bcml06 07

the way forward
Balrampur Chini Mills Limited

Annual Report 2006-07
Forward-looking statement
Statements in this report that describe the companys objectives, projections, estimates, expectations or predictions of the future may be forward-looking statements within the meaning of the applicable securities laws and regulations. The company cautions that such statements involve risks and uncertainty and that actual results could differ materially from those expressed or implied. Important factors that could cause differences include raw materials cost or availability, cyclical demand and pricing in the companys principal markets, changes in government regulations, economic developments within the countries in which the company conducts business, and other factors relating to the companys operations, such as litigation, labour negotiations and fiscal regimes.
Contents
Challenging environment 2 The way forward 4 MDs review 15 Five year financial summary 18 Financial ratios 20 Shareholder value management 22 Report of the Board of Directors 24 Corporate governance report
36 65
Managements discussion and analysis 50 Auditors report 61 Balance Sheet 64 Profit and Loss Account Cash Flow Statement 66 Schedules 67 Consolidated Accounts 87 Subsidiary Accounts 107
Balrampur Chini Mills Limited (BCML).
One of the largest sugar manufacturers in Indias private sector.

The Company has nine mills spread across eastern and central Uttar Pradesh with an aggregate sugarcane crushing capacity of 73,000 tonnes per day (TCD). Over the years, the Company has de-risked its business through diversification into distillery (320 KLPD), power cogeneration (181 MWsaleable power 126 MW) and bio-compost manufacture. The Company also acquired a majority stake in Indo Gulf Industries, engaged in sugar, molasses and bagasse.
Challenging environment
During the sugar season 2006-07, the fortunes of the Indian sugar industry weakened. This transpired on account of a growing sugar surplus on the one hand and weaker realisations following unfavourable government policies on the other.
The countrys consumption was estimated at 20-21 million tonnes; total production increased sharply from 19.2 million tonnes in 2005-06 to 28.3 million tonnes. The result was a surplus of around 8 million tonnes at the end of the sugar season 2006-07. Sugar realisations in the state of Uttar Pradesh, accounting for 30% of the total sugar produced in the country, declined to Rs.13 per kg. Even as sugar prices declined, raw material costs for UP-based sugar companies increased to Rs.125 per quintal (as per SAP) amounting to Rs.13.71 per kg. Result: non-recovery of even operating costs for companies like Balrampur Chini. As a result of this mismatch between the realisation of sugar and price of raw material, Balrampur Chini reported an operating loss of Rs. 52.26 crore from its sugar segment, the first time ever in its history. In the midst of this challenging environment, the integrated nature of the business model as well as scale of economies enabled the Company to arrest the full downside of the circumstances.
Balrampur Chini Mills Limited 2
Our capacities
Units Sugar crushing capacity (in TCD) Balrampur Babhnan Tulsipur Haidergarh Akbarpur Rauzagaon Mankapur Kumbhi Gularia Total 12,000 10,000 7,000 5,000 7,500 7,500 8,000 8,000 8,000* 73,000 Distillery (in KLPD) 160 60 100 320 Cogeneration (in MW) 24.55 3.00 23.25 18.00 26.75* 34.00 20.00 31.30* 180.85 Bio-compost (in MT) 30,000 18,000 10,000 58,000
* Project under implementation and will commence operation beginning season 2007-08.
Building block
Sugar is more than just a business; it is a way of life for a large part of India. The industry is the second largest agro-based sector in India; area under sugarcane accounts for 2.2% of Indias total cropped area.
The sugar industry is a large employment generator, providing employment to over two million skilled and semiskilled workers in addition to those involved in ancillary activities at 570 factories across the country. Around 45 million sugarcane farmers, their dependents and a large mass of agricultural labourers are involved in sugarcane cultivation, harvesting and ancillary activities, constituting no less than 7.5% of Indias rural population. The sugar industry acquires a rural produce, pays on time, remunerates an increasing value per unit of purchase, invests in larger capacities and catalyses other supporting businesses. In turn, this development has resulted in the creation of schools, colleges, healthcare centres and hospitals for the benefit of Indias rural populace. Over the years, a number of companies extended from the singular production of sugar to downstream businesses like distilleries, organic chemical plants, paper and board factories as well as cogeneration units. Besides, the sugar industry generated its own restorable biomass, used it as a resource without depending on fossil fuels and made a significant contribution to the economy. From this holistic perspective, the sugar industry can be considered as a building block of economic progress in the regions of its presence.
By encouraging the planting of cane, thousands of farmers within the Companys command areas have graduated from labourers into land-owners. The Companys emphasis helped introduce superior quality seeds leading to an enhanced yield. The Companys awareness programmes educated farmers on the improved application of knowledge, including crop rotation and irrigation. The Company catalysed regional economic growth through the generation of renewable power, green fuel and biocompost manure. In 2006-07, Balrampur generated 6,768.06 lac units of power; 4,926.17 lac units were marketed the state electricity grid. The Company produced 10,177.78 KL of ethanol, which was sold to oil companies for onward blending with petrol. It manufactured 25,460 MT of organic manure. Besides, the Company paid Rs. 87.10 crore in various taxes viz. excise duty and income tax during the year under review.
The way forward

Despite this significant local, regional and national contribution, Indias sugar industry is presently challenged by industry cyclicality, high raw material support prices, inadequate working capital, partial control and an uncertain export programme. A combination of these is threatening not just the industry in a direct way, but the entire social structure supported by the industry in an indirect manner. If the Indian sugar industry is completely de-regulated and provided with a level playing field, it can achieve steady production growth, feed a growing nation, deepen its retail presence, diversify into power generation and ethanol production and enhance its international exposure.
Corporate picture
Balrampurs evolution from a fledgling sugar mill into the second largest sugar manufacturer in India has correspondingly translated into considerable regional growth, reflected in the improvement of roads, power, irrigation, health and education support, influencing in turn the lifestyles of farmers, employees and citizens.
Parity
Even as Indias sugar industry is positioned to play a growing role in the economy, it continues to be shackled by ever-increasing raw material prices that are completely decoupled from end-product realisations. In short, the raw material prices that are required to be paid by the industry are completely insensitive to existing industry realities.
This market place-industry mismatch was most visible in Uttar Pradesh where sugar companies were compelled to pay farmers as per the State Advised Prices (SAP) that were higher than the Statutory Minimum Prices (SMP) set by the Central Government. The anomaly: while Uttar Pradesh-based Balrampur Chini Mills was compelled to pay Rs. 125 to procure one quintal of cane, its counterpart in Maharashtra was required to correspondingly pay only Rs. 90, leading to significant variations in input costs across regions and a considerable inequity in the implementation of a government directive.
As it turned out, even as sugar realisations declined to Rs. 14.56 per kg, raw material costs at Rs. 13.71 per kg were almost 94.17% of realisations, considerably higher than that in the past. With a delta of only 0.85 paise per kg, the Company was unable to recover its operating costs. As a result, a Company that prides on timely payments to farmers delayed payments by almost five months for the first time in its history, entirely on account of unreasonable business conditions created by government ruling. Its inability to recover basic costs resulted in arrears of Rs. 125 crore, again for the first time in the Companys existence.
The impact
Volatile sugar prices worked against sugar manufacturers during the downturn. Sugar manufacturers suffered an accumulation of arrears payable to farmers. For instance, Uttar Pradesh mills purchased sugarcane worth Rs. 11,000 crore in 2006-07 but could only remunerate to the extent of Rs. 9,500 crore. The decoupling induced cyclicality, destabilising revenues.
The way forward

At this challenging juncture, what is required is inclusive growth where the farmer shares the industry upturn and downturn with the sugar company. The government can couple the two through a linkage between cane and sugar realisations; it can modify the sugarcane pricing mechanism to evolve a formula based on region-specific variations. A uniform national cane pricing policy can supersede the State Advised Price, removing regional disparities. In an industry, where raw material accounts for 70% of the total cost, linking raw material cost to sugar realisations could lead to a lower-cost sugar economy on the one hand and equip its manufacturers better to handle industry downturns. In the long run, this sensitive structure promises to protect the long-term viability of both, enhancing industry sustainability.
Corporate picture
Through its presence in Uttar Pradesh, Balrampur Chini was also adversely affected. The Company suffered on account of rising cane prices and declining sugar realisations. The result: the Companys sugar segment reported an operating loss of Rs. 52.26 crore for 2006-07, the first such instance in its existence.
Security
In India, ethanol is derived from molasses, a sugar industry by-product. This diversification helps generate additional revenue and provides stability especially during industry downturns when it helps protect margins. By virtue of being a green fuel, ethanol also promotes the case for a clean environment and counters global warming.
Encouraging the use of ethanol is especially relevant for India where 70% of oil requirements are met through imports. At a time when crude oil prices are around US$100 per barrel, the country could benefit attractively from the enhanced blending of petrol with ethanol. Interestingly, even as the government has mandated 5% ethanol blending with petrol across the country, ethanol offtake is below this ratio (at ~2%). States like Tamil Nadu and West Bengal do not follow the blending programme due to high state levies. So despite being economically lucrative, oil companies are purchasing ethanol to the extent that their requirement warrants. What is required is free inter-state ethanol movement so that there is parity in duties across the country. This revision is of critical importance at a time when the government has increased the blending ratio to a mandatory 10% across all Indian states from October 2008. At the currently mandated blending levels of 5%, India can easily meet its ethanol demand of 550-600 mn litres per annum.
north-eastern Indian states, Andaman and Nicobar Islands and Lakshadweep). The government has also proposed that sugar companies be allowed to manufacture ethanol directly from sugarcane as against the erstwhile practice of doing so through molasses (in line with the Brazilian model where mills are allowed to manufacture ethanol directly from sugarcane).
The way forward

These two proposals will represent a significantly positive step forward. They will result in the diversion of substantial cane away from sugar manufacture during a glut, strengthening sugar prices. If the new proposal is accepted, then sugar production may not report an immediate decline over the long term; there could be greater stability owing to a flexibility in adjusting sugar production in line with the demand-supply situation for sugar and ethanol. The government has also agreed to recommend a uniform ethanol purchase price of Rs. 21.50 per litre ex-factory across the country for three years. The reality is that even if the direct route of ethanol manufacture is implemented, it will not leave adequate margins for North Indian sugar mills on account of higher cane prices required to be paid by them compared to sugar mills in South and West India. To make it uniformly remunerative for sugar companies across the country to switch to the direct route, what will also be required is a lower and uniform raw material price throughout India linked to end-product realisations. It is also suggested that the import duty on industrial ethanol be reduced from 7.5% to 5%, to prevent a shortage of industrial alcohol arising out of a diversion of raw material to ethanol. The industrys dynamics will be strengthened if the government permits ethanol export. If export realisations for ethanol are better than domestic realisations, sugar mills can reduce sugar production and divert cane towards ethanol production, strengthening margins. At a time when robust oil prices are being predicted, the outlook for enhanced ethanol demand appears positive.
Corporate picture
Balrampur, an integrated sugar manufacturer, has progressively contributed towards the countrys energy security. The Companys three distilleries possess the capacity to manufacture 320 KLPD of ethanol. In 2006-07, the Company manufactured 10177.78 kl of ethanol, fetching an average realisation of Rs. 21.88 per litre. As a result, the Companys distilleries generated revenues of Rs. 134.99 crore, accounting for almost 9.11% of its total revenues in 2006-07. Correspondingly, the distilleries reported an operating profit of Rs. 56.57 crore, helping offset the loss reported by the sugar segment. During the year under review, the Company strengthened its ethanol business by commissioning its 100 KLPD capacity distillery at Mankapur. This expansion is considered opportune; while 5% blending is currently optional for individual states, the government has recommended a mandatory 10% ethanol blending by October 2008 (exceptions being Jammu and Kashmir,
Potential
Apart from catering to the largest sugar-consuming population in the world, the Indian sugar industry is likely to emerge as a significant provider of electricity through co-generation from bagasse, a primary byproduct of sugarcane. India being a power-deficit country, cogeneration can represent an important initiative to bridge the countrys energy gap and meet its green-energy goals from renewable and sustainable biomass.
As per KPMG, Indias installed power capacity is 128 giga watts (GW); requirement is expected to increase to 306 GW by 2016-17. Against that, the current bagasse-based exportable power is estimated at 847 MW, which could increase to 9,700 MW by 2017, addressing almost 6% of the countrys additional power requirement. The sector would also be in a position to generate 48 million carbon credits through co-generation. Bagasse and other renewable biomass can play a significant role in substituting fossil fuels in power generation, leading to a reduction in greenhouse gases. Prospective bagasse-fired cogeneration projects can enjoy an additional revenue stream by monetising carbon emission reductions (or carbon credits) that they generate. Bagasse co-generation CDM projects hold attractive potential in India with a strongly growing electricity demand and a carbon-intense baseline. Captive power generation also empowers mills to rationalise power costs on the one hand, and enhance power availability and asset utilisation on the other. It can also strengthen the decentralised generation of power, leading to a greater availability for rural electrification through co-generation.
6,768.06 lac units of power and marketed 4,926.17 lac units to the grid at an average rate of Rs. 2.94 per unit. The Companys revenues from the power division increased by 44.62% over the previous year to Rs. 145.97 crore, accounting for 9.85% of the total revenues. The profit derived from the power division continued to be attractive due to tax incentives. Operating profits from the segment increased by 48.11% from Rs. 75.26 crore in 2005-06 to Rs. 111.47 crore in 2006-07. Balrampur is now engaged in commissioning a 31.30 MW cogeneration plant at Gularia and 26.75 MW at Rauzagaon, beginning season 2007-08. The new units, when commissioned, will not only strengthen the topline but also protect margins, especially during sectoral downturns.
The way forward

Although the Ministry of New and Renewable Energy has provided subsidy to grid-interactive power generation based on renewable energy, co-generation promotion requires policy consistency for the business to attract large investments. For instance, the State Electricity Boards should be directed to adhere to the tariffs set by the government rather than arrive at them arbitrarily. The infrastructure for the evacuation of power to the grids needs to be strengthened to eliminate voltage and frequency fluctuations. Besides, the government needs to encourage investments in co-generation, the full requirement of which is estimated at Rs. 37,000 crore (in 2007) based on the industry potential (Source: KPMG report). In 2017, this estimate is expected to increase by Rs. 16,000 crore if the countrys cogen potential is to be fully realised.
Corporate picture
Over the years, Balrampur has become totally independent of the state grid for its power requirement. On the contrary, the Companys power division markets surplus power to the state electricity grid, generating assured revenues. Balrampur strengthened this segment of the business through the commissioning of three new power plants 34 MW at Mankapur, 20 MW at Kumbhi and 3 MW at Babhnan. During the year under review, Balrampur generated
Support
The domestic sugar industry received timecritical government support in the form of incentives and export-import policies to protect it from cyclicality.
Incentives
Over the years, the government announced various incentives to support the sugar industry during sectoral downturns, protecting the interest of farmers. For instance, The government created a five million tonne buffer stock to help reduce carrying costs and ease the working capital requirements of sugar mills. The Central Government announced a subsidy on sugar exports. Various state governments provided additional subsidies. For instance, Maharashtra government announced an additional export subsidy in addition to a transport subsidy of Rs. 2 per tonne per km for cane crushed after 160 days of crushing and also abolished the purchase tax. Similar subsides were announced by the Madhya Pradesh, Karnataka and Andhra Pradesh Government. Even as these incentives help mills tide over a short-term cash crunch, they do not represent a long-term solution. It is only the alignment of sugarcane prices to sugar realisations that will correct the industry imbalance, providing a longterm profitability solution. For the industry to benefit from these incentives, it is critical that they should be respected and persisted with, independent of political changes. For instance, the discontinuation of the Sugar Promotion Policy, 2004, entailed capital and operational subsides as well as local tax exemptions to companies making investments of Rs. 3.5 billion and above in fresh sugar capacities in Uttar Pradesh affecting the long-term plans of UP companies and aggravating industry uncertainty.
there is a sugar surplus, exports could help alleviate the surfeit in the domestic market. Indias acceptability as a credible exporter will provide it with additional markets to divert surplus production. Similarly, in the case of deficit, raw sugar imports could enhance availability. The Central Government provided an export incentive of Rs. 1,350 per mt for mills located in coastal regions and Rs. 1,450 per mt for mills in non-coastal regions. Additionally, the Maharashtra government announced an additional export subsidy of Rs. 1,000 per mt for exports up to one million tonnes. India is the fourth most competitive sugar producer in the world (after Australia, Brazil and Thailand). India's cost of sugar production is a fourth of that in Europe. It is possitioned to export to major Indian Ocean markets due to its freight competitiveness over key competitors (Brazil and Thailand). India is expected to export white and raw sugar to the extent of 40 lakh tonnes during 2007-08. New global markets have emerged following the withdrawal of EU subsidy, which has made export from EU countries uncompetitive. India will need to leverage this opportunity through productivity improvements and the alignment of cane and sugar prices in the domestic market. India's competitiveness can also be increased through a strengthening of the export infrastructure like rates and port draft. The existing cost structure of the Indian industry is uncompetitive for exports, making it imperative for the government to offer WTOcompliant subsidies to make exports viable, should there be a large sugar surplus. However, due to the increasing emergence of destination refineries, key markets are importing a greater share of raw sugar where India's competitiveness is relatively limited (India's competitiveness is higher in white sugar markets). Going forward, India will need to build a capability to produce raw sugar and refined sugar of international quality standard to leverage a growing export opportunity.
Exports
International trade in sugar is of strategic importance as it can help India maintain stability within the domestic market, despite cyclicality in production. For instance, if
Policy environment
The Indian sugar industry needs a policy environment that protects the interest of the farmers and consumers while enhancing mill viability. Currently, while the end product realisations of sugar is deregulated, the prices of sugarcane continue to be regulated. Besides, the government also regulates the monthly release mechanism, determination of levy sugar and assigning of command areas. The absence of a level-playing field may lead to select growth in areas, but at the expense of others. The result could be cyclicality and low profitability, reducing investment attractiveness and the social objectives for farmers, millers and consumers. The need of the hour is a complete deregulation in raw material prices, reflected in the following: The monthly release mechanism that determines the amount of stock that each company can sell in the market in a month should be removed. A strategic stock can be created for maintaining the sugar price in a sustainable band. This will ensure that cane price can be realised from the sugar price after accounting for all costs and taxes. A levy sugar policy that requires the mills to earmark 10% of their production for sale to the government at levy prices (usually lower than free sale price) needs to be discontinued. Instead, the government should purchase sugar for PDS requirements from the free market. The government-mandated command area stipulation should be respected with reviews during exceptional instances.
MDs review
Today, the entire viability of the industry is in serious question and not because of the basic economics of the business but because of the arbitrary fixation of cane price.
Mr. Vivek Saraogi on the sugar industry and the Companys prospects
How challenging was the year under review for your industry in general and your Company in particular?
I would like to be direct about this: the financial year 2006-07 was the worst ever year for the Uttar Pradesh sugar industry and for Balrampur Chini that I have seen in my two-decade career with the Company. It was also the first time that we reported a loss despite our integrated model.
We have for the last number of years complained that raw material prices in Uttar Pradesh were higher than the rest of the country, resulting in a muted profitability for the millers. This request or you can call it appeal fell on deaf ears. However, what transpired during 2006-07 was completely unprecedented; even as the country was sitting on a large sugar surplus that caused realisations to be depressed, the raw material prices were maintained at a really prohibitive level of around Rs. 125 per quintal.
What was the reason for this dismal performance?

It would be important to state that the reason for the dismal performance of the agro-based sugar industry was entirely man-made; the climate and the soil had nothing to do with it. It would be simplistic to state that for any industry to be profitable, it must be paid a reasonable remuneration for converting its raw material into a finished product. When it comes to the sugar industry, where the cost of the raw material is regulated, much of this intervention is done by the state government machinery, ensuring that the supplier of raw material the farmer gets an higher remuneration for his produce.
The result was that all the patient initiatives that we had invested in strengthening our business model down the years went down the tube in a flash. At one point during the financial year under review, the Company was not even recovering its raw material cost, forget the conversion cost, the interest burden and overheads.
By this yardstick it must have been a uniformly challenging year for the rest of the industry.
This is precisely what was not. Even though the rest of the sugar industry did find the scenario a bit trying, it was nowhere near the circumstances experienced by millers in Uttar Pradesh for a number of reasons:
While governments in other cane-growing states were sympathetic towards the sugar manufacturers for the various reasons already enunciated, Uttar Pradesh witnessed a totally different scenario. For instance, other state governments agreed to peg the cane price payable by the mills at SMP, protecting the interests of millers for the moment and the interests of the farmers for the long-term. In Uttar Pradesh, there was no corresponding respite; the high cane prices were maintained with complete disregard to industry viability. The result was that companies like Balrampur which had always prided on paying farmers on time, come hell or high water were now compelled to default on their commitments to farmers for a period of time. In Maharashtra, the government announced an export subsidy of Rs. 1,000 per mt for exports up to one million tonnes, a transport subsidy of Rs. 2 per tonne per km for late crushing (i.e. cane crushed after 160 days of crushing) and abolishment of the purchase tax. Similar support schemes were announced by states like Madhya Pradesh, Karnataka and Andhra Pradesh to protect industry profitability. However, it has pained us deeply that there has been no corresponding response from the Uttar Pradesh government. To cut the wound deeper, the UP government issued recovery certificates to the sugar millers, empowering it to seize and liquidate our movable and immovable assets so that cane arrears could be paid. The upshot was that for the first time in our history, even Balrampur was issued a recovery certificate.
about the widespread disenchantment across the fields of East and West Uttar Pradesh where farmers have not been able to recover their dues, nor fund capital expenditure and have not been able to enhance their standard of living. So interestingly, by pegging unrealistically high cane prices, we have a lose-lose situation among farmers and millers in Uttar Pradesh.
Balrampur had embarked on a number of expansions in the last few years. Where does it leave the Company at such an uncertain industry inflection?
Permit me to provide a macro perspective. For the last few months, much of our corporate management time was increasingly allocated to numerous litigations in the pursuit of justice. I will also say that as a corporate we are rattled, dismayed and despondent: if this is how one of the most globally competitive sugar milling communities are going to be treated by its state government, where is the confidence to invest in asset building? Where is the optimism to take a forward-looking view of things? And if I may be permitted to go one step ahead, where is the balance sheet strength to encourage my banker to provide adequate funds in a working capital-intensive business? The result is that today, the entire viability of the industry, which supports not just millions of farmers but millions of other dependants as well, is in serious question and not because of the basic economics of the business but because of the arbitrary fixation of cane prices.
The farmers must have benefited because of high cane prices.

This is an important point. The fact that farmers would have benefited at the industrys expense would be most plausible. But this is far from reality for a simple reason: because the industry could not remunerate farmers for their raw material, the loss was the farmers. In fact, I must speak
What is required to enhance investor confidence to ensure sustainable growth of the industry?
Two things: a uniform cane pricing policy where cane is procured by the industry at scientifically determined SMP rates, protecting the interests of all stakeholders; the need for a transparent linkage between sugar realisations on the
one hand, and sugarcane prices on the other. This in my mind is the only way I must stress this the long-term sustainability of the sugar industry can be ensured. I have a few serious points to make here: India has globalised across a number of industries, the sugar industry being possibly the only glaring exception. Why? Who does it benefit? Who are we trying to protect? I have already explained that the mills will lose money; I have already explained that the farmer is losing his income and if there is a sharp decline in sugar production over the next few years, the consumer will stand to lose as well. I am going one step further; if cane prices are unrealistically and unsustainably maintained at high levels, you will inevitably endanger the food security in the state and region.
millers. It announced an export subsidy, created a fivemillion tonne buffer and announced interest-free loans for the excise paid on SMP basis. This is an interesting admission by the Central Government that the sugar industry is bleeding and needs to be protected from the relatively low SMP rates; so you can imagine our condition in UP, where we are procuring raw material at rates considerably higher (more than 30%).
How is the Company tiding over the crisis?

While I estimate that Indias sugar consumption will rise to 22.50 million tonnes, I believe that this sugar seasons production will not cross the levels seen in 2006-07. This, coupled with some exports, makes me optimistic that there will not be a sizeable increase in the countrys sugar inventory next year. However, cane pricing continues to remain a concern. To tide over the immediate crisis we are raising long-term funds to the tune of Rs. 159 crore through the preferential allotment of 73,00,000 equity shares at Rs. 92 per share to the promoters and 1,00,00,000 warrants convertible in the next 18 months at the same price. Meanwhile, we are continuing to commission the factories that we promised as we believe in the long-term economics of our integrated business model. So when the industry reverses out of the trough, we will have our capacities on stream, resulting in a sharp improvement in performance over the coming years.
How does cane affect the food security of the region?

When a state government arbitrarily increases sugarcane prices, the sugarcane growers earn disproportionate returns on their produce visa-vis other crops. As a result, more farmers shift their production from alternative food crops to sugarcane, leading to a disproportionately higher production of sugar and a relative shortage of alternative crops. So, even as the consumers are perceived to benefit on account of low sugar prices, their food budget could remain unaffected because of high prices of the alternative foods. As a result, tinkering disproportionately with one crop could destabilise a basket of crops within a region, affecting consumer interests. It is ironical that the state government failed to acknowledge something so evidently straight-forward with the result that UP is now an economic island in a world that is by and large aligned with free-market practices.
How is the Central Government correcting the situation?

To be fair, the Central Government has done a fair amount under its ambit in the circumstances to provide relief to
Five year operational summary

Cane crushed
Unit Balrampur Babhnan Tulsipur Haidergarh Akbarpur Rauzagaoan Mankapur Kumbhi Total 2002-03 17.53 13.32 7.72 38.57 2003-04 23.79 17.24 11.57 3.38 55.98 2004-05 15.34 10.41 7.71 5.18 38.64 2005-06* 22.78 15.65 8.74 6.53 7.56 8.85 70.11 (in lac tonnes) 2006-07 21.50 16.60 12.06 7.90 11.37 9.75 12.75 0.38 92.31
Sugar production
Unit Balrampur Babhnan Tulsipur Haidergarh Akbarpur Rauzagaoan Mankapur Kumbhi Total 2002-03 1.82 1.42 0.76 4.00 2003-04 2.30 1.71 1.08 0.33 5.42 2004-05 1.57 1.09 0.73 0.53 3.92 2005-06* 2.34 1.62 0.87 0.65 0.87 0.91 7.26
(in lac tonnes) 2006-07 2.10 1.64 1.14 0.78 1.15 1.00 1.31 0.03 9.15
Alcohol production
2002-03 26,611 2003-04 30,900 2004-05 37,735 2005-06* 57,279
(in kilo litre) 2006-07 65,292
Power production
2002-03 32.33 *18-month period; year ended on 30th September, 2006 2003-04 1,820.71 2004-05 2,080.81 2005-06* 4,398.50
(in lac units) 2006-07 6,768.06
Five year financial summary

Financials
Parameters Sales Non-manufacturing income Total income (incl. stock adjustment) Raw materials Excise duty Gross profit Overheads and all other expenditure PBDIT Interest PBDT Depreciation Profit before tax and extraordinary items Extraordinary items Pre-tax profit Tax Post-tax profit Equity capital Reserves (excluding revaluation reserves) 2002-03 667.58 2.19 678.30 395.04 102.56 180.70 108.45 72.25 13.55 58.70 21.28 37.42 37.42 7.91 29.51 18.97 217.34 2003-04 802.29 5.98 917.97 549.45 102.91 265.61 136.22 129.39 19.80 109.59 30.23 79.36 79.36 18.88 60.48 18.97 256.36 2004-05 929.61 2.94 970.21 471.76 116.88 381.57 139.14 242.43 18.93 223.50 37.26 186.24 22.33 163.91 38.85 125.06 23.18 468.60 2005-06* 1989.77 6.81 1715.35 940.47 91.35 683.53 217.04 466.49 34.51 431.99 67.09 364.89 364.89 73.30 291.59 24.82 880.83 (Rs. in crore) 2006-07 1476.32 10.23 1700.14 1280.99 84.61 334.54 235.27 99.27 54.42 44.85 80.22 (35.37) (35.37) 6.48 (41.84) 24.82 839.17 (Rs. in crore) 2002-03 573.58 2.78 576.36 395.04 80.01 101.31 21.28 80.03 28.59 7.91 14.02 11.77 17.74 2003-04 809.07 5.98 815.05 549.45 101.08 164.53 30.23 134.30 35.14 18.88 19.80 21.40 39.08 2004-05 828.05 2.94 830.99 471.76 104.15 255.08 37.26 217.82 34.98 38.85 18.93 42.34 82.72 2005-06* 1,617.19 6.81 1,624.00 940.47 150.44 533.09 67.09 466.00 66.60 73.30 34.51 99.04 192.55 2006-07 1,605.30 10.23 1,615.54 1,280.99 159.98 174.57 80.22 94.35 75.29 6.48 54.42 Nil (41.84)
Value-added statement
Parameters Income from production Add: Financial income Corporate output Less: Cost of raw materials Less: Other manufacturing expenses Equals gross value-added Less: Depreciation Equals net value-added Allocation of net value-added To personnel To taxes To creditors (via interest) To investors (via dividend) To the Company (retained earnings) *18-month period; year ended on 30th September, 2006
Financial ratios
Key financial ratios
Financial year Raw material costs/ Total turnover (%) Overheads/ Total turnover (%) PBDIT/ Total turnover (%) Interest/ Total turnover (%) Interest cover (times) PBDT/ Total turnover (%) Net profit/ Total turnover (%) Cash profit/ Total turnover (%) 2002-03 59.17 16.03 10.82 2.03 5.35 8.79 4.42 7.61 2003-04 68.49 16.74 16.13 2.47 6.55 13.66 7.54 11.31 2004-05 50.75 14.32 23.68 2.04 11.66 21.64 13.45 17.46 2005-06* 47.27 10.62 23.44 1.73 13.52 21.71 14.65 18.03 2006-07 86.77 15.72 6.72 3.69 1.83 3.03 (2.83) 2.60
Balance sheet ratios

Financial year Debt-equity ratio Inventory turnover (days) Current ratio Quick ratio Asset turnover [Total revenue/ total assets] Capital output ratio (Turnover/ Average capital employed) (%) 132.41 116.72 110.26 171.13 82.12 2002-03 0.57 151 1.27 0.31 0.88 2003-04 0.78 178 1.51 0.31 0.78 2004-05 0.41 167 1.49 0.38 0.79 2005-06* 0.39 25 1.10 0.79 1.11 2006-07 1.10 90 1.02 0.51 0.56
Growth ratios
Financial year Growth in turnover (%) Growth in PBDIT (%) Growth in PAT (%) Growth in cash profit (%) 2002-03 21.61 (22.60) (37.66) (24.57) 2003-04 20.18 79.09 104.96 78.61 2004-05 15.87 70.11 106.76 78.95 2005-06* 114.04 111.94 133.15 120.96 2006-07 (25.80) (78.72) N.A. (89.30)
*18-month period; year ended on 30th September, 2006
Per share data

Financial year EPS (Rs.) CEPS (Rs.) Dividend (Rs.) Book value (Rs.) Dividend payout % Price / earnings Net indebtedness (Rs.) 2002-03 15.55 26.77 5.50 124.00 39.89 7.13 71.01 2003-04 31.57 47.34 10.00 145.00 35.39 9.63 113.34 2004-05 6.16 7.99 1.60 21.15 33.85 11.27 8.63 2005-06* 12.19 15.00 3.50 36.31 33.96 8.32 14.28 2006-07 (1.69) 1.55 Nil 34.69 N.A. N.A. 38.32
The face value of equity shares has been reduced from Rs. 10 to Re. 1 with effect from 31st March, 2005 *18-month period; year ended on 30th September, 2006
PBDIT/ Total turnover (%) 23.68 16.13 10.82 6.72 23.44
Cash profit/ Total turnover (%)
02-03 03-04 Debt-equity ratio
04-05 05-06* 06-07 Book value per share (Rs.)
The face value of equity shares has been reduced from Rs. 10 to Re. 1 with effect from 31st March, 2005
Shareholder value management

Market capitalisation
Balrampurs market capitalisation declined from Rs. 2,516.29 crore as on 30th September 2006 to Rs. 1,874.81 crore as on 30th September, 2007. (Rs. in crore) 31 March 2003 Market capitalisation 210.50 31 March 2004 576.66 31 March 2005# 1,608.71 30 Sept 2006* 2,516.29 30 Sept 2007 1,874.81
* 18-month period; market capitalisation as on 30th September, 2006 # Sub-division of shares from Rs. 10 each to Re 1 per share
Total shareholders return (TSR)

Total shareholders return indicates the gain delivered to the shareholders by the Company directly (in the form of dividends received by them) and indirectly (in the form of capital appreciation registered by the stock during the financial year under review). The TSR was calculated by adding the dividend to the difference between the closing and the opening market capitalisation (equity shares multiplied by closing market price on the stock exchanges). During the year under review, Balrampur reported a negative TSR of 24.01%. 2002-03 Closing market price per share (Rs.) Dividend paid (Rs.) TSR (%) * 18-month period; data as on 30th September, 2006 110.95 8.50 (3.98) 2003-04 303.95 5.50 178.91 2004-05 69.40 1.00 131.58 2005-06* 101.40 3.60 51.30 2006-07 75.55 1.50 (24.01)
Economic value-added (EVA)

In 2006-07, Balrampur reported a negative EVA of Rs. 216.19 crore on account of the loss reported by the Company. The EVA, designed by Stern, Stewart & Company, captures growth parameters into a unique formula. Its principal highlights comprise: For the cost of shareholders funds, the actual outgo towards shareholders (dividend etc.) was ignored. Instead, a market-driven cost of equity funds was considered. The cost of equity was arrived at using the beta-factor for the Company scrip. The risk-free return in the economy (6.75% in the financial year 2006-07 was taken). To this was added the product of the beta factor and the stock market risk premium. The stock market risk premium was what investors expected to earn over the risk free return from the market.
added to the risk-free return in the economy to get the Companys cost of equity. The base for calculating the rupee cost of equity was the market capitalisation as on a particular date (because the EVA calculation uses a stock market-driven set of variables for calculating the cost of equity). For the cost of debt, the post-tax marginal cost of borrowing based on average debt during the year and actual outflow of interest and tax were used. The cost of debt for the Company was 5.66%. The weighted average cost of capital was 12.84%. # 18-month period; year ended on 30th September, 2006
EVA summary
PBIT Tax
(Rs. in crore) 19.05 1.86 4.39
The product of the premium and the beta was what investors expected to earn (over and above the risk-free return of 6.75%) from the Balrampur scrip in the financial year under review. This was the correct cost of equity funds to consider for the EVA calculation. The beta value was calculated at 0.8. This beta was multiplied by the stock market risk premium assessed at 12% for Balrampur. The result was
Adjusted tax NOPAT (net operating profit less adjusted tax) WACC (weighted average cost of capital) Average capital Cost of capital EVA
14.66 12.84% 1797.84 230.83 (216.19)
Report of the Board of Directors

For the year ended 30th September, 2007
Your Directors present their thirty second Annual Report along with the audited accounts of the Company for the year ended 30th September, 2007. Operating and financial review
[Rs. in Lac] Financial results 2006-07 (for 12 months) Gross turnover Operating profit before interest, depreciation and tax Interest and other financial charges Depreciation Provision for taxation Net profit/(loss) Add : Balance brought forward from previous year Profit/(loss) available for appropriation Appropriations : Interim dividend on equity shares Proposed dividend on equity shares Corporate tax on dividend General reserve Leaving a balance to be carried forward to next years account (3,608.43) (3,608.43) 4,963.08 3,722.32 1,218.13 19,200.00 575.99 29,679.52 5,441.73 8,021.99 647.68 14,111.40 (4,184.42) 575.99 (3,608.43) 1,47,632.44 9,926.98 3,450.78 6,709.28 7,330.08 17,490.14 29,158.82 520.70 29,679.52 2005-06 (for 18 months) 1,98,976.71 46,648.96
Your Directors do not recommend dividend on equity shares in view of the loss incurred by the Company during the year under review.
Operations
The operational data for the last two years are as follows: Season 2006-07 Balrampur (2005-06) Crushing capacity (TCD) Start of crushing season Closing of crushing season Duration (Days) Sugar cane crushed (In lac quintal) Recovery (%) Sugar produced (In lac quintal) 9.78 (10.24) 21.00 (20.36) 9.89 (10.32) 16.41 (15.08) 9.42 (9.92) 11.37 (8.67) 9.87 (10.00) 7.80 (6.53) 10.15 (10.50) 11.54 ( 7.93 ) 10.29 (10.27) 10.03 (9.09) 10.25 () 13.06 () 7.69 () 0.29 () 9.91 (10.22) 91.50 (67.66) 12000 (12000) 16.11.06 10000 (9000) 08.11.06 7000 (7000) 18.11.06 5000 (5000) 12.11.06 7500 (7000) 16.11.06 7500 (7500) 21.11.06 (15.11.05) 03.05.07 (19.04.06) 164 (156) 97.54 (88.56) 8000 () 16.11.06 () 17.05.07 () 183 () 127.50 () 8000 () 27.04.07 () 13.05.07 () 16 () 3.81 65000 (47500) () () () 923.10 Babhnan Tulsipur Haidergarh Akbarpur Rauzagaon Mankapur Kumbhi Total
(17.11.05) (08.11.05) (21.11.05) 29.05.07 19.05.07 13.06.07
(09.11.05) (30.11.05 ) 29.04.07 03.05.07
(13.05.06) (04.05.06) (21.04.06) 194 (178) 214.95 (198.84) 192 (177) 165.99 (146.11) 208 (152) 120.62 (87.41)
(07.04.06) (18.04.06) 168 (150) 78.98 (65.29) 169 (140) 113.71 (75.60)
() (661.81)
Performance 2006-07
The financial results for the year 2006-07 are for a period of 12 months and hence are not comparable with the results of 2005-06, which were for a period of 18 months. The crushing and production of sugar during the season 2006-07 was substantially higher at 923.10 lac quintal and 91.50 lac quintal as against 661.81 lac quintal and 67.66 lac quintal respectively in 2005-06. Recovery was lower at 9.91% in season 2006-07 as against 10.22% in the preceding season. Lower recovery was due to extended crushing operation particularly in May and June 2007. Higher crushing and production are attributable to large availability of sugar cane and also due to commencement of production at the Companys newly set up green field complex at Mankapur. Record sugar production in season 2006-07 coupled with huge carry-over opening stock of the previous year, resulted in a steep decline in sugar price from a peak of Rs. 18 per kg to Rs. 13 per kg during the year under review. While sugar price declined, cost of production increased. Depressed sugar price and higher cost of production due to lower recovery
and increased cane price from Rs. 115 per quintal to Rs. 125 per quintal resulted in losses in the Company during the year under review. Bumper production in Brazil, Australia, Thailand and India led to a lower international sugar price. During the year under review, cost of other inputs like manpower, chemicals etc. also increased. Interest cost has also gone up during the year owing to borrowings made for Mankapur, Akbarpur, Rauzagaon and Kumbhi units. Interest was also high because of large inventory. The Government of India banned export of sugar in July 2006 at which point of time the price in the global market was conducive for export of sugar and thereby missed an opportunity of reducing inventory. UP Government arbitrarily increased the cane price from Rs. 115 to Rs. 125 a quintal for season 2006-07 when it was very evident from the planting estimates that India is expected to have a record bumper production in season 2006-07. Other states like Maharashtra, Tamil Nadu and Andhra Pradesh resorted to far more rational cane pricing mechanism and also came forward in many ways to give incentives to sugar mills and
cane growers in their states to tide over the unparalleled crisis created by large surplus of sugar. Incentives given were in the form of remission of taxes, export incentive, compensation against standing crops to farmers etc. The Government of UP needs to rationalise cane prices and take proactive initiatives to save the sugar industry in the state, which is passing through an unprecedented financial crisis.
commissioned during the year which also performed satisfactorily. The distillery produced 30.54 lac BL of rectified spirit and 13.55 lac BL of ethanol. The quality of these products was well accepted in the market.
Greenfield sugar complex at Kumbhi and Gularia

Kumbhi greenfield integrated sugar complex in central U.P. was set up in a record time of 12 months. The trial production of the sugar unit with a crushing capacity of 8000 tcd commenced on 27th April, 2007. This unit has a 20 MW cogen power plant and will sell 11 MW power to UPPCL during the season only. The Gularia greenfield integrated sugar complex possesses an 8000-tcd crushing capacity and 31.3 MW cogen facility. It will supply 20 MW power to UPPCL throughout the year. This unit is ready and will commence operations in the season 2007-08. Legal cases filed by Ojas Industries against setting up of Kumbhi and Gularia units were settled.
Distillery performance
Performance of distillery at Balrampur and Babhnan was satisfactory. Distilleries produced 652.92 lac BL of industrial alcohol. Average realisation per BL was Rs. 19.60 in 2006-07 as against Rs. 20.50 in 2005-06. U.P. Government continues with the previous seasons policy under which 15% molasses is to be reserved by sugar mills for producing country liquor.
Power
Cogen power plants at Balrampur, Haidergarh and Akbarpur performed satisfactorily. There has been sufficient availability of bagasse for running the power capacity fully. Total supply of power from our cogen units to Uttar Pradesh Power Corporation Ltd. under Power Purchase Agreement [PPA] during the year was 4926.17 lac units. During the year, Babhnan unit also started generating power under cogen in a small way. This was made possible by de-bottlenecking of the existing power generating facility in the sugar unit.
Acquisition of Indo Gulf Industries Ltd.

