Asian Paints

The Directors have pleasure in presenting the 62nd Annual
 Report of your Company and the Audited Accounts for the
 financial year ended 31st March, 2008.
 
                                                        (Rs. in Crores)
                                                     Asian Paints Group
                          Asian Paints Limited          Consolidated
                       2007-08 2006-07 Growth     2007-08 2006-07 Growh
                                         (%)                        (%)
 
 Sales and 
 Operating Income (Net)   3,416   2,821   21.1      4,404   3,670   20.0
 
 Operating Profit           617     462   33.5        720     515   39.8
 
 Less: Interest               8       7                21      19
 
 Less: Depreciation          44      45                59      61
 
 Profit Before EOI and Tax  565     410  37.7         640     435   47.1
 
 Less: Extraordinary item 
 (EOI)                        7       8                 -       -
 
 Profit Before Tax          565     410  37.7         633     427   48.2
 
 Less: Provision for 
 current, fringe 
 benefit and 188            140     203               147       -
 deferred Tax
 
 Profit After Tax           377     270  39.6         430     280  53.6
 
 Add/(Less): Prior
 period items (2) 2 (2) 3
 
 Net Profit after prior
 period items              375     272   37.9         428     283  51.2
 
 Less: Minority interest    19       2                  -      -
 
 Net Profit attributable
 to shareholders of        375     270   37.9          409    281  45.6
 the Company
 
 Add: Balance brought 
 forward from the          150     110                 150    110
 previous year
 
 DISPOSABLE PROFIT         525     382                 559    391
 
 Dividend-1st Interim       62      53                  62     53
 
 -2nd interim                -      62                   -     62
 
 -Final                    101      10                 101     10
 
 Tax on Dividend            28      18                  28     18
 
 Transfer to 
 General Reserve           134      89                 168     98
 
 Balance carried 
 forward to Balance Sheet  200     150                 200    150
 
 Net sales and operating income for the standalone entity
 increased to Rs. 3,416 crores from Rs. 2,821 crores in the
 previous year - a growth of 21.1%. The operating profit (PBDIT)
 increased by 33.5%, from Rs. 462 crores to Rs. 617 crores. The
 profit after tax increased to Rs. 375 crores from Rs. 272
 crores, representing a growth of 37.9%.
 
 The consolidated sales and operating income net of discounts and
 excise duty increased to Rs. 4,404 crores from Rs. 3,670 crores
 - a growth of 20%. Net profit after minority interest for the
 group increased to Rs. 409 crores from Rs. 281 crores,
 representing a growth of 45.6%.
 
 The analysis on the performance of your Company is discussed in
 the Managements Discussion and Analysis report.
 
 CONSOLIDATED ACCOUNTS
 
 Your Company has been granted exemption from attaching the
 financial statements of the subsidiary companies in India and
 abroad, both direct and indirect, to the balance sheet of your
 Company for the financial year 2007-2008, under Section 212(8)
 of the Companies Act, 1956 by the Ministry of Corporate Affairs
 (MCA). A statement of summarised financials of all subsidiaries
 of your Company, pursuant to the approvals under Section 212(8)
 of the Companies Act, 1956, forms part of this report. Any
 further information in respect of the annual report and the
 financial statements of the subsidiary companies of your Company
 will be made available to the members on request. In accordance
 with the Accounting Standard (AS 21), Consolidated Financial
 Statements presented by your Company include the financial
 information of all its subsidiaries.
 
 DIVIDEND
 
 For the financial year 2007-2008, your Company declared and paid
 an interim dividend of Rs. 6.50 per equity share (65%) in the
 month of October, 2007.  In addition, your Directors recommend
 payment of Rs. 10.50 per equity share (105%) as the final
 dividend for the financial year ended 31st March, 2008. If
 approved by the shareholders at the Annual General Meeting, the
 total dividend (the interim dividend and the final dividend) for
 the financial year 2007-2008 will be Rs.17/- per equity share
 (170%) as against Rs.13/- (130%) per equity share paid tor the
 previous year.
 
 TRANSFER TO RESERVES
 
 Your Company proposes to transfer Rs. 134.42 crores to the
 general reserve. An amount of Rs. 200 crores is proposed to be
 retained in the profit and loss account.
 
 MANAGEMENT DISCUSION AND ANALYSIS:
 
 The Indian economy continued to grow strongly in 2007-2008. GDP
 growth is estimated to have been 8.7%, driven by 2.6% growth in
 agriculture, 8.6% in manufacturing and 10.6% in services. There
 are concerns about the countrys ability to sustain a very high
 growth rate into the future without further substantive reforms.
 There seems to be little will to push ahead; as elections
 approach, there is likely to be no movement on that front. In
 spite of unprecedented prices for crude oil, there is no change
 in selling prices of the major petroleum products.
 Infrastructure development continued to progress slowly.
 
 The sub-prime crisis in the US snowballed and dominated the news
 in the second half of the year. This impacted US$ liquidity,
 health of the international banking sector, housing demand and
 consumer spending in the US and the stock markets across the
 globe. The US$ continued to fall against most currencies,
 including the Indian Rupee during the year.
 
 The average inflation for the year was at 4.56% compared to
 5.39% last year. Inflation went up sharply in the fourth quarter
 of the financial year and is expected to remain high on back of
 high crude, food and metal prices.
 
 The rising Rupee benefitted the importers though, surprisingly,
 export growth held its ground. On the date of this report, the
 Rupee has shown a weak trend against the US$.
 
 Prices of crude oil and commodities including agricultural
 products have been rising and are far from reaching any • levels
 of stability. Thus, while the medium term outlook for growth is
 good, albeit a little lower than in the recent past, your
 Company will have to cope with volatile prices as many of our
 raw and packing materials are commodity based.
 
 The Indian paint industry continued to do well, especially in
 the^consumer segments. While some slowdown in construction
 activity was reