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THE ANSWER IS IN THE QUESTION.

ITS AMAZING HOW MUCH CAN BE ACHIEVED BY A WILLINGNESS TO QUESTION. AND IT IS EVEN MORE AMAZING HOW MUCH CAN BE ACHIEVED BY SIMPLY ASKING WHY.

TODAYS INDIA IS PROBABLY THE FASTEST GROWING URBAN MARKET IN THE WORLD.
REFLECTED IN THE UNPRECEDENTED SKYLINE-CHANGING ROLLOUT OF NEW HOMES, OFFICES AND STORES. THIS IS EXPECTED TO BENEFIT SELECT INDUSTRIES. THOSE MANUFACTURING AND MARKETING CERAMIC AND VITRIFIED TILES FOR ONE.
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IN TURN, THE GROWTH IN THIS SECTOR WILL BENEFIT THOSE EXTENDING FROM MERE MANUFACTURE TO PROVIDING INTEGRATED FLOORING SOLUTIONS.
NITCO TILES FIGURES ON BOTH COUNTS. THE RESULT: IT HAS EMERGED AMONG THE THREE LEADING INDIAN COMPANIES IN ITS SECTOR IN THE COUNTRY TODAY.
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CORPORATE IDENTITY
WHO WE ARE
NITCO Tiles Limited is a leading innovationsdriven flooring solutions provider. Possesses over five decades of rich experience in Indias infrastructure support industry. The Company derives its competitive edge from the manufacture of premium products that represent boutique appeal, attractive profitability and low competition. The Company enjoys a favourable recall through Rs. 27.08 cr of brand investments in the last three years.

WHAT WE DEAL IN
We provide an exotic repertoire of flooring preferences, comprising ceramic tiles, vitrified tiles, cement terrazzo tiles, Italian marbles, pavers, steps and risers, etc. We are in the business of manufacturing, marketing and branding mosaic and ceramic tiles. We import and process marbles. We also outsource the manufacture of vitrified tiles. We provide an exhaustive collection across diverse designs and colours for indoor, outdoor and industrial applications.

WHO WE CATER TO
Brand-enhancing institutional clients (property and mall developers) like Hiranandanis, Rahejas, Pantaloons, Godrej Properties, DLF, Unitech, Oberoi Construction, Keystone, Piramals, Nirmal Lifestyle, Shrusti, Runwal, RNA, etc. Retail individual buyers.

WHERE WE ARE LOCATED


Headquartered in the financial capital of Mumbai (India). Spread across 17 states through a marketing and distribution network of 550 direct dealers and 5,000-odd retail outlets. Runs 130 shop-in-shops for promotion and impulse buying. Eight exclusive showrooms in Worli Mumbai, Andheri Mumbai, Nashik, Ahmedabad, Cochin, Coimbatore, Kolkata and Goa.

WHAT WE ACHIEVED IN 2006-07


Undertook a capacity expansion in premium tiles of 22.80 lac square metres per annum (May 2006) at our Alibaug factory. Appointed an additional outsourcing partner for vitrified tiles in China, facilitating scale and derisking. Introduced innovative products (Timberland, Metallica, Steps and Risers, Dholpur Series, Slate Stone Series, Estonia, Matrix, Pietre Del Sol, Art Stone, Innova and African Slate). Extended into the real estate business through the setting up of Nitco Realties Private Limited (100% subsidiary). Land bank value: Rs. 406 cr (as on August 31, 2007). Derived revenues of Rs. 4.43 cr from the wind farm business within one year of commissioning the 7.5-MW wind farm assets in Dhule (Maharashtra).

HOW WE PERFORMED FINANCIALLY


54% increase in turnover (gross) from Rs. 306.36 cr in 2005-06 to Rs. 470.43 cr in 2006-07. 65% growth in EBIDTA from Rs. 43.01 cr in 2005-06 to Rs. 70.97 cr in 2006-07. 128-basis point expansion in EBIDTA margin from 15.90% in 2005-06 to 17.18% in 2006-07. 90% surge in post-tax profit from Rs. 20.02 cr in 2005-06 to Rs. 38.03 cr in 2006-07.

CAPACITY ALLOCATION
Plant location Alibaug, Maharashtra Product manufactured Ceramic tiles Installed capacity 63.12 lac square metres per annum

WHERE WE ARE LISTED


Listed on the National and Bombay stock exchanges. Enjoyed a market capitalisation of Rs. 739 cr (as on October 24, 2007), the highest among industry peers.

Plant location Thane, Mumbai, Maharashtra Product manufactured Mosaic tiles Installed capacity 8.44 lac square metres per annum

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FROM STEPPING STONES TO MILESTONES

1966 1984
NITCO Tiles Private Limited incorporated to manufacture cement tiles. Work begins for manufacturing cement tiles in Thane. Marble operations begin in Kanjurmarg (Mumbai).

2001
Strategic decision to outsource NITCO brand. vitrified/wall tiles from China under the

Infrastructure at the Alibaug facility

2004
Initial public offer floated to mobilise Rs. 168 cr at Rs. 168 per share. Creation of Nitco Realties Private Limited (100% subsidiary) to engage in the real estate business.

upgraded for manufacturing porcelain tiles.

1995 1997
Work begins for setting up a Production commences of ceramic floor tiles in Alibaug (Maharashtra). Capacity: 10,000 square metres per day. greenfield plant to manufacture ceramic floor tiles. Estimated cost: Rs. 900 mn.

2002
Winning the Quality Excellence Award for ceramic floor tiles from the Institute of Trade and Industrial Development.

2006
Started distribution of Cement sourced from Pakistan. Merged Shark Properties Private Ltd. with Nitco Tiles Ltd. and Nitco Realties Private Ltd. with Motivation Properties Private Ltd.

2007
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For years investors asked questions. In 2006-07 as in other years we delivered enlightening answers
31.03.2003 31.03.2004 40.32 40.32 40.32 40.32 63.12 31.3.2003 31.3.2004 31.3.2005 114.95 123.21 136.05 198.98 229.25

Enhancing production capacity Ceramic tiles (sq. metres in lacs)

31.03.2005 31.03.2006 31.03.2007

Increasing gross block (Rs. cr)

31.3.2006 31.3.2007

2002-03 2003-04

151.10 172.38 208.81 306.36 470.43

2002-03 2003-04

1.11 1.17 1.36 0.32 0.42

Growing income from operations (Rs. cr)

2004-05 2005-06 2006-07

Strengthening debt-equity ratio

2004-05 2005-06 2006-07

2002-03 2003-04

22.90 22.13 24.02 43.00 70.97

2002-03 NIL 2003-04 NIL

Strengthening EBIDTA (Rs. cr)

2004-05 2005-06 2006-07

Growing dividend (%)

2004-05 NIL 2005-06 2006-07 10 20

2002-03 2003-04 14.55 12.80

17.10

2002-03 2003-04

49.74 54.19 69.10 115.81 132.33

Increasing EBIDTA margin (%)

2004-05 2005-06 2006-07

Rising book value per share (Rs.)


15.90 17.18

2004-05 2005-06 2006-07

2002-03 2003-04

6.00 5.51 7.54 20.01 38.03

2002-03 2003-04

4.89 4.49 6.15 15.59 16.39

Surging post-tax profit (Rs. cr)

2004-05 2005-06 2006-07

Expanding earnings per share (Rs.)

2004-05 2005-06 2006-07

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Question one: Why should life not imitate art?

Core philosophy
At NITCO, we define the balance between science and art in one word. Innovation. The result is products needed by people. The result is products inspired by tradition, nature and life. The result is products that enhance a users pride. The result is products that translate into our competitive edge.

Our product variety fuses art, colour and design for residential, hospitality, retail and industrial applications. Our one-stop-complementary-solutions-shop concept reinforces the prospect of cross-sale with a scale up-scale down flexibility. Our product portfolio defines our presence at each price point, reinforcing our brand.

Achievements
We are the only company in our industry space to provide a comprehensive range of products and flooring solutions, comprising ceramic tiles, vitrified tiles, marble and mosaic. Our impressive array of products is conveniently available under one roof.

Result
Our topline generated a compounded annual growth rate (CAGR) of 40% over the three years ending 2006-07, higher than the industry average of 17%.

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Question two: Why cant global be local?

Core philosophy
At NITCO, we believe that all business, international or national, are essentially just one thing. Local. The result is extensive travel by our regional specialists. The result is a willingness to absorb local culture, people, habits and traditions. The result is a liberated mindset reflected in shifting processes and transactions to the most attractive geographies. The result is superior customer service.

only helps us channelise and strengthen our bandwidth in front-end marketing and branding but also helps us focus more on our core laboratory strengths of research and innovation. We possess a competitive edge in a business where asset and technology barriers are relatively low with high competition from unorganised players. We enjoy a mutually rewarding association as a result: while we provide the designs and monitor quality, our partner turns the plan into a commercialised product in the shortest time at relatively low costs, leading to a quicker time-tomarket and enhanced market share.

Achievements
We are the only company in our industry to possess a dedicated contract manufacturing base for vitrified tiles in a geography that offers lower costs and attractive scale; we entered into a parallel alliance in the same geography to enhance scale and de-risk our dependence on a single partner. We possess an outsourcing advantage that not

Result
Our income from the outsourced vitrified tiles business stood at a robust 54% of our revenue in 2006-07.

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Question three: Why cant we capture share of a space that really doesnt exist?

Core philosophy
At NITCO, we believe that the most important battles of the marketplace are first fought and won in a terrain more sophisticated. The mind. The result is the making of a sale before it has transpired. The result is a positive recall in an environment of clutter. The result is a premium at a time of declining margins.

resulting in a perpetual product excitement and new customer segments. We have introduced innovative products, comprising the rustic series, wood strips, INVIZA (dirt-free tile), leather finish tiles, Timberland (wood finish tiles), slate stone (beauty of natural slate stone), the Spa Collection, Pietre De Sol, African slate, Matrix and Innova.

Achievements
We are among the first few in our industry to introduce branding in the flooring market. We enjoy a brand association with innovation

Result
We invested Rs. 27.08 cr in our brand in the three years leading to 2006-07, the highest in our industry, and also reported one of the highest brand-profit ratios in the business.

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Question four: Why cant we question the conventional?

Core philosophy
At NITCO, we believe that radical, sustainable growth can only be derived through a consistent pursuit of a challenging ideal. The impossible. The result is a benchmarking with the best global standards and then beyond them. The result is an extension from sales to the customer to education for the customer.

We possess the most advanced technology imported from SACMI (Italy) to generate consistent quality products at an affordable cost. We possess one of the largest bandwidths of first quality products in our industry at 70% generating higher than average realisations. We are the only company in our industry with a 24x7 customer helpline to serve our customers with speed and surety.

Achievements
We are among the few in our industry to have invested in an automatic sorting line classifies products based on their quality right up to the time they are packaged, eliminating manual interventions and ensuring customised delivery.

Result
Our average realisations are nearly 30% higher than our peer companies, a strong endorsement of our quality.

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Question five: Why cant we see far away from up close?

Core philosophy
At NITCO, we do more than predict or decipher the future. We invent it. The result is an extension from understanding the competition to comprehending the consumer. The result is an extension in our obsession from the product to applications. The result is an extension beyond products to products, solutions and services. The result is a graduation from what is to what can be.

by reputed real estate consultants Knight Frank (as on August 31, 2007). We embarked on eight residential/commercial projects across Maharashtra (project gestation of 34 years). We will concurrently scale-up our pan-Indian presence through exclusive display showrooms: 20 Le Studio (average floor space of 2,000-4,000 sq. ft.) Company operated outlets and 100 Le Express franchisee outlets (average floor space of 1,500 sq. ft.) in 2007-08.

Achievements
We leveraged our four decade-plus experience in the construction sector to integrate forwards into real estate through a 100% subsidiary (NITCO Realties Private Limited). We created a land bank estimated at Rs. 406 cr

Result
The extension of NITCO Tiles to NITCO Realty will drive growth, tap prospects arising out of both businesses and enhance valuations over the coming years.

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The volume growth for tiles (ceramic and vitrified) in 2006-07 was the highest in the countrys history, while prices turned modest on account of increasing supply and competition. 10 minutes with the Managing Director

What initiatives helped the Company reinforce profitability?

wind power to the Maharashtra State Electricity Board.

without a corresponding focus on quality. At NITCO Tiles, we had predicted that customers would soon wake up to this. We responded with a consistent approach that has now become our brand: we focused on offering a pipeline of attractive innovative designs, which helped service niche requirements, graduate to a wider mix and emerge as a one-stop shop. The result was that in 2006-07, our offering comprised the rustic series, wood strips, INVIZA, leather finish tiles, Timberland, slate stone, the Spa Collection, Pietre De Sol and African slate, among others.

Our gross turnover surged 53.55% to Rs. 470.43 cr in 2006-07, while our post-tax profit registered a sharper growth of 90% to Rs. 38.03 cr.
Mr. Vivek Talwar appraises the performance of the Company in 2006-07 and shares his optimism for the future

It is important to emphasise that our rising profitability is not only the result of what is happening in the marketplace but importantly, the philosophy that has been guiding our business for the last four decades. So what is this philosophy, one may ask. If I have to condense this into a simple line, it would be: conviction, innovation and value-addition. Conviction because India will need to increase infrastructure investments to support its ongoing economic growth. Innovation because we invested in assets, knowledge and practices. Value-addition because thats the key to sustainable success in this competitive environment.

Can you go into all the initiatives that helped the Company enhance profitability?
I would like to mention two specifically: We invested in state-of-the-art assets with a clear objective: tighten efficiencies, enhance volumes, reduce costs and improve quality. Result: our turnover (gross) to capital employed ratio strengthened from Rs. 0.89 in 2005-06 to Rs. 1.08 in 2006-07. We focused on the manufacture of premium innovative products with another objective: maximising market share. Result: the Company leads the premium market segment. The success of these initiatives was reflected in the 128-bps growth in our EBIDTA margin to 17.18% in 2006-07, one of the highest EBIDTA margin growth rates achieved in our industry in a difficult industry environment. In what way did the Company drive its quality and innovation agenda? We have over the years come to the conclusion that when we lead in design, we lead the market. Let me explain. In a business where fuel costs are not uniform for all players, many opt for a cheaper fuel mix, achieve lower production costs and use the price arbitrage to capture market share

How did the Companys enhanced focus on profitability through innovation bear fruit in 2006-07?
The year under review was one of the best ever for us in many ways. From a financial perspective, our gross turnover surged 53.55% from Rs. 306.36 cr in 2005-06 to Rs. 470.43 cr in 2006-07, while our post-tax profit registered a sharper growth of 90% from Rs. 20.02 cr to Rs. 38.03 cr. This shows that our bottomline growth is responding quicker than a growth in our topline, justifying our focus on profitability through innovation and value-addition. We embarked on timely initiatives to sustain this trend: we undertook a capacity expansion at our ceramic tiles division to enhance our overall installed 20 > NITCO Tiles Limited

capacity by 56%. We appointed one more associate in China to ramp up our vitrified tiles business in addition to achieving higher sales across our mosaic and marble product segments. On the overall, a profitability growth across each of our four businesses ceramic tiles, vitrified tiles, mosaic and marble gives me considerable optimism that our strategy is compatible with the needs of the present and future.

Realties Private Limited, a 100% subsidiary of NITCO Tiles Limited. We will leverage our rich experience and vast land bank (valued at Rs. 406 cr) to execute eight residential/ commercial projects in Maharashtra. We reported an income of Rs. 4.42 cr from our wind power generation in 2006-07 through 100% sales to the Maharashtra State Electricity Board. We foresee considerable revenue generation from this venture through an attractive power purchase agreement with the utility. We won the best SAP project implementation award SAP ACE 2007 (Award for Customer Excellence) in August 2007 (post-balance sheet development) for the best consumer products sector implementation among mid-size enterprises in India.

What is your outlook for 2007-08?


The industry environment continues to be optimistic. The volume growth for tiles (ceramic and vitrified) in 2006-07 was the highest in the countrys history, while prices turned modest on account of increasing supply and competition. NITCO responded to this reality through value-addition, cost management and a focus on institutional customers. Going ahead, we will focus on profitability growth through enhanced ceramic tile and marble processing capacities on the one hand and growth of our real estate business, translating into accelerated profit and margins momentum over the foreseeable future.

How did the Company manage costs when oil prices peaked?
NITCOS cost management practices were derived through the use of superior technology, better negotiation and cost control. This was reflected in a decline in operating expenditure as a percentage of turnover (net) by 100 basis points to 84.59% in 2006-07. Besides, the Companys power and fuel expenses (the second biggest cost component) as a proportion of total operating expenditure declined 256 bps to 7.08% in 2006-07, largely attributed to income accrued by way of sale of

What were some of the major achievements of the Company in 2006-07?


There are quite a few achievements such as: We consolidated our presence in the attractively growing real estate sector through the establishment of NITCO

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INDUSTRY REVIEW

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

Global ceramic tiles industry


The global ceramic tiles industry clocked a robust 6% growth per annum; ceramic tiles production was estimated at 6,400 million square metres in 2006, indicating an uptrend in production and consumption. Asia continued to be the most significant geography in both. Asia enjoyed the lions share of 52% of global tile production, largely driven by low-cost manufacturing destinations, comprising China, India and Vietnam, among others. Even in terms of consumption, Asia dominated the global scenario with consumption matching production. The world tile production The world tile consumption

Indian ceramic tiles industry


Overview
India is the second largest producer of ceramic tiles in Asia and the seventh largest in the world. Sustained economic growth and attractive infrastructure investments are expected to catapult the Indian tiles industry to among the top five in the world by 2010. The Government of India revised its investments in infrastructure during the Eleventh Plan period (2008-12) from US$288 billion to upwards of US$470 billion, making a 185% leap over the proposed investments in the Tenth Plan (2003-07), indicating attractive prospects for domestic tile manufacturers.

The great Indian realty boom


Economy: Surging at a staggering 9.4% (2006-07), India retained its position as the second fastest growing economy. Riding on an expanding services and industrial sectors, the economy is projected to be a bigger growth driver than any of the six largest European Union countries by 2035. From being the fourth largest economy in terms of purchasing power parity, India is expected to emerge as the third major economic power - ahead of Japan - within the next decade. This wil translate into attractive prospects across the housing, hospitality and commercial real estate sectors. Income: Salaries in India one of the principal drivers for residential realty sustained their uptrend during the year under review. A projected 14.5% annual increase by end2007 will enable the average Indian to record the highest salary growth across the Asia Pacific (Hewitt Associates). The number of households with earnings above Rs. 1 million a year is expected to grow from 0.8 million in 2002 to 3.8 million in 2010. The Indian middle-class is expected to grow from 57 million in 2001-02 to 92 million in 2005-06 to 153 million by 2009-10 and 583 million by 2025, positioning India as the fifth largest consuming economy in the world (source: McKinsey). Housing: The potent combination of liquid cash and increasing affordability has fuelled the demand for residential realty in India. The average real household disposable income will grow from Rs. 113,744 in 2005 to Rs. 318,896 by 2025, a projected CAGR of 5.3% that is significantly more rapid than the 3.6% annual growth reported in the past 20 years. With the exception of China, this growth is quicker than the income growth in major markets like the US (source: McKinsey). In 2006 alone, the estimated shortfall of dwelling Annual Report 2006-07 > 23

Classification
The Indian tiles industry is generally classified into three broad

America

European continent

Asia

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

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

Floor tiles: This segment is growing at a relatively fast rate. Vitrified and porcelain tiles: These segments have accelerated market growth, weaning it gradually market from the conventional ceramic segment (wall and floor) on account of lower maintenance cost and attractive aesthetics.

Tiles to go
The global tiles industry registered a CAGR of 6% per annum over the last few years. China is the largest tiles producer with an aggregate output of 2,500 million square metres per annum (nearly 36% of world production). Spain is the second largest producer of ceramic tiles with an output of 656 million square metres per annum followed by Italy (production 570 million square metres). India ranks seventh in the world in terms of output with 4.3% of the global production.

Vitrified tiles (60 million sq. mtrs) Ceramic tiles (Upper-end market) (140 million sq. mtrs) Ceramic tiles Lower-end market) (138 million sq. mtrs)

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Indias IT/BPO industry is expected to account for 60-70% of its commercial real estate demand over the next 10 years. Currently, about 130 million square feet are acquired by IT-ITeS companies and the demand is expected to rise to 500 million square feet by 2010.

US$11.5-billion earmarked by the Jawaharlal Nehru Urban Renewal Mission Plan (JNURM) over the next five years for 60 cities.

units was 22.50 million and Confederation of Real Estate Developers Association of India (CREDAI) envisages the creation of 100 million houses by 2020. Hospitality: A rapidly growing economy and favourable investment and trade opportunities have strengthened Indias hospitality sector growth at around 15% per annum. A surge in both the business and leisure travellers arriving flocking to India, 2006-07 witnessed a record 4.5 million foreign visitors. The sunshine sector 2006 Domestic tourists International tourists Hotel rooms 60 70 million 4 5 million 109,000 2010 (estimated) 80 90 million 10 13 million 275,000

Retail: Retail is the right industry at the right time in todays India. The country is set to emerge among the five largest retail markets across the coming decade. An increasing demand for quality retail space is being influenced by a growth in Indias organised retail, growing preference for shopping in malls and increase in the number of players in the organised retail sector. Ernst & Young (E&Y) indicates that India is witnessing a shift towards value retailing; hypermarkets requiring large space outlays are emerging as a preferred format. However, there are less than 50 hypermarkets in India are operated by only four-five big retailers; E&Y says the countrys 67 cities with populations of half a million or more have the potential to absorb a considerably higher number of hypermarkets over the next few years. The domestic retail industry is expecting an investment of over Rs. 100 billion up to 2009-10 from existing and new players. Available mall space of about 30 million square feet in the country is expected to touch 100 million square feet by 2009-10. Corporate: The increasing demand for commercial space in India is being triggered by a widening geographic footprint of companies, reflected in the commissioning of regional/sales/branch offices. Besides, government and public sector outfits are also going in for a makeover with plug-andplay infrastructure. UBS indicates that the domestic office market has doubled over three years to 100 million square feet. Much of the optimism surrounding the commercial space segment is based on the outlook of Indias IT and ITenabled sectors (ITeS). Indias IT/BPO industry is expected to account for 60-70% of its commercial real estate demand over the next 10 years. Currently, about 130 million square feet are acquired by IT-ITeS companies and the demand is expected to rise to 500 million square feet by 2010. Besides, the growth of the special economic zones (SEZs) is being

driven by tax incentives for users and developers alike, strengthening the market for flooring solutions.

Around 20 million new dwelling units are expected to be commissioned every year for the next five years. There is a projected increase in the built-up mall area from 32.60 million square feet in 2005 to 87.80 million square feet in 2007; the number of malls is expected to increase from 100 to 350. Over 50,000 hotel rooms are expected to be added across five years. A per capita use of ceramic tiles at 0.15 square metres per annum in India compares poorly with Chinas 1.89 square metres, an anomaly that is expected to correct.

Outlook
The following points summarise the potential for rapid growth of Indias flooring solutions industry: The aggregate demand for office space between 2005 and 2008 is estimated to be above 85 million square feet, recording an annual growth of 14.50%. US$11.5-billion earmarked by the Jawaharlal Nehru Urban Renewal Mission Plan (JNURM) over the next five years for 60 cities.

The countrys hospitality sector has not been able to catch up with the surging demand. The current gap between supply (61,000 rooms) and demand (90,000 rooms) is expected to widen further with the sustained economic growth. The current aggregate of hotel rooms across the country in the branded category stands at 110,000. The bulk of the new rooms is likely to be added between 2007 and 2011 (see the following table), triggering a fresh demand for flooring solutions. Estimated potential in hospitality sector Year 2007 (Estimated) 2008 (Estimated) 2009 (Estimated) 2010 (Estimated) Source: HVS International New rooms to be added 6,440 11,043 20,102 10,502

In a nutshell
Industry size pegged at Rs. 7,400 cr in March 2007. Production estimated at 345 million square metres (as on March 2007). Industry growth rate estimated at 17% in March 2007. Rs. 2,000 cr investments made in the last five years. Organised sector contributes nearly Rs. 150 cr per year. Industry expected to grow at 16-18% over the medium term.

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MANAGING RISKS AT NITCO TILES

In line with industry trends and prospects, NITCOs gross sales expanded at a CAGR of 39.88% over the three years, leading to 2006-07.

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RISK IS AN EXPRESSION OF THE UNCERTAINTY ABOUT EVENTS AND THEIR POSSIBLE IMPACT ON THE PERFORMANCE AND PROSPECTS OF A COMPANY. AS A RISK-CONSCIOUS ORGANISATION, NITCO TILES IS COMMITTED TO PROACTIVE AWARENESS, APPRAISAL AND COUNTER-ACTION.
Risk management is a structured, consistent and continuous process, applied across the organisation for the identification and assessment of risks, control assessment and exposure monitoring.

Vendor risk
Risk explanation The Company imports its entire requirement of vitrified tiles from China. In the advent of attrition, it might yield its industry presence. Risk response The Company enjoys exclusive five-year purchasing rights for vitrified tiles from its associate in China. The Company undertook a significant corporate initiative through the addition of another associate in

China for the supply of vitrified tiles, de-risking the Company from an overdependence on a single supplier and enabling it to ramp its vitrified presence. The Company is also planning to set up a manufacturing base for vitrified tiles in Gujarat under a joint venture arrangement. Risk measurement Over the past three years, revenues from the vitrified tiles business expanded 77.52% compared with the Companys turnover growth of 39.88%.

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Brand risk
Risk explanation The flooring solutions industry is highly dependent on recall; inefficient brand management could lead to a decline in sales.

with architects, masons, consumers, specifiers, etc. to keep a tab on changing preferences. The Company appointed the vibrant Perizaad Zorabian as its brand ambassador, enhancing visibility. Risk measurement The Companys brand spends of Rs. 27.08 cr over the three years leading to 2006-07 has been the highest among competitors.

Industry risk
Risk explanation The Indian real estate industry might witness a deceleration, slowing the demand for tiles and other flooring products. Risk response The demand for flooring solutions is expected to attractively increase over the foreseeable future on account of the following reasons: The Working Group on Housing of Planning Commission estimated an urban housing shortage at 22.44 million units during the Tenth Plan period (200207). Indias real estate industry is expected to grow from US$12 billion to US$45-50 billion over the next five years, making it one of the countrys fastest growing sectors. According to a RONCS report (Opportunities in Indian Housing Sector 2006-07), demand for housing units will

swell to a massive 400 million units by 2010. In view of this, analysts are projecting that the countrys housing and real estate sector will grow at 14% annually over the foreseeable future. The organised retail industry in India is expected to grow 25-30% annually and treble from US$7.7 billion in 2004-05 to US$24 billion by 2010 (CRISIL Research and Information Services). The Indian hospitality industry is growing at a rate of 15% annually. The current gap between supply (61,000 rooms) and demand (90,000 rooms) is expected to widen further as the economy opens and grows (The Economic Times, May 29, 2007). Risk measurement In line with industry trends and prospects, NITCOs gross sales expanded at a CAGR of 39.88% over the three years, leading to 2006-07. Risk response The Company expects to reduce its excessive dependence on LPG through a substitution with liquified natural gas following the commissioning of the DahejUran gas pipeline. The choice of liquefied petroleum gas (LPG) as primary fuel has translated into consistently superior quality. Risk response The Company routinely carries out surveys and meetings

Power and fuel risk


Risk explanation Power and fuel costs comprise 5.16% of the Companys turnover. A sharp increase in input costs might impact profitability.

To compensate for high fuel costs, the Company established wind farms in Dhule (Maharashtra), with 100% of the output sold to the MSEB. It earned revenues of Rs. 4.42 cr through this venture in 2006-07. An attractive power purchase agreement will generate attractive revenues over the years. The Company expanded its presence in the premium flooring solutions space, enabling it to effectively offset any increase in the costs of power and fuel. Risk measurement The Companys power and fuel expenses declined from 7.15% of turnover (gross) in 2005-06 to 5.16% in 2006-07.

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The Companys receivables declined from 53 days of turnover in 2004-05 to 31 days in 2006-07.

Competition risk
Risk explanation The Company might be compelled to undercut competition to expand market share. Risk response The Company has uniquely positioned itself in the premium flooring solutions space, divergent from a pricedriven volume approach. A small portion of the product mix is price-sensitive, an adequate safeguard from the prospect of a price slash. The Company plans to stay ahead of competition through the following initiatives: Focus on brand-enhancing institutional clients: The

Company derives over 60% of its sales from institutional clients, who provide an effective counterbalance against an erosion of retail sales. Wide range of products: The Company provides a basket of products comprising vitrified tiles, ceramic tiles, mosaic and marble. These products are available at various price points across the value-chain, which provide the Company with adequate protection in the event of a slowdown in any one product segment. Risk measurement The Companys average realisation is 30% higher then their Competitors.

Innovation risk
Risk explanation The Company is focused on the premium end of the market, which requires to be fed with a constant and wide variety of designs. An inability to do so might impact profitability. Risk response At NITCO, we sustained marketplace excitement through an aggressive rollout of fresh and innovative products, comprising the rustic series, wood strips, INVIZA

(dirt-free tile), leather finish tiles, timberland (wood finish tiles), slate stone (beauty of natural slate stone), the Spa Collection, Pietre De Sol, African slate, matrix and the latest innova. The Company catered to institutional customers through service and customisation. Risk measurement The Company derived an increasing proportion of its income from products less than three years old.

Customer attrition risk


Risk explanation The Companys profitability might be impacted in the event of customer attrition. Risk response The Company enjoys strong relations with a number of reputed institutional customers, comprising ICICI Bank, HDFC Bank, Hiranandani Developers, Wipro, Reliance, Tata, MSEB Holdings, BSNL, Shoppers Stop and Nokia, among others.

The Company evolved its product into a service through a high degree of customisation, quality and just-in-time delivery. The Company is the first in its industry to run a 24x7 helpline service to address customer queries and grievances with speed and surety. Risk measurement The Company recorded an increase in sales from the existing customers in 2006-07.

Dealer attrition risk


Risk explanation Attrition among its dealers might impact the Companys sales and profitability. Risk response The Company possesses a strong pan-India dealer network, which was further strengthened during the year under review.

The Company has progressively spread this risk through the rollout of a chain of exclusive display showrooms (Le Studio), expected to touch 20 in 2007-08. The Companys franchisee Le Express Outlets are expected to increase to 100 by the end of 2007-08. Risk measurement Nearly 37% of the dealers have remained with the Company over the last five years, endorsing strong relationships with channel partners.

Interest rate risk


Risk explanation There was an upward trend in international and domestic interest rates, leading to an increase in the average cost of borrowing. Risk response To counter this threat, the Company is effectively investing in enhancing capacities which will enable it to

spread fixed costs across a larger production volume. As a prudent corporate initiative, a large proportion of the Companys borrowings are in foreign currency. This strategy was vindicated when it reported a net gain of Rs. 2.80 cr in 2006-07 on account of the strengthening rupee vis--vis the US dollar and other currencies. Risk measurement Gross interest charges as a proportion of turnover has declined from 4.32% in 2005-06 to 1.72% in 2006-07.

1 0

Debtors risk
Risk explanation An efficient recovery mechanism is essential to de-risk a company from the possible impact of a delayed return on its working cycle and profitability. Risk response The popularity of the NITCO brand serves as an effective insurance against defaults.

The Company selects and appoints dealers based on their integrity, credit history and brand equity. The Company imposes a specific rate of interest payable on credit exceeding the stipulated tenure with a view to prevent defaults. Risk measurement The Companys receivables declined from 53 days of turnover in 2004-05 to 31 days in 2006-07.

28 > NITCO Tiles Limited

Annual Report 2006-07 > 29

MANAGEMENT DISCUSSION AND ANALYSIS

NITCO capitalised on the favourable industry upturn in a significant way: gross revenues increased 54% from Rs.3063.62 million in 2005-06 to Rs. 4704.33 million in 2006-07.

Profit & Loss Account I. Revenues


NITCO capitalised on the favourable industry upturn in a significant way: gross revenues increased 54% from Rs.306.36 cr in 2005-06 to Rs. 470.43 cr in 2006-07 (break-up given below): Product 2006-07 (Rs. cr) Ceramic tiles Vitrified tiles Marble Mosaic tiles Others Total 117.17 252.88 76.31 16.22 7.85 470.43 2005-06 (Rs. cr) 93.72 168.83 32.50 11.31 306.36

II. Raw material overview


Ceramic tiles (i) The principal raw materials used in the manufacture of ceramic tiles comprise clay, silica and feldspar (body raw material). The principal component of the cost of body raw material is transportation. The overall cost of body material increased by 20% on account of increase in freight rates and also increased consumption due to change in product mix. (ii) Glazed material: Glazes or surface finish materials provided colour and design to the tiles. These were partly imported from Italy and Spain. The cost of glaze per MT increased 6.29% from Rs. 27617 per ton to Rs. 29349 per ton.

average cost of furnace oil increased 34.72% from Rs. 14.10 per kg to Rs. 19.00 per kg. Due to All-round increase in fuel cost, overall power and fuel charges for the ceramic tiles unit increased by 30.96% from Rs. 21.94 cr to Rs. 28.73 cr (including electricity amounting to Rs. 4.42 cr generated through wind mills).

expenses and higher spends on advertisement and sales promotion.

VII. Interest
During 2006-07, interest and other financial charges decreased from Rs. 13.25 cr to Rs. 8.05 cr on account of foreign exchange gain of Rs. 2.80 cr in 2006-07 as compared to foreign exchange loss of Rs. 0.41 cr in 2005-06.

IV. Vitrified tiles


The entire requirement of vitrified tiles was outsourced from two reputed manufacturers in China with whom Company enjoys exclusive arrangements. The average cost of vitrified tiles reduced from Rs. 311 per sq. mtrs to Rs. 293 per sq. mtrs due to reduction in sea freight and product mix.

VIII. Depreciation
The Company follows the straight-line method in the computation of depreciation at rates provided under Schedule XIV of The Companies Act, 1956.

a) The Companys ceramic tiles division reported sales of Rs. 117.17 cr corresponding to a sale of 0.40 cr sq. mtrs. in 2006-07 compared with Rs. 93.72 cr in 2005-06 corresponding to sales of 0.32 cr sq. mtrs. The sales increased by 25% during 2006-07 due to increase in capacity during F.Y. 2006-07. As capacity addition happened during the year, increased capacity could be utilised for part of the year. Full effect of increased capacity would be reflected in the performance of 2007-08 onwards. b) Vitrified tiles: Vitrified Tiles maintained its share of around 54% of revenue.

The sales of vitrified tiles jumped 50% from Rs. 168.83 cr in 2005-06 to Rs. 252.88 cr in 2006-07. Average realizations were slightly slipped from Rs. 513 per sq. mtr. to Rs. 487 per sq. mtr. due to product mix. Due to substantial increase in sales over a higher base, the Company had to cover products at all price points. c) Marble: Revenues derived from the sale of marble was increased by 135% to Rs. 76.31 cr in 2006-07 from Rs. 32.50 cr in 2005-06. Sales of marble increased mainly due to availability of higher license of 12816 tons as compared to 2392 tons in the previous year. Average

realizations increased from Rs. 228 per sq. ft. to Rs. 229 per sq. ft. on account of a change in the product mix. Being a natural product, prices varied based on material, colour, appearance and other features. d) Mosaic tiles: Following a decline in the offtake of traditional mosaic tiles, the Company focused on the manufacture of cement-based paver tiles used in roads and walkways. This switch resulted in a 43% increase in turnover from Rs. 11.31 cr in 2005-06 to Rs. 16.22 cr in 2006-07. Average realization increased from Rs. 24 per sq. ft. to Rs. 32 per sq. ft.

IX. Margins
EBITDA for 2006-07 was Rs. 70.90 cr as against Rs. 43.01 cr, an increase of 65%. EBITDA margins improved from 15.90% in 2005-06 to 17.18% in 2006-07, an increase of 128 basis points on account of an increased sale of vitrified tiles.

V. Personnel III. Fuel


The manufacture of ceramic tiles is power and fuel intensive. The Company uses LPG for running its kiln, a mixture of furnace oil and C9 for running the spray dryer and electrical energy for operating other equipment and lighting installations. During the year under review, there was increase in fuel prices. The average cost of LPG increased 2.23% from Rs. 30.34 per kg to Rs. 31.02 per kg; the average cost of C9 increased 6.44% from Rs. 23.65 per kg to Rs. 25.17 per kg while the The Companys personnel cost increased 24% to Rs. 18.29 cr from Rs. 14.70 cr due to annual increments and the recruitment of additional man power to sustain a substantial increase in business volumes.

X. Tax
Due to depreciation benefits available on windmills, the Company was required to pay only minimum alternate tax.

VI. Selling and distribution expenses


Selling and distribution expenses increased by 59.53% from Rs. 57.90 cr to Rs. 92.37 cr on account of an increase in sales tax (due to higher volumes), increase in freight forwarding

XI. Earnings per share


As a result of higher profits, Earnings Per Share increased from Rs. 15.59 per share in 2005-06 to Rs. 16.39 per share in 2006-07. Annual Report 2006-07 > 31

30 > NITCO Tiles Limited

5-YEAR FINANCIAL SUMMARY


(Rs. in crores)

Balance Sheet I. Reserves & surplus


The reserves of the Company increased from Rs. 235.63 cr on March 31, 2006 to Rs. 268.69 cr on March 31, 2007.

expansion. The results from this investment has started reflecting in the Companys performance.

V. Debtors
Even as the Companys sales increased 54%, debtors increased by 48% indicative of the Companys brand strength as well as a tighter receivables management. Debtors increased from Rs. 32.13 cr as on March 31, 2006 to Rs. 47.83 cr, declined from 38 days of turnover to 31 days.

Balance sheet as at Sources of funds Equity share capital and share capital suspence Reserves & surplus Net worth Minority Interest Deferred tax liability Secured loans Unsecured loans Total loans Total liabilities Application of funds Net fixed assets Investments Current assets Current liabilities Net current assets Total assets

March 2007

March 2006

March 2005

March 2004

March 2003

25.97 268.73 294.70 0.15 12.46 81.07 47.16 128.23 435.54 211.14 37.39 327.33 140.32 187.01 435.54

22.27 235.63 257.90 4.06 58.09 24.77 82.86 344.82 170.99 74.83 181.56 82.56 99.00 344.82

12.27 72.51 84.78 3.35 104.52 15.43 119.95 208.08 109.84 0.00 138.92 40.68 98.24 208.08

12.27 54.22 66.49 12.63 72.75 20.18 92.93 172.05 100.82 0.00 92.74 21.51 71.23 172.05

12.27 48.76 61.03 9.58 73.43 16.03 89.46 169.72 97.00 0.00 93.61 20.89 72.72 169.72

IV. Inventories
Tiles must be made and presented in various colours, designs and sizes, requiring large inventory carrying. Besides, the imported vitrified tiles must also be adequately stocked to ensure an anytime availability, especially prior to the customary annual shut down in China during January and February. As an added service, the Company holds inventories at its end rather than force it upon dealers with a view to shorten receivables, resulting in a relatively higher stock level. The average inventory holding increased from 128 days to 140 days.

II. Loans
Overall loans on the balance sheet increased by Rs. 44.85 cr during the year under review due to increased working capital requirement.

XII. Cash & bank balances


Cash and bank balances comprised fixed deposits placed with the bank by way of margin money etc.

III. Gross block


The Companys gross block (including capital work-in-process) increased from Rs. 212.41 cr in 2005-06 to Rs. 257.86 cr in 2006-07 on account of an infrastructure upgradation at Alibaug and ceramic floor tile capacity

XIII. Sundry Creditors


Sundry creditors increased from Rs. 64.01 cr to Rs. 99.29 cr mainly on account of an increased import of vitrified tiles.

Profit & loss account as on Gross sales Less: Excise Less: Sales tax Net sales Other income Total income EBDITA Interest PBDT Depreciation PBT Tax PAT

March 2007 470.43 11.06 46.26 413.11 1.26 414.37 70.97 8.11 62.86 10.04 52.82 14.79 38.03

March 2006 306.36 7.97 27.91 270.48 0.02 270.50 43.00 13.25 29.75 6.46 23.29 3.28 20.01

March 2005 208.81 6.46 14.70 187.65 0.01 187.66 24.02 8.56 15.46 5.64 9.82 2.28 7.54

March 2004 172.38 7.75 12.56 152.07 0.01 152.08 22.13 7.62 14.51 5.25 9.26 3.75 5.51

March 2003 151.10 10.56 6.63 133.91 0.01 133.92 22.90 9.79 13.11 4.89 8.22 2.22 6.00

32 > NITCO Tiles Limited

Annual Report 2006-07 > 33

RATIOS
Financial performance ratios
Year ended on 31 March Domestic turnover /total sales (%) Export turnover/total sales (%) Other Income/total income (%) Raw material cost/gross sales (%) Manpower costs/total income (%) Excise/gross sales (%) Interest/total income (%) Depreciation/ total income (%) Tax/PBT (%) Cash profit/ total income (%) RONW (PAT/average net worth) ROCE (PBIT/average capital employed) Capital output ratio (total income/ avg. capital employed) PBDIT/interest Raw material cost/total cost (%) Manpower cost/total cost (%) Power cost/total cost (%) Other costs/total cost (%) 2007 98.22 1.78 0.30 49.20 4.42 2.35 1.96 2.42 28.00 11.60 13.76 15.62 1.06 8.75 67.40 5.34 7.08 20.19 2006 99.76 0.24 0.01 47.14 5.43 2.60 4.90 2.39 14.08 9.79 11.68 13.22 0.98 3.25 63.49 6.46 9.64 20.41 2005 98.39 1.61 0.01 43.15 6.19 3.09 4.56 3.01 23.22 7.02 9.97 9.67 0.99 2.81 55.07 7.10 13.19 24.64 2004 96.15 3.85 0.01 37.82 7.11 4.50 5.01 3.45 40.50 7.08 8.64 9.88 0.89 2.90 50.17 8.33 17.02 24.48 2003 91.22 8.78 0.01 38.45 6.71 6.99 7.31 3.65 27.01 8.13 9.70 10.90 0.81 2.34 52.33 8.09 14.90 24.68 PBDIT (%) PBDT (%) 17.18 15.22 9.18 15.90 11.00 7.40 12.80 8.24 4.02 14.55 9.54 3.62 17.10 9.79 4.48

Growth ratio
Particulars Growth in total income (%) Growth in PBDIT (%) Growth in PAT (%) Growth in cash profit (%) Growth in gross block (%) 2007 53.19 65.03 90.01 81.57 15.21 2006 44.14 79.04 165.45 100.87 46.25 2005 23.40 8.54 36.84 22.49 10.42 2004 13.56 -3.36 -8.17 -1.19 7.19 2003 3.79 -11.24 -18.26 -9.93 2.78

Per share data ratio


Particulars Earnings (Rs) Cash earnings (Rs) Book value (Rs) Net indebtedness (Rs) EPS growth (%) 2007 16.39 18.51 132.33 49.38 5.13 2006 15.59 11.89 115.81 37.21 153.70 2005 6.15 10.74 69.10 97.76 36.84 2004 4.49 8.77 54.19 75.74 -8.17 2003 4.89 8.88 49.74 72.91 -18.26

Margins
Particulars 2007 2006 2005 2004 2003

Balance sheet ratios


(As at 31 March) Debt-equity ratio (secured loans+Unsecured loans/ net worth + deferred tax liability) Debtors turnover (days) Inventory turnover (days) Current ratio (current assets/current liabilities + cash credit) Quick ratio Cash equivalents/total assets Depreciation/gross block Asset turnover (net sales/average total assets) 0.42 31 157 1.94 0.66 0.04 0.04 1.06 0.32 38 128 2.01 0.95 0.05 0.03 0.98 1.36 53 120 1.79 0.80 0.02 0.04 0.99 1.17 70 90 1.80 1.02 0.02 0.04 0.89 1.11 87 85 1.68 1.14 0.01 0.04 0.81 2007 2006 2005 2004 2003

PAT/total income (%)

34 > NITCO Tiles Limited

Annual Report 2006-07 > 35

DIRECTORS' REPORT
Company commissioned an increase in its ceramic floor tile capacity. This resulted in sales of Ceramic Tiles increasing from Rs. 93.72 crore in Your Directors take pleasure in presenting the Annual Report with the audited statement of accounts of the Company for the year ended March 31, 2007. 2005-06 to Rs. 117.17 crore in 2006-07. Higher allotment of marble import license of 12,816 tons. Rs. in crores For the year ended March 31, Gross sales Profit before interest depreciation and tax Interest Depreciation Profit before tax Provision for tax (including fringe benefit tax) Profit after tax Balance brought forward from the previous year Profit available for appropriation Proposed dividend Dividend tax on proposed dividend Provision for dividend payable on new shares to be allotted under Qualified Institutional Placement(QIP) including dividend tax Transferred to General Reserve Balance carried forward 2.11 5.00 76.30 crore to Rs. 470.43 crore. EBIDTA increased 65% from Rs. 43.01 crore to Rs. 70.90 crore while EBIDTA margin strengthened from 15.90% to 17.16%. Profit after tax increased 90% from Rs. 20.02 crore to Rs. 38.02 crore. 5.00 51.47 Particulars Expansion of ceramic capacity Installation of wind mills Setting up of wall tile unit Public issue expenses General corporate purposes Total Projected utilisation as per prospectus 20.91 37.86 36.91 11.74 60.58 168.00 Rs. in crore Actuals as at 31.03.2007 21.41 38.08 0.08 12.37 60.58 132.52 2007 470.43 70.90 8.05 10.04 52.81 14.79 38.02 51.47 89.49 5.20 0.88 2006 306.36 43.01 13.25 6.46 23.30 3.28 20.02 38.99 59.01 2.23 0.31 The Company has successfully implemented one of the Best ERP package SAP. Nitco Tiles was awarded SAP ACE 2007 Award for Best SAP Implementation Project Consumer Products Sector Midsize Enterprises. Several innovative products such as Timberland, Metallica, Matrix, Dholpur Series, Slate Stone Series, Estonia, Pietre Del Sol, Art Stone, Innova, African Slate etc were successfully introduced during the year. Consolidation of Real Estate activities through Nitco Realties Pvt. Ltd., a 100% subsidiary. ended March 31, 2007 were Rs. 8.37 crore as compared to Rs. 0.72 crore in the previous year. Limited (NRPL), Shark Properties Private Limited (SPPL) and Motivation Properties Private Limited (MPPL) and their respective shareholders and creditors pursuant to the provisions of Sections 391 to 394 and other relevant provisions of the Companies Act, 1956. The said composite scheme was approved by the Honble High Court, Bombay vide its order dated September 7, 2007. Pursuant to scheme of arrangement, 37,03,703 equity shares of Rs. 10 each of the Company were allotted to shareholders of Shark Properties Private Limited on October 24, 2007. Pending allotment as on March 31, 2007, 37,03,703 equity shares have been shown as Share Capital Suspense.

Dividend
In view of the Company's satisfactory performance during the financial year under consideration, your Board has recommended a dividend of Rs. 2 per share on the entire enhanced equity shares (previous year Rs. 1 per share) and seeks approval for the same. If approved, the total outgo on account of the dividend will be Rs. 6.08 cr. (inclusive of corporate tax on dividend). In addition, the Company has also made a provision for dividend of Rs. 2.11 crores (including Dividend Tax) being dividend payable on the new shares that may be allotted under Qualified Institutional Placement (QIP).

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

Share capital
The Board of Directors and shareholders of the Company had approved a composite scheme of arrangement between Nitco Tiles Limited (NTL), Nitco Realties Private

Utilization of funds of IPO proceeds


The details of the amount spent out of the proceeds of the public issue in comparison with the amount as projected in the prospectus is given below:

Exports
The Company's exports during the year

Review of operations
During the year under review, the Company registered a robust growth in sales and profits driven by an increased demand, thanks to the country's booming infrastructure and realty sectors. Sales increased 54% from Rs. 306.36

its vitrified business from Rs. 168.83 crore in 2005-06 to Rs. 252.88 crore in 2006-07, entirely outsourced from manufacturers in China with whom the Company entered into exclusive longterm arrangement in return for price, process, quality and supply stability.

Highlights 2006-07
The Company substantially scaled up

In first quarter of FY 2006-07, the

36 > NITCO Tiles Limited

Annual Report 2006-07 > 37

Pending utilization of funds for the projects as envisaged in the prospectus, the balance amount has been invested in term/fixed deposits with banks.

commence by April 2008. 2. The Company has planned to set up state of art processing facilities for marble at Silvassa. The production is expected to commence by second quarter of the financial year 2008-09. 3. The Company is also in discussion for a joint venture for manufacturing of Vitrified Tiles at Gujarat.

real estate activities. Glamorous Properties Private Ltd. is a wholly owned subsidiary of Nitco Realties Pvt. Ltd. By virtue of the composite scheme of arrangement, Nitco Realties Private Limited merged with Motivation Properties Private Limited and Motivation Properties Private Limited was renamed as Nitco Realties Pvt. Ltd. The merger was effective January 1, 2007. By virtue of the scheme, Particle Board India Ltd. and Opera Properties Private Ltd. which were subsidiaries of Motivation Properties Private Limited became subsidiaries of the Nitco Realties Private Limited. The Central Government in exercise of the power conferred by Section 212 (8) of the Companies Act, 1956, has accorded its approval for exemption from attaching the account of subsidiaries to the balance sheet of the Company. The Company shall provide a copy of the Annual Report of its subsidiary companies as required under Section 212 of the Act to members on their request, free of cost. These documents will also be available for inspection by any shareholder at the registered office of the Company on any working day during business hours. A statement pursuant to section 212 of the Companies Act 1956 containing details of subsidiaries of the Company, forms part of the Annual Report.

Consolidated financial statements


As required by the Listing Agreement with the Stock Exchanges and in accordance with the Accounting Standards AS-21 on consolidated financial statements, your Directors provide the audited annual consolidated financial statements in this Annual Report.

Employees stock option scheme


Grant of stock option to employees is a time tested and well established mechanism to align the interest of the employees with those of the Company. Towards achieving this goal, the approval of members is being sought at the ensuing Annual General Meeting to grant stock options to the employees not exceeding 5,00,000 option. The Employee Stock Compensation Committee, constituted in accordance with SEBI guidelines will administer and monitor the scheme.

accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and d) the annual accounts have been prepared on a going concern basis.

Current year's outlook


The tile industry caters primarily to housing, infrastructure and real estate sectors which are experiencing an unprecedented boom. All real estate and infrastructure-related companies have embarked on ambitious plans, raised funds from the capital market and begun fresh construction. The Company, by virtue of being one of the leading players in India's tile industry, expects to benefit from this boom: the Company has outlined a number of initiatives that will translate into enhanced turnover and profits during the current year.

Corporate Governance
Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a detailed report on Corporate Governance forms a part of this Annual Report. A certificate from the auditors of the Company confirming compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is attached to this Report.

Companys initiative in the real estate business


During the year, the Company took steps to consolidate all its real estate initiatives through its wholly-owned subsidiary, Nitco Realties Pvt. Ltd. The Company appointed an eminent valuer, Knight Frank, to carry out the valuation for some of the properties owned by Nitco Tiles/Nitco Realties or its SPVs. For these initial set of properties, Knight Frank has put the net present value of Nitcos land bank at Rs. 406 crore. These projects are expected to be completed over a period of next three years. Nitco is vigorously pursuing its objectives of creating value in the real estate sector. The Company is in talks to undertake many more projects. As and when these projects bear fruit, this would add significant value to the Company.

Directors
Mr. Pran Nath Talwar, Director and Chairman of the Company is due for retirement by rotation and is eligible for re-appointment. Required details are given in the report on Corporate Governance and Notice. The tenure of Ms. Poonam Talwar, Whole time Director, expired on March 31, 2007 and the Board of Directors has re-appointed her as the Whole time Director, subject to members approval at the Annual General Meeting. She will have a five-year tenure starting April 1, 2007. Required details are given in the report on Corporate Governance and Notice. Mr. Gaurav Burman was appointed as an Additional Director at the meeting of the Board of Directors held on October 24, 2007 and will hold office until the conclusion of the next Annual General Meeting. Notices have been received from members of the Company for reappointing Mr. Gaurav Burman at the ensuing Annual General Meeting.

Directors' responsibility statement


Pursuant to Section 217 (2AA) of the Companies Act, 1956, as amended by the Companies (Amendment) Act, 2000, the Directors confirm that: a) in preparation of the annual accounts, applicable accounting standards have been followed along with proper explanations relating to material departures; b) appropriate accounting policies have been selected and applied consistently and have made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as on March 31, 2007 and of the profit of the Company for the year ended March 31, 2007. c) proper and sufficient care has been taken for maintenance of adequate

Expansion plans
The Company has planned following expansion programmes during the financial year 2007-08:1. The Company had originally planned to set up a Wall Tile unit with the capacity of 5000 sq. mtrs per day at our existing location at Alibaug. The Company has now upgraded the scope of the project to manufacture high end ceramic tiles with capacity of 10,000 sq. mtrs per day. The plant will be capable of producing high end tiles which will have application both on wall and floor. The Company has already placed orders on machinery suppliers and production is expected to 38 > NITCO Tiles Limited

Management Discussion and Analysis


Management Discussion and Analysis on matters related to business performance, as stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges, is given in a separate statement which form part of the Annual Report.

Personnel
Relationships with employees continued to be cordial. The HR policies of our Company were focused on the development potential of each employee. With this premise, a comprehensive set of HR policies were laid down, aimed at attracting,

Subsidiary companies
During the year, Nitco Realties Private Limited became the wholly-owned subsidiary of the Company to carry out

Annual Report 2006-07 > 39

ANNEXURE A

TO DIRECTORS' REPORT
retaining and motivating employees at all levels. Information required under Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975, is provided in the Annexure forming part of this Report. In terms of section 219(1)(b)(iv) of the Act, the Report and Accounts are being sent to the shareholders excluding the aforesaid Annexure. Any shareholder interested in obtaining copy of the same may write to the Company Secretary at the Registered Office. (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, with respect to conservation of energy, technology absorption and foreign exchange earnings/outgo is given in Annexure A which forms part of this Report. Directors recommend their appointment. Particulars as per the Companies (Disclosure of particulars in the report of the Board of Directors) Rules, 1988. rebate of Rs. 0.25 cr during 2006-07, against a rebate of Rs. 0.16 cr during the year 2005-06 4. As a part of cost reduction, the sizes, namely 450x450 mm and 600x300 mm, were increased. During the year, several innovative products such as Timberland, Metallica, Matrix, Dholpur Series, Slate Stone Series, Estonia, Pietre Del Sol, Art Stone, Innova, African Slate etc were successfully introduced. As a part of technology upgradation roto colour printing machines were installed in three numbers of glaze lines and all the new designs were being developed using Roto Colour. Due to several initiatives taken by the department, the Company successfully launched new products which will help it to stay ahead of competition.

Appreciation
Your Directors wish to place on record their sincere thanks to the following stakeholders: Customers, who continue to be delighted in the Company's range of products and their quality, and who therefore continue to patronise the Company's products in spite of competition Banks and financial institutions for

A. Conservation of energy:
Your Company continues to be committed to energy conservation in its manufacturing operations. The following are energy conservation measures taken during the year under review. 1. Specific consumption of LPG reduced from 67.1 kg per MT of tile during 2005-06 to 65.7 kg per MT of tile during 2006-07. 2. Average electrical energy consumption reduced from 3.64 kwh per sq. mtr during the year 2005-06 to 3.42 Kwh per sq. mtrs during 2006-07. 3. Power factor continued to be 0.999 during the entire year of operations; the Company received a power factor

Company has installed two numbers of hot air generators using coal as fuel in the second quarter of FY 2007-08, the benefits of which will accrue in the subsequent years.

Auditors Report
The Board has duly examined the statutory auditors report to accounts and clarifications, wherever necessary, have been included in the Notes to Accounts section of the Annual Report.

B. Technology absorption
The single firing fuel efficient technology for manufacture of ceramic floor tiles imported from SACMI Italy has been fully absorbed. The Company has a full-fledged Research and Development department, which is constantly engaged in product innovation, productivity improvement, quality improvement and cost reduction. The production capacity of tiles of higher

Conservation of energy, technology absorption and foreign exchange earnings/outgo


The information required under Section 217 (1) (e) of the Companies Act, 1956, read with the Companies

Auditors
The present auditors of the Company, M/s. A. Husein Noumanali & Co., Chartered Accountants, retire at the conclusion of the Annual General Meeting and being eligible, offer themselves for re-appointment. Your

their continued support Employees for their sincere effort without which the Company could not have reported phenomenal growth during the year under review.

C. Foreign exchange earnings and outgo


The information on foreign exchange earnings and outgo is furnished in the Notes to the Accounts.

For and on behalf of the Board

For and on behalf of the Board

Vivek Talwar Managing Director

Poonam Talwar Whole Time Director

Vivek Talwar Managing Director

Poonam Talwar Whole Time Director

Dated: October 24, 2007, Mumbai

Dated: October 24, 2007, Mumbai

40 > NITCO Tiles Limited

Annual Report 2006-07 > 41

REPORT ON CORPORATE GOVERNANCE


Corporate Governance pertains to the system by which companies are directed and controlled, keeping in mind the long-term interests of stakeholders. It refers to the blend of law, regulations and voluntary practices, which enable the Company to attract financial and human capital, perform efficiently and thereby perpetually generate long-term economic value for its shareholders, while respecting and balancing the interests of other stakeholders and the society as a whole. It aims to align the interest of the Company with that of its shareholders and other key stakeholders. The incentive for companies and for those who own and manage them to adopt global governance standards is that these standards will help them achieve a long-term partnership with their stakeholders and achieve their corporate objectives efficiently. The principal characteristics of Corporate Governance are transparency, independence, accountability, responsibility, fairness, and social responsibility. In sum, Corporate Governance focuses on treatment of all shareholders and reinforces the belief among the shareholders that it is "Your Company" as it belongs to them. The Chairman and Board of Directors are the shareholders fiduciaries and trustees pushing the business forward and maximizing long-term value for them. A good governance process provides 42 > NITCO Tiles Limited transparency of corporate policies, strategies and the decision-making process and also strengthens internal control systems and helps in building relationship with all stakeholders. We at NITCO believe in being transparent and we commit ourselves to adherence to good corporate governance practices at all times as we believe that good governance generates goodwill among business partners, customers and investors and helps the Company grow. holds 3,17,952 equity shares in the Company. He retires by rotation and is eligible for re-appointment at this Annual General Meeting. He is Director of Nitco Paints Pvt. Ltd., Nitco Tiles & Marble Ind. (Andhra) Pvt. Ltd., Nitco Construction Material Pvt. Ltd., and Nitco Terrazzo Tiles Pvt. Ltd. Mr. Vivek Talwar, son of Mr. Pran Nath Talwar and aged 50 years, is the Managing Director of our Company. He has over 26 years of experience in the tile industry. He joined the Company as a Director in 1980. The operational responsibility and day-to-day functioning of our Company were gradually handed over to him. He was instrumental in setting up a plant at Alibaug to manufacture ceramic floor tiles and also in diversifying the business of the Company by entering into new activities such as marketing of imported marble and vitrified tiles in India. Ms. Poonam Talwar, aged 42 years, daughter of Mr. Pran Nath Talwar holds a bachelors degree in commerce and law and is the Whole time Director of the Company. She joined the Company as a Director in 2002. She is in charge of the mosaic tile unit of our Company. Under her leadership, the mosaic tile division has witnessed growth. The Board of Directors has reappointed Ms. Poonam Talwar as Whole time Director for five years with effect from April 1, 2007 subject to approval of members in the Annual General Meeting. She holds 62,562 equity shares in the Company. At present, she is Director of Nitco Paints Pvt. Ltd., Nitco Tiles and Marble Ind. (Andhra) Pvt. Ltd., Nitco Construction Material Pvt. Ltd. and Nitco Terrazzo Tiles Pvt. Ltd. Mr. Dinesh H. Kanabar, aged 48 years, is an Independent Director of the Company. He is an eminent chartered accountant and is an Executive Director (Tax & Regulatory Services) at PricewaterhouseCoopers Pvt. Ltd. After qualifying as a chartered accountant, Mr. Kanabar specialised in tax and business advisory services and international taxation. Mr. Kanabar is an advisor to several global organizations for providing expert counsel on cross-border tax issues encompassing transfer pricing regulations applicable to multinational corporations and the taxation of e-commerce. Mr. S.K. Bhardwaj, aged 62 years, is an Independent Director of the Company. He is a postgraduate from Punjab University. He has held various senior positions with the Government of India such as Chief Commissioner Customs Mumbai, Chief Commissioner - Central Excise and Service Tax, Mumbai, CommissionerCustoms and Central Excise, Baroda, Commissioner of Customs, Mumbai and Joint Secretary, Ministry of Defence, Government of India. He has vast experience of nearly 37 years in the field of indirect taxation, public administration, etc. He has dealt with issues relating to the fiscal policy and VAT at Harvard University, Boston, USA. He retired as a member of the Central Board of Excise and Customs, Ministry of Finance, Government of India. He is currently engaged in providing consultancy services in the field of Indirect Taxes to several Corporates. Mr. Atul Sud, aged 50 years, is an Independent Director of the Company. Mr. Sud has completed a postgraduate diploma in business management from IIM Ahmedabad, and holds a master degree in economics from the Delhi School of Economics. After over a decade of service in a senior position at American Express Bank as India head for commercial banking, treasury and investment banking, he founded the Strategic Group. Mr. Gaurav Burman, aged 35 year, has been appointed as an additional director of the Company in the Board meeting held on October 24, 2007. Mr. Burman is BA with a dual degree in Economics and history from Tufts University, USA. He has over 10 years experience in private equity which has seen him invest in Europe, Asia, and America. Mr. Burman has been a partner at Promethean a UK listed private equity fund, since its inception. He participated in all of the investment decisions of Promethean. Mr. Burman was instrumental in the structuring and marketing of Promethean and is responsible for a number of investor relationship Promethean enjoys. He holds a Board seat for Intermediactive Group Limited. Mr. Burman holds 45,000 equity shares in the Company. 2. Board procedure To follow transparency, the Board follows the procedure of advance planning in matters requiring discussion/decisions by the Board. The Board is given presentations on finance, sales, marketing, major business segments and operations of the Company and other matters as members want. The Chairman of the Board finalises the agenda papers for the Board meeting in consultation with other persons concerned. The minutes of the proceeding of each Board meeting are maintained in terms of statutory provisions. Meetings of various committee meetings are held properly. The minutes of committee and Board meetings of subsidiary companies are placed regularly before the Board for its review. 3. The names and categories of the Directors on the Board, their attendance at Board meetings held during the year and the number of directorships and committee chairmanships/memberships held by them in other public companies is given below. Other directorships do not include alternate directorships, directorships of private limited companies and of companies incorporated outside India. Chairmanship/Membership of Board Committees include only Audit and Shareholders/Investors Grievance Committees. Annual Report 2006-07 > 43

A. Board of Directors
1. Composition of the Board and a brief profile of Directors During the financial year 2006-07, the Board of Nitco consisted of three Independent Directors, who together constituted for 50% of the Board. The day-to-day management of the Company is conducted by the Managing Director who is ably assisted by the Whole time Director. Mr. Pran Nath Talwar, aged 80 years, is the Chairman of our Company. He started his industrial venture in 1956 by setting up a partnership firm Northern India Tiles Corporation (Delhi) for manufacturing mosaic tiles. He is the founder of Nitco Group and our Company. He has more than 50 years of experience in the tile industry. He has been instrumental in the growth of the Nitco Group. In recognition of his contribution to the industry, he received an award from the Institute of Trade and Industrial Development in 1999 and 2000 for excellence in industrial performance. Mr. Talwar

Name

Category

No. of Board meetings held during the year 2006-07

No. of directorships held in other public companies

No. of committee positions held in other public companies

Whether attended the last AGM

(b) Investigation of any activity within its terms of reference (c) Overseeing of the Companys financial reporting process and disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible (d) Reviewing of the annual financial statement with the management (e) Reviewing of the adequacy of internal control systems with the management and the external and internal auditors (f) Reviewing of the adequacy of internal audit function, including the structure of the internal audit department, staffing and seniority of

the official heading the department, reporting structure coverage and frequency of internal audit (g) Reviewing of the Companys financial and risk management policies (h) Periodic discussion with the auditor about the internal control system, scope of audit including observations of auditors and review the quarterly, half-yearly, and annual financial statement before submissions to the Board. 2. Shareholders/Investors Grievance Committee The Company has constituted a Shareholders/Investors Grievance and Share Transfer Committee to look into

various issues relating to shareholders including transfer and transmission of shares as well as non-receipt of dividend, annual report, and shares after transfers and delay in transfer of shares. In addition, the Committee looks into other issues including status of dematerialisation/rematerialisation of shares as well as systems and procedures followed to track investor complaints and suggest measures for improvement from time to time. The composition of the Shareholders/Investors Grievance Committee and the details of meetings attended by its members are given below:

Held Attended Chairman Member Chairman Member Mr. Pran Nath Talwar Mr. Vivek Talwar Ms. Poonam Talwar Non-Executive Chairman Executive/Managing Director Executive/Whole time Director 5 5 5 5 5 5 5 4 5 5 5 1 1 No Yes Yes Yes Yes Yes

Mr. Dinesh H. Kanabar Independent Mr. S.K. Bhardwaj Mr. Atul Sud Independent Independent

Five Board meetings were held during the year and the gap between two meetings did not exceed four months. The dates on which the Board meetings were held are: May 16, 2006; July 27, 2006; October 19, 2006; January 23, 2007; and March 2, 2007. 4. Code of conduct The Board has laid down a code of conduct for all Board members and Name of Director

senior management of the Company. The same is posted on the website of the Company. None of the Non-Executive Directors have any material pecuniary relationship or transactions with the Company. Necessary information pursuant to Clause 49 of the Listing Agreement has been placed before the Board.

B. Committees of the Board


1. Audit Committee The Company has an Audit Committee in accordance with the requirement of Section 292A of the Companies Act, 1956, and the terms of reference are in conformity with Clause 49 of the Listing Agreement entered into with the stock exchanges. The composition of the Audit Committee and the attendance of each member at the meetings are as follows:

Name of Director

Category

No. of Committee meetings Held Attended 8 8 6

Mr. S.K. Bhardwaj, Chairman Mr. Atul Sud Mr. Vivek Talwar

Independent Independent Non-independent

8 8 8

Category

No. of Committee meetings Held Attended 4 4 4 The Companys shares are listed for trading on the Bombay Stock Exchange and National Stock Exchange. During the year, 229 investor complaints were received and all were resolved. There were no pending investor complaints as at March 31, 2007. Mr. B.G. Borkar, CFO and Company Secretary has been appointed as compliance officer. 3. Remuneration Committee The Board, on the recommendation of the Remuneration Committee, determines the remuneration payable to Managing Director and Whole time Director. The remuneration of the nonexecutive Directors is restricted only to sitting fees for attending the Board/Committee meetings. The members of the Remuneration Committee are all independent Directors. They are: Mr. Atul Sud Mr. Dinesh H. Kanabar Mr. S.K. Bhardwaj Member Member Member

Mr. Dinesh H. Kanabar, Chairman Mr. S.K. Bhardwaj Mr. Vivek Talwar

Independent Independent Managing Director

4 4 4

The members elect chairman of the Committee from amongst themselves. The Committee met once during the year to recommend the re-appointment and remuneration of the Whole time Director Ms. Poonam Talwar which was attended by all the members mentioned above. Annual Report 2006-07 > 45

The Chairman of the Audit Committee has attended the Annual General Meeting held on August 24, 2006. Mr. B.G. Borkar, CFO and Company Secretary of the Company is secretary to the Committee. Terms of reference of the Audit Committee, inter alia, are: (a) Authority to investigate any matter pertaining to the items specified in Section 292A of the Companies Act or referred to it by the Board

44 > NITCO Tiles Limited

Details of remuneration paid to Directors during the financial year ended March 31, 2007 are as under: Rs. in lacs Name of Directors Category Salary Perquisites and other benefits Mr. Pran Nath Talwar Mr. Vivek Talwar Ms. Poonam Talwar Mr. Dinesh H. Kanabar Mr. S.K. Bhardwaj Mr. Atul Sud Chairman MD Whole time Director Independent Director Independent Director Independent Director 38.40 8.40 10.25 2.45 53.71 Directors Mr. Pran Nath Talwar Mr. Vivek Talwar Ms. Poonam Talwar Mr. Dinesh H. Kanabar Mr. Atul Sud Mr. S.K. Bhardwaj 2.00 2.16 1.36 102.36 10.85 2.00 2.16 1.36 No. of equity shares held 3,17,952 31,24,487 62,562 7,584 Commission Sitting fees Total

entered into with the stock exchanges as well as SEBI Regulations and Guidelines, wherever applicable. No penalties have been imposed or strictures issued by SEBI, the stock exchanges or any statutory authority on matters relating to capital markets in the last three years. c) The Company has complied with non-mandatory requirements relating to the Remuneration Committee and financial statements of the Company are unqualified.

term/fixed deposits with banks. F. Means of communication The quarterly, half-yearly and annual results of the Company are published in leading newspapers in India like The Economic Times, Business Standard, Free Press Journal, Navshakti, and Maharashtra Times. The results are also displayed on the Companys website www.nitcotiles.com. Press releases made by the Company from time to time are also displayed on the website. Presentations made to institutional investors and analysts after the declaration of quarterly, half-yearly and annual results are displayed on the Companys website. The Company also informs by way of intimation to the stock exchanges all price-sensitive matters or such other matters which in its opinion are material and relevant to shareholders and subsequently issues a press release on those matters. All data/reports required to be filed electronically on EDIFAR site pursuant to Clause 51 of the Listing Agreement with the Stock Exchanges have been regularly filed in addition to their physical filing with the stock exchanges.

Management Discussion and Analysis: a report on Management Discussion and Analysis is appended and forms part of this Annual Report. G. Shareholders information a) The Annual General Meeting is scheduled to be held on December 11, 2007, at 11:30 am at MC Ghia Hall, Bhogilal Hargovindas Building, 2nd Floor, 18/20, Kaikhusru Dubhash Marg, Mumbai - 400 001 b) Financial year: The Company follows April-March as its financial year. The results for every quarter beginning from April are declared in the month following the quarter. c) Date of book closure: December 5, 2007 to December 11, 2007 (both days inclusive) d) Dividend payment date: December 15, 2007 e) Listing on stock exchanges: The Company's equity shares are listed on the National Stock Exchange of India Ltd. and Bombay Stock Exchange Ltd. The Company has paid listing fees to the stock exchanges for the financial year 2007-08. f) Stock code/symbol: BSE 532722. NSE- NITCO. ISIN-INE858F01012

Tenure of MD is for five years from March 31, 2006 Tenure of Whole time Director is for five years from April 1, 2007 None of the Directors hold any instrument convertible to shares. Criteria for payment to independent D. General Body Meetings

Director: At present, the Company pays sitting fees to independent Directors for the Board/Committee meetings they attend. C. Details of shares of the Company held by Directors as on March 31, 2007 are as follows:

d) Secretarial audit: A qualified practising Company Secretary carried out a secretarial audit to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL), total issued and listed capital. The secretarial audit report confirms that the total issued/paid up capital is in agreement with the total

The last three Annual General Meetings were held as per details given below: Year 2005-06 2004-05 2003-04 Date 24th August 2006 23rd September 2005 29th September 2004 Time 3.30 pm 4.30 pm 4.30 pm Venue Patkar Hall, Nathibai Thakersey Road, Mumbai 400 020 Registered office of the Company Registered office of the Company Special Resolution passed Appointing Mr. Vivek Talwar as Managing Director 31, 2007. However the Company did not have any related-party transactions, which may have potential conflict with the interests of the Company at large. b) The Company has complied with all the provisions of the Listing Agreement

number of shares in physical form and number of dematerialised shares held with NSDL and CDSL. e) Proceeds from public issues: Out of the issue proceeds of Rs. 16800 lac, the Company has utilised Rs. 13,252 lac towards objects of the issue and pending utilization, balance funds as at March 31, 2007 have been invested in

None of the resolutions passed by the Company required resolution to be passed through postal ballots. The Company shall comply with the requirements relating to postal ballot as and when it will require compliance.

E. Disclosures a) Disclosure on materially significant related-party transactions: Related-party transactions have been disclosed in the Notes to Accounts in the financial statements as on March

46 > NITCO Tiles Limited

Annual Report 2006-07 > 47

g) Market price data: The monthly high and low price of shares traded on the National Stock Exchange of India Ltd. and the Bombay Stock Exchange Ltd. are as follows: Month High April 06 May 06 June 06 July 06 August 06 September 06 October 06 November 06 December 06 January 07 February 07 March 07 214.00 237.40 188.70 169.70 200.95 221.00 223.00 237.40 265.00 260.00 272.40 272.40 NSE Low 176.55 141.25 112.00 138.00 125.00 195.00 176.50 175.10 217.00 225.25 195.00 172.65 High 214.40 236.70 189.00 167.95 200.75 223.10 224.00 236.95 267.00 258.35 273.00 217.95 BSE Low 175.55 158.00 112.00 123.20 131.65 195.10 176.50 175.35 215.00 225.15 198.75 172.22

i) Shareholding pattern as on March 31, 2007 Category Promoters holding Indian promoters Promoters group Sub-total Public shareholding Mutual funds and UTI Financial institutions/banks FIIs Independent Director Private corporate bodies NRIs/OCBs Other Sub-total Grand total j) Distribution of shareholding as on March 31, 2007 27,14,622 18,000 30,54,367 7,584 31,30,382 13,03,998 13,75,015 1,16,03,968 2,22,71,330 12.19 0.08 13.71 0.03 14.06 5.86 6.17 52.10 100.00 70,20,182 36,47,180 1,06,67,362 31.52 16.38 47.90 No. of shares held % of total

h) Performance of the Companys stock price vis--vis NSE Nifty

No. of equity shares 1 500

No. of share holders 8593 107 82 23 9 11 23 84 8932

% of share holders 96.21 1.19 0.91 0.26 0.11 0.12 0.26 0.94 100.00

No. of shares held 778140 87857 127077 58466 34094 50930 159712 20975054 22271330

% of share holding 3.50 0.40 0.57 0.27 0.15 0.23 0.71 94.17 100.00

274 241 208 176 143 110 03.04.06

Nitco Tiles

Nifty

501 1000 1001 2000 2001 3000 3001 4000 4001 5000 5001 - 10000 10001 and above

19.05.06

30.06.06

14.08.06

27.09.06

13.11.06

27.12.06

13.02.07

30.03.07

Historic graph 01.04.2006 to 31.03.07

Note : 2,22,71,330 equity shares does not include 37,03,703 equity shares allotted pursuant to scheme of arrangement which was approved by Bombay High Court order dated September 7, 2007.

48 > NITCO Tiles Limited

Annual Report 2006-07 > 49

AUDITORS CERTIFICATE ON CORPORATE GOVERNANCE


k) Address for communication: Nitco Tiles Ltd., Recondo compound, Inside Municipal Asphalt compound, S. K. Ahire Marg, Worli, Mumbai 400 030 Tel: 022 66164555 Fax: 022 6660 8248 Email: investorgrievances@nitcotiles.com Website: www.nitcotiles.com l) Plant locations: Our existing production facilities are located at Thane for Mosaic Tiles and Poynad (Alibaug) for ceramic/porcelain tiles. Our marble processing facilities are located at Kanjurmarg (Mumbai) and Silvassa. m) Registrars and Transfer Agents: Intime Spectrum Registry Limited, C 13 Panalal Silk Mills Compound, LBS Marg, Bhandup (W) Mumbai 400 078. Tel: 022 2596 3838/2596 3838 Fax: 022 2596 0329 E-mail: nitcoipo@intimespectrum.com Website: www.intimespectrum.com n) Share transfer system All the shares of the Company issued during the IPO are in dematerialised form. Transfers of these shares are done through a depository where there is no involvement of the Company. The transfer of shares in physical form as and when received are normally processed within 15 days from the date of receipt of documents complete in all respects. As on March 31, 2007, 71.27% of the Mr. Vivek Talwar Managing Director Dated: October 24, 2007 Mumbai For A. Husein Noumanali & Co. Chartered accountants For and on behalf of the Board o) Nomination facility: Shareholders holding shares in the physical form and desirous of making a nomination in respect of their holding in the Company, as permitted under Section 109A of the Companies Act, 1956, are requested to submit to the Company the prescribed Form 2B for this purpose. The compliance with conditions of Corporate Governance is the responsibility of the management. Our examination was limited to a review of procedures and implementation thereof, adopted by the Company for ensuring compliance with the conditions of Corporate Governance. It is neither an audit nor an expression of opinion of the financial statements of the Company. In our opinion and to the best of our information and explanations given to us, we hereby certify that the Company has complied in all respects with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement. On the basis of representations received from the Registrar and Share Transfer Agents and as per the records maintained by the Company which are presented to the Shareholders/Investor Grievance Committee, we state that as on March 31, 2007, no investor grievances are pending against the Company for a period exceeding one month. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or the effectiveness with which the management has conducted the affairs of the Company. equity shares have been dematerialised. We have no GDR/ADR or any convertible instrument. To The members Nitco Tiles Limited We have examined the compliance with conditions of Corporate Governance procedures implemented by Nitco Tiles Limited for the year ended March 31, 2007, as stipulated in Clause 49 of the Listing Agreement of the said Company with the stock exchanges of India.

Mr. A. Husein Noumanali

DECLARATION
In accordance with Clause 49 of the Listing Agreement with the Stock Exchanges, I hereby confirm and declare that all the Directors and the senior management personnel of the Company have affirmed compliance with the code of conduct of the Company laid down for them for the financial year ended March 31, 2007. For Nitco Tiles Limited

Proprietor Place: Mumbai Date: October 24, 2007 M. No. 14757

Mr. Vivek Talwar Dated: October 24, 2007 Mumbai Managing Director

50 > NITCO Tiles Limited

Annual Report 2006-07 > 51

Auditors Report

To the members of NITCO TILES LIMITED We have audited the attached Balance Sheet of M/s NITCO TILES LIMITED as on March 31, 2007 and also the Profit & Loss Account of the Company for the year ended on that date, annexed thereto. These Financial Statements are the responsibility of the 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. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India in terms of subsection (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraph 4 of the said Order. Further to our comments in the Annexure referred to above, we report that: 1) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit; 2) In our opinion proper books of accounts as required by law have been kept by the Company, so far as appears from our examination of the books; 3) The Balance Sheet and Profit & Loss Account dealt with by this report are in agreement with the books of accounts; Place: Mumbai Date : October 24, 2007 4) In our opinion, the Balance Sheet and Profit & Loss Account dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 to the extent applicable. 5) On the basis of written representations received from the directors of the Company, as on 31st March 2007, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st Mar 2007 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. 6) In our opinion and to the best of our information and according to the explanation given to us, the said accounts give the information as required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India subject to (i) giving effect to the scheme of arrangement between Nitco Tiles Limited NTL, Nitco Realties Private Limited NRPL, Shark Properties Private Limited SPPL and Motivation Properties Private Limited MPPL: a) In the case of the Balance Sheet of the state of affair of the Company as at 31 March 2007 and b) In the case of Profit & Loss account of the Profit for the year ended on that date. c) In the case of the Cash Flow Statement of the cash flow for the year ended on that date. For A. Husein Noumanali & Co. Chartered Accountants

FINANCIAL SECTION

(A. Husein Noumanali) Proprietor Membership No. 14757

52 > NITCO Tiles Limited

Annual Report 2006-07 > 53

Annexure to the Auditors Report

(a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets; (b) As per the information and explanations given to us, physical verification of fixed assets has been carried out in terms of the phased programme of verification of its fixed assets adopted by the Company and no material discrepancies were noticed on such verification. In our opinion, the frequency of verification is reasonable, having regard to the size of the Company and nature of its business. (c) During the year, the Company has not disposed of any substantial / major part of fixed assets. 6

explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods. During the course of our audit, no major weakness has been noticed in the internal controls. (a) In our opinion and according to the information and explanations given to us, transactions that need to be entered into the Register in pursuance of Section 301 of the Companies Act, 1956 have been so entered. (b) In our opinion and according to the information and explanations given to us, the transactions exceeding Rupees Five Lacs in respect of each party made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 have been made at prices, which are reasonable having regard to prevailing market prices at the relevant time. 7 The Company has not accepted any deposits during the year from the public within the meaning of the provisions of Section 58A and 58AA of the Companies Act, 1956 and rules made thereunder. Hence, the Clause (vi) of the order is not applicable. 8 In our opinion, the Company has an internal audit system commensurate with the size of the Company and the nature of its business. 9. Paragraph 4(viii) is not applicable as the Company is not required to maintain cost records u/s 209(1)(d) of the Companies Act, 1956. 10 (a) According to the records of the Company, the Company is regular in depositing undisputed statutory dues including Employees State Insurance, Income tax, Sales tax, Wealth-tax, Customs Duty, Excise Duty, Cess and other statutory dues with appropriate authorities. According to the information and explanations given to us, there are no undisputed amounts payable in respect of such statutory dues which have remained outstanding as at 31st March,

2007 for a period more than six months from the date they became payable. (b) According to the records of the Company, the dues of sales tax, income-tax, customs, wealth-tax, excise duty, cess which have not been deposited on account of disputes and the forum where the dispute is pending are as under:Name of Nature of Statute Central Excise Act Central Excise Act Customs Act the dues Excise duty demand/ penalty Excise duty demand/ penalty Duty demand/ penalty Amount Forum (Rs./lacs) 8.30 Customs Excise & Service Tax Appellate Tribunal, Mumbai 6.50 Commissioner Central Excise (Appeals) 10.80 Customs Excise & Service Tax Appellate Tribunal, Mumbai 11 The Company has no accumulated losses as per books of accounts at the end of the financial year and it has not incurred cash losses in the financial year under report and the immediately preceding financial year. 12 The Company has not defaulted in repayment of its dues to financial institutions and banks. 13 The Company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures or other securities. 14 The provisions of any Special Statute applicable to Chit Fund, Nidhi or Mutual benefit Fund / Societies are not applicable to the Company. 15 In our opinion and according to the information and explanations given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4 (xiv) of the Companies (Auditors Report) Order, 2003 are not

applicable to the Company. 16 According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from banks and financial institutions. 17 According to the information and explanations given to us, the term loans raised during the year have been applied for the purpose for which they were raised. 18 According to the cash flow statement and other records examined by us and the information and explanations given to us, on an overall basis, funds raised on short term basis have, prima facie, not been used during the year for long term investment. 19 The Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956. 20 The Company has not issued any security debentures during the year. Hence, provisions of Clause 4 (xix) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company. 21 We have verified that the end use of money raised by public issues is as disclosed in the notes to the financial statements. 22 During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing principles in India, and according to the information and explanation given to us, we have neither come across any instances of material fraud on or by the company, noticed or reported during the year, nor have been informed of such case by the management. For A. Husein Noumanali & Co. Chartered Accountants

(a) Physical verification of inventory has been conducted during the year by the management at reasonable intervals. (b) In our opinion and according to the information and explanations given to us, procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c) The Company has maintained proper records of inventories and discrepancies noticed on physical verification of inventories as compared to book records were not material.

The Company has not granted any loans to companies, firms or other parties covered in the Register, maintained under Section 301 of the Companies Act, 1956. Accordingly sub clauses b, c & d in relation to rate of interest & terms & conditions, regularity in repayment & overdue amounts are not applicable.

The Company has taken loan from one party covered in the Register maintained under Section 301 of the Companies Act, 1956. The rate of interest and terms and conditions on these loans are not prejudicial to the interest of the Company. The Company is regular in repayment, as per terms, and there are no overdue amount.

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

In our opinion and according to the information and

54 > NITCO Tiles Limited

Annual Report 2006-07 > 55

Balance Sheet
I SOURCES OF FUNDS Shareholders Funds Share Capital

As at 31st March, 2007 Schedules 31.03.2007

(Rupees in Lacs) 31.03.2006

Profit and Loss Account


SALES AND OTHER INCOME Gross Sales

For the year ended 31st March, 2007 Schedules 31.03.2007

(Rupees in Lacs) 31.03.2006

XIII

47043.30 1105.95 45937.35

30636.21 796.98 29839.23 2.34 29841.57 14442.82 295.21 2193.51 1470.12 1349.01 5790.25 25540.92 4300.65 1324.90 645.79 2329.96 196.07 60.00 71.45 2002.44 3898.05 5900.49 222.71 31.24 0.00 0.00 500.00 5146.54 15.59

I II

2227.13 370.37 26868.60 29466.10 1246.05

2227.13 23563.18 25790.31 406.30 5808.68 2477.52 8286.20 34482.81

Less : Excise Duty Net Sales Other Income EXPENDITURE Materials Consumed XV XIV

Share Capital Suspense (Refer Note 2, Schedule XX) Reserves & Surplus Deferred Tax Liabilities Loan Funds Secured Loans Unsecured Loans Total II APPLICATION OF FUNDS Fixed Assets Gross Block Less: Depreciation Net Block Capital Work-in-progress Investments Current Assets, Loans and Advances Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Less: Current Liabilities and Provisions Current Liabilities Provisions Net Current Assets Total Statement of significant accounting policies and Notes to the Accounts Schedules referred to above form an integral part of the Financial Statements Per our report attached For A. Husein Noumanali & Co. Chartered Accountants XX XI XII VII VIII IX X VI V III IV

117.51 46054.86 23143.26 416.74 2430.64

8106.63 4664.98 12771.61 43483.76

Stores Consumed Power and Fuel Personnel Administrative Expenses Selling & Distribution Expenses XVI XVII XVIII

1828.70 1908.56 9236.99 38964.89 7089.97

22482.38 5113.95 17368.43 3303.29 20671.72 4301.59 18256.41 4782.85 1388.45 7509.89 31937.60 11513.79 1913.36 13427.15 18510.45 43483.76

19897.71 4141.80 15755.91 1343.13 17099.04 7483.00 9566.55 3213.24 1582.52 3794.43 18156.74 7527.74 728.23 8255.97 9900.77 34482.81

Profit Before Interest, Depreciation & Tax Interest and Other Financial Charges Depreciation Profit Before Taxation Provision for Current Tax Provision for Fringe Benefit Tax Provision for Deferred Tax Profit After Taxation Add : Balance brought forward from previous year Amount Available For Appropriation Less : Proposed Dividend Less : Dividend Tax on Proposed Dividend Less : Provision for Dividend payable on new shares, to be allotted under Qualified Institutional Placement (QIP) Less: Dividend Tax on above Less: Transferred to General Reserve Balance Carried To Balance Sheet Earning Per Share - basic & diluted (face value per share Rs.10/- each) Statement of significant accounting policies and Notes to the Accounts Schedules referred to above form an integral part of the Financial Statements XX(18) XX XIX V

804.93 1004.03 5281.01 588.47 50.78 839.75 3802.01 5146.54 8948.55 519.50 88.29 180.00 30.59 500.00 7630.17 16.39

For and on Behalf of the Board

Per our report attached For A. Husein Noumanali & Co. Chartered Accountants

For and on Behalf of the Board

A. Husein Noumanali Proprietor Membership No. 14757 Mumbai, October 24, 2007

B G Borkar CFO & Company Secretary

Poonam Talwar Wholetime Director

Vivek Talwar Managing Director

A. Husein Noumanali Proprietor Membership No. 14757 Mumbai, October 24, 2007

B G Borkar CFO & Company Secretary

Poonam Talwar Wholetime Director

Vivek Talwar Managing Director

56 > NITCO Tiles Limited

Annual Report 2006-07 > 57

Schedule to the Accounts


I SHARE CAPITAL

As at 31st March, 2007 31.03.2007

(Rupees in Lacs) 31.03.2006

Schedule to the Accounts


V FIXED ASSETS
GROSS BLOCK Description of Assets Freehold Land Leasehold Land Buildings Office Equipment Plant & Machinery Electrical Installations Furniture & Fixtures Motor Vehicles Windmill Total Previous Year As at 1.04.2006 Additions 0.00 0.00 70.72 141.51 2134.05 7.08 175.88 135.94 0.00 2665.19 6299.57 1435.44 145.88 4590.67 592.16 8309.54 452.34 270.87 420.28 3680.54 19897.71 13605.48 0.00 0.00 0.00 0.00 0.00 0.00 0.00 80.52 0.00 80.52 7.34

As at 31st March, 2007 (Rupees in Lacs)


DEPRECIATION As at As at 1.04.2006 0.00 0.00 772.92 156.91 2827.77 149.25 79.14 123.46 32.34 4141.80 3498.81 For the 0.00 0.00 154.33 69.33 503.40 21.52 21.26 39.86 194.33 1004.03 645.78 0.00 0.00 0.00 0.00 0.00 0.00 0.00 31.88 0.00 31.88 2.79 As at 0.00 0.00 927.25 226.23 3331.17 170.77 100.40 131.45 226.67 5113.95 4141.80 NET BLOCK As at 1435.44 145.88 3734.13 507.43 7112.43 288.65 346.36 344.25 3453.86 17368.43 15755.91 As at 1435.44 145.88 3817.75 435.25 5481.77 303.09 191.73 296.81 3648.20 15755.91

Authorised 50,000,000 Equity Shares of Rs. 10 each (Previous year - 27,500,000 Equity Shares of Rs. 10 each) Issued and Subscribed 22,271,330 Equity Shares of Rs. 10 each fully paid-up

Deductions 31.03.2007 1435.44 145.88 4661.38 733.67 10443.60 459.42 446.75 475.70 3680.54 22482.38 19897.71

Period Deductions 31.03.2007 31.03.2007 31.03.2006

5000.00 5000.00 2227.13 2227.13

2750.00 2750.00 2227.13 2227.13

Notes: 1 In respect of the above Equity Shares, 16 Equity Shares of the face value of Rs. 10/- each have been allotted as fully paid up and issued to the shareholders of the erstwhile Mahalakshmi Tiles & Marble Co. Pvt. Ltd. and Cospar Impex Pvt. Ltd. on amalgamation with the Company without payment being received in cash. 2 On 11th March 2006, Company allotted 10,000,000 Equity shares of Rs. 10/- each at a premium of Rs. 158 per Share through Initial Public Offer.

VI II RESERVES AND SURPLUS 0.57 965.00 16916.23 0.00 0.00 16916.23 534.84 500.00 321.79 1356.63 7630.17 26868.60 0.57 965.00 2352.92 15800.00 1236.69 16916.23 34.84 500.00 534.84 5146.54 23563.18 Capital Reserve Capital Redemption Reserve Share Premium Account Opening Balance Add: Additions Less: Public Issue Expenses General Reserve Opening Balance Add: Additions Add: On account of Merger Profit & Loss Account Balance

INVESTMENTS (At Cost, Non-Trade, Current) 3606.00 0.00 5503.00 1980.00

Fixed Deposit with Scheduled Bank (Refer Note No. 21) Liquidity Fund of Reliance Mutual Fund 18,974,011.383 Units of Rs. 10 each of Reliance Mutual Fund sold during the year (Previous year - 33,521,693.324 units purchased & 14,547,681.942 units sold during the year) (Market Value as on 31st March, 2007 - Rs. NIL, previous year - Rs. 1,984.32 Lacs) Equity Investments in 100% Subsidiary (Nitco Realties Pvt Ltd) 200000 Equity Shares of Re. 1/- each fully paid up in NRPL 10000 Preference Shares of Rs. 10/- each fully paid up in NRPL (Refer note below)

694.59 1.00 4301.59

0.00 0.00 7483.00

Note : Pursuant to the merger , the name of Motivation Properties Pvt. Ltd. has been changed to Nitco Realties Pvt. Ltd. The company is in the process of filing necessary forms with the ROC. VII INVENTORIES 2205.15 363.60 15079.61 603.55 4.50 18256.41 1060.15 236.95 7778.78 442.67 48.00 9566.55

Note : Premium on issue of Equity Shares represents premium of Rs. 158 per share on issue of 10,000,000 equity shares under an initial public offer. III SECURED LOANS 5156.31 0.00 2824.00 126.32 8106.63 4804.78 121.29 762.73 119.88 5808.68

Raw Materials Process Stock Finished Products Stores, Spares and Consumables Goods in Transit

Term Loans From Banks From Financial Institutions Cash Credit from Banks Hire Purchase Arrangements

VIII

SUNDRY DEBTORS (Unsecured) 280.25 128.63 408.88 128.63 280.25 4502.60 4782.85 213.10 103.27 316.37 103.27 213.10 3000.14 3213.24

Outstanding over six months Considered good Considered doubtful Less: Provision for Doubtful Debts

IV

UNSECURED LOANS 4599.99 64.99 4664.98 2377.11 100.41 2477.52

Short Term Loans From Banks Inter corporate Deposits

Other debts considered good

58 > NITCO Tiles Limited

Annual Report 2006-07 > 59

Schedule to the Accounts


IX CASH AND BANK BALANCES

As at 31st March, 2007 31.03.2007

(Rupees in Lacs) 31.03.2006

Schedule to the Accounts


XV MATERIAL CONSUMED

For the year ended 31st March, 2007 31.03.2007

(Rupees in Lacs) 31.03.2006

Cash on Hand Balance with Scheduled Bank Current Account Margin Money Account

93.54 1006.25 288.66 1388.45

74.89 1026.42 481.21 1582.52

Increase/Decrease in Stock Opening Stock Finished Stock Process Stock Less: Closing Stock Finished Stock Process Stock

7778.78 236.95 8015.73 15079.61 363.60 15443.21 (7427.48) 1060.15 10005.74 11065.89 2205.15 8860.74 21710.00 23143.26

5782.66 158.43 5941.09 7778.78 236.95 8015.73 (2074.64) 1052.90 4577.67 5630.57 1060.15 4570.42 11947.04 14442.82

LOANS AND ADVANCES (Unsecured, Considered Good) 2373.06 3078.75 1066.30 991.78 7509.89 2979.47 0.00 397.22 417.74 3794.43

Advances recoverable in cash or in kind or for value to be received Advance to Subsidiary Company Balances with Customs & Excise Income-tax payments

(Increase)/Decrease in Stock (A) Consumption of Raw Materials Opening Stock Add: Purchases Less: Closing Stock Total Raw Material Consumed (B) Purchase of Finished Goods for Sale (C) Total Materials Consumed (A+B+C) XVI PERSONNEL COST Salaries, Wages, Bonus etc Contribution to Provident & Other Funds Welfare Expenses

XI

CURRENT LIABILITIES 9929.27 239.84 1164.97 0.55 179.16 11513.79 6401.13 213.39 761.98 1.91 149.33 7527.74

Sundry Creditors Dealer Deposit Other Liabilities Interest accrued but not due on Loans Excise Duty

XII

PROVISIONS 1094.98 818.38 1913.36 474.28 253.95 728.23 XVII ADMINISTRATIVE EXPENSES

1609.11 105.05 114.54 1828.70

1241.14 110.95 118.03 1470.12

For Taxation For Proposed Dividend

Schedule to the Accounts


XIII SALES Sales Labour Charges

For the year ended 31st March, 2007

47038.05 5.25 47043.30

30635.17 1.04 30636.21

XIV OTHER INCOME Rent received Dividend received etc. 3.93 113.58 117.51 0.00 2.34 2.34

Rent Rates and Taxes Processing Charges Water Charges Postage and Telephone Printing and Stationery Insurance Legal and Professional Fees Travelling & Conveyance Expenses Audit Fees Hire Charges Security Charges Donations Repairs and Maintenance Buildings Machinery Others Miscellaneous Expenses

297.75 122.67 46.14 144.29 44.98 104.05 123.67 340.22 15.76 327.64 24.23 3.48 38.83 38.60 58.26 177.99 1908.56

201.34 102.33 34.10 113.67 31.81 45.63 96.84 328.44 12.00 170.47 19.20 0.70 40.66 37.55 57.57 56.70 1349.01

60 > NITCO Tiles Limited

Annual Report 2006-07 > 61

Schedule to the Accounts


XVIII SELLING & DISTRIBUTION EXPENSES

For the year ended 31st March, 2007 31.03.2007

(Rupees in Lacs) 31.03.2006

Schedule to the Accounts


XX STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS (Contd.) F. Investments Long-term investments are carried at cost. However, provision for diminution in value is made to recognize a decline, other than temporary. Current investments are stated at cost or fair value whichever is lower. Cost is determined on a weighted average basis. G. Customs & Excise Duty Customs Duty and Excise Duty have been accounted on the basis of both payments made in respect of goods cleared as also provision made for goods lying in bonded warehouses. H. Sales Sales are inclusive of excise duty and sales tax as applicable. I. Foreign Currency Transactions i) All loans repayable in foreign currency and outstanding at the close of the year are expressed in Indian Currency at the appropriate rates of exchange prevailing on the date of the Balance Sheet. Any increase or decrease in these liabilities, to the extent they relate to borrowings for financing fixed assets, is shown as an addition to or deduction from the cost of the assets acquired out of such borrowings. ii) Balances in the form of Current Assets and Current Liabilities in foreign currency, outstanding at the close of the year, are converted in Indian Currency at the appropriate rates of exchange prevailing on the date of the Balance Sheet. Resultant gain or loss is accounted as income or expense as the case may be. iii) All other incomes or expenditure in foreign currency, are recorded at the rates of exchange prevailing on the date of the transaction. The difference between the rate prevailing on the date of the transaction and on the date of the settlement is recognised as income or expense as the case may be. iv) In respect of forward exchange contracts the difference between the forward rate and the exchange rate at the inception of the contract is recognised as income or expense over the period of the contract, except in respect of fixed assets where it is adjusted to the cost of the acquisition thereof. v) Gains or losses on cancellation of forward exchange contracts are recognised as income or expense, except in respect of fixed assets where respective adjustment is made to the cost of acquisition thereof. J. Employment / Retirement Benefits i) Companys contribution to Provident Fund, Superannuation Fund and other Funds for the year is accounted for on accrual basis and charged to the Profit & Loss Account of the year. ii) Liability for Leave encashment benefits has been provided on last salary drawn by employees. iii) The Company has taken a Group Gratuity cum Life Insurance Policy with the Life Insurance Corporation of India for all eligible employees. The liability is actuarially assessed by LIC and accounted for on accrual basis. K. Taxation Current Tax Current tax is provided on the basis of tax payable on estimated taxable income computed in accordance with the applicable provisions of Income tax Act, 1961 after considering the benefits available under the said Act. Deferred Taxes In accordance with Accounting Standard 22 Accounting for Taxes on Income, issued by the Institute of Chartered Accountants of India, the deferred tax for timing difference between the book and tax profits for the year is accounted for using the tax rates and laws that have been enacted or substantially enacted as of the balance sheet date. Deferred Tax Assets arising from temporary timing differences are recognized to the extent there is reasonable certainty that the assets can be realized in future. 2. Merger (The Composite Scheme of Arrangement) I) A Composite Scheme of Arrangement under Section 391 to 394 read with Sections 78 and 100 to 103 of the Companies Act, 1956 (the Scheme) between Nitco Tiles Limited (NTL), Nitco Realties Private Limited (NRPL), Shark Properties Private Limited (SPPL) and Motivation Properties Private Limited (MPPL) and their respective shareholders and creditors has been sanctioned by Honble High Courts of at Mumbai. Upon necessary filings with the Registrar of Companies, the scheme has become effective on October 2,2007. Consequently, in terms of the Scheme: a) The entire business and undertaking of SPPL including all assets and liabilities, as a going concern, will stand transferred to and vested in NTL with effect from January 1, 2007 being the Appointed Date. Annual Report 2006-07 > 63

Advertisement & Sales Promotion Sales Tax Freight Forwarding & Distribution & Other Exp Bad Debts Provision for Doubtful Debts

1506.52 4626.37 3072.42 6.32 25.36 9236.99

1289.82 2791.24 1684.25 5.79 19.15 5790.25

XIX

INTEREST AND OTHER FINANCIAL CHARGES 323.92 449.88 31.13 804.93 494.26 265.97 564.67 1324.90

Term Loans Cash Credit Others

XX

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS

1. Significant Accounting Policies A. Basis of Preparation of Financial Statements i) The financial statements are prepared under the Historical Cost convention in accordance with generally applicable accounting principles and relevant provisions of the Companies Act, 1956, as adopted consistently by the Company. The same are prepared on a going concern basis. ii) The Company follows mercantile system of accounting and recognises significant items of income and expenditure on accrual basis. B. Fixed Assets and Depreciation i) Fixed assets are stated at cost / professional valuation less accumulated depreciation and impairment loss, if any. ii) Depreciation on fixed assets is provided in the books of accounts on straight line method in accordance with and at the rates and manner prescribed under Schedule XIV to the Companies Act, 1956. iii) Modvat Credit availed on capital goods is accounted for by credit to respective assets, and no depreciation is availed thereon. C. Inventories i. Stores and spare parts are stated at or below cost. ii. Inventories other than stores and spare parts are valued At cost or Net Realizable Value, whichever is lower. Cost is generally determined on weighted average cost basis and whenever required, appropriate overheads are taken into account. Net Realizable Value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated costs necessary to make the sale. iii. Cost of raw materials, stores, spare parts and consumables is net of applicable Modvat credit wherever applicable. D. Impairment of Assets The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal / external factors. An impairment loss will be recognized wherever the carrying amount of an asset exceeds its estimated recoverable amount. The recoverable amount is greater of the assets net selling price and value in use. In assessing the value in use, the estimated future cash flows are discounted to the present value using the weighted average cost of capital. Previously recognized impairment loss is further provided or reversed depending on change in circumstances. E. Expenditure during construction period In case of new projects and substantial expansion of existing factories, expenditure incurred, including trial production expenses net of revenue earned and attributable interest and financing costs, prior to commencement of commercial production are capitalized.

62 > NITCO Tiles Limited

Schedule to the Accounts


XX STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS (Contd.) b) SPPL stand dissolved without being wound up. Consequently, II) In consideration of the merger, NTL will issue 10 (Ten) Equity Shares of Rs. 10 each/- fully paid up for every 27 (Twenty Seven) Equity Shares of Re 1 each held in the SPPL on October 2,2007. Hence, NTL has issued 37,03,703 equity shares. Pursuant to merger of SPPL into NTL, both NRPL and MPPL will be wholly owned subsidiaries of NTL. MPPL shall, without any further application or deed, issue and allot to NTL or its heirs, executors, administrators or the successors-in-title, as the case may be 10,000 fully paid up Preference Shares of Rs. 10 each for 10,000 equity shares of Rs. 10 each held by NTL in NRPL. III) Accounting for Amalgamation a) With effect from the Appointed Date, all the assets including investments and liabilities appearing in the books of accounts of SPPL and NRPL stands transferred to and vested in NTL or MPPL, as the case may be pursuant to the Scheme and have been recorded by NTL and MPPL at their book values. b) 37,03,703 Equity Shares of Rs. 10/- each to be issued as fully paid up to the Equity Shareholders of Shark Properties Pvt. Ltd. persuant to the scheme of Amalgamation for consideration other than cash. Pending allotment, the face value of such shares has been shown as Equity Share Suspense. c) Rs. 321.79 Lacs being difference between the value of the net assets of SPPL transferred to NTL pursuant to High Court Order at their book values and the value of shares allotted by NTL, under this Scheme, is credited to General Reserve Account of NTL. IV) All costs, charges, taxes including duties, levies and all other expenses, if any (save as expressly otherwise agreed), incurred in carrying out and implementing this Scheme and matters incidentals thereto, is being borne by NTL 3. Secured Loans A. Term Loans from Banks / Financial Institutions have been secured by a first charge on pari passu basis on all movable and immovable fixed assets of the Ceramics Tiles factory at Alibaug. It has been additionally secured by an irrevocable and unconditional personal guarantee from Mr. Vivek Talwar, Managing Director of the Company. B. Cash Credit from banks has been secured by hypothecation of the whole of the current assets of the Company including inventories, book debts, consumable stores & spares (not relating to Plant & Machinery), bills receivable and all other movables, both present and future wheresoever situated. It is further secured by a first charge on the Fixed Assets of the companys mosaic tiles division at Thane and Second charge on the Fixed Assets of the ceramic tiles division at Alibaug and is also guaranteed by Mr. Vivek Talwar the Managing Director of the Company. C. Hire Purchases have been secured by hypothecation of specific assets. 4. Unsecured Loans Unsecured Loans from Banks are secured by personal guarantee of Mr. Vivek Talwar, Managing Director. 5. The Company had imported certain equipments at concessional duty under various licenses pursuant to the Export Promotion Capital Goods Scheme. The export obligation under individual licenses have to be fulfilled within a period of 8 years from the date of the licence or such extended period as may be allowed from time to time. 6. Excise Duty of Rs. 179.16 Lacs (Previous year Rs. 149.33 Lacs) has been provided on goods held in bond and consequently included in the valuation of inventories. 7. Balances of Sundry Debtors, Sundry Creditors, Loans and Advances, and Deposits are subject to confirmation. In the opinion of the Board, the Current Assets, Loans and Advances are of the value stated as realisable in the ordinary course of the business. Accounts receivable is net of advances. The provisions for depreciation and all the known liabilities are not in excess of the amount reasonably necessary. 8. Interest and other financial charges include loss / gain on exchange fluctuations on revenue account. 9. Provision for Taxation a) Current year charge The Income Tax Provision of Rs. 588.47 Lacs (Previous year Rs. 196.07 Lacs) has been made pursuant to section 115JB of the Income Tax Act (MAT). No tax is payable on regular income for the year. Rs. 50.78 Lacs (Previous year Rs. 60.00 Lacs) has been provided towards fringe benefit tax. b) Deferred Tax The Company has been recognising in the financial statements the deferred tax assets / liabilities, in accordance with

Schedule to the Accounts


XX STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS (Contd.) Accounting Standard 22 Accounting for Taxes on Income issued by the Institute of Chartered Accountants of India. During the year, the Company has debited the Profit and Loss Account with Deferred Tax Liability of Rs. 839.75 Lacs (Previous year Rs. 71.45 Lacs). The position of Deferred Tax Assets and Liabilities during the year is as follows: (Rupees in Lacs) Upto 31.03.2006 Deferred Tax Liabilities 1) Difference between accounting and Tax Depreciation (Cumulative) Deferred Tax Assets 1) Unabsorbed Losses and Depreciation 2) Others Net Deferred Tax Liabilities During the Year 2006-07 32.44 (807.31) NIL 839.75 Carried as at 31.03.2007 1606.44 243.27 117.12 1246.05

1574.00 1050.58 117.12 406.30

Tax effect of timing difference on account of depreciation of windmills has been ignored as the same is reversed during the tax holiday period available under Section 80IA of the Income Tax Act. 10. Sundry Creditors in Schedule VI to the accounts includes: a) Rs. 17.08 Lacs (previous year Rs. 10.44 Lacs) due to Small Scale Industrial Undertakings. b) Rs. 9912.19 Lacs (previous year Rs. 6390.69 Lacs) due to other creditors. The disclosure is based on the information available with the Company regarding the status of suppliers under the Industries Development & Regulation Act, 1951. Names of small scale industrial undertakings to whom an amount of Rs. 1 lac or more was payable and outstanding for more than 30 days is as follows:i) Praveen Pulverizers. Rs. 17.08 Lacs 11. Previous years figures have been regrouped wherever necessary to make them comparable with those of the current year 12. Capacity, Production, Purchases, Turnover and Stock Particulars A. Licenced, Installed Capacity and Actual Production Mosaic Tiles Licenced Capacity Installed Capacity (Sq.ft.) Actual Production (Sq.ft.) Ceramic Tiles / Pavers Licenced Capacity Installed Capacity (Sq.mts.) Actual Production (Sq.mts.) 31.03.2007 (Figures in Lacs) 31.03.2006

N.A. 90.88 48.29 N.A. 63.12 42.17

N.A. 90.88 49.82 N.A. 40.32 32.86

Installed capacity of the plant has been estimated on the basis of standard size of Ceramic Tiles of 300 mm x 300 mm. The capacity of the plant gets reduced with production of tiles of higher sizes. (Figures in Lacs) Particulars B. Purchases Vitrified (Sq.mts.) Mosaic Tiles / Pavers (Sq. ft. ) Others Total 31.03.2007 Quantity 71.36 0.36 0.00 Rs. 31.03.2006 Quantity 38.41 0.08 0.00 Rs.

20,932.84 6.95 770.21 21,710.00

11,945.12 1.92 0.00 11,947.04

64 > NITCO Tiles Limited

Annual Report 2006-07 > 65

Schedule to the Accounts


XX STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS (Contd.) (Figures in Lacs) Particulars C. Turnover Ceramic Floor Tiles (Sq.mts.) Vitrified (Sq.mts.) Marble (Sq.ft.) Mosaic Tiles / Pavers (Sq.ft.) Others Total 31.03.2007 Quantity 40.18 51.90 33.35 50.91 Rs. 31.03.2006 Quantity 32.11 32.92 14.26 47.11 Rs.

Schedule to the Accounts


XX STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS (Contd.) (Rupees in Lacs) 31.03.2007 837.09 31.03.2006 72.44 13. Earnings in Foreign Exchange (Exports) Particulars FOB Value of Exports 11,717.42 25,288.15 7,630.75 1,621.71 785.27 47043.30 9,372.44 16,883.22 3,249.90 1,130.65 30,636.21 14. Value of imports calculated on CIF basis Goods for Resale Raw Material Capital Goods Spare Parts & Components Total 15. Expenditure in Foreign Currency 14366.23 3141.96 554.22 115.98 18178.39 8603.01 1038.85 803.33 28.30 10473.49

D. Opening Stock Ceramic Floor Tiles (Sq.mts.) Vitrified (Sq.mts.) Marble (Sq.ft.) Mosaic Tiles / Pavers (Sq.ft.) Total

11.23 14.85 5.11 7.94

1,972.55 4,999.17 700.39 106.67 7,778.78

10.48 9.36 6.78 5.15

1,873.54 2,887.25 968.22 53.65 5,782.66

Interest Foreign Travel etc.

1.62 126.65 128.27

273.56 178.08 451.64

16. Auditors Remuneration Audit Fees Out of Pocket expenses 15.61 0.15 15.76 12.00 0.00 12.00

E. Closing Stock Ceramic Floor Tiles (Sq.mts.) Vitrified (Sq.mts.) Marble (Sq.ft.) Mosaic Tiles / Pavers (Sq.ft.) Total

13.23 34.32 8.67 5.68

2,546.19 11,186.57 1,204.64 142.21 15079.61

11.23 14.85 5.11 7.94

1,972.55 4,999.17 700.39 106.67 7,778.78

17. Directors Remuneration Salary Contribution to PF and other Funds Perquisites Commission Directors sitting fees 46.80 9.54 3.16 53.71 5.52 118.73 42.70 7.63 2.33 24.00 1.29 77.95

F. Raw Materials Consumed: Body Material Glaze Material Rough marble Blocks / Slabs Packing Material Others Total Particulars G. Value of Raw Materials, Spares Components consumed during the year Raw Materials Imported Indigenous Total Spares & Components Imported Indigenous Total

MT MT Sq.ft

0.80 0.05 36.91

1,740.17 1,467.44 4,375.39 483.57 794.17 8860.74

0.63 0.04 12.59

1,145.24 1,104.66 1,571.68 326.79 422.05 4570.42

Computation of Net Profit in accordance with Section 349 of the Companies Act, 1956 for calculation of commission payable to Managing Director 31.03.2007 Profit before tax as per profit & loss Account Add :- Provision for depreciation as per profit & loss Account Assets written off as per profit & loss account Remuneration to Directors Provision for Doubtful Debts Less :- Depreciation under Section 350 of the Companies Act, 1956 Profit as per section 349 of the companies Act , 1956 1% commission payable to Managing Director 5,281.01 1,004.03 0.00 65.02 25.36 6,375.42 (1,004.03) 5,371.39 53.71 31.03.2006 2,329.96 645.79 3.83 53.95 19.15 3,052.69 (645.79) 2,406.90 24.00

31.03.2007 Rs. Lacs

31.03.2006 Rs. Lacs

4361.07 4499.67 8860.74 68.36 348.38 416.74

49.22% 50.78% 100.00% 16.40% 83.60% 100.00%

1933.27 2637.15 4570.42 45.85 249.36 295.21

42.30% 57.70% 100.00% 15.53% 84.47% 100.00%

18. Earnings per share - (EPS) 31.03.2007 i. ii. iii. iv. Profit computation for Earnings Per Share of Rs. 10 each Weighted average number of equity shares for Earnings Per Share Earnings Per Share (Weighted Average) Basic & Diluted EPS. (Rs.) Face Value per Share (Rs.) 3802.01 23197256 16.39 10.00 31.03.2006 2,002.44 12846672 15.59 10.00

66 > NITCO Tiles Limited

Annual Report 2006-07 > 67

Schedule to the Accounts


XX STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS (Contd.) (Rupees in Lacs) 31.03.2006 383.07 1,488.19 161.01 231.95 19. Contingent Liabilities 31.03.2007 Guarantees / Counter Guartantees given by the company / by banks on behalf of company Letter of credits opened for which the company is contingently liable Export Bills discounted / purchased with the banks Estimated amount of contracts remaining to be executed on capital account and not provided for ( net of advances ) Demands against the company not acknowledged as debts and not provided for against which the company is in appeal Excise Duty Custom Duty 215.91 5,515.16 99.46 391.95

Schedule to the Accounts


XX STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE ACCOUNTS (Contd.) (Rupees in Lacs) Directors Purchase Goods & services Rent Paid Remuneration / Sitting Fees Interest on loans paid Rent Deposit Advances made as on 31.03.2007 Loans taken outstanding as on 31.03.2007 21. Details of utilization of IPO proceeds are stated below 0.00 3.00 5.52 3.69 200.00 0.00 0.00 Company controlled by Directors/Relatives 43.46 62.00 0.00 5.49 1300.00 3078.75 44.65 Related Party Transactions FY 2007

98.80 398.30

249.00 908.00

20. Information on related party transactions as required by Accounting Standard 18 for the year ended 31.03.2007 The related parties with whom there were transactions during the year are listed below: 1. Directors Mr.P.N.Talwar Mr.Vivek Talwar Ms.Poonam Talwar Mr.Dinesh Kanabar Mr. S.K. Bhardwaj Mr. Atul Sud 2. Relatives of Directors : Ms.Anjali Talwar Mr.Lovraj Talwar Ms.Dolly Talwar Mr. Rohan Talwar Chairman Managing Director W/T Director Independent Director Independent Director Independent Director Ms.Savitri Talwar Ms.Sanjana Talwar Mrs.Rajeshwari Talwar Expansion of Ceramic Tiles capacity Setting up of Wall Tile Unit Installation of wind Mills Public Issue Expenses General Corporate Purposes

Utilisation as projected in the prospectus 2091 3691 3786 1174 6058 16800

Actuals as on 31.03.2007 2141 8 3808 1237 6058 13252

Note: Pending utilization, as on 31.03.2007 balance funds have been invested in Fixed Deposits with Banks. 22. Remittance in foreign currency on account of dividend The Company has paid dividend in respect of shares held by Non Residents on repatriation basis. This inter-alia includes portfolio investment and direct investment, where the amount is also credited to Non Resident External Account (NRE A/c). The exact amount of dividend remitted in foreign currency cannot be ascertained. The total amount remittable in this respect is given herein below: Final Dividend a) Number of Non Resident Shareholders b) Number of Equity Share held by them c) (i) Amount of Dividend Paid (Gross) (Rs. in lacs) (ii) Year to which dividend relates 2006-07 1 825281 8.25 2005-06 2005-06

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

23. Segment Reporting for the year ended 31st March 2007 The Management has identified that the companys products, ceramic tiles, mosaic tiles, vitrified tiles and marble are products, which serve the flooring requirements of its customers. These products are interchangeable since the ultimate use of the said products is the same. As such the company has only one segment, i.e., flooring products segment and as such no separate details on segment reporting required under AS17 (Segment Reporting) issued by the Institute of Chartered Accountants of India, is being furnished. Per our report attached For A. Husein Noumanali & Co. Chartered Accountants A. Husein Noumanali Proprietor Membership No. 14757 Mumbai, October 24, 2007 B G Borkar CFO & Company Secretary Poonam Talwar Wholetime Director For and on Behalf of the Board

Vivek Talwar Managing Director

68 > NITCO Tiles Limited

Annual Report 2006-07 > 69

Cash Flow Statement

For the year ended 31st March, 2007 31.03.2007

(Rupees in Lacs) 31.03.2006 2329.96 645.79 19.15 3.83 0.00 1324.90 4323.64 16.69 (1854.29) (1127.83) 3677.45 5035.65 (181.79) 4853.86 (6765.09) 0.71 (7483.00) 0.00 (14247.38) 0.00 (3708.83) 1000.00 14563.31 (1324.90) 0.00 10529.58 1136.06 446.46 1582.52

Balance Sheet Abstract and Companys Business Profile


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

A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit as restated before Tax and Extraordinary items Adjusted for Depreciation Provision for Bad and Doubtful Debts (Profit)/Loss on sale of assets (Profit)/Loss on sale of Investments ( Net ) Interest and Financial Charges (Net) Operating Profit before Working Capital Changes Adjusted for changes in Working Capital : (Increase)/Decrease in Sundry Debtors (Increase)/Decrease in Inventories (Increase)/Decrease in Other Receivables Change in Current Liabilities Cash Generated from Operations Income Taxes Paid Net Cash from Operating activities B. CASH FLOW FROM INVESTING ACTIVITY Purchase of Fixed Assets ( Net ) Sale of Fixed Assets Sale/(purchase) of Investments Purchase of Investments in Subsidiary Company Net Cash from in Investing Activity C. CASH FLOW FROM FINANCING ACTIVITIES Advance to Subsidiary Companies Proceeds from / (Repayment) of Long Term / Short Term Borrowings, net Issue of shares at par Share premium on fresh issue received (net of Issue Expenses) Interest Paid Pyt. Of Proposed Dividend & CDT Net Cash from / (used in) Financing Activities Net Increase / (Decrease) in Cash & Cash Equivalents Opening Balance of Cash and Cash Equivalents Closing Balance of Cash and Cash Equivalents

5281.01 1004.03 25.36 24.41 (68.09) 804.93 7071.65 (1594.97) (8689.86) (62.67) 3986.05 710.20 (592.59) 117.61 (4625.35) 24.22 3942.66 (1.00) (659.47) (3078.75) 4485.42 0.00 0.00 (804.93) (253.95) 347.79 (194.07) 1582.52 1388.45

I.

Registration Details Registration No. Balance Sheet Date 3


Date

1 1 0 3 2

6 0

5 0

7 7

State Code

Month

Year

II.

Capital Raised during the year (Rs. in Lacs) Public Issue Bonus Issue N N I I L L Rights Issue Private Placement N N I I L L

III.

Position of Mobilisation and Deployment of Funds (Rs. in Lacs) Total Liabilities (Including
Shareholders Funds)

Total Assets

Sources of Funds Paid-up Capital


(including share application money)

2 1 8

5 2 1

9 4 0

7 6 6

. . .

5 0 6

0 5 3

Reserves & Surplus Unsecured Loans

6 4

8 6

6 6

8 4

. .

6 9

0 8

Deferred Tax Liability Secured Loans

Application of Funds (Rs. in Lacs) Net Fixed Assets


(including Capital Work-in-Progress)

2 1

0 8

6 5

7 1

1 0

. . N

7 4 I

2 5 L

Investments Misc. Expenditure

. N

5 I

9 L

Net Current Assets Accumulated Losses IV.

Performance of the Company (Rs. in Lacs) Turnover (Sales and other income) 4 Profit/Loss before Tax
Earnings Per Share in Rs.

6 5

0 2

5 8 1

4 1 6

. . .

8 0 3

6 1 9

Total Expenditure Profit/ Loss after Tax + Dividend Rate%

0 3

7 8

7 0

3 2

. .

8 0 2

5 1 0

Notes: 1 The Cash Flow Statement has been prepared under the Indirect method as set out in Accounting Standard - 3(AS-3) on Cash Flow Statement issued by The Institute of Chartered Accountants of India. 2 Cash and Cash Equivalent consists of Cash on hand Rs. 93.54 Lacs (Previous Year Rs. 74.89 Lacs), Balance in Current Account - Rs. 1006.25 Lacs (Previous Year - Rs. 1026.42 Lacs) and Balance in Margin Money - Rs. 288.66 Lacs (Previous Year - Rs. 481.21 Lacs). For and on Behalf of the Board V.

Generic Names of Three Principal Products/Services of Company (As per monetary terms) Product Description Glazed Ceramic, Vitrified Tiles Cement Tiles of Mosaic Marble Blocks, Slabs, Tiles Item Code No. (ITC Code) 6 6 6 9 8 8 0 1 0 7 0 2

Per our report attached For A. Husein Noumanali & Co. Chartered Accountants

A. Husein Noumanali Proprietor Membership No. 14757 Mumbai, October 24, 2007

B G Borkar CFO & Company Secretary

Poonam Talwar Wholetime Director

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

For and on Behalf of the Board Vivek Talwar Managing Director

70 > NITCO Tiles Limited

Annual Report 2006-07 > 71

Statement pursuant to Section 212 of the Companies Act, 1956, Relating to subsidiary Companies
Name of Subsidiary Company Nitco Realties Pvt. Ltd. (Motivation Properties Pvt. Ltd) 31/03/2007 Glamorous Particle Boards Properties Pvt. Ltd. India Ltd. Opera Properties Pvt. Ltd.

Consolidated Auditors Report

1. Financial year of the subsidiary ended on 2. Shares of the subsidiary held by the Company directly or through it subsidiary companies on March 31, 2007 a. Number and face value of Equity Shares b. Extent of holding (%) 3. Net aggregate amount of profit / (loss) of the subsidiary for the financial year of the subsidiary so far as they concern members of the Company a. Dealt with in the accounts of the Company for the year ended March 31, 2007 b. Not dealt with in the accounts of the Company for the year ended March 31, 2007 4. Net aggregate amount of profits / (Losses) for previous financial years of the subsidiary, since it became a subsidiary so far as they concern members of the Company. a. Dealt with in the accounts of the Company for the year ended March 31, 2007 b. Not dealt with in the accounts of the Company for the year ended March 31, 2007

31/03/2007

31/03/2007

31/03/2007

200000 Equity 10000 Equity Shares of Re. 1 each Shares of Rs. 10 fully paid up each fully paid up 100 100

214860 Equity Shares of Rs. 100 each fully paid up 95.49

5000 Equity Shares of Rs. 100 each fully paid up 100

To the Board of NITCO TILES LIMITED We have audited the attached Consolidated Balance Sheet of Nitco Tiles Limited (the company) and its Subsidiaries as at 31st March 2007, and also the Consolidated Profit & loss Account and consolidated cash flow statement for the year ended on that date annexed thereto. These financial statement are the responsibility of the Companies management and have been prepared by the management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these financial statement based on our audit. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by the Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. accordance with the requirement of Accounting standard (AS) 21, consolidated financial statement and accounting standard (AS) 23, Accounting for investment in Associates in consolidated financial statement and issued by Institute of Chartered Accountants of India. 3. Based on audit as aforesaid, and on consideration of reports of other auditors on the separate financial statement and on the other financial information of the component and accounts approved by the Board of Directors and to the best of our information and according to the information given to us, we are of the opinion that the attached consolidated financial statement give true and fair view in conformity with the accounting principles generally accepted in India: i) in the case of the Consolidated Balance Sheet, of the state of affair of the Group as at 31st march 2007;

NIL

NIL

NIL

NIL

1.51

NIL

(0.57)

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

NIL

ii) in the case of the Consolidated Profit and loss Account, of the Profit of the Group for the year ended on that date; and iii) in the case of the Consolidated Cash Flow statement, of the state of the Cash Flows of the Group for the year ended on that date. For A. Husein Noumanali & Co. Chartered Accountants

Information of Subsidiary Companies for the year ended March 31, 2007 Name of Subsidiary Company Paid up Capital Reserves Total Assets Total Liabilities Investments (except investment in subsidiary companies) Turnover Profit before taxation Provision for taxation Profit after taxation Proposed dividend Motivation Properties Pvt. Ltd. 3.00 697.30 4,052.49 3,352.19 132.75 8.66 2.28 0.77 1.51 NIL Glamorous Properties Pvt. Ltd. 1.00 0.00 93.86 92.86 NIL NIL NIL NIL NIL NIL Opera Properties Pvt. Ltd. 5.00 0.00 251.28 246.28 NIL NIL NIL NIL NIL NIL Particle Board India Ltd. 230.00 1.25 874.48 643.24 0.10 68.00 18.06 3.66 14.40 NIL

1. We did not audit the financial statement of the subsidiary companies whose, financial statements reflect total asset of Rs. 5272.11 Lacs. as at 31st March, 2007, the total revenue of Rs. 76.66 Lacs for the year then ended. These financial statement and other financial information have been audited by other auditors whose report has been furnished to us, and our opinion is based solely on report of other auditors. 2. We report that the consolidated financial statement have been prepared by the companys management in

Place: Mumbai Date : October 24, 2007

A. Husein Noumanali Proprietor Membership No. 14757

72 > NITCO Tiles Limited

Annual Report 2006-07 > 73

Consolidated Balance Sheet


I SOURCES OF FUNDS Shareholders Funds Share Capital Share Capital Suspense (Refer Note 3, Schedule XX) Reserves & Surplus Minority Interest Deferred Tax Liabilities Loan Funds Secured Loans Unsecured Loans Total II APPLICATION OF FUNDS Fixed Assets Gross Block Less: Depreciation Net Block Capital Work-in-progress Investments Current Assets, Loans and Advances Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Less: Current Liabilities and Provisions Current Liabilities Provisions Net Current Assets Total

As at March 31, 2007 Schedules

(Rupees in Lacs) 31.03.2007

Consolidated Profit and Loss Account


SALES AND OTHER INCOME Gross Sales

For the year ended March 31, 2007 (Rupees in Lacs) Schedules 31.03.2007

XIV

47043.30 1105.95 45937.35

I II

2227.13 370.37 26872.74 29470.24 14.81 1246.05

Less: Excise Duty Net Sales Other Income EXPENDITURE Materials Stores Power and Fuel Personnel Administrative Expenses Selling & Distribution Expenses Profit Before Interest, Depreciation & Tax XVII XVIII XIX XVI XV

126.17 46063.52 23143.26 416.74 2430.64 1831.85 1906.52 9237.07 38966.08 7097.44

III IV

8106.63 4716.31 12822.94 43554.04

V 22924.97 5113.95 17811.02 3303.29 21114.31 VI VII VIII IX X 3738.85 21578.60 4782.85 1693.39 4677.68 32732.52 XI XII 12108.66 1922.98 14031.64 18700.88 43554.04 XX

Interest and Other Financial Charges Depreciation Profit Before Taxation Provision for Current Tax Provision for Fringe Benefit Tax Provision for Deferred Tax Profit after Taxation (Before Adjustment for Minority Interest) Add: Share of Loss transferred to Minority Profit after Taxation (After Adjustment for Minority Interest) Add: Balance brought forward from previous year Amount available for appropriation Less: Proposed Dividend Less: Dividend Tax on Proposed Dividend

XX V

811.33 1004.03 5282.08 588.63 50.78 839.75 3802.92 0.03 3802.95 5146.54 8949.49 519.50 88.29 180.00 30.59 500.00 7631.11

Less: Provision for Dividend payable on new shares, to be allotted under Qualified Institutional Placement (QIP) Less: Dividend Tax on above Less: Transferred to General Reserve Balance Carried to Balance Sheet Earning per share-Basic & Diluted (Face value per share Rs. 10/- each) Statement of significant accounting policies and Notes to the Accounts Schedules referred to above form an integral part of the Financial Statements XX(18) XX

16.39

Statement of significant accounting policies and Notes to the Accounts Schedules referred to above form an integral part of the Financial Statements Per our report attached For A. Husein Noumanali & Co. Chartered Accountants

For and on Behalf of the Board

Per our report attached For A. Husein Noumanali & Co. Chartered Accountants

For and on Behalf of the Board

A. Husein Noumanali Proprietor Membership No. 14757 Mumbai, October 24, 2007

B G Borkar CFO & Company Secretary

Poonam Talwar Wholetime Director

Vivek Talwar Managing Director

A. Husein Noumanali Proprietor Membership No. 14757 Mumbai, October 24, 2007

B G Borkar CFO & Company Secretary

Poonam Talwar Wholetime Director

Vivek Talwar Managing Director

74 > NITCO Tiles Limited

Annual Report 2006-07 > 75

Schedule to the Consolidated Accounts


I SHARE CAPITAL

As at March 31, 2007

(Rupees in Lacs) 31.03.2007

Schedule to the Consolidated Accounts


IV UNSECURED LOANS

As at March 31, 2007 (Rupees in Lacs) 31.03.2007

Authorised 50,000,000 Equity Shares of Rs. 10 each Issued and Subscribed 22,271,330 Equity Shares of Rs.10 each fully paid-up

5000.00 5000.00 2227.13 2,227.13

Short Term Loans From Banks Inter Corporate Deposits

4599.99 116.32 4716.31

Notes: 1. In respect of the above Equity Shares, 16 Equity Shares of the face value of Rs.10/- each have been allotted as fully paid up and issued to the shareholders of the erstwhile Mahalakshmi Tiles & Marble Co. Pvt. Ltd. and Cospar Impex Pvt. Ltd. on amalgamation with the Company without payment being received in cash. 2. On March 11, 2006, Company allotted 10,000,000 Equity shares of Rs.10/- each at a premium of Rs.158 per Share through Initial Public Offer

CONSOLIDATED FIXED ASSETS


GROSS BLOCK DEPRECIATION As at Additions 422.89 0.00 0.00 70.72 141.51 2134.05 7.08 175.88 135.94 0.00 3088.08 Deductions 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 80.52 0.00 80.52 31.03.2007 422.89 1435.44 165.58 4661.38 733.67 10443.60 459.42 446.75 475.70 3680.54 22924.97 As at 1.04.2006 0.00 0.00 0.00 772.92 156.91 2827.77 149.25 79.14 123.46 32.34 4141.80 For the Period 0.00 0.00 0.00 154.33 69.33 503.40 21.52 21.26 39.86 194.33 1004.03 Deductions 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 31.88 0.00 31.88 As at 31.03.2007 0.00 0.00 0.00 927.25 226.23 3331.17 170.77 100.40 131.45 226.67 5113.95 NET BLOCK As at 31.03.2007 422.89 1435.44 165.58 3734.13 507.43 7112.43 288.65 346.36 344.25 3453.86 17811.02 As at 1.04.2006

Description of Assets

Goodwill Freehold Land Leasehold Land

0.00 1435.44 165.58 4590.67 592.16 8309.54 452.34 270.87 420.28 3680.54 19917.41

II

RESERVES AND SURPLUS 0.57 3.20 965.00 16916.23 534.84 500.00 321.79 1356.63 7631.11 26872.74

Buildings Office Equipment

Capital Reserve Capital Reserve on consolidation Capital Redemption Reserve Share Premium Account General Reserve Opening Balance Add: Additions Add: On account of Merger Profit & Loss Account Balance

Plant & Machinery Electrical Installations Furniture & Fixtures Motor Vehicles Windmill Total

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

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

VI

INVESTMENTS (At Cost, Non-Trade, Current) 3606.00 0.10 132.33 0.42 3738.85

III

SECURED LOANS 5156.31 2824.00 126.32 8106.63

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

Term Loans From Banks Cash Credit from Banks Hire Purchase Arrangements

VII

INVENTORIES 2205.15 3685.79 15079.61 603.55 4.50 21578.60

Raw Materials Process Stock Finished Products Stores, Spares and Consumables Goods in Transit

76 > NITCO Tiles Limited

Annual Report 2006-07 > 77

Schedule to the Consolidated Accounts


VIII SUNDRY DEBTORS (Unsecured)

As at March 31, 2007

(Rupees in Lacs) 31.03.2007

Schedule to the Consolidated Accounts


XIV SALES

For the year ended March 31, 2007 (Rupees in Lacs) 31.03.2007

Outstanding over six months Considered good Considered doubtful Less: Provision for Doubtful Debts Other debts considered good

280.25 128.63 408.88 128.63 280.25 4502.60 4782.85

Sales Labour Charges

47038.05 5.25 47043.30

XV

OTHER INCOME 12.59 113.58 126.17

Rent received Dividend received etc. IX CASH AND BANK BALANCES 93.54 1311.19 288.66 1693.39

Cash on Hand Balance with Scheduled Bank Current Account Margin Money Account

XVI MATERIAL CONSUMED Increase/Decrease in Stock Opening Stock Finished Stock Process Stock Less: Closing Stock Finished Stock Process Stock (Increase)/Decrease in Stock (A) Consumption of Raw Materials Opening Stock Add: Purchases

LOANS AND ADVANCES (Unsecured, Considered Good) 2619.60 1066.30 991.78 4677.68

7778.78 236.95 8015.73 15079.61 363.60 15443.21 (7427.48) 1060.15 10005.74 11065.89 2205.15 8860.74 21710.00 23143.26

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

XI

CURRENT LIABILITIES 9962.62 239.84 1726.49 0.55 179.16 12108.66

Sundry Creditors Dealer Deposit Other Liabilities Interest accrued but not due on Loans Excise Duty

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

XVII PERSONNEL COST XII PROVISIONS 1104.60 818.38 1922.98 Salaries, Wages, Bonus etc Contribution to Provident & Other Funds Welfare Expenses 1612.26 105.05 114.54 1831.85

For Taxation For Proposed Dividend

78 > NITCO Tiles Limited

Annual Report 2006-07 > 79

Schedule to the Consolidated Accounts


XVIII ADMINISTRATIVE EXPENSES

For the year ended March 31, 2007 (Rupees in Lacs) 31.03.2007

Schedule to the Consolidated Accounts


XX

For the year ended March 31, 2007

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

Rent Rates and Taxes Processing Charges Water Charges Postage and Telephone Printing and Stationery Insurance Legal and Professional Fees Travelling & Conveyance Expenses Audit Fees Hire Charges Security Charges Donations Repairs and Maintenance Buildings Machinery Others Miscellaneous Expenses

296.54 119.00 46.14 144.29 45.00 104.33 126.09 340.24 15.86 327.64 24.23 3.48 38.83 38.60 58.26 177.99 1906.52

1. Principles of Consolidation These accounts represent consolidated accounts of the Group and its majority owned subsidiaries as follows: Entity Country of Incorporation India India India India Nature of Business Relationship Shareholding as at March 31, 2007 100% 95.49% 100% 100%

Nitco Realities Pvt Ltd.(*) Particle Boards India Ltd Glamorous Properties Pvt Ltd Opera Properties Pvt Ltd

Real Estate Development Real Estate Development & Service provider Real Estate Development Real Estate Development

Subsidiary Subsidiary Subsidiary Subsidiary

* Note - Pursuant to the merger of Nitco Realties Pvt. Ltd. with Motivation Properties Pvt. Ltd., the name of Motivation Properties Pvt. Ltd . has been changed to Nitco Realties Pvt. Ltd. The company is in the process of filing necessary forms with the ROC. For the purpose of this consolidation, jointly owned entities, where Nitco Tiles Ltd. or its subsidiaries own directly or indirectly more than 50 percent of voting right of a companys share capital, have been accounted for as subsidiaries. The equity and net income attributable to minority shareholders interest are shown separately in the Balance Sheets and Profit and Loss Account, respectively. 2. Other significant accounting policies These are set out under Significant Accounting Polices as given in the standalone Financial Statement of Nitco Tiles Limited

XIX

SELLING & DISTRIBUTION EXPENSES 1506.60 4626.37 3072.42 6.32 25.36 9237.07

Advertisement & Sales Promotion Sales Tax Freight Forwarding & Distribution & Other Exp Bad Debts Provision for Doubtful Debts

3. Merger (The Composite Scheme of Arrangement) I) A Composite Scheme of Arrangement under Section 391 to 394 read with Sections 78 and 100 to 103 of the Companies Act, 1956 (the Scheme) between Nitco Tiles Limited (NTL), Nitco Realties Private Limited (NRPL), Shark Properties Private Limited (SPPL) and Motivation Properties Private Limited (MPPL) and their respective shareholders and creditors has been sanctioned by Honble High Court of Mumbai. Upon necessary filings with the Registrar of Companies, the scheme has become effective on October 2,2007. Consequently, in terms of the Scheme: a) The entire business and undertaking of SPPL including all assets and liabilities, as a going concern, will stand transferred to and vested in NTL with effect from January 1, 2007 being the Appointed Date. b) SPPL stand dissolved without being wound up. Consequently, II) In consideration of the merger, NTL will issue 10 (Ten) Equity Shares of Rs. 10 each/- fully paid up for every 27 (Twenty Seven) Equity Shares of Re 1 each held in the SPPL on October 2,2007. Hence, NTL has issued 37,03,703 equity shares.

XX

INTEREST AND OTHER FINANCIAL CHARGES 323.92 449.88 37.53 811.33

Term Loans Cash Credit Others

Pursuant to merger of SPPL into NTL, both NRPL and MPPL will be wholly owned subsidiaries of NTL. MPPL shall, without any further application or deed, issue and allot to NTL or its heirs, executors, administrators or the successors-in-title, as the case may be 10,000 fully paid up Preference Shares of Rs. 10 each for 10,000 equity shares of Rs. 10 each held by NTL in NRPL. III) Accounting for Amalgamation a) With effect from the Appointed Date, all the assets including investments and liabilities appearing in the books of accounts of SPPL and NRPL stands transferred to and vested in NTL or MPPL, as the case may be pursuant to the Scheme and have been recorded by NTL and MPPL at their book values. b) 37,03,703 Equity Shares of Rs.10/- each to be issued as fully paid up to the Equity Shareholders of Shark Properties Pvt. Ltd. persuant to the scheme of Amalgamation for consideration other than cash. Pending allotment, the face value of such shares has been shown as Equity Share Suspense.

80 > NITCO Tiles Limited

Annual Report 2006-07 > 81

Schedule to the Consolidated Accounts


XX

For the year ended March 31, 2007

Schedule to the Consolidated Accounts


XX

For the year ended March 31, 2007

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS TO THE CONSOLIDATED ACCOUNTS. (Contd.) c) Rs. 321.79 Lacs being difference between the value of the net assets of SPPL transferred to NTL pursuant to High Court Order at their book values and the value of shares allotted by NTL, under this Scheme, is credited to General Reserve Account of NTL.

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

Tax effect of timing difference on account of depreciation of windmills has been ignored as the same is reversed during the tax holiday period available under Section 80IA of the Income Tax Act. 11. Sundry Creditors in Schedule VI to the accounts includes: a) Rs.17.08 Lacs (previous year Rs.10.44 Lacs) due to Small Scale Industrial Undertakings. b) Rs. 9945.54 Lacs (previous year Rs. 6390.69 Lacs ) due to other creditors. The disclosure is based on the information available with the Company regarding the status of suppliers under the Industries Development & Regulation Act, 1951. Names of small scale industrial undertakings to whom an amount of Rs. 1 lac or more was payable and outstanding for more than 30 days is as follows:i) Praveen Pulverizers. Rs.17.08 Lacs (Figures in Lacs) Particulars A. Licenced, Installed Capacity and Actual Production Mosaic Tiles Licenced Capacity Installed Capacity (Sq.ft.) Actual Production (Sq.ft.) Ceramic Tiles / Pavers Licenced Capacity Installed Capacity (Sq.mts.) Actual Production (Sq.mts.) 31.03.2007

IV) All costs, charges, taxes including duties, levies and all other expenses, if any (save as expressly otherwise agreed), incurred in carrying out and implementing this Scheme and matters incidentals thereto, is being borne by NTL. 4. Secured Loans A. Term Loans from Banks / Financial Institutions have been secured by a first charge on pari passu basis on all movable and immovable fixed assets of the Ceramics Tiles factory at Alibaug. It has been additionally secured by an irrevocable and unconditional personal guarantee from Mr. Vivek Talwar, Managing Director of the Company. B. Cash Credit from banks have been secured by hypothecation of the whole of the current assets of the Company including inventories, book debts, consumable stores & spares (not relating to Plant & Machinery), bills receivable and all other movables, both present and future wheresoever situated. It is further secured by a first charge on the Fixed Assets of the companys mosaic tiles division at Thane and Second charge on the Fixed Assets of the ceramic tiles division at Alibaug and is also guaranteed by Mr. Vivek Talwar, Managing Director of the Company. C. Hire Purchases have been secured by hypothecation of specific assets. 5. Unsecured Loans Unsecured Loans from Banks are secured by personal guarantee of Mr. Vivek Talwar, Managing Director. 6. The Company had imported certain equipments at concessional duty under various licenses pursuant to the Export Promotion Capital Goods Scheme. The export obligation under individual licenses have to be fulfilled within a period of 8 years from the date of the licence or such extended period as may be allowed from time to time. 7. Excise Duty of Rs.179.16 Lacs (Previous year Rs.149.33 Lacs) has been provided on goods held in bond and consequently included in the valuation of inventories. 8. Balances of Sundry Debtors, Sundry Creditors, Loans and Advances, and Deposits are subject to confirmation. In the opinion of the Board, the Current Assets, Loans and Advances are of the value stated as realisable in the ordinary course of the business. Accounts receivable is net of advances. The provisions for depreciation and all the known liabilities are not in excess of the amount reasonably necessary. 9. Interest and other financial charges include loss / gain on exchange fluctuations on revenue account. 10. Deferred Tax The Company has been recognising in the financial statements the deferred tax assets / liabilities, in accordance with Accounting Standard 22 Accounting for Taxes on Income issued by the Institute of Chartered Accountants of India. During the year, the Company has debited the Profit and Loss Account with Deferred Tax Liability of Rs. 839.75 Lacs (Previous year Rs.71.45 Lacs). The position of Deferred Tax Assets and Liabilities during the year is as follows: (Rupees in Lacs) Upto 31.03.2006 Deferred Tax Liabilities 1) Difference between accounting and Tax Depreciation (Cumulative) Deferred Tax Assets 1. Unabsorbed Losses and Depreciation 2. Others Net Deferred Tax Liabilities During the Year 2006-07 Carried as at 31.03.2007

12. Capacity, Production, Purchases, Turnover & Stock

N.A. 90.88 48.29 N.A. 63.12 42.17

Installed capacity of the plant has been estimated on the basis of standard size of Ceramic Tiles of 300 mm x 300 mm. The capacity of the plant gets reduced with production of tiles of higher sizes. (Figures in Lacs) Particulars B. Purchases Vitrified (Sq.mts.) Mosaic Tiles / Pavers ( Sq. ft. ) Others Total 31.03.2007 Quantity 71.36 0.36 0.00 Rs.

20,932.84 6.95 770.21 21,710.00

1574.00 1050.58 117.12 406.30

32.44 (807.31) NIL 839.75

1606.44 243.27 117.12 1246.05

C. Turnover Ceramic Floor Tiles (Sq.mts.) Vitrified (Sq.mts.) Marble (Sq.ft.) Mosaic Tiles / Pavers (Sq.ft.) Others Total

40.18 51.90 33.35 50.91

11,717.42 25,288.15 7,630.75 1,621.71 785.27 47043.30

82 > NITCO Tiles Limited

Annual Report 2006-07 > 83

Schedule to the Consolidated Accounts


XX Particulars D. Opening Stock Ceramic Floor Tiles (Sq.mts.) Vitrified (Sq.mts.) Marble (Sq.ft.) Mosaic Tiles / Pavers (Sq.ft.) Total

For the year ended March 31, 2007

Schedule to the Consolidated Accounts


XX

For the year ended March 31, 2007

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

(Figures in Lacs) 31.03.2007 Quantity 11.23 14.85 5.11 7.94 Rs. 1,972.55 4,999.17 700.39 106.67 7,778.78

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS TO THE CONSOLIDATED ACCOUNTS. (Contd.) 14. Value of imports calculated on CIF basis: Particulars Goods for Resale Raw Material Capital Goods Spare Parts & Components Total 15. Expenditure in Foreign Currency Interest Foreign Travel etc.

(Rupees in Lacs) 31.03.2007 14366.23 3141.96 554.22 115.98 18178.40

E. Closing Stock Ceramic Floor Tiles (Sq.mts.) Vitrified (Sq.mts.) Marble (Sq.ft.) Mosaic Tiles / Pavers (Sq.ft.) Total

1.62 126.65 128.27

13.23 34.32 8.67 5.68

2,546.19 11,186.57 1,204.64 142.21 15079.61

16. Auditors Remuneration Audit Fees Out of Pocket expenses 15.71 0.15 15.86

17. Directors Remuneration F. Raw Materials Consumed Body Material Glaze Material Rough marble Blocks / Slabs Packing Material Others Total MT MT Sq.ft 0.80 0.05 36.91 1,740.17 1,467.44 4,375.39 483.57 794.17 8860.74 Salary Contribution to PF and other Funds Perquisites Commission Directors sitting fees 46.80 9.54 3.16 53.71 5.52 118.73

Computation of Net Profit in accordance with Section 349 of the Companies Act, 1956 for calculation of commission payable to Managing Director Particulars G. Value of Raw Materials, Spares Components consumed during the year Raw Materials Imported Indigenous Total Spares & Components Imported Indigenous Total 31.03.2007 Rs. Lacs Profit before tax as per profit & loss Account Add :- Provision for depreciation as per profit & loss Account Remuneration to Directors Provision for Doubtful Debts Less :- Depreciation under Section 350 of the Companies Act, 1956 Profit as per section 349 of the companies Act, 1956 1% commission payable to Managing Director 5,281.01 1,004.03 65.02 25.36 6,375.42 (1,004.03) 5,371.39 53.71

4361.07 4499.67 8860.74 68.36 348.38 416.74

49.22% 50.78% 100.00% 16.40% 83.60% 100.00%

Note: As no commission is payable to subsidiaries, the aforesaid computation of commission to MD is related to Nitco Tiles Limited. 18. Earnings per share - (EPS) Particulars i. Profit computation for Earnings Per Share of Rs. 10 each ii. Weighted average number of equity shares for Earnings Per Share iii. Earnings Per Share (Weighted Average) Basic & Diluted EPS (Rs.) iv. Face Value per Share (Rs.) 31.03.2007 3802.95 23197256 16.39 10.00

13. Earnings in Foreign Exchange (Exports) Particulars FOB Value of Exports

(Rupees in Lacs) 31.03.2007 837.09

84 > NITCO Tiles Limited

Annual Report 2006-07 > 85

Schedule to the Consolidated Accounts


XX 19. Contingent Liabilities

For the year ended March 31, 2007

Schedule to the Consolidated Accounts


XX Related party Transaction of FY 2006-07

For the year ended March 31, 2007

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS TO THE CONSOLIDATED ACCOUNTS. (Contd.) (Rupees in Lacs) 31.03.2007 215.91 5,515.16 99.46 391.95

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS TO THE CONSOLIDATED ACCOUNTS. (Contd.) (Rupees in Lacs) Directors Company controlled by Directors / Relatives 0.46 38.00 0.00 5.49 700.00 44.65

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

Purchase Goods & services Rent Paid Remuneration / Sitting Fees Interest on loans paid Rent Deposit Loans taken outstanding as on 31.03.2007 21. Details of utilization of IPO proceeds are stated below

0.00 3.00 5.52 3.69 200.00 0.00

98.80 398.30

Utilisation as projected in the prospectus Expansion of Ceramic Tiles capacity Setting up of Wall Tile Unit Installation of wind Mills Public Issue Expenses General Corporate Purposes 2091 3691 3786 1174 6058 16800

Actuals as on 31.03.2007 2141 8 3808 1237 6058 13252

20. Information on related party transactions as required by Accounting Standard 18 for the year ended 31.03.2007 The related parties with whom there were transactions during the year are listed below: 1. Directors Mr. P. N. Talwar Mr. Vivek Talwar Ms. Poonam Talwar Mr. Dinesh Kanabar Mr. S. K. Bhardwaj Mr. Atul Sud 2. Relatives of Directors Ms. Anjali Talwar Mr. Lovraj Talwar Ms. Dolly Talwar Mr. Rohan Talwar 3. List of Related Parties over which the Directors have significant influence or control Anandshree (Bombay) Holding Pvt. Ltd. Cosmos Realtors Pvt. Ltd. Delicious properties Pvt. Ltd. Eden Garden Builders Pvt. Ltd. Enjoy Builders Pvt. Ltd. Ferocity Properties Pvt. Ltd. Lavender Properties Pvt. Ltd. Merino Realtors Pvt. Ltd. Nitco Construction Materials Pvt. Ltd. Nitco Consultants & Exports Pvt. Ltd. Nitco Paints Pvt. Ltd. Nitco Terrazzo Tiles Pvt. Ltd. Mahalakshmi Tiles Corporation Maharashtra Marble Co. Nitco Exports Nitco Sales Corporation (Delhi) Nitco Tiles & Marble Industries (A) Pvt. Ltd. Norita Investments Pvt. Ltd. Orchid Realtors Pvt. Ltd. Prakalp Properties Pvt. Ltd. Rangmandir Builders Pvt. Ltd. Rhythm Real Estates Pvt. Ltd. Strength Properties Pvt. Ltd. Ushakiran Builders Pvt. Ltd. Watco Engineering Co. Pvt. Ltd. Watco Properties Pvt. Ltd. Watco Real Estate Pvt. Ltd. Watco Trading Pvt. Ltd. Nitco Tiles Nitco Tiles Sales Corporation (Bombay) Northern India Tiles (Sales) Corporation The Northern India Tiles Corporation (Delhi) Ms. Savitri Talwar Ms. Sanjana Talwar Mrs. Rajeshwari Talwar Chairman Managing Director W/T Director Independent Director Independent Director Independent Director

Note: Pending utilization, as on 31.03.2007 balance funds have been invested in Fixed Deposits with Banks. 22. Since the consolidated financial statements are required to be presented for the first time, comparative figures for the previous year are not given. 23. Remittance in foreign currency on account of dividend The Company has paid dividend in respect of shares held by Non Residents on repatriation basis. This inter-alia includes portfolio investment and direct investment, where the amount is also credited to Non Resident External Account (NRE A/c). The exact amount of dividend remitted in foreign currency cannot be ascertained. The total amount remittable in this respect is given herein below: Final Dividend a) Number of Non Resident Shareholders b) Number of Equity Share held by them c) (i) Amount of Dividend Paid (Gross) (Rs. in Lacs) (ii) Year to which dividend relates 2006-07 1 825281 8.25 2005-06 2005-06

24. Segment Reporting for the year ended March 31, 2007 The Management has identified that the companys products, ceramic tiles, mosaic tiles, vitrified tiles and marble are products, which serve the flooring requirements of its customers. These products are interchangeable since the ultimate use of the said products is the same. As such the company has only one segment, i.e., flooring products segment and as such no separate details on segment reporting required under AS17 (Segment Reporting) issued by the Institute of Chartered Accountants of India, is being furnished. Per our report attached For A. Husein Noumanali & Co. Chartered Accountants A. Husein Noumanali Proprietor Membership No. 14757 Mumbai, October 24, 2007 B G Borkar CFO & Company Secretary Poonam Talwar Wholetime Director For and on Behalf of the Board

Vivek Talwar Managing Director

86 > NITCO Tiles Limited

Annual Report 2006-07 > 87

Consolidated Cash Flow Statements


A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit as restated before Tax and Extraordinary items Adjusted for Depreciation Provision for Bad and Doubtful Debts (Profit)/Loss on sale of assets (Profit)/Loss on sale of Investments (Net) Interest and Financial Charges (Net) Operating Profit before Working Capital Changes Adjusted for changes in Working Capital: (Increase)/Decrease in Sundry Debtors (Increase)/Decrease in Inventories (Increase)/Decrease in Other Receivables Change in Current Liabilities Cash Generated from / (used in) Operations Income Taxes Paid Net Cash from / (used in) Operating activities B. CASH FLOW FROM INVESTING ACTIVITY Purchase of Fixed Assets (Net) Sale of Fixed Assets Sale/(purchase) of Investments Net Cash from / (used in) Investing Activity C. CASH FLOW FROM FINANCING ACTIVITIES Minority Interest Proceeds from / (Repayment) of Long Term / Short Term Borrowings, net Interest Paid Pyt. Of Proposed Dividend & CDT Net Cash from / (used in) Financing Activities Net Increase / (Decrease) in Cash & Cash Equivalents Opening Balance of Cash and Cash Equivalents Closing Balance of Cash and Cash Equivalents

For the year ended March 31, 2007 (Rupees in Lacs) 31.03.2007 5,282.08 1004.03 25.36 24.41 (68.09) 811.33 7079.12 (1594.97) (12012.05) (309.21) 4580.92 (2256.19) (583.13) (2839.32) (5067.93) 24.22 4507.59 (536.12) 14.84 4536.75 (811.33) (253.95) 3486.31 110.87 1582.52 1693.39

Notes: 1. The Cash Flow Statement has been prepared under the Indirect method as set out in Accounting Standard - 3 (AS-3) on Cash Flow Statement issued by The Institute of Chartered Accountants of India. 2. Cash and Cash Equivalent consists of Cash on hand Rs. 93.54 Lacs, Balance in Current Account Rs. 1311.19 Lacs and Balance in Margin Money - Rs. 288.66 Lacs Schedules referred to above form an integral part of the Financial Statements Per our report attached For A. Husein Noumanali & Co. Chartered Accountants For and on Behalf of the Board

A. Husein Noumanali Proprietor Membership No. 14757 Mumbai, October 24, 2007

B G Borkar CFO & Company Secretary

Poonam Talwar Wholetime Director

Vivek Talwar Managing Director

88 > NITCO Tiles Limited