beneficial owner of the security.

in the AOA of the Company and to file such forms, applications, documents with statutory authorities and perform all such other acts, deeds and things as may be necessary or desirable and to sign, execute any application, forms, undertaking or confirmation as may be required by the Registrar of Companies, Maharashtra.” 8. To consider and if thought fit, to pass with or without modification(s), the following resolution as a Special Resolution: “RESOLVED THAT pursuant to the provisions of Section 314 and other applicable provisions, if any, of the Companies Act, 1956 and rules and regulations thereunder, or any statutory modification(s) or any amendment or substitution or re-enactment thereof and subject to the approval of the Central Government, consent of the Company be and is hereby accorded to the revision of the remuneration payable to Mr. Jalaj Dani (a relative of Company’s Directors, Mr. Ashwin Dani and Mr. Hasit Dani) holding an office or place of profit under the Company as President – International Business Unit, at a monthly salary of Rs. 4,15,000 (Rupees Four Lakhs Fifteen Thousand only) and other allowances, perquisites, benefits and amenities as applicable to the Company’s Presidents in the same grade, with effect from 1st April, 2008. RESOLVED FURTHER THAT the Board be and is hereby authorised to make and submit applications to the Central Government or any other statutory authority as may be required, settle any question, difficulty or doubt, that may arise in giving effect to this resolution, do all such acts, deeds, matters and things and sign and execute all documents or writings as may be necessary, proper or expedient for the purpose of giving effect to this resolution and for matters concerned therewith or incidental thereto.” To consider, and, if thought fit, to pass with or without modification(s), the following resolution as a Special Resolution: “RESOLVED THAT pursuant to the provisions of Section 314 and other applicable provisions, if any, of the Companies Act, 1956 and rules and regulations thereunder, or any statutory modification(s) or any amendment or substitution or re-enactment thereof and subject to the approval of the Central Government, consent of the Company be and is hereby accorded to the revision of the remuneration payable to Mr. Manish Choksi (a relative of Company’s Director, Mr. Mahendra Choksi) holding an office or place of profit under the Company as ChiefCorporate Strategy & CIO, at a monthly salary of Rs. 4,15,000 (Rupees Four Lakhs Fifteen Thousand Only) and other allowances, perquisites, benefits and amenities as applicable to the Company’s Presidents in the same grade, with effect from 1st April, 2008. RESOLVED FURTHER THAT the Board be and is hereby authorised to make and submit applications to the Central Government or any other statutory authority as may be required, settle any question, difficulty or doubt, that may arise in giving effect to this resolution, do all such acts, deeds, matters and things and

65C. Rights of Depositories and Beneficial Owners. Notwithstanding anything to the contrary contained in the Act or these Articles, a depository shall be deemed to be the registered owner for the purpose of effecting transfer of ownership of security on behalf of the beneficial owner. Save as otherwise provided, the depository as the registered owner of the securities shall not have any voting rights or any other right in respect of the securities held by it. Every person holding securities in the name of the Company and whose name is entered as the beneficial owner in the records of the depository shall be deemed to be a member of the Company. The beneficial owner of the securities shall be entitled to all the rights and benefits and be subject to all the liabilities in respect of his securities which are held by a depository.

65D. Service of documents. Notwithstanding anything contained in the Act or these Articles to the contrary, where securities are held in a depository, the records of the beneficial owner may be served by such depository on the Company by means of electronic mode or by delivery of floppies or discs. 9.

65E. Transfer of Securities. Nothing contained in Section 108 of the Act or these Articles, shall apply to transfer of securities effected by a transferor and transferee both of whom are entered as beneficial owners in the records of the depository.

65F. Allotment of securities dealt with by a Depository. Notwithstanding anything contained in the Act or these Articles, where securities are dealt with by a depository, the Company shall intimate the details thereof to the depository immediately on allotment of such securities.

RESOLVED FURTHER THAT the Board of Directors (which shall include Committee(s) of the Board of Directors or a representative authorised by the Board) be and are hereby severally authorised to carry out the aforesaid amendments, alteration, substitutions and/or deletion

Asian Paints Limited .......

ii

sign and execute all documents or writings as may be necessary, proper or expedient for the purpose of giving effect to this resolution and for matters concerned therewith or incidental thereto.” 10. To consider, and, if thought fit, to pass with or without modification(s), the following resolution as a Special Resolution: “RESOLVED THAT pursuant to the provisions of Section 314 and other applicable provisions, if any, of the Companies Act, 1956 and rules and regulations thereunder, or any statutory modification(s) or any amendment or substitution or re-enactment thereof and subject to the approval of the Central Government, consent of the Company be and is hereby accorded to revision of the remuneration payable to Ms. Nehal Vakil (a relative of Company’s Director Mr. Abhay Vakil) holding an office or place of profit under the Company as Manager- Business Process Renovation, at a monthly salary of Rs. 56,800 (Rupees Fifty Six Thousand Eight Hundred only) and other allowances, perquisites, benefits and amenities as applicable to the Company’s employees in the same grade, with effect from 1st April, 2008. RESOLVED FURTHER THAT the Board be and is hereby authorised to make and submit applications to the Central Government or any other statutory authority as may be required, settle any question, difficulty or doubt, that may arise in giving effect to this resolution, do all such acts, deeds, matters and things and sign and execute all documents or writings as may be necessary, proper or expedient for the purpose of giving effect to this resolution and for matters concerned therewith or incidental thereto.” 6.

the dividend will be payable on the basis of beneficial ownership as at the close of 13th June, 2008, as per the details furnished by National Securities Depository Limited (NSDL)/Central Depository Services (India) Limited (CDSL) for the purpose as on that date. Members holding shares in physical form are requested to notify/send the following to the Company’s Registrar and Transfer Agent at: Sharepro Services (India) Pvt. Ltd., Unit: Asian Paints Limited, 912, Raheja Centre, Free Press Journal Road, Nariman Point, Mumbai 400 021 or Sharepro Services (India) Pvt. Limited, Satam Estate, 3rd Floor, Above Bank of Baroda, Cardinal Gracious Road, Chakala, Andheri (East), Mumbai 400 099 at the earliest but not later than 13th June, 2008. • • 7. Any change in their address/mandate/bank details; and Particulars of their bank account, in case the same have not been sent earlier.

Members holding shares in the electronic form are advised to inform changes in address/bank mandate directly to their respective Depository Participants. The address/bank mandate as furnished to the Company by the respective Depositories viz., NSDL and CDSL will be printed on the dividend warrants. Members desirous of making a nomination in respect of their shareholding in the Company, as permitted under Section 109A of the Companies Act, 1956, are requested to fill up the form annexed as a part of the Annual Report and send the same to the office of the Registrar and Transfer Agent of the Company. Members are requested to hand over the enclosed Attendance Slip, duly signed in accordance with their specimen signature(s) registered with the Company for admission to the meeting hall. Members who hold shares in dematerialised form are requested to bring their Client ID and DP ID Numbers for identification.

8.

9.

NOTES: 1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE ANNUAL GENERAL MEETING MAY APPOINT A PROXY TO ATTEND AND, ON A POLL, VOTE INSTEAD OF HIMSELF/ HERSELF. A PROXY NEED NOT BE A MEMBER. PROXIES IN ORDER TO BE EFFECTIVE MUST BE RECEIVED BY THE COMPANY AT ITS REGISTERED OFFICE NOT LATER THAN FORTY-EIGHT HOURS BEFORE THE COMMENCEMENT OF THE MEETING. Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956, in respect of the Special Business to be transacted at the Annual General Meeting as set out in the Notice is annexed hereto. The documents referred to in the proposed resolutions are available for inspection at the Registered Office of the Company on working days, during working hours between 11.00 a.m to 1.00 p.m, except holidays. The Register of Members and Share Transfer Books of the Company will remain closed from 14th June, 2008 to 24th June, 2008 (both days inclusive). Dividend recommended by Directors, if approved by the Members at the Annual General Meeting, will be paid after 25th June, 2008 to those members whose names appear on the Register of Members as on 24th June, 2008. In respect of shares held in electronic form,

10. Corporate Members are requested to send to the Company’s Registrar & Transfer Agent, a duly certified copy of the Board Resolution authorising their representative to attend and vote at the Annual General Meeting. 11. In terms of Sections 205A and 205C of the Companies Act, 1956, the amount of dividend remaining unclaimed or unpaid for a period of seven years from the date of transfer to the unpaid dividend account is required to be transferred to the Investor Education and Protection Fund (IEPF). Accordingly, in the year 2008-2009, the Company would be transferring the unclaimed or unpaid Final Dividend for the financial year ended 31st March, 2001 and Interim Dividend for the financial year ended 31st March, 2002, to the Investor Education and Protection Fund on or before 27th September, 2008 and 29th November, 2008, respectively. Shareholders are requested to ensure that they claim the dividend(s) from the Company before transfer of the said amounts to the Investor Education and Protection Fund. 12. Information required under Clause 49 IV G of the Listing Agreement (relating to Corporate Governance) with respect to the Directors retiring by rotation and being eligible seeking re-appointment is as under:

2.

3.

4.

5.

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Ms. Tarjani Vakil Profile of the Director Ms. Tarjani Vakil has contributed immensely for almost 40 years in the field of Development Banking. She retired in October 1996 as Chairperson and Managing Director of Export - Import Bank of India (‘EXIM Bank”). Ms. Vakil was actively involved in extensive interaction with multilateral agencies for initiation of an informed annual dialogue among heads of Export Credit Agencies in Asia and Australia. Ms. Vakil has been a member consultant for carrying a study of the feasibility for establishment of an Export Credit Guarantee facility for GCC Countries for establishment of Export-Import Bank of Malaysia and other developing countries of Asia and Africa. Ms. Vakil has won several awards including Mahila Shiromani, CEO of the Year, Woman of the Year, etc. She was also ranked as the highest woman official in Banking in Asia and named in the 50 world - class women executives in the 1996 Survey conducted by KPMG Peat Marwick, USA. After retirement, Ms. Vakil, is serving as a Director on a number of Body Corporate(s). 1st December, 1998 • i-flex Solutions Limited Member - Audit Committee Chairperson - Shareholder Grievance Committee • Idea Cellular Limited Member – Audit Committee • Mahindra Intertrade Limited Chairperson - Audit Committee • Aditya Birla Nuvo Limited Chairperson – Audit Committee • Alkyl Amines Chemicals Limited

Mr. Dipankar Basu Mr. Dipankar Basu retired as Chairman, State Bank of India (SBI) in August 1995. As Chairman of India’s largest Bank, he concurrently chaired the Boards of 10 commercial banking subsidiaries of SBI (seven in India and one each in UK, Canada and USA) and three nonbanking subsidiaries. Joining SBI in 1956, after obtaining a Master’s degree in Economics from Delhi University, Mr. Basu spent his entire professional career with SBI, serving in India as well as in the U K. In India, he spearheaded the Bank’s entry into investment banking and mutual fund businesses and was responsible for setting up SBI Capital Markets Limited, and SBI Mutual Fund. While serving as Chairman, SBI, Mr. Basu served on the Boards of several apex financial institutions of India (e.g. IDBI, Export Import Bank of India, General Insurance Corp. of India Ltd., National Bank for Agriculture and Rural Development, etc.) as also on the Governing Boards of national level Banking Association and Institutes. After retirement Mr. Basu, has been serving on the Board of several Body Corporate(s). 15th April, 2000 • Securities Trading Corporation of India Limited Chairman – Audit Committee • Deepak Fertilizers & Petrochemicals Corporation Limited Chairman – Shareholders Grievance Committee • Rain CII Carbon (India) Limited Member – Audit Committee • Peerless Securities Limited Chairman – Audit Committee • Peerless General Finance & Investment Company Limited • Saregama India Limited • STCI Primary Dealer Limited • Chambal Fertilizers & Chemicals Limited • Standard Chartered - Capital STCI Capital Markets Limited

