Annual Report

2003 ESAB ESAB INDIA LIMITED

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ESAB INDIA LIMITED
Annual Report 2003

Board of Directors Corporate Management

H. P. R. Mullan Chairman
G. Hariharan Chief Operating Officer
G. Hariharan Chief Operating Officer
A. Banerjee Corporate Affairs Manager & Company Secretary
P. Mallick
N. H. Mirza P. Gupta Corporate Finance Manager
S. Tandon
J. Templeman

S. N. Talwar Alternate to J. Templeman

Registered Office Contents Page

Lloyds Centre Point, 2nd Floor,
1096-A, Appasaheb Marathe Marg,
Notice
Prabhadevi, Mumbai - 400 025
Tel: 2431 3224 Fax: 2432 9940
E-mail: esabho@bom4.vsnl.net.in
Directors' Report

Corporate Governance 11
Bankers
State Bank of India
State Bank of Bikaner & Jaipur Auditors' Report 15
State Bank of Travancore
Bank of Baroda
Balance Sheet 18

Profit & Loss Account 19

Solicitors
Crawford Bayley & Company
Schedules to Accounts 20

Auditors Cash Flow Statement 38

Lovelock & Lewes

Auditors' Report on Consolidated Accounts 39

Registrars & Share Transfer Agents

Consolidated Accounts 40
Computech Sharecap Limited,
147, Mahatma Gandhi Road, Mumbai - 400 023
Tel.: 2267 1824 Fax : 2267 0380 Accounts of Subsidiary Company 56
Notice
NOTICE is hereby given that the Seventeenth Annual General
Meeting of the Members of the Company will be held at the
Bombay House Auditorium, Bombay House, Homi Mody Street,
Mumbai 400 001, on Friday, 14 May 2004, at 4.00 p.m. to transact
the following business :
ORDINARY BUSINESS :
1. To consider and adopt the Balance Sheet as at 31
December 2003 and Profit and Loss Account for the year
ended on that date together with the Reports of the Directors
and the Auditors thereon.
2. To appoint a Director in place of Mr. J. Templeman who
retires by rotation and, being eligible, offers himself for re-
appointment.
3. To appoint auditors and to fix their remuneration.
Special Notice under Section 225(1) of the Companies
Act, 1956 has been received from a member signifying his
intention to move the following resolution as an Ordinary
Resolution.
"RESOLVED THAT Bharat S. Raut & Co. be and they are
hereby appointed as auditors of the Company in place of
the retiring auditors from the conclusion of this Annual
General Meeting until the conclusion of the next Annual
General Meeting, on terms (including remuneration,
reimbursement of out-of-pocket expenses and applicable
service tax) to be agreed between the auditors and the
Board of Directors."
SPECIAL BUSINESS :
4. To appoint Mr. S. Tandon as a Director of the Company.
5. To appoint Mr. P. Mallick as a Director of the Company.
6. To consider and, if thought fit, to pass with or without
modification, as an Ordinary Resolution, the following :
"RESOLVED THAT in partial modification of the resolution
passed at the Sixteenth Annual General Meeting held on
12 June 2003, and pursuant to the provisions of Sections
198, 269, 309 and 310 and any other applicable provisions
of the Companies Act, 1956, consent of the Company be
and it is hereby accorded to the payment of revised
remuneration to Mr. G. Hariharan, Wholetime Director, upon
the terms and conditions specified in the resolutions of the
Board of Directors passed on 27 August 2003 and 10 March
2004."
7. To consider and, if thought fit, to pass with or without
modification, as an Ordinary Resolution, the following:
"RESOLVED THAT pursuant to the provisions of Section
198, 269, 309 and 310 and any other applicable provisions
of the Companies Act, 1956, consent of the Company be
and it is hereby accorded to the re-appointment of Mr. G.
Hariharan as Wholetime Director (and to his receiving
remuneration, benefits and amenities) for a period of five
years from 7 January 2004 to 6 January 2009 upon the
terms and conditions specified in the resolutions of the
Board of Directors passed on 15 December 2003 and 10
March 2004."
8. To consider and, if thought fit, to pass with or without
modification, as a Special Resolution, the following :
"RESOLVED THAT subject to the applicable provisions of
the Securities and Exchange Board of India (Delisting of
Securities) Guidelines, 2003, and of the Companies Act,
1956 (including any modifications or amendments thereto
cr re-enactments thereof for the time being in force) and
subject to such approvals as may be necessary and subject
to such terms, conditions, stipulations and modifications
prescribed or imposed by such approvals by the relevant
authorities as may be agreed to by the Board of Directors
of the Company (hereinafter referred to as 'the Board' which
term shall be deemed to include any committee thereof)
consent of the Company be and is hereby accorded to the
Board to delist the equity shares of the Company from the
Calcutta Stock Exchange."
NOTES:
a) The explanatory statements required pursuant to Section
173 of the Companies Act, 1956 in relation to Items 4 to 8
above are annexed hereto.
b) A Member entitled to attend and vote at the Meeting is
entitled to appoint one or more proxies to attend and v.ote
instead of himself on a poll only, and a proxy need not be a
Member. Proxies, in order to be effective, must be received
at the office of the Company's Registrars & Share Transfer
Agents, Computech Sharecap Limited, 147, Mahatma
Gandhi Road, Fort, Mumbai 400 023, not less than forty-
eight hours before the scheduled start of the Meeting.
c) The Register of Members and Share Transfer Books of the
Company will remain closed from 5 May 2004 to 14 May
2004 (both days inclusive),
d) Queries on the Accounts and operations of the Company,
if any, may be sent to the Company at its Registered Office
(and marked for the attention of the Corporate Affairs
Manager & Company Secretary) a? least'seven days in
advance of the Meeting.
e) Members are requested to notify any change of address
to the Company's Registrars and Share Transfer Agents
quoting the relevant Folio number in each case.
f) Members are requested to bring their copies of-the
Company's Report and Accounts for the year ended 31
December 2003 to the Meeting.
g) Members holding shares under identical names (in the
same order) in more than one Folio are requested to write
to the Company's Registrars & Share Transfer Agents,
enclosing their share certificates, to enable consolidation
of their holdings into one Folio.
h) Members holding shares in dematerialised form may please
note that when opening a depository account they may
have provided their bank account details, which will be
printed on their dividend warrants. Members wishing to
change or delete these bank account details should inform
their Depository Participant directly. The Company will not
 entertain any direct request from Members in this
connection.
Members who hold shares in the physical form can
nominate a person in respect of all the shares held by them
singly or jointly. Members who hold shares in a single
name are advised, in their own interests, to avail of the
nomination facility by completing and submitting Form 2B.
Blank forms will be supplied by the Company's Registrars
& Share Transfer Agents on request. Members holding
shares in the dematerialised form may contact their
Depository Participant for recording the nomination in
respect of their shares.
The Company has transferred all unclaimed dividends in
respect of the years up to and including the financial year
1994-95 to the General Revenue Account of the Central
Government under the provisions of Section 205A of the
Companies Act, 1956. Members who have so far not
claimed or collected their dividends in respect of such years
may do so from the Registrar of Companies, Maharashtra,
Mumbai by submitting an application in the prescribed form.
The Company is obliged to transfer any dividends which
remain unpaid or unclaimed for a period of seven years
(from the date of the transfer into the Unpaid Dividend
Account) to the credit of the Investor Education and
Protection Fund ("the Fund") established by the Central
Government. Accordingly, the Company has transferred
unclaimed dividends for the financial year 1995-96 to the
Fund. In accordance with Section 205C of the Companies
Act, 1956, no claim shall lie against the Company or the
Fund in respect of any dividends remaining unclaimed and
unpaid for a period of seven years from the dates they first
became due for payment and no payment shall be made
by the Company or the Fund in respect of any such claims.
k) As required under clause 49(VI) of the Listing Agreement,
given below are the details of Directors, (i) being appointed
or re-appointed and (ii) retiring by rotation and eligible for
re-appointment :
(i) Appointment / Re-appointment of Directors :
Mr. S. Tandon
Mr. S.Tandon is a Chemical Engineer having graduated
from LIT New Delhi. He did his Post Graduate Diploma
in Marketing & Sales Management from Delhi University.
He has 37 years' experience in Alfa Laval (India) Limited
having worked in various capacities. Since January 1998
he has had overall responsibility as Managing Director
of Alfa Laval (India) Limited.
He is a Director of Alfa Laval (India) Limited and Skansen
Engineering & Consultancy Company Limited.
He is on the Committees of the Board of Directors of
Alfa Laval (India) Limited.
Mr. P. Maliick
Mr.P.Mallick is a graduate Electrical Engineer from
LIT Madras, a Chartered Engineer and Fellow of the
Institution of Electrical Engineers, London. He holds
a Diploma in Business Management from the UK. He
has 36 years' experience having worked with
companies such as Cromptoh Greaves, Tata Exports
and Genelec. From 1988 to 2003 he was the Managing
Director of Wartsila India Limited.
He is a Director of the following companies :
ACCOR Radhakrishna Corp Services Pvt. Ltd., Beck
India Ltd., Blue Star Ltd., DISA India Ltd, Maersk India
Pvt. Ltd., SBI Funds Management Pvt. Ltd., Tata
Telecom Ltd. and Tube Investments of India Ltd.
He is on the Committees of the Boards of Directors of
the following companies:
Beck India Ltd., Blue Star Ltd., DISA India Ltd., Tata Telecom
Ltd. and Tube Investments of India Ltd.
• Mr. G, Hariharan
Mr. Hariharan is a Metallurgical Engineer having
graduated from I.IT Mumbai. He has thirty .years'
experience having worked in various capacities at
W.G.Forge & Allied Industries Ltd., M.N.Dastur & Co
(P) Ltd., Kirloskar Consultants Ltd., and Philips India
Ltd. before joining the Company in 1988. He was
responsible for Sales, Marketing, and Exports and,
latterly, the Welding Consumables Division before his
appointment as Wholetime Director in January 2003.
Director retiring by rotation and eligible for re- ,
appointment :
Mr, ,.!„ Teni pi errs an :
Mr. J. Templeman is a Bachelor of Arts (Oxford
University) and Master of Arts (Oxford University).
He is an Associate Member of the Institute of
Chartered Accountants in England & Wales.
He worked for 17 years with Price Waterhouse,
London, in various capacities rising to Salaried Partner.
He also worked for a time at Charter pic., as Director
of Investor Relations. At present he is the Chief
Executive Officer of the Esab Group.
He is a Director of Esab Holdings Limited and Esab
Seah Corporation.
By Order of the Board of Directors
A. Banerjee
Company Secretary
Mumbai, 13 April 2004
Registered Office :
Lloyds Centre Point, 2nd floor,
1096-A, Appasaheb Marathe Marg,
Prabhadevi, Mumbai 400 025.
 Notice
ANNEXURE TO NOTICE
Explanatory Statement pursuant to Section 173 of the
Companies Act, 1956
Item no 4
Mr. S. Tandon has been appointed an Additional Director with
effect from 12 June 2003. Pursuant to the provisions of Article
116 of the Company's Articles of Association, read with Section
260 of the Companies Act, 1956, he holds office upto the date of
this Annual General Meeting. As required by Section 257 of the
Companies Act, 1956, notice has been received from a Member
signifying his intention to propose Mr. S. Tandon as a Director.
The Board recommends this resolution for acceptance by the
Members.
None of the Directors, except Mr. S. Tandon, is concerned or
interested in this resolution.
Item no 5
Mr. P. Mallick has been appointed an Additional Director with
effect from 23 October 2003. Pursuant to the provisions of Article
116 of the Company's Articles of Association, read with Section
260 of the Companies Act, 1956, he holds office upto the date of
this Annual General Meeting. As required by Section 257 of the
Companies Act, 1956, notice has been received from a Member
signifying his intention to propose Mr. P. Mallick as a Director. The
Board recommends this resolution for acceptance by the
Members.
None of the Directors, except Mr. P. Mallick, is concerned or
interested in this resolution.
Item no 6
The Board of Directors at its meeting held on 27 August 2003
revised the remuneration of Mr. G. Hariharan, Wholetime Director,
for the period from 1 April 2003 until the expiry of his term on 6
January 2004, subject to the approval of the shareholders, to
include :
a) payment by the Company of club fees of one club and
reimbursement of all actual entertainment expenses at the
club reasonably incurred in or about the business of the
Company;
b) reimbursement of the costs of providing electricity at his
residence.
In addition, the Board of Directors at its meeting on 10 March
2004 confirmed the perquisites value of assets installed and
maintained at the residence of Mr. Hariharan (for the period from
7 January 2003 until 6 January 2004) in an amount of Rs.11,889,
subject to the approval of the shareholders.
Your Directors consider the aforesaid revisions in remuneration
commensurate with the duties and responsibilities of the
Wholetime Director and recommend the resolution for
acceptance. This may be treated as an abstract under Section
302 of the Companies Act, 1956.
Mr. G. Hariharan is concerned and interested in the resolution as
it relates to his remuneration.
item no 7
The term of appointment of Mr. G. Hariharan, Wholetime Director
of the Company, expired on 6 January 2004. The Board of
Directors at its meeting held on 15 December 2003 re-appointed
Mr. G. Hariharan as Wholetime Director (and designated him
Chief Operating Officer) for a period of five years with effect
from 7 January 2004, subject to the approval of the shareholders.
The Board at its meeting on 10 March 2004 made further
adjustments to Mr. Hariharan's remuneration, subject to the
approval of the shareholders. •
The remuneration payable and the perquisites to be granted to
Mr. G. Hariharan on his re-appointment, and the other main terms
of his re-appointment as Wholetime Director of the Company,
are as follows :
a) Salary of Rs. 27,000 per month in the scale of Rs. 27,000 -
Rs. 75,000 per month with authority to the Board to fix his
salary within this scale.
b) Other Allowances of Rs. 63,000 per month with authority to
the Board to grant such increases as it may consider
appropriate, subject to such allowances not exceeding
Rs. 100,000 per month. /
c) Rent free furnished accommodation (or House Rent
Allowance of 60% of salary in lieu thereof), reimbursement
of expenditure on utilities (such as electricity, water and
gas) and furnishings including maintenance and repairs
thereof, subject to such perquisites being approved by the
Chairman of the Board and the aggregate value thereof not
exceeding an amount equivalent to 150% of annual salary.
d) Reimbursement of actual medical expenses incurred
(including hospitalization expenses) in respect of the
Wholetime Director, his spouse and two dependent children.
e) Pension, Gratuity and Provident Fund as provided for under
the Rules of the relevant Schemes of the Company
thereunder as may be amended from time to time.
f) The provision of a suitable car and a telephone at his residence
for official use.
g) Payment by the Company of club fees of one club and
reimbursement of all actual entertainment expenses at
the club reasonably incurred in or about the business of
the Company.
h) Bonus and incentives in accordance with the policy
applicable to the Management Staff of the Company.
i) Perquisites to be evaluated as per Income Tax Rules
wherever applicable. In the absence of any such rules,
perquisites to be evaluated at actual cost.
j) If in any financial year, during his tenure, the Company
has no profits or its profits are inadequate, the Wholetime
Director shall be paid such remuneration (by way of
salary, allowances and perquisites) as shall be determined
at the discretion of the Board of Directors subject to the
applicable provisions of Schedule XIII of the Companies
Act, 1956 as may be amended from time to time or any
equivalent statutory re-enactment thereof.
k) The Wholetime Director or his spouse or any of his
relatives (as defined in Schedule 1A of the Companies
Act, 1956) shall not without the sanction of the Board of
Directors, accept any office or place of profit in the
Company or its subsidiaries, nor shall any of them accept
any dealership, distributorship or selling agency of the
Company, either directly or indirectly.
I) The Wholetime Director shall not, so long as he functions
as such, engage himself in any business or occupation,
without the sanction of the Board of Directors.
m) The Wholetime Director shall be entitled to annual leave,
sick leave and casual leave in accordance with the rules
applicable to Management Staff of the Company as may
be amended from time to time. He shall be entitled to
encashment of privilege leave standing to his credit at
the cessation of his appointment in accordance with the
rules then applicable to the Management Staff.
n) No sitting fees for attending meetings of the Board of
Directors or Committees thereof.
o) The appointment may be terminated either by the
Company or the Wholetime Director at any time by giving
three months' notice (or salary and allowances in lieu
thereof) to the other party.
The terms and conditions set out above may be treated as an
abstract under Section 302 of the Companies Act, 1956.
Mr. Hariharan is concerned and interested in this resolution as it
relates to his re-appointment. The Board recommends the
resolution for acceptance by the Members.
Item no 8
The equity shares of the Company are currently listed on the
Stock Exchange, Mumbai (BSE), the National Stock Exchange
(NSE) and the Calcutta Stock Exchange (CSE).
The shares of the Company are regularly traded on the BSE and
the NSE. Trading of the Company's equity shares have remained
negligible on the CSE for the past several years.
Under the Securities and Exchange Board of India (Delisting of
Securities) Guidelines, 2003 ('Regulations') the Company may
voluntarily delist its securities from a stock exchange, provided
that the shares of the Company continue to be listed on a stock
exchange that has nationwide trading terminals.
With a view to reducing costs, the Board of Directors at its
meeting on 10 March 2004 decided to delist the Company's
shares from the CSE subject to Members' approval and subject
further to receipt of the necessary regulatory approvals.
The proposed voluntary delisting should not adversely affect
investors, especially since the Company's shares have been
specified for settlement only in dematerialised form by all
investors. In addition, investors now have access to online dealing
in the Company's shares across the country. Pursuant to the
Regulations it is now proposed to seek Members' approval by
way of a special resolution for the voluntary delisting of the
Company's equity shares as set out at Resolution No. 8.
The proposed delisting is in the interests of the Company, and the
Board recommends the resolution for acceptance by Members.
None of the directors of the Company is concerned or interested in
the resolution.
By Order of the Board of Directors
A, Banerjee
Company Secretary
Mumbai, 13 April 2004
Registered Office :
Lloyds Centre Point, 2nd floor,
1096-A, Appasaheb Marathe Marg,
Prabhadevi, Mumbai 400 025
 Directors' Report

Your Directors herewith present the Seventeenth Annual Report is reasonably confident that your Company should be able to
together with the audited accounts of the Company for the year realize higher prices compared to localised competition by virtue
ended 31 December 2003. of its superior product and service quality.
The fact that Esab is now the only major international brand with
FINANCIAL RESULTS
a manufacturing, selling and distribution network across the
2003 2002 broad range of welding products in the Indian market is seen as
Rs. 'OOOs Rs. 'OOOs an opportunity for your Company. As the engineering industry in
Sales and other income 1,524,815 1,414,885 India acquires a more global outlook, demand for your Company's
products is expected to improve as customers look increasingly
Earnings before interest, for a locally available global brand to improve their international
tax and depreciation 92,237 (76,577) competitiveness. However, with the lowering of import duties,
competition from imports is expected to increase and may lead
Interest 22,441 25,921
to a reduction in average price realization, especially at the high
Depreciation 55,717 42,079 value end of the product range.
Operating profit / (loss) 14,079 (144,577) During the year, your Directors brought in special expertise to
Non operating items (7,747) (1,928) examine and develop new Standard Operating Procedures as
Profit / (Loss) before taxation 6,332 (146,505) part of a commitment to best practices in all systems and
business procedures, internal and external. These have now
Taxation Credit 651 30,333 been introduced by Management throughout the Company.
Profit / (Loss) for the year 6,983 (116,172) Internal controls at all locations have also been subjected to
rigorous reviews by internal and external auditors, and actions
taken where lapses were identified. This has resulted in improved
Earnings before interest, tax and depreciation (EBITDA)
registered an improvement of Rs. 168.8 million over the internal audit ratings across all control units in the Company.
corresponding figure for 2002. EBITDA for the year is stated Turnover for the year (net of excise duties) recorded a growth of
after providing for the following : over 7% to Rs.1,341 million. Gross of excise duty, the 14%
growth in welding consumables was offset by a 10% decline in
Rs. 22.61 million against sundry debtors that are doubtful
sales of the Equipment Division, resulting in an overall increase
' of recovery (2002 : Rs. 18.36 million);
of some 8% over the previous year. The increase in turnover in
Rs. 21.25 million against slow moving and obsolete the Consumables Division was partly due to higher volumes, but
inventories (2002 : Rs. 3.4 million); the principal increase came from better price realizations. This
was made possible by shifting the focus away from mass market,
Rs. 24.00 million against the increased costs of employee
low price electrodes in favour of higher value types.
retirement benefits (2002 : Rs. 21 million);
The focus on higher value products also helped margins : though
Rs. 2.8 million in respect of voluntary separation
sales increased by about 8%, there was a 3% reduction in the
compensation and related costs (2002 : Rs. 26.19 million).
cost of materials consumed. As a percentage, the cost of material
DIVIDEND to sales reduced from 68% to 62%. This reduction was achieved
in spite of increases in most input prices, especially in mild steel,
In view of the Company's accumulated losses, a dividend cannot which is the Company's major raw material, where an average
be recommended for the period under review. 5% price increase added approximately Rs.16 million to raw
MANAGEMENT DISCUSSION AND ANALYSIS material consumption costs. Combined with improved
Increased activity in the primary steel using industries was productivity, much emphasis was placed on the management of
reflected in increased demand for welding products throughout costs; communication and travel costs, in particular, were
the year. With the Government's continuing emphasis on significantly reduced.
infrastructure development, the demand for welding consumables The charge to depreciation for the year was increased by Rs.
and equipment is expected to remain strong during 2004. Your 5.09 million as a result of writing down the net book value of
Company has geared up its production, marketing and sales, as leasehold land and of buildings at Taratala over the remaining
well as its service functions, to cater to this demand. period of the lease.
Your Directors expect that the competitive threat from low priced The payroll for unionized staff rose by 14%, which was partly
local manufacturers of welding consumables, equipment and compensated by a reduction in the management payroll of 5%.
gas cutting products will continue. In addition, average realized The cost of the Company's generous retirement benefits plans
prices will continue to be under pressure. However, Management continues to rise as the general level of interest rates declines