Pursuant to the Share Purchase Agreement and in terms of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, the Company had acquired 45,56,663 equity shares representing 47.63% of the equity share capital of Indo Gulf Industries Ltd. [IGIL]. 6,05,860 equity shares representing 6.33% shares of Dr. S.K. Garg (the then promoter of IGIL) could not be transferred due to interim order passed by Delhi High Court on 6th September 2006. Now the dispute has been settled and disposed off by the court and accordingly the said 6,05,860 shares of Dr. S.K. Garg have now been transferred in the name of the Company on 30th August 2007 and consequently IGIL became a subsidiary of Balrampur Chini Mills Limited, effective from the said date. The sugar unit of the said Company, which was closed for the last five years, started crushing operations in April 2007.
Biocompost
The performance of Biocompost division was satisfactory during the year.
Greenfield complex at Mankapur

As reported in the last Directors Report, the greenfield integrated complex at Mankapur, having a 8000 TCD sugar unit, commenced its operation on 16th November 2006. The sugar unit crushed 127.50 lac quintal in season 2006-07 with a recovery of 10.25%. The 34 MW cogen plant commissioned on September 19, 2006 performed exceedingly well during the year under review and supplied 1521.63 lac units of power to UPPCL under the Power Purchase Agreement. The 100-KLPD distillery was
New subsidiary company

Balrampur Overseas Pvt. Ltd. [BOPL] was incorporated in Hong Kong with the purpose of trading activities. The paidup capital of the said Company is 20,00,000 equity shares of
HK$1 each. The entire holding of BOPL is held by Balrampur Chini Mills Ltd. which became the subsidiary of the Company with effect from 11th October, 2007. It will help the Company trade sugar in the international market through its subsidiary. The statement as required under Section 212 (3) of the Companies Act, 1956, in respect of the subsidiary companies is separately annexed.
blending with petrol with immediate effect and 10% blending from 1st October 2008.
Legal cases related to cane arrears

On P.I.L. No. 5624 of 2007 filed by Shri V.M. Singh, the High Court, Allahabad, Lucknow Bench, Lucknow had passed an order for recovery of arrears of cane price by issuing recovery certificates, and accordingly recovery certificates have been issued by the cane commissioner to recover the payment of arrears of cane price of 2006-07 season. These recovery certificates have been challenged by the Company through writ petition no. 8054 of 2007 before the High Court of Judicature at Allahabad, Lucknow Bench, Lucknow. The High Court has passed an order on 29.10.07 for payment of 25% of the balance cane price and cane commission within five weeks.
Cane and Sugar Policy

The salient features of the sugar policy for 2006-07 are as follows: The ratio of levy and free-sale sugar remained unchanged at 10: 90. The price of levy sugar for the season 2005-06 was not revised and supplies continued at Rs. 1,383.41 per quintal The Statutory Minimum Price (SMP) of sugarcane was fixed at Rs. 81.18 per quintal linked to a basic recovery of 9% with a premium for higher recovery, as against Rs. 80.25 per quintal on 9% recovery in the previous year. The U.P. Government fixed a State Advised Price (SAP) of Rs. 125 per quintal of sugar cane for the season 2006-07 as against Rs. 115 per quintal for the season 2005-06. Ethanol price has been fixed at Rs. 21.50 per litre ex-factory. Reimbursement of internal transport and freight charges subject to a ceiling of Rs. 1,350 per tonne for mills situated in western and southern states and Rs. 1,450 per tonne for mills situated in other states as incentive to encourage exports. Fixed DEPB on export of sugar at 4% Creation of a sugar buffer of 50 lac tonnes for which the government will reimburse actual interest, storage and insurance charges to provide financial assistance to tide over unprecedented financial crisis. The Central Government has announced a grant of loans from banks to sugar mills equivalent to excise duty paid by sugar mills in 2006-07 and to be paid during 2007-08. The government will reimburse the interest amount on such loans. The Central Government has mandated 5% ethanol
Legal case related to SAP

The state advised price (SAP) for the season 2006-07 and validity of Section 16 of U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, was challenged before Allahabad High Court, by writ petition number 23305 of 2007 in which we are also one of the petitioners. The hearing in this writ petition has been concluded and the order has been reserved by the High Court. A writ petition number 8548 (MB) of 2007 has been filed by the east U.P. Sugar Mills Association (in which, we are also petitioner No.4) seeking relief to stay the effect and operation of the decision dated 31.10.2007 of the State Government, announcing the State Advised Price for the season 2007-08 as Rs. 130 for early variety, Rs. 125 for general and Rs.122.50 for unsuitable varieties, and to permit the petitioners to commence crushing operation by paying the statutory minimum price fixed by the Central Government. The High Court passed an interim order on 15.11.2007 and as an interim measure, the factories were directed to pay cane price at Rs. 110 per quintal and start cane crushing operations till the next date of hearing i.e. on 18th December, 2007.
Outlook
Sugar production in the country during the season 2006-07 was 283 lac tonnes as against 192 lac tonnes in the previous season. World sugar prices were bearish during most of
2007. The significant excess of global production over consumption depressed sentiment, leading to a sharp fall in domestic and international sugar prices during the year. Sugar production in the season 2007-08 is estimated at 286 lac tonnes. We expect growth in consumption owing to a double digit growth in GDP and a changing pattern in consumption. The Indian sugar industry in 2007-08 is expected to aggressively export four to five million tonnes in the form of raw and white sugar. Higher consumption and aggressive exports are likely to ensure that there will not be any sizeable increase in inventory levels. The sugar production in 2008-09 is expected to fall as farmers in various sugar producing states are likely to switch to the cultivation of other crops owing to the distressed state of the sugar industry, as well as an expected remunerative return from other crops like wheat and rice. In view of the above scenario, we expect the sugar prices are not likely to show any appreciable increase from the current levels in 2007-08 and likely to show upward movement thereafter in season 2008-09. As mentioned earlier, intervention of the Government of UP to rationalise the cane price in the state is urgently required for the long-term sustainability of the sugar industry in the state. The Company constantly pursues organic growth and setting up of a new sugar mill complex for the effective by-product utilisation and diversifying its product range to reduce the rigorous sugar cycles. The sugar business is essentially cyclical and swift changes in demand-supply disequilibrium causes a volatile change in pricing power. Co-generation and ethanol offer a vast untapped scope for more effective by-product utilisation. They bring synergy to sugar, soften the inimical impact of sugar cycles and shore up substantiality operations. Your Company has diversified into alcohol and power for the usage of multiple by-products leading to enhanced value addition for every quintal of cane crushed. As a result, cogeneration and distilleries are emerging as growth drivers, offsetting the negative trend in revenues from sugar activities. Ethanol is a real-world petroleum substitute which is likely to emerge as a complete energy solution in the coming year, especially with an increase in the cost of crude. In India the blending of petrol with 5% ethanol has been
permitted in all states except Jammu & Kashmir, North Eastern states and island territories. India requires an estimated 5,500 lac litres of ethanol. The government has already made 5% blending with petrol compulsory which will increase to 10% from October 2008. This progressive use of ethanol will reduce the vehicular pollution load and migrate the vehicles to Euro IV norms. The said increase to 10% is expected to double the demand of ethanol significantly in the long term. The Company will be able to generate about 180.85 MW of electricity, of which 125.5 MW will be supplied to UPPCL. The revenue from power and alcohol will help the Company add value.
Listing of equity shares

Your Companys equity shares are listed on the Calcutta, Bombay and National Stock Exchanges. An application has been made for delisting the shares from Calcutta Stock Exchange, which is pending. Your Company has paid the annual listing fees to each of these stock exchanges. The GDRs are listed on the Luxembourg Stock Exchange.
Corporate Governance
As per Clause 49 of the Listing Agreement with the stock exchanges, Managements Discussion and Analysis, a report on Corporate Governance together with the Auditors Certificate on the compliance of conditions of Corporate Governance forms a part of the annual report.
Credit Rating
Credit rating of A1+ for short-term debts (Rs.500 crore) enjoyed by your Company for a long time was downgraded to A1 by ICRA. Our non-convertible debenture programme of Rs. 30 crore was downgraded from LAA to LA+. The down grading was done by ICRA in view of the tight cash flow and unprecedented crisis suffered by the industry.
Employee Stock Option Scheme

Your Company formulated and implemented an Employee Stock Option Scheme in accordance with the guidelines issued by the SEBI. Pursuant to the scheme, on 27th November, 2006, 8,83,000 stock options were granted among eligible employees including the Wholetime Director. The details of options granted and outstanding
as on 30th September, 2007, along with other particulars as required by Clause 12 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Auditors Certificate required to be placed at the forthcoming AGM, pursuant to Clause 14 of the said guidelines, are set out in the annexure to the report.
Shri R.K. Choudhury and Shri S.B. Budhiraja, Directors of your Company, retire from the Board by rotation and are eligible for re-election.
Directors Responsibility Statement

As required under Section 217 (2AA) of the Companies Act, 1956, your Directors confirm that i. In preparation of the annual accounts, the applicable accounting standards have been followed. ii. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year, and of the loss of your Company for that period. iii. The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities, and iv. The Directors have prepared the annual accounts on a going concern basis.
Directors
Shri K.N. Saraogi resigned as Chairman and Director of the Company effective from 26.04.2007 due to his indifferent health. However, the Board was conscious of the contribution of Shri K.N. Saraogi in the growth of the Company over the years and also that his guidance and association will continue to be useful. Therefore, the Board appointed Shri K.N. Saraogi as Chairman Emeritus. Shri Suresh Neotia was appointed as chairman of the Company effective from 26.04.2007 to fill the vacancy caused by the resignation of Shri K.N. Saraogi. The Board placed on record its high appreciation for the valuable services rendered by Shri K.N. Saraogi, both as a Director and later as a Chairman, resulting in substantial progress. Shri P.R. Srinivasan resigned from the directorship of the Company. Shri P.R. Srinivasan was appointed a Nominee Director of Citicorp International Finance Corporation [CIFC], USA pursuant to the investment agreement entered into between the Company and CIFC on 9th March, 2005, for subscription by the said CIFC in the equity shares of the Company. CIFC has disposed its entire shareholding of the Company and Shri Srinivasan resigned from the directorship of the Company. The Board placed on record its high appreciation for the valuable services rendered by Shri P.R. Srinivasan during his tenure as a Director of the Company. The term of office of Smt. Meenakshi Saraogi, Joint Managing Director of the Company, expired on 30th September, 2007. The shareholders at the Extra-ordinary General Meeting approved the reappointment of Smt. Meenakshi Saraogi as a Joint Managing Director for a further period of three years effective from 1st October, 2007.
Particulars of employees
Your Directors wish to acknowledge the support and valuable contributions made by the employees at all levels. Particulars of employees as required under Section 217(2A) of the Companies Act, 1956, are given in a separate annexure attached hereto and forms part of this report.
Conservation of energy, etc.

Particulars in respect of conservation of energy, technology absorption and foreign exchange earnings and outgo as required under Section 217 (1) (e) of the Companies Act, 1956, are given in a separate annexure attached hereto and forms part of this report.
Auditors Report
The observations of Auditors in their report read with the relevant notes to accounts in schedules S and T are self explanatory and do not require further explanation.
Auditors
M/s. G.P. Agrawal & Co., Chartered Accountants, Auditors of your Company, retire and being eligible, offers themselves for re-appointment.
shareholders, Central Government, Government of U.P, financial institutions, State Bank of India and customers for their valuable contribution to the growth of the organisation. For and on behalf of the Board of Directors
Cost Auditors
Pursuant to the directives of the Central Government under the provisions of Section 233B of the Companies Act, 1956, M/s. N. Radhakrishnan & Co, Cost Accountants, have been appointed to conduct cost audits relating to sugar. Kishor Shah
Vivek Saraogi Managing Director
Appreciation
Your Directors wish to place on record their sincere appreciation for the continued support received from the
Director cum Chief Financial Officer Kolkata 19th November, 2007
Annexure to the
Directors Report
Information pursuant to the Companies (Disclosures of particulars in the report of the Board of Directors) rules 1988 and forming part of the Directors Report for the year ended 30th September, 2007
A. Conservation of energy
a) Your Company continues to give high priority to the conservation of energy on an ongoing basis. Some of the significant measures taken are: i) Installation of high-efficiency spreader stocker type, travelling grates, high pressure boilers. ii) Installation of bigger size, constant ratio mill with variable speed, DC motor drive having full auto-control, hydraulic cane unloaders, rotary-screens, juice-flow stabilisation system, continuous sulphur burner, high-efficiency centrifugal pumps, fluidised bed sugar drier and sugar bag conveying system, efficient and automatic centrifugal machines, semi kesteners, etc. iii) Installation of condensing-cum-extraction turbine, variable frequency drives with different machines, fans, heat recovery units in boilers, pre-heaters for boiler feed water, distributed control system for centralised efficient operation.
b) The required data with regard to conservation of energy are furnished below:
(A) Power and fuel consumption

2006-07 (12 months) 1. a) Purchased units (excluding domestic units) Total amount (Rs. lacs) Rate per unit (Rs.) b) Own generation i) Through Diesel Generator sets (units) Units per ltr. of Diesel Cost/unit (Rs.) ii) Through Steam Turbine/Generator (units) Unit per quintal of Bagasse cost/unit 2. Coal (specify quality and where used quantity) (tonnes) Total amount /average cost 3. Furnace Oil (qty.k.ltrs.) Total amount /average rate 4. Other/Internal Generation Quantity total cost rate/ unit -do-doNil -do-doNil 1224991 3.48 8.58 226519887 4199788 3.41 8.53 155671168 210683 11.37 5.40 2005-06 (18 months) 1217817 67.90 5.58
Steam produced by use of own bagasse Not directly consumed in production -doNot directly consumed in production -do-
(B) Consumption per unit of production

2006-07 (12 months) Sugar (lac quintal) Electricity (Units per quintal of production) Furnace Oil Coal (specify quality) Other (specify) 91.68 24.86 Nil Nil Nil 2005-06 (18 months) 64.34 25.04 Nil Nil Nil
B. Research and development, technology absorption

Your Company has been carrying out research and development in the following specific areas: i) Rearing of speed nurseries of new improved varieties for replacement.
ii) Heat therapy to eradicate seed-born diseases. iii) Pest control measures to protect cane from diseases and soil testing laboratory. iv) Ratoon crop management helping in increased yield and recovery. v) Biological control laboratory for sugarcane pest management. Owing to the above efforts, a higher yield of disease free cane will be available to the Company, resulting in a higher return to the Company and the cane growers. Future plans i) Continuous research to generate better-yield and disease-free cane varieties. ii) Installing a tissue culture laboratory. iii) Installing machineries with the latest technology at different stations in the factory. iv) Providing irrigation facilities to growers by distributing pumping sets and borings. The Company has not imported any technology.
C. Foreign exchange earning and outgo

200607 (12 months) i) Activities relating to exports initiative taken to increase exports ii) Development of new export market for product and services and export plan iii) Total foreign exchange earnings (Rs. lacs) iv) Used (Rs. lacs) NIL 4,613.46 320.17 2,256.95 Various export proposals are being examined -do200506 (18 months) Various export proposals are being examined -do-
For and on behalf of the Board of Directors
Kolkata 19th November, 2007
Kishor Shah Director cum Chief Financial Officer
Particulars of employees as required under Section 217(2A) of the Companies Act, 1956, and forming part of the Directors report for the year ended 30th September 2007.
Name Designation Remuneration Qualification (Rs.) and experience (years) Age (years) Date of commencement of employment Last employer, designation
A. Employed throughout the year and in receipt of the remuneration of Rs. 24 lacs or more per annum Vivek Saraogi Meenakshi Saraogi K.N. Ranasaria Kishor Shah Prem Kumar Shrawat N.K. Khetan P.R. Singh G.L. Khetan Managing Director Jt. Managing Director Wholetime Director Director-cum-Chief Financial Officer Executive President Chief General Manager Executive President Chief General Manager 1,16,49,715 B.Com (Hons.), (20) 1,05,61,636 B.A. (25) 33,29,482 M.A. (Sahityaratna), (44) 34,03,467 B. Com., ACA, (19) 26,14,633 B.Sc., Engineering (Mech.), (35) 25,42,590 FCA, (23) 27,49,252 B. Com., PGDBM, LLB (42) 24,35,672 B. Com., FCA (24) 41 63 72 3rd July 1987 1st October 1982 Service transferred from Balrampur Sugar Co. Ltd. 24th January, 1994 8th April 2004 1st June 1989 1st August 2003 1st August 1990 None None Secretary, Balrampur Sugar Co. Ltd. Independent consultancy New Swadeshi Sugar Mills (A unit of Birla Sugars), Executive V.P. Partner in a Chartered Accountant firm JK Industries Limited, sugar division, CE (W) Hindustan Development Corporation, Manager-Accounts & Administration Ghaghara Sugar Ltd. (DSCL- Ajbapur), D.G.M. (Engg.)
43 60
49 59 48
K.P. Singh
Executive President
25,06,721 Diploma in Mech. Engineering (30)
50
16th September 2002
B. Employed for part of the year and in receipt of the remuneration of Rs. 2 lacs or more per month Ram Chandra Jha Notes: 1) Remuneration includes salary, bonus, Companys contribution to provident fund, pension and monetary value of perquisites excluding contribuition to gratuity. 2) All appointments are contractual. Other terms and conditions are as per their respective agreement/ Board Resolution and as per Rules of the Company. 3) Shri Vivek Saraogi (Managing Director) and Smt. Meenakshi Saraogi (Jt. Managing Director) are related to each other. Shri K.N. Saraogi resigned to be as Chairman and Director on 26.04.2007, is also related to Shri Vivek Saraogi and Smt. Meenakshi Saraogi. Executive President 8,86,264 B.E. (Mech.), (40) 64 31st May 2007 Bajaj Hindusthan Ltd., Sr. Vice President
Annexure to the
Directors Report
Statement as at 30th September, 2007 pursuant to Clause 12 of the SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999.
a] Description:
Year No. of options granted Date of grant Exercise price per share (Each option is equivalent to one equity share of the face value of Re.1 each of the Company) Rs.74.60 Rs.104.10 2005 6,22,500 31.10.2005 2006 8,83,000 27.11.2006 price of the equity shares of the Company during the preceding 26 weeks, prior to the date of grant [on the stock exchange it is traded most].
c] Options Vested : 5,03,500 d] Options Exercised : NIL e] Total number of equity shares arising as a result of exercise of options : N. A. f] Options Lapsed : 2,04,500 g] Variation of Terms of Option : N. A.
b] Pricing formula:
The exercise price of the options is determined by the Remuneration Committee on the date the option is granted. It is based on the average daily closing market
h] Money realised of the Exercise of Option : NIL i] Total no of Option in Force : 13,01,000
j] Details of Option Granted to

i] Senior Managerial Personnel: Name 1 2 3 4 5 6 7 Shri K.N. Ranasaria Shri Kishor Shah Shri R.N. Mishra Shri S.K. Agrawala Shri P.K. Shrawat Shri P.R. Singh Shri K.P. Singh Designation Wholetime Director Director-cum-CFO Wholetime Director Company Secretary Executive President Executive President Executive President 2005 (On 31.10.2005) 10,000 10,000 10,000 10,000 10,000 10,000 10,000 2006 (On 27.11.2006) 10,000 10,000 10,000 10,000 10,000 10,000 10,000
ii] Any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year NIL iii] Identified employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant NIL
k] Diluted earnings per share (EPS) pursuant to the issue of

shares on exercise of options calculated in accordance with Accounting Standard [AS] 20. Earning per share is Rs. (1.69).
Earning Per Share Basic (Rs.) - As reported - As adjusted (1.69) (1.82)
Diluted (Rs.) (1.69) (1.82)
l] i) The employee compensation cost has been calculated

using the intrinsic value method of accounting for options issued under BCML Employees Stock Option Scheme. The stock-based compensation cost as per the intrinsic value method for year ended 30th September, 2007 is Nil. ii) The employee compensation cost that shall have been recognised if the Company had used the fair value of the options is Rs.3,36,90,388. The difference between the employee compensation cost so computed at (i) above and the employee compensation cost that shall have been recognised if the Company had used the fair value of the options is Rs.3,36,90,388. iii) Impact of this difference on profits and EPS of the Company: The effect of adopting the fair value method on the net income and earnings per share is presented below: Net Income/ (loss) As reported Add: Intrinsic value Compensation cost Less: Fair value Compensation cost (Black Scholes model) Adjusted Net Income/(Loss) 336.90 (4521.32) Rs. in lacs (4184.42) Nil
m] The weighted average exercise price of the options granted

on 27.11.06 is Rs.104.10 per equity share. The weighted average fair value of options is Rs.42.245 per option.
n] A description of the method and significant assumptions

used during the period to estimate the fair values of options, including the following weighted-average information is given below: [1] Method Black Scholes Model [2] Risk-free interest rate 7.4% [3] Expected life 9 years (including vesting period of 1 year) [4] Expected volatility 25.7% [5] The price of the underlying share in market at the time of option grant 87.75
For and on behalf of the Board of Directors
Kishor Shah Director cum Chief Financial Officer Kolkata 19th November, 2007
Auditors Certificate as required under Clause 14 of the SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999
We have examined the books of account and other relevant records of Balrampur Chini Mills Limited having its registered office at FMC Fortuna, 2nd Floor, 234/3A, A.J.C. Bose Road, Kolkata 700 020 and based on the information and explanations given to us, we certify that in our opinion, the Company has implemented the Employee Stock Option Scheme in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and in accordance with the special resolution passed by the Company in the Extra-ordinary General Meeting held on 8th September, 2005. For G. P. Agrawal & Co. Chartered Accountants
7A, Kiran Shankar Ray Road Kolkata - 700 001 19th November, 2007
Ajay Agrawal Membership No. 17643 Partner
Corporate Governance Report

Philosophy on Code of Governance
The Company firmly believes that good Corporate Governance represents the foundation of corporate excellence. A sound governance process consists of a combination of business practices, which result in enhancement of shareholders value and enable the Company to fulfill its obligations to customers, employees, financiers and to the society at large. The Company aims to increase and sustain its corporate value through growth and innovation. the constitution of the Board was: Two Promoters, Executive Directors Three Non-Promoters, Executive Directors Six Independent, Non-Executive Directors During the year ended 30th September, 2007, four Board meetings were held on 16th November, 2006, 30th January, 2007, 26th April, 2007 and 24th July, 2007. The composition of the Board of Directors as on 30th September 2007, the number of other Board of Directors or Board Committees of which he/she is a member/Chairperson and the attendance of each director at these Board meetings and the last Annual General Meeting (AGM) are as under: No. of Board meetings attended [5] Attendance at last AGM [6]
Board of Directors
The current policy is to have an appropriate mix of Executive and Independent Directors to maintain the independence of the Board. As on 30th September, 2007, Name of the Director Category
[1] Shri Suresh Neotia (Chairman) Shri Vivek Saraogi (Managing Director) Smt. Meenakshi Saraogi (Jt. Managing Director)
[2] Independent, Non-executive Promoter, Executive Promoter, Executive
No. of other No. of membership/ directorships* (Public chairmanship on other Limited company) Board committees [3] [4] 6 (including 1 as Chairman) 1 Nil Nil 7 (including 3 as Chairman) 8 (including 2 as Chairman) 4 Nil 8
Nil Nil Nil Nil
4 4
No Yes No No
Shri Kamal Nayan Saraogi, Promoter, resigned on 26.04.2007 Non-executive Shri Sudhir Jalan Shri R.K. Choudhury Shri S.B. Budhiraja Shri M.M. Mukherjee Shri Naresh Chandra Independent, Non-executive -do-do-do-do-
2 3 3 (including 1 as Chairman) Nil 9 (including 2 as Chairman)
1 1 4 4 3
No No Yes Yes No
Name of the Director
Category
[1] Shri P R Srinivasan [Nominee of Citicorp International Finance Corporation, being equity investor], resigned on 26.04.2007 Shri K.N. Ranasaria (Wholetime Director) Shri Kishor Shah [Director cum Chief Financial Officer] Shri R.N. Misra (Wholetime Director)
[2] Non-Executive Nominee Director
No. of other No. of membership/ directorships* (Public chairmanship on other Limited company) Board committees [3] [4] 1 Nil
No. of Board meetings attended [5] 1
Attendance at last AGM [6] Yes
Non-promoter Executive Non-promoter Executive Non-promoter Executive
1 Nil
1 Nil
4 4
Yes Yes
Nil
Nil
No
(*) Excludes membership of the Managing Committee of various chambers/bodies and directorship in foreign companies.
Board committees
Audit Committee
The Audit Committee has the following powers: 1) To investigate into any matter in relation to the items, specified in Section 292A of the Companies Act, 1956 or referred to it by the Board and shall have full access to information contained in the records of the Company and external professional advice, if necessary. 2) To investigate any activity within its terms of reference. 3) To seek information from any employee. 4) To obtain outside legal or other professional advice. 5) To secure attendance of outsiders with relevant expertise, if it considers necessary. The role of the Audit Committee includes the following: 1. Oversight of the Companys financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible. 2. Recommending to the Board, the appointment, reappointment and, if required, the replacement or removal of the statutory auditor and the fixation of audit fees. 3. Approval of payment to statutory auditors for any other services rendered by them. 4. Reviewing, with the management, the annual financial statements before submission to the Board for approval, with particular reference to:
Composition
The Audit Committee of the Company comprises five directors - all of whom are Independent, Non-Executive. All of them are experts in corporate finance, accounts and company law. The Chairman of the Committee is an Independent Non-Executive Director, nominated by the Board. The Company Secretary acts as the secretary to the Committee. The Director-cum-Chief Financial Officer, the Statutory Auditor, Cost Auditor and the Internal Auditor of the Company are permanent invitees at the meetings of the Committee. The composition of the Audit Committee: Sl Name of Directors 1 2 3 4 5 Shri S.B. Budhiraja Position Chairman, independent, non-executive
Shri Naresh Chandra Vice-chairman, Independent, Non-Executive Shri Suresh Neotia Shri Sudhir Jalan Member, Independent, Non-Executive -do-
Shri M.M. Mukherjee -do-
a. Matters required to be included in the Directors Responsibility Statement to be included in the Boards report in terms of Clause (2AA) of Section 217 of the Companies Act, 1956 b. Changes, if any, in accounting policies and practices and reasons for the same c. Major accounting entries involving estimates based on the exercise of judgment by the management d. Significant adjustments made in the financial statements arising out of audit findings e. Compliance with listing and other legal requirements relating to financial statements f. Disclosure of any related party transactions g. Qualifications in the draft audit report. 5. Reviewing, with the management, the quarterly financial statements before submission to the Board for approval 6. Reviewing, with the management, performance of Statutory and Internal Auditors, and adequacy of the internal control systems. 7. Reviewing the adequacy of the internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of the internal audit. 8. Discussion with internal auditors, any significant findings and follow up there on. 9. Reviewing the findings of any internal investigations by the internal auditors into matters, where there is suspected fraud, irregularity or a failure of the internal control systems of a material nature and reporting the matter to the Board. 10. Discussion with Statutory Auditors before the audit commences, about the nature and the scope of audit as well as the post-audit discussion to ascertain any area of concern. 11. To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non payment of declared dividends) and the creditors. 12. Reviewing the Companys financial and risk management policies, 13. Carrying out such other functions which, maybe, from time to time specifically referred by the Board of Directors.
The Audit Committee also reviews the following information: 1. The Managements discussion and analysis of financial condition and results of operations; 2. Statement of significant related party transactions, submitted by management; 3. Management letters/ letters of internal control weaknesses issued by the statutory auditors; 4. Internal audit reports relating to internal control weaknesses; 5. The appointment, removal and terms of remuneration of the Chief internal auditor; and 6. Review of uses/ application of funds raised through (public issue, right issue, preferential issue, GDR etc.)
Meetings and attendance

During the year ended 30th September 2007 four Audit Committee meetings were held on 16th November, 2006, 30th January, 2007, 26th April, 2007 and 24th July, 2007. Name of Directors Shri S.B. Budhiraja Shri Naresh Chandra Shri Suresh Neotia Shri Sudhir Jalan Shri M.M. Mukherjee No. of meetings attended 4 3 4 1 4
Shri S.B. Budhiraja, Chairman attended the AGM held on 11th January, 2007 and replied to the queries related to accounts to the satisfaction of the shareholders.
Remuneration Committee
The Remuneration Committee recommends to the Board of Directors regarding the remuneration payable to the Executive Directors of the Company. The Remuneration Committee comprises four Directors, all of whom are NonExecutive, Independent Directors. The members of the committee are Shri Naresh Chandra, Shri Suresh Neotia, Shri R.K. Choudhury and Shri Sudhir Jalan. Shri Naresh Chandra is the Chairman of the Committee. The Remuneration Committee also administers the Employee Stock Option Scheme, which was approved by a resolution of shareholders at the Extra-ordinary General Meeting of the Company held on 8th September, 2005. During the year ended 30th September, 2007, two
Remuneration Committee meetings were held on 27th November, 2006 and 24th July, 2007. The attendance of the members at the meetings was as follows: Name of Directors Shri Naresh Chandra Shri Suresh Neotia Shri R.K. Choudhury Shri Sudhir Jalan No. of meetings attended 2 2 2 2
Remuneration policy
Remuneration of employees largely consists of base remuneration, perquisites, bonus, exgratia, etc. The components of the total remuneration vary for different cadres/grades and are governed by industry pattern, qualification and experience of the employee, responsibilities handled by him, individual performance, etc. The objectives of the remuneration policy are to motivate employees to excel in their performance, recognise their contribution, retain talent in the organisation and reward merits. The Company pays remuneration by way of salary and
perquisites to the Managing Director, Joint Managing Director and the Wholetime Directors. The Managing Director and the Joint Managing Director are also entitled to receive an annual commission. The Director-cum-Chief Financial Officer is also entitled to receive a commission w.e.f. 01.04.2007. The salary and the commission is recommended by the Remuneration Committee to the Board of Directors and placed before the shareholders meeting for approval. The commission payments to the Managing Director, Joint Managing Director and Directorcum-Chief Financial Officer are at the rate of one per cent of the net profits of the Company, subject to a ceiling of Rs. 90 lacs p.a. each in case of Managing Director, Joint Managing Director and Rs.30 lacs p.a. in case of Director-cum-Chief Financial Officer. The Non-executive Directors are remunerated by way of commission and sitting fees of Rs. 10,000 for each Board of Directors meeting and committee meeting. In accordance with the shareholders resolution passed at the Annual General Meeting held on 29th July, 2003, the aggregate commission payable to the Non-Executive Directors is up to one per cent of the net profits of the Company, which is subject to the overall ceiling as fixed by the Board of Directors from time to time.
Details of remuneration to the Directors for the year ended 30th September, 2007: Name of the Directors Salary (Rs.) Shri Suresh Neotia Shri Vivek Saraogi Benefits (Rs.) Bonus Commission (Rs.) (Rs.) Sitting Fees (Rs.) Total No. of Stock Service Contract/ Options Notice period/ (Rs.) granted* Severance Fees 110,000 Retire by rotation Term of office valid up to 31.03.2011. No notice period and no severance fees. Term of office valid up to 30.09.2010. No notice period and no severance fees. Retire by rotation
110,000
9,000,000 2,649,715
11,649,715
Smt. Meenakshi Saraogi
9,000,000 1,561,636
10,561,636
Shri Kamal Nayan Saraogi resigned on 26.04.2007 Shri Sudhir Jalan
20,000
20,000
- 140,000
140,000
- -do-
Name of the Directors
Salary (Rs.)
Benefits (Rs.)
Bonus Commission (Rs.) (Rs.)
Sitting Fees (Rs.)
Total No. of Stock Service Contract/ Options Notice period/ (Rs.) granted* Severance Fees 110,000 80,000 80,000 100,000 Retire by rotation -do -do -do -do-
Shri R.K. Choudhury Shri S.B. Budhiraja Shri M.M. Mukherjee Shri Naresh Chandra Shri PR Srinivasan resigned on 26.04.2007 Shri R.N. Misra
110,000 80,000 80,000
100,000
688,500
86,718
775,218
20,000 Terms of office valid up to 30.06.2009. No notice period and no severance fee. 20,000 Terms of office valid up to 11.05.2009. No notice period and no severance fee. 20,000 Terms of office valid up to 30.01.2011 subject to re-appointment after retirement by rotation. No notice period, no severance fees.
Shri K.N. Ranasaria
2,493,333
356,149
480,000
3,329,482
Shri Kishor Shah
2,631,667
261,800
510,000
3,403,467
* Employee Stock Options (each option equivalent to one equity share of the face value of Re.1 each of the Company) were granted on 31.10.2005 at an exercise price of Rs.74.60 per equity share and on 27.11.2006 at an exercise price of Rs.104.10 per equity share. These options shall vest after one year from the date of grant and may be exercised within a period of 96 months from the date of their vesting. Note: (i) Approval of Central Government for the remuneration paid to the Managing Director and Jt. Managing Director during the year 2006-07 pursuant to resolution passed in EGM held on 29.09.2007 is awaited. (ii) The payment of remuneration to Shri K.N. Ranasaria is subject to the approval of the shareholders in the forthcoming AGM. (iii) The amount of gratuity has not
been shown in the above table, as the Managing Directors & Wholetime Directors are entitled to receive gratuity at the end of their tenure.
Shareholders Committee
i) Share Transfer Committee
A share transfer committee was constituted to deal with various matters relating to share transfer/transmission, issue of duplicate share certificates, approving the split and consolidation requests and other matters relating to transfer and registration of shares. The members of the committee are Shri Vivek Saraogi, Smt. Meenakshi Saraogi, Shri Suresh Neotia, Shri Sudhir Jalan and Shri R.K. Choudhury. Shri K.N. Saraogi has ceased
from membership of the Share Transfer Committee on 26th April 2007. During the year ended 30th September 2007, 11 Share Transfer Committee Meetings were held.
During the year ended 30th September 2007 two Shareholders/Investors Grievance Committee meetings were held.
ii) Shareholders/Investors Grievance Committee

The Company constituted the Shareholders/Investors Grievance Committee to oversee the redressal of shareholders and investors grievances in relation to the transfer of shares, non-receipt of annual report, non-receipt of dividend etc. The constitution of the Committee is as follows: Shri Sudhir Jalan, Chairman, Independent Non-executive Shri Naresh Chandra, Member, Independent Non-executive Shri Vivek Saraogi, Member, Promoter, Executive
Compliance Officer
The Board has designated Shri S.K. Agrawala, Company Secretary as the Compliance Officer.
Details of shareholders complaints received

The total 312 number of complaints/correspondence received and replied to the satisfaction of the shareholders during the year ended 30th September, 2007. There were no outstanding complaints as on 30th September, 2007. No shares were pending for transfer as on 30th September, 2007.
General Body Meeting

Location and time, where last three Annual General Meetings were held are given below: Accounting Year 2003-04 2004-05 Date Location of the Meeting Time Special Resolution passed
29.07.2004 22.07.2005
Kalakunj, 48, Shakespeare Sarani, Kolkata 700 017 Gorky Sadan, 3, Gorky Terrace, Kolkata-700017
11.00 a.m 3.00 p.m
NIL 1. Delisting of equity shares from The Calcutta Stock Exchange Association Ltd. and The Delhi Stock Exchange Association Ltd. 2. Alteration of Articles of Association.
2005-06
11.01.2007
Kala Mandir, 48, Shakespeare Sarani, 10.30 a.m. Kolkata 700 017
1. Re-appointment of Shri Vivek Saraogi as the Managing Director. 2. Payment of enhanced remuneration to Smt. Meenakshi Saraogi, Jt. Managing Director. 3. Appointment of Shri Kishor Shah as the Director-cum-chief financial officer. 4. Re-appointment of Shri K.N. Ranasaria as the Wholetime Director. 5. Re-appointment of Shri R.N. Misra as the Wholetime Director. 6. Investment by FIIs up to 60% of the paid up equity share capital of the Company.
No special resolution was passed through ballot at the last AGM and no special resolution is proposed to be conducted through postal ballot at the forthcoming AGM to be held on 18th February, 2008.
Details of Extra-ordinary General Meeting held during the year 2006-07 are given below: Accounting Year 2006-07 Date Location of the Meeting Time Special Resolution passed
29.09.2007
Kalakunj, 48, Shakespeare Sarani, Kolkata 700 017
11.00 a.m
1. Payment of existing remuneration to Shri Vivek Saraogi, Managing Director. 2. Payment of existing remuneration to Smt. Meenakshi Saraogi and her reappointment as Jt. Managing Director. 3. Payment of Enhanced remuneration to Shri Kishor Shah. 4. Alteration of Articles of Association.
Disclosure
i) The Company does not have any related party transactions, which may have potential conflict with the interests of the Company at large. ii) The Company has complied with the requirements of regulatory authorities on capital markets and no penalties/strictures were imposed against it during the last three years. iii) The following Non-Executive Director hold equity shares of the Company as stated below as on 30th September, 2007: Name of the Director Shri R.K. Choudhury No. of Shares 56000
the leading English and Bengali newspapers such as The Business Standard, The Economic Times, Dainik Jagran and Dainik Lipi. iii) As per Clause 51 of the Listing Agreement with stock exchanges, certain documents/information such as quarterly/annual financial results, shareholding pattern and corporate governance are accessible on the website www.sebiedifar.nic.in. iv) Presentations were also made to the media, analysts, institutional investors, fund managers, etc. from time to time. Such presentations are also posted on the Companys website. v) The managements discussion and analysis forms part of the Annual Report, which is posted to the shareholders of the Company.
Means of communication
i) A half-yearly report was not sent to each household of shareholders. Shareholders were intimated through the press and the Companys website www.chini.com about the quarterly performance and financial results of the Company. ii) The quarterly and half-yearly results were published in
General Shareholders Information

Annual General Meeting
Date and Time Venue : 18th February, 2008 at 4.00 pm : Kalakunj, 48, Shakespeare Sarani, Kolkata 700 017
Profiles of Directors retiring by rotation

Shri R.K. Choudhury
Date of birth Qualifications : 26.01.1936 : A leading Advocate
Expertise and experience in specific functional areas
: He has vast experience in the matters of taxation, corporate planning and international arbitration. He is on the Board of Directors of several companies. He is also a member of the International Bar Association, Supreme Court Bar Association, Bar Council of India and Indian Council of Arbitration. He is also connected with several social and philanthropic organisations. : Upper Ganges Sugar and Industries Ltd., Reliance Bengal Industries Ltd., Lynx Machinery and Commercial Ltd., Birla VXL Ltd., Puja Corporation Ltd., Khaitan Consultants Ltd., Suryakiran Apartment Services Pvt. Ltd., Elpro International Ltd., Travel Hub Pvt. Ltd., Super Diamond Nirman Ltd. and Rajratan Impex Pvt. Ltd. : Member, Audit Committee of Upper Ganges Sugar and Industries Ltd., Member, Audit Committee of Elpro International Ltd., Member, Committee of Directors and Share Transfer and Shareholders/ Investors Grievance Committee of Birla VXL Ltd.
Directorship held in other Companies
Membership in other Board Committees
Shareholding in the Company as on 30.09.07
: 56,000 equity shares
Shri S.B. Budhiraja

Date of Birth Qualifications Expertise and Experience in specific functional areas : 23.03.1931 : Gold Medallist in Mechanical Engineering from the University of Roorkee. : He is an independent management consultant. He was the youngest-ever Managing Director of Indian Oil Corporation in 1974-78 and was also the Managing Director of IBP, Balmer Lawrie, and Indian Oxygen. He was the Overseas Director in Al Futtaim Group, U.A.E. He is a fellow of the All India Management Association, and the Institute of Management Consultants of India. He was also the president of the Indian Chamber of Commerce, Kolkata in 1989-90 and Chairman, CII Eastern Region in 1988-89. : Hindustan Sanitaryware and Industries Ltd., JCL International Ltd., Neuland Laboratories Ltd., Sushramika Pvt. Ltd. and Kumar Housing and Land Development Ltd. : Chairman, Share Transfer and Grievance Committee, Member, Audit Committee of Hindustan Sanitaryware and Industries Ltd. and Member, Audit Committee, Neuland Laboratories Ltd. Member, Audit Committee - Kumar Housing and Land Development Ltd.
Directorships held in other companies Membership in other Board Committees
Shareholding in the Company as on 30.09.07
: Nil
Financial year
The financial year 2005-06 of the Company was extended upto 30th September 2006. Thereafter, the financial year of the Company is from 1st October to 30th September every year.
Financial year calendar for 200708 (Tentative)

Results for the quarter ending 31st December 2007 Results for the quarter ending 31st March 2008 Results for the quarter ending 30th June 2008 Results for the quarter ending 30th September 2008 Fourth week of January 2008 Fourth week of April 2008 Fourth week of July 2008 Second week of November 2008
Book closure date

13th February 2008 to 18th February 2008 (both days inclusive) on account of AGM.
Listing fees
Listing fee for the year 200708 has been paid to the above stock exchanges.
Dividend
The Board has not recommended any dividend for the year ended 30th September 2007.
Depositories
i) National Securities Depository Ltd. Trade World, 4th Floor, Kamala Mills Compound Senapati Bapat Marg, Lower Parel Mumbai 400 003
Listing of equity shares on stock exchanges at

i) National Stock Exchange of India Ltd. Exchange Plaza, 5th Floor Plot No. C/1, G Block Bandra Kurla Complex, Bandra (E) Mumbai 400 051
ii) Central Depository Services (India) Ltd. Phiroze Jeejeebhoy Towers, 17th Floor, Dalal Street, Mumbai 400 023
Stock code
NSE symbol for BCML is BALRAMCHIN BSE code for BCML is 500038 CSE code for BCML is 12012 ISIN number for BCML is INE119A01028 Regulation S GDR code for BCML is US0587882095 Rule 144A GDR code for BCML is US0587881006
ii) Bombay Stock Exchange Ltd. The Corporate Relationship Department Rotunda Building, PJ. Towers, Dalal Street Fort, Mumbai 400 001. iii) The Calcutta Stock Exchange Association Ltd. 7 Lyons Range, Kolkata 700 001 [Application for delisting has been made]. iv] GDRs listed at Luxembourg Stock Exchange SOCIETE DE LA BOURSE DE LUXEMBOURG 11 av de la Porte-Neuve, L-2227 Luxembourg
Reuters code
NSE BACH.NS and BSE BACH.BO Stock Market data (Face value of Re.1 each)
Months
National Stock Exchange (NSE) Months high price (Rs.) Months Low Price (Rs.) 98.05 82.05 76.30 67.00 50.00 52.50 61.20 60.60 65.55 64.75 49.80 59.05 Volume (Nos) 84139139 65667138 65461441 56083520 91652085 68591053 64880455 73820408 71356589 66482887 36552045 140947521
Bombay Stock Exchange (BSE) Months high price (Rs.) 115.45 107.00 94.50 90.00 69.70 68.20 75.80 81.35 78.10 77.90 70.05 89.45 Months Low Price (Rs.) 97.90 82.00 76.50 67.05 53.50 57.35 61.25 61.10 65.85 65.00 49.90 59.10 Volume (Nos) 27080295 21535900 21758697 17289351 31019850 22498041 20575928 21279253 21005051 18751145 10750567 42509036
Oct. 2006 Nov. 2006 Dec. 2006 Jan. 2007 Feb. 2007 Mar. 2007 Apr. 2007 May 2007 Jun. 2007 Jul. 2007 Aug. 2007 Sept. 2007
115.45 107.00 94.35 92.00 69.50 68.20 75.65 87.40 82.00 81.55 67.70 87.50
Share price performance

BSE Sensex Accounting year % Change in BCML share price - 25.71 % Change in Sensex + 38.84 NSE S&P CNX Nifty % Change in BCML share price - 25.54 % Change in Nifty + 39.93
2006 07
Share Transfer System

Presently, the share transfers which are received in physical form are normally put into effect within a maximum period of 30 days from the date of receipt and demat requests are confirmed within a maximum period of 15 days. The Company provides investor and depository services in-house through its secretarial department. Distribution of shareholding as on 30th September, 2007 (Face Value: Re. 1 each) Shareholding Range Up to 10,000 10,001-50,000 50,001-100,000 100,001-500,000 500,001-1,000,000 1,000,001 and above Total No. of shareholders 140005 587 75 63 11 25 140766 % of shareholders 99.46 0.42 0.05 0.04 0.01 0.02 100.00 No. of shares 44339595 12317513 5237080 12523762 8357745 165378965 248154660 % of shareholding 17.87 4.96 2.11 5.05 3.37 66.64 100.00
Pattern of shareholding as on 30th September, 2007 (Face Value: Re.1 each) No. of Shares Promoters Group Financial Institutions, Insurance Companies, Banks and Mutual Funds etc. Foreign Institutional Investors Foreign Corporate Bodies through FDI Private Corporate Bodies NRIs Foreign Nationals Indian Public Outstanding GDRs Total 78950890 27575948 66634690 NIL 21727932 831509 1000 52414891 17800 248154660 % of Holding 31.82 11.11 26.85 NIL 8.76 0.33 0.00 21.12 0.01 100.00
Dematerialisation of shares
98.34% of the share capital is held in dematerialised form with the National Securities Depository Limited (NSDL) and the Central Depository Services (India) Ltd. (CDSL) as on 30th September, 2007.
Outstanding GDR/ADR/or any convertible instruments, etc.

1,63,52,000 Global Depository Receipts [GDRs] (each GDR represents one underlying equity share of the face value of Re.1
each of the Company) were issued by the Company on 27.01.2006 and listed on the Luxembourg Stock Exchange. Outstanding GDRs as on 30.09.2007 represents 17800 equity shares constituting 0.01 % of the paid up equity capital of the Company.
Investors Correspondence
Mr. S.K. Agrawala, Company Secretary Balrampur Chini Mills Ltd. "FMC Fortuna", 2nd Floor, 234/3A, A.J.C. Bose Road Kolkata 700 020 Phone : 2287 4749 Email santoshk.agrawala@bcml.in
Plant Location
Unit 1 : Balrampur (Sugar, Cogeneration, Distillery and Bio-compost units), Dist: Balrampur, Uttar Pradesh. : Babhnan (Sugar, Cogeneration, Distillery & Bio-compost units), Dist: Gonda, Uttar Pradesh : Tulsipur (Sugar Unit), Dist: Balrampur, Uttar Pradesh : Haidergarh (Sugar and Cogeneration units), Dist. Barabanki, Uttar Pradesh. : Akbarpur (Sugar and Co-generation units), Dist. Ambedkarnagar, Uttar Pradesh. : Mankapur (Sugar, Co-generation, Distillery Bio-compost units), Dist: Gonda, Uttar Pradesh. : Rauzagaon (Sugar and Co-generation units) Dist: Barabanki, Uttar Pradesh. : Kumbhi (Sugar and Co-generation units), Dist: Lakhimpur-Kheri, Uttar Pradesh. : Gularia (Sugar & Co-generation units), Dist: Lakhimpur Kheri, Uttar Pradesh (under implementation).
Non-Mandatory Requirements:
i) The Company shall take a decision on the maximum tenure of Independent Directors on the Board of the Company at an appropriate time.
Unit 2
Unit 3
ii] The Company has set up a Remuneration Committee in May 2005. The Remuneration Committee recommends to the Board of Directors regarding remuneration payable to the Executive Directors and also administers the Employee Stock Option Scheme [ESOS]. iii) The quarterly/half-yearly results are published in the newspapers and hosted on the Companys website www.chini.com and EDIFAR website www.sebiedifar.nic.in. iv] The Company is always striving towards ensuring the unqualified financial statements. v] The Company has not yet adopted any system of training for its Board members or performance evaluation of its non-executive directors. vi] No resolution by postal ballot was passed during the last year.
Unit 4
Unit 5
Unit 6 and
Unit 7
Unit 8
Code of Conduct
The Company has adopted a code of conduct for its Board of Directors and Senior Management personnel and the same has been posted on the Companys website.
Unit 9
Declaration by the Managing Director on the Code of Conduct

Pursuant to Clause 49 of the Listing Agreement with stock exchanges, I, Vivek Saraogi, Managing Director of Balrampur Chini Mills Limited, declare that all the Board Members and Senior Executives of the Company have affirmed their compliance with the Code of Conduct during the year ended 30th September, 2007.
Kolkata 19th November 2007
CEO/CFO Certification
The Board of Directors Balrampur Chini Mills Limited Kolkata. Re : Financial Statements for the year ended 30th September, 2007 Certification by Managing Director and Director-cum-Chief Financial Officer. We, Vivek Saraogi, Managing Director and Kishor Shah, Director-cum-Chief Financial Officer, of Balrampur Chini Mills Limited, on the basis of the review of the financial statements and the cash flow statement for the year ended 30th September 2007 and to the best of our knowledge and belief, hereby certify that :1. These statements do not contain any materially untrue statements or omit any material fact or contain statements that might be misleading; 2. These statements together present a true and fair view of the Companys affairs and are in compliance with existing accounting standards, applicable laws and regulations. 3. There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year ended 30th September 2007 which, are fraudulent, illegal or violative of the Companys Code of Conduct. 4. We accept responsibility for establishing and maintaining internal controls for financial reporting. We have evaluated the effectiveness of the internal control systems of the Company pertaining to financial reporting and we have disclosed to the auditors and the Audit Committee those deficiencies in the design or operation of such internal controls of which, we are aware and the steps we have taken or propose to take to rectify these deficiencies. 5. We have indicated to the Auditors and the Audit Committee: (a) there have been no significant changes in internal control over financial reporting during this year. (b) there have been no significant changes in accounting policies during this year. (c) there have been no instances of significant fraud of which we have become aware and the involvement therein, of management or an employee having significant role in the Companys internal control systems over financial reporting.
Auditors Certificate
To the members of Balrampur Chini Mills Limited ended 30th September, 2007, as stipulated in Clause 49 of the Listing Agreement of the said company with the Stock Exchanges.
on Corporate Governance
We have examined the compliance of the conditions of Corporate Governance by Balrampur Chini Mills Limited for the year
The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of the opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, and the representation made by the directors and the management, we certify that the Company has complied with the conditions of corporate governance as stipulated in the above-mentioned Listing Agreement. As required by the guidance note issued by the Institute of Chartered Accountants of India, we have to state that as per the records maintained, there were no investors grievances remaining unattended/pending for more than 30 days as at 30th September, 2007. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company. For G. P. Agrawal & Co. Chartered Accountants
7A, Kiran Shankar Ray Road, Kolkata 700 001. 19th November 2007.
(Ajay Agrawal) Membership No. 17643 Partner
Section 212
Statement pursuant to Section 212 of the Companies Act, 1956, relating to the Companys interest in subsidiary company for the year ended 30th September, 2007
1 Name of the subsidiary company 2 The financial year of the subsidiary company ends on 3 Date from which they became subsidiary company 4 Holding companys interest : : : : Indo Gulf Industries Ltd. 30th September, 2007 30th August, 2007 4353365 equity shares of Rs.10 each fully paid-up and 809158 equity shares of Rs.10 each partly paid-up (Rs.5 paid-up per share) 5 Extent of holding 6 The net aggregate amount of the subsidiary company profit/ loss so far as it concerns the members of the holding company a Not dealt with in the holding companys accounts : i) For the financial year ended 30th September, 2007 ii) For the previous financial years of the subsidiary company since they became the holding companys subsidiary b Dealt with in the holding companys accounts: i) For the financial year ended 30th September, 2007 ii) For the previous financial years of the subsidiary company since they became the holding companys subsidiary : Not applicable : Nil : Not applicable : (Rs.88.04 lacs) : 53.96 %
S. K. Agrawala Secretary
Managements discussion and analysis

Industry structure and development
India is the worlds largest consumer and the second largest producer of sugar. Sugarcane is primarily grown in nine Indian states: Andhra Pradesh, Bihar, Gujarat, Haryana, Karnataka, Maharashtra, Punjab, Uttar Pradesh and Tamil Nadu. More than 45 million farmers and their families are dependent on sugarcane for their livelihood, while around 0.5 million workers are directly employed as agricultural labourers.
Besides contributing to the rural economy, the sugar industry has a significant impact on the environment. At one end, sugar can be potentially polluting if adequate safeguards are not taken; at the other end, sugar can be a responsible green business, self-sufficient in energy needs through the prudent utilisation of bagasse. The sugar industry is also the primary source of raw material for the production of ethanol and alcohol.
of the total Indian mills in operation, private mills for 41% and cooperative mills for 53%.
Consumption
A primary indicator for sugar consumption in any country is the measure of GDP growth. Following Indias 9.4% GDP growth in 2006-07, sugar consumption appears to be on a high growth path. The countrys sugar consumption has grown steadily at 3.5% over the last decade, touching a cumulative 20 mn tonnes during the year under review. While population recorded a CAGR of 1.4% since 1996, the per capita consumption of sugar averaged 2.1% growth during the same period. Traditionally, gur and khandsari have been the major alternatives to sugar in India. The country is finally at a stage when growth in sugar consumption is at the expense of these alternatives, suggesting a shift in consumption trends. The drawal rate indicating the use of sugarcane for sugar production as a percent of total sugarcane production was 68%, an all-time high. This has been a reversal in trend from the 1960s, when the drawal rate was a low 30%.
Production
A record sugar production of 28.3 mn tonnes in 2006-07, translated into an over-supply, pulling down sugar realisations. With an individual yield of more than one mn tonne, six out of the nine sugar producing states in the country accounted for around 94% of the total production during the year under review. Uttar Pradesh and Maharashtra were the top producers, accounting for 30% and 27% of the national production. State-wise production of sugar in India (in lakh tonnes) State 2005-06 (Final) Andhra Pradesh Bihar Gujarat Haryana Karnataka Maharashtra Punjab Tamil Nadu Uttar Pradesh Others Total Source: A USFDA report The sugar industry is cyclical, influenced by climatic variations, water availability and pest attack; each cycle runs for around four to six years in India. Indias sugar manufacturing mills are of three types public, private and cooperative. Public mills account for around 6% 12.4 4.2 11.7 4.1 19.4 52.0 3.4 21.4 57.8 6.3 192.6 2006-07 (Revised) 16.8 4.5 14.2 6.5 26.6 90.9 4.9 25.7 84.8 8.1 283.0 2007-08 (Forecast) 17.0
Of the total sugar sold in the free market, around 61% is 4.5 14.3 6.5 26.7 92.0 5.0 26.0 85.5 8.5 286.0 Low income households with a monthly earning of less than Rs. 5,000 consume around 4.51 mn tonnes of sugar every year or 25.8% of the total non-levy sugar consumption. High income households, with a monthly income of above Rs. 5,000, account for an estimated 2.24 mn tonnes of annual consumption with a share of 12.8%. The industrial consumer segment consumed around 5.26 mn tonnes of sugar in 2006-07, claiming a 30% share of the total non-levy sugar consumption. The small business segment accounts for an estimated 5.51 mn tonnes with a 31.5% share. accounted for by the industrial and small business segments, also referred to as indirect consumption. The household segment, which consumes sugar directly, accounts for an estimated 39% of the total free sale (non-levy) sugar consumption. The total non-levy consumption is estimated at 17.52 mn tonnes [Source: KPMG report].
While dairy, confectionery, bakery and beverages account for around 75% of industrial consumption, amounting to 1.27 mn tonnes (in 2006-07), sweetmeat manufacturers claim around 58% share of sugar requirements by small businesses.
was the lowest in 2006-07. The global sugar industry also witnessed a downturn during the year under review, thanks to a bumper cane crop in Brazil, Thailand and other major sugar producing countries. Sugar prices across the globe weakened, making exports from India unviable. As a result, only 5% of the countrys total sugar production was shipped abroad in 2006-07.
Price trends
While excessive government regulations have led to unabated rise in sugarcane prices, they have succeeded partly in smoothening price volatility for sugar. Following stock correction in 2003-04, domestic sugar prices looked up until mid-2006. Consequently, ex-factory realisations in Uttar Pradesh increased from around Rs. 11,500 per tonne in 2002-03 to around Rs. 18,000 per tonne by June 2006. However, sugar prices plunged from October 2006 onwards due to surplus production, pulling realisations down to around Rs. 16,000 per tonne in the first quarter of 2006-07 and then to around Rs. 14,500 per tonne in the second quarter, touching a low of Rs. 12,500 in the third quarter. It strengthened thereafter to a firmer Rs. 13,500 per tonne following the governments announcement of creating a 5 mn tonne buffer stock.
Global perspective
According to International Sugar Organisation predictions, India is poised to outstrip Brazil as the world's biggest sugar producer in 2007-08. While India's production in 2007-08 is pegged at 28.6 mn tonnes in raw value, it is anticipated that Brazil, too, will enjoy a record production, though global industry expansion is expected to be sluggish in 2008. The 2006-07 sugar year (October to September) saw the international sugar markets driven by complex dynamic trends of demand and supply as well as policy forces. With sugar stocks being built up, prices remained under pressure.
Trade
Domestic trade: Sugar is consumed widely across the
country. The nine sugar-producing states supply to the rest of India. The movement of sugar has always been from the surplus states to the nearby deficient once. For instance, while Karnataka and Tamil Nadu supply sugar to Kerala, Maharashtra and Gujarat, Uttar Pradesh supplies to western and central states. Uttar Pradesh, Punjab and Haryana supply sugar to the entire North India, while Uttar Pradesh, Karnataka, Andhra Pradesh and Tamil Nadu supply sugar to the eastern and north eastern regions of the country.
World sugar stock estimates

World sugar balance
2006/07 (million tonne, raw value) 2005/06 Change in in mn tonne % 10.542 6.93 3.647 2.43
Production Consumption Surplus / Deficit Import demand Export availability End stocks Stocks/Consumption ratio in% Source: ISMA
162.621 153.506 9.115 44.438 47.492 65.825 42.88
152.079 149.859 2.220 46.676 46.689 59.764 39.88
-2.238 -4.79 0.803 1.72 6.061 10.14
International trade: The Indian sugar industry has been

both, an importer and exporter. In times of deficit, India imported sugar from Brazil, Australia and South Africa. In times of surplus, India exported to EU, Persian Gulf, Somalia, Sri Lanka, Indonesia and Bangladesh; there have also been instances of India exporting and importing sugar from Pakistan. Owing to an excessive production, domestic prices were relatively low; with a high tariff placed on low-priced imports by the government, international trade
The global sugar landscape continued to be highly influenced by Brazil, thanks to its status as the lowest-cost producer and largest exporter. Apart from this, change in
the perception of ethanol from a downstream by-product to a mainstream product had a significant influence on the global sugar market. Worldwide, the sugar industry is highly regulated and this is largely due to the perishable nature of cane, the need to influence domestic prices and the landholding structure. There is however, a difference in the instruments of regulation, which vary across geographies.
Production
During the sugar year 2006-07, global sugar production was pegged at 150 mn tonnes with a CAGR of 1.5%. While Brazil, China and the US continued to be the major sugar producers, accounting for nearly 45% of the total sugar production, the European Union collectively produced around 14%. The year under review saw Brazil retaining its status as the largest producer of sugar, successfully raising its production at a CAGR of 5.7% since the deregulation in 1999-2000. India kept up the second spot during the tenure, except in years of natural adversity.
Asia looks the most promising in terms of consumption growth (nine-year CAGR) at 3.05%, followed by Africa at 3.01%.
Consumption
During the year under review, global sugar consumption was 149 mn tonnes. While India continued to remain the largest consumer, it was closely followed by China, Brazil, the US and the Russian Federation. Since the sugar consumption in China, India and Brazil is outgrowing the global average of 2.2%, these geographies are expected to play a larger role in the global sugar trade. Overall, Asia looks the most promising in consumption growth (nine-year CAGR) at 3.05%, followed by Africa at 3.01% (indicated below): Growth in global sugar consumption population. The growth in developed economies like North America and Europe were the lowest at 0.76% and 0.62%. Given that the largest producers of sugar, except for the EU, are also in these regions, it is expected that these geographies will play a major role in the future.
Trade
In a dynamic trading environment, the major sugar producers are also the leading exporters. The world sugar trade accounts for around 36% of the global sugar production, with India a marginal player. In 2006-07, the average volume of preferential trade was estimated at 10 mn tonnes. The major players in the sugar trade are Brazil, the EU, Australia and Thailand. Major sugar exporters
Source KPMG report This rise in sugar consumption has been particularly aided by high growth in domestic economies and an increasing Source KPMG report
Going forward, weather conditions and international crude oil price trends (which will influence the extent of cane
Currently, the cumulative exportable power generated by the Indian sugar industry has been established at 847 MW with co-generation, clearly enjoying a proven revenue potential under the Clean Development Mechanism (CDM)-based carbon credits.
diversion to ethanol) will remain key determinants of the global sugar stock and price trends.
Global sugar outlook

Recent sugar reforms in the European Union could turn the EU into a net importer with compensation paid to its farmers and displaced processing facilities. High oil prices and related ethanol boom places Brazil at the epicentre of market developments. As for the US, corn sweetener and sugar markets are being integrated with Mexico under NAFTA. Among developing countries, low-cost producers will benefit from a liberalised trading environment, while others are likely to be affected by the loss of preferential markets.
By-products
The sugar industry in India has diversified into multiple products with the objective to enhance realisations at every stage of cane crushing. While molasses, bagasse and
Price trends
Global raw and refined sugar prices usually move in sync with an average differential of USD 60 between raw and refined realisations. The world sugar realisations were highly influenced by Brazil. Driven by a combination of factors which included high crude oil prices (resulting in a diversion of cane crop to ethanol, phase out of export subsidies by the European Union, increased consumption and lower production in key countries like India, white sugar prices firmed up to around USD 480 per tonne by June 2006. However, since the beginning of sugar year 2006-07, international prices reversed. Higher production in major sugar producing countries, especially Brazil and India, resulted in white sugar prices declining to around USD 325 by 2007. Large sugar exporters typically generate higher margins from domestic sales compared with exports. Government interventions and regulations help maintain high domestic prices in these countries compared with global prices, a key feature of global sugar trade. India is unique in this respect thanks to its low reliance on exports, it maintains one of the lowest retail prices among the key geographies.
pressmud continue to be primary by-products, ethanol and exportable power are emerging as mainstream sources of revenue. The significant increase in cane production during 2006-07 adversely affected the pricing of by-products like molasses and bagasse. In this scenario, integration became critical for mill profitability as power and alcohol (including ethanol) prices were relatively less variable, partly because of government and regulatory support. For instance, power tariffs remained at Rs. 3 per unit in the major sugar producing states, while ethanol cost Rs. 21.5 per litre. In adverse years, co-generation and ethanol contributed significantly to the bottomline of sugar companies.
Co-generation
A visible industry trend is bagasse-based co-generation (exportable power) after meeting a companys captive power and steam requirements. The realisations from exportable power are influenced by long-term power purchase agreements with the respective state governments and power companies. Currently, the cumulative exportable power generated by the Indian sugar industry has been
established at 847 MW enjoying a proven revenue potential under the Clean Development Mechanism (CDM)-based carbon credits.
World ethanol production Country Brazil Per cent share 36 32 9 5 6 2 1 1 8
Indian co-generation status States Tamil Nadu Karnataka Uttar Pradesh Andhra Pradesh Punjab Source: KPMG report Per cent 29 25 27 18 1
USA China India EU Russia South Africa Saudi Arabia Others Source: KPMG report
Alcohol
Potable alcohol and fuel ethanol are by-products manufactured from molasses. Fuel ethanol is generally used as a substitute for gasoline; its corresponding realisations are dependant on the government-mandated price which, in turn, is paid by oil marketers. Fuel ethanol is eco-friendly like bio-diesel and enjoys the potential to generate revenues through carbon credits. Another positive development on the ethanol front was a 5% doping of petrol with ethanol, made mandatory from October 2006. Oil marketing companies started sourcing ethanol from distilleries to counter various operating and legal hurdles like inter-state movements of alcohol and molasses and sales tax disputes. While 5% blending was only implemented in selective states, the government increased the blending ratio to 10% across all states (barring Jammu and Kashmir, North-east India, Andaman and Nicobar Islands and Lakshadweep) from October 2008. A uniform purchase price of Rs. 21.50 per litre, ex-factory, is recommended for the supply of ethanol, to be implemented all over the country in three years.
Among the by-products of sugar ethanol and bagasse (power) ethanol has the most encouraging impact on sugar trade. Ethanol represents an alternative use for cane; it can be manufactured from cane directly or as a by-product of sugar manufacture. Major sugar producing countries like Brazil adopted a dynamic and balanced product mix between sugar and ethanol, which enabled it to respond to global shifts in the demand and supply, fuelling changes in the perception of ethanol from a downstream product to a mainstream product. Countries like Brazil, the US, Canada and France are producing ethanol and formulating ethanol programmes. The impact of ethanol on sugar is set to intensify with key geographies like Japan, South Korea, Australia, EU nations, India and Argentina on the path to ethanol adoption. These programmes address environmental concerns by reducing an overdependence on the highly price-volatile crude oil.
Opportunities and Threats

Sugar mills in India were able to crush higher quantities of sugarcane in 2006-07, optimising the utilisation of sugarcane crushing capacities. The production far exceeding the demand created
Ethanol
Sugarcane is the primary raw material for ethanol; the major sugar producing countries are also major ethanol producers. Consider this: Brazil and the US together produce more than 68% of the global ethanol production.
excess inventory in the sugar industry and reduced sugar prices substantially, leading to losses for manufacturers. During the year, the central government mandated a compulsory 5% blending of ethanol with petrol. This is expected to go up to 10% by 1st October, 2008.
This move will provide value-addition to its by-product molasses. A higher availability of sugarcane would provide higher quantity of bagasse and molasses for higher production of power and alcohol. Any restriction on export of sugar as was done by the government in July 2006, may result in a decrease in the prices of sugar.
next 10 years while the Planning Commission estimates that the demand for sugarcane will record a CAGR of 3.6% between 2006 and 2011. Assuming a growth rate of 4%, the projected domestic sugar consumption is estimated at 28.5 million MT in 2017. Ethanol being a green fuel, the government has made the blending of petrol with ethanol mandatory. The blend ratio has been increased from 5% to 10% across most states, which is likely to double the demand for ethanol from the present 50 crore litres. The government is actively encouraging the generation of renewable power through co-generation in line with its Power for all by 2012 policy. Considering that the peak deficit in Uttar Pradesh is around 9%, there exists a big opportunity for UP-based sugar companies to supply power to the State Grid.
Segment-wise performance
Sugar: Sugar represented the largest income source for
BCML, contributing 80.98% to the turnover in 2006-07# (88.12% in 2005-06).
Alcohol: Alcohol contributed 9.11% to the Companys

turnover in 2006-07# (6.77% in 2005-06).
Power: Power contributed 9.85% to the Companys

turnover in 2006-07# (5.06% in 2005-06).
Bio-fertilisers: Bio-fertilisers contributed 0.05%

to the Companys turnover in 2006-07# (0.06% in 2005-06).
Cyclicality Risk
Indian sugar companies are prone to induced cyclicality, with higher cane prices, in spite of falling sugar realisations, adversely affecting profitability.
Segment-wise revenues Products Sugar Alcohol Power Others Total
(Rs. in crore) Risk response To minimise the cyclicality risk, the Company has progressively invested in business integration for the last four years. This has helped to diversify its product portfolio and has generated steady revenues from additional streams like distillery and co-generation apart from sugar. Besides, the implementation of a uniform cane policy, linking cane prices to sugar prices, will diminish the risk of induced cyclicality.
2003-04 2004-05 2005-06# 2006-07 647.37 119.34 40.30 1.26 808.27 692.56 191.20 48.02 0.77 932.55 1757.71 1199.83 134.96 100.93 1.17 134.99 145.97 0.78
1994.77 1481.57
#18-month period; year ended on 30th September, 2006
Outlook
This section has been discussed in detail in the Directors Report.
Industry Risk
The downturn in the Indian sugar industry may continue. Risk response A uniform cane pricing policy linking the cane price to the end-product price, when implemented, will substantially improve the health of sugar companies. An excess inventory owing to surplus production and corresponding price risks can also be managed by hedging, which calls for managing a VaR of Rs. 3,000 crore as well as a greater use of commodity exchanges like NCDEX and MCX, leading to a lower variability in cash flows and price
Risks and Concerns

Demand Risk
A decline in the domestic demand for sugar, ethanol and power might pose a threat for Indian sugar manufacturers. Risk Response According to estimates by FAPRI, domestic consumption in India is expected to witness a CAGR of 1.9% over the
risk. This is particularly effective for sugar as sugar contracts are actively traded on the commodity exchanges, which have adopted various checks and controls to ensure a completely fair market.
Regulatory Risk
The policies of the government may not be conducive to the growth and development of the Indian sugar industry, particularly in a difficult year. Risk response The government has decided to assemble buffer stocks of five million tonnes of sugar, responding to industry demands to reduce excess supply. The government has also provided an export incentive between Rs. 1,350 and Rs. 1,450 per tonne of sugar to mills to be paid out of the governments Sugarcane Development Fund (SDF). Some state governments have announced tax relief measures and subsidies to mills to encourage timely payments to cane farmers and for late-season crushing. In addition, transport subsidies are also declared for each metric tonne of sugar transported from the fields to the sugar mills, which is paid from the state government funds.
According to estimates by FAPRI, domestic consumption in India is expected to witness a CAGR of 1.9% over the next 10 years
In 2006-07, nearly 5% of the total sugar production in India was exported. At present, nearly 2.5 million tonnes are exported under advanced licensing scheme and open general scheme with effect from January 2007. Moreover, the Government of India has also announced an export incentive scheme to encourage exports.
Export Risk
Exports are primarily used to manage the surplus and deficit in the domestic markets of countries where internal consumption is equally high. Adverse national or foreign policies and the location of the country might pose a disadvantage to sugar exports in India. Risk response India is a major white sugar producer and exporter, being close to the under-provided markets of Indonesia, Bangladesh, Sri Lanka, and Pakistan. The WTO enforcement has resulted in a decline in sugar exports from the EU, vacating around 4.5 million MT of exports from the world market and creating export opportunities for countries like India. Moreover, the country is situated in a favourable location resulting in a comparative freight advantage while exporting raw sugar to the sugar-deficient countries of the Middle East like Saudi Arabia, the UAE and some East African countries.
Business Model Risk

The Companys business model may not be effective in a year of sugar downturn. Risk response Balrampur follows an integrated model which mitigates the inherent risk of cyclicality in the sugar business. The success of its business model was evident in 2006-07, a year of industry recession. The loss in the sugar business was offset to a certain extent through stable revenues from the cogeneration and distillery businesses. Riding on the favourable scenario in the ethanol and power segments, the Company commissioned new distilleries and cogen plants during the year under review. These will significantly contribute to the bottomline and margins in the years to come.
Working Capital Risk

The sugar sector is working-capital intensive. The continued
During the year under review, there was no change in the capital reserve, security premium reserve, capital redemption reserve and revaluation reserve. The free reserves of the Company at the end of 2006-07 stood at Rs. 837.14 crore and comprised nearly 99.74% of
Of the total debtors of the Company, Rs. 42.32 crore of debt (comprising 91.64% of total debts) was less than six months old.
the total reserves and surplus.
Loan Profile
The borrowed funds of the Company increased by 134.96%, from Rs. 547.40 crore in 2005-06 to Rs. 1286.15 crore in 2006-07. Secured loans comprising 94.12% of the total loans, increased from Rs. 416.52 crore in 2005-06 to Rs. 1,210.59 crore in 2006-07, while unsecured loans declined from Rs. 130.88 crore to Rs. 75.56 crore during the same period. The Company took term loans primarily to finance the setting up of greenfield sugar complexes at Kumbhi and Gularia and for expansion at other units during the year under review. During 2006-07, BCML raised external commercial borrowings from DBS Bank Ltd (Rs. 66.51cr),
slump in the industry may adversely affect the Companys ability to manage its working capital requirements. Risk response The Company will manage the enhanced requirement of working capital by means of expected increase in working capital limits from banks. Apart from this it is also raising long-term funds to the tune of Rs. 159.16 crore through the issue of equity shares to promoters on preferential basis.
Standard Chartered Bank (Rs. 43.72 crore), UCO Bank (Rs. 41.21 crore), Coopertive Centrale Raiffesisen Boerenleenbank, B.A (Rs. 89.28 crore), International Finance Corporation, Washington (Rs. 162.12 crore), State Bank of India (Rs. 141.70 crore), ABN Amro Bank (Rs.60.01 crore) and Citi Bank (Rs. 44.20 crore). ICRA revised the Companys rating of the Company from A1+ to A1, keeping the industry scenario and the prevailing financials in mind.
Financial Performance
Capital Structure
The Companys equity capital stood at Rs. 24.81 crore comprising 24,81,54,660 equity shares of Re. 1 each (fully paid up). There was no fresh equity dilution during the year under review.
Capital Employed
The capital employed by the Company in the business increased by 48.22% from Rs. 1,448.58 crore in 2005-06 to Rs. 2,147.10 crore in 2006-07, mainly on account of investments in fixed assets. The Companys fixed assets (net) as a proportion of total capital employed was at 89.42% at the end of the year. During the year under review, the Companys ROCE declined significantly from 40.12% to 5.52%.
Reserves and Surplus

At BCML, reserves and surplus declined from Rs. 881.00 crore in 2005-06 to Rs. 839.35 crore in 2006-07, on account of a loss of Rs. 41.84 crore. The loss reported by the Company was primarily on account of higher sugarcane price under the SAP regime and low sugar price owing to large production in the country.
Gross Block and Depreciation

The gross block of the Company increased in absolute terms from Rs. 1,338.59 crore in 2005-06 to Rs. 1,970.32 crore
in 2006-07, a growth of nearly 47.19%. This can be attributed to the installation of a new plant and machinery at Kumbhi, Gularia and Rauzagaon during the year. The Company continued to upgrade infrastructure and technology across all its manufacturing facilities. The Company provided Rs. 80.21 crore on account of depreciation in line with the Straight Line Method during the year under review.
every stage of its production and dispatch cycle to ensure strict operational and quality compliance. An audit committee, headed by a Non-Executive Independent Director, periodically reviews the audit observations
Human Resources
Balrampur believes that people represent its primary asset. The Company strives to provide a fair, empowered and merit-based workplace with scope for continuous learning, enriching competencies among employees and accelerating corporate growth. During the year under review, the Company had total employee strength of 4967 people across its plants and offices. The Company was also actively engaged in imparting
Investments
Cumulative investments at BCML increased from Rs. 0.21 crore in 2005-06 to Rs. 3.43 crore in 2006-07, mainly on account of a 53.96% stake acquired in Indo-Gulf Industries for Rs. 3.21 crore.
Sundry Debtors
Owing to improved receivables management, the debtors at BCML declined from Rs. 55.68 crore in 2005-06 to Rs. 46.18 crore in 2006-07. Of the total debtors of the Company, Rs. 42.32 crore of debt (comprising 91.64% of total debts) was less than six months old.
functional and attitudinal training to all levels of employees to ensure maximum productivity. The other initiatives taken to manage the growing human resource base include a regularised recruitment process, a fair and unbiased performance appraisal system along with an in-built feedback system. During the year under review, the Company created a compensation structure that provides members with both tangible and intangible benefits.
Loans and Advances

Loans and advances comprised 32.61% of the Companys current assets. Loans and advances made by the Company increased from Rs. 203.06 crore in 2005-06 to Rs. 239.90 crore in 2006-07. The increase was primarily due to an increase in payments made towards excise duty and cane purchase tax advances to the extent of Rs. 29.21 crore over the previous year and loan to subsidiary company amounting to Rs.70.33 crore.
Cautionary Statement
Statements in this Management Discussion and Analysis Report may be "forward looking statements" within the meaning of applicable securities laws and regulations. These statements are based on certain assumptions and expectations of future events. Actual results could differ materially from those expressed or implied. Important facts that could make a difference to the Companys operations include economic conditions affecting global and domestic demand-supply, raw-material costs and availability, changes in Government regulations, tax regimes, economic developments within India and other factors such as litigation and industrial relations, the Company assumes no responsibility to publicly amend, modify or revise any forward looking statement, on the basis of any subsequent developments, information or events.
Internal Control Systems

The Company has stringent as well as comprehensive internal control systems and procedures in place to prevent the unauthorised use of its products and to ensure optimal and efficient utilisation of resources. The internal controls are evident right from the selection of crops, the purchase, storage and logistics to the sale of the final product. The Company conducts both regular and extensive checks at
Financial section
Auditors Report
To the members of Balrampur Chini Mills Limited
1. We have audited the attached Balance Sheet of BALRAMPUR CHINI MILLS LIMITED as at 30th September, 2007 and the relative Profit and Loss Account and the Cash Flow Statement for the year ended on that date, all of which we have signed under reference to this report. These financial statements are the responsibility of the management of the Company. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We have conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditor's Report) Order, 2003 (as amended), issued by the Central Government of India in terms of section 227(4A) of the Companies Act, 1956 (the Act) and on the basis of such checks as we considered appropriate and according to the information and explanations given to us, we set out in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that: a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books. 7A, Kiran Shankar Ray Road, Kolkata 700 001 19th November, 2007 Ajay Agrawal Membership No. 17643 Partner f) c) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account. d) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report have been prepared in compliance with the applicable accounting standards referred to in Section 211 (3C) of the Act. e) On the basis of written representations received from the Directors, as on 30th September, 2007 and taken on record by the Board of Directors of the Company, none of the Directors is disqualified as on 30th September, 2007 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Act; In our opinion and to the best of our information and according to the explanations given to us, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement together with the Notes thereon and attached thereto, give in the prescribed manner the information required by the Act and give a true and fair view in conformity with the accounting principles generally accepted in India: i) in the case of the Balance Sheet, of the state of affairs of the Company as at 30th September, 2007, ii) in the case of the Profit & Loss Account, of the LOSS for the year ended on that date, and iii) in the case of the Cash Flow Statement, of the Cash Flows for the year ended on that date. For G. P. Agrawal & Co. Chartered Accountants
Annexure to the Auditors Report

Statement referred to in our report of even date to the members of BALRAMPUR CHINI MILLS LIMITED on the accounts for the year ended 30th September, 2007.
i) a) The Company has maintained proper records showing full particulars including quantitative details and situation of its fixed assets. b) As explained to us, the Company has a programme of physically verifying all its fixed assets once in a period of three years, and in accordance therewith, major portion of fixed assets were physically verified by the management during the year. In our opinion, the frequency of verification is reasonable having regard to the size of the Company and nature of its assets. The discrepancies noticed on such verification were not material and have been properly dealt with in the books of account. c) During the year, the Company has not disposed of substantial part of its fixed assets. a) The inventories have been physically verified during the year by the management at reasonable intervals except stock lying with outside parties for which confirmation has been obtained. b) In our opinion and according to the information and explanations given to us, the procedure of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the Company and nature of its business. c) On the basis of our examination, we are of the opinion that the Company is maintaining proper records of inventory. No material discrepancies were noticed on verification between the physical stocks and the book records. a) The Company has not granted any loan, secured or unsecured, to companies, firms or other parties covered in the register maintained under section 301 of the Act. b) As the Company has not granted any loan, secured or unsecured, to companies, firms or other parties covered in the register maintained under section 301 of the Act, clauses (iii) (b) to (iii)(d) of paragraph 4 of the said order are not applicable to the Company. c) The Company has not taken any loan, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Act. d) As the Company has not taken any loan, secured or unsecured, from companies, firms or other parties covered in the register maintained under section 301 of the Act, clauses (iii) (f) and (iii) (g) of paragraph 4 of the said order are not applicable to the Company. iv) On the basis of information and explanation given to us, we are of the opinion that the Company has an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. a) Based on the audit procedure applied by us and according to information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Act have been entered in the register required to be maintained under that section. b) In our opinion and according to information and explanation given to us, the transactions made in pursuance of such contracts have been made at prices which are reasonable having regard to prevailing market prices at the relevant time. The Company has not accepted any deposit within the meaning of section 58A, 58AA or any other relevant provisions of the Act and the rules framed there under.
v)
ii)
vi)
vii) In our opinion, the internal audit system of the Company is commensurate with the size of the Company and nature of its business. viii) We have broadly reviewed the books of account maintained by the Company in respect of products where pursuant to the rules made by the Central Government, the maintenance of cost records has been prescribed under section 209(1)(d) of the Act and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We, however, as not required, have not made a detailed examination of such records. ix) a) On the basis of our examination, the Company is regular in depositing undisputed statutory dues including Provident Fund, Income Tax, Sales Tax, Service Tax, Custom Duty, Excise Duty, Cess, Investor Education and Protection Fund, Wealth Tax and other statutory dues with appropriate authorities and no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 30th September, 2007 for a period of more than six months from the date of becoming payable. On the basis of our information, the provisions of Employees State Insurance Act are not applicable to the Company. b) The disputed statutory dues aggregating to Rs. 1052.65 lacs that have not been deposited on account of matters pending before appropriate authorities are as under:
iii)
Sl. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.
Name of the statute Central Excise Act, 1944 Central Excise Act, 1944 Central Excise Act, 1944 Central Excise Act, 1944 Central Excise Act, 1944 Central Excise Act, 1944 Central Excise Act, 1944 Central Excise Act, 1944 U.P. Sheera Niyantran Adhiniyam, 1964 U P Trade Tax Act, 1948 U P Trade Tax Act, 1948 U P Trade Tax Act, 1948 U P Trade Tax Act, 1948 U P Trade Tax Act, 1948 U P Trade Tax Act, 1948 Tax on Entry of Goods Act, 1999
Nature of dues Excise Duty Excise Duty Excise Duty Excise Duty Excise Duty Excise Duty Excise Duty Excise Duty Adm. Charges on Molasses Sales Tax Sales Tax Sales Tax Sales Tax Sales Tax Sales Tax Entry Tax Total
Period to which pertain 1995 1996 1998 to 2000 2005 2006 2003 2000 2003 2005 2005 1996 1990 1998 1999 1999 1999 2000 2001 to to to 2004 2003 2004 2006 2006 2007 1991 1999 2000 2000 2000 2003 2002
Amount Forum (Where the (Rs. Lacs) dispute is pending) 7.96 Commissioner of Central Excise. 1.82 Joint Commissioner of Central Excise. 4.80 Assistant Commissioner of Central Excise. 6.57 Tribunal. 20.20 Supreme Court. 1.03 Commissioner of Central Excise. 2.82 Commissioner of Central Excise. 20.88 CESTAT. 971.19 High Court. 0.22 1.26 1.39 2.04 0.34 0.65 9.48 1052.65 High Court. Joint Commissioner (Appeals). Joint Commissioner (Appeals). High Court. High Court. Joint Commissioner (Appeals). Tribunal.
x)
The Company has no accumulated losses and has not incurred any cash loss during the year covered by our audit or in the immediately preceding financial period. The Company has not defaulted in payment of dues to a financial institution or bank or debentureholders.
xi)
xvii) According to the information and explanation given to us and on and overall examination of the Balance Sheet of the Company, we report that no funds raised on short term basis have been used for long term purposes. xviii) The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act. xix) The Company has not issued any secured debentures. xx) The Company has not raised any moneys by public issue during the year covered by our audit report. xxi) In our opinion and according to the information and explanation given to us, no fraud on or by the Company has been noticed or reported during the year that causes the financial statements materially misstated. For G. P. Agrawal & Co. Chartered Accountants
xii) The Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures or other securities. xiii) The provisions of any special statue applicable to Chit Fund, Nidhi or Mutual Benefit Society are not applicable to this Company. (xiv) The Company is not dealing or trading in shares, securities, debentures or other investments. However, the investments made by the Company in shares and other securities are held by the Company in its own name. xv) According to the records of the Company and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions. xvi) On the basis of our examination and according to the information and explanation given to us, the term loans have been applied for the purpose for which the loans were obtained.
7A, Kiran Shankar Ray Road, Kolkata 700 001 19th November, 2007
Balance Sheet
As at 30th September, 2007 (Rupees in Lacs)

Schedule As at 30th September, 2007 As at 30th September, 2006
I.
SOURCES OF FUNDS 1. Shareholders' Funds a) Share Capital b) Reserves & Surplus 2. Loan Funds a) Secured Loans b) Unsecured Loans 3. Deferred Tax Liability (Net) C D E 121059.36 7556.00 128615.36 12324.45 227356.36 41651.75 13088.24 54739.99 11926.77 157249.27 A B 2481.55 83935.00 86416.55 2481.55 88100.96 90582.51
II. APPLICATION OF FUNDS 1. Fixed Assets a) Gross Block b) Less: Depreciation c) Net Block d) Capital Work-in-progress Net Fixed Assets 2. Investments 3. Current Assets, Loans & Advances a) Current Assets b) Loans & Advances c) Less: Current Liabilities & Provisions Net Current Assets 4. Miscellaneous Expenditure & Losses (To the extent not written off or adjusted) 227356.36 Significant Accounting Policies Notes on Accounts S T 157249.27 K H I J 49566.05 23989.66 73555.71 38860.76 34694.95 321.19 26972.49 20305.58 47278.07 23706.37 23571.70 464.28 F G 197031.69 38252.48 158779.21 33218.00 191997.21 343.01 133859.12 30192.29 103666.83 29525.32 133192.15 21.14
Schedules 'A' to 'K', 'S' & 'T' referred to above form an integral part of the Balance Sheet.
This is the Balance Sheet referred to in our report of even date. For G. P. Agrawal & Co. Chartered Accountants
Ajay Agrawal Membership No. 17643 Partner 7A, Kiran Shankar Ray Road Kolkata - 700 001 19th November, 2007
Profit and Loss Account
For the year ended 30th September, 2007 (Rupees in Lacs)

Schedule Year ended 30th September, 2007 147632.44 8460.54 L M N 18 Months ended 30th September, 2006 198976.71 9134.77
INCOME Gross Turnover Less: Excise Duty Net Turnover Other Income Increase/ (Decrease) in Stock Profit/ (Loss) from Farm Account EXPENDITURE Cost of Raw Materials Consumed Purchase of Finished Goods Salaries, Wages & other Employees' Benefits Other Manufacturing & Administrative Expenses Selling Expenses Managerial Remuneration Interest & Other Financial Charges Depreciation Transfer to Storage Fund for Molasses
139171.90 1022.86 21360.32 (2.07) 161553.01 128099.05 7528.63 14744.35 872.00 359.54 5441.73 8021.99 22.46 165089.75 (3536.74)
189841.94 681.02 (28124.14) 0.58 162399.40 82731.55 11315.11 6659.82 13447.47 1044.13 533.03 3450.78 6709.28 19.33 125910.50 36488.90
II
O P Q R
III Profit/ (Loss) before Tax (Add)/Less: Provision for Tax Current Tax Fringe Benefit Tax Deferred Tax IV Profit/ (Loss) after Tax Balance brought forward V Profit/ (Loss) available for appropriation VI APPROPRIATIONS Interim Dividend on Equity Shares Proposed Final Dividend on Equity Shares Corporate Tax on Dividend General Reserve Balance Carried to Balance Sheet
(186.00) (64.00) (397.68)
(647.68) (4184.42) 575.99 (3608.43) (3608.43) (3608.43) (1.69)
5491.00 86.00 1753.08
7330.08 29158.82 520.70 29679.52 4963.08 3722.32 1218.13 19200.00 575.99 29679.52 12.19
Basic and diluted earnings per share of Re. 1/- each (Refer Note - 14 of schedule- "T" ) Significant Accounting Policies S Notes on Accounts T Schedules 'L' to 'T' form an integral part of the Profit and Loss Account.
This is the Profit and Loss Account referred to in our report of even date. For G. P. Agrawal & Co. Chartered Accountants
Cash Flow Statement

A

Year ended 30th September, 2007
(Rupees in Lacs)
18 Months ended 30th September, 2006 36488.90 6709.28 214.64 3450.78 (32.86) (1.24) 164.73 43.33 36.72 263.77 19.33 (16482.77) 26862.01 2903.97
CASH FLOW FROM OPERATING ACTIVITIES Net Profit before tax and extra ordinary items Adjustments for: Depreciation Share Issue Expenses written off Interest (Net) Dividend received Profit on sale of Investments (Net) Loss on sale/discard/impairment of Fixed Assets Exchange Rate Fluctuation (Net) Employee Stock Option Expense Provision for liabilities Transferred to Storage Fund for Molasses Operating Profit before working capital changes Adjustments for: Trade and other receivables Inventories Trade payable Cash generated from operations Direct Taxes (paid) /received Cash Flow before extra ordinary items Extra ordinary items Net Cash Generated/(used) - operating activities CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets Sale of Fixed Assets Purchase of Investments Sale of Investments Loan given to a Subsidiary Dividend received Interest received Net cash Generated/(used) - investing activities CASH FLOW FROM FINANCING ACTIVITIES Proceeds from Issuance of Equity Share capital (Net) Proceeds from long term borrowings Repayment of long term borrowings Proceeds from other borrowings Interest paid Dividend paid Net cash Generated/(used) - Financing Activities Net Increase/(Decrease) in Cash & Cash Equivalents (A+B+C) Opening Cash and Cash Equivalents Closing Cash and Cash Equivalents
(3536.74) 8021.99 143.09 5441.73 (1.44) 51.60 (306.66) (4.00) 22.46 3940.05 (23464.23) 16012.69
13368.77 9832.03
10868.48 47357.38
(3511.49) 6320.54 3358.42 9678.96 9678.96
13283.21 60640.59 (4869.23) 55771.36 55771.36
(67097.56) 218.92 (8928.00) 8606.13 (7033.68) 1.44 441.59 66723.36 (6757.45) 14216.10 (5815.47) (4244.38)
(73791.03)
(85000.22) 254.44 (43509.09) 48015.80 32.86 34.28 21542.16 23857.94 (8473.85) 672.44 (3577.69) (9888.15)
(80171.93)
64122.16 9.96 1348.37 1358.33
24132.85 (267.72) 1616.09 1348.37
Notes : 1) The above Cash Flow Statement has been prepared under the ''Indirect Method'' as set out in the Accounting Standard - 3 on Cash Flow Statement issued by the Institute of Chartered Accountants of India. 2) Figures in bracket represent cash outflow. (Rupees in Lacs) 3) Cash and Cash equivalents at the end of the year consist of: Year ended 30th 18 Months ended 30th September, 2007 September, 2006 a) Cash and Cheques in hand 559.86 816.08 b) Balances with banks in Current Accounts 798.01 531.83 c) Balances with Post office in Saving Bank Accounts 0.46 0.46 1358.33 1348.37
This is the Cash Flow Statement referred to in our report of even date. For G. P. Agrawal & Co. Chartered Accountants
Schedules forming part of the accounts

As at 30th September, 2007
(Rupees in Lacs) As at 30th September, 2006
A SHARE CAPITAL
Authorised 40,00,00,000 25,00,000 Equity Shares of Re. 1/- each Preference shares of Rs. 100/- each 4000.00 2500.00 6500.00 2481.55 2481.55 4000.00 2500.00 6500.00 2481.55 2481.55
Issued, Subscribed and Paid up 24,81,54,660 Equity Shares of Re. 1/- each fully paid up
Notes: 1) 15,55,39,650 Equity Shares have been issued and allotted as fully paid up Bonus Shares by capitalisation of Security Premium, Capital Redemption Reserve and General Reserve. 2) 2,37,55,600 Equity Shares have been issued to the members of erstwhile Babhnan Sugar Mills Limited pursuant to Scheme of Amalgamation. 3) 21,15,400 Equity Shares have been issued to the members of erstwhile Tulsipur Sugar Company Limited pursuant to Scheme of Amalgamation. 4) Out of 2,27,66,780 Equity Shares of Re. 1/- each offered to the shareholders on right basis, issue of 17,270 (Previous Period 17,270) Equity Shares have been kept in abeyance as per the direction of court. 5) 1,63,52,000 fully paid up Equity Shares of Re.1/- each were allotted in January, 2006 at a price of Rs. 135/- per share, ranking pari passu with the existing Equity Shares, each of which is represented by one Global Depository Receipt (GDR) issued @ US$ 3.0577 each for an aggregate amount of US $ 50 million.
(Rupees in Lacs) As at 1st October, 2006 Additions Deductions As at 30th September, 2007
B RESERVES AND SURPLUS

Capital Reserve Security Premium Capital Redemption Reserve Revaluation Reserve Storage Fund for Molasses General Reserve Less: Debit Balance of Profit & Loss Account (As per Contra) Employees Stock Option Adjustment Account Surplus as per Profit & Loss Account 86.42 42050.56 2500.00 18.24 60.84 42772.19 42772.19 36.72 575.99 88100.96 22.46 3608.43 86.42 42050.56 2500.00 18.24 83.30 42772.19 (3608.43) 39163.76 32.72 83935.00
22.46
4.00 575.99 4188.42
Notes: Deductions in Employees Stock Option Adjustment Account represents forfeited Options.

C SECURED LOANS
A. Term Loans I. Rupee Loans a) ICICI Limited (ICICI) b) State Bank of India (SBI) c) Government of India, Sugar Development Fund (SDF) d) Government of India (GOI) (Free of Interest) II. External Commercial Borrowings (ECB) a) International Finance Corporation, Washington (IFC) b) ABN Amro Bank, NV (ABN) c) State Bank of India (SBI) d) DBS Bank Ltd. (DBS) e) Standard Chartered Bank (SCB) f) Coopertive Centrale Raiffeisen Boerenleenbank, B.A (CCRB) g) BNP Paribas (BNP) h) UCO Bank (UCO) i) CITI Bank (CITI) B. Cash Credit Account State Bank of India (SBI)
2500.00 5454.01 160.50 19395.50 10110.73 21993.12 6651.00 4372.00 8928.16 6982.50 4120.50 4420.00 25971.34 121059.36
625.00 2500.00 4329.33 186.18 4899.30 5136.44 9239.00 1531.00 6982.50 6223.00 41651.75
Notes: 1) Term Loan from ICICI was secured by way of first equitable mortgage on immovable properties and hypothecation of movable properties, both present and future, pertaining to the Company's cogeneration unit at Balrampur, subject to charge on current assets (including book debts) created in favour of SBI to secure the working capital limits (due within a year Rs. Nil, previous period Rs. 625.00 Lacs). 2) Term loan from SBI is secured by way of first pari passu equitable mortgage on immovable properties and hypothecation of moveable properties, both present and future, pertaining to Company's sugar and co-generation units at Akbarpur and also guaranteed by a Director of the Company (due within a year Rs. 625.00 Lacs, previous period Nil). 3) Term Loans from SDF are secured by an exclusive second charge by way of equitable mortgage on immovable properties and hypothecation of movable properties (excluding current assets and book debts), both present and future, pertaining to Company's sugar and cogeneration units at Balrampur, sugar unit at Babhnan, sugar and cogeneration units at Haidergarh, sugar and cogeneration units at Akbarpur and sugar unit at Tulsipur (due within a year Rs 882.70 Lacs, previous period Rs.723.69 Lacs). 4) Term Loan from GOI is secured by way of equitable mortgage on immovable properties and hypothecation of movable properties, both present and future, pertaining to Companys sugar unit at Babhnan, subject to charge on current assets (including book debts) created in favour of SBI to secure the working capital limits and also guaranteed by some of the Directors of the Company (due within a year Rs.40.13 Lacs, previous period Rs.25.68 Lacs). 5) a) ECB from IFC amounting to Rs. 3499.50 Lacs is secured, by way of first equitable mortgage on immovable properties and hypothecation of movable properties and second charge on current assets, both present and future, pertaining to Company's sugar and cogeneration units at Haidergarh, exclusive first charge by way of equitable mortgage on immovable properties and hypothecation of movable properties and second charge on current assets, both present and future, pertaining to Company's distillery and bio compost units at Babhnan and further guaranteed by some of the Directors of the Company (due within a year Rs.1399.80 Lacs, previous period Rs.1399.80 Lacs). b)ECB from IFC amounting to Rs. 15896.00 Lacs is to be secured, by way of first equitable mortgage on immovable properties and hypothecation of movable properties and second charge on current assets, both present and future, pertaining to Company's sugar and cogeneration unit at Haidergarh, equitable mortgage on immovable properties and hypothecation of movable properties and second charge on current assets, both present and future, pertaining to Company's sugar and cogeneration unit at Rauzagaon and further guaranteed by some of the Directors of the Company (due within a year Rs.Nil, previous period Nil). 6) ECBs from ABN are secured by way of exclusive first equitable mortgage on immovable properties and hypothecation

7) of movable properties (excluding current assets and book debts), both present and future, pertaining to Company's sugar and cogeneration units at Mankapur (due within a year Rs.1027.29 Lacs, previous period Rs. 1027.29 Lacs). a) ECB from SBI amounting to Rs. 8084.12 Lacs is secured by way of first pari passu equitable mortgage on immovable properties and hypothecation of movable properties, both present and future, pertaining to Company's sugar and cogeneration units at Akbarpur (due within a year Rs. 2309.76 Lacs, previous period Rs. 1154.88 Lacs). b)ECB from SBI amounting to Rs. 13909.00 Lacs is secured by way of first pari passu equitable mortgage on immovable properties and hypothecation of movable properties (excluding current assets and book debts), both present and future, pertaining to Company's sugar and cogeneration units at Kumbhi and Gularia (due within a year Nil, previous period Nil). ECB from DBS is secured by way of hypothecation of movable properties (excluding current assets and book debts), both present and future, and to be further secured by equitable mortgage on immoveable properties pertaining to Company's sugar unit at Balrampur (due within a year Nil, previous period Nil). ECB from SCB is secured by way of hypothecation of movable properties (excluding current assets and book debts), both present and future, pertaining to Company's cogeneration unit at Balrampur (due within a year Nil, previous period Nil). a) ECB from CCRB amounting to Rs. Nil (Previous period Rs. 1531.00 Lacs) was secured by way of hypothecation of movable properties (excluding current assets and book debts), both present and future, pertaining to Company's sugar unit at Balrampur, Babhnan and Tulsipur (due within a year Nil, previous period Rs. 1531.00 Lacs). b)ECB from CCRB amounting to Rs. 8928.16 Lacs is secured by way of first pari passu equitable mortgage on immovable properties and hypothecation of movable properties (excluding current assets and book debts), both present and future, pertaining to Company's sugar and cogeneration units at Kumbhi and Gularia (due within a year Nil, previous period Nil). ECB from BNP and UCO are secured by way of first pari passu equitable mortgage on immovable properties and hypothecation of movable properties (excluding current assets and book debts), both present and future, pertaining to Company's sugar and cogeneration units at Kumbhi and Gularia (due within a year Rs. 2327.50 lacs, previous period Nil). ECB from CITI is secured by way of first pari passu hypothecation of movable properties (excluding current assets and book debts), both present and future, pertaining to Company's sugar and cogeneration units at Kumbhi and Gularia (due within a year Nil, previous period Nil). Cash Credit with SBI is secured / to be secured by way of hypothecation of stock of sugar, sugar in process and other current assets including book debts (excluding current assets of cogeneration & distillery units), both present and future, and 3rd charge by way of joint equitable mortgage on Company's immovable properties and hypothecation of movable properties (excluding cogeneration & distillery units) and also guaranteed by some of the Directors of the Company. (Rupees in Lacs) As at 30th September, 2007 As at 30th September, 2006
8)
9) 10)
11)
12)
13)
D UNSECURED LOANS
From Banks Others 4056.00 3500.00 7556.00 13088.24 13088.24 (Rupees in Lacs) As at 30th September, 2007 As at 30th September, 2006
E DEFERRED TAX LIABILITY (NET)

Deferred Tax Liability Depreciation on Fixed Assets Deferred Tax Assets MAT Credit Carried Forward Losses Expenses allowable for tax purposes when paid 17145.33 13098.46
(1559.90) (539.39) (1446.31) (1814.67) (4820.88) (632.30) (1171.69) 12324.45 11926.77

(Rupees in Lacs) NET BLOCK
FIXED ASSETS
Particulars 5173.35 394.57 22247.88 11.13 363.64 101487.92 2418.50 1762.13 133859.12 732.57 140.82 63634.34 56.88 49.56 461.77 3094.19 1853.39 197031.69 1196.04 830.53 30192.29 242.17 121.72 8251.44 13.76 16.69 191.25 1424.45 935.56 38252.48 664.67 9.77 14216.79 84.51 47785.21 12.82 52.18 3.05 287.28 5825.20 404.34 36412.49 11.13 445.10 148985.85 2926.85 5.85 46.70 25186.32 895.28 0.41 7.18 6984.68 0.48 0.61 159.71 3821.65 6.26 53.27 32011.29
GROSS BLOCK Additions/ Deductions/ Adjustments Adjustments Total As at during the during the As at 01.10.2006 year year 30.09.2007 Up to 30.09.2006 Total up to 30.09.2007 As at 30.09.2007 5825.20 404.34 32590.84 4.87 391.83 116974.56 1669.74 917.83 158779.21 33218.00 191997.21 6889.55 398.39 30192.29
DEPRECIATION Deductions/ Adjustments For the during the year year
As at 30.09.2006 5173.35 394.57 19321.03 5.28 316.94 76301.60 1222.46 931.60 103666.83 29525.32 133192.15
Land (Free hold) Land (Lease hold) Building & Office Premises Railway Siding Tube well & Water Supply Plant & Machinery Furniture & Other Office Equipments Motor Vehicles Total Capital Work-in-Progress Total Previous period figures 77462.89 57213.79 817.56 133859.12 23701.13
Notes: 1) Depreciation for the year includes: i) Rs. 0.56 lac (Previous period Rs. 3.64 lacs) for earlier years.
ii) Rs. 228.89 lacs (Previous period Rs. 180.27 lacs) debited to Capital work - in - progress.
2) Amount of borrowing cost capitalised during the year Rs. 688.00 lacs (Previous period Rs. 411.37 lacs).

(Rupees in Lacs) As at 30th September, 2007 As at 30th September, 2006
G INVESTMENTS
Long Term In Government Securities : (Deposited with Government authorities) National Plan Certificates Post Office National Saving Certificates In Shares of Joint Stock Companies : Trade Investments : Quoted : Subsidiary Company : 4353365 (Previous period Nil) Equity Shares of Rs.10/- each fully paid up in Indo Gulf Industries Ltd. 809158 (Previous period Nil) Equity Shares of Rs.10/- each partly paid up in Indo Gulf Industries Ltd. (Rs.5/- per Share paid up) Unquoted, Fully Paid Up : 196600 Equity Shares of Rs.10/- each in Avantika Ganna Pvt. Ltd. 35 Ordinary Shares of Rs.100/- each in Balrampur Sugar Co. Consumers Co-operative Society Ltd. 110 Ordinary Shares of Rs.10/- each in Co-oprative Development Union Ltd. 1 Ordinary Share of Rs.10/- each in Co-operative Stores Ltd. Other than Trade : Unquoted, Fully Paid Up : 48 Ordinary Shares of Re.1/- each in Fortuna Services Ltd. @ Market Value not available. * Book Value Re.1/-, hence shown as Nil. The Following units were purchased and sold during the year : 1) 49272772.587 Units of Reliance Liquidity Fund, 2) 358956.153 Units of Tata Liquid Super High Investment Fund.
0.04 1.55
0.04 1.40
305.39 @ 16.33 @
19.66 0.03 0.01 *
19.66 0.03 0.01 *
* 343.01
* 21.14

(Rupees in Lacs) As at 30th September, 2006 4.19 6083.41 261.85 65.64
H CURRENT ASSETS
Interest accrued on Investments Stock (As taken, valued & certified by the Management) i) Stores & Spare Parts ii) Loose Tools & Equipments iii) Scrap Stock-in-Trade Raw Materials Finished Goods i) Sugar ii) Industrial Alcohol iii) Bio-compost iv) Banked Power Work-in-Process i) Sugar ii) Molasses iii) Bio-compost Molasses Bagasse Pressmud Standing Crop Sundry Debtors (Unsecured, considered good) i) Debts outstanding for a period exceeding six months ii) Other debts Cash & Bank Balances Cash and cheques in hand (As certified) i) Cash in hand ii) Cheques in hand With Scheduled Banks i) In Current Accounts ii) In Fixed Deposit Accounts iii) In Unclaimed Dividend Accounts With Post Office In Saving Bank Accounts 4.95 6538.14 365.14 42.60
6945.88 10.64
6410.90 19.32
34421.68 307.35 73.67 26.18 83.18 1.89 13.31
34828.88
11980.69 180.72 56.32 13.27 82.85 2.89 4.26
12231.00
98.38 893.36 509.76 11.18 0.86 4617.88
90.00 455.22 622.68 3.45 2.15 5567.50
385.97 4231.91 156.84 403.02 798.01 167.11 118.84
309.83 5257.67 187.28 628.80 531.83 126.30 91.41
559.86
816.08
1083.96 0.46 49566.05
749.54 0.46 26972.49
Notes: i) Sundry debtors include Rs. 45.59 lacs (Previous period Rs. 44.93 lacs) under litigation. ii) Stock in transit included in Stock of Stores & Spare Parts Rs. 133.45 lacs (Previous period Rs. 247.58 lacs). (Rupees in Lacs) As at 30th As at 30th September, 2007 September, 2006
LOANS AND ADVANCES (Considered good)

7033.68 5242.41 3874.97 7771.21 67.39 23989.66 4225.87 10850.95 318.36 4849.88 60.52 20305.58
Loans (Secured) To Subsidiary Company Advances (Unsecured) Advances recoverable in cash or in kind or for value to be received or pending adjustment Advances against Capital Assets Advance Payment of Tax Less: Provision for Tax Excise Duty & Cane Purchase Tax Advance Security Deposits
6105.40 6105.40
9978.26 9659.90
Notes: Loans & Advances include Rs. 13.36 lacs (Previous period Rs. 13.86 lacs) under litigation.

CURRENT LIABILITIES AND PROVISIONS

32225.52 2652.10 43.15 118.84 9631.89 6105.40 35039.61 16910.99 2158.66 43.15 91.41 9659.90 9659.90 19204.21
Current Liabilities Sundry Creditors (Refer Note 4 of Schedule - "T") Interest accrued but not due Excess Price of Levy Sugar (Refer Note -3 of Schedule -"T") Investor Education & Protection Fund : Unclaimed Dividend Provisions Provision for Tax Less: Advance Payment of Tax Proposed Final Dividend Provision for Corporate Tax on Dividend Provision for Retirement Benefits of Employees Provision for Liabilities (Refer Note -16 of Schedule -"T")
3526.49 279.66 15.00 38860.76
3722.32 522.06 250.38 7.40 23706.37 (Rupees in Lacs)
K MISCELLANEOUS EXPENDITURE & LOSSES

Share Issue Expenses Less : Written off during the year Debit Balance of Profit & Loss Account (As per Annexed Account) Less: General Reserve (As per contra) 464.28 143.09 3608.43 3608.43 321.19 321.19 678.92 214.64 464.28 464.28
(Rupees in Lacs) Year ended 30th September, 2007 18 Months ended 30th September, 2006
OTHER INCOME
1.44 4.69 233.71 55.58 262.45 464.99 1022.86 32.86 53.64 266.87 185.00 1.07 0.17 133.25 8.16 681.02
Dividend on Current Investments (other than trade) Profit from Sugar Trading Insurance Claims Received Liabilities no longer required written back Provision against Investments written back (Net) Profit on sale of Current Investments (other than trade) Miscellaneous Income * Exchange Rate Fluctuation (Net) Adjustment relating to earlier years (Net)
* Includes Rent received (Gross) Rs. 100.03 lacs (Previous period Rs. 53.53 lacs), TDS Rs. 4.83 lacs (Previous period Rs. 0.79 lac).

(Rupees in Lacs) 18 Months ended 30th September, 2006
M INCREASE/(DECREASE) IN STOCK
Opening Stock Finished Goods Molasses Bagasse Pressmud Work in Process Add : Acquired on Takeover Finished Goods Bagasse Closing Stock Finished Goods Molasses Bagasse Pressmud Work in Process Add/Less : Excise Duty & Education Cess on Stock* 12231.00 455.22 622.68 3.45 90.00 34828.88 893.36 509.76 11.18 98.38 40211.05 1923.81 763.67 13.63 759.25 21.81 5.78 12231.00 455.22 622.68 3.45 90.00
13402.35
43671.41
27.59
36341.56 22939.21 (1578.89) 21360.32
13402.35 (30296.65) 2172.51 (28124.14)
* Represents differential Excise duty & Education Cess on opening & closing stock of finished goods /by products. (Rupees in Lacs) Year ended 30th September, 2007 18 Months ended 30th September, 2006
N FARM ACCOUNT
Sales Closing Stock of Standing Crop Net Loss/ (Profit) transferred to Profit & Loss Account Opening Stock of Standing Crop Cane Seed Purchase Fertiliser & Manures Salary & Wages Power & Fuel Rent Irrigation & Cultivation Expenses Repairs & Maintenance - Others Miscellaneous Expenses Adjustment relating to earlier years 3.94 2.82 2.07 8.83 4.58 0.06 0.49 0.95 0.25 1.00 0.50 0.26 0.10 0.64 8.83 3.53 4.58 (0.58) 7.53 2.02 0.16 0.32 1.38 0.30 1.50 0.91 0.88 0.06 7.53 (Rupees in Lacs) Year ended 30th September, 2007 18 Months ended 30th September, 2006
O SALARIES, WAGES & OTHER EMPLOYEES BENEFITS

Salaries, Wages, Bonus etc. Contribution to Provident Fund, Gratuity & Other Funds (Including provisions) Workmen & Staff Welfare Expenses 6550.82 660.06 317.75 7528.63 5745.50 634.57 279.75 6659.82

Year ended 30th September, 2007 P OTHER MANUFACTURING & ADMINISTRATIVE EXPENSES Stores & Spare Parts consumed Power & Fuel Filling and Packing Expenses Rent Rates & Taxes Repairs & Maintenance Plant & Machinery Buildings Others Payment to Auditors As Audit Fees For Other Services " Certification Work " Expenses Miscellaneous Expenses Insurance Charity & Donation Directors' Fees Loss on sale/discard of Fixed Assets (Net) Exchange Rate Fluctuation (Net) Provision for Liabilities (Refer Note - 16 of Schedule -"T") Adjustment Relating to earlier years (Net) Share Issue Expenses written off 7388.68 402.32 216.41 55.74 152.15 2834.46 301.52 214.16 12.50 6.74 1.33 1.45
(Rupees in Lacs) 18 Months ended 30th September, 2006 5119.23 616.90 157.33 32.66 132.25 2999.79 490.67 256.43 7.50 19.14 0.69 1.54
3350.14
3746.89
22.02 2333.00 514.96 90.49 6.40 51.60 7.60 9.75 143.09 14744.35
28.87 2254.64 680.54 167.70 11.65 164.73 119.42 0.02 214.64 13447.47
(Rupees in Lacs) Year ended 30th September, 2007 Q SELLING EXPENSES Brokerage Despatching and Forwarding Expenses Cash Discount Others 378.34 262.33 181.19 50.14 872.00 Year ended 30th September, 2007 R INTEREST AND OTHER FINANCIAL CHARGES On Fixed Loans On Other Loans (Including Financial Charges) Interest Received (Gross)* On Long Term Investments On Loan to Subsidiary On Income Tax Refund On Others 2792.79 3516.12 1.40 430.90 424.83 10.05 6308.91 3050.78 435.39 1.01 34.38 3486.17 601.89 242.31 152.52 47.41 1044.13 (Rupees in Lacs) 18 Months ended 30th September, 2006 18 Months ended 30th September, 2006
867.18 5441.73
35.39 3450.78
* Tax deducted at Source Rs. 14.94 lacs (Previous period Rs. 5.55 lacs).

S SIGNIFICANT ACCOUNTING POLICIES
The accounts are prepared under the historical cost convention and are in accordance with the generally accepted accounting principles in India and provisions of the Companies Act, 1956. The significant accounting policies followed by the Company are stated below: 1. Fixed Assets a) Fixed Assets are stated at their original cost adjusted by revaluation of Land, Building, Plant & Machinery, Railway Siding and Tube well of the Balrampur Unit as on 30th June, 1988 and Land, Building and Plant & Machinery of Tulsipur Unit as on 31st March, 1999. Cost includes acquisition price, attributable expenses and pre operational expenses including finance charges, wherever applicable. b) Depreciation on Fixed Assets is provided on Straight Line method in accordance with the rates as specified in Schedule XIV to the Companies Act, 1956 (as amended). c) Expenditure during construction period : Expenditure (including financing cost relating to borrowed funds for construction or acquisition of fixed assets) incurred on projects under implementation are being treated as Pre-operative expenses pending allocation to the assets and are shown under "Capital work in progress". d) Lease hold land in the nature of perpetual lease are not depreciated. 2. Investments Long Term Investments are carried at cost. Provision for diminution is made to recognise a decline, other than temporary, in the value of long term investments, script wise. Current Investments are valued at lower of cost or fair value, category wise. Cost of investments includes acquisition cost such as brokerage, stamp duty, etc. 3. Inventories a) Inventories (other than By-products, Scrap and Standing crop) are valued at lower of cost or net realisable value. The cost of Inventories is computed on weighted average basis. The cost of Finished goods and work-in-process include cost of conversion and other cost incurred in bringing the Inventories to their present location and condition. b) By-products (Molasses & Bagasse), Scrap and Standing Crop are valued at net realisable value. 4. Revenue Recognition a) Sale of goods is recognised at the time of transfer of substantial risk and rewards of ownership to the buyer for a consideration. b) Gross turnover is net of sales tax and inclusive of excise duty. c) Dividend income is accounted for in the year it is declared. d) All other income are accounted for on accrual basis. 5. Expenses All the expenses are accounted for on accrual basis. 6. Retirement Benefits Company's contribution to Provident Fund and Pension Fund are charged to Profit and Loss Account. Gratuity and Leave encashment benefit is accounted for on the basis of actuarial valuation carried out as at the Balance Sheet date. 7. Borrowing Costs Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue. 8. Share Issue expenses These are equally amortised over five years. 9. Insurance Claims Accounted for on settlement of claims. 10. Government Grants a) Government grants related to fixed assets are adjusted with the value of the fixed asset/ credited to Capital Reserve.. b) Government grants related to revenue items are adjusted with the related expenditure/ taken as income. 11. Foreign Currency Transactions a) Transactions in Foreign currency are initially recorded at the exchange rate at which the transaction is carried out. b) Monetary Assets and Liabilities related to foreign currency transactions remaining outstanding at the year end are translated at the year end rate. The effect of Exchange Rate fluctuations in respect of fixed assets is adjusted

S SIGNIFICANT ACCOUNTING POLICIES (Contd.)
with the cost of the respective Asset, whereas in respect of Monetary Assets the same is taken to Profit and Loss Account. c) Forward exchange contracts entered into for hedging purposes are accounted for separately from the underlying transactions. The premium or discount on forward exchange contracts is amortised over the period of the respective contract. Exchange difference on such contracts at the year-end/upon termination is taken to Profit and Loss Account. d) Transactions covered by cross currency swap contracts are marked to market at the Balance Sheet date and the gain or loss is taken to Profit and Loss Account. 12. Taxes on Income Current tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax is recognised, subject to the consideration of prudence, in respect of deferred tax assets, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. 13. Impairment of Assets Impairment losses, if any, are recognised in accordance with the accounting standard issued in this regard by The Institute of Chartered Accountants of India. 14. Provisions, Contingent Liabilities and Contingent Assets Provisions are recognised in respect of obligations where, based on the evidence available, their existence at the Balance Sheet date is considered probable. Contingent Liabilities are shown by way of notes to the Accounts in respect of obligations where, based on the evidence available, their existence at the Balance Sheet date is considered not probable. A Contingent Asset is not recognised in the Accounts. 15. Employee Stock Option Scheme In respect of stock options granted pursuant to the company's Employee Stock Option Scheme, the intrinsic value of the options (excess of market price of the share over the exercise price of the option) is treated as discount and accounted for as employee compensation cost over the vesting period.
T NOTES ON ACCOUNTS
(Rupees in Lacs) As at 30th September, 2007 1. a) Estimated amount of contracts remaining to be executed on Capital Account and not provided for b) Advances paid against above 2. Contingent Liabilities not provided for in respect of: a) Calls in arrear in respect of partly paid up shares b) Differential cane price for the sugar seasons 1978-79 and 1979-80 pending disposal of the Writs filed by the Company in Hon'ble Calcutta High Court c) No provision has been made for interest on excess amount of levy sugar for sugar season 1982-83 realised as per Court Order against which TDR of Rs. 25.54 Lacs has been deposited with a Bank d) Claims for acquisition of 12.82 acres of land for the Chemical unit at Balrampur and compensation there against is under dispute and the matter is subjudice e) Claims against the Company not acknowledged as debts : i) Excise duty Demand-under appeal ii) Sales Tax Demand- under appeal iii) Others - under appeal/litigation f) Bank Guarantee furnished in respect of excise duty rebate 3. Excess amount of levy sugar received to date for various sugar seasons as per Orders of the Hon'ble High Court has not been credited to the Profit and Loss Account as the matter is sub-judice 4. a) Amount due to Small Scale Industrial undertakings based on information furnished by the creditors 8603.06 3874.97 40.46 32.93 25.54 Amount not ascertainable 233.09 18.53 189.05 20.39 43.15 299.30 As at 30th September, 2006 50806.67 10850.95 32.93 25.54 Amount not ascertainable 257.18 18.90 185.73 20.39 43.15 174.92

T NOTES ON ACCOUNTS (Contd.)
b) List of Small Scale Industrial undertakings to whom outstanding is over 30 days (as per terms of order): M/s Alpha Controls Instruments Pvt. Ltd., M/s Amrec Cooling Tower Pvt. Ltd., M/s Atul Electroformers Pvt. Ltd., M/s Baba Vishwakarma Engg. Co. Pvt. Ltd., M/s Biodeg Chemicals and Allied Industries, M/s Bharat Engineering & Casting, M/s Chemical Systems Technologies, M/s Calsens Private Ltd., M/s Centrifugal Systems, M/s Chemical Systems Tech. (I) Pvt. Ltd., M/s Dembla Valves Pvt. Ltd., M/s G.S. Rollers, M/s Hi-Tech Systems & Services, M/s High Tech Engineers, M/s Instruments & Systems, M/s Kay Kay Industries, M/s K.S. Projects Process Engineers, M/s Kohli Enterprises, M/s Khanna Engineering Works, M/s Lord Krishna Poly Plast, M/s Mangla Rubber Industries, M/s M.R.Kalia Industries, M/s Nu-Plast Pipes & Plastics, M/s New Pumps India, M/s P.G.Goyal Industries, M/s Pelican Valves & Engineering Works, M/s Puri Industries, M/s Pancy Industrial Corporation, M/s Pathak Machines Tools Pvt. Ltd., M/s R.C. Engineers Works Pvt. Ltd., M/s Raj Chemical & Minerals, M/s Sangam Refractories, M/s Stichwell Qualitex, M/s Shiva Engineers, M/s Sintech Precision Products Ltd., M/s S.J. Industries, M/s Sunderson Engineers Pvt. Ltd., M/s Swajit Engineering Pvt. Ltd., M/s Three Star Engineering Works, M/s Universal Heavy Engineering Company, M/s Uttam Industrial Engineering Pvt. Ltd., M/s Vishal Engineering Works c) In the absence of necessary information from the suppliers relating to their registration status under the Micro, Small and Medium Enterprises Development Act, 2006, the information required under the said act could not be compiled and disclosed. 5. The levy sugar price for the seasons 2004-05, 2005-06 and 2006-07 is yet to be announced by the Government of India. Pending such announcement, the sale of levy sugar has been accounted for at the 2003-04 season's levy price. 6. a) Land, Building and Plant & Machinery of Tulsipur unit were revalued as at 31st March, 1999 on net replacement value as per the report of Lodha & Co. and the cost of the respective asset was substituted by the revalued cost and credited to Revaluation Reserve in the books of erstwhile Tulsipur Sugar Company Limited. b) Land, Building, Plant & Machinery, Railway Siding and Tubewell and Water Supply Machinery of Balrampur unit were revalued as at 30th June, 1988 on net replacement value as per the report of S.R. Batliboi Consultants Private Ltd. and the cost of the respective asset was substituted by the revalued cost and credited to Revaluation Reserve.. 7. During the year the Company has acquired Promoters' Shares representing 27.28% of the total Equity Share Capital of Indo Gulf Industries Limited (IGIL) and 26.68% of the Share Capital of IGIL pursuant to an open offer made in compliance with the provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. By virtue of the above acquisition, IGIL became a subsidiary of the Company w.e.f. 30th August, 2007. No provision against diminution in value of investment in shares of the subsidiary has been made as such diminution is considered as temporary in nature. 8. The Employee Stock Option Scheme was approved by the Board of Directors and the shareholders in 2005. Under this scheme, the remuneration committee granted 622500 options in 2005 and 883000 options in 2006 having a vesting period of one year and a maximum exercise period of eight years. The exercise price of the options is based on the average daily closing market price of the company's shares during the preceding twenty six weeks prior to the date of grant on the stock exchange, where the shares are traded most. Out of the above, 204500 options have lapsed and balance 1301000 options were outstanding as on 30th September, 2007. 9. The company has been granted eligibility certificate dated 23rd February, 2007 under New Sugar Industry Promotion Policy, 2004 of the Government of Uttar Pradesh. Accordingly, incentives aggregating to Rs.1757.08 lacs allowable under the above policy have been accounted for during the year. The above policy which was applicable to units to be set up till 31st March, 2008 has been terminated by the

Government vide order dated 4th June, 2007 wherein the Government expressed its intention to introduce another policy. The company has been legally advised that it continues to be eligible to receive the incentives under the above policy as the eligibility certificate was issued to the company before termination of the above policy. 10. a) Approval of Central Government for the remuneration paid/payable to the Managing / Joint Managing directors pursuant to Resolution passed in the Extra Ordinary General Meeting of the Share holders of the company is awaited. b) The remuneration paid/payable to Shri K.N. Ranasaria, a wholetime Director, is subject to approval of the shareholders in the ensuing Annual General Meeting. c) Computation of Net Profit for the purpose of calculating directors remuneration has not been made as remuneration paid/payable to the directors is the minimum remuneration. d) Details of remuneration paid/payable to Directors : (Rupees in Lacs) 2006-07 i) ii) iii) iv) Salary Commission Contribution to Provident Fund, Gratuity and other Funds Perquisites (including monetary value of perquisites) 248.04 100.63 21.20 369.87 2005-06 240.74 195.00 101.12 14.53 551.39
11. Segment information as per Accounting Standard - 17 on 'Segment Reporting' : The Company has identified four business segments viz. Sugar, Distillery, Co-generation and others. Segments have been identified and reported taking into account the nature of the products, the differing risks and returns, the organisational structure and internal business reporting system. a) Revenue and expenses have been identified to a segment on the basis of relationship to operating activities of the segment. Revenue and expenses which relate to enterprise as a whole and are not allocable to a segment on reasonable basis have been disclosed as Unallocable. b) Segment Assets and Segment Liabilities represent assets and liabilities of respective segment. Investments, tax related assets and other assets and liabilities that cannot be allocated to a segment on reasonable basis have been disclosed as Unallocable. c) Information about Primary Business Segments: (Rupees in Lacs) Sugar Revenue Gross Revenue Less: Inter/ Intra Segment Revenue Total Revenue Result Segment Result Less: Unallocated expenditure net of unallocated income Interest Profit / (Loss) before Tax 128697.64 (182431.86) 8714.38 (6661.14) 119983.26 (175770.72) () 10110.60 (32449.41) Distillery 15491.50 (14686.74) 1992.39 (1190.27) 13499.11 (13496.47) 5061.36 (3856.36) Co-generation 18844.89 (12724.83) 4247.60 (2631.47) 14597.29 (10093.36) Others 184.07 (299.20) 106.49 (182.47) 77.58 (116.73) Unallocated Total
163218.10 (210142.63) 15060.86 (10665.35) 148157.24 (199477.28) 1708.72 (2205.00) 5441.73 (3450.78) 3613.71 (42144.68) 1708.72 (2205.00) 5441.73 (3450.78) () 3536.74 (36488.90)
8717.98 () 55.03 (5861.53) () (22.62)

(Rupees in Lacs) Sugar Tax Current Tax Fringe Benefit Tax Deferred Tax Profit /(Loss) after Tax Other Information Segment Assets Segment Liabilities Capital expenditure Depreciation Non cash expenses other than depreciation Distillery Co-generation Others Unallocated Total 186.00 (5491.00) 64.00 (86.00) 397.68 (1753.08) () 4184.42 (29158.82) 177304.90 (123221.10) 29284.29 (13966.25) 38865.88 (50862.92) 4884.32 (4432.66) 3.05 (55.50) 17782.65 (12117.30) 2350.83 (1675.22) 6273.28 (4088.91) 596.39 (510.57) () 6.71 (274.77) 60287.70 (42339.12) 298.12 (455.11) 21299.43 (29057.89) 2429.76 (1664.07) 0.69 () 1419.72 (820.99) 22.14 (41.43) 560.80 (243.88) 53.71 (42.68) () 9422.15 (2457.13) 147845.19 (74235.12) 98.73 (746.62) 57.81 (59.30) 173.65 (287.68) 266217.12 (180955.64) 179800.57 (90373.13) 67098.12 (85000.22) 8021.99 (6709.28) 170.68 (617.95)
Notes: a) Transactions between segments are primarily for materials which are transferred at market determined prices. Common costs are apportioned on a reasonable basis. b) Since the Companys activities/operations are primarily within the country, there is only one geographical segment. 12. Related party disclosures as per Accounting Standard - 18 for the year ended 30th September, 2007 are given below: a) Name of the related parties and description of relationship : i) Subsidiary : Indo Gulf Industries Ltd. ii) Associate : Avantika Ganna Pvt. Ltd. iii) Key Managerial Personnel (KMP): Mr. Vivek Saraogi - Managing Director Mrs. Meenakshi Saraogi - Joint Managing Director Mr. K.N. Ranasaria - Whole Time Director Mr. Kishor Shah - Whole Time Director Mr. R.N.Mishra - Whole Time Director. iv) Relative of KMP : Mr. K.N. Saraogi - Chairman (Non Executive) upto 26th April, 2007 and relative of Managing Director and Joint Managing Director. v) Enterprise in which KMP and their relatives have substantial interest : Kamal Nayan & Co. (Rupees in Lacs) b) Transactions with Related parties : Nature of Transaction/ Name of the party Enterprise in which KMP and their relatives have substantial interest 1.00 (0.95) () Key Managerial Personnel (KMP) () ()
Subsidiary Associates i) Purchase of Goods Kamal Nayan & Co. () () () (5.80)
Relative of KMP () ()
Total 1.00 (0.95) (5.80)
ii) Interest Paid/Payable Avantika Ganna Pvt. Ltd.

(Rupees in Lacs) Nature of Transaction/ Name of the party Enterprise in which KMP and their relatives have substantial interest Key Managerial Personnel (KMP)
Subsidiary Associates iii) Intercorporate Loan Taken Avantika Ganna Pvt. Ltd. iv) Interest Received/ Receivable Indo Gulf Industries Ltd. @ v) Intercorporate Loan Given Indo Gulf Industries Ltd. @ vi) Rendering of Services Avantika Ganna Pvt. Ltd. Mr. K.N.Saraogi Mrs. Meenakshi Saraogi Mr. Vivek Saraogi Mr. K.N. Ranasaria Mr. Kishor Shah Mr. R.N. Mishra Amount due to / from related parties i) Accounts payable Mr. K.N. Saraogi Mrs. Meenakshi Saraogi Mr. Vivek Saraogi Mr. K.N. Ranasaria Mr. Kishor Shah ii) Accounts receivable Indo Gulf Industries Ltd.
Relative of KMP
Total
()
(134.00)
()
()
()
(134.00)
430.90 ()
()
()
()
()
430.90 ()
6616.92 () () () () () () () ()
() 2.90 (4.35) () () () () () ()
() () () () () () () ()
() () () 135.02 (223.88) 135.55 (211.02) 50.29 (56.24) 39.93 (18.06) 7.75 (8.84)
() () 0.20 (3.99) () () () () ()
6616.92 () 2.90 (4.35) 0.20 (3.99) 135.02 (223.88) 135.55 (211.02) 50.29 (56.24) 39.93 (18.06) 7.75 (8.84)
() () () () () 7033.68 ()
() () () () () ()
() () () () () ()
() (90.00) (90.00) 2.40 (1.51) 6.96 (2.10) ()
(2.02) () () () () ()
(2.02) (90.00) (90.00) 2.40 (1.51) 6.96 (2.10) 7033.68 ()
@ Also represents maximum amount outstanding during the year. 13. Disclosure under clause 32 of the Listing Agreement : There are no transactions (other than loan transactions with subsidiary as given in para12 (b) (v) above) which are required to be disclosed under clause 32 of Listing Agreement.

14. Earnings per Share The numerators and denominators used to calculate Basic/Diluted Earnings per Share : 2006-07 a) Amount used as the numerator (Rs. Lacs) Profit / (Loss) after Tax Total - (A) b) Weighted average number of Equity Shares used as the denominator for Basic Earnings per Share - (B) Add : Weighted average number of Equity Shares on account of Employees Stock Option Scheme c) Weighted average number of Equity Shares used as the denominator for Diluted Earnings per Share - (C) d) Nominal value of Equity Shares (Re.) e) Basic Earnings per Share (Rs.) f) Diluted Earnings per Share (Rs.) (4184.42) (4184.42) 248154660 40355 248195015 1.00 (1.69) (1.69) 2005-06 29158.82 29158.82 239172357 45284 239217641 1.00 12.19 12.19
15. Intangible Assets The unamortised amount of Share Issue Expenses Rs.54.79 lacs and Rs.266.40 lacs are to be amortised equally in the next 1 year & 6 months and 2 years & 6 months respectively. 16. Disclosure in terms of Accounting Standard -29 on Provisions, Contingent Liabilities and Contingent Assets: a) Movement for Provision for Liabilities: (Rupees in Lacs) Particulars Balance as at 1st October, 2006 Provided during the year Amount used during the year Reversed during the year Balance as at 30th September, 2007 Timing of outflow/uncertainities Legal cases 7.40 7.60 15.00 Outflow on settlement/crystallization
b) The Contingent Liabilities & Liabilities mentioned at Sl. No. 2 & 16 (a) respectively are dependent upon Court decision /out of court settlement/disposal of appeals etc. c) No reimbursement is expected in the case of Contingent Liabilities & Liabilities shown respectively under Sl. No. 2 & 16 (a) above. 17. Additional information pursuant to the provisions of paragraphs 3 & 4 of Part - II of Schedule VI to the Companies Act, 1956: A QUANTITATIVE INFORMATION: i) Licensed Capacity Sugar Distillery Bio-compost Power ii) Installed capacity (As certified by the Management) Sugar Distillery Bio-compost Power Not applicable 320 KLPD Not applicable Not applicable 65000 TCD 320 KLPD 58000 M.T. 134.30 MW Not applicable 320 KLPD Not applicable Not applicable 47500 TCD 160 KLPD 48000 M.T. 93.80 MW

iii) Particulars of Goods Manufactured Class of Goods Production Unit a) Sugar b) Molasses c) Industrial Alcohol d) Potable Alcohol e) Power f) Bio-compost Qtls. Qtls. B.L. B.L. Kw. M.T. Qtls. Quantity 9148718 (6439826) 4866521 (3155540) 71571202 (62678662) (-) 676806039 (439850120) 25460 (34014) 30318175 (19507279) ^ # * @ $ & Sales Quantity 7536409 (9260105) 4288459 (4059657) 70100041 (66941990) (108335) 675802276 (440178047) 19564 (34113) 30127071 (20250098) Amount (Rs. in Lacs) 115894.44 (170953.19) 3201.29 (4160.98) 13487.24 (13312.65) (102.15) 14491.29 (10023.82) 186.75 (269.43) 268.97 (122.60) 102.46 (31.89) 147632.44 (198976.71)
g) Bagasse h) Miscellaneous Total ^ # *
Includes 561 Qtls. (3124 Qtls.) process/storage loss. Includes 114997 Qtls. (116423 Qtls.) auto combustion/storage loss and 2780970 Qtls. (2515317 Qtls.) inter unit transfers taken at nil value. Includes 909786 B.L. (422730 B.L.) storage loss, 6278689 B.L. (5362729 B.L.) inter unit transfers and 10000 B.L. (previous period Nil) captive consumption taken at nil value. Includes 69271106 KW (37978864 KW) captive consumption, 11350654 KW (2998442 KW) transmission loss and 102563450 KW (51914205 KW) inter unit transfers taken at nil value.
@ Includes Nil (24545 B.L.) storage loss and Nil (15812 B.L.) inter unit transfers taken at nil value. $
& Includes 2187 M.T. (7693 M.T.) issued as sample / loss and 1448 M.T. (1692 M.T.) inter unit transfers taken at nil value. Includes 12326093 Qtls. (9116247 Qtls.) captive consumption and 16738148 Qtls. (10876326 Qtls.) inter unit transfers taken at nil value.
Purchase of Trading Goods Unit Class of Goods Sugar Qtls. (792250) Quantity Amount (Rs. in Lacs) (11315.11)

Class of Goods Unit a) Sugar b) Molasses Qtls. Qtls # c) Industrial Alcohol d) Potable Alcohol e) Power - Banked B.L. B.L. Kw. # f) Bio-compost M.T. Qtls. # Total # Acquired on Takeover. A RAW MATERIALS CONSUMED Unit a) Sugar Cane b) Molasses c) Industrial Alcohol d) Pressmud e) Bagasse f) Others Qtls. Qtls. B.L. M.T. Qtls. * @ # ^ Quantity 92310134 (62208034) 2868377 (2565872) 6278689 (6075346) 88724 (122628) 16738148 (9743517) Amount (Rs. in Lacs) 125492.08 (79860.63) 1422.40 (1500.82) (94.37) 30.69 (34.38) 1070.53 (1129.49) 83.35 (111.86) 128099.05 (82731.55) Opening Stock Quantity 784155 (2812184) 258417 (184088) (978446) 1147166 (5410494) (108335) 759357 (762596) (324688) 5477 (5576) 1672385 (126794) (2288410) Amount (Rs. in Lacs) 11980.69 (39348.81) 455.22 (1923.81) 180.72 (682.05) (136.64) 13.27 (21.81) (4.36) 56.32 (39.19) 622.68 (5.78) (763.67) 13308.90 (42926.12) Closing Stock Quantity 2396464 (784155) 836479 (258417) 2618327 (1147166) (-) 1763120 (759357) 11373 (5477) 1863488 (1672385) Amount (Rs. in Lacs) 34421.68 (11980.69) 893.36 (455.22) 307.35 (180.72) (-) 26.18 (13.27) 73.67 (56.32) 509.76 (622.68) 36232.00 (13308.90)
g) Bagasse
Total
* Includes 2780970 Qtls. (2515317 Qtls.) consumed out of inter unit transfers taken at nil value. @ Includes 6278689 B.L. (5362729 B.L.) consumed out of inter unit transfers taken at nil value. # Consumed out of inter unit transfers taken at nil value. ^ Includes 16738148 Qtls. (9743517 Qtls.) consumed out of inter unit transfers taken at nil value.

C) CONSUMPTION OF RAW MATERIALS Percentage Amount (Rs. in lacs) Imported Indigenous (0.10) 100.00 (99.90) 100.00 (100.00) (79.94) 128099.05 (82651.61) 128099.05 (82731.55)
D) CONSUMPTION OF STORES & SPARE PARTS Percentage Amount (Rs. in lacs) Imported Indigenous 0.03 (0.03) 99.97 (99.97) 100.00 (100.00) 2.14 (1.61) 7386.54 (5117.62) 7388.68 (5119.23)
E) EXPENDITURE IN FOREIGN CURRENCY Amount (Rs. in lacs) On Professional & Consultancy On Travelling On Interest On Others 16.58 (122.94) 26.50 (55.96) 3516.04 (1189.68) (141.51)
F) EARNINGS IN FOREIGN CURRENCY Amount (Rs. in lacs) FOB Value of exports (through an export house) Others () (320.17)
G) C.I.F. VALUE OF IMPORTS Amount (Rs. in lacs) Components and Spare Parts Capital Goods Note : Figures in brackets pertain to previous year. (47.06) 1054.34 (699.80)

18. Balance Sheet Abstract & Company's General Business Profile a) Registration details : Company Identification No. State Code Balance Sheet Date b) Capital raised during the year Public Issue Rights Issue Bonus Issue Private Placement c) Position of mobilisation and deployment of funds Total Liabilities Total Assets SOURCES OF FUNDS Paid up Capital Reserve & Surplus Secured Loans Unsecured Loans Deferred Tax Liability (Net) APPLICATION OF FUNDS Net Fixed Assets Investments Net Current Assets Miscellaneous Expenditure d) Performance of the Company Turnover (including Other Income) Total Expenditure Profit / (Loss) before Taxation Profit / (Loss) after Tax Earnings per Share (Rs.) Dividend Rate (%) e) Generic names of principal products of the Company Product Description Sugar Industrial Alcohol (Rupees in Lacs) L15421WB1975PLC030118 21 30th September, 2007 Nil Nil Nil Nil 227356.36 227356.36 2481.55 83935.00 121059.36 7556.00 12324.45 227356.36 191997.21 343.01 34694.95 321.19 227356.36 140192.69 143729.43 (3536.74) (4184.42) (1.69) Nil Item Code No. (ITC Code) 170111.09 220720.00
19. Previous periods figures have been re-grouped / re-arranged wherever found necessary and are not comparable with current year's figures which are for 12 months. Signatories to all foregoing Schedules 'A' to 'T' forming part of the Accounts. For G. P. Agrawal & Co. Chartered Accountants
Auditors Report on Consolidated Financial Statements

To the Board of Directors of Balrampur Chini Mills Limited 1. We have examined the attached Consolidated Balance Sheet of BALRAMPUR CHINI MILLS LIMITED, its subsidiary and its associate as at 30th September, 2007 and the Consolidated Profit and Loss Account for the year ended on that date annexed thereto. 2. These financial statements are the responsibility of the management of the company and have been prepared by the management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these financial statements based on our audit. 3. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 4. The Financial Statements for the year ended 30th September, 2007 of Indo Gulf Industries Limited, the subsidiary company whose total assets of Rs.11782.97 lacs and total revenue of Rs.346.62 lacs have been proportionately consolidated, have been audited by another auditor whose report has been furnished to us and our opinion, so far it relates to the amount included in respect of the subsidiary, is based solely on the report of the other auditor. 5. The financial statements of Avantika Ganna Private Limited (Associate Company) which have been proportionately consolidated, have been audited by another auditor for the year ended 31st March, 2007 whose report has been furnished to us and our opinion, so far it relates to the amount included in respect of the associate, is based solely on the report of the other auditor. 6. We report that the consolidated financial statements have been prepared by the management of Balrampur Chini Mills Limited in accordance with Accounting Standard 21, Consolidated Financial Statements and Accounting Standard 23, Accounting for investment in Associates in Consolidated Financial Statements issued by the Institute of Chartered Accountants of India on the basis of separate audited financial statements of Balrampur Chini Mills Limited, its subsidiary and associate. 7. Attention is drawn to the following in respect of the subsidiary company : i) Note No. II (vi) of Schedule S regarding Gratuity provision made on estimated basis instead of actuarial basis - quantum unascertained. ii) Note No. 9 (ii) of Schedule T regarding nonavailability of Bank Statement for nonoperative bank accounts and its reconciliation. iii) Note No. 9 (iv) of Schedule T regarding nonprovision of interest on Deferred Sales Tax Liability quantum unascertained. iv) Note No. 9 (v) of Schedule T regarding nonprovision of interest and penalty on statutory liabilities - quantum unascertained. 8. Subject to the above and on the basis of the information and explanations given to us and based on our audit and on consideration of the separate audit reports on the individual financial statements of the company, its subsidiary and associate read together with significant accounting policies and notes thereon, we are of the opinion that the attached Consolidated Financial statements give a true and fair view in conformity with the accounting principles generally accepted in India: i) in the case of the Consolidated Balance Sheet, of the consolidated state of affairs of Balrampur Chini Mills Limited, its subsidiary, and its associate as at 30th September, 2007; and
ii) in the case of the Consolidated Profit & Loss Account, of the consolidated result of operation of Balrampur Chini Mills Limited its subsidiary, and its associate for the year ended on that date. For G. P. Agrawal & Co. Chartered Accountants
7A, Kiran Shankar Ray Road, Kolkata 700 001 19th November, 2007.
Consolidated Balance Sheet

(Rupees in Lacs) Schedule As at 30th September, 2007
SOURCES OF FUNDS 1. Shareholders' Funds a) Share Capital b) Reserves & Surplus 2. Loan Funds a) Secured Loans b) Unsecured Loans 3. Deferred Tax Liability (Net) C D E 121059.36 7900.56 128959.92 12324.45 227194.63 A B 2481.55 83428.71 85910.26
II
APPLICATION OF FUNDS 1. Fixed Assets a) Gross Block b) Less: Depreciation c) Net Block d) Capital Work-in-progress Net Fixed Assets 2. Investments 3. Current Assets, Loans & Advances a) Current Assets b) Loans & Advances c) Less: Current Liabilities & Provisions Net Current Assets 4. Miscellaneous Expenditure & Losses (To the extent not written off or adjusted) 227194.63 Basis of Consolidation and Significant Accounting Policies Consolidated Notes on Accounts S T K H I J 50571.00 17459.28 68030.28 40008.27 28022.01 321.19 F G 208203.64 42787.33 165416.31 33371.52 198787.83 63.60
Schedules 'A' to 'K', 'S' & 'T' referred to above form an integral part of the Balance Sheet. This is the Consolidated Balance Sheet referred to in our report of even date. For G. P. Agrawal & Co. Chartered Accountants
Consolidated Profit and Loss Account

(Rupees in Lacs) Schedule Year ended 30th September, 2007 147987.25 8506.48 L M N
INCOME Gross Turnover Less: Excise Duty Net Turnover Other Income Increase in Stock Profit/(Loss) from Farm Account
139480.77 1061.64 21839.82 (3.11) 162379.12 128886.96 7723.57 15829.86 872.73 359.54 6004.28 8383.66 22.46 168083.06 (5703.94)
II Expenditure Cost of Raw Materials Consumed Salaries, Wages & other Employees' Benefits Other Manufacturing & Administrative Expenses Selling Expenses Managerial Remuneration Interest & Other Financial Charges Depreciation Transfer to Storage Fund for Molasses
O P Q R
III Profit/(Loss) before Tax (Add)/Less: Provision for Tax Current Tax (186.00) Fringe Benefit Tax (65.63) Deferred Tax (397.68) IV Profit/(Loss) after Tax but before Adjustment of Minority Interest & Share of Associate Less: Loss for the period before the date of becoming subsidiary Less: Profit/ (Loss) attributable to Minority Shareholders' Add: Share of Profit in Associate V Profit/(Loss) after adjustment of Minority Interest & Share of Associate Balance brought forward Profit/(Loss) available for Appropriation VI Appropriations Balance Carried to Balance Sheet Earnings per share of Re. 1/- each (Refer Note - 12 of schedule- "T") Basic (Rs.) Diluted (Rs.) Basis of Consolidation and Significant Accounting Policies S Notes on Accounts T Schedules 'L' to 'T' referred to above form an integral part of the Consolidated Profit and Loss Account. This is the Consolidated Profit and Loss Account referred to in our report of even date. For G. P. Agrawal & Co. Chartered Accountants
(649.31) (6353.25) 1624.31 0.89 (4728.05) 575.99 (4152.06) (4152.06) (1.91) (1.90)
Schedules forming part of the Consolidated accounts

A SHARE CAPITAL
Authorised 40,00,00,000 25,00,000 Equity Shares of Re. 1/- each Preference Shares of Rs. 100/- each
4000.00 2500.00 6500.00 2481.55 2481.55
Issued, Subscribed and Paid up : 24,81,54,660 Equity Shares of Re. 1/- each fully paid up
Notes: 1) 15,55,39,650 Equity Shares have been issued and allotted as fully paid up Bonus Shares by capitalisation of Security Premium, Capital Redemption Reserve and General Reserve. 2) 2,37,55,600 Equity Shares have been issued to the members of erstwhile Babhnan Sugar Mills Limited pursuant to Scheme of Amalgamation. 3) 21,15,400 Equity Shares have been issued to the members of erstwhile Tulsipur Sugar Company Limited pursuant to Scheme of Amalgamation. 4) Out of 2,27,66,780 Equity Shares of Re. 1/- each offered to the shareholders on right basis, issue of 17,270 (Previous Period 17,270) Equity Shares have been kept in abeyance as per the direction of court. 5) 1,63,52,000 fully paid up Equity Shares of Re.1/- each were allotted in January, 2006 at a price of Rs. 135/- per share, ranking pari passu with the existing Equity Shares, each of which is represented by one Global Depository Receipt (GDR) issued @ US$ 3.0577 each for an aggregate amount of US $ 50 million.
(Rupees in Lacs) As at 1st October, 2006 Additions Deductions As at 30th September, 2007

Capital Reserve Capital Reserve (Arising on Consolidation) Security Premium Capital Redemption Reserve Revaluation Reserve Storage Fund for Molasses General Reserve Less: Debit Balance of Profit & Loss Account (As per Contra) Employees Stock Option Adjustment Account Surplus as per Profit & Loss Account 86.42 42050.56 2500.00 18.24 60.84 42772.19 42772.19 36.72 575.99 88100.96 11.57 22.46 25.77 4152.06 86.42 11.57 42050.56 2500.00 18.24 83.30 42797.96 (4152.06) 38645.90 32.72 83428.71
59.80
4.00 575.99 4732.05
Notes: Deductions in Employees Stock Option Adjustment Account represents forfeited Options.

C SECURED LOANS
A. Term Loans I. Rupee Loans a) State Bank of India (SBI) b) Government of India, Sugar Development Fund (SDF) c) Government of India (GOI) (Free of Interest) II. External Commercial Borrowings (ECB) a) International Finance Corporation, Washington (IFC) b) ABN Amro Bank, NV (ABN) c) State Bank of India (SBI) d) DBS Bank Ltd. (DBS) e) Standard Chartered Bank (SCB) f) Coopertive Centrale Raiffeisen Boerenleenbank, B.A (CCRB) g) BNP Paribas (BNP) h) UCO Bank (UCO) i) CITI Bank (CITI) B. Cash Credit Account State Bank of India (SBI)
2500.00 5454.01 160.50 19395.50 10110.73 21993.12 6651.00 4372.00 8928.16 6982.50 4120.50 4420.00 25971.34 121059.36
Notes: 1) Term loan from SBI is secured by way of first pari passu equitable mortgage on immovable properties and hypothecation of movable properties, both present and future, pertaining to Company's sugar and co-generation units at Akbarpur and also guaranteed by a Director of the Company (due within a year Rs. 625.00 Lacs). 2) Term Loans from SDF are secured by an exclusive second charge by way of equitable mortgage on immovable properties and hypothecation of movable properties (excluding current assets and book debts), both present and future, pertaining to Company's sugar and cogeneration units at Balrampur, sugar unit at Babhnan, sugar and cogeneration units at Haidergarh, sugar and cogeneration units at Akbarpur and sugar unit at Tulsipur (due within a year Rs 882.70 Lacs). 3) Term Loan from GOI is secured by way of equitable mortgage on immovable properties and hypothecation of movable properties, both present and future, pertaining to Companys sugar unit at Babhnan, subject to charge on current assets (including book debts) created in favour of SBI to secure the working capital limits and also guaranteed by some of the Directors of the Company (due within a year Rs.40.13 Lacs). 4) a) ECB from IFC amounting to Rs. 3499.50 Lacs is secured, by way of first equitable mortgage on immovable properties and hypothecation of movable properties and second charge on current assets, both present and future, pertaining to Company's sugar and cogeneration units at Haidergarh, exclusive first charge by way of equitable mortgage on immovable properties and hypothecation of movable properties and second charge on current assets, both present and future, pertaining to Company's distillery and bio compost units at Babhnan and further guaranteed by some of the Directors of the Company (due within a year Rs.1399.80 Lacs). b) ECB from IFC amounting to Rs. 15896.00 Lacs is to be secured, by way of first equitable mortgage on immovable properties and hypothecation of movable properties and second charge on current assets, both present and future, pertaining to Company's sugar and cogeneration unit at Haidergarh, equitable mortgage on immovable properties and hypothecation of movable properties and second charge on current assets, both present and future, pertaining to Company's sugar and cogeneration units at Rauzagaon and further guaranteed by some of the Directors of the Company (due within a year Nil). 5) ECBs from ABN are secured by way of exclusive first equitable mortgage on immovable properties and hypothecation of movable properties (excluding current assets and book debts), both present and future, pertaining to Company's sugar and cogeneration units at Mankapur (due within a year Rs.1027.29 Lacs). 6) a) ECB from SBI amounting to Rs. 8084.12 Lacs is secured by way of first pari passu equitable mortgage on

immovable properties and hypothecation of movable properties, both present and future, pertaining to Company's sugar and cogeneration units at Akbarpur (due within a year Rs. 2309.76 Lacs). b) ECB from SBI amounting to Rs. 13909.00 Lacs is secured by way of first pari passu equitable mortgage on immovable properties and hypothecation of movable properties (excluding current assets and book debts), both present and future, pertaining to Company's sugar and cogeneration units at Kumbhi and Gularia (due within a year Nil). 7) ECB from DBS is secured by way of hypothecation of movable properties (excluding current assets and book debts), both present and future, and to be further secured by equitable mortgage on immoveable properties pertaining to Company's sugar unit at Balrampur (due within a year Nil). 8) ECB from SCB is secured by way of hypothecation of movable properties (excluding current assets and book debts), both present and future, pertaining to Company's cogeneration unit at Balrampur (due within a year Nil). 9) ECB from CCRB amounting to Rs. 8928.16 Lacs is secured by way of first pari passu equitable mortgage on immovable properties and hypothecation of movable properties (excluding current assets and book debts), both present and future, pertaining to Company's sugar and cogeneration units at Kumbhi and Gularia (due within a year Nil). 10) ECB from BNP and UCO are secured by way of first pari passu equitable mortgage on immovable properties and hypothecation of movable properties (excluding current assets and book debts), both present and future, pertaining to Company's sugar and cogeneration units at Kumbhi and Gularia (due within a year Rs. 2327.50 lacs). 11) ECB from CITI is secured by way of first pari passu hypothecation of movable properties (excluding current assets and book debts), both present and future, pertaining to Company's sugar and cogeneration units at Kumbhi and Gularia (due within a year Nil). 12) Cash Credit with SBI is secured / to be secured by way of hypothecation of stock of sugar, sugar in process and other current assets including book debts (excluding current assets of cogeneration & distillery units), both present and future, and 3rd charge by way of joint equitable mortgage on Company's immovable properties and hypothecation of movable properties (excluding cogeneration & distillery units) and also guaranteed by some of the Directors of the Company.
D UNSECURED LOANS
From Director From Banks From Others Deferred Sales Tax 36.17 4056.00 3500.01 308.38 7900.56 (Rupees in Lacs)
As at 30th September, 2007 E DEFERRED TAX LIABILITY (NET)

Deferred Tax Liability Depreciation on Fixed Assets Deferred Tax Assets MAT Credit Carried Forward Losses Expenses allowable for tax purposes when paid 17145.33 (1559.90) (1446.31) (1814.67)
(4820.88) 12324.45

(Rupees in Lacs) NET BLOCK
FIXED ASSETS
As at 01.10.2006 5326.16 394.58 23700.63 11.14 364.84 106881.27 2628.23 1874.74 141181.59 785.72 143.27 67483.82 56.88 49.56 461.77 3357.07 1968.45 208203.64 1393.53 943.15 33982.44 255.68 121.86 8996.14 13.76 16.69 191.25 1635.45 1048.32 42787.33
Particulars Goodwill on Consolidation Land (Free hold) Land (Lease hold) Building & Office Premises Railway Siding Tube well & Water Supply Plant & Machinery Furniture & Other Office Equipments Motor Vehicles Total Capital Work-in-Progress Total
GROSS BLOCK Additions/ Deductions/ Adjustments Adjustments during the during the year year 1906.74 688.27 12.82 9.77 14404.00 52.18 84.51 3.05 49461.54 287.28 Total As at 30.09.2007 1906.74 6001.61 404.35 38052.45 11.14 446.30 156055.53 Up to 30.09.2006 3345.52 5.86 47.40 28246.98 Total up to 30.09.2007 381.35 4290.64 6.27 54.03 35371.27 As at 30.09.2007 1525.39 6001.61 404.35 33761.81 4.87 392.27 120684.26 1721.62 920.13 165416.31 33371.52 198787.83
DEPRECIATION Deductions/ Adjustments For the during the year year 381.35 945.60 0.48 0.41 7.24 0.61 7284.00 159.71
Notes: 1) Depreciation for the year includes: i) Rs. 0.56 lac for earlier years.
ii) Rs. 230.57 lacs debited to Capital work - in - progress.
iii) Rs. 381.35 lacs Goodwill written off.
2) Amount of borrowing cost capitalised during the year Rs. 688.00 lacs.

G INVESTMENTS
Long Term In Government Securities : (Deposited with Government authorities) National Plan Certificates Kishan Vikash Patra Post Office National Saving Certificates In Shares of Joint Stock Companies : Trade Investments : Quoted : Fully Paid Up : 200000 American Paints (India) Ltd. 8400 Classic Global Security Ltd. 60100 Damania Capital Markets Ltd. 1000 Easter India Ltd. 23000 Eastern Sugar Mills Ltd. 52000 Inland Printers Ltd. 16500 KM Capital Ltd. 135320 Ram Gopal Poly Ltd. 10300 VLS Finance Ltd. Unquoted, Fully Paid Up : 196600 Equity Shares of Rs.10/- each in Avantika Ganna Pvt Ltd. (Including Capital Reserve Rs. 11.57 lacs arising on acquisition of the Associate) 35 Ordinary Shares of Rs.100/- each in Balrampur Sugar Co. Consumers Co-operative Society Ltd. 110 Ordinary Shares of Rs.10/- each in Co-operative Development Union Ltd., Babhnan 1 Ordinary Share of Rs.10/- each in Co-operative Stores Ltd., Babhnan. Other than Trade : Unquoted, Fully Paid Up : 48 Ordinary Shares of Re.1/- each in Fortuna Services Ltd. Less: Provision for Diminution in value of Investments
0.04 0.01 2.63
20.00 1.64 18.08 0.37 2.30 31.24 2.14 22.32 38.43 57.88
0.03 0.01 *
* 197.12 133.52 63.60
* Book Value Re.1/-, hence shown as Nil. The Following units were purchased and sold during the year : 1) 49272772.587 Units of Reliance Liquidity Fund, 2) 358956.153 Units of Tata Liquid Super High Investment Fund.

H CURRENT ASSETS
Interest accrued on Investments Stock (As taken, valued & certified by the Management) i) Stores & Spare Parts ii) Loose Tools & Equipments iii) Scrap Stock-in-Trade Raw Materials Finished Goods i) Sugar ii) Industrial Alcohol iii) Bio-compost iv) Banked Power Work-in-Process i) Sugar ii) Molasses iii) Bio-compost Molasses Bagasse Pressmud Standing Crop Sundry Debtors (Unsecured, Considered good) i) Debts outstanding for a period exceeding six months ii) Other debts Cash & Bank Balances Cash and cheques in hand (As certified) i) Cash in hand ii) Cheques in hand With Scheduled Banks i) In Current Accounts ii) In Fixed Deposit Accounts iii) In Unclaimed Dividend Accounts With Post Office In Saving Bank Accounts Notes: 1) Sundry debtors include Rs. 45.59 lacs under litigation. 2) Stock in transit included in Stock of Stores & Spare Parts Rs. 133.45 lacs.
4.95 6810.70 381.94 42.60
7235.24 10.64
34925.84 307.35 73.68 26.18 84.25 1.89 13.31
35333.05
99.45 893.36 513.14 11.17 3.30
385.97 4282.76
4668.73
157.44 403.02 945.08 173.13 118.84
560.46
1237.05 0.46 50571.00

I LOANS AND ADVANCES
(Unsecured, Considered good) Advances Advances recoverable in cash or in kind or for value to be received or pending adjustment Advances Considered Doubtful Less : Provision for Doubtful Advance Advances against Capital Assets Advance Payment of Tax Less: Provision for Tax Excise Duty & Cane Purchase Tax Advance Security Deposits Note: Loans & Advances include Rs. 13.36 lacs under litigation.
5613.88 491.61 (491.61) 6105.40 (6105.40) 3874.97 7902.68 67.75 17459.28
CURRENT LIABILITIES
33024.33 2652.10 43.16 118.83 9631.89 (6105.40) 35838.42
Sundry Creditors (Refer Note 4 of Schedule - "T") Interest accrued but not due Excess Price of Levy Sugar (Refer Note -3 of Schedule -"T") Investor Education & Protection Fund Unclaimed Dividend Provisions Provision for Tax Less: Advance Payment of Tax Provision for Retirement Benefits of Employees Provision for Liabilities (Refer Note -13 of Schedule -"T")
3526.49 338.68 304.68 40008.27
K MISCELLANEOUS EXPENDITURE & LOSSES

(To the extent not written off or adjusted) Share Issue Expenses Less : Written off during the year Debit Balance of Profit & Loss Account (As per Annexed Account) Less: General Reserve (As per contra) 464.28 (143.09) 4152.06 (4152.06)
321.19
321.19

L OTHER INCOME
(Rupees in Lacs)
Dividend on Current Investments (other than trade) Profit from Sugar Trading Insurance Claims Received Liabilities no longer required written back Miscellaneous Income * Exchange Rate Fluctuation (Net) * Includes Rent received (Gross) Rs. 100.03 lacs, TDS Rs. 4.83 lacs.
1.44 4.69 233.71 83.29 273.52 464.99 1061.64
(Rupees in Lacs) Year ended 30th September, 2007
M INCREASE IN STOCK
Opening Stock Finished Goods Molasses Bagasse Pressmud Work in Process Closing Stock Finished Goods Molasses Bagasse Pressmud Work in Process Add/Less : Excise Duty & Education Cess on Stock* 12231.00 455.22 622.68 3.45 90.00 35333.05 893.36 513.14 11.17 99.45
13402.35
36850.17 23447.82 (1608.00) 21839.82
* Represents differential Excise duty & Education Cess on opening & closing stock of finished goods /by products. (Rupees in Lacs) Year ended 30th September, 2007
N FARM ACCOUNT
Sales Closing Stock of Standing Crop Net Loss transferred to Profit & Loss Account Opening Stock of Standing Crop Cane Seed Purchase Fertiliser & Manures Salary & Wages Power & Fuel Rent Irrigation & Cultivation Expenses Repairs & Maintenance - Others Miscellaneous Expenses Adjustment relating to earlier years 3.94 5.26 3.11 12.31 4.58 0.67 1.18 1.52 0.25 1.00 1.84 0.53 0.10 0.64 12.31

O SALARIES, WAGES AND OTHER EMPLOYEES BENEFITS
Salaries, Wages, Bonus etc. Contribution to Provident Fund, Gratuity & Other Funds (Including provisions) Workmen & Staff Welfare Expenses
6717.56 683.77 322.24 7723.57 (Rupees in Lacs) Year ended 30th September, 2007
P OTHER MANUFACTURING AND ADMINISTRATIVE EXPENSES

Stores & Spare Parts consumed Power & Fuel Filling and Packing Expenses Rent Rates & Taxes Repairs & Maintenance Plant & Machinery Buildings Others Payment to Auditors As Audit Fees For Tax Audit For Other Services For Certification Work For Expenses Miscellaneous Expenses Insurance Charity & Donation Directors' Fees Bad Debts Loss on sale/discard of Fixed Assets (Net) Provision for Liabilities (Refer Note - 13 of Schedule -"T") Adjustment relating to earlier year (Net) Share Issue Expenses written off Goodwill written off 7449.54 423.93 219.51 60.34 152.84 2945.16 315.18 220.20 14.35 0.84 7.53 1.33 1.45
3480.54
25.50 2468.92 519.67 90.49 6.40 30.73 51.61 7.60 317.80 143.09 381.35 15829.86 (Rupees in Lacs) Year ended 30th September, 2007
Q SELLING EXPENSES
Brokerage Despatching and Forwarding Expenses Cash Discount Others 379.07 262.33 181.19 50.14 872.73

R INTEREST AND OTHER FINANCIAL CHARGES
On Fixed Loans On Other Loans (Including Financial Charges) Less: Interest Received (Gross)* On Long Term Investments (Other than trade) On Income Tax Refund On Others * Tax deducted at Source Rs. 14.94 lacs. 2792.79 3647.77 1.40 424.83 10.05
6440.56
436.28 6004.28
S
I.
BASIS OF CONSOLIDATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation : The consolidated financial statements relate to Balrampur Chini Mills Limited ("Company"), its subsidiary company and associate. The Company and its subsidiary constitute the Group. a) Basis of Accounting: i) The financial statements of the subsidiary company used in the consolidation is drawn upto the same reporting date as of the Company i.e. 30th September, 2007. ii) The financial statement of the Group have been prepared in accordance with the Accounting Standards issued by the Institute of Chartered Accountants of India, and other generally accepted accounting principles. Principles of Consolidation : The consolidated financial statements have been prepared on the following basis: i) The financial statements of the Company and its subsidiary company have been combined on a line-byline basis by adding together like items of assets, liabilities, income and expenses. The intra-group balances and intra-group transactions and unrealised profits or losses have been fully eliminated. ii) The Consolidated Financial Statements include the Share of Profit / Loss of the Associate Company which has been accounted as per the "Equity method"; and accordingly the Share of Profit / Loss of the Associate Company has been added to / deducted from the cost of investments. An Associate is an enterprise in which the investor has significant influence and which is neither a Subsidiary nor a Joint Venture of the investor. iii) The excess of cost to the Company of its investments in the subsidiary company over its share of equity of the subsidiary company, at the date on which the investment in the subsidiary company is made, is recognised as "Goodwill" being an asset in the consolidated financial statements. The Goodwill so arising is amortised in 5 years. iv) The minority interest in the net assets of the subsidiary as on the date of Balance Sheet is nil as the net worth of the subsidiary has been fully eroded. Accordingly, the minority share in the loss has been adjusted with the share of majority and shown as goodwill. Companies considered in the consolidated financial statements are : Name of the Company Subsidiary Indo Gulf Industries Ltd. Associate Avantika Ganna Pvt. Ltd. Holding as on 30th September, 2007 53.96% 39.34% Financial year ended on 30th September, 2007 31st March, 2007
b)
c)
II. Significant Accounting Policies The accounts are prepared under the historical cost convention and are in accordance with the generally accepted accounting principles in India and provisions of the Companies Act, 1956. The significant accounting policies followed by the Company and the subsidiary company are stated below: i) Fixed Assets a) Fixed Assets are stated at their original cost adjusted by revaluation of Land, Building, Plant & Machinery,

S BASIS OF CONSOLIDATION AND SIGNIFICANT ACCOUNTING POLICIES (Contd.)
Railway Siding and Tubewell of the Balrampur Unit as on 30th June, 1988 and Land, Building and Plant & Machinery of Tulsipur unit as on 31st March, 1999. Cost includes acquisition price, attributable expenses and pre operational expenses including finance charges, wherever applicable. b) Depreciation on Fixed Assets is provided on Straight Line method in accordance with the rates as specified in Schedule XIV to the Companies Act,1956 (as amended). c) Expenditure during construction period : Expenditure (including financing cost relating to borrowed funds for construction or acquisition of fixed assets) incurred on projects under implementation are being treated as Pre-operative expenses pending allocation to the assets and are shown under "Capital work in progress". d) Lease hold land in the nature of perpetual lease are not depreciated. ii) Investments Long Term Investments are carried at cost. Provision for diminution is made to recognise a decline, other than temporary, in the value of long term investments, script wise. Current Investments are valued at lower of cost or fair value, category wise. Cost of investments includes acquisition cost such as brokerage, stamp duty, etc. Inventories a) Inventories (other than By-products, Scrap and Standing crop) are valued at lower of cost or net realisable value. The cost of Inventories is computed on weighted average basis. The cost of Finished goods and work-inprocess include cost of conversion and other cost incurred in bringing the Inventories to their present location and condition. In respect of subsidiary company , the cost of Stores & Spare parts, Raw Materials and Finished Goods are determined on FIFO basis. b) By-products (Molasses & Bagasse), Scrap and Standing Crop are valued at net realisable value. Revenue Recognition a) Sale of goods is recognised at the time of transfer of substantial risk and rewards of ownership to the buyer for a consideration. b) Gross turnover is net of sales tax and inclusive of excise duty. c) Dividend income is accounted for in the year it is declared. d) All other income are accounted for on accrual basis. Expenses All the expenses are accounted for on accrual basis. Retirement Benefits Company's contribution to Provident Fund and Pension Fund are charged to Profit and Loss Account. Gratuity and Leave encashment benefit is accounted for on the basis of actuarial valuation carried out as at the Balance Sheet date. In respect of subsidiary company, provision for gratuity and leave encashment is made on estimated basis.
iii)
iv)
v) vi)
vii) Borrowing Costs Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue. viii) Share Issue expenses These are equally amortised over five years. In respect of subsidiary company, these are amortised over a period of ten years. ix) x) Insurance Claims Accounted for on settlement of claims. Government Grants a) Government grants related to fixed assets are adjusted with the value of the fixed asset/ credited to Capital Reserve. b) Government grants related to revenue items are adjusted with the related expenditure/ taken as income. Foreign Currency Transactions a) Transactions in Foreign currency are initially recorded at the exchange rate at which the transaction is carried out. b) Monetary Assets and Liabilities related to foreign currency transactions remaining outstanding at the year end are translated at the year end rate. The effect of Exchange Rate fluctuations in respect of fixed assets
xi)

S BASIS OF CONSOLIDATION AND SIGNIFICANT ACCOUNTING POLICIES (Contd.)
is adjusted with the cost of the respective Asset, whereas in respect of Monetary Assets the same is taken to Profit and Loss Account. c) Forward exchange contracts entered into for hedging purposes are accounted for separately from the underlying transactions. The premium or discount on forward exchange contracts is amortised over the period of the respective contract. Exchange difference on such contracts at the year-end / upon termination is taken to Profit and Loss Account. d) Transactions covered by cross currency swap contracts are marked to market at the Balance Sheet date and the gain or loss is taken to Profit and Loss Account. xii) Taxes on Income Current tax is determined as the amount of tax payable in respect of taxable income for the year. Deferred tax is recognised, subject to the consideration of prudence, in respect of deferred tax assets, on timing differences, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. xiii) Impairment of Assets Impairment losses, if any, are recognised in accordance with the accounting standard issued in this regard by The Institute of Chartered Accountants of India. xiv) Provisions, Contingent Liabilities and Contingent Assets Provisions are recognised in respect of obligations where, based on the evidence available, their existence at the Balance Sheet date is considered probable. Contingent Liabilities are shown by way of notes to the Accounts in respect of obligations where, based on the evidence available, their existence at the Balance Sheet date is considered not probable. A Contingent Asset is not recognised in the Accounts. xv) Employee Stock Option Scheme In respect of stock options granted pursuant to the company's Employee Stock Option Scheme, the intrinsic value of the options (excess of market price of the share over the exercise price of the option) is treated as discount and accounted for as employee compensation cost over the vesting period.
T NOTES ON CONSOLIDATED ACCOUNTS

(Rupees in Lacs) As at 30th September, 2007 1. a) Estimated amount of contracts remaining to be executed on Capital Account and not provided for b) Advances paid against above 2. Contingent Liabilities not provided for in respect of: a) Differential cane price for the sugar seasons 1978-79 and 1979-80 pending disposal of the writs filed by the Company in Hon'ble Calcutta High Court b) No provision has been made for interest on excess amount of levy sugar for sugar season 1982-83 realised as per Court Order against which TDR of Rs. 25.54 Lacs has been deposited with a Bank c) Claims for acquisition of 12.82 acres of land for the Chemical unit at Balrampur and compensation there against is under dispute and the matter is subjudice d) Claims against the Company not acknowledged as debts : i) Excise duty Demand-under appeal ii) Sales Tax Demand- under appeal iii) Others - under appeal/litigation e) Bank Guarantee furnished in respect of excise duty rebate etc. f) The supplier of the Plant & Machinery of the sugar division of the subsidiary company has gone into arbitration regarding certain claims and Company has also filed counter claim.The case is pending with the arbitrator. 3. Excess amount of levy sugar received to date for various sugar seasons as per Orders of the Hon'ble High Court has not been credited to the Profit and Loss Account as the matter is sub-judice 4. a) Amount due to Small Scale Industrial undertakings based on information furnished by the creditors 8669.33 3874.97 32.93 25.54 Amount not ascertainable 233.09 18.53 189.05 21.39 Amount not ascertainable 43.15 304.25

T NOTES ON CONSOLIDATED ACCOUNTS (Contd.)
b) List of Small Scale Industrial undertakings to whom outstanding is over 30 days (as per terms of order): M/s Alpha Controls Instruments Pvt. Ltd., M/s Amrec Cooling Tower Pvt. Ltd., M/s Atul Electroformers Pvt. Ltd., M/s Bharat Engineering & Casting, M/s Baba Vishwakarma Engg. Co. Pvt. Ltd., M/s Biodeg Chemicals and Allied Industries, M/s Chemical Systems Technologies, M/s Calsens Private Ltd., M/s Chemical Systems Tech. (I) Pvt. Ltd., M/s Dembla Valves Pvt. Ltd., M/s Centrifugal Systems, M/s G.S.Rollers, M/s Hi-Tech Systems & Services, M/s High Tech Engineers, M/s Instruments & Systems, M/s Kohli Enterprises, M/s Kay Kay Industries, M/s K.S.Projects Process Engineers, M/s Khanna Engineering Works, M/s Lord Krishna Poly Plast, M/s Mangla Rubber Industries, M/s New Pumps India, M/s M.R.Kalia Industries, M/s Nu-Plast Pipes & Plastics, M/s P.G.Goyal Industries, M/s Pelican Valves & Engineering Works, M/s Pancy Industrial Corporation, M/s Pathak Machines Tools Pvt. Ltd., M/s Puri Industries, M/s R.C.Engineers Works Pvt. Ltd., M/s Raj Chemical & Minerals, M/s Sangam Refractories, M/s Shiva Engineers, M/s Sintech Precision Products Ltd., M/s Sunderson Engineers Pvt. Ltd., M/s Swajit Engineering Pvt. Ltd., M/s Stichwell Qualitex, M/s S.J.Industries, M/s Three Star Engineering Works, M/s Universal Heavy Engineering Company, M/s Uttam Industrial Engineering Pvt. Ltd., M/s Vishal Engineering works, M/s Waaree Instrument Ltd. c) In the absence of necessary information from the suppliers relating to their registration status under the Micro, Small and Medium Enterprises Development Act, 2006, the information required under the said act could not be compiled and disclosed. 5. The levy sugar price for the seasons 2004-05, 2005-06 and 2006-07 is yet to be announced by the Government of India. Pending such announcement, the sale of levy sugar has been accounted for at the 2003-04 season's levy price. 6. The Employee Stock Option Scheme was approved by the Board of Directors and the shareholders in 2005. Under this scheme, the remuneration committee granted 622500 options in 2005 and 883000 options in 2006 having a vesting period of one year and a maximum exercise period of eight years. The exercise price of the options is based on the average daily closing market price of the company's shares during the preceding twenty six weeks prior to the date of grant on the stock exchange, where the shares are traded most. Out of the above, 204500 options were lapsed till the Balance Sheet date and balance 1301000 options were outstanding as on 30th September, 2007. 7. The company has been granted eligibility certificate dated 23rd February, 2007 under New Sugar Industry Promotion Policy, 2004 of the Government of Uttar Pradesh. Accordingly, incentives aggregating to Rs.1757.08 lacs allowable under the above policy have been accounted for during the year. The above policy which was applicable to units to be set up till 31st March, 2008 has been terminated by the Government vide order dated 4th June, 2007 wherein the Government expressed its intention to introduce another policy. The company has been legally advised that it continues to be eligible to receive the incentives under the above policy as the eligibility certificate was issued to the company before termination of the above policy. 8. Details of remuneration paid to Directors : i) Salary ii) Contribution to Provident Fund, Gratuity and other Funds iii) Perquisites (including monetary value of perquisites) (Rupees in Lacs) 2006-07 248.04 100.63 21.20 369.87

9 Other notes in respect of subsidiary company i) a) The Government of Uttar Pradesh has initiated recovery proceedings for recovery of Sales Tax dues related to Explosive unit at Jhansi pursuant to which the factory at Jhansi has been seized by the Government authorities. All the assets located at factory including records there at remain seized till the year end. Out of the above assets, certain assets pertaining to the said unit have been auctioned by the office of the Labour Commissioner, Jhansi against which a sum of Rs.8.03 lacs is lying with them. Pending availability of relevant information, no adjustment in this respect has been carried out in these accounts. b) Pursuant to recovery proceedings initiated by U.P. State Government for the recovery of pending dues of cane growers and for giving effect to the Recovery Certificates amounting to Rs.1561.00 lacs, all the movable & immovables assets of the sugar unit located at Maizapur, District Gonda (U.P.) were seized by the District Administration on August 12, 2002. Towards the said recovery certificates, District Administration sold the entire stocks belonging to the Company and deposited the sale proceeds amounting to Rs.1250.41 lacs with Registrar, Allahabad High Court. The Company has also deposited a sum of Rs.323.31 lacs with the Hon'ble High Court towards the said recovery and other cane dues. Out of the said amount, Rs.1493.31 lacs has been released by the Court to the Cane Commissioner leaving a balance of Rs.80.41 lacs in the Court, which is being reflected under the head Loans and Advances. c) During the auction of sugar as per the directive of Hon'ble High Court of Allahabad, 49128 quintals of sugar was found short for which investigation proceedings have been initiated by the Hon'ble High Court. Pending completion of such inestivation, the value including excise duty on above stock of sugar of Rs.700.07 lacs (as valued on 30.06.2002) has been considered at Nil value in these accounts. ii) The Company is in the process of obtaining bank statements / balance confirmation certificates of nonoperative accounts from banks at various locations without which the bank accounts could not be reconciled. The rest of the bank accounts having balances of Rs.31.37 lacs have been reconciled. The amount of Rs.147.07 lacs shown in "Balance with Schedule Banks" under "Cash & Bank Balances" includes Rs.15.45 lacs realised from the auction of molasses in the previous year, kept with Gonda District Administration and Allahabad Bank, Gonda Branch in a No-Lien account subject to disposal as per the order of Hon'ble Allahabad High Court, Lucknow Bench, but does not include Rs.49.46 lacs being negative balance with schedule banks shown in "Current Liabilities" as book overdraft. iii) Share application money given Rs.112.60 lacs and included in Loans and Advances against which shares are yet to be issued by the concerned companies are considered to be good, there by no provision has been made for the same. iv) a) Calls in arrears and Deferred Sales Tax Liabilities are under reconciliation. Necessary adjustments, if any, will be made after reconciliation. b) The installments for payment of Deferred Sales Tax converted into unsecured loan by Sales Tax Department are overdue. The same have not been paid and the interest thereon, if any, has not been provided in the accounts as the quantum thereof is not ascertainable. v) Pending final settlement, Interest on statutory liabilities outstanding for a long period has not been provided as the quantum thereof is not ascertainable. vi) Investment in Shares are in the name of the company except those which are in the process of transfer. vii) Balances shown under Sundry Creditors and Advances are subject to confirmation and reconciliation with the parties. viii) Lease deed for 50 Acres of Land (Out of total land of 705 acres) for Jhansi Plant has not been executed. In respect of some other land, the registration formalities are under progress. ix) Disclosure pursuant to AS-28 on "Impairment of Assets" : Due to seizure of company's explosive plant at Jhansi, the condition of the Plant & Machineries and other fixed assets there at and the impairment loss, if any, in respect thereof could not be determined, pending which no provision for such loss, if any, could be made in the accounts.
10. Segment information as per Accounting Standard - 17 on 'Segment Reporting' : The Company and its subsidiary has identified four business segments viz. Sugar, Distillery, Co-generation and others. Segments have been identified and reported taking into account the nature of the products, the differing risks and returns, the organisational structure and internal business reporting system. a) Revenue and expenses have been identified to a segment on the basis of relationship to operating activities of

the segment. Revenue and expenses which relate to enterprise as a whole and are not allocable to a segment on reasonable basis have been disclosed as Unallocable. b) Segment Assets and Segment Liabilities represent assets and liabilities of respective segments. Investments, tax related assets and other assets and liabilities that cannot be allocated to a segment on reasonable basis have been disclosed as Unallocable. c) Information about Primary Business Segments: (Rupees in Lacs) Sugar Revenue Gross Revenue Less: Inter/ Intra Segment Revenue Total Revenue Result Segment Result Less: Unallocated expenditure net of unallocated income Interest Profit / (Loss) before Tax Tax Current Tax Fringe Benefit Tax Deferred Tax Profit /(Loss) after Tax Other Information Segment Assets Segment Liabilities Capital expenditure Depreciation Non cash expenses other than depreciation 129090.20 8714.38 120375.82 () 11715.25 Distillery 15491.50 1992.39 13499.11 5061.36 Co-generation 18844.89 4247.60 14597.29 Others 184.07 106.49 77.58 Unallocated Total 163610.66 15060.86 148549.80 2009.06
8717.98 () 55.03
1708.72 6004.28
1708.72 6004.28 () 5703.94 186.00 65.63 397.68 () 6353.25
184078.39 30431.80 42916.52 5245.99 3.05
17782.65 2350.83 6273.28 596.39 () 6.71
60287.70 298.12 21299.43 2429.76 0.69
1419.72 22.14 560.80 53.71
3634.43 148189.74 98.73 57.81 584.77
267202.89 181292.63 71148.76 8383.66 581.80
Notes: a) Transactions between segments are primarily for materials which are transferred at market determined prices. Common costs are apportioned on a reasonable basis. b) Since the Companys activities/operations are primarily within the country, there is only one geographical segment. 11. Related party disclosures as per Accounting Standard - 18 for the year ended 30th September, 2007 are given below: a) Name of the related parties and description of relationship : i) Associate : Avantika Ganna Pvt. Ltd. ii) Key Managerial Personnel (KMP): Mr. Vivek Saraogi - Managing Director Mrs. Meenakshi Saraogi - Joint Managing Director Mr. K.N. Ranasaria - Whole Time Director Mr. Kishor Shah - Whole Time Director Mr. R. N. Mishra - Whole Time Director. iii) Relative of KMP : Mr. K.N. Saraogi - Chairman (Non Executive) upto 26th April, 2007 and relative of Managing Director and Joint Managing Director. iv) Enterprise in which KMP and their relatives have substantial interest : Kamal Nayan & Co.

b) Transactions with Related parties : Nature of Transaction/ Name of the party Enterprise in which KMP and their relatives have substantial interest 1.00 Key Managerial Personnel (KMP) 135.02 135.55 50.29 39.93 7.75 (Rupees in Lacs)
Associate i) Purchase of Goods Kamal Nayan & Co. ii) Rendering of Services Avantika Ganna Pvt. Ltd. Mr. K.N. Saraogi Mrs. Meenakshi Saraogi Mr. Vivek Saraogi Mr. K.N. Ranasaria Mr. Kishor Shah Mr. R.N. Mishra Amount due to/from related parties i) Accounts payable Mr. K.N. Ranasaria Mr. Kishor Shah 2.90
Relative of KMP 0.20
Total 1.00 2.90 0.20 135.02 135.55 50.29 39.93 7.75
2.40 6.96
2.40 6.96
12. Earnings per Share - The numerators and denominators used to calculate Basic/Diluted Earnings per Share : 2006-07 a) Amount used as the numerator (Rs. Lacs) Loss after Tax but before adjustment of Minority Interest and Share of Associate Total - (A) b) Weighted average number of Equity Shares used as the denominator for Basic Earnings per Share - (B) Add : Weighted average number of Equity Shares on account of Employees Stock Option Scheme c) Weighted average number of Equity Shares used as the denominator for Diluted Earnings per Share - (C) d) Nominal value of Equity Shares (Re.) e) Basic Earnings per Share (Rs.) f) Diluted Earnings per Share (Rs.) (4728.05) (4728.05) 248154660 40355 248195015 1.00 (1.91) (1.90)

13. Disclosure in terms of Accounting Standard -29 on Provisions, Contingent Liabilities and Contingent Assets: a) Movement for Provision for Liabilities: (Rupees in Lacs) Particulars Balance as at 1st October, 2006 Provided during the year Amount used during the year Reversed during the year Balance as at 30th September, 2007 Timing of outflow/uncertainties Legal cases 297.08 7.60 304.68 Outflow on settlement/crystallization
b) The Contingent Liabilities & Liabilities mentioned at Sl. No. 2 & 13 (a) respectively are dependent upon Court decision /out of court settlement/disposal of appeals etc. c) No reimbursement is expected in the case of Contingent Liabilities & Liabilities shown respectively under Sl.No. 2 & 13 (a) above. 14. This being first year of consolidation, (a) the cash flow statement could not be prepared under the indirect method in the absence of previous year comparatives, and (b) previous year figures have not been given. Signatories to all foregoing Schedules 'A' to 'T' forming part of the Accounts. For G. P. Agrawal & Co. Chartered Accountants
INDO GULF INDUSTRIES LIMITED
Directors Report
Your Directors have pleasure in presenting the TwentyFifth Annual Report and Audited Accounts of the Company for the year ended 30th September, 2007. Particulars Sales and other Income Profit/(Loss) before Depreciation, Interest and Taxation Less: Interest Less: Depreciation Profit/(Loss) before Tax Provision for Tax Net Profit/(Loss) Add: Balance brought forward from previous year Loss Carried over to Balance Sheet (Rs. in thousands) Year ended Year ended 30.09.2007 30.09.2006 34766.09 16834.52 recommend dividend for the year under review. Public Deposits During the year under report, the Company has not accepted any deposits within the purview of Section 58A of the Companies Act, 1956. Directors Mr Vimal Kumar Jain will retire from the Board by rotation at this Annual General Meeting and being eligible, offers himself for reappointment. Your Directors recommend his re-appointment. Mr Gauri Shankar Agarwala will retire from the Board by rotation at this Annual General Meeting and being eligible, offers himself for reappointment. Your Directors recommend his re-appointment. Directors Responsibility Statement Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to Directors Responsibility Statement, your directors hereby confirm: i) that in the preparation of the annual accounts for the financial year ended 30th September, 2007, the applicable accounting standards have been followed along with proper explanation relating to material departures;
(86160.13) 56255.57 36167.75 (17883.45) (163.44) (178746.89) (435625.93) (614372.82)
(2267.45) 13077.65 32086.60 (47431.70) (35.96) (47467.66) (388158.27) (435625.93)
Operations The Maizapur unit of the Company commenced Crushing operations for the season 2006-2007 w.e.f 7th April, 2007. The quantitative performance results of Season 2006-07 were as under: Duration of Sugar season : From 7th April, 2007 to 4th May 2007 Cane Crushed (Qtls.) : 595400 Recovery(%) : 9.22 Production of Sugar (Qtls) : 54814 None of the Explosive Units of the Company is in operation during the year. The dispute with respect to the transfer of shares of Dr. S.K. Garg has been resolved. Pursuant to Share Purchase Agreement and in accordance with (Substantial Acquisition of Shares and Takeover) Regulation 1997, Balrampur Chini Mills Ltd. as on date had acquired 53.96% of Equity Shares of the Company and had become its holding Company. Future Outlook and Prospects The Company had a successful trial run of its sugar unit during the season 2006-07. It is expected that the plant will run at its rated capacity during the ensuing sugar season. Dividend In view of Losses, the directors regret their inability to
ii) that the directors had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the Profit or Loss of the Company for the year under review; iii) that the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv) that the directors had prepared the accounts for the financial year ended 30th September, 2007 on a going concern basis. Auditors Report As required under Section 217 of the Companies Act, 1956, the observation of auditors in their report on various issues are explained as follows : The Company had commenced the production and it
Indo Gulf Industries Limited 107
is expected that sugar plant will run at its rated capacity. Based on the rehabilitation measures undertaken by the Company, accounts have been prepared on a Going Concern Basis. The account statements (Non-operative accounts) from the Banks from the year 2002 onwards at various locations have been called for, which have not been provided by the bank. Without this the reconciliation process (Non-operative accounts) cannot be made. The bank accounts currently in operation have been reconciled. In view of this practical difficulty the amounts of bank accounts have been shown as per books. The overdue instalments of deferred sales tax has not been paid and the interest thereon, if any, has not been provided in the accounts, as the quantum thereof is not ascertainable. The same will be provided on final settlement. Interest on outstanding statutory liabilities will be provided upon final settlement as at present the amount is not ascertained. Due to the seizure of the units of the Company, requisite records of employees are not available. The provision of gratuity on accrual basis will be completed after compilation of records.
Exchanges, Managements Discussion and Analysis, a report on Corporate Governance together with the Certificate from Practicing Company Secretarys on the compliance of conditions of the Corporate Governance forms part of the Annual Report. Particulars of Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo In accordance with the requirement of Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, the statement showing particulars with respect to conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is annexed hereto and form a part of this report. Particulars of Employees During the year under review there were no employees who were drawing remuneration as prescribed in section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 either for full year or for a part of the year under review. Acknowledgements Your directors wish to place on records their appreciation for co-operation and support extended by the Bankers, other Financial Agencies and employees of the company. By order of the Board For Indo Gulf Industries Limited
Auditors M/s Vipin Aggarwal & Associates, Chartered Accountants, Statutory Auditors of the Company retire and being eligible, offer themselves for reappointment. The Company has received a certificate from the Auditors to the effect that their reappointment, if made, would be in accordance with section 224 of the Companies Act, 1956. Corporate Governance As per clause 49 of the Listing Agreement with the Stock
Sd/Anup Kumar Acharya Director New Delhi 14th November, 2007
Sd/Dr. Arvind Krishna Saxena Director
Annexure to the Directors Report

Information Pursuant to the Companies [Disclosure of Particulars in the Report of the Board of Directors] Rules 1988 and forming part of the Directors Report for the year ended 30th September, 2007 A. Conservation of Energy a) Your Company continues to give high priority to the conservation of energy on an ongoing basis, some of the significant measures taken are: i) Installation of dumping grates, high pressure boilers, high efficiency swing type fiberisor, milling control system, flash vapour system. ii) Installation of bigger size, constant ratio mill with variable speed, DC motor drive having full auto control, hydraulic cane unloaders, rotary-screens, continuous sulphur burner, high efficiency centrifugal pumps, Sugar bag conveying system, efficient & fully automatic centrifugal, semi kestner etc. iii) Installation of compressors & fans, heat recovery units in boiler, feed water heaters, distributed control system for centralized efficient operation. b) The required data with regard to conservation of energy are furnished below: A) Power and fuel consumption 1. a) Purchased Units b) Own generation i) Through Diesel Generator sets (Units) Units per ltr. of Diesel Cost/ Units (Rs.) ii) Through Steam Turbine/ Generator (Units) Unit per quintal of Bagasse Cost/Unit 2. Coal (specify quality and where used quantity) (Tonnes) Total amount/average cost 3. Furnace Oil (K.Ltrs.) 4. Other/Internal Generation Quantity total cost rate/Unit B) Consumption per Unit of production Sugar (lac quintal) Electricity (Units per qtl. of production) Furnace Oil Coal (specify quality) Other (specify quality) 2006-07 Nil 2005-06 Nil
381495 Nil 3.21 Nil 10.49 Nil 2539413.70 Nil Steam produced by use of own bagasse Not directly consumed in production - do - do - do Nil 0.55 46.33 Nil Nil Nil Nil Nil Nil Nil Nil Nil
B. Research and development technology absorption Your Company has been carrying out research and development in the following specific areas: i) Rearing of seed nurseries of new improved varieties for varietal replacement. ii) Pest control measures to protect cane from disease. iii) Ratoon crop management helping increase yield and recovery. Owing to the efforts, a higher yield of disease free cane will be available to the Company, resulting in a higher return to the Company and to the cane growers. Future plans i) continuing research to generate better-yielding and disease free cane varieties. ii) Installing machineries with the latest technology at different stations in the factory. iii) Providing irrigation facilities to growers by distributing pumping sets and boring. C. Foreign exchange earnings and outgo i) Activities relating to exports initiative taken to increase exports ii) development of new export market for product and services and export plan iii) Total foreign exchange earnings (Rs. Lacs) iv) Used (Rs. Lacs) Nil Nil Nil Nil Nil Nil Nil Nil
For and on behalf of the Board of Directors Sd/Anup Kumar Acharya Director Sd/Dr. Arvind Krishna Saxena Director
New Delhi 14th November, 2007
Corporate Governance Report

Companys Philosophy on Code of Corporate Governance The company firmly believes that Corporate Governance is a continuous process to attain high standards of efficiency, transparency, integrity and ethical behavior with a view to maximize benefits from the business for all constituents with due regards to and compliance with laws. Your company has adopted a Code of Business Conduct and Ethics, which lays down the standards of values ethics and business principles for Board Members and Senior Management of the Company. Board of Directors The Composition of Board of Directors as on 30th Sl. No. Name of Director Number of other Directorship (Public Ltd. Company) September, 2007 is as follows: 1. Non-independent Non-executive Directors i) Dr. Arvind Krishna Saxena 2. Independent Non-executive Directors i) Mr. Vimal Kumar Jain ii) Mr. Gauri Shankar Agarwala iii) Mr. Shiv Bhagwan Khowala iv) Mr. Anup Kumar Acharya The composition of the Board of Directors, number of other Directorship or Board Committees of which he is a Member and the attendance of each Director at the Board Meeting and the last Annual General Meeting (AGM) are as under:Number of membership/ Chairmanship of other Board Committee Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Number of Board meetings attended Attendance at last AGM
1 2 3 4 5 6 7 8 9 10
Dr. S.K. Garg** Dr. Avinash Garg* Mr. Deepak Garg* Mr. M.K. Garg* Mr. N.K. Agarwal* (Alternate to Avinash Garg) Dr. Arvind Krishna Saxena Mr. Vimal Kumar Jain Mr. Gauri Shankar Agarwal Mr. Shiv Bhagwan Khowala Mr. Anup Kumar Acharya
Nil Nil Nil 2 Nil Nil Nil 1 Nil Nil
2 1 3 6 6 5 6 5
NA NA NA NA NA Yes Yes Yes No Yes
**Dr. S.K. Garg resigned from the Board on 31st January, 2007. *Dr. Avinash Garg, Mr. Deepak Garg and Mr. M. K. Garg resigned from the Board on 27th January, 2007 effective from 28th January, 2007. Mr. N. K. Agarwal was alternate Director to Dr. Avinash Garg, hence ceased to be the Director. Mr. Vimal Kumar Jain, Mr. Gauri Shankar Agarwala, Mr. Shiv Bhagwan Khowala and Mr. Anup Kumar Acharya were appointed as the Additional Directors on December 20, 2006. During the year ended 30th September, 2007, 9 Board Meetings were held i.e. on 12th October, 2006, 20th November, 2006, 20th December, 2006, 27th January, 2007, 31st January, 2007, 1st March, 2007, 30th April, 2007, 30th July, 2007 and 30th August, 2007. Board Committees: Audit Committee The Board of Directors on 20th December, 2006 reconstituted the Audit Committee, empowering it with necessary powers and defining its duties to comply with the provision of the Listing Agreement and Companies Act, 1956. The Audit Committee constituted by the Board of
Directors consists of the following Directors as members: 1. Mr. Vimal Kumar Jain : Chairman, Independent, Non-executive 2. Dr Arvind Krishna : Non-independent Saxena Non-executive 3. Mr. Shiv Bhagwan : Independent, Khowala Non-executive 4. Mr. Anup Kumar : Independent, Acharya Non-executive All these Directors possess Knowledge of corporate finance, accounts and Company Law. The Chairman of the Committee is an Independent Non-executive Director nominated by the Board. The Company Secretary acts as a Secretary to the Committee. The Audit Committee have following powers : 1. To investigate into any matter in relation to the items specified in Sections 292A of the Companies Act, 1956 or referred to it by the Board and shall have full access to information contained in the records of the Company and external professional advice, if necessary. 2. To investigate any activity within its terms of reference. 3. To seek information from any employee.
4. To obtain outside legal or other professional advice. 5. To secure attendance of outsiders with relevant expertise, if it considers necessary. The Role of the Audit Committee includes following: 1) Oversight of the companys financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible. 2) Recommending to the Board, the appointment, reappointment and, if required, the replacement or removal of the statutory auditor and the fixation of audit fees. 3) Approval of payment to statutory auditors for any other services rendered by the statutory auditors. 4) Reviewing, with the management, the annual financial statements before submission to the board for approval, with particular reference to: a) Matters required to be included in the Directors Responsibility Statement to be included in the Boards report in terms of clause (2AA) of section 217 of the Companies Act, 1956. b) Changes, if any, in accounting policies and practices and reasons for the same. c) Major accounting entries involving estimates based on the exercise of judgment by management. d) Significant adjustments made in the financial statements arising out of audit findings. e) Compliance with listing and other legal requirements relating to financial statements. f) Disclosure of any related party transactions. g) Qualifications in the draft audit report. 5) Reviewing, with the management, the quarterly financial statements before submission to the board for approval. 6) Reviewing, with the management, performance of statutory and internal auditors, and adequacy of the internal control systems. 7) Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit. 8) Discussion with internal auditors any significant findings and follow up there on. 9) Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the board. 10) Discussion with statutory auditors before the audit commences, about the nature and scope of audit as
well as post-audit discussion to ascertain any area of concern. 11) To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non payment of declared dividends) and creditors. 12) Reviewing Companys financial and risk management policies. 13) Carrying out such other function as may be time to time specifically referred by the Board of Directors. The Audit Committee also reviews the following information: 1) The Management discussion and analysis of financial condition and results of operations; 2) Statement of significant related party transactions, submitted by management; 3) Management letters / letters of internal control weaknesses issued by the statutory auditors; 4) Internal audit reports relating to internal control weaknesses; 5) The appointment, removal and terms of remuneration of the Chief internal auditor; and 6) Review of uses/ application of funds raised through (public issue, right issue, preferential issue, etc.). Meetings and attendance During the financial year ended 30th September, 2007, Audit Committee meetings were held on 27th January, 2007, 28th February, 2007, 30th April, 2007 and 30th July, 2007 Name of Directors No. of Meetings attended Mr. Vimal Kumar Jain 4 Dr. Arvind Krishna Saxena 4 Mr. Shiv Bhagwan Khowala 4 Mr. Anup Kumar Acharya 3 Remuneration Committee The Remuneration Committee was constituted on 20th December, 2006. Prior to the constitution of the Remuneration Committee, compensation for Executive Directors was fixed by the Board of Directors and approved by the Shareholders. As on the date of this report, Remuneration Committee comprises of 3 Directors, all of whom are non-executive, independent Directors. The members of the Committee are:1. Mr. Anup Kumar Acharya : Chairman 2. Mr. Shiv Bhagwan Khowala 3. Mr. Vimal Kumar Jain During the financial year ended 30th September, 2007, Remuneration Committee meeting was held on 29th January, 2007. The details of payment to Non-Executive Directors during
the year 2006-07 are as under: Non Executive Directors Dr. Arvind Krishna Saxena Mr. Vimal Kumar Jain Mr. Gauri Shankar Agarwal Mr. Shiv Bhagwan Khowala Mr. Anup Kumar Acharya Mr. N.K. Agarwal Mr. M.K. Garg
Sitting Fees (Rs) 6000 6000 5000 6000 5000 1000 1000
No shares were pending for transfer as on 30th September, 2007. ii) Shareholder Investors Grievance Committee The Company constituted the Shareholder / Investor Grievance Committee on 20th December, 2006 to oversee the redressal of shareholders and investor grievances in relation to transfer of shares, nonreceipt of Annual Report, non- receipt of dividend etc. The constitution of the Committee is as follows:1. Mr. Anup Kumar Acharya : Chairman 2. Mr. Vimal Kumar Jain 3. Mr. Shiv Bhagwan Khowala During the financial year ended 30th September, 2007, Shareholder Investors Grievance Committee were held on 2nd April, 2007 and 30th July, 2007. The Company attends the shareholders/investors grievances/correspondence expeditiously. During the year under review, 64 investor complaints were received and all of them have been resolved. No shares were pending for transfer as on 30th September, 2007. Compliance Officer Ms. Neha Kejriwal, Company Secretary is the Compliance Officer of the Company. General Body Meeting The last three Annual General Meetings were held as given below:-
Shareholders Committee i) Share Transfer Committee A Share Transfer Committee was reconstituted on 20th December, 2006 to deal with various matters relating to share transfer / transmission, issue of duplicate share certificates, approving the split and consolidation requests and other matters relating to transfer and registration of shares. At present the members in Share Transfer Committee are as below: 1. Mr. Vimal Kumar Jain 2. Mr. Shiv Bhagwan Khowala 3. Mr. Anup Kumar Acharya During the financial year ended 30th September, 2007, 7 Share Transfer Committee meetings which were held on 2nd April, 2007, 10th May, 2007, 25th May, 2007, 11th June, 2007, 29th June, 2007, 23rd July, 2007, 27th September, 2007. Financial year 2003-04 2004-05 2005-06 Date 31.01.2006 15.11.2006 30.03.2007
Location of the Meeting Time Special resolution passed 422,Okhla Industrial Estate, 10.00 A.M. Reappointment of Dr. S.K. Garg as New Delhi Chairman-cum-Managing Director 422,Okhla Industrial Estate, 10.00 A.M. Nil New Delhi The Little Theatre Group, Copernicus 10.00 A.M. Nil Marg, New Delhi 110001 General Shareholders Information Annual General Meeting. Date and Time : 29th January, 2008 at 11.00 A.M Venue : The Little Theatre Group, Copernicus Marg, New Delhi - 110001 Financial year calendar : October, 2007 to September, 2008. (Tentative) Results for the quarter ending 31st December, 2007 fourth week of January, 2008 Results for the quarter ending 31st March, 2008 fourth week of April, 2008. Results for the quarter ending 30th June, 2008 fourth week of July, 2008. Results for the quarter ending 30th September, 2008 fourth week of October, 2008. Book closure date 21st January, 2008 to 29th January, 2008 (both days inclusive).
No special resolution was put through ballot at the last AGM and no special resolution is proposed to be conducted through postal ballot at the forthcoming AGM. Disclosures i) The company does not have any related party transactions which may have potential conflict with the interests of the company at large. ii) The Company has fulfilled all statutory compliances except the payment of listing fees to Ahmedabad Stock Exchange Limited. Means of communication The Company usually published its Quarterly, Half Yearly Un-audited Financial Results and Audited Financial Results in the prescribed form in Financial Express and Jansatta. The results were also sent to Stock Exchanges where the securities of the Company are listed. The Managements discussion and analysis forms a part of the Annual Report, which is posted to the shareholders of the Company.
Dividend Considering the Losses, the Board of Directors have not recommended any dividend for the year. Listing of Equity shares on Stock Exchanges : i) Bombay Stock Exchange Ltd. The Corporate Relationship Department, Rotunda Building, P.J. Towers, Dalal Street, Fort, Mumbai 400 001. ii) The Stock Exchange (Ahmedabad) Ltd. Kamdhenu Complex, opposite. Sahajanand College, Panjara Pole, Ambawadi, Ahmedabad - 380 015. Listing Fee Listing fee for the year 2006-07 has been paid to the Bombay Stock Exchange. Listing fee of ASE is in arrear. Shareholding range Upto 5000 5001-10000 10001-20000 20001-30000 30001-40000 40001-50000 50001-100000 100001 and above Total No. of Shares 2780996 131834 109398 23650 69500 50000 470050 5931842 9567270
Stock Code BSE Code for Indo Gulf Industries Ltd. - 506945 ASE Code for Indo Gulf Industries Ltd. - 26110 Trading of Shares Presently, the trading of the shares of the Company is suspended on the above Stock Exchanges. Share Transfer System : Shares lodged for transfer are normally effected with in a maximum period of 30 days from the date of receipt. Shares for transfer should be lodged at the Registered Office of the Company i.e. 104, Buildcon Apartment, 70, Ber Sarai, New Delhi 110 016. Distribution of shareholding as on 30th September, 2007 (face value of Rs. 10 each). No. of Shareholders 18064 18 7 1 2 1 6 6 18105 % of shareholders 99.77 0.10 0.04 0.01 0.01 0.01 0.03 0.03 100.00
% of Shareholding 29.07 1.38 1.14 0.25 0.73 0.52 4.91 62.00 100.00
Pattern of shareholding as on 30th September, 2007 (face value of Rs 10 each). Promoters Group Financial Institution, Insurance Companies, Banks and Mutual Funds etc. Foreign Institutional Investors Private Corporate Bodies NRIs Indian Public Total Dematerialisation of shares Due to the closure of the operations of the Company from last four years, the company has not received the ISIN number and the shares of the company are not in dematerialised form. Plant location Explosive Division Unit 1: Babina, Jhansi (U.P.) Unit 2: Singrauli, (M.P.) Unit 3: Korba, (Chattisgarh) Unit 4: I.B Valley, (Orissa) Unit 5: Talchar, (Orissa) Sugar Division: Maizapur, Gonda (U.P.) Investor correspondence Indo Gulf Industries Ltd., Flat No. 104, Buildcon Apartment, 70, Ber Sarai, New Delhi 110 016 (India). No. of Shares 5162523 175548 1298 898686 97508 3231707 9567270 % of Holding 53.96 1.83 0.01 9.39 1.02 33.78 100.00
Non Mandatory Requirement The Company has set up a Remuneration Committee on 20th December, 2006. The Remuneration Committee makes/ recommends to the Board of Directors regarding remuneration payable to the Managerial Personnel. Code of Conduct The company has adopted a Code of Conduct for its Board of Directors and Senior Management Personnel. Declaration on the Code of Conduct The company has adopted a Code of Conduct in its meeting held on 20th December, 2006. All the Board Members and Senior Executives of the Company have affirmed and assured their Compliance with the Code of Conduct of the Company in future. New Delhi 14th November, 2007 Sd/Dr. Gopi Krishna Gupta Manager
CEO / CFO Certification

The Board of Directors, Indo Gulf Industries Limited, New Delhi. Re: Financial Statements for the financial year 2006-07 Certification by Manager and Manager (Accounts) We, Gopi Krishna Gupta, Manager and Mr. Sanjay Kumar Agarwal, Manager (Accounts) of Indo Gulf Industries Limited, on the basis of the review of the financial statements and the cash flow statement for the financial year ending 30th September, 2007 and to the best of our knowledge and belief, hereby certify that:1. These statements do not contain any materially untrue statements or omit any material fact or contain statements that might be misleading. 2. These statements together present a true and fair view of the Companys affairs and are in compliance with existing accounting standards, applicable laws and regulations. 3. There are, to the best of our knowledge and belief, no transactions entered into by the Company during the financial year ended 30th September, 2007 which are fraudulent, illegal or violative of the Companys Code of Conduct. 4. We accept responsibility for establishing and maintaining internal controls for financial reporting, we have evaluated the effectiveness of the internal control systems of the company pertaining to financial reporting and we have disclosed to the auditors and the Audit Committee those deficiencies in the design or operation of such internal controls of which we are aware and the steps we have taken or propose to take to rectify these deficiencies. 5. We have indicated to the Auditors & Committee:the Audit
a) there have been no significant changes in internal control over financial reporting during this period. b) there have been no significant changes in accounting policies during this period. c) there have been no instances of significant fraud of which we have become aware and the involvement therein, of management or an employee having significant role in the Companys internal control systems over financial reporting.
Sd/Sanjay Kumar Agarwal Manager (Accounts) New Delhi 14th November, 2007
Sd/Gopi Krishna Gupta Manager
Certificate on Corporate Governance

To the Members of Indo Gulf Industries Limited, We have reviewed the compliance of conditions of corporate governance by Indo Gulf Industries Limited for the year ended 30th September, 2007, as stipulated in the Clause 49 of the Listing Agreement of the said Company with Stock Exchanges, with the relevant records and documents maintained by the Company and furnished to us. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination is limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of conditions of corporate governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to explanations given to us, we certify that the company has complied with the conditions of corporate governance as stipulated in the abovementioned Listing Agreement. We further state that such compliance is neither an assurance to the future viability of the Company nor the efficiency of effectiveness with which the management has conducted the affairs of the Company. We have been explained that no investor grievances are pending as on 30th September, 2007 for a period exceeding one month against the Company as per the records maintained by the Company.
For Anjali Yadav & Associates Company Secretaries
Sd/(Anjali Yadav) Membership No. 15353
Auditors Report
To the Members of Indo Gulf Industries Limited 1. We have audited the attached Balance Sheet of INDO GULF INDUSTRIES LIMITED as at 30th September 2007 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date, annexed thereto. These Financial Statements are the responsibility of Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. 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 misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies, (Auditors Report) Order, 2003, issued by the Central Government of India in terms of section 227 (4A) of the Companies Act, 1956, we enclose in the Annexure hereto, a statement on the matters specified in Paragraphs 4 and 5 of the said Order. 4. Further to our comments in the Annexure referred to in paragraph 3 above; we report that: I. we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit except non availability of non-operative bank account statements and its reconciliation. II. in our opinion, proper books of account, as required by law, have been kept by the Company so far as appears from our examination of the books; III. the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; IV. in our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; V. in our opinion and to the best of our information and according to the explanations given to us, the said accounts read with significant accounting policies and notes thereon, subject to matters stated in paragraphs herein below: i. Your attention is drawn on Note No. 2(c) in Schedule R of the Financial Statement regarding erosion of net-worth of the Company. Though, the company has incurred a net loss of Rs. 17.87 crores for the year ended 30.09.2007 & as of date accumulated losses of Rs. 61.44 crores of the Company has exceeded the shareholders fund of Rs. 44.05 crores subject to amounts presently un-ascertainable as mentioned in under noted para (ii) and (iii) ; yet in view of the factors as mentioned in para 2(c) of the Notes on Accounts, the accounts have been made on the presumption of going concern. ii a. Regarding non-availability of bank Statements for non-operative bank accounts & its reconciliation. (Note No. 7(a) of Schedule R). b. Regarding non-provision of interest on Deferred Sales Tax Liability under the head Unsecured Loans, amount being unascertained. (Note No. 7 (b) of schedule R). c. Regarding non-provision of interest and penalty on statutory liabilities the amount being unascertained. (Note No. 8 of schedule R). iii. The provision for Gratuity has been made on estimated basis instead of actuarial basis. (Note No. IX (b) of Schedule Q) give the information required by the Companies Act, 1956 in the manner so required and we state that the accounts present a true and fair view in conformity with the accounting principles generally accepted in India: i) in the case of the Balance Sheet of the state of affairs of the Company as at 30th September, 2007 ; ii) in the case of the Profit and Loss Account, of the LOSS for the year ended on that date; and iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. For Vipin Aggarwal & Associates Chartered Accountants
Sd/(Vipin Aggarwal) Partner
Annexure to the Auditors Report
Annexure referred to in paragraph [3] of our report of even date i) a) We have been informed that, the Company is again under process of preparing the records of fixed assets. b) According to explanation given to us, fixed assets acquired during the year for the Sugar unit at Gonda (U.P.) have been physically verified by the management. However, in respect of the fixed assets acquired during the previous years, the management is in the process of its reconciliation. Further, in respect of the fixed assets of the explosive units, we have been informed that the same could not be physically verified due to seizure of the plants. c) There was no disposal of fixed assets during the year. ii) a) The inventories have been physically verified during the period by the management at reasonable intervals for the sugar unit at Maizapur, Gonda (U.P). Further, there is no inventory at Explosive unit, Jhansi as the same has been written off during the year. b) In our opinion and according to the information and explanations given to us, the procedure of physically verifying the inventory followed by the management is reasonable and adequate in relation to the size of the Company and nature of its business. c) On the basis of our examination, we are of the opinion that the Company is maintaining proper records of inventory. No material discrepancies were noticed on verification between the physical stocks and the book records. iii) The Company has neither granted nor taken any vi) iv) loans secured or unsecured to/from Companies, firm or other parties listed in the register maintained under section 301 and/or to the Companies Act, 1956. On the basis of information and explanations given to us, we are of the opinion that the Company has an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods. Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that there are no transactions that need to be entered into the register maintained under Section 301 of the Companies Act. Accordingly, clause 4(v) of the Order is not applicable to the Company. The Company has not accepted any deposits from the public within the meaning of Section 58A, 58AA or any other relevant provisions of the Act and rules framed there under.
v)
vii) In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business. viii) To the best of our knowledge and as explained, the Central Government has not prescribed the maintenance of cost records under clause (d) of sub section (1) of Section 209 of the Companies Act, 1956 for the products of the Company. ix) a) There are no such undisputed statutory dues during the year. However, due to non availability of records on account of seizure of sugar factory at Maizapur, Gonda (U.P.) and explosive units, we are unable to comment
whether in respect of earlier years any undisputed statutory dues were outstanding at the year end. x) The accumulated losses are Rs. 6143.73 lakhs (without including unascertained amounts as mentioned in para V ii (a to c) & iii of our report against the shareholders fund of Rs. 4404.74 lakhs, which exceeds its net worth. Further, it has incurred cash losses of Rs. 1125.31 lakhs during the year under consideration and Rs. 117.85 lakhs in the immediately preceding financial year without considering the effect as mentioned above. xi) According to the information and explanations given to us, Paragraph 4(xi) of the order regarding default in payment of dues to a financial institution or bank or debenture-holders, is not applicable.
xvi) During the year, since the Company has not taken any term loans, paragraph 4 (xvi) of the order is not applicable. xvii) According to the information and explanations given to us, and an overall examination of the Balance Sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment by the Company and viceversa. xviii) The Company has not made any preferential allotment of shares to parties or Companies covered in the register maintained under section 301 of the Companies Act, 1956. xix) During the year, since the company has not issued any debentures, paragraph 4 (xix) of the order is not applicable. xx) The Company has not raised any money through a public issue during the year. Hence paragraph 4 (xx) of the order is not applicable. xxi) Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.
xii) According to the information and explanations given to us, and based on the documents and records produced to us, the company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. xiii) In our opinion and according to the information and explanations given to us, the nature of activities of the Company does not attract any special statute applicable to chit fund and Nidhi / mutual benefit fund/societies. xiv) The Company does not deal or trade in shares, securities, and debentures other than the investments made by it. xv) During the year, since the Company has not given any guarantee for loans taken by others, paragraph 4 (xv) of the order is not applicable.
For Vipin Aggarwal & Associates Chartered Accountants
Sd/(Vipin Aggarwal) Partner
Balance Sheet
As at 30th September, 2007 (Rs. in thousands) Schedule As at 30th September, 2007 As at 30th September, 2006
I. SOURCES OF FUNDS 1. Shareholders' Funds a) Share Capital b) Reserves & Surplus 2. Loan Funds a) Secured Loans b) Unsecured Loans II. APPLICATION OF FUNDS 1. Fixed Assets a) Gross Block b) Less: Depreciation c) Net Block d) Capital Work-in-progress Net Fixed Assets 2. Investments 3. Current Assets, Loans & Advances a) Current Assets i) Inventories ii) Sundry Debtors iii) Cash and Bank Balances b) Loans & Advances
A B C D
88179.90 352293.44 703368.12 34455.35
440473.34
88179.90 352293.44 221337.07 93952.12
440473.34
737823.47 1178296.81
315289.19 755762.53
926522.24 415349.48 511172.76 15352.36 E F G 80041.36 5084.32 15368.07 50329.04 150822.79 114750.87 36071.92 526525.12 408.18
732247.29 379014.85 353232.44 7095.45 360327.89 243.44
c) Less: Current Liabilities & Provisions I Net Current Assets 4. Miscellaneous Expenditure (To the extent not written off or adjusted) Share Issue Expenses Less: Written off during the period 5. Profit and Loss Account
643.76 18181.77 97605.72 116431.25 159689.23 (43257.98)
2823.25 1904.48
918.77 614372.82 1178296.81
4727.73 1904.48
2823.25 435625.93 755762.53
Significant Accounting Policies Q Notes on Accounts R Schedules 'A' to 'I', 'Q' & 'R' referred to above form an integral part of the Balance Sheet. This is the Balance Sheet referred to in our report of even date. For Vipin Aggarwal & Associates Chartered Accountants
Sd/Vipin Aggarwal Partner New Delhi 14th November, 2007
Sd/Neha Kejriwal Secretary
Sd/Anup Kumar Acharya Director
Sd/Arvind Krishna Saxena Director
Profit and Loss Account
For the year ended 30th September, 2007 (Rs. in thousands) Schedule Year ended 30th September, 2007 Year ended 30th September, 2006
I. INCOME Gross Turnover Sales Less : Excise Duty Net Turnover Other Income Increase/(Decrease) in Stock Loss transferred from Farm Account II. EXPENDITURE Cost of Raw Materials Consumed Salaries, Wages & other Employees' Benefits Selling Expenses Interest & Other Financial Charges Depreciation Share Issue Expenses written off Adjustment Pertaining to Previous year (Net) III. LOSS BEFORE TAX Less: Provision for Fringe Benefit Tax IV. LOSS AFTER TAX Balance brought forward V. Balance Carried to Balance Sheet Significant Accounting Policies Notes on Accounts Q R M O P Other Manufacturing & Administrative Expenses N 78789.97 18510.99 38689.27 72.85 56255.57 36167.75 1904.48 30804.86 261195.74 (178583.45) 163.44 (178746.89) (435625.93) (614372.82) 752.37 12886.67 13077.65 32086.60 1904.47 3558.46 64266.22 (47431.70) 35.96 (47467.66) (388158.27) (435625.93) J K L 35482.24 4594.18 30888.06 3878.03 47950.14 (103.94) 82612.29 16834.52 16834.52
Schedules 'J' to 'R' form an integral part of the Profit and Loss Account. This is the Profit and Loss Account referred to in our report of even date. For Vipin Aggarwal & Associates Chartered Accountants
Cash Flow Statement

A

(Rs. in thousands)
Year ended 30th September, 2006 (43873.24) 32086.60 1904.47 63.00 (3558.46) 13077.65 (8418.36) 7725.85 (8415.58) 53620.00 (97480.00)
CASH FLOW FROM OPERATING ACTIVITIES Net Profit before tax and extra ordinary items Adjustment for: Depreciation Share Issue Expenses written off Provision for dimunition in value of Investments Other Provisions Prior period items Interest Paid Inventories written off Provision for doubtful debts Bad Debts Written off Balances written back Operating Profit before working capital changes Adjustment for: Trade and other receivables Inventories Trade Payable Cash Generated from operations Direct Taxes paid/refund Cash Flow before extra ordinary items Extra Ordinary Items Net Cash from Operating Activities CASH FLOW FROM INVESTING ACTIVITIES Purchase of Investments Capital work-in-progress Purchase of Fixed Asset Net Cash from Investing Activities CASH FLOW FROM FINANCING ACTIVITIES Proceeds from other borrowings Interest paid Loans repaid Net Cash from Financing Activities Net Increase/ (decrease) in Cash & Cash Equivalent Opening Cash and Cash Equivalents Closing Cash and Cash Equivalents
(147778.60) 36167.75 1904.48 (162.74) 836.56 (30804.85) 56255.57 (177.22) (2343.71) 3073.09 (2771.57) 41462.99 (79220.38) (43166.79)
(85801.24)
(9408.07)
(80924.18) (166725.42) (166725.42) (166725.42) (2.00) (8256.92) (194108.07) (202366.99) 482031.05 (56255.57) (59496.77) 366278.71 (2813.70) 18181.77 15368.07
(43860.00) (53268.07) (53268.07) (53268.07) (31.90) (31.90) 280834.00 (13077.65) (209100.00) 58656.35 5356.38 12825.39 18181.77
Notes : 1) The above Cash Flow Statement has been prepared under the ''Indirect Method'' as set out in the Accounting Standard - 3 on Cash Flow Statement issued by the Institute of Chartered Accountants of India. 2) Figures in bracket represent cash outflow. 3) Cash and Cash equivalents at the end of the year consist of: (Rs. in thousands) Year ended 30th Year ended 30th September, 2007 September, 2006 a) Cash and Cheque in hand 59.31 1142.23 b) Balances with banks: Current Accounts 14706.89 16930.64 Fixed Deposits 601.87 108.90 Total 15368.07 18181.77
As per our report of even date. For Vipin Aggarwal & Associates Chartered Accountants Sd/Vipin Aggarwal Partner New Delhi 14th November, 2007 Sd/Neha Kejriwal Secretary Sd/Anup Kumar Acharya Director Sd/Arvind Krishna Saxena Director
Schedules to the accounts

(Rs. in thousands)
A SHARE CAPITAL
Authorised 1,97,50,000 Equity Shares of Rs. 10/- each 25,000 10% Convertible Cumulative Preference Shares of Rs.100/- each Issued, Subscribed & Paid up 95,67,270 Equity Shares of Rs. 10/- each Less: Call unpaid (Allotment money) 197500.00 2500.00 200000.00 95672.70 7492.80 88179.90 197500.00 2500.00 200000.00 95672.70 7492.80 88179.90
(Rs. in thousands)
As at 1st October, 2006 Additions Deductions As at 30th September, 2007

Subsidy Security Premium Less: Calls in Arrears Investment Allowance Reserve (Utilised) Debenture Redemption Reserve 3985.68 378044.08 (39450.47) 338593.61 9614.15 100.00 352293.44 3985.68 378044.08 (39450.47) 338593.61 9614.15 100.00 352293.44
(Rs. in thousands)
As at 30th September, 2007 As at 30th September, 2006
C SECURED LOANS
From Holding Company 703368.12 703368.12 221337.07 221337.07
Note: Loan from Body Corporate is secured by 1st Charge on entire Current Assets and Moveable Fixed Assets of the Company.
(Rs. in thousands)
D UNSECURED LOANS
From Bodies Corporate From Others (Ex-Director) Deferred Sales Tax 3617.11 30838.24 34455.35 59496.77 3617.11 30838.24 93952.12

E FIXED ASSETS
GROSS BLOCK Additions Total As at during the As at 01.10.2006 year 30.09.2007 15281.94 144168.42 1106.01 120.64 539334.11 10798.64 3172.54 3299.02 3703.40 11262.57 732247.29 732247.29 732215.39 2360.70 17642.64 18720.85 162889.27 1106.01 120.64 167632.88 706966.99 10798.64 2755.43 5927.97 3299.02 2559.78 6263.18 245.31 11507.88 194274.95 926522.24 194274.95 926522.24 31.90 732247.29 DEPRECIATION Up to 30.09.2006 41618.12 248.79 70.44 306065.85 10307.30 3156.77 2658.08 3626.92 11262.58 379014.85 379014.85 346928.25
(Rs. in thousands)
NET BLOCK Total For the up to As at As at year 30.09.2007 30.09.2007 30.09.2006 46632.46 266.82 76.17 335997.28 10798.64 3533.01 2822.65 3945.97 11276.48 415349.48 415349.48 379014.85 17642.64 116256.81 839.19 44.47 370969.71 2394.96 476.37 2317.21 231.40 511172.76 15352.36 526525.12 353232.44 15281.94 102550.30 857.22 50.20 233268.25 491.34 15.77 640.94 76.48 353232.44 7095.45 360327.89
Particulars Land and Site Development Buildings Staff Quarters Tubewell & Water Supply Plant & Machinery Electric Installation Furniture & Fixtures Office Equipments Computers Motor Vehicles Total Capital Work-in-Progress Total - Current Year Total - Previous Year
5014.34 18.03 5.73 29931.43 491.34 376.24 164.57 319.05 13.90 36334.63 36334.63 32086.60
Notes: Depreciation amounting to Rs. 166880/- during the year have been capitalised.
(Rs. in thousands)
INVESTMENTS
Long Term a) In Government Securities : (Deposited with Government authorities) Kisan Vikas Patra Post Office National Saving Certificates b) In Shares of Joint Stock Companies No. of Equity Shares Trade Investments Quoted, Fully Paid Up American Paints (India) Ltd. Classic Global Security Ltd. Damania Capital Markets Ltd. Easter India Ltd. Eastern Sugar Mills Ltd. Inland Printers Ltd. KM Capital Ltd. Ram Gopal Poly Ltd. VLS Finance Ltd. Less : Provision for dimunition in value of investments Total
1.00 107.96 108.96 No. of Equity Shares
1.00 105.96 106.96
200000 8400 60100 1000 23000 52000 16500 135320 10300
2000.00 164.00 1808.00 37.00 230.00 3124.11 214.00 2232.00 3842.00 13651.11 13351.89 299.22 408.18
200000 8400 60100 1000 23000 52000 16500 135320 10300
2000.00 164.00 1808.00 37.00 230.00 3124.11 214.00 2232.00 3842.00 13651.11 13514.63 136.48 243.44
Market Value of quoted investment Current year - Rs. 299215/- (Previous year Rs. 136475/-)

(Rs. in thousands)
G CURRENT ASSETS
a) Inventories (As taken, valued & certified by the Management) i) Stores & Spare Parts ii) Loose Tools & Equipments Finished Goods Sugar Work-in-Process Sugar Bagasse Standing Crop b) Sundry Debtors (Unsecured, Considered Good) i) Debts outstanding for a period exceeding six months ii) Other debts c) Cash & Bank Balances Cash In Hand With Scheduled Banks i) In Current Accounts ii) In Fixed Deposit Accounts
27256.00 1680.21
28936.21 50416.51 107.14 337.50 244.00 80041.36 5084.32 5084.32 59.31
643.76
643.76 643.76 1142.23
14706.89 601.87
15308.76 15368.07
16558.88 480.66
17039.54 18181.77
(Rs. in thousands)
H LOANS & ADVANCES

(Unsecured, considered good unless stated otherwise) Advances Advances recoverable in cash or in kind or for value to be received or pending adjustment Considered Good Considered Doubtful Less: Provision for Doubtful Debts Deposits Less: Provision made for Doubtful Deposits Excise Duty & Cane Purchase Tax Advance Considered Good Considered Doubtful Less: Provision made Security Deposit
36559.79 36559.79 12601.00 12601.00
37146.67 13147.37 35.00 50329.04
38903.50 38903.50 12601.00 12601.00
97605.72 97605.72
2922.79 2922.79
2922.79 2922.79

(Rs. in thousands)
CURRENT LIABILITIES & PROVISIONS

79880.74 124529.65 1191.95
a) Current Liabilities Sundry Creditors Share Application Refund Account b) Provisions Provision for Retirement Benefits of Employees Provision for liabilities
79880.74 5902.50 28967.63 114750.87
125721.60 5000.00 28967.63 159689.23
(Rs. in thousands)
Year ended 30th September, 2007 Year ended 30th September, 2006
OTHER INCOME
2771.57 1106.46 3878.03 16833.95 0.57 16834.52
Liabilities no longer required written back Miscellaneous Income (Net)
(Rs. in thousands)
K INCREASE / (DECREASE) IN STOCK

Opening Stock Finished Goods Bagasse Work- in- Process Closing Stock Finished Goods Bagasse Work- in- Process Less: Excise Duty and Education Cess on Stock Increase in Stock 50416.51 337.49 107.14
50861.14 50861.14 2911.00 47950.14 47950.14
(Rs. in thousands)
FARM ACCOUNT
244.00 244.00 61.24 69.60 56.56 133.76 26.78 347.94 (103.94)
Sales Closing Stock of Standing Crop Opening Stock of Standing Crop Cane Seed Purchase Fertiliser & Manures Salary & Wages (labour) Irrigation & Cultivation Expenses Repairs & Maintenance - Others Net Loss transferred to Profit & Loss Account

(Rs. in thousands)
M SALARIES, WAGES & OTHER EMPLOYEES BENEFITS

Salaries, Wages, Bonus, etc. Contribution to Provident Fund, Gratuity & Other Funds (including Provisions) Workmen & Staff Welfare Expenses 15690.30 2371.55 449.14 18510.99 664.24 65.86 22.27 752.37
(Rs. in thousands)
N OTHER MANUFACTURING & ADMINISTRATIVE EXPENSES

Stores & Spare Parts Consumed Power & Fuel Filling & Packing Expenses Rent Rates & Taxes Repairs & Maintenance Plant & Machinery Buildings Others Payment to Auditors As Audit Fees Tax Audit Other matters Travelling and Conveyance Legal and Professional AGM Expenses Security Expenses Miscellaneous Expenses Insurance Conservancy and Upkeep Bad debts Provision for Diminution in value of Investment 6086.36 2160.62 309.85 459.85 69.09 11069.86 1365.61 604.00 185.39 84.27 78.76 185.20 84.18 196.42 354.39 17.87
13039.47
348.42 2317.99 6324.34 413.13 983.32 2092.65 470.93 540.16 3073.09 38689.27
465.80 221.75 1397.71 198.62 1352.88 1083.02 5.78 7725.85 63.00 12886.67
(Rs. in thousands)
O SELLING EXPENSES
Brokerage 72.85 72.85
(Rs. in thousands)
P INTEREST & OTHER FINANCIAL CHARGES

On Inter Corporate Deposits 56255.57 56255.57 13077.65 13077.65

Q SIGNIFICANT ACCOUNTING POLICIES
i) Basis of accounting The financial statements are prepared under the historical cost convention, in compliance with the Accounting Standards issued by The Institute of Chartered Accountants of India and relevant presentational requirements of the Companies Act, 1956. The accounts for the year have been prepared on the assumption that the company is a going concern. Fixed Assets and Depreciation Fixed Assets are stated at cost less accumulated depreciation. Cost of Acquisition or construction is inclusive of freight, duties, taxes, financial costs and other related expenses up to the date of commissioning of the assets. The Company is following the straight-line method of depreciation in respect of all assets at the rates specified in Schedule XIV to the Companies Act, 1956. Depreciation is not provided on assets sold, discarded etc. in the year of sale. Leasehold land value is not amortized in view of the long-term nature of the lease. Inventories The basis of valuation of various categories of inventories is as follows: Stores & Spares, Raw Material & Finished goods At lower of cost or net realizable value. Cost is determined by using FIFO (first in first out) method and does not include recoverable taxes and duties incurred (in the period under reference, there was no stock of finished goods which in the previous years were valued at selling price including excise duty but excluding sales tax). At Estimated Realisable value. At Net Realisable value. At net Realisable value
ii)
iii)
Process stocks By Products Standing Crop iv) v)
Sales Sales are net of sales return, sales tax and inclusive of excise duty, trade tax and entry tax. Excise Duty Excise Duty is paid on clearance of goods from the factory, however liability for the same is provided on the finished goods stock lying in the factory. Material in transit All the materials which are purchased before the closing date of the financial year but are not received by the Company, are accounted for as material in transit. The CENVAT on such material in transit is also accounted for as CENVAT receivable.
vi)
vii) Investments Long term investments are carried at cost. Provision for diminution is made to recognise a decline, other than temporary, in the value of long term investments, script wise. Current investments are valued at lower of cost or fair value, category wise. Cost of investment includes acquisition cost such as brokerage, stamp duty etc. viii) Expenses incurred during construction/erection/commissioning of Plant a) All the expenses including interest incurred during the construction/ major renovation period, which are directly allocable to specific assets, are capitalised to the respective assets. Expenses in the nature of overheads both direct and indirect are allocated to Building, Plant & Machinery & Electrical Installations in the ratio of their balance appearing before the commissioning of the plant. b) Depreciation is not charged on assets before a plant is commissioned/ re-commissioned. c) Any income arising out of trial production before the commissioning of the plant is reduced from the preoperative expenditure. ix) x) Share Issue expenses Issue expenses incurred by the Company is amortised over a period of ten years. Recognition of Revenue & Expenditure All expenses and income are recognised on accrual basis except interest on Calls- in- Arrears which is accounted for on receipt basis. Retirement Benefits a) Companys contribution to Provident fund and pension fund is charged to Profit & Loss Account. b) Provision for Gratuity and leave encashment is made on estimated basis.
xi)

Q SIGNIFICANT ACCOUNTING POLICIES (Contd.)
xii) Borrowing Cost Borrowing costs that are attributable to the acquisition, construction or major renovation of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue. xiii) Insurance Claim Insurance claims are accounted for on settlement of claims. xiv) Government Grant a) Government grant related to fixed assets are adjusted with the value of the fixed assets / credited to capital reserve. b) Government grants related to revenue items are adjusted with the related expenditure / taken in revenue. xv) Research & Development Expenses Revenue expenditure incurred on cane development is charged of in the year it is incurred. xvi) Taxes on Income Current taxes are determined as the amount of tax payable in respect of taxable income for the period. Deferred tax is recognised, subject to the consideration of prudence in respect of deferred tax assets, on timing differences, being the difference between taxation income and accounting income that originate in one period and are capable of reversal in one or more subsequent period. xvii) Impairment of Assets Impairment losses, if any are recognised in accordance with the accounting standard issued in this regard by the Institute of Chartered Accountants of India. xviii) Provisions, Contingent Liabilities and Contingent Assets Provisions are recognised in respect of obligations where, based on the evidence available, their existence at balance sheet date is considered probable. Contingent liabilities are shown by way of notes to the accounts in respect of obligations where, based on the evidence available, their existence at the balance sheet date is considered not probable. A contingent asset is not recognised in the Accounts.
R NOTES ON ACCOUNTS
1. Contingent Liabilities not provided for: a) Bank guarantee for Rs. 1.00 Lac provided to U.P. Pollution Control Board for granting consent of Air and Water is backed by FDRs of the same amount. b) Estimated amount of contracts remaining to be executed on capital account Rs. 66.27 lakhs (Previous Year Nil). c) The supplier of the Plant & Machinery of the sugar division has gone into arbitration regarding certain claims and Company has also filed counter claim. The case is pending with the arbitrator. No effect has been taken in the books of account, as ultimate effect is not ascertainable. 2. a) The Government of Uttar Pradesh has initiated recovery proceedings for recovery of Sales Tax dues related to Explosive unit at Jhansi, pursuant to which, the factory at Jhansi has been seized by the Government authorities. All the assets located at factory including records there at remain seized till the year end. Out of the above assets, certain assets pertaining to the said unit have been auctioned by the office of the labour commissioner, Jhansi, against which a sum of Rs. 8.03 lakh is lying with them. Pending availability of relevant information, no adjustment in this respect has been carried out in these accounts. b) Pursuant to recovery proceedings initiated by U.P. State Government for the recovery of pending dues of Cane Growers and for giving effect to the Recovery Certificates amounting to Rs. 1561 lakhs, all the moveable & immoveable assets of the sugar unit located at Maizapur, District Gonda (U.P.) were seized by the District Administration on August 12, 2002. Towards the said recovery Certificate Distt. Administration sold the entire stocks belonging to the Company and deposited the sale proceeds amounting to Rs. 1250.41 lakhs with Registrar Allahabad High Court. The Company has also deposited a sum of the Rs. 323.31 lakhs with the Honble High Court towards the said recovery and other cane dues. Out of the said amount Rs. 1493.31 lakhs had been released by the Court to the Cane Commissioner leaving a balance of Rs. 80.41 lakhs in the Court, which is being reflected under the head loan and advances. c) The Companys net worth has been fully eroded as the accumulated loss of Rs. 61.44 Crores has exceeded its

R NOTES ON ACCOUNTS (Contd.)
shareholders fund of Rs. 44.04 Crore. It was felt that the status of the Company will be improved in the following years, as the production has already commenced and plant will run on a continuous basis. Further the holding Company has provided the necessary funds for the operations. Accordingly the Company has considered that it will be able to continue as a Going Concern entity. d) During the auction of sugar as per the directive of Honble High Court of Allahabad, 49128 quintals of sugar was found short for which investigation proceedings have been initiated by the Honble High Court. Pending completion of such investigation, the value including excise duty on above stock of sugar of Rs. 700.07 lakhs (as valued on 30.06.2002) has been considered at NIL value in these accounts. 3. The Company has made one time settlement with the Financial Institutions and Banks in the year ending 31st March, 2006 and Rs. 1917.06 lakhs were written back due to the said one time settlement. However the said amount was over written back by Rs. 308 lakhs, which has been written off as prior period expenses during the year. 4. The inventories at Maizapur Unit have been verified and the same have been stated at cost. However the inventories of Explosive Division stated earlier at the valuation taken on 30th September, 2005 for Rs. 1.80 Lacs have been written off during the year. 5. a) The Company is in the process of obtaining bank statements/ balance confirmation certificates of non-operative accounts from banks at various locations, without which the bank accounts could not be reconciled. The rest of the bank accounts having balances of Rs. 31.37 lakhs have been reconciled. The amount of Rs. 147.07 Lakhs shown in Balance with Schedule Banks under Cash & Bank Balances includes Rs. 15.45 lakhs realised from the auction of molasses in the previous year, kept with Gonda District Administration and Allahabad Bank, Gonda Branch in a no-lien account subject to disposal as per the order of Honble Allahabad High Court, Lucknow Bench, Lucknow but does not include Rs. 49.46 lakhs being negative balance with schedule banks shown in Current Liabilities as book overdraft. b) Due to seizure of factory and records, cash in hand which included Rs. 4.87 Lakhs of Cash Balance lying at the time of seizure have become irrecoverable and hence have been written off during the year. 6. a) In the opinion of management, the Loans and Advances have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated in the Balance Sheet. Further, in respect of certain items which were long outstanding, necessary provision has been made. b) i) Rs. 112.60 lakhs given as share application money and included in Loans and Advances against which shares are yet to be issued by the concerned companies are still considered to be good, there by no provision has been made for the same. ii) Loans and Advances includes Rs. 71.35 lakhs paid under protest with Sales Tax Authorities towards Sales Tax dues, against which liability for Rs. 289.68 lakhs have been provided. 7. a) Calls in arrears and Deferred Sales Tax Liabilities are under reconciliation. Necessary adjustment, if any, will be made after reconciliation. b) The installments for payment of Deferred Sales Tax converted into unsecured loan by Sales Tax Department are overdue. The same has not been paid and the interest thereon, if any, has not been provided in the accounts, as the quantum thereof is not ascertainable. 8. Pending final settlement, Interest on statutory liabilities outstanding for a long period has not been provided, as the quantum thereof is not ascertainable. 9. Interest receivable (net of interest payable) on allotment money remaining unpaid in respect of Equity Shares issued on conversion of 12% Convertible Debentures will be accounted for on receipt basis. 10. Investments in Shares are in the name of the company except those, which are in the process of transfer. 11. a) Amount due to Small Scale Industrial undertakings to whom outstanding is over 30 days is Rs. 4.95 lakhs (as per terms of order). b) List of small scale industries is as under: i) M/s Bharat Engineering and Castings ii) M/s Dembla Valves Pvt. Ltd. iii) M/s Kay Kay Industries iv) M/s Mangla Rubber Industries v) M/s S. J. Industries vi) M/s Shiva Engineers vii) M/s Waaree Instrument Ltd. 12. Balances shown under Sundry Creditors and advances are subject to confirmation and reconciliation with the parties.

R NOTES ON ACCOUNTS (Contd.)
13. Lease deed for 50 Acres of Land (Out of total land of 705 acres) for Jhansi Plant has not been executed. In respect of some other land, the registration formalities are under process. 14. No provision for taxation has been made since there are no taxable profits as per the provisions of Income Tax Act, 1961. 15. In accordance with Accounting Standard 22 Accounting for taxes on Income Tax, issued by The Institute of Chartered Accountants of India, the company has not accounted for deferred tax during the year. The Company has significant amount of carried forward losses and unabsorbed depreciation under the Income Tax Act, 1961. However, as a matter of prudence deferred tax assets have not been recognised. 16. Earnings per Share: a) The numerators and denominators used to calculate basic / diluted earnings per share: Sl. No. Particulars A B C D Amount used as the numerator Profit / (loss) after tax (Rs. in thousands) Basic / weighted average number of equity shares used as denominator Nominal value of equity shares (Rs.) Basic/Diluted earning per share(A/B)(Rs.) (not annualised) 2006-07 (178746.89) 8817990 10 (20.27) 2005-06 (47467.66) 8817990 10 (5.38)
17. Disclosure pursuant to AS 28 on impairment of Assets Due to seizure of companys explosive plant at Jhansi, the condition of the Plant & Machineries and other fixed assets there at and the impairment loss, if any, in respect thereof could not be determined, pending which no provision for such loss, if any, could be made in the accounts. 18. Disclosure in terms of Accounting Standards 29 on Provisions, Contingent Liabilities and Contingent Assets: a) Movement for Provision for Liabilities: (Rupees in Lacs) Particulars Balance as at 1st October, 2006 Provided during the year (included under prior period adjustment) Amount used during the year Reversed during the year Balance as at 30th September, 2007 Timing of outflow/uncertainties Statutory Dues 289.68 289.68 Outflow on settlement/Crystallization
b) The Liabilities mentioned above depend upon Court decision/ out of court settlement/disposal of appeals etc. c) No reimbursement is expected in the case of Contingent liabilities and liabilities shown respectively under Sl. No. 2 & 18(a) above. 19. There are no related party transactions during the current period. The Company has taken Rs. 70.34 Crore as loan from the Holding Company including interest of Rs. 4.31 Crore on the said loan. 20. Previous year figures have been regrouped/ rearranged wherever found necessary. 21. Additional information pursuant to the provisions of Para 3 & 4 of Part -II of Schedule VI of the Companies Act, 1956 to the extent applicable to the Company: a) Capacity Slurry Explosive (MT) Blasting Agents (MT) Cast Booster (MT) Detonating Fuse (million meters) Sugar (TCD) * As certified by the Management 2006-07 Licensed 10000 35000 20 5 3000 Installed* 10000 35000 20 5 3000 2005-06 Licensed 10000 35000 20 5 3000 Installed* 10000 35000 20 5 3000

R NOTES ON ACCOUNTS
b) Other Details Unit Explosives Opening Balance Production Sales Obsolete/Damaged Closing Balance Cast Booster Opening Balance Production Sales Obsolete/Damaged Closing Balance Detonating Fuse Opening Balance Production Sales Obsolete/Damaged Closing Balance Sugar Opening Balance Production Sales Shortage (under investigation) Closing Balance Molasses Opening Balance Production Sales Damaged/wastage Closing Balance Bagasse Opening Balance Production Sales Obsolete/Damaged Captive Consumption Closing Balance 2006-07 Qty. Value (Rs. in Lacs) 54814 20213 34601 37892 37444 408 232415 68565 148850 15000 278.19 475.06 63.39 12.80 3.38 2005-06 Qty. Value (Rs. in Lacs) 146.97 146.97 4250 4250 37500 37500 49128 49128 57170 57170 189810 189810 31.54 31.54 7.65 7.65 1.52 1.52 860.62 860.62 110.06 110.06 56.94 56.94
MT MT MT MT MT Kgs. Kgs. Kgs. Kgs. Kgs. Mtrs. Mtrs. Mtrs. Mtrs. Mtrs. Qtls. Qtls. Qtls. Qtls. Qtls. Qtls. Qtls. Qtls. Qtls. Qtls. Qtls. Qtls. Qtls. Qtls. Qtls. Qtls.

R NOTES ON ACCOUNTS
c) Raw Material Consumed Unit Raw Material Ammonium Nitrate Hexamine Sugarcane Others d) Expenditure in Foreign Currency Particulars Foreign Travel Expenses Remittance in Foreign Currency on account of Dividend The year to which Dividend relates 2006-07 Nil Nil 2005-06 Nil Nil 2006-07 Qty. Amount (Rs. in Lacs) 5.95 787.90 2005-06 Qty. Amount (Rs. in Lacs)
MT MT Lakh/Qtls
As per our report of even date. For Vipin Aggarwal & Associates Chartered Accountants
Balance Sheet Abstract and Companys General Business Profile

(Rs. in Thousands) I. Registration details : a. Registration No. b. State Code c. Balance Sheet Date Capital raised during the year a. Public Issue and Rights Issue b. Bonus Issue c. Private Placement (Preferential Issue) d. Others (Conversion of Debenture into equity) Position of Mobilisation and Deployment of Funds a. Total Liabilities b. Total Assets c. Source of Funds Paid up Capital Reserve and Surplus Secured Loans Unsecured Loans d. Application of funds Net Fixed Assets( Including Capital Work in Progress) Investment Net Current Assets Miscellaneous Expenditure and Losses Performance of Company a. Turnover and other Incomes b. Total Expenditure c. Profit/(Loss) before Tax d. Profit/(Loss) after Tax e. Earning per Share f. Dividend Rate General Names of Three Principal Products/Services of Companys (As per monetary terms) a. Item Code No. (ITC Code) Product Description b. Item Code No. ( ITC Code) Product Description 11425 55 30.09.2007 1,178,296.81 1,178,296.81 88,179.90 352,293.44 703,368.12 34,455.35 526,525.13 408.18 36,071.92 615,291.59 82,612.29 261,195.74 (178,583.45) (178,746.89) (20.27)
II.
III.
IV.
V.
36020009 Industrial Explosive 170111.09 White Crystal Sugar
As per our report of even date. For Vipin Aggarwal & Associates Chartered Accountants
Corporate information
Chairman Emeritus
Kamal Nayan Saraogi
Share Transfer Committee:

Vivek Saraogi Meenakshi Saraogi Suresh Neotia Sudhir Jalan R.K. Choudhury
Unit 2: Babhnan
(Including Distillery, Bio-compost and Co-generation units) Dist: Gonda, Uttar Pradesh
Board of Directors
Suresh Neotia, Chairman Vivek Saraogi, Managing Director Meenakshi Saraogi, Joint Managing Director Sudhir Jalan, Director R.K. Choudhury, Director S.B. Budhiraja, Director M.M. Mukherjee, Director Naresh Chandra, Director Kedar Nath Ranasaria, Whole-time Director Kishor Shah, Director cum Chief Financial Officer Ram Nayak Misra, Whole-time Director
Unit 3: Tulsipur
Dist: Balrampur, Uttar Pradesh
Shareholders / Investors Grievance Committee:

Sudhir Jalan, Chairman Naresh Chandra Vivek Saraogi
Unit 4: Haidergarh
(Including Co-generation unit) Dist: Barabanki, Uttar Pradesh
Unit 5: Akbarpur
(Including Co-generation unit) Dist: Ambedkar Nagar, Uttar Pradesh
Solicitors and advocates

Khaitan & Co. 1B, Old Post Office Street, Kolkata 700 001
Unit 6: Rauzagaon
(Including Co-generation unit) Dist: Barabanki, Uttar Pradesh
Bankers
State Bank of India
Secretary
S.K. Agrawala
Unit 7: Mankapur
(Including Distillery, Bio-compost and Co-generation units) Dist: Gonda, Uttar Pradesh
Auditors
G.P. Agrawal & Co. Chartered Accountants
Board Committees
Audit Committee:
S.B. Budhiraja, Chairman Naresh Chandra, Vice Chairman Suresh Neotia Sudhir Jalan M.M. Mukherjee
Unit 8: Kumbhi (Including

Co-generation units) Dist: Lakhimpur Kheri, Uttar Pradesh
Registered office
FMC Fortuna, 2nd Floor, 234/3A, A.J.C. Bose Road, Kolkata 700 020
Unit 9: Gularia (Including

Co-generation units) Dist: Lakhimpur Kheri, Uttar Pradesh (under implementation).
Remuneration Committee:
Naresh Chandra, Chairman Suresh Neotia R.K. Choudhury Sudhir Jalan
Sugar factories
Unit 1: Balrampur
(Including Distillery, Bio-compost and Co-generation units) Dist: Balrampur, Uttar Pradesh
PRODUCT info@trisyscom.com
Balrampur Chini Mills Limited

www.chini.com

bcml06 07

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

bcml06 07

Uploaded by

Copyright:

Available Formats

the way forward

Balrampur Chini Mills Limited

Balrampur Chini Mills Limited (BCML).

One of the largest sugar manufacturers in Indias private sector.

Balrampur Chini Mills Limited 2

Balrampur Chini Mills Limited 3

Balrampur Chini Mills Limited 4

The way forward

Balrampur Chini Mills Limited 5

Balrampur Chini Mills Limited 6

The way forward

Balrampur Chini Mills Limited 7

Balrampur Chini Mills Limited 8

The way forward

Balrampur Chini Mills Limited 9

Balrampur Chini Mills Limited 10

The way forward

Balrampur Chini Mills Limited 11

Balrampur Chini Mills Limited 12

Balrampur Chini Mills Limited 13

Balrampur Chini Mills Limited 14

What was the reason for this dismal performance?

Balrampur Chini Mills Limited 15

The farmers must have benefited because of high cane prices.

Balrampur Chini Mills Limited 16

How is the Company tiding over the crisis?

How does cane affect the food security of the region?

How is the Central Government correcting the situation?

Balrampur Chini Mills Limited 17

Five year operational summary

(in kilo litre) 2006-07 65,292

(in lac units) 2006-07 6,768.06

Balrampur Chini Mills Limited 18

Five year financial summary

Balrampur Chini Mills Limited 19

Balance sheet ratios

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

Balrampur Chini Mills Limited 20

Per share data

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

Cash profit/ Total turnover (%)

02-03 03-04 Debt-equity ratio

04-05 05-06* 06-07 Book value per share (Rs.)

Balrampur Chini Mills Limited 21

Shareholder value management

Balrampur Chini Mills Limited 22

Total shareholders return (TSR)

Economic value-added (EVA)

(Rs. in crore) 19.05 1.86 4.39

14.66 12.84% 1797.84 230.83 (216.19)

Balrampur Chini Mills Limited 23

Report of the Board of Directors

Balrampur Chini Mills Limited 24

(17.11.05) (08.11.05) (21.11.05) 29.05.07 19.05.07 13.06.07

(09.11.05) (30.11.05 ) 29.04.07 03.05.07

Balrampur Chini Mills Limited 25

Greenfield sugar complex at Kumbhi and Gularia

Acquisition of Indo Gulf Industries Ltd.

Greenfield complex at Mankapur

New subsidiary company

Balrampur Chini Mills Limited 26

Legal cases related to cane arrears

Cane and Sugar Policy