Mr. Deepak Satwalekar Mr. Deepak Satwalekar is a B.Tech. from the Indian Institute of Technology (IIT), Bombay and has completed his post graduation in business administration from the American University, Washington DC. He was appointed as a Dy. Managing Director of HDFC in 1990 and became Managing Director in 1993. Presently he holds the position of Managing Director & CEO of HDFC Standard Life Insurance Co. Ltd. Has been a consultant to the World Bank, the Asian Development Bank, United States Agency for International Development (USAID) and the United Nations Centre for Human Settlement (HABITAT). He was involved in policy work as a member of the Steering Committee on Urban Infrastructure and Housing for the Ninth Five Year Plan of the Govt. of India and Chairman of the Working Group on avoidance of conflict of interest in the financial services sector set up by the Reserve Bank of India.

Date of joining the Board Directorships and Committee Memberships in other Companies

30th May, 2000 • Housing Development Finance Corporation Limited Member - Investors Grievance Committee • Infosys Technologies Limited Chairman - Audit Committee • Nicholas Piramal India Limited Chairman – Investors Grievance Committee • HDFC Standard Life Insurance Company Limited • Entertainment Network (India) Limited • Tata Power Company Limited

None of the above Directors hold any shares of the Company either in their own name or on behalf of others on beneficial basis. The Board of Directors recommend the re-appointment of Ms. Tarjani Vakil, Mr. Dipankar Basu and Mr. Deepak Satwalekar, as Directors of the Company. Excepting, Ms. Tarjani Vakil, Mr. Dipankar Basu and Mr. Deepak Satwalekar, none of the Directors of the Company may be deemed to be concerned or interested in this item.

for Asian Paints Limited

Registered Office: 6A, Shantinagar Santacruz (East) Mumbai 400 055 9th May, 2008

Jayesh Merchant Chief Financial Officer & Company Secretary

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ANNEXURE TO NOTICE EXPLANATORY STATEMENT: (Pursuant to Section 173(2) of the Companies Act, 1956) Item No. 7: The enactment of the Depositories Act, 1996, (“The Act”) brought about changes in the Companies Act, 1956 as well as Securities Contracts (Regulation) Act, 1956, in respect of transferability of the securities of public listed Companies. Consequent to the said amendment, the Act introduced a concept of free transferability of shares and debentures of public listed companies. Accordingly, listed Companies cannot refuse to transfer its shares unless there is a lien on its shares or the transfer requests are not lodged as per the rules laid down by the Securities Exchange Board of India (SEBI) or in accordance with the Listing Agreement. The Articles of Association (“AOA”) of your Company have to be in conformity with the aforesaid amendments. It is therefore, proposed to amend the AOA of your Company in order to remove certain restrictions on transfers/ transmissions embodied in it and to add certain provisions in respect of the shares held in dematerialised form in the following manner: • Article 2 of the AOA pertaining to the definition of Board or Board Members is proposed to be amended in order to include Committee(s) of the Board under the said definition. Article 9A is proposed to be inserted, which states that the rights conferred upon the shareholders holding shares in the Company, which may include right to vote, to receive dividend, etc., shall not be affected or varied as a result of issue of fresh shares ranking pari passu with the existing shares. The existing Article 21A which imposes certain restriction on sub-division or consolidation of shares, is proposed to be amended to bring it in conformity with the provisions contained in the Companies Act, 1956. Articles 53A, 56, 60 and 64 of the AOA contain certain restrictions as to the transferability of shares of the Company. Accordingly, they are proposed to be amended/deleted as mentioned in the resolution. Articles 65A to Article 65F are proposed to be inserted subsequent to Article 65. These Articles contain provisions in respect of the shares held in dematerialised form in accordance with the Depositories Act, 1996.

at its Registered Office on any working day of the Company between 11.00 a.m and 1.00 p.m upto the date of the Meeting. None of the Directors of your Company are concerned or interested in the said Resolution, except as a member, if any, of the Company. Item No. 8: At the Fifty-ninth Annual General Meeting of the Company held on 27th June, 2005, the shareholders had, pursuant to the provisions of Section 314 and other applicable provisions, if any, of the Companies Act, 1956, accorded their approval through a Special Resolution to Mr. Jalaj Dani, a relative of the Company’s Directors, Mr. Ashwin Dani and Mr. Hasit Dani, to hold and continue to hold office or place of profit under the Company as its President - International Business Unit at the salary, allowances, perquisites, benefits, and amenities as approved by the shareholders effective 27th June, 2005. As the salary, allowances and perquisites, benefits and amenities as approved by shareholders and payable to Mr. Jalaj Dani exceeded the monetary ceiling prescribed under Section 314 (1B) of the Companies Act, 1956, approval of the Central Government was also obtained for the same by its letter with reference No.3/38/2005-CL.VII dated 26th October, 2005. Mr. Jalaj Dani holds a Bachelor’s Degree in Chemical Engineering from the University of Wisconsin, USA. He has obtained a post graduate degree in Chemical Engineering from Massachusetts Institute of Technology, USA and has working experience in the field of specialty chemicals. In the course of his association with the Company, Mr. Jalaj Dani, has made significant contribution in achieving the Company’s growth plans and particularly in leading, managing and developing international business and the overseas subsidiaries. Mr. Jalaj Dani spearheads the operations at International Business Unit and also plays a major role in the Corporate Communication as well as the Corporate Social Responsibilities. His participation in mergers and acquisitions, both domestic and international in the past few years has been significant. In view of the contributions by Mr. Jalaj Dani towards the progress of the Company, his increased responsibilities and the overall increase in the compensation payable as per industry standards, there is a need to review and revise the remuneration payable to him. Also, the proposed revision would align the remuneration payable to Mr. Jalaj Dani to the remuneration payable to other Senior Management Personnel in the same Management Cadre within the Company. The Board of Directors at their meeting held on 9th May, 2008, on recommendation by the Remuneration Committee, approved the proposed revision in the remuneration payable to Mr. Jalaj Dani. The details of the salary, allowances, perquisites, benefits and amenities proposed to be paid to Mr. Jalaj Dani with effect from

As per the provisions of the Companies Act, 1956, amendment(s) to the Articles of Association of the Company require the approval of the Shareholders in a General Meeting, by way of a Special Resolution. Your Directors recommend the Special Resolution as set out in the Notice for approval of the shareholders. A copy of the AOA of the Company together with the proposed alterations, deletions and/or modification(s) is available for inspection by the Members of the Company

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1st April, 2008, as applicable to employees in the same grade are as follows: (in Rupees) Particulars Salary (Per month) House Rent Allowance (Per month) Furnishing Allowance (Per annum) Leave Travel Allowance (Per annum) Performance Incentive (Per annum) Medical Reimbursement (Per annum) Provident Fund and Superannuation benefits (Per annum) Company’s Car with driver *Not exceeding Rs.50,00,000 per annum. Increment: On the basic salary on annual basis not exceeding 20% of the basic salary. Perquisites: As per the rules of the Company payable in his grade but not lower than as stated above. Performance Incentive: As per the rules of the Company payable in his grade but subject to the ceiling as stated above and at the discretion of the Board of Directors of the Company. Since the proposed increase in the remuneration payable to Mr. Jalaj Dani would exceed the monetary ceiling prescribed under Section 314 (1B) of the Companies Act 1956, if approved by the shareholders, it would be necessary to obtain the approval of the Central Government. Necessary application under Section 314 (1B) and other applicable provisions, if any, of the Companies Act, 1956 for obtaining the approval of the Central Government will be preferred after obtaining consent of the shareholders. Accordingly, your Directors recommend the Special Resolution as set out under Item No. 8 in the Notice for approval of the shareholders under Section 314 and other applicable provisions, if any, of the Companies Act, 1956. Excepting Mr. Ashwin Dani and Mr. Hasit Dani no other Director of the Company may be deemed to be concerned or interested in the Special Resolution at Item No. 8 of this Notice, except as a member, if any, of the Company. Item No. 9: At the Fifty-ninth Annual General Meeting of the Company held on 27th June, 2005, the shareholders had, pursuant to the provisions of Section 314 and other applicable provisions, if any, of the Companies Act, 1956, accorded their approval through a Special Resolution to Mr. Manish Choksi, a relative of the Company’s Director, Mr. Mahendra Choksi, to hold and continue to hold office or place of profit under the Company as its ChiefCorporate Strategy & CIO, at the salary, allowances, Proposed Remuneration 4,15,000 1,50,000 2,00,000 2,00,000 50,00,000 * 15,000 As per the rules of the Company Yes

perquisites, benefits, and amenities as approved by the shareholders with effect from 27th June, 2005. As the salary, allowances and perquisites, benefits and amenities as approved by shareholders and payable to Mr. Manish Choksi exceeded the monetary ceiling prescribed under Section 314 (1B) of the Companies Act, 1956, approval of the Central Government was also obtained for the same by its letter with reference No.3/41/2005-CL.VII dated 26th October, 2005. Mr. Manish Choksi is a bachelor of Chemical Engineering from the University of Houston, USA. He obtained his Masters of Business Administration with specialisation in Entrepreneurial Management and MIS from the same University. In the course of his association with the Company, Mr. Manish Choksi has made significant contribution in achieving the Company’s growth plans, more particularly in the critical areas of implementation of Supply Chain Management solution as well as the Enterprise Resource Planning software and demonstrated maturity and foresight in identifying opportunities and guiding the Company’s e-business initiatives. Mr. Manish Choksi has worked exceptionally well while executing his role in the area of strategic planning and integration of IT with the business of the Company. In view of the contributions by Mr. Manish Choksi towards the progress of the Company, his increased responsibilities and the overall increase in the compensation payable as per industry standards, there is a need to review and revise the remuneration payable to him. Also, the proposed revision would align the remuneration payable to Mr. Manish Choksi to the remuneration payable to other Senior Management Personnel in the same Management Cadre within the Company. The Board of Directors at their meeting held on 9th May, 2008, on recommendation by the Remuneration Committee approved the proposed revision in the remuneration payable to Mr. Manish Choksi. The details of the salary, allowances, perquisites, benefits and amenities proposed to be paid to Mr. Manish Choksi with effect from 1st April, 2008, as applicable to employees in the same grade are as follows: (in Rupees) Particulars Salary (Per month) House Rent Allowance (Per month) Furnishing Allowance (Per annum) Leave Travel Allowance (Per annum) Performance Incentive (Per annum) Medical Reimbursement (Per annum) Provident Fund and Superannuation benefits (Per annum) Company’s Car with driver *Not exceeding Rs. 50,00,000 per annum Proposed Remuneration 4,15,000 1,50,000 2,00,000 2,00,000 50,00,000 * 15,000 As per the rules of the Company Yes

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Increment: On the basic salary on annual basis not exceeding 20% of the basic salary. Perquisites: As per the rules of the Company payable in his grade but not lower than as stated above. Performance Incentive: As per the rules of the Company payable in his grade but subject to the ceiling as stated above and at the discretion of the Board of Directors of the Company. Since the proposed increase in the remuneration payable to Mr. Manish Choksi would exceed the monetary ceiling prescribed under Section 314 (1B) of the Companies Act 1956, if approved by the shareholders, it would be necessary to obtain the approval of the Central Government. Necessary application under Section 314 (1B) and other applicable provisions, if any, of the Companies Act, 1956 for obtaining the approval of the Central Government will be preferred after obtaining consent of the shareholders. Accordingly, your Directors recommend the Special Resolution as set out under Item No.9 in the Notice for approval of the shareholders under Section 314 and other applicable provisions, if any, of the Companies Act, 1956. Excepting Mr. Mahendra Choksi, no other Director of the Company may be deemed to be concerned or interested in the Special Resolution at Item No. 9 of this Notice, except as a member, if any, of the Company. Item No. 10: At the Fifty-ninth Annual General Meeting of the Company held on 27th June, 2005, the shareholders had, pursuant to the provisions of Section 314 and other applicable provisions, if any, of the Companies Act, 1956, accorded their approval through a Special Resolution to Ms. Nehal Vakil, a relative of the Company’s Director, Mr. Abhay Vakil, to hold and continue to hold office or place of profit under the Company as Finance Executive, at the salary, allowances, perquisites, benefits, and amenities as approved by the shareholders effective 27th June, 2005. As the salary, allowances and perquisites, benefits and amenities as approved by shareholders and payable to Ms. Nehal Vakil, exceeded the monetary ceiling prescribed under Section 314 (1B) of the Companies Act, 1956, approval of the Central Government was also obtained for the same by its letter with reference No. 3/39/2005-CL.VII dated 24th October, 2005. Ms. Nehal Abhay Vakil has obtained a degree of Bachelor of Arts in Finance from the Michigan State University of USA. The annual increments and performance incentives, currently being paid to Ms. Nehal Vakil are not commensurate with the capabilities and potential demonstrated in the performance of her functional responsibilities. The Board of Directors at their meeting held on 9th May, 2008, on recommendation by the Remuneration Committee, approved the proposed revision in the remuneration payable to Ms. Nehal Vakil. The details of

the salary, allowances, perquisites, benefits and amenities proposed to be paid to her with effect from 1st April, 2008, as applicable to employees in the same grade are as follows: (in Rupees) Particulars Salary (Per month) Flexible Grade Allowance (Per annum) Performance Incentive (Per annum) Medical Reimbursement (Per annum) Provident Fund and Superannuation benefits (Per annum) * Not exceeding Rs.5,00,000 per annum. Increment: On the basic salary on annual basis not exceeding 20% of the basic salary. Perquisites: As per the rules of the Company payable in her grade but not lower than as stated above. Performance Incentive: As per the rules of the Company payable in her grade but subject to the ceiling as stated above and at the discretion of the Board of Directors of the Company. Since the proposed increase in the remuneration payable to Ms. Nehal Vakil would exceed the monetary ceiling prescribed under Section 314 (1B) of the Companies Act, 1956, if approved by the shareholders, it would be necessary to obtain the approval of the Central Government. Necessary application under Section 314 (1B) and other applicable provisions, if any, of the Companies Act, 1956 for obtaining the approval of the Central Government will be preferred after obtaining consent of the shareholders. Accordingly, your Directors recommend the Special Resolution as set out under Item No. 10 in the Notice for approval of the shareholders under Section 314 and other applicable provisions, if any, of the Companies Act, 1956. Excepting Mr. Abhay Vakil, no other Director of the Company may be deemed to be concerned or interested in the Special Resolution at Item No. 10 of this Notice, except as a member, if any, of the Company. Proposed Remuneration 56,800 6,75,000 5,00,000 * 15,000 As per the rules of the Company

for Asian Paints Limited

Registered Office: 6A, Shantinagar Santacruz (East) Mumbai 400 055 9th May, 2008

Jayesh Merchant Chief Financial Officer & Company Secretary

Asian Paints Limited .......

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NOTES

Experience what colour can do for your home

Asian Paints Limited, 6A, Shantinagar, Santacruz (East), Mumbai - 400 055. www.asianpaints.com