Esab India Limited Annual Reoor! 2003

with a consequential increase in the cost of purchased annuities.
Based on valuations made by the Company's actuaries, an
additional provision of Rs. 24 million was made in the year in this
respect.
Overall, the operational profit of the Consumables Division
increased almost threefold from Rs. 46 million in 2002 to Rs.132
million this year. In the Equipment Division, in spite of various
measures, the operational loss increased by Rs. 17 million to
12% of sales (previous year 6%). Your attention is drawn to Note
19 of Schedule R to the Accounts, which provides details of the
performance of each of these two business segments.
There has been a significant reduction in the amount of rates
and taxes. In the previous year, a provision of Rs. 58 million had
to be created to cover disputed or pending sales tax
assessments. A number of the disputed assessments have been
resolved in favour of the Company during 2003, although the
outstanding disputed amounts are significant enough to justify
retention of the entire provision made in 2002.
There is a charge of Rs. 26 million on account of prior period
items of which Rs. 25 million relates to the Equipment Division.
This amount is in respect of raw material consumption, freight
costs and other direct charges that were understated in the
Accounts in 2002. Your Directors took a serious view of this
lapse in accounting discipline, and disciplinary action was taken
against two employees in this respect.
Management has continued the focus upon tight control of
inventories, although the total value of inventories has increased
by Rs. 36 million compared to the previous year. This increase
is on account of finished goods and raw material inventories,
offset by a reduction in work-in-progress. A major portion of the
increase was due to higher quantities of electrodes and other
consumable inventories that have been built-up with the increasing
volume of business. Your attention is drawn to Note 26 of Schedule
R to the Accounts, which explains the change to the Company's
method of estimating the provision for old and obsolete raw
material. The new method eliminates subjectivity and is in line
with international practice.
The focus upon debtor management resulted in a reduction in
the net aggregate accounts receivable from Rs. 123 million to
Rs. 51 million. This helped ease the working capital situation
considerably.
The major addition to fixed assets was a "layer-winding" machine
and the equipment for making wire basket spools at the Nagpur
consumables factory. Rs.18 million was realized from the sale of
fixed assets, adding Rs.10 million to profits. The sale of vacant
land at Khardah, West Bengal, was the major constituent of this item.
The consumables business has continued to improve
throughout 2003 and, barring unforeseen circumstances,
should continue to show better results in 2004. The business
is dependent upon the overall volume of steel consumption,
particularly sheet metal, in the country. The growth in demand
from the automobile and consumer durables sector and the
government's infrastructure spending have helped its growth.
The production of electrodes has increased by over 18%, and
in recent months the Company's electrode plants have been
working to near full capacity.
The profitability of the Equipment business continues to be a
matter of concern, although there has been an encouraging
improvement in performance in recent months. A thorough
review of the product range and production processes
employed at the Equipment Division has been instituted with
the assistance of external consultants who are expected to
report their findings in May 2004.
In 2001, the Company undertook to manufacture certain
varieties of equipment that were then being made at the Esab
Group's Thailand plant. Unfortunately, the terms agreed by the
then senior management of the Company for the re-location of
this production facility to India have proved to be fundamentally
unattrac-tive to the Company. These have now been
renegotiated.
Having regard to the history of problems in the Equfpment
Division, your Directors have decided to advance the
implementation of Accounting Standard 28, which deals with
impairment in the economic value of assets employed in a
business. In accordance with that Standard, Rs. 10 million has
been written down from the Equipment Division's fixed assets;
although, in accordance with the transition rules of the
Standard, the amount has not been charged through the Profit
and Loss Account, but directly to reserves. Your attention is
drawn to Note 18 of Schedule R to ihe Accounts.
Tax for the year has reduced from a credit of Rs. 30 million in
2002 to a credit of Rs. 0.65 million in the current year. ln2Q02,
there was also a charge of Rs. 24 million for disputed taxes in
respect of preceding years. The credit for deferred tax is
substantially lower in the current year because of lower tax
losses in 2003. This is partly offset by the increase in deferred
tax credits on account of higher provisions for doubtful debts
and an increase in the adjustment under Section 43B, of the
Income Tax Act (Note 20 of Schedule R to the Accounts).
The operations for 2003 generated cash of Rs. 84 million,
which was substantially used to reduce creditors to a more
acceptable level; although these still remain relatively high, at
more than Rs. 300 million. Operating cash flow, net of changes
in working capital, was positive at Rs. 53 million, and was used
to repay borrowings.
RELATED PARTIES
Note 22 of Schedule R to the Accounts sets out the nature of
transactions with related parties. Your Company handles the sales
of cutting equipment manufactured by its subsidiary, Esab Holding
and Cutting Systems Limited, Pune. Also, there are small
 Directors' Report
purchases of specialized equipment from other Esab Group
companies, and sales to those companies. All of these
transactions are done at arm's length. Overall, the Company is
foreign exchange positive with earnings exceeding payments
by Rs. 32 million (Notes 10, 11 and 12 of Schedule R to the
Accounts).
Esab Welding and Cutting Systems Limited is owned 86% by
your Company with the remaining 14% held by another Esab
Group company. It makes specialized cutting equipment, whose
customers also buy welding equipment and consumables.
Consequently, there is synergy between the businesses, and
Management is contemplating action to consolidate the cutting
equipment business with the Company's mainstream businesses.
CHARTER PLC GROUP
Esab India Limited is a part of the Charter pic Group. The
Company's principal shareholder, Esab Holdings Limited, an
unlisted company incorporated under the laws of England and
Wales having its registered office at 50 Curzon Street, London
W1J 7UW, United Kingdom, holds 37.31% of the paid-up equity
share capital of the Company as at 31 December 2003. Esab
Holdings Limited is owned through various intermediary
companies by Charter pic., the ultimate parent, a listed company
incorporated under the laws of England and Wales having its
registered office at 52, Grosvenor Gardens, London SW1W OAU,
United Kingdom. Charter pic has over 280 subsidiaries and
affiliates. Charter pic, its subsidiaries and affiliates including
Charter Overseas Holdings Limited, Weldcure Limited, Esab
Holdings Limited, Exelvia Netherlands BV, Exelvia International
Holdings BV, Charter Consolidated pic, Cecil Holdings Limited,
Exelvia India BV and Esab International Holdings BV form the
Charter pic Group. This information is given pursuant to SEBI
(Substantial Acquisition of Shares and Takeover) Regulations,
1997, as amended to date.
FINANCE
In June 2003, your Company received a US$ 2.5 million five
year loan at a fixed interest rate of 4.5% pa from its major
shareholder, Esab Holdings Limited. This greatly eased the
Company's reliance on borrowings from local banks.
The sale of a portion of excess vacant land at Khardah for
Rs. 16.6 million during the year eased the liquidity position further
and, with the improved cash flow from operations, borrowings
amounting to Rs. 51 million were repaid during the year.
Relationships with the Company's bankers remained cordial
throughout the year; although one bank has elected to withdraw
from its lending relationship with the Company. The improvements
in liquidity and operating performance should allow your Company
to receive better banking terms and to reconstitute its banking
syndicate during 2004.
PREMISES
In November 2003, the lease to approximately half the area ther
occupied at your Company's offices in Prabhadevi was
surrendered. The Western Regional Sales Office, which hac
occupied that space, was relocated to significantly less expensive
premises in Andheri. During the year, the Southern Regiona
office was relocated to new leased premises in Chennai, th€
Northern Sales Office to new premises in Delhi, and a Centra
India sales office was opened in Nagpur.
The site of the Company's former welding consumables plant al
Kalwa, which is held on lease from the Maharashtra Industria
Development Corporation, is currently for sale. Your Directors
expect that the sale of this site will be concluded during 2004.
It is your Directors' intention to replace, and possibly to relocate,
the welding consumables plant at Khardah which is over 45
years old. The space currently occupied by the Equipment Factory
at Taratala may be sufficient to include a welding consumables
plant. However, the lease of the land at Taratala occupied by the
Equipment Factory is due to expire in October 2005. The lessor
Kolkata Port Trust, has recently put forward lease- renewal terms
which would very significantly increase the cost to the Company
of occupying these premises, and materially and adversely affect
the economics of consolidating the Khardah and Taratala
operations at Taratala. Management is currently assessing all of
the options available to the Company in this important matter.
SUBSIDIARY ' '
Flotech Welding & Cutting Systems Limited changed its name to
Esab Welding & Cutting Systems Limited in order to make
appropriate use of Esab's brand name for the effective marketing
of its products. The Directors' Report and the Audited Apcounts
for the year ended 31 December 2003, along with the Report of
the Auditors and the statement required under Section 212(1)(e)
of the Companies Act, 1956 for Esab Welding &-Cutting Systems
Limited, are appended. In view of the general improvement in the
state of the capital goods sector, the subsidiary registered a
36% increase in annual turnover to Rs. 23.8 million, and a
marginal profit of Rs. 0.54 million for the year.
ENVIRONMENT AND SAFETY
The Company is committed to industrial safety and environment
protection. The Equipment factory at Taratala and all three
consumables manufacturing units hold ISO 14001: 1996
certification.
DIRECTORS' RESPONSIBILITY STATEMENT
To the best of their knowledge and belief, and according to the
information and explanations obtained by them, your Directors
make the following statement in terms of Section 217(2AA) of
the Companies Act, 1956 :
1. that in the preparation of the annual accounts for the year
ended 31 December 2003, the applicable accounting
standards have been followed;
2. that the accounting policies mentioned in Note 1 of Schedule
R to the Accounts have been selected and applied
consistently and judgements and estimates that are
reasonable and prudent made so as to give a true and fair
view of the state of affairs of the Company at the end of the
financial year on 31 December 2003 and of the profit of the
Company for that year;
3. that 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;
4. that the annual accounts for the year ended 31 December
2003 have been prepared on a going concern basis.
CAUTIONARY STATEMENT
Certain statements in this Directors' Report may constitute
"forward looking statements" within the meaning of applicable
laws and regulations. Actual results may differ materially from
those either expressed or implied in this Report.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION
AND FOREIGN EXCHANGE
The information required under Section 217(1)(e) of the
Companies Act, 1956 read with the Companies (Disclosure of
Particulars in the Report of the Board of Directors) Rules, 1988,
is given in the Annexure and forms part of this Report.
DIRECTORS
Mr. T. Mitra and Mr. B. Pekkari resigned as Directors of the
Company with effect from 13 June 2003 and 23 October 2003,
respectively. Your Directors place on record their sincere
appreciation for the contribution made by them during their tenure.
Mr. S. Tandon and Mr. P. Mallick who have been appointed as
Additional Directors of the Company with effect from 12 June
2003 and 23 October 2003, respectively, hold office up to the
conclusion of the forthcoming Annual General Meeting. A notice
has been received from Members pursuant to Section 257 of
the Companies Act, 1956 proposing their candidature for the
office of Director.
Mr. G. Hariharan whose term of office as Wholetime Director
expired on 6 January 2004 was re-appointed Wholetime Director,
and designated Chief Operating Officer, for a period of five years
with effect from 7 January 2004. Necessary resolutions for the
Shareholders' approval of his re-appointment and remuneration
are being proposed at the forthcoming Annual General Meeting.
In accordance with the provisions of Article 130 of the Company's
Articles of Association, Mr. J. Templeman retires by rotation at
the forthcoming Annual General Meeting and, being eligible, has
offered himself for re-appointment.
AUDITORS
Lovelock & Lewes, Chartered Accountants, Mumbai retire as
Auditors of the Company at the forthcoming Annual General
Meeting and have expressed their desire not to be re-appointed.
The Directors recommend that Bharat S. Raut & Co., Chartered
Accountants, Mumbai, be appointed as the Company's auditors,
to hold office until the conclusion of the next Annual General
Meeting. The Company has received confirmation that their
appointment will be within the limits prescribed under Section
224 (1B) of the Companies Act, 1956.
AUDITORS' REPORT
Note 18 of Schedule R to the Accounts explains that your Directors
have considered it prudent to provide for a Rs. 10 million charge
for impairment in the economic value of the assets of the
Equipment Division. In accordance with the relevant Accounting
Standard, this charge has not been reduced from profits, but
has been directly debited to reserves. The auditors agree with
this treatment. However, the auditors are of the opinion that the
Financial .Statements do not give a true and fair view, because
the resultant deferred tax adjustment of Rs. 3.6 million has not
been added to profits. Your Directors are of the view that prudent
accounting requires that the credit not be added to profits when
the related debit on which it is based has not been reduced from
profits. It also violates the fundamental accounting rule of
matching debits with credits. Consequently, your Directors do
not agree with the auditors in this regard.
The auditors have also qualified the true and fair view displayed
by the Financial Statements because the Wholetime Director
enjoyed certain perquisites worth Rs. 47,000 that are yet to be
approved by the Members. The resolution for their approval is
contained in the agenda for the Annual General Meeting notified
for 14 May 2004. The auditors have also qualified their opinion
because Company has yet to recover the excess remuneration
of Rs. 3.25 million drawn by the former Managing'Director. As
explained below, legal proceedings have been commenced for
recovery of this amount. In your Directors' opinion neither of
these two matters, in any manner, impairs the true and fair view
depicted by the attached Financial Statements.
PERSONNEL
At the end of December 2003, the Company had 578 employees
as against 574 at the end of 2002. Your Directors are pleased to
report that industrial relations at all of the Company's locations
remained cordial during the year.
Unfortunately, disciplinary action had to be taken during the year
against four employees who did not meet the high standards of
financial probity and discipline that your Company requires. As a
result, the employment contracts of two of those employees
were terminated, and the resignations of the two other employees
were accepted.
Owing to the poor performance of the Equipment Division, no
salary increases were awarded during the year to the senior
Directors' Report
management staff employed in that business. Your Directors are
gratified at the determination and commitment shown by the
Division to improve its performance and wish to record their
special thanks to these individuals for their very significant efforts
in a most difficult environment.
The previous Managing Director, Mr. S.K.Bhattacharyya, whose
term of office ended on 31 January 2003, has filed three separate
legal actions against the Company. One of these relates principally
to the alleged non-payment on account of accumulated leave
and performance bonus in respect of previous years (in which
the Company recorded significant losses). The largest of the
three actions relates to a claim to a lifelong pension of about
Rs. 212,000 per month (against a pension of about Rs. 31,570
per month which he currently receives). Your Directors, and the
Company's legal advisers, regard these claims to be baseless
and entirely without merit and will vigorously defend the Company
against these actions. As a result of these claims, contingent
liabilities include an amount of Rs. 42 million, which the Company
has not acknowledged as debts (Note 3 of Schedule R to the
Accounts). Your Company has also instituted legal proceedings
against Mr. Bhattacharyya for the recovery of excess
remuneration drawn by him during 2002. Your Directors, and the
ANNEXURE TO THE DIRECTORS' REPORT
Statement under Section 217(1)(e) of the Companies Act, 1956
read with Companies (Disclosure of Particulars in the Report of
the Board of Directors) Rules, 1988 and forming part of the
Directors' Report for the year ended 31 December 2003 :
CONSERVATION OF ENERGY :
Energy Conservation Measures :
Installation of LPG evaporator in SAP heating system to
reduce the consumption of LPG;
Installation of new capacitor bank at Khardah and Nagpur
factories to avoid punitive energy charges;
Power factor monitoring survey to optimise power factor at
Taratala plant.
The energy conservation measures adopted have reduced
production costs. Energy consumption data is not supplied, since
the Company does not fall within the list of specified industries.
TECHNOLOGY ABSORPTION :
Research and Development was conducted into :
Development of new customized electrodes for major
customers;
Introduction of silicate as a part of process upgradation;
Fine adjustments in the formulations of some critical
electrodes to meet specified results;
Eco-friendly packaging in the form of wire baskets for MIG
wires;
Indigenisation of printed circuit boards and transformers
for Power Compact project;
10 Esab India Liii
company's legal advisers, are of the opinion that the Company
would succeed in this claim.
No employee has drawn remuneration during 2003 in excess of
the limits specified under the Companies (Particulars of
Employees) Rules, 1975. Accordingly, particulars of employees'
remuneration prescribed under Section 217 (2A) of the
Companies Act, 1956 are not attached to this Report.
ACKNOWLEDGMENTS
Your Directors wish to record their appreciation of the support
extended to the Company by its many customers, suppliers and
shareholders as well as the Company's bankers and financial
institutions.
Your Directors also wish to place on record their appreciation of
the efforts and contribution of the Company's employees at all
levels and across different locations all over the country during
the year.
For and on behalf of the Board of Directors
Homi P. R. Mullan
Chairman
13 April 2004
Development of special current carrying component to
enable import substitution and increased machine utilisation.
The Research and Development programme has led to a
reduction in production costs, the introduction of a wider product
range, improved product quality, and increased exports.
Research and Development is also proposed into the
indigenisation of electronic components in the Manley Multivent
Ventilator.
Expenditure on Research and Development amounted to
Rs. 2.8 million representing some 0.18% of annual turnover.
The ventilator technology imported in 1999 has been fully
absorbed.
FOREIGN EXCHANGE : .
Export markets are USA, Japan, Singapore, Canada,
Bangladesh, Sri Lanka and certain countries in Africa.
During the year, the total foreign exchange expenditure amounted
to Rs. 48.13 million (including Rs. 28.27 million for the import of
raw materials, Rs. 1.86 million for the import of components,
Rs. 14.9 million for the import of capital goods and Rs. 3.1 million
towards expenditure in foreign currency).
Foreign exchange earnings in the year, represented by the FOB
value of exports, amounted to Rs. 80.97 million
For and on behalf of the Board of Directors
Homi P. R. Mullan
Chairman
13 April 2004
 Corporate Governance

The Company is committed to good corporate governance. The

Board of Directors is determined to create an inclusive culture, Directorships* other Board
which is open and transparent. Policies and procedures that are Committees
designed to secure shareholder value are rigorously Mr. H. P. R. Mullan 1 Nil
implemented.
Mr. G. Hariharan Nil Nil
BOARD OF DIRECTORS
Mr. P. Mallick 5 6 (of which 1 as Cl
The Board of Directors currently consists of six members. Other
Mr. N.H. Mirza 4 4 (of which 1 as Cl
than the Wholetime Director, all other members of the Board are
non-executive directors, including three who are independent Mr. S. Tandon 2 2
directors. Mr. J. Templeman Nil Nil

Eight Board Meetings were held during the year on : Mr. S. N. Talwar 15 1 0 (of which 4 as C

7 January 2003, * Excluding Alternate Directorships and Directorships of Private

Limited Companies and Foreign Companies, wherever
10 February 2003, applicable.
8 March 2003, AUDIT COMMITTEE
24 April 2003, The terms of reference of the Committee cover the matters
specified under the Listing Agreements and Section 292A of the
12 June 2003,
Companies Act, 1 956. The members of the Committee are:
27 August 2003, Mr. N. H. Mirza (Chairman)
23 October 2003 Mr. P. Mallick
Mr. S. Tandon
15 December 2003
Mr. J. Templeman
The composition of the Audit Committee meets the stipulated
minimum number of independent directors. The Company's
Director Directorship Attendance
Board AGM Corporate Finance Manager, its statutory auditors and its internal
auditors are permanent invitees to the Committee's meetings.
Mr. H. P. R. Mullan Nominee, 8 Yes
Esab Holdings Limited The Company Secretary is Secretary to the Committee. The
Mr. G. Hariharan Executive 6 Yes Re-appointed on quorum for Committee meetings is two members or one third of
7 January 2004
the total strength of the Committee, whichever is higher.
Mr. P. Mallick Independent & 2 NA Appointed on
Non-Executive 23 October 2003 There were five meetings of the Audit Committee held during the
Mr. N. H. Mirza Independents 8 Yes year on :
Non-Executive

Mr. S. Tandon Independents 2 NA Appointed on 6 January 2003,

Non-Executive 12 June 2003
7 March 2003,
Mr. J. Templeman Non-Executive 5 Yes
24 April 2003,
Mr. S. N. Talwar Non-Executive 7 No Ceased to be Alternate 8 September 2003,
to Mr. B. Pekkari on
23 October 2003 23 October 2003
Appointed as Alternate
' to Mr. J. Templeman The number of meetings attended by each member is
on 25 October 2003 ,
as follows :
Ms. A. R. Yapp Non-Executive 3 Yes Ceased to be Alternate
to Mr. J.Templeman on Mr. N. H. Mirza 5
23 October 2003

Mr. B. Pekkari Non-Executive No Resigned on Mr. P. Mallick 1 (Appointed 23 October 2003)

23 October 2003
Mr. S. Tandon 2 (Appointed 12 June 2003)
Mr. T. Mitra Independents 4 Yes Resigned
Non-Executive on 13 June 2003 Mr J. Templeman 3
Mr. S. K. Bhattacharyya Executive 1 NA Until 31 January 2003 Mr. T. Mitra ' 3 (Resigned 13 June 2003)

11 Esab India Limited Annual Report 2003

 Corporate Governance
REMUNERATION COMMITTEE
The Company has not set up a Remuneration Committee (which
is not mandatory) as the Board contains only one executive
director. The remuneration of that Director is determined and
approved by the Board of Directors and is subject to the approval
of the Company in general meeting and of other applicable
regulatory and statutory authorities.
During the year under review, Mr. G. Hariharan, the Wholetime
Director, drew remuneration aggregating to some Rs.1.159 million
(excluding pension and gratuity contributions) as set out in
Schedule R Note 13 of the Accounts. He was not paid any
performance linked incentives during the period under review.
The one year service contract of Mr. Hariharan expired on
6 January 2004. He was however re-appointed as Wholetime
Director for a further period of five years effective from
7 January 2004.
The Company does not grant stock options to any of its Directors
or employees.
The other Indian Directors, who are all non-executive, do not
draw any remuneration from the Company except sitting fees,
which in respect of the year ended 31 December 2003 were
paid as follows :
Mr. P. Mallick Rs. 32,000
Mr. N. H. Mirza Rs. 96,000
Mr. T. Mitra Rs. 39,000
Mr. S. N. Talwar Rs. 40,000
Mr. S. Tandon Rs. 39,000
The Directors received no commission in the absence of profits.
The Overseas Directors (Mr. H. P. R. Mullan and Mr. J. Templeman)
do not draw any remuneration from the Company.
During the year, the Company paid professional fees (including
advances) amounting to Rs. 449,689 to Crawford Bayley & Co.,
Advocates and Solicitors, a firm in which Mr. S. N. Talwar is a Partner.
INVESTORS' GRIEVANCE COMMITTEE
The Investors' Grievance Committee (previously, the Share
Transfer cum Investors' Grievance Committee) now functions
under the Chairmanship of Mr. S. Tandon, a non-Executive
Independent Director. The other members of the Committee are
Mr. N. H. Mirza, Mr. J. Templeman and Mr. P. Mallick.
Mr. A. Banerjee, Company Secretary, is the Compliance Officer
of the Company.
The Directors review the position on all major investors'
grievances at meetings of the Board of Directors and the
Investors' Grievance Committee.
12 f
During the year, the Company received 69 complaints from
shareholders. All the complaints had been resolved to the
satisfaction of the shareholders. As at 31 December 2003 there
were no pending share transfers (other than those sent under
objections or held up because of warning notices sent to the
sellers).
GENERAL BODY MEETINGS
The last three Annual General Meetings of the Company have
been held at Bombay House Auditorium, Bombay House, Mumbai
at 4.00 p.m. All the proposed resolutions, including special
resolutions, were passed by the shareholders as set out in their
respective Notices.
No resolutions were put through postal ballot, and the Company is
not considering the introduction of a postal ballot.
DISCLOSURES
There have been no transactions of a material nature which
present a potential conflict of interest.
There has been no non-compliance by the Conlpany, and no
penalties or strictures have been imposed by any regulatory or
statutory authority, on any matter relating to the capital markets
during the last three years.
COMMUNICATION
The Company's quarterly and half-yearly financial results, after
their approval by the Board of Directors, are promptly issued to
all the Stock Exchanges with whom the Company has Listing
arrangements. These financial results, in the prescribed format,
are also published in leading local and national newspapers
(including Business Standard and Sakal) as well as being posted
on the Company's website, www.esabindia.com. The financial
results are also posted on the Electronic Data Information Filing
and Retrieval System at www.sebiedifar.nic.in. The half-yearly
report is not sent to individual shareholders.
On occasion, presentations are made to institutional investors
and analysts, after filing of the periodic results with the Stock
Exchanges. A Management Discussion and Analysis forms part of
the Directors' Report, which is included in the Annual Report.
GENERAL SHAREHOLDER INFORMATION
AGM : Date,Time 4.00 pm on 14 May 2004 at Bombay
& Venue House Auditorium, Bombay House,
Homi Mody Street, Mumbai, 400 001
Financial Year January to December
Approval of QE 31 Mar 2004 : Last week, Apr 2004
financial results HY 30 Jun 2004 : Last week, Aug 2004
QE 30 Sep 2004 : Last week, Oct 2004
YE 31 Dec 2004 : Last week, Feb 2005
 AGM for YE April-May 2005 Registrars and Share Computech Sharecap Limited
31 Dec 2004 Transfer Agents 147, Mahatma Gandhi Road,
3rd Floor, Fort,
Dates of Book 5 May 2004 to 14 May 2004 (both days
Closure inclusive) Mumbai - 400 023

Dividend payment No dividend recommended. Share Transfer System Share transfers are processed and
date approved, subject to receipt of all
requisite documents. The Company
Listing on Stock The Stock Exchange, Mumbai
seeks to ensure that all transfers are
Exchanges The National Stock Exchange
approved for registration within the
The Calcutta Stock Exchange
stipulated period. With a view to
The Board of Directors at its meeting held on
expediting the approval process, the
10 March 2004 has approved the voluntary
Board of Directors has severally
delisting of the Company's shares from the
authorized the Chairman of the Board
Calcutta Stock Exchange, subject to the
of Directors, the Chairman of the
approval of the shareholders and compliance
Investors' Grievance Committee and the
with the provisions of the Securities and
Company Secretary to approve the
Exchange Board of India (Delisting of
transfer of shares.
Securities Guidelines).
The listing fees for the financial year 2004-
05 will be paid within the stipulated time on Distribution of shareholding as on 31 December 2003
their becoming due. Shareholding Shareholders Number of Shares % of total
Stock Code Physical
UptoSOO 12,326 2,144,935 13.93
The Stock Exchange, Mumbai : 500133
501-1000 886 700,401 4.55
The National Stock Exchange : ESABINDIA
The Calcutta Stock Exchange :1 001 5010 1001-2000 340 516,595 3.35

Demat 2001-3000 132 334,957 2.18

INE284A01012 3001-4000 49 176,550 .1.15

4001 - 5000 52 250,270 - 1 .63

Stock Market Price* Data & Stock Performance :
5001-10000 52 384,872 . 2.50
Mumbai National Calcutta** BSESensex •
10001 and above 60 10,884,440 ' 70.71
High Low High Low High Low High Low
Rs Rs Rs Rs Rs Rs Total 13,897 15,393,020 100.00

Jan 44 38 44 38 - - 3390 3220

Feb 40 37 40 38 41 38 3322 3223

Shareholding pattern as on 31 December 2003
Mar 38 29 33 29 - - 3277 3049

Apr 33 29 33 29 - - 3215 2924 Number of Shares % of total

May 42 31 42 31 - - 3181 2943 Esab Holdings Limited 5,743,200 .37.31

Jun 44 39 44 38 - - 3607 3182 Unit Trust of India 1,011,942 6.57
Jul 49 41 49 40 - - 3793 3554
Mutual Funds 556,114 3.61
Aug 49 42 49 42 - - 4245 3742
Banks, Financial Institutions, and
Sep 57 45 57 46 - - 4453 4134
Insurance Companies 1,322,565 8.59
Oct 73 53 73 53 - - 4931 4455
Foreign Institutional Investors 1,200 0.01
Nov 77 67 77 67 - - 5098 4771
Corporate Bodies 1 ,355,542 8,81
Deo 79 68 79 68 79 73 5839 5132
Directors and Relatives 1,440 0.01
* Share prices are rounded off to the nearest Rupee.
NRIs/OCBs 39,804 - 0,26
** Except for February 2003 and December 2003, no trading Indian Public 5,361,213 34.83
has taken place in the Company's equity shares on the
Calcutta Stock Exchange during the year. 15,393,020 100.00

13
Corporate Governance

Dematerialisation As on 31 December 2003, 56.30% of
of shares & liquidity the total paid-up equity capital was held
in dematerialised form. 37.31% of the
paid up equity capital which is held by
Esab Holdings Limited, a UK
incorporated company, has not been
dematerialised. The Company has
entered into an Agreement with National
Securities Depository Limited and
Central Depository Services (India)
Limited to offer shareholders the option
to dematerialise their shares with
Depositories.
Outstanding GDRs None
/ADRs
Plant Locations Plot No. 13, 3rd Main Road,
Industrial Estate
Ambattur, Chennai 600 058
B.T. Road, Khardah, P.O. B.D. Sopan
North 24 Parganas, Kolkata 743 121
B-28, MIDC Industrial Area,
Kalmeshwar, Nagpur 441 501
P-41 Taratala Road, Kolkata 700 088
Address for Corporate Affairs Manager &
correspondence Company Secretary
Esab India Limited
Lloyds Centre Point, 2nd Floor,
1096-A, Appasaheb Marathe Marg,
Prabhadevi, Mumbai - 400 025
Tel : 022 2431 4569/4573/3224
Fax: 022 2432 9940
E-mail:esabho@ bom4.vsnl.net.in

For and on behalf of the Board of Directors

Homi P. R. Mullan
Chairman
Mumbai, 10 March 2004

Auditors' Certificate on Corporate Governance;

To the Members of Esab India Limited

We have examined the compliance of the conditions of Corporate Governance by Esab India Limited for the year ended 31
December 2003 as stipulated in clause 49 of the Listing Agreements of the said Company 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 the 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 an 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, the Company has complied
with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreements.

We state that in respect of investor grievances received during the year ended 31 December 2003, no investor grievances are
pending against the Company exceeding one month as per the records maintained by the Company.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or
effectiveness with which the management has conducted the affairs of the Company.

. For Lovelock and Lewes

Chartered Accountants

Place: Mumbai Vasant Gujarathi

Date: 10 March 2004 Partner

14 Esab India Limited Annual Report 2003

Auditors' Report
To the Members of Esab India Limited :
1. We have audited the attached Balance Sheet of Esab India
Limited as at 31 December 2003, the related Profit and
Loss Account for the year ended on that date annexed
thereto and the Cash Flow Statement for the year ended
on that date, which we have signed under reference to this
report. These financial statements are the responsibility of
the management of the Company. Our responsibility is to
express an opinion on these financial statements based
on our audit.
2. We conducted our audit in accordance with auditing
standards generally accepted in India. Those Standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles
used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation. We believe that our audit provides a
reasonable basis for our opinion.
3. As required by the Manufacturing and Other Companies
(Auditor's Report) Order, 1988 issued by the Central
Government of India in terms of sub-section (4A) of Section
227 of the Companies Act, 1956 of India (the 'Act') and on
the basis of such checks as we considered appropriate
. and according to the information and explanations given to
us, we set out in the Annexure a statement on the matters
specified in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to in
paragraph 3 above, we report that :
(a) Read together with our comments in paragraph (d)
below, we have obtained all the information and
explanations, which to the best of our knowledge and
belief were necessary for the purposes of our audit;
(b) In our opinion, proper books of account as required
by law have been kept by the Company so far as
appears from our examination of those books;
(c) The Balance Sheet, Profit and Loss Account and the
Cash Flow Statement dealt with by this report are in
agreement with the books of account;
(d) With reference to Note 22 of Schedule R, our
verification of related party disclosures as required
under Accounting Standard 18 - Related Party
Disclosures has been based on the information made
available to us by the Company. Read together with
the comments above and subject to our remarks in
paragraph (f) below, in our opinion, the Balance Sheet,
Profit and Loss Account and the Cash Flow Statement
dealt with by this report comply with the accounting
standards referred to in Section 211 (3C) of the Act;
15 Esab India Limited Afinuai Report 2003
(e) On the basis of written representations received from
the directors, as on 31 December 2003, and taken on
record by the Board of Directors, we report that no
director of the Company is disqualified as on 31
December 2003 from being appointed as a director as
referred to in Section 274 (1 )(g) of the Act;
(f) In accordance with the transitional provisions of
Accounting Standard 28 - Impairment of Assets, the
Company has accounted for an impairment loss of
Rs. 10.0 million relating to its Equipment business by
way of an adjustment from the opening balance of
General Reserve. However, the deferred tax credit
of Rs. 3.588 million arising on account of impairment
loss has also been adjusted to General Reserve which
is not in accordance with Accounting Standard 22 -
Accounting for Taxes on Income, which provides for
recognition of such credit to revenue reserves only
on the first occasion that the taxes on income are
accounted by an entity in accordance with that
• Standard. Consequently, profit for the year is
understated by Rs. 3.588 million and general reserve
is overstated by ah equivalent amount (refer Note 18
of Schedule R);
(g) The remuneration paid to the Wholetime Director
includes Rs. 0.047 million towards perquisites which
is subject to the approval of the shareholders of the
Company (refer Note 13 of Schedule R);
(h) The balance amount of excess remuneration of
Rs. 3.251 million paid to the former Managing Director
during the year ended 31 December 2002 is
recoverable from him (refer Note 13 of Schedule R);
(i) Subject to our remarks in paragraphs (f), (g) and (h)
above, in our opinion and to the best of our information
and according to the explanations given to us, the
Balance Sheet, Profit and Loss Account and the Cash
Flow Statement together with Schedules A to R
annexed thereto, give in the prescribed manner the
information required by the Act, and give a true and
fair view in conformity with the accounting principles
generally accepted in India :
i) in the case of the Balance Sheet, of the state of
the affairs of the Company as at 31 December
2003;
ii) in the case of the Profit and Loss Account, of
the profit for the year ended on that date; and
iii) in the case of Cash Flow Statement, of the cash
flows for the year ended on that date.
For Lovelock & Lewes
Chartered Accountants
Place : Mumbai Vasant Gujarathi
Date : 10 March 2004 Partner
Auditors' Report
Annexure referred to in paragraph 3 of the Auditors' Report of
even date to the members of Esab India Limited on the accounts
for the year ended 31 December 2003 :
1. The Company has maintained proper records to show full
particulars including quantitative details and the location of
its fixed assets. The fixed assets of the Company have
been physically verified during the year by the management.
The discrepancies noticed on such verification have been
properly dealt with in the books of account.
2. The fixed assets of the Company have not been revalued
during the year.
3. The stocks of finished goods, work-in-progress, raw
materials and stores & spare parts of the Company at all
its locations have been physically verified by the
management during the year. In respect of stocks lying
with third parties, these have substantially been confirmed
by them. In our opinion, the frequency of physical verification
- of stocks is reasonable.
4. The procedures for physical verification of stocks followed
by the management are reasonable and adequate in relation
to the size of the Company and the nature of its business.
5. The discrepancies noticed on such verification between
the physical stocks and the book records were not material
and these have been properly dealt with in the books of
account.
6. On the basis of our examination of stock records we are of
the opinion that the valuation of stocks is fair and proper in
accordance with normally accepted accounting principles
and is on the same basis as in the preceding year.
7. The Company has taken an unsecured loan from Esab
Holdings Limited, in which a director is interested. The rate
of interest and other terms and conditions of such loan are
not prima facie prejudicial to the interests of the Company.
The Company has not taken any other loans, secured or
unsecured, from companies, firms or other parties listed in
the register maintained under Section 301 of the Act. In
terms of sub-section (6) of Section 370 of the Act, provisions
of the Section are not applicable to a company on or after
the commencement of The Companies (Amendments) Act,
1999, of India.
8. The Company has not granted any loans, secured or
unsecured, to companies, firms or other parties listed in
the register maintained under Section 301 of the Act. In
terms of sub-section (6) of Section 370 of the Act, provisions
of the Section are not applicable to a company on or after
the commencement of The Companies (Amendment) Act,
1999, of India.
18
9. The parties, including employees, to whom loans (or
advances in the nature of loans) have been given by the
Company are repaying the principal amounts as stipulated
and are also regular in the payment of interest, where applicable.
10. In our opinion and having regard to the explanations that
some of the items are of a special nature for which alternate
quotations are not available, there are adequate internal
control procedures commensurate with the size of the
Company and the nature of its business for purchases of
stores, raw materials including components, plant and
machinery, equipment and other assets and for the sale of
goods.
11. In our opinion, in respect of purchases of raw materials,
made in pursuance of contracts or arrangements with
parties listed in the register maintained under Section 301
of the Act (and aggregating during the year to Rs.50,000 or
more in respect of each party), no comparison of prices
could be made since the raw materials were of a highly
special nature and there were no other transactions of a
similar nature with other parties. There are no transactions
for purchase of goods and sale of goods, materials and
services made in pursuance of contracts or arrangements
entered in the register maintained under Section 301 of the Act.
12. The Company has a regular procedure for the determination
of unserviceable or damaged stores, raw materials and
finished goods and necessary adjustment for any resultant
loss has been made in the accounts.
13. The Company has not accepted any deposits from the public.
14. In our opinion, reasonable records have been maintained
by the Company for the sale and disposal of realisable
scrap. As explained to us, there are no by-products.
15. In our opinion, the Company has an internal audit system
commensurate with its size and the nature of its business.
16. The maintenance of cost records has not been prescribed
by the Central Government of India under Section 209 (1) (d)
of the Act, for the products manufactured by the Company.
17. The Company has generally been regular during the year
in depositing Provident Fund and Employees' State
Insurance dues, with the appropriate authorities in India.
However, as regards Employees' State Insurance dues,
pertaining to the employees of Kolkata establishments,
consequent to the amendment in the Employees' State
Insurance Act with effect from 1 January 1997, the
Company has neither deducted nor deposited such
contributions during the year, in view of an interim stay
order granted by the Honourable Calcutta High Court.
18. There were no undisputed amounts payable in respect of 20. The Company is not a sick industrial company within the
income tax, wealth tax, sales tax, customs duty and excise meaning of clause (o) of Section 3(1) of the Sick Industrial
duty as at 31 December 2003, which were outstanding for Companies (Special Provisions) Act, 1985, of India.
more than six months from the date they became payable.
21. In respect of the Company's trading activities, damaged
19. During the course of our examination of the books of goods have been determined and necessary adjustment
account carried out in accordance with generally accepted for any resultant loss has been made in the accounts.
auditing practices in India, we have not come across any
personal expenses of employees or directors which have For Lovelock & Lewes
been charged to the Profit and Loss Account, nor have we Chartered Accountants
been informed of any such cases by the management
other than those payable under contractual obligations Place Mumbai Vasant Gujarathi
and / or accepted business practices. Date 10 March 2004 Partner

17 Esab India Limited Annual Report 2003

Balance Sheet
as at 31 December 2003

2002
Schedule Rs.'OOO Rs.'OOO Rs.'OOO
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share Capital A 153,930 153,930
Reserves and Surplus B 110,590 110,590
264,520 264,520
LOAN FUNDS
Secured Loans C 69,065 237,084
Unsecured Loans D 114,835 -
183,900 237,084
DEFERRED TAX LIABILITY(Refer Note 20 of Schedule R) 60,303 67,664
508,723 569,268
APPLICATION OF FUNDS
FIXED ASSETS E
Gross Block 742,633 733,484
Less: "Depreciation 320,318 261,308
Net Block 422,315 472,176
Capital Work-in-progress including Advances 1 ,089
422,315 473,265
INVESTMENTS F 5,271 5,271

DEFERRED TAX ASSET (Refer Note 20 of Schedule R) 133,427 , 136,324

CURRENT ASSETS, LOANS AND ADVANCES
Inventories G 161,470 125,088
Sundry Debtors H 50,890 123,465
Cash and Bank Balances I 30,135 50,836
Loans and Advances J 44,364 40,547
286,859 339,936
LESS :
CURRENT LIABILITIES AND PROVISIONS <
Liabilities K 393,980 444,765
Provisions L 12,581 8,746
406,561 453,511
NET CURRENT ASSETS (119,702) ' (113,575)
PROFIT AND LOSS ACCOUNT M 67,412 67,983
508,723 569,268

Notes to Accounts R

The Schedules referred to above form an integral part of the Balance Sheet

In terms of our report of even date

For Lovelock & Lewes For and on behalf of the Board of Directors
Chartered Accountants H. P. R. Mullan Chairman
G. Hariharan Chief Operating Officer
P. Mallick Director
Vasant Gujarathi N. H. Mirza Director
Partner S. N. Talwar Director
S. Tandon Director
A. Banerjee Company Secretary
Mumbai, 10 March 2004

18
Profit and Loss Account
for the year ended 31 December 2003

2002
Schedule Rs.'OOO Rs.'OOO

INCOME
Sales (Gross) 1,524,815 1,414,885
Less: Excise Duty 183,684 164,618
Sales (Net) 1,341,131 1,250,267
Other Income N 16,526 13,351
1,357,657 1,263,618

EXPENDITURE
Materials O 826,030 848,617
Manufacturing, Selling and Administrative Expenses P 439,390 491,578
Interest Q 22,441 25,921
Depreciation 55,717 42,079
1,343,578 1,408,195

OPERATING PROFIT 14,079 (144,577)

Diminution in the value of investment - (1,928)
Profit on sale of land (Refer Note 29 of Schedule R) 10,832 -
Provision for liabilities no longer required
written back (Refer Note 28 of Schedule R) 7,880 -
Prior period expenses (26,459) -

PROFIT / (LOSS) BEFORE TAXATION 6,332 (146,505)

Taxation (Refer Notes 20 and 23 of Schedule R) 651 30,333

PROFIT / (LOSS) AFTER TAXATION 6,983 (116,172)

Balance brought forward from previous year (116,172) -

BALANCE CARRIED TO BALANCE SHEET (109,189) (116,172)

Earnings per share : (Refer Note 21 of Schedule R)

Basic Rs. 0.45 Rs. (7.55)
Diluted Rs. 0.45 Rs., (7.55)

Notes to Accounts R

The Schedules referred to above form an integral part of the Profit and Loss Account

In terms of our report of even date

For Lovelock & Lewes For and on behalf of the Board of Directors
Chartered Accountants H. P. R. Mullan Chairman
G. Hariharan Chief Operating Officer
P. Mallick Director
Vasant Gujarathi N. H. Mirza Director
Partner S. N. Talwar Director
S. Tandon Director
A. Banerjee Company Secretary
Mumbai, 10 March 2004

19 Esab India Limited Annual Report 2003

Schedules to the Accounts
31 December 2003

2002
Rs.'OOO Rs.'OOO

A. SHARE CAPITAL

Authorised:
17,000,000 Equity Shares of Rs.10 each 170,000 170,000
3,000,000 Unclassified Shares of Rs.10 each 30,000 30,000

200,000 200,000
Issued and Subscribed:
15,393,020 Equity Shares of Rs.10 each fully paid up
(of which 999,000 shares were allotted as fully paid up
pursuant to a Scheme of Amalgamation) 153,930 153,930

B. RESERVES AND SURPLUS

Amalgamation Reserve
As per last Balance Sheet 10,000 10,000

Securities Premium Account

As per last Balance Sheet 93,190 93,190

Special Capital Incentive Subsidy

As per last Balance Sheet 2,000 2,000

Investment Allowance Reserve Account

As per last Balance Sheet 5,400 5,400

General Reserve
As per last Balance Sheet 48,189 48,189
Impairment loss on Fixed Assets (10,000)
Deferred Tax credit on account of impairment 3,588
41,777 48,189

Less : Debit Balance in Profit and Loss Account 41,777 48,189

(as per contra - Schedule M)

110,590 110,590

C. SECURED LOANS

Term Loans from Banks 65,800 100,000

Cash Credits from Banks 3,265 23,260
Working Capital Demand Loans from Banks 113,300
Interest Accrued and Due 524

69,065 237,084

Notes :
Term Loans are secured by the hypothecation of movable assets (excluding stocks and debtors) of the Company.
Cash Credits and Working Capital Demand Loans from Banks are secured by the hypothecation of stocks and debtors.
Term Loans include amounts repayable within one year of Rs. 36.8 million (previous year Rs. 34.2 million).

D. UNSECURED LOANS

Long Term Loan

External Commercial Borrowings 114,835

A fixed rate term loan from Esab Holdings Limited, UK, which holds 37.31 % of the equity share capital of the Company. The loan is denominated in US
dollars (US $ 2.5 million) and is for a term of 5 years at a fixed interest rate of 4.5% per annum, payable half yearly. Repayment is to be made in 5 equal
half yearly instalments beginning on 1 July 2006.

| 20 Esab India Limited Annual Report 2003

Schedules to the Accounts
31 December 2003

E FIXED ASSETS

(Refer Notes 16 to 18 and 29 of Schedule R)

Rs. '000

Freehold Leasehold Building Plant & Furniture & Motor . Total 2002
Land Land Machinery Fixtures Vehicles

GROSS BLOCK AT COST

As at 1 January 2003 40,557 18,261 135,247 510,772 12,573 16,074 733,484 735,435

Additions - - 436 24,217 31 1 725 25,689 21,035

Reclassification - - (10,304) 11,025 (889) 168 -

Deductions 5,737 - 179 8,806 1,649 169 16,540 22,986

As at 31 December 2003 34,820 18,261 125,200 537,208 10,346 16,798 742,633 733,484

DEPRECIATION

As at 1 January 2003 - 7,830 29,749 213,544 4,883 5,302 261,308 232,245

Additions - 179 9,070 42,687 1,854 1,526 55,316 42,079

Reclassification - - (2,106) 2,557 (168) 118 401

Asset Impairment - - 1,529 7,856 368 247 10,000

Deductions - - 134 5,370 1,076 127 6,707 13,016

As at 31 December 2003 - 8,009 38,108 261,274 5,861 7,066 320,318 261,308

NET BLOCK

As at 31 December 2003 34,820 10,252 87,092 275,934 4,485 9,732 422,315

As at 31 December 2002 40,557 10,431 105,498 297,228 7,690 10,772 472,176

Capital Work in Progress 1,089

including Advances

2002
Rs.'OOO Rs.'OOO

F. INVESTMENTS (UNQUOTED)

Long term investment at cost (net of provision for diminution in value),

in Subsidiary Company Esab Welding & Cutting Systems Limited :
1,200,000 (previous year 1,200,000) Equity Shares of Rs.10 each
fully paid up 5,271 5,271

G. INVENTORIES

Raw and Packing Materials 69,223 50,968

Work-in-Process 10,283 27,132
Finished Goods 78,549 42,794
Stores and Spare Parts 3,415 .4,194

161,470 125,088

21
 Schedules to the Accounts
31 December 2003

2002
Rs.'OOO Rs.'OOO

H, SUNDRY DEBTORS (UNSECURED)

Over six months -

Considered Good 3,495 15,313
Considered Doubtful 33,385 21,268
Others, Considered Good 47,395 108,152
84,275 144,733
Less : Provision for Doubtful Debts 33,385 21,268

50,890 123,465

1. CASH AND BANK BALANCES

Cash on hand 469 452

Cheques on hand and remittances in transit 25,419 39,945
Balances with Scheduled Banks on Current Account 3,780 10,014
Margin money with bank 467 425

30,135 50,836

LOANS AND ADVANCES

Secured
Vehicle Loans to employees 902 1,503
(Secured against hypothecation of vehicles)

Unsecured, considered good unless otherwise stated

Advances to Esab Welding & Cutting Systems Limited,
a Subsidiary Company 3,251 2,525
Advances recoverable in cash or in kind or for value
to be received
Considered Good 36,040 34,453
Considered Doubtful 3,994
40,034 34,453
Less : Provision for doubtful advances 3,994 36,040 34,453
Balances with Customs, Port Trust, Excise, etc. 4,171 2,066
44,364 40,547

K. CURRENT LIABILITIES

Sundry Creditors (Refer Notes 14 and 15 of Schedule R) 313,640 348,161

Customers' Credit Balances 26,707 29,882
Other Liabilities 49,649 64,396
Unclaimed Dividends * 1,124 1,269
Interest accrued and not due 2,860 1,057
393,980 444,765

* There is no amount due and outstanding to be credited to the Investor Education and Protection Fund.

22 Esab India Limited Annual Report 2003

Schedules to the Accounts
31 December 2003

2002
Rs.'OOO Rs.'OOO

L PROVISIONS

Provision for Income-tax less advance tax payments 12,581 8,746

12,581 8,746

M. PROFIT AND LOSS ACCOUNT

Debit Balance in Profit and Loss Account 109,189 116,172

Less : As per Contra in General Reserve (Schedule B) 41,777 48,189

67,412 67,983

Scrap Sales 9,163 7,386

Less : Excise Duty 1,352 7,811 1,044 6,342
Commission 1,101 -:
Miscellaneous 7,614 7,009
16,526 13,351

O. MATERIALS

Raw & Packing Materials Consumed 704,139 602,788

Purchases of Finished Goods 140,797 126,013
844,936 728,801
(Increase) / Decrease in Finished Goods & Work-in-Process
Opening Stock
Finished Goods 42,794 165,751
Work-in-Process 27,132 23,991
69,926 189,742
Closing Stock
Finished Goods 78,549 42,794
Work-in-Process 10,283 27,132
88,832 69,926
(18,906) 119,816
826,030 848,617

23 I
Schedules to the Accounts
31 December 2003

2002
Rs.'OOO Rs.'OOO

P. MANUFACTURING, SELLING AND ADMINISTRATIVE EXPENSES

Salaries, Wages and Bonus 100,070 95,208

Contributions to Provident and Other Funds 37,798 35,226
Workmen and Staff Welfare Expenses 12,249 12,798
Voluntary Separation Compensation and related payments 2,871 26,193
Consumption of Stores and Spare parts 22,111 13,974
Power and Fuel 53,843 48,642
Repairs : Buildings 4,591 5,833
Plant and Machinery 5,937 5,778
Others 6,729 7,413
Rent 16,250 15,477
Rates and Taxes 3,081 61,780
Excise Duty 7,050 (19,802)
Insurance 3,723 3,371
Provision for Doubtful Debts 22,612 21,268
Less : Writeback of provisions, no longer required 22,612 (2,903) 18,365
Bad Debts written off 1 0,495 29,113
Less : Provision 10,495 - 29,113
Transport and Freight 25,317 18,706
Communication Costs 13,167 16,109
Travelling, Conveyance and Motor Car Expenses 28,141 37,765
Special Discounts and Commissions 5,080 6,912
Loss on sale of fixed assets (net) 338 2,039
Fixed Assets written off 2,555 4,105
Advertising 445 1,519
Sundry balances written off - 3,250
Provision for doubtful advances 3,994
Exchange differences (net) 1,715 2,630
Provision for warranty cost 1,000 . -
Miscellaneous Expenses 58,723 68,287

439,390 491,578

Q, INTEREST

On Fixed Loans 12,263 8,814

On Other Loans 10,693 17;613

22,956 26,427
Less : Interest income including interest on income tax refund 515 506
[tax deducted at source Rs.0.06 million (previous year Rs.0.11 million)]

22,441 25,921

24 Esab India Limited Annual Report 2003

Notes to the Accounts (Schedule R)
31 December 2003

R. NOTES FORMING PART OF THE ACCOUNTS

1. Accounting Policies

a) The accounts have been prepared to comply in all material aspects with applicable accounting principles in India, the
Accounting Standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies
Act, 1956.

b) Fixed assets are stated at cost and in the case of projects include identifiable incidental and installation expenses and
interest on funds borrowed in order to bring the assets into use. An impairment loss is recognised wherever the carrying
value of the fixed assets of a cash generating unit exceeds its market value or value, in use, whichever is higher.

c) Depreciation for the year is provided on the straight line method at the rates and in the manner specified in Schedule XIV of
the Companies Act, 1956, except for the cost of buildings and leasehold land atTaratala, Kolkata, which has been amortised
over the remaining lease period.

d) Inventories of raw and packing materials are valued at the lower of cost and net realisable value on a First-In-First-Out
basis. Work-in-process and finished goods are valued at the lower of cost and net realisable value. Costs are generally
calculated at standards adjusted to actuals, and in the case of manufactured inventories include cost of conversion and
other costs incurred in bringing the inventories to their present location and condition. Inventories of stores and spare parts
are valued at cost.

e) Voluntary Separation Compensation and related payments including payments made in instalments are charged to the Profit
and Loss Account during the year in which they are incurred.

f) Revenue from the sale of goods is recognised on despatch to the customer. Sales are net of trade discounts and rebates.

g) The liabilities for gratuity, pension and leave salary are assessed actuarially.

h) Foreign currency transactions are accounted at the exchange rates prevailing on the date of the relevant transaction.
Foreign currency monetary assets and liabilities are restated at rates ruling at the year end. Exchange differences "relating
to the liability incurred for the purchase of fixed assets are adjusted in the cost of the assets. Other exchange differences
are dealt with in the Profit and Loss Account.

i) The excise duty in respect of closing inventory of finished goods is included as part of inventory. The amount of CENVAT
credits in respect of materials consumed for sales is deducted from the cost of materials consumed.

j) Current tax is determined on the basis of the amount of tax payable on taxable income for the year.

Deferred tax is calculated at the current statutory income tax rate and is recognised on timing 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 recognised and carried forward only to the extent that there is reasonable certainty that sufficient
future taxable income will be available against which such deferred tax assets can be realised.

k) Investments are stated at cost. Provision is made for diminution if, in the opinion of the management, the diminution is other
than temporary.

I) The accounting policies adopted for segment reporting are in line with the accounting policies of the Company.

Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the
segment. Revenue and expenses which relate to the enterprise as a whole, and not allocable to segments on a reasonable
basis, have been included under the heading "other common expenses".

25 Esab India Limited Annual Report 2003

Notes to the Accounts (Schedule R)
31 December 2003

2002
RS.'OOO Rs.'OOO

2 Estimated amount ;»* > , , iiMnr) jo be executed

on capital account i> ' t i <> i'iet of advances) 403 14,548

3. Contingent Liabilities
For disputed taxes and duties 219,354 221,410
(Interest and penalty, if any, payable on contingent liability relating
to sales tax and excise duty demands are presently not ascertainable.)

Guarantee given to bank on behalf of Subsidiary Company 20,900 20,900

(Facilities outstanding - Rs. 5.51 million (previous year - Rs. 6.88 million))

Claims against the Company not acknowledged as debts 42,579 -

4. Auditors" Remuneration
Audit fees 700 800

Tax Audit and Tax Accounts 425 319

Certification 70 56

Other Professional Services 525 ' 525

Out of pocket expenses 70 34

5. Particulars of Licensed and installed Capacity and Actual Production

2003 2002-
Licensed Installed Actual Licensed Installed Actual
Unit Capacity Capacity* Production Capacity Capacity* Production

Welding Electrodes '000 Mtrs 341,148 151,200 129,471 267,996 151,200 109,736
Continuous Electrodes/
Copper Coated Wires Tonnes 7,640 6,100 5,172 4,640 6,100 4,098
Automatic Submerged
Arc Electrodes Tonnes 480 - - 480 -.
MS Welding Rods
(Copper Coated) Tonnes 360 200 91 360 200 47
Welding Fluxes Tonnes 7,061 2,140 896 7,061 2,140 785

Gas & Electric Welding &

Cutting Equipment &
Accessories Nos. 69,790 140,837 84,010 69,790 140,837 87,147
Gas Cylinder Valves Nos. 74,000 61,000 -, . 74,000 61,000 . -
Cutting Unit & Small Tools Nos. 6,000 7,500 6,000 7,500 -

Medical Equipment Nos. 6,650 7,772 4,527 6,650 7,772 7,992

Industrial Voltage Regulators
& Stabilizer Equipment Nos. 12,000 12,000 -
'
Flux Cored Wires Tonnes 2,600 2,600
Industrial Uninterrupted
Power Supply System Nos. 2,000 2,000

* As certified by the Management.

Notes to the Accounts (Schedule R)
31 December 2003

6. Particulars of Closing Stocks of Finished Goods

2002 2001

Unit Qty Value Qty Value Qty Value

Rs.'OOO Rs.'OOO Rs.'OOO
Welding Electrodes PCS ('OOOs) 7,842 17,138 3,623 9,824 43,758 88,561
Tonnes 161 22,668 33 5,850 58 10,195

Continuous Electrodes/
Copper Coated Wires Tonnes 43 2,733 13 663 368 17,472

Welding Fluxes Tonnes 25 1,376 30 1 ,824 23 1 ,622

Gas & Electric Welding &
Cutting Equipment &
Accessories 28,137 20,453 38,756

Gas Cylinder Valves Nos. 479 110 426 98 426 98

Medical Equipment &
Accessories 4,870 3,418 7,576

Others 1,517 664 1 ,4/1

78,549 42,794 165,751

7. Particulars of Sales
2002
Unit Qty Value Qty Value
Rs.'OOO Rs.'OOO

Welding Electrodes PCS ('OOOs) 304,649 663,073 304,847 590,844

Tonnes 672 182,125 528 140,731

Continuous Electrodes/
Copper Coated Wires Tonnes 5,159 241,375 4,422 198,552

Welding Fluxes Tonnes 892 50,458 745 42,244

Gas & Electric Welding &
Cutting Equipment &
Accessories 318,060 328,613

Medical Equipment & Accessories 37,636 65,539

Others 32,088 48,362

1,524,815 1,414,885

Notes :
i) Separate information for purchases, stock and turnover of traded items is not conveniently available; these are included in the above
figures.
ii) Quantitative data for equipment and spares is not given as it covers a large variety of items, which would not be meaningful in aggregate.
Special electrodes, for which separate licenses were issued for some plants, are included with Welding Electrodes.
Notes to the Accounts (Schedule R)
31 December 2003

8. Details of Raw & Packing Materials consumed

2002
Quantity (Tonnes) Value Rs.'OOO Quantity (Tonnes) Value Rs.'OOO

Mild Steel 16,443 309,363 13,580 241,893

Non-Ferrous Metals 246 54,788 231 42,505
Minerals 5,021 82,215 4,713 74,888
Chemicals 2,155 82,327 1,912 77,860
Piece Parts 121,923 118,251
Others 53,523 47,391
704,139 602,788

Value of imported and indigenous Raw & Packing Materials, Components and Stores & Spare Parts consumed

Value Rs.'OOO % age of Total Consumption

2003 2002 2003 2002

Raw & Packing Materials & Components

Imported 40,956 40,850 5.8 6.8
Indigenous 663,183 561,938 94.2 93.2

704,139 602,788 100.0 1.00.0

Stores & Spare Parts
Imported 2,483 357 11.2 2.6
Indigenous 19,628 13,617 88.8 ' 97.4

22,111 13,974 100.0 100.0

2003 2002
Rs.'OOO Rs.'OOO
10. •C.I.F. Value of Imports
Raw Materials 28,276 28,566
Components 1,859 352
Capital Goods 14,910 _ 6,077
45,045 34,995

11. Expenditure in Foreign Currency

Technical Know-how Fee 881
Travelling expenses 237 851
Royalty 50 713
Interest 2,777
Others 96 550

3,160 2,995

12. Earnings in Foreign Exchange

FOB Value of Exports 79,818 79,995
Commission 1,101
Others 48
80,967 79,995

28 Esab India Limited Annual Report 2003

Notes to the Accounts (Schedule R)
31 December 2003

13. Managerial Remuneration

2002
Rs.'OOO Rs.'OOO Rs.'OOO Rs.'OOO
A) Computation of net profit in accordance with
Section 198 of the Companies Act, 1956 :
Profit / (Loss) before Tax as per Profit & Loss Account 6,332 (146,505)
Add: Directors' remuneration 1,628 6,137
Provision for Bad & Doubtful Debts/advances 26,606 18,365
Loss on Investment in Subsidiary Company 1,928
Loss on sale of Fixed Assets (net) 338 3,817
Voluntary Separation Compensation and
related payments 2,871 26,193
Fixed Assets written off 2,555 4,105
33,998 60,545
Less: Excess remuneration to Managing Director
credited to Profit and Loss Account - 3,922
Bad Debts written off 10,495 29,113
Profit on sale of land 10,832
Excess of expenditure over income pertaining to
previous year to the extent not adjusted 131,702 12,707
153,029 45,742
(112,699) (131,702)

In view of the net loss resulting from the computation under Section 198 of the Companies Act, 1956, no commission is
payable to the Directors.

B) Managerial remuneration :
i) Wholetime Directors
Salary 997 2,530
Contribution to Provident Fund 103 304
Perquisites 282 3,192
1,382 6,026
ii) Non Wholetime Directors
Sitting fees 246 111

246 1-11

Notes:

a) The above remuneration includes Rs. 0.047 million reimbursed to the Wholetime Director towards perquisites, in variation of the terms and
conditions of appointment, pending approval of the shareholders.
The above remuneration excludes provision for contribution to pension and gratuity funds, since these are based on actuarial valuations done
on an overall company basis.
c) In view of the computation pursuant to Section 198 [read with Section 309 (5)] of the Companies Act, 1956 resulting in a loss for the year 2002,
the remuneration paid to the then Managing Director during the year 2002 is in excess of the limit specified under Schedule XIII of the Companies
Act, 1956. The Company has taken legal steps to recover the balance excess remuneration of Rs. 3.251 million.

29 Esab India Limited Annual Report 2003

Notes to the Accounts (Schedule R)
31 December 2003

14, Sundry Creditors include :

a) Rs. 5.43 million (previous year Rs. 3.30 million) advance payment received for sale of excess vacant land at
the Khardah factory, West Bengal.

b) Rs. 1.96 million (previous year Rs. 2.87 million) payable to Esab Welding & Cutting Systems Limited, a Subsidiary
Company.

15. Sundry Creditors comprise Rs. 20.11 million (previous year Rs. 12.61 million) outstanding to Small Scale Industrial Undertakings
and Rs. 293.53 million (previous year Rs. 335.55 million) to other Creditors. Amounts due to the following Small Scale
Industrial Undertakings (on the basis of information available with the Company) are outstanding for more than 30 days :

Basanti Enterprise, Bharat Electronics & Electricals, Chemicals & Meters, Components & Equipments, Das Moulding & Engg
Works, Die Casting Corporation, Eastern Lamination Pvt. Ltd., Eastern Mechanical Industries, Electrical Micanite Corporation,
EPC Electricals Limited, Fairdeal Corporation, Ferro Curves, Hatim Dielectrics Pvt. Ltd., JBA Eng Works, Kanchan Engineering
Corporation, Laminations Core Fabricators, Progressive Rubber Works, Psco, R.K.Enterprises, Ragsons Industry, Sarada
Steel Industries, Senate Engineering Industries, Standard Engineering &Tool Maker, Sun Electrical Engineering Co., Supersmelt,
Superstar Cable Industries, Tara Spring & Engineering Co., Techno Enterprise, Welding Technocrats, Yetazu Instrumentation.

18, Based on management's expectation that the lease would be renewed, buildings constructed on leasehold land at Taratala,
Kolkata, were hitherto depreciated at the rates and in the manner prescribed in Schedule XIV of the Companies Act, 1956.
During the year, the Company has depreciated these buildings over the remaining lease period on account of uncertainties
arising in respect of the renewal of the lease. Consequently, the depreciation charge for the year is higher by Rs. 5.09 million.

17 The written down value of Fixed Assets includes Rs.25.84 million (previous year Rs. 27.86 million) in respect of assets at
Kalwa, which are not used for productive purposes and are held for disposal.

18. Asset Impairment

As a matter of prudent accounting practice, the Company, has adopted Accounting Standard 28: Impairment of Assets. An
impairment loss of Rs. 10.00 million has been recognised in relation to the Company's Equipment Division (a cash generating
unit and a primary reportable segment) on the basis of the present value of future expected cash flows and the net book value
of assets.

As per the transitional provisions of the Accounting Standard, the impairment loss has been adjusted against the General
Reserve. The deferred tax credit of Rs. 3.59 million arising on account of the impairment loss has been credited to General
Reserve (Schedule B). Fixed assets are recognised net of the impairment loss with respect to the Equipment Division.

The Equipment Division's operations have resulted in losses in the past several years. In management's opinion, the carrying
value of the net assets employed in the Equipment business exceeds the present value of the future estimated cash flows.
The lowering of import tariffs has further exposed the Division to competition from imports. However, the sale of equipment
remains an important part of the Company's business, complementing the sale of consumables.

The class of assets to which the impairment loss is recognised is mentioned in Schedule E. A 14% p.a. discounting rate'was
used in the calculation of the impairment loss.

30 Esab India Limited Annual Reoort 2003

Notes to the Accounts (Schedule R)
31 December 2003

19. Business Segments

The Company has two business (and primary) segments, which have been identified by the type of their respective products and
services, their differing risks and returns, the Company's orgainisation structure and internal financial reporting systems,

Consumables : Welding electrodes, Copper coated wires and Welding fluxes

Equipment : Welding machines and Cutting equipment

Rs.'OOO

CONSlJMABLES EQUIFWENT TOT;\L

2003 2002 2003 2002 2003 2002

External sales (Gross) 1,168,923 1 ,021 ,449 355,892 393,436 1,524,815 1,414,885

Segment results 131,837 45,740 (41 ,990) (24,728) 89,847 21,012

Less: Interest (Net) 22,441 25,921
Other common expenses 34,615 141,596
Prior period expenses 26,459 -
Total Profit / (Loss) before tax 6,332 {146,505)

Capital employed
Segment Assets 514,899 518,882 148,044 239,684 662,943 758,566
Common Assets 184,929 196,230
Total Assets 847,872 954,796

Segment Liabilities 162,582 189,469 85,947 94,829 248,529 284,298

Common Liabilities 402,235 473,961
Total Liabilities 650,764 758,259

Segment Capital Employed 352,317 329,413 62,097 144,855 414,414 474,268

Common Capital Employed (217,306) (277,731)
Total Capital Employed 197,108 196,537

Segment Capital Expenditure 24,376 13,379 435 6,525 24,811 • .19,904

Common Capital Expenditure 878 1,131
Total Capital Expenditure 25,689 21,035

Segment Depreciation 36,596 31,022 11,359 6,688 47,955 37,710

Common Depreciation 7,762 4,369
Total Depreciation 55,717 42,079

Segment non cash expenditure 6,942 5,678 19,914 16,933 26,856 22,611
Common non cash expenditure (5,833) 4,982
Total non cash expenditure 21,023 27,593

Prior period expenses of Rs. 26.46 million comprise Rs. 24.66 million relating to the Equipment segment and Rs. 1.80 million
relating to the Consumables segment.

31
Notes to the Accounts (Schedule R)
31 December 2003

20. Deferred taxation

2002
Rs.'OOO Rs.'OOO Rs.'OOO Rs.'OOO

Deferred Tax Asset -

Unabsorbed Losses * 12,422 30,170

Unabsorbed Depreciation * 63,000 59,033

Voluntary Separation Compensation and related payments

(debited to Profit and Loss Account but deductible for tax
over five equal annual instalments) 10,205 14,310
Provision for doubtful debts / advances 13,143 7,816
Amounts disallowed under Section 43B of the Income-tax 33,911 24,249
Act, 1961
Provision for royalty 746 133,427 746 136,324

Deferred Tax Liability -

Excess of net block over written down value as per the
provisions of the Income-tax Act, 1961 (60,303) (67,664)
73,124 68,660
* In the opinion of the management, the Company will have
sufficient taxable profits to recoup unabsorbed losses and
depreciation in subsequent periods.

Earnings per Share

2003 2002

Basic Earnings per Share Rs. 0.45 Rs. (7.55)

Diluted Earnings per Share Rs. 0.45 Rs. (7.55)

Nominal value per Share Rs. 10.00 Rs. 10.00

Earnings per share are calculated by dividing the profit / (loss)

attributable to the equity shareholders by the weighted average
number of equity shares outstanding during the year

Profit / (Loss) after taxation Rs.'OOO 6,983 Rs.'OOO (116,172)

Weighted average number of shares outstanding 'OOOs 15,393 'OOOs 15,393

32 E'sab India Limited Annual Report 2003

Notes to the Accounts (Schedule R)
31 December 2003

22. Related Parly Disclosures

a) Parties where control exists

i) Esab Holdings Limited Principal Shareholder

Holds 37.31% of the paid up equity share capital of the Company
as at 31 December 2003. Charter Overseas Holdings Limited,
the holding company of Esab Holdings Limited, is a subsidiary of
Charter pic, the ultimate holding company.

ii) Esab Welding & Cutting Systems Limited Subsidiary Company

85.71% of whose paid up equity share capital is held by the
Company as at 31 December 2003.
iii) Charter pic Group Related parties in the Charter pic Group where common control
exists include :

Esab AB, Sweden

Esab Cutting Systems GmbH, Germany
The Esab Group Inc., USA
Esab SA Industria e Comercio, Brazil
Conarco Alambres y Soldaduras S.A., Argentina
Esab Asia/Pacific Pte Limited, Singapore
Howden Power Limited, Northern Ireland
Howden Sirocco SA, France
Burton Corblin SA, France
Ventilatoren Sirocco Howden BV, Netherlands
Turbowerke Meissen Howden GmbH, Germany
Voith Howden GmbH, Germany
Howden Power A/S, Denmark
Howden Power Spain S. L., Spain
Howden Buffalo Inc., USA
Howden Hua Engineering Co Limited, China
Howden African Holdings Limited, South Africa
Howden Food Equipment Inc., USA
HD Engineering Limited, Hong Kong
Esab Automation Limited, England & Wales
ESAB Limited, England & Wales
Murex Welding Products Limited, England & Wales
Murex Limited, England & Wales
Murex Welding Products (Ireland) Limited, England & Wales
Hancock Cutting Machines Limited, England & Wales
Brinal Limited, England & Wales
Filarc Welding Limited, England & Wales
Arcos Welding Products Limited, England & Wales
Bilston Wire Mill Limited, England & Wales
Esta Properties (UK) Limited, England & Wales
Esab Group (UK) Limited, England & Wales
Charter Overseas Holdings Limited, England & Wales
Weldcure Limited, England & Wales

33
Notes to the Accounts (Schedule R)
31 December 2003

Esab Holdings Limited, England & Wales

Exelvia Netherlands BV, Netherlands
Exelvia International Holdings BV, Netherlands
Charter Consolidated pic, England & Wales
Cecil Holdings Limited, England & Wales
Exelvia India BV, Netherlands
Esab International Holdings BV, Netherlands
b) Key Management Personnel
Managing Director Mr.S.K.Bhattacharyya (until 31st January, 2003)

Wholetime Director Mr.G.Hariharan (appointed on 7th January, 2003 and

reappointed on 7th January, 2004)

c) Transactions and outstanding balances with Related Parties

Rs;000
Common Key Management
Nature of Transaction Control Exists [a(i)] Subsidiary[a(ii)] Control [a(iii)] Personnel [b] Total
2003 2002 2003 2002 2003 2002 2003 2002 2003 2002
Loan taken 117,335 - 117,335 -
Interest on Loan 2,777 - 2,777 -

Purchase of goods 19,445 17,088 11,281 12,788 30,726 29,876

Sale of goods 126 82 22,111 9,857 22,237 9,939

Service Charges received 13 - 13 -

Royalty Expense - 513 - 513

Expenses recharged 190 530 190 530

by subsidiary
Expenses recharged 777 746 777 '746
to subsidiary
Guarantees in favour 5,514 6,878 5,514 6,878
of subsidiary
Remuneration 1,382 2,104 1,382 2,104

Recovery of expenses - 620 - 620

Rent paid for residential flat - 438 - 438

Sale of Assets 300 - 300

Outstanding payables (net) 117,045 - - 342 - 539 - - 117,045 881

Outstanding receivables(net) 1,289 - 6,556 - 3,251 3,922 11,096 3,922

The companies listed at Note 22(a) above have been identified on the basis of information available with the Company.

34
Notes to the Accounts (Schedule R)
31 December 2003

23. Taxation

2002
Rs.'OOO Rs.'OOO

Tax provision for current year 225 -

Tax provision for earlier years - 24,000
Deferred Tax Credit' 876 54,333
651 30,333

24. The Company has taken various residential and office premises under operating lease or leave & licence agreements. These are
generally cancellable; have a term of between 11 months and 3 years, and have no specific obligations for renewal. Lease
payments are recognised in the statement of Profit and Loss Account under Rent in Schedule P.

25. Sales are net of quantity discounts and incentives.

26. During the year, the Company has changed its method of estimating the provision for old and obsolete inventory. The provision
is calculated either on the basis of an ageing analysis or by specifically identifying obsolete items through a technical evaluation,
whichever yields the higher amount. Owing to this change in method, profit is lower by Rs. 6.06 million with a corresponding
decrease jn raw material inventory.

27. In the last quarter of 2003, the Company provided an aggregate amount of Rs. 60.00 million in respect of accelerated depreciation,
doubtful debts, write off of fixed assets, write down of inventories and additional provision towards pension.

28. Provision for liabilities no longer required written back is on account of

2003 2002
Rs.'OOO Rs. 'OOP

Purchases 2,265

Salaries, Wages and Bonus 1,494

Rates and Taxes 2,506

Transport and Freight 278 -

Miscellaneous Expenses 351 -

Deposits 986

7,880

29. Profit on sale of land of Rs.10.8 million represents profit on sale of excess vacant land situated at Khardah.

I 35 Esab India Limited Annual Report 2003

Notes to the Accounts (Schedule R)
31 December 2003

30, Additional Information as required under Part IV of Schedule V! to the Companies Act, 1956, :
Balance Sheet Abstract and Company's General Business Profile :

Registration Details

Registration No. 4 5 2 5 1 State Code

Balance Sheet Date

Date Month Year

Capital raised during the year (Rs '000)

Public Issue Rights Issue

III. Position of Mobilisation and Deployment of Funds (Rs '000)

Total Liabilities* Total Assets*

5 0 8 7 2 3 5 0 8 7 2 3

* Includes Deferred Tax Liabilities ' Net of Current Liabilities & Provisions
' Includes Deferred Tax Asset and
debit balance in Profit and Loss Account

Source of funds (Rs '000)

Paid-up Capital Reserves & Surplus

1 5 3 1 1 0 5 9 0

Secured Loans Unsecured Loans

6 9 0 6 5 1 1 4 3 5

Deferred Tax Liability

6 0 3 0 3

Application of funds (Rs '000)

Net Fixed Assets Investments

4 2 2 3 1 5

Net Current Assets Misc. Expenditure

(-) 1 1 9 7 0 2

Accumulated Losses Deferred Tax Assets

6 7 4 1 2 1 3 3 4 2 7

36 Esab India Limited Annual Report 2003

Notes to the Accounts (Schedule R)
31 December 2003

!V. Performance of Company (Rs '000)

Turnover * Total Expenditure

1 3 7 6 e\9 1 3 7 0 0 3 7
includes other income

Profit/Loss Before Tax Profit/Loss After Tax

6 3 3 2 I I6H8|3

Earnings per Share Dividend Rate %

0 . 4 5

V, Generic Names of Three Principal Products / 'Services of Company

Item Code 8 3 1 1 1 0 . 0 0
(ITC Code)

Product Description W | E| L | D J I | N | G | [ E fL | E | C | T | R JO | D | E\S

Item Code
(ITC Code)
Product Description' A |R C W E| L | D| I |N G | M | AJlT H I | N |fi~ S

Item Code 7 2 2
(ITC Code)

Product Description c| o | p | P | E | R | [C|O|A|T|E|D| [ wj i | R [ E | s

31. The previous year's figures have been regrouped or reclassified wherever necessary.

Schedules A to R form an integral part of the Accounts.

For and on behalf of the Board of Directors
H. P. R. Mullan Chairman
C. Hariharan Chief Operating Officer
P. Mallick Director
N. H. Mirza Director
S. N. Talwar Director
S. Tandon Director
A. Banerjee Company Secretary
Mumbai, 10 March 2004

37 Esab India Limited Annual Report 2003

 Cash Flow Statement
for the year ended 31 December 2003

2002
Rs. '000 Rs. '000

A. CASH FLOW FROM OPERATING ACTIVITIES :

Profit / (Loss) before Tax 6,332 (146,505)
Voluntary Separation Compensation and related payments 2,871 26,193
Profit on sale of Land (10,832) -
Loss on Sale of Fixed Assets (Net) 338 2,039
Fixed Assets written off 2,555 4,105
Diminution in the value of Investment - 1,928
Unrealised Exchange Differences (259) 932
Depreciation 55,717 42,079
Interest - net 22,441 25,921
Provision for Doubtful Advances 3,994 -
Provision for Doubtful Debts 22,612 18,365
Operating Profit before Working Capital Changes 105,769 (24,943)
Trade and Other Receivables 41,963 (9,522)
Inventories (36,382) 122,282
Trade Payables (42,450) (29,629)
Cash Generated from Operations 68,900 58,188
Voluntary Separation Compensation and related payments (19,083) (22,576)
Direct Taxes Paid - Net 3,610 (291)
Net Cash from Operating Activities [A] 53,427 35,321

B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets (24,600) (15,303)
Sale of Fixed Assets 17,772 3,826
Advance against Sale of Fixed Assets 5,431 • -
Interest Received 515 506
Net Cash used in Investing Activities [B] (882) (10,971)

C. CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from Borrowings (51,273) (7,691)
Dividend Paid / Transfer to Investor Education and Protection Fund (157) (467)
Interest Paid (21,816) (25,794)
Net Cash used in Financing Activities [C] (73,246) (33,952)
NET DECREASE IN CASH AND CASH EQUIVALENTS [A+B+C] (20,701) (9,602)
CASH AND CASH EQUIVALENTS AS AT 1st JANUARY, 2003 50,836 .60,438
CASH AND CASH EQUIVALENTS AS AT 31st DECEMBER, 2003 30,135 50,836

Notes :
i) Cash and Cash Equivalents include:
(a) Cash and Bank balances other than those mentioned in (b) below. 26,924 43,562
(b) Cash and Bank balances not available for use by the Company 3,211 7,274
Cash and Bank balances not available for use by the Company include margin money, 30,135 50,836
unclaimed dividends and debenture interest.
ii) The above cash flow statement has been prepared under the 'Indirect Method' as set out in Accounting
Standard - 3 on "Cash Flow Statements" issued by the Institute of Chartered Accountants of India.
iii) Previous year's figures have been regrouped or reclassified wherever necessary.

In terms of our report of even date

For Lovelock & Lewes For and on behalf of the Board of Directors
Chartered Accountants H. P. R. Mullan Chairman
C. Hariharan Chief Operating Officer
P. Mallick Director
Vasant Gujarathi N. H. Mirza Director
Partner S. N. Talwar Director
S. Tandon Director
A. Banerjee Company Secretary
Mumbai, 10 March 2004

38 Esab India Limited Annual Report 2003

Auditors' Report on Consolidated Accounts
To the Directors of Esab India Limited :
1. We have audited the attached consolidated Balance Sheet
of Esab India Limited (the Company) and its subsidiary as
at 31 December 2003, the consolidated Profit and Loss
Account for the year ended on that date annexed thereto,
and the consolidated Cash Flow Statement for the year
ended on that date which we have signed under reference
to this report. These consolidated financial statements are
the responsibility of the management of the Company. Our
responsibility is to express an opinion on these financial
statements based on our audit.
2. We 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 prepared, in all material respects, in
accordance with an identified financial reporting framework
and 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 and the report of
the other auditor (referred to in paragraph 3 below) provide
a reasonable basis for our opinion.
3. We did not audit the financial statements of Esab Welding &
Cutting Systems Limited (formerly Flotech Welding &
Cutting Systems Limited) whose financial statements reflect
total assets of Rs. 19.548 million as at 31 December 2003
and total revenues of Rs. 21.0 million for the year ended on
that date. These financial statements have been audited by
another auditor whose unqualified report has been furnished
to us, and our opinion, insofar as it relates to the amounts
included in respect of this subsidiary, is based solely on
the report of the other auditor.
4. We report that the consolidated financial statements have
been prepared by the Company in accordance with the
requirements of Accounting Standard 21, Consolidated
Financial Statements, issued by the Institute of Chartered
Accountants of India and on the basis of the separate
audited financial statements of Esab India Limited and its
subsidiary.
5. With reference to Note 14 of Schedule R, our verification of
related party disclosures as required under Accounting
Standard 18 - Related Party Disclosures has been based
on the information made available to us by the Company.
39 Esab India Limited Annual Report 2003
6. In accordance with the transitional provisions of Accounting
Standard 28 - Impairment of Assets, the Company has
accounted for an impairment loss of Rs. 10.0 million relating
to its Equipment business by way of an adjustment from
the opening balance of General Reserve. However, the
deferred tax credit of Rs. 3.588 million arising on account
of impairment loss has also been adjusted to General
Reserve which is not in accordance with Accounting
Standard 22 - Accounting for Taxes on Income, which
provides for recognition of such credit to revenue reserves
only on the first occasion that the taxes on income are
accounted by an entity in accordance with that Standard.
Consequently, profit for the year is understated by Rs.
3.588 million and general reserve is overstated by an
equivalent amount (refer Note 9 of Schedule R).
7. The remuneration paid to the Wholetime Director includes
Rs. 0.047 million towards perquisites which is subject to
the approval of the shareholders of the Company.
8. The balance amount of excess remuneration of Rs.3.251
million paid to the former Managing Director during the
year ended December 31, 2002 is recoverable from him. '
9. On the basis of the information and explanations given to
us, read together with our comments in paragraph (5) above
and on the consideration of the separate audit reports on
the individual audited financial statements of Esab India
Limited and its subsidiary, subject to our comments in
paragraphs (6), (7) & (8) above, in our opinion, the financial
statements give a true and fair view in conformity with
accounting principles generally accepted in India:
a. in the case of the consolidated Balance Sheet, of
the consolidated state of affairs of Esab India Limited
and its subsidiary as at 31 December 2003;'
b. in the case of the consolidated Profit and Loss
Account, of the consolidated results of operations
of Esab India Limited and its subsidiary for the .year
ended on that date; and
c. in the case of the consolidated Cash Flow Statement,
of the consolidated cash flows of Esab India Limited
and its subsidiary for the year ended on that date.
For Lovelock & Lewes
Chartered Accountants
Place : Mumbai Vasant Gujarathi
Date : 10 March 2004 Partner
Consolidated Balance Sheet
as at 31 December 2003

2002
Schedule Rs.'OOO Rs.'OOO Rs.'OOO

SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share Capital A 153,930 153,930
Reserves and Surplus B 110,590 110,590
264,520 264,520
MINORITY INTEREST C 954 877
LOAN FUNDS
Secured Loans D 74,046 242,413
Unsecured Loans E 114,835 -
188,881 242,413
DEFERRED TAX LIABILITY (Refer Note 11 of Schedule R) 60,303 67,664
514,658 575,474
APPLICATION OF FUNDS
FIXED ASSETS G
Gross Block 752,897 743,664
Less: Depreciation 325,908 266,474
Net Block 426,989 477,190
Capital Work-in-progress including Advances 1 ,089
426,989 478,279
DEFERRED TAX ASSET (Refer Note 11 of Schedule R) 133,427 136,324
. CURRENT ASSETS, LOANS AND ADVANCES
Inventories F 169,707 131,659
'.. Sundry Debtors H 51,205 123,559
Cash and Bank Balances I 30,335 51,434
Loans and Advances J 42,073 38,843
293,320 345,495
LESS :
CURRENT LIABILITIES AND PROVISIONS
Liabilities K 396,650 446,055
Provisions L 9,382 6,553
406,032 452,608
NET CURRENT ASSETS (112,712) (107,113)
PROFIT AND LOSS ACCOUNT M 66,954 - 67,984
514,658 575,474

Notes to Accounts R

The Schedules referred to above form an integral part of the Balance Sheet

In terms of our report of even date

For Lovelock & Lewes For and on behalf of the Board of Directors
Chartered Accountants H. P. R. Mullan Chairman
G. Hariharan Chief Operating Officer
P. Mallick Director
Vasant Gujarathi N. H. Mirza Director
Partner S. N. Talwar Director
S. Tandon Director
A. Banerjee Company Secretary
Mumbai, 10 March 2004

40 Esab India Limited Annual Report: 2003

Consolidated Profit and Loss Account
for the year ended 31 December 2003

2002
Schedule Rs.'OOO Rs.'OOO

INCOME
Sales (Gross) 1,529,961 1,415,858
Less : Excise Duty 184,129 164,6^1

Sales (Net) 1,345,832 1,251,217

Other Income N 16,788 13,721
1,362,620 1,264,938

EXPENDITURE
Materials O 824,485 845,381
Manufacturing, Selling and Administrative Expenses P 444,301 496,012
Interest Q 23,100 26,690
Depreciation 56,141 42,522
1,348,027 1,410,605

OPERATING PROFIT 14,593 (145,667)

Profit on sale of Land (Refer Note 21 of Schedule R) 10,832
Provision for liabilities no longer required
written back (Refer Note 20 of Schedule R) 7,902
Prior period expenses (26,459)
PROFIT / (LOSS) BEFORE TAXATION 6,868 (145,667)
Taxation (Refer Notes 11 & 15 of Schedule R) 651 30,333

PROFIT / (LOSS) AFTER TAXATION 7,519 (115,334)

Minority Interest (77) . 156
PROFIT / (LOSS) AFTER MINORITY INTEREST 7,442 (115,1/8).
Balance brought forward from previous year (115,178)
BALANCE CARRIED TO BALANCE SHEET (107,736) (115,178)

Earnings per share : (Refer Note 12 of Schedule R)

Basic Rs. 0.48 Rs. (7.48)
Diluted Rs. 0.48 Rs. (7.48)

Notes to Accounts R

The Schedules referred to above form an integral part of the Profit and Loss Account

In terms of our report of even date

For Lovelock & Lewes For and on behalf of the Board of Directors
Chartered Accountants H. P. R. Mullan Chairman
C. Hariharan Chief Operating Officer
P. Mallick Director
Vasant Cujarathi N. H. Mirza Director
Partner S. N. Talwar Director
S. Tandon Director
A. Banerjee Company Secretary
Mumbai, 10 March 2004

Esab India Limited Annual Report 2003

Schedules to the Consolidated Accounts
31 December 2003

2002
Rs.'OOO Rs.'OOO

A, SHARE CAPITAL

Authorised:
17,000,000 Equity Shares of Rs. 10 each 170,000 170,000
3,000,000 Unclassified Shares of Rs. 10 each 30,000 30,000

200,000 200,000

Issued and Subscribed:

15,393,020 Equity Shares of Rs.10 each fully paid up
(of which, 999,000 shares were allotted as fully paid up
pursuant to a Scheme of Amalgamation) 153,930 153,930

EL RESERVES AND SURPLUS

Amalgamation Reserve
As per last Balance Sheet 10,000 10,000

Securities- Premium Account

As per last Balance Sheet 93,190 93,190
Special Capital Incentive Subsidy
As per last Balance Sheet 2,UOO 2,000

Investment Allowance Reserve Account

As per last Balance Sheet 5,400 5,400

General Reserve
As per last Balance Sheet 47,194 47,194
Impairment Loss on Fixed Assets (10,000)
Deferred Tax credit on account of impairm3nt 3,588
40,782 47,194
Less : Debit Balance in Profit and Loss Account 40,782 47,194
(as per centra-Schedule M)

110,590 110,590

C, MINORITY INTEREST

As per last Balance Sheet 877 1,033

Transferred from Profit and Loss Account 77 (156)

954 877

42 Esab India Limited Annual Report 2003

Schedules to the Consolidated Accounts
31 December 2003

2002
Rs.'OOO Rs.'OOO

D. SECURED LOANS

Term Loans from Banks / Institutions 65,800 100,000

Cash Credits from Banks 8,246 28,589
Working Capital Demand Loans from Banks 113,300
Interest Accrued and Due 524

74,046 242,413
Notes : ~
Term Loans are secured by the hypothecation of movable assets (excluding stocks and debtors) of Esab India Limited.
Cash Credits and Working Capital Demand Loans from Banks are secured by the hypothecation of stocks and debtors in the case of Esab India Limited
and by the hypothecation of stocks, debtors and plant & machinery and the mortgage of immovable property in the case of Esab Welding & Cutting
Systems Limited.
Term Loans include amounts repayable within one year of Rs. 36.8 million (previous year Rs. 34.2 million).

E, UNSECURED LOANS

Long Term Loan

External Commercial Borrowings 114,835

A fixed rate term loan from Esab Holdings Limited, UK,'. r.ich holds 37.31 % of the equity share capital of Esab India Limited. The loan is denominated
in US dollars(US $ 2.5 million) and is for a term of 5 years at a fixed interest rate of 4.5% per annum, payable half yearly. Repayment is to be made
in 5 equal half yearly instalments beginning on 1 July 2006.

F. INVENTORIES

Raw and Packing Materials 73,845 54,706

WorK-in-Process 13,898 29,965

Finished Goods 78,549 42,794

Stores and Spare Parts 3,415 4,194

169,707 1 31 ,659

43 Esab India Limited Annual Report 2003

Schedules to the Consolidated Accounts
31 December 2003

G. FIXED ASSET'S
(Refer Notes 7 to 9 and 21 of Schedule R)

Rs. '000

Freehold Leasehold Building Plant & Furniture & Motor Total 2002

Land Land Machinery Fixtures Vehicles

GROSS BLOCK AT COST

As at 1 January 2003 40,912 18,261 139,714 515,510 13,193 16,074 743,664 745,300

Additions - - 436 24,301 311 725 25,773 21,741

Reclassification - - (10,304) 11,025 (889) 168 ._

Deductions 5,737 179 8,806 1,649 169 16,540 23,377

As at 31 December 2003 35,175 18,261 129,667 542,030 10,966 16,798 752,897 743,664

DEPREC! \TION

As at 1 January -2003 - 7,830 31,738 216,290 5,314 5,302 266,474 237,335

Additions - 179 9,220 42,922 1,893 1,526 55,740 42,522

Reclassification - - (2,106) 2,557 (168) 118 401

Asset Impairment - - 1,529 7,856 368 247 10,000

Deductions - - 134 5,370 1,076 127 6,707 13,383

As at 31 December 2003 - 8,009 40,247 264,255 6,331 7,066 325,908 266,474

NET BLOCK

As at 31 December 2003 35,175 10,252 89,420 277,775 4,635 9,732 426,989

As at 31 December 2002 40,912 10,431 107,976 299,220 7,879 10,772 477,190

Capital Work in Progress 1,089

including Advances

2002
Rs.'OOO Rs.'OOO,

H. SUNDRY DEBTORS (UNSECURED)

Over six months -

Considered Good 3,528 15,313

Considered Doubtful 33,919 21,802

Others, Considered Good 47,677 108,246

85,124 145,361

Less : Provision for Doubtful Debts 33,919 21,802

51,205 123,559

44 Esab India Limited Annual Report 2003

Schedules to the Consolidated Accounts
31 December 2003

2002
Rs.'OOO Rs.'OOO

!, CASH AND BANK BALANCES

Cash on hand 475 458
Cheques on hand and remittances in transit 25,419 39,945
Balances with Scheduled Banks on Current Account 3,841 10,219
Margin money with banks 600 812
30,335 51,434

J. LOANS AND ADVANCES

Secured
Vehicle Loans to employees 902 1,503
(Secured against hypothecation of vehicles)

Unsecured, considered good unless otherwise stated

Advances recoverable in cash or in kind or for

value to be received

Considered Good 36,747 35,021

Considered Doubtful 3,994 -
40,741 35,021
Less : Provision for doubtful advances 3,994 36,747 35,021
Balances with Customs, Port Trust, Excise, etc. 4,424 . 2,319
42,073 38,843

K. CURRENT LIABILITIES
Sundry Creditors (Refer Note 6 of Schedule R) 315,941 349,135
Customers' Credit Balances 26,721 29,903
Other Liabilities 50,004 6,4,691
Unclaimed Dividends * 1,124 1 ,269
Interest accrued and not due 2,860 ' 1,057

396,650 446,055

' There is no amount due and outstanding to be credited to the Investor Education and
Protection Fund

L. PROVISIONS

Provision for Income-tax less advance tax payments 9,382 6,553

45 Esab India Limited Annual Report 2003

Schedules to the Consolidated Accounts
31 December 2003

2002
Rs.'OOO Rs.'OOO

M. PROFIT AND LOSS ACCOUNT

Debit Balance in Profit and Loss Account 107,736 115,178
Less : As per Contra in General Reserve (Schedule B) 40,782 47,194

66,954 67,984

N. OTHER INCOME
Scrap Sales 9,163 7,386
Less : Excise Duty 1,352 7,811 1 ,044 6,342
Commission 1,101 -
Miscellaneous 7,876 7,379

16,788 13,721

O, MATERIALS

Raw & Packing Materials Consumed 719,286 599,337

Purchases of Finished Goods 124,887 126,013
844,173 725,350

(Increase) / Decrease in Finished Goods & Work-in-Process

Opening Stock
Finished Goods 42,794 165,751
Work-in-Process 29,965 27,039
72,759 192,790
Closing Stock
Finished Goods 78,549 42,794
Work-in-Process 13,898 29,965
92,447 72,759
(19,688) 120,031

824,485 845,381.

46 Esab India Limited Annual Report 2003

Schedules to the Consolidated Accounts
31 December 2003

2002
Rs.'OOO Rs.'OOO

P. MANUFACTURING, SELLING AND ADMINISTRATIVE EXPENSE'S

Salaries, Wages and Bonus 101,994 97,136
Contributions to Provident and Other Funds 37,946 35,350
Workmen and Staff Welfare Expenses 12,413 12,959
Voluntary Separation Compensation and related payments 2,871 26,193
Consumption of Stores and Spare parts 22,111 13,974
Power and Fuel 54,216 49,002
Repairs :
Buildings 4,591 5,833
Plant & Machinery 5,966 5,809
Others 6,816 7,435
Rent 16,250 15,477
Rates and Taxes 3,241 61,926
Excise Duty 7,060 (19,681)
Insurance 3,723 3,371
Provision for Doubtful Debts ' 22,612 21,268
Less : Write back of provisions, no longer required 22,612 (2,903) 18,365
Bad Debts written off 10,495 29,113
Less : Provision 10,495 - 29,113
Transport and Freight 25,366 18,784
Communication Costs 13,167 16,109
Travelling, Conveyance and Motor Car Expenses 28,937 38,466
Special Discounts and Commissions 5,080 6,912
Loss on sale of fixed assets (net) 338 2,039
Fixed Assets written off 2,555 4,129
Advertising 445 1,519
Sundry balances written off - 3,250
Provision for doubtful advances 3,994 •
Exchange differences (net) 1,715 2,630
Provision for warranty cost 1,000 .-
Miscellaneous Expenses 59,894 69,025

444,301 496,012

Q. INTEREST
On Fixed Loans 12,263 8,814
On Other Loans 11,360 18,413
23,623 27,227
Less : Interest income including interest on income tax refund 523 537
[tax deducted at source Rs. 0.06 million (previous year Rs. 0.11 million)]
23,100 2e,690

47 Esab India Limited Annual Report 2003

Notes to the Consolidated Accounts (Schedule R)
31 December 2003

NOTES FORMING PART OF THE. CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Consolidation

The consolidated financial statements of Esab India Limited and its subsidiary, Esab Welding & Cutting Systems Limited
have been prepared to comply in all material aspects with generally accepted accounting principles in India and applicable
Accounting Standards issued by the Institute of Chartered Accountants of India.

2. Accounting Policies

a) Fixed assets are stated at cost and in the case of projects include identifiable incidental and installation expenses and
interest on funds borrowed in order to bring the assets into use. An impairment loss is recognised wherever the
carrying value of the fixed assets of a cash generating unit exceeds its market value or value in use, whichever is
higher.

b) Depreciation for the year is provided on the straight line method at the rates and in the manner specified in Schedule
XIV of the Companies Act, 1956, except for the cost of buildings and leasehold land at Taratala, Kolkata, which has
been amortised over the remaining lease period.

c) Inventories of raw and packing materials are valued at the lower of cost and net realisable value on a First-In-First-
Out basis. Work-in-process and finished goods are valued at the lower of cost and net realisable value. Costs are
generally calculated at standards adjusted to actuals, and in the case of manufactured inventories include cost of
conversion and other costs incurred in bringing the inventories to their present location and condition. Inventories of
stores and spare parts are valued at cost.

d) Voluntary Separation Compensation and related payments including payments made in instalments are charged to
the Profit and Loss Account during the year in which they are incurred.

e) Revenue from the sale of goods is recognised on despatch to the customer. Sales are net of trade discounts and
rebates.

f) The liabilities for gratuity, pension and leave salary for Esab India Limited are assessed actuarially. For Esab Welding
& Cutting Systems Limited, nrovision for gratuity is made as per The Payment of Gratuity Act, 1972 and liability for
leave salary is calculated on the unavailed accumulated leave balance of employees on the basis of their current
salaries.

g) Foreign currency transactions are accounted at the exchange rates prevailing on the date of the relevant transaction.
Foreign currency monetary assets and liabilities are restated at rates ruling at the year end. Exchange differences
relating to the liability incurred for the purchase of fixed assets are adjusted in the cost of the assets. Other exchange
differences are dealt with in the Profit and Loss Account.

h) The excise duty in respect of closing inventory of finished goods is included as part of inventory. The amount of
CENVAT credits in respect of materials consumed for sales is deducted from the cost of materials consumed.

i) Current tax is determined on the basis of the amount of tax payable on taxable income for the year.

Deferred tax is calculated at the current statutory income tax rate and is recognised on timing 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 recognised and carried forward only to the extent that there is reasonable
certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised.

j) The accounting policies adopted for segment reporting are in line with the accounting policies adopted in the consolidated
financial statements.

Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities
of the segment. Revenue and expenses which relate to the enterprise as a whole, and not allocable to segments on
a reasonable basis, have been included under the heading "other common expenses".

48 E;sab India Limited Annual Report 2003

Notes to the Consolidated Accounts (Schedule R)
31 December 2003

2002
Rs.'OOO Rs.'OOO

3. Estimated amount of contracts remaining to be executed

on capital account and not provided for (net of advances) 403 14,548

4, Contingent Liabilities
For disputed taxes and duties 224,933 225,867
(Interest and penalty, if any, payable on contingent liability relating
to sales tax and excise duty demands are presently not ascertainable.)
Bank Guarantees 533 1,549
Claims against the Company not acknowledged as debts 42,579

5. Auditors' Remuneration
Audit fees 730 823
Tax Audit and Tax Accounts 425 319
Certification 70 56
Other Professional Services 573 544
Out of pocket expenses 70 34

6 Sundry Creditors include Rs. 5.43 million (previous year Rs. 3.30 million) advance payment received for sale of excess vacant
land at the Khardah factory, West Bengal.

7. Based on management's expectation that the lease would be renewed, buildings constructed, on leasehold laftd at Taratala,
Kolkata, were hitherto depreciated at the rates and in the manner prescribed in Schedule XIV of the Companies Act, 1956. During
the year, the Company has depreciated these buildings over the remaining lease period on account of uncertainties arising in
respect of the renewal of the lease. Consequently, the depreciation charge for the year is higher by Rs. 5.09 million.

8. The written down value of Fixed Assets includes Rs. 25.84 million (previous year Rs. 27.86 million) in respect of assets at Kalwa,
which are not used for productive purposes and are held for disposal.

9. ' Asset Impairment '

As a matter of prudent accounting practice, the Company, has adopted Accounting Standard 28: Impairment of Assets. An
impairment loss of Rs. 10.00 million has been recognised in relation to the Company's Equipment Division (a cash generating unit
and primary reportable segment) on the basis of the present value of future expected cash flows and the net book value of assets.

As per the transitional provisions of the Accounting Standard, the impairment loss has been adjusted against the General
Reserve. The deferred tax credit of Rs. 3.59 million arising on account of the impairment loss has been credited to General
Reserve (Schedule B). Fixed assets are recognised net of the impairment loss with respect to the Equipment Division.

The Equipment Division's operations have resulted in losses in the past several years. In management's opinion, the carrying
value of the net assets employed in the Equipment business exceeds the present value of the future estimated cash flows. The
lowering of import tariffs has further exposed the Division to competition from imports. However, the sale of equipment remains an
important part of the Company's business, complementing the sale of consumables.

The class of assets to which the impairment loss is recognised is mentioned in Schedule G. A 14% p.a. discounting rate was used
in the calculation of the impairment loss.

49 Esab India Limited Annual Report 2003

Notes to the Consolidated Accounts (Schedule R)
31 December 2003

10. Business Segments

The Company has two business (and primary) segments, which have been identified by the type of their respective products and
services, their differing risks and returns, the Company's orgainisation structure and internal financial reporting systems.

Consumables : Welding electrodes, Copper coated wires and Welding fluxes

Equipment : Welding machines and Cutting equipment

Rs.'OOO

CONSLIMABLES EQUI PMENT TO TAL

2003 2002 2003 2002 2003 2002

External sales (Gross) 1,168,923 1 ,021 ,449 361,038 394,409 1,529,961 1,415,858
Segment results 131,837 45,740 (40,817) (25,048) 91,020 20,692
Less: Interest (Net) 23,100 26,690
Other common expenses 34,593 139,669
Prior period expenses 26,459 -

Total Profit / (Loss) before tax 6,868 (145,667)

Capital Employed

Segment Assets 514,899 518,882 159,180 250,258 674,079 769,140

Common Assets 179,657 190,958
Total Assets 853,736 960,098

Segment Liabilities 162,582 189,469 88,617 96,119 251,199 285',588

Common Liabilities 404,017 477,097
Total Liabilities 655,216 762,685

Segment Capital Employed 352,317 329,413 70,563 154,139 422,880 483,552

Common Capital Employed (224,360) (286,139)
Total Capital Employed 198,520 197,413

Segment Capital Expenditure 24,376 13,379 519 7,231 24,895 20,610

Common Capital Expenditure 878 1,131
Total Capital Expenditure 25,773 21,741

Segment Depreciation 36,596 31,022 11,783 7,131 48,379 38,153

Common Depreciation 7,762 4,369

Total Depreciation 56,141 42,522

Segment non cash expenditure 6,942 5,678 19,914 16,933 26,856 22,611
Common non cash expenditure (5,833) 4,982
Total non cash expenditure 21,023 27,593

Prior period expenses of Rs. 26.46 million comprise Rs. 24.66 million relating to the Equipment segment and Rs. 1.80 million
relating to the Consumables segment.

50 Esab India Limited Annual Report 2003

Notes to the Consolidated Accounts (Schedule R)
31 December 2003

2002
Rs.'OOO Rs.'OOO Rs.'OOO Rs.'OOO

11, Deferred taxation

Deferred Tax Asset -
Unabsorbed Losses * 12,422 30,170

Unabsorbed Depreciation * 63,000 59,033

Voluntary Separation Compensation and related payments
(debited to Profit and Loss Account but deductible for tax
over five equal annual installments) 10,205 14,310
Provision for doubtful debts/advances 13,143 7,816
Amounts disallowed under Section 43B of the Income-tax
Act, 1961 33,911 24,249
Provision for royalty 746 133,427 746 136,324

Deferred Tax Liability -

Excess of net block over written down value as per
the provisions of Income-tax Act, 1961 (60,303 (67,664)
73,124 68,660

' In the opinion of the management, the Company will have

sufficient taxable profits to recoup unabsorbed losses and
depreciation in subsequent periods.

12: Earnings per Share

2003 2002
Basic Earnings per Share Rs. 0.48 Rs. (7.48)
Diluted Earnings per Share Rs. 0.48 Rs. (7.48)
Nominal value per Share Rs. 10.00 Rs. 10.00
Earnings per share are calculated by dividing the profit / (loss)
attributable to the equity shareholders by the weighted average
number of equity shares outstanding during the year.

Profit / (Loss) after Minority Interest Rs.'OOO 7,442 Rs.'OOO (115,178)

Weighted average number of shares outstanding '000 15,393 '000 15,393

13. Esab India Limited and Esab Welding & Cutting Systems Limited have both adopted the same accounting policies, except in
respect of gratuity and leave salary [Refer Note 2 (f) of Schedule R].

Name of the Subsidiary Esab Welding & Cutting Systems Limited

Country of Incorporation India

Shareholding as at 31 December 2003 85.71%

51 Esab India Limited Annual Report 2003

Notes to the Consolidated Accounts (Schedule R)
31 December 2003

14, Related Party Disclosures

a) Parties where control exists
i) Esab Holdings Limited Principal Shareholder
Holds 37.31% of the paid up equity share capital of Esab India Limited
as at 31 December 2003. Charter Overseas Holdings Limited, the
holding company of Esab Holdings Limited is a subsidiary of
Charter pic, the ultimate holding company.
ii) Charter pic Group Related parties in the Charter pic Group where common control exists
include :
Esab AB, Sweden
Esab Cutting Systems GmbH, Germany
The Esab Group Inc., USA
Esab SA Industria e Comercio, Brazil
Conarco Alambres y Soldaduras S.A., Argentina
Esab Asia/Pacific Pte Limited, Singapore
Howden Power Limited, Northern Ireland
Howden Sirocco SA, France
Burton Corblin SA, France
Ventilatoren Sirocco Howden BV, Netherlands
Turbowerke Meissen Howden GmbH, Germany
Voith Howden GmbH, Germany
Howden Power A/S, Denmark
Howden Power Spain S. L., Spain
Howden Buffalo Inc., USA
Howden Hua Engineering Co Limited, China
Howden African Holdings Limited, South Africa
Howden Food Equipment Inc., USA
HD Engineering Limited, Hong Kong
Esab Automation Limited, England & Wales
ESAB Limited, England & Wales
Murex Welding Products Limited, England & Wales
Murex Limited, England & Wales
Murex Welding Products (Ireland) Limited, England & Wales
Hancock Cutting Machines Limited, England & Wales
Brinal Limited, England & Wales
Filarc Welding Limited, England & Wales
Arcos Welding Products Limited, England & Wales
Bilston Wire Mill Limited, England & Wales
Esta Properties (UK) Limited, England & Wales
Esab Group (UK) Limited, England & Wales
Charter Overseas Holdings Limited, England & Wales
Weldcure Limited, England & Wales
Esab Holdings Limited, England & Wales
Exelvia Netherlands BV, Netherlands
Exelvia International Holdings BV, Netherlands
Charter Consolidated pic, England & Wales
Cecil Holdings Limited, England & Wales
Exelvia India BV, Netherlands
Esab International Holdings BV, Netherlands
Esab Hancock GmbH,Germany

52 Esab India Limited Annual Report 2003

 Notes to the Consolidated Accounts (Schedule R)
31 December 2003

b) Key Management Personnel

Managing Director Mr.S.K.Bhattacharyya (until 31 January 2003)
Whole-time Director Mr.G.Hariharan (appointed on 7 January 2003 and
re-appointed on 7 January 2004.)

c) Transactions and outstanding balances with Related Parties

Rs.'OOO
Common Control Key Management Total
Nature of Transaction Control Exists [a(i)J [a(ii) & (iii)] Personnel [b]

2003 2002 2003 2002 2003 2002 2003 2002

Loan 117,335 — 117,335 _

Interest on Loan 2,777 - 2,777 -

Purchase of goods 12,522 13,693 12,522 13,693
Sale of goods 22,111 9,857 22,111 9,857
Service charges received 13 - 13 -
Royalty Expense 5 643 5 643
Remuneration 1,382 2,104 1,382 2,104
Recovery of expenses - 620 - 620
Rent paid for residential flat - 438 - 438

Sale of Assets 300 - 300 -

Outstanding payables (net) 117,045 - - 908 117,045 908
Outstanding receivables (net) 6,049 - 3,251 3,922 9,300 3,922

The companies listed at Note 14(a) above have been identified on the basis of information available with the Company.
15. Taxation ' '
2002
Rs.'OOO Rs.'OOO

Tax provision for current year 225

Tax provision for earlier years 24,000
Deferred Tax Credit 876 54,333
651 30,333

16. The Company has taken various residential and office premises under operating lease or leave & licence agreements. These are
generally cancellable; have a term of between 11 months and 3 years, and have no specific obligations for renewal. Lease
payments are recognised in the statement of Profit and Loss Account under Rent in Schedule P.

17. Sales are net of quantity discounts and incentives.

18. During the year, the Company has changed its method of estimating the provision for old and obsolete inventory. The provision
is calculated either on the basis of ageing analysis or by specifically identifying obsolete items through a technical evaluation,
whichever yields the higher amount. Owing to this change in method, profit is lower by Rs. 6.06 million with a corresponding
decrease in raw material inventory.

53 Esab India Limited Annual Report 2003

Notes to the Consolidated Accounts (Schedule R)
31 December 2003

19, In the last quarter of 2003, the Company provided an aggregate amount of Rs. 60.00 million in respect of accelerated depreciation,
doubtful debts, write off of fixed assets, write down of inventories and additional provision towards pension.
20. Provision for liabilities no longer required written back is on account of
2003 2002
Rs.'OOO Rs. '000

Purchases 2,287

Salaries, Wages and Bonus 1,494

Rates and Taxes 2,506

Transport and Freight 278

Miscellaneous Expenses 351

Deposits 986

7,902

21. Profit on sale of land of Rs.10.8 million represents profit on sale of excess vacant land situated at Khardah.

22. Previous year's figures have been regrouped or reclassified wherever necessary.

Schedules A to R form an integral part of the Accounts.

For and on behalf of the Board of Directors
H. P. R. Mullan Chairman
G. Hariharan Chief Operating Officer
P. Mallick Director
N. H. Mirza Director
S. N. Talwar Director
S. Tandon Director
A. Banerjee Company Secretary

Mumbai, 10 March 2004

54 Esab India Limited Annual Report 2003

Consolidated Cash Flow Statement
for the year ended 31 December 2003

2002
Rs.'OOO Rs.'OOO
CASH FLOW FROM OPERATING ACTIVITIES :
Profit / (Loss) before Tax 6,868 (145,667)
Voluntary Separation Compensation and related payments 2,871 26,193
Profit on sale of Land (10,832)
Loss on sale of Fixed Assets (Net) 338 2,039
Fixed Assets written off 2,555 4,129
Unrealised Exchange Differences (259) 932
Depreciation 56,141 42,522
Interest - net 23,100 26,690
Provision for Doubtful Advances 3,994
Provision for Doubtful Debts 22,612 18,365
Operating Profit before Working Capital Changes 107,388 (24,797)
Trade and Other Receivables 42,323 (9,107)
Inventories (38,048) 124,899
Trade Payables (41,071) (30,912)
Cash Generated from Operations 70,592 60,083
Voluntary Separation Compensation and Related Payments (19,083) (22,576)
Direct Taxes Paid - Net 2,604 (1,028)
Net Cash from Operating Activities [A] 54,113 36,479
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Fixed Assets (24,684) (16,008)
Sale of Fixed Assets 17,772 3,826
Advance against sale of Fixed Assets 5,431
Interest Received 523 537
Net Cash used in Investing Activities [B]
c. CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from Borrowings (51,621) (8,580)
Dividend Paid / Transfer to Investor Education
and Protection Fund (157) (467)
Interest Paid (22,476) (26,456)
Net Cash used in Financing Activities [C] (74,254) (35,503)
NET DECREASE IN CASH AND CASH EQUIVALENTS [A+B+C] (21,099) (10,669)
CASH AND CASH EQUIVALENTS AS AT 1 JANUARY 2003 51,434 62,103
CASH AND CASH EQUIVALENTS AS AT 31 DECEMBER 2003 30,335 51,434
Notes:
i) Cash and Cash Equivalents include:
(a) Cash and Bank balances other than those mentioned in (b) below. 44,160
(b) Cash and Bank balances not available for use by the Company 7,274
Cash and Bank balances not available for use by the Company include margin money, -51,434
unclaimed dividends and debunture interest,
ii) The above cash flow statement has been prepared under the 'Indirect Method' as set out in Accounting
Standard-3 on "Cash Flow Statements" issued by the Institute of Chartered Accountants of India,
iii) Previous year's figures have been regrouped or reclassified wherever necessary.

In terms of our report of even date

For Lovelock & Lewes For and on behalf of the Board of Directors
Chartered Accountants H. P. R. Mullan Chairman
G. Hariharan Chief Operating Officer
P. Mallick Director
Vasant Gujarathi N. H. Mirza Director
Partner S. N. Talwar .Director
S. Tandon Director
A. Banerjee Company Secretary
Mumbai, 10 March 2004

55 Esab India Limited Annual Report 2003

Section 212 Statement

The following statement is provided pursuant to Section 212 of the Companies Act, 1956 relating to the Company's Subsidiary, Esab
Welding & Cutting Systems Limited (formerly, Flotech Welding & Cutting Systems Limited).
1 Financial year of the Subsidiary 31 December 2003
2 Shares of the Subsidiary held by Esab India Limited
on the above date
Number and Face Value 1,200,000 Equity Shares of Rs. 10 fully paid-up.
Extent of holding 85.71%
3 Net aggregate amount of Profit / (Loss) of the Subsidiary
so far as they concern the members of Esab India Limited
(a) not dealt with in the Accounts of Esab India Limited
for the year ended 31 December 2003
(except to the extent dealt with in (b) below)
(i) for the Subsidiary's financial year ended
31 December 2003 (Rs. 'OOOs) 459
(ii) for the previous financial years of the Subsidiary
since it became a Subsidiary (Rs. 'OOOs) 1,222
(b) dealt with in the Accounts of Esab India Limited for
the .year ended 31 December 2003
(being dividend received) :
(i) for the Subsidiary's financial year ended
31 December 2003 (Rs. 'OOOs) NIL
(ii) for the previous financial years of the Subsidiary
since it became a Subsidiary (Rs. 'OOOs) 2,400

For and on behalf of the Board of Directors

H. P. R. Mullan Chairman
C. Hariharan Chief Operating Officer
P. Mallick Director
N. H. Mirza Director
S. N. Talwar Director
S. Tandon Director
A. Banerjee Company Secretary
Mumbai, 10 March 2004

56 Esab India Limited Annual Report 2003

Esab Welding & Cutting Systems Limited
Directors' Report
Your Directors herewith present their Sixteenth Annual Report
together with the audited accounts for the year ended 31
December 2003.
FINANCIAL RESULTS
2003 2002
Rs 'OOOs Rs 'OOOs
Profit before taxes, interest
and depreciation 1619 123
Interest 659 769
Depreciation 424 443
Profit / (Loss) before and 536 (1089)
after tax
The Company's performance improved significantly with a 35%
increase in sales and an improvement of more than Rs. 1.6
million in profit after tax. Outstanding orders at the year end
amounted to more than 25% of annual turnover: the highest
achieved in the last three years. The Company supplied the entire
range of cutting systems, and maintained its leadership in the
market for oxyfuel mechanised cutting machines. The Company's
continuing efforts to find alternate sources for high cost
components resulted in material cost reduction.
In view of the accumulated losses, your Directors do not
recommend any dividend for the year.
DIRECTORS
Mr. Klaus Decker resigned as a Director of the Company with
effect from 7 July 2003. Your Directors place on record their
appreciation for the contribution made by Mr. Decker during his
tenure as a Director.
Mr. A. Banerjee who was appointed as an Additional Director with
effect from 24 April 2003 and who held office upto the conclusion
of the Fifteenth Annual General Meeting, was appointed at the
said Annual General Meeting. Mr. A. Banerjee retires by rotation
at the forthcoming Annual General Meeting and, being eligible,
has offered himself for re-appointment.
CHANGE OF NAME
In order to make appropriate use of the ESAB brand name in the
marketing of its products, the name of the Company has been
changed from "Flotech Welding & Cutting Systems Limited" to
"Esab Welding & Cutting Systems Limited" effective from 12
January 2004.
AUDITORS
S.N. Gogate & Company, Chartered Accountants, the retiring
auditors, being eligible, have offered themselves for re-
57 Esab India Limited Annual Report 2003
appointment to hold office until the conclusion of the Seventeenth
Annual General Meeting.
To the best of their knowledge and belief and according to the
information and explanations obtained by them, your Directors
make the following statement in terms of Section 217 (2AA) of
the Companies Act, 1956.
1. that in the preparation of the annual accounts for the year
ended 31 December 2003, the applicable accounting
standards have been followed;
2. that the accounting policies as mentioned in Schedule M to
the Accounts have been selected and applied consistently
and judgements and estimates that are reasonable and
prudent made so as to give a true and fair view of the state
of affairs of the Company at the end of the financial year on
31 December 2003 and of the profit of the Company for
that year;
3. that 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;
4. that the annual accounts for the year ended 31 December
2003 have been prepared on a going concern basis.
i"OU .1 V pi i ' ( t i 1 : NERGY, TECHNOLOGY 1>
-
11
XCHANGE
Energy Conservation measures taken included improvements
in the methodology of testing products, and better monitoring of
compressor use. These measures resulted in energy, savings
with resultant savings in cost. Improved operational methods
and processes are to be introduced in order to reduce energy
consumption further.
The requirement to provide energy consumption data is not
applicable.
Research and Development was conducted into product
development, technology upgradation, and the development of
testing facilities. Research and development is proposed into new
product development, and further weight and cost reductions.
Efforts to adapt technology in order to upgrade the Company's
products are ongoing. As a result of these efforts, the "CNC"
cutting machines have been upgraded, and a number of electrical
and mechanical components of the "CNC" flame cutting machines
have been indigenised.
New products were successfully developed and produced in
Esab Welding & Cutting Systems Limited
Directors' Report

the year. Indigenous drives and controllers were developed for APPRECIATION
medium size CMC machines, which yielded a cost advantage of Your Directors record their appreciation of the support given to
more than 40% over the existing imported purchase price. your Company by the State Bank of India, Esab Hancock GmbH
_. ^ . , , , „. .. .., and Esab India Limited.
The technology in respect of gas cutting machines, which was
imported in 1998, has been fully absorbed.

The Company is exploring the possibility of exporting its products.

On behalf of the Board of Directors
Information relating to foreign exchange earnings and
For ESAB WELDING & CUTTING SYSTEMS LIMITED
expenditure is provided at Schedule M to the Accounts of the
Company.

EMPLOYEES
None of the employees received remuneration of Rs. 200,000 or H P R Mullan
more per month. Mumbai, 9 March 2004 Chairman

58 Esab India Limited Annual Report 2003

Esab Welding & Cutting Systems Limited
Auditors' Report
To the Members of Esab Welding & Cuttting Systems Limited
(formerly, Flotech Welding & Cutting Systems Limited) :
We have audited the attached Balance Sheet of Esab
Welding & Cutting Systems Limited (formerly, Flotech Welding &
Cutting Systems Limited) as at 31 December 2003 and the Profit
and Loss Account of the Company for the year ended on that
date annexed thereto, both of which we have signed under
reference to this report. 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 for our
opinion.
1. As required by the Manufacturing and Other Companies
(Auditor's Report) Order, 1988, issued by the Company
Law Board in terms of Section 227 (4A) of the
Companies Act, 1956, we include in the Annexure a
statement on the matters specified in paragraphs 4 and 5
of the said Order.
2. Further to our comments in the Annexure referred to in
paragraph 1 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;
59 Esab India Limited Annual Report 2003
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 the books;
c. the Balance Sheet and Profit and Loss Account dealt
with by this report are in agreement with the books of
account;
d. in our opinion the Balance Sheet and the Profit and
Loss Account dealt with by this report are in
compliance with the mandatory Accounting Standards
referred to in sub-section (3C) of Section 211 of the
Companies Act, 1956, to the extent applicable;
e. as per the information and explanations given to us,
none of the directors of the Company is disqualified
from being appointed as a director under clause (g)
of sub-section (1) of Section 274 of the Companies
Act, 1956;
f. in our opinion and to the best of our information and
according to the explanations given to us, the said
accounts read together with the notes thereon, give
the information required by the Companies Act, 1956,
in the manner so required and give a true and fair
view :
i) in the case of the Balance Sheet of the state of
affairs of the Company as at 31 December 2003;
and
ii) in the case of the Profit and Loss Account, of
the Profit of the Company for the year ended on
that date.
S. N. GOGATE & CO.
Place : Mumbai S. N. GOGATE
Dated : 9 March 2004 Chartered Accountants
Esab Welding & Cutting Systems Limited
Auditors' Report
The Annexure to the Auditors' Report (referred to in paragraph 1
of our report of even date on the accounts for the year ended
31 December 2003 of Esab Welding & Cutting Systems Limited
(formerly, Flotech Welding & Cutting Systems Limited)).
Further we report that :
I NTE R N AI CO N T RO L S
1. There are adequate internal control procedures
commensurate with the size of the Company and the nature
of its business for the purchase of stores, raw materials,
components, plant and machinery, equipment, other assets
and for the sale of goods.
2. The Company has a reasonable system of authorisation
at proper levels and an adequate system of internal control
and job allocation of man hours commensurate with the
size of the Company and the nature of its business related
to service assignments.
3. In our opinion the Company has an internal audit system
commensurate with the size and nature of its business.
FIXED ASSETS
4. The Company has maintained proper records showing full
particulars including quantitative details and the location of
Fixed Assets. All the assets have been physically verified
by the management during the year. As informed to us, no
material discrepancies were noticed on such verification
• as compared to the records.
5. None of the Fixed Assets has been revalued during the
year.
INVENTORIES
6. The stocks of finished goods, spare parts and raw materials
have been physically verified by the management at
reasonable intervals. In our opinion, the frequency of
verification is reasonable.
7. In our opinion the procedures for physical verification of
stocks followed by the management is reasonable and
adequate in relation to the size of the Company and the
nature of its business.
8. Discrepancies noticed during the physical verification of
stocks as compared to the book records have been
properly dealt with in the books of account.
9. In our opinion the valuation of stocks is fair and proper in
accordance with normally accepted accounting principles
and is on the same basis as in earlier years.
60 Esab India Limited Annual Report 2003
10. As explained to us, the Company has a regular procedure
for the determination of unserviceable or damaged stores,
raw materials and finished goods. Adequate provision has
been made in the accounts for the loss arising on the items
so determined.
11. There were no sales of scrap or by-products during the
year.
12. The Central Government has not prescribed the
maintenance of cost records under Section 209 (1) {d) of
the Companies Act, 1956 for any of the products of the
Company.
SERVICE ACTIVITIES
13. The Company's service activities involve the use of
technical manpower only and hence the question of having
a system of recording receipts, issues and consumption
of raw materials and issues of stores does not arise.
LOANS AND ADVANCES , -:
14. The Company has not taken any loans, secured or
unsecured, from companies, firms or other parties listed in
the Register maintained under Section 301 of the
Companies Act,1956 and/or from companies under the
same management as defined under sub-section (1B) of
Section 370 of the Companies Act, 1956.
15. The Company has not given any loans to any companies
or other parties listed in the registers maintained under
Sections 301 and 370 (1C) of the Companies Act, 1956.
16. The Company has not given any loans and/or advances in
the nature of loans.
RELATED PARTIES
17. There have been purchases of materials and sales of goods
made in pursuance of contracts or arrangements which
would be required to be entered in the register maintained
under Section 301 of the Companies Act, 1956 and
aggregating during the year to Rs. 50,000 or more in respect
of each party. No comparison with the prevailing market
prices was possible due to the specialised nature of such
transactions.
18. The Company has not accepted any deposits from the
public attracting the provisions of Section 58A of the
Companies Act, 1956, and the rules framed thereunder.
Esab Welding & Cutting Systems Limited
Auditors' Report

STAFF WELFARE 2003 for a period of more than six months from the date

19. According to the records of the Company, the Company they became payable.

has been regular in depositing the dues under the
Employees' Provident Fund and Miscellaneous Provisions
22.
Act, 1952 and the Employees' State Insurance Schemes
with the appropriate authorities.
20. During the course of our examination of the books of
account, we have not come across any personal expenses
which have been charged to the Profit and Loss Account
other than those payable under contractual obligations or
in accordance with generally accepted business practices.
TAXATION
SICK INDUSTRiAi COMPANY
The Company is not a Sick Industrial. Company within the
meaning of Section 3(1 )(o) of the Sick Industrial Companies
(Special Provisions) Act, 1985 (SICA). The accumulated
losses of the Company have resulted in erosion of more
than fifty per cent of its net worth; but, the Company is a
registered Small Scale Industrial Undertaking and hence
the provisions of SICA do not apply.
S. N. GOG ATE & CO.

21. There are no undisputed amounts payable in respect of

Income Tax, Wealth Tax, Sales Tax, Customs Duty and
Place : Mumbai S. N. GOGATE
Excise Duty which remained outstanding as at 31 December Dated : 9 March 2004 Chartered Accountants

61 Esab India Limited Annual Report 2003

Esab Welding & Cutting Systems Limited
Balance Sheet
as at 31 December 2003

2002
Schedule Rs. '000 to. 'ooo Rs. '000

SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share Capital 14,000 14,000
14,000 14,000
LOAN FUNDS
Secured Loans 4,981 5,329
18,981 19,329
APPLICATION OF FUNDS
FIXED ASSETS
Gross Block 10,264 10,180
Less : Depreciation 5,590 5,166
Net Block 4,074 5,014

CURRENT ASSETS, LOANS AND ADVANCES

Inventories D 8,237 6,571
Sundry Debtors E 2,277 2,961
Cash & Bank Balances F 200 598
Loans & Advances G 4»1tO 3,015
14,874 13,145
LESS :
CURRENT LIABILITIES AND PROVISIONS 7,883 6,682
7,803 6,682

NET CURRENT ASSETS 6,991 6,463

PROFIT AND LOSS ACCOUNT

Net Loss as per Profit and Loss Account 7,852
19,329

Notes to Accounts M

The Schedules referred to above form an integral part of the Balance Sheet.

In terms of our report of even date

S. N. GOGATE & CO. For and on behalf of the Board of Directors
H. P. R. Mullan Chairman
A. Banerjee Director

S. N. GOCATE
Chartered Accountants S. Gajbare Company Secretary

Mumbai, 9 March 2004

Esab Welding & Cutting Systems Limited
Profit and Loss Account
for the year ended 31 December 2003

' • ,, , 2002
Schedule , , 'R«» '<W<> Rs. '000

INCOME .
Sales (Gross) 23.83S 17,474
Less : Excise Duty 9;139 ' 2,217
Sales (Net) 20,714 15,257

Other Income 1 I284 409

,21,000 ' 15,666
„ , „ „ „ „ „

EXPENDITURE
Material Cost J t4,4f0 " 11,109
Manufacturing, Selling & Administrative Expenses K "' ' ,4»W'l 4,434
Interest L 850 769
Depreciation " '''"'' 4$4 443
• ae,4i4 16,755
PROFIT / (LOSS) BEFORE AND AFTER TAXATION ,, ', ; S8$' (1,089)

1
Add : Balance brought forward from the previous year ,;', ' :f7»8S|):' (6,763)

NET LOSS CARRIED TO BALANCE SHEET , ,'. ( , . ; {T,*t&J (7,852)

Notes to Accounts M

The Schedules referred to above form an integral part of the Profit and Loss Account.

In terms of our report of even date

S. N. GOGATE & CO. For and on behalf of the Board of Directors
H. P. R. Mullan Chairman
A. Banerjee Director

S. N. GOGATE
Chartered Accountants S. Gajbare Company Secretary

Mumbai, 9 March 2004

Esab Welding & Cutting Systems Limited
Schedules to the Accounts
31 December 2003

2002
Rs. '000 Rs.'OOO
SHARE CAPITAL
Authorised :
1,400,000 Equity Shares of Rs. 10/- each 14,000 14,000
Issued, Subscribed and Paid-up
1,400,000 Equity Shares of Rs. 107- each fully subscribed and paid-up.
(1,200,000 Equity Shares are held by Esab India Limited and
200,000 Equity Shares are held by Esab Hancock, GmbH, Germany) 14,000 14,000

B, SECURED LOANS
From State Bank of India
Cash Credit secured by hypothecation of stocks, debtors and
plant & machinery and mortgage of immovable property —4,981~ 5,329
— .

C. FIXED ASSETS
Rs.'OOO

Land Builidng Plant & Furniture & Total 2002

Machinery Fixtures

GROSS BLOCK AT COST

As at 1 January 2003 355 4,467 4,738 620 10,180 9,865

Additions - - 84 - 84 706
Deductions - 391

As at 31 December 2003 355 4,467 4,822 620 10,264 10,180

DEPRECIATION

As at 1 January 2003 - 1,989 2,746 431 5,166 5,090

Additions - 150 235 39 424 443
Deductions - - 367

As at 31 December 2003 - 2,139 2,981 470 5,590 5,166

NET BLOCK -
As at 31 December 2003 355 2,328 1,841 150 4,674
As at 31 December 2002 355 2,478 1,992 189 5,014 ,

D. INVENTORIES
Materials & Components 4,622 3,738
Work In Process 3,615 2,833
8,237 '6,571

64 Esab India Limited Annual Report 2003

 Esab Welding & Cutting Systems Limited
Schedules to the Accounts
31 December 2003

2002
Rs. "000 Rs. '000

E. SUNDRY DEBTORS (UNSECURED)

Over six months -
Considered good 33 - -
Considered doubtful 534 534

567 534

Others, Considered good 2,244 2,961

3,811 3,495
Less : Provision for Doubtful Debts 534 534
2,277 2,961

F. CASH AND BANK BALANCES

Cash on hand .6
Balance with Scheduled Banks :
In fixed deposits as margin money 133 387
Current Accounts 61 205
200 598

G. LOANS AND ADVANCES

(Unsecured, considered good)
Advances recoverable in cash or in kind or for value to be received 708, 569
Advance Tax including Tax Deducted at Source - - - 3*18*. 2,193
Deposits 283 253
4,160 3,015
"' i" '!•

H. CURRENT LIABILITIES AND PROVISIONS

Sundry Creditors (Refer Note 10 of Schedule M) 7,514 6,366
Customers' credit balances 14 21
Government dues 275 '215
Other Liabilities 80 80
7,883 6,682
M-***"*'"*-*-'"!

.I. OTHER INCOME

Miscellaneous Receipts ' 262 370
Liabilities no longer required written back - ••• ^22 39

284 409

Esab India Limited Annual Report 2003

Esab Welding & Cutting Systems Limited
Schedules to the Accounts
31 December 2003

2002
Rs, "000 Rs. '000

J. MATERIAL COST

Materials Consumed 15,252 10,894

(Decrease) / Increase in Work-in-Process

Opening Stock 2,833 3,048

Less: Closing Stock 3,615 2,833

(782) 215

14,470 11,109

K, MANUFACTURING, SELLING AND ADMINISTRATIVE EXPENSES

Salaries and Wages 1,924 1,928

Contribution to Provident and other funds 148 124
Staff Welfare 164 161
Power & Fuel 373 360
Repairs & Maintenance
Plant & Machinery 29 31
Others 87 22
Rates, Taxes & Insurance 160 146
Excise Duty 10 121
Travelling, Conveyance & Vehicle Expenses 796 ' 701
Professional Fees 310 115
Bank Charges 149 100
Postage, Telegram and Telephone 223 205
Fixed Assets written off - 24
Transport & Octroi Charges 49 78
Other Expenses 489 ,318

j 4,911 4,434

L. INTEREST

For Working Capital facility 667 800

Less : Bank Interest income 8 31
[Tax Deducted at Source Rs. 1(Rs. '000) (Previous Year Rs.Nil)] ;

659 ' 769

I

68 Esab India Limited Annual Report 2003

Esab Welding & Cutting Systems Limited
Schedules to the Accounts
31 December 2003

M. NOTES FORMING PART OF THE ACCOUNTS

1. Accounting Policies

The accounts are prepared on the historical cost convention and materially comply with the mandatory Accounting Standards
referred to in Section 211 (3C) of the Companies Act, 1956. The significant accounting policies followed by the Company are as
follows:
a. Sales are inclusive of Excise Duty and net of discount.

b. Depreciation has been provided on the basis of the straight line method at the rates specified in Schedule XIV of the
Companies Act, 1956.

c. Inventories of raw materials and components are valued at the lower of cost and net realisable value on a First-In-First-Out
basis. Work-in-Process is valued at the lower of cost and net realisable value. In case of Work-in-Process appropriate
overheads are added to cost. Finished goods are valued at the lower of cost and net realisable value. Cost comprises cost
of purchases, cost of conversion and other costs incurred in bringing the inventories to their present location and condition.
CENVAT and sales tax rebates are deducted from purchases to determine the cost on an 'exclusive basis'.

d. Provision for Gratuity is computed and full liability is provided as per The Payment of Gratuity Act, 1972.

e. Current tax is determined on the basis of the amount of tax payable on the taxable income for the year. Deferred tax is
calculated at the current statutory income tax rate and is recognised on the timing 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 recognised and carried forward only to the extent that there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be realised.

• f. Foreign currency transactions are accounted at the exchange rate prevailing on the date of the transaction. Foreign
currency monetary assets and liabilities are restated at rates ruling at the year end. Other exchange differences are dealt
with in the Profit and Loss Account.

2 0 0 3 2 0 0 2
Rs. 'OOP Rs. '000

2. Contingent Liabilities Not Provided For

Bank Guarantees , $33 1,549

For disputed sales tax matters 2 2

For disputed excise duty matters 107 '187

For disputed service tax matters 84 54-

For disputed income tax liability 5,336 4,214

(Interest and penalty, if any, payable on contingent liabilities relating to sales tax, excise duty,
service tax and income tax demands are presently not ascertainable)

3. Auditors' Remuneration
Audit fees 30 23
Other Professional Services 48 19

78 42

67 Esab India Limited Annual Report 2003

Esab Welding & Cutting Systems Limited
Schedules to the Accounts
31 December 2003

4. Capacity, Production, Stock and Value

Licensed Installed Sales

Capacity Capacity Production Quantity Value
Number Number Number Number Rs. '000

Cross Carriage Cutting Machines :-

Large 9 9 12,531

(4) (4) (5,570)

Small 830 830 233 233 3,951

(830) (830) (34) , (34) (1,427)

Spares NA NA NA 7,357

(NA) (NA) (NA) (NA) (10,477)

830 830 242 242 23,839

Previous Year (830) (830) (38) (38) (17,474)

There were no opening or closing stocks under any category.

5. Components Consumed

2003 2002
Rs. '000 Rs. '000

Components 1S,2S2 10,894

15,252 -10,894
«-*-*——»•* "*'

6,, Value Of Imports Calculated On C.I.F Basis

Components 7,174 3,725

7,174 3,725
.,-.__..

7. Value Of Imported and Indigenous Materials And Components Consumed

Value Rs. '000 % age of Total Consumption

2003 2002 2003 2002

Imported 9,376 7,384 61,0 ' 68.0

Indigenous , 5,877 3,510 39.0 32.0

15,252 10,894 100.0 100.0

68 Esab India Limited Annual Report 2003

Esab Welding & Cutting Systems Limited
Schedules to the Accounts
31 December 2003

3. There was no expenditure, and no earnings, in foreign currency.

9. The net difference in foreign exchange debited to Profit and Loss Account is Rs. 0.19 million. (Previous year Rs. 0.06 million)
10. Sundry Creditors comprise Rs. 0.54 million (previous year Rs. 0.90 million) outstanding to Small Scale Industrial Undertakings and
Rs. 6.97 million (previous year Rs. 5.47 million) to other creditors. Amounts due to the following Small Scale Industrial Undertakings
(on the basis of information available with the Company) are outstanding for more than 30 days:

Dynatronic Systems, Hydroteck Engineering Company, Mahamaya Metal Products Private Limited, Polyfab Foams (India) Private
Limited, Vikas Hydro Tools.

11. The Company has computed the amount of deferred taxation as per the mandatory Accounting Standard 22 - "Accounting for
Taxes on Income" issued by The Institute of Chartered Accountants of India. On the grounds of prudence, the Company has not
accounted for cumulative net deferred tax asset of Rs. 2.33 million as at 31 December 2003.

12. Earnings Per Share

2003 2002

Basic Earnings per Share Rs, 0,38 Rs. (0.78)

Diluted Earnings per Share Rs. 0,38 Rs. (0.78)

Nominal value per Share Rs. 10,00 Rs. 10.00

Earnings per share are calculated by dividing the profit / (loss)

attributable to the equity shareholders by the weighted average
number of equity shares outstanding during the year

Profit / (Loss) after taxation Rs.'000 536 Rs.'000 (1,089)

Weighted average number of shares outstanding *OQQs 14,000 'OOOs 14,000

69 Esab India Limited Annual Report 2003

Esab Welding & Cutting Systems Limited
Schedules to the Accounts
31 December 2003

13. Additional Information as required under I* t ' \ f ""*i ti nnirs Act, 1956.
Balance Sheet Abstract and Company's General Business Profile .

Registration Details

Registration No. 4 7 2 0 9 State Code

Balance Sheet Date

Date Month Year

Capital raised during the year {Rs "000)

Public Issue Rights Issue

III. Position of Mobilisation and Deployment of Funds (Rs '000} ,

Total Liabilities* Total Assets*

Includes Deferred Tax Liabilities ' Net of Current Liabilities & Provisions
' Includes Deferred Tax Asset and
debit balance in Profit and Loss Account

Source of funds (Rs '000)

Reserves & Surplus

Application of funds (Rs '000)

Investments

70 Esab India Limited Annual Report 2003

Esab Welding & Cutting Systems Limited
Schedules to the Accounts
31 December 2003

IV. Performance of Company (Rs '000)

Turnover * Total Expenditure

|o |o |o
* includes other / extra ordinary
income

+/- Profit / Loss Before Tax +/- Profit / Loss After Tax

Earnings per Share

V. Generic Names of Three Principal Products / Services of Company

Item Code P P
(ITC Code)

Product Description c u T T i N E|Q|U|I|P|M|E|N|T[

Item Code
(ITC Code)

Product Description

Item Code
(ITC Code)

Product Description

31. The previous year's figures have been regrouped or reclassified wherever necessary.

Schedules A to R form an integral part of the Accounts.

In terms of our report of even date

For and on behalf of the Board of Directors
S. N. GOGATE & CO.
H. P. R. Mullan Chairrnan
A. Banerjee Director

S. N. GOCATE
Chartered Accountants S. Gajbare Company Secretary

Mumbai, 9 March 2PP4

71 Esab India Limited Annual Report 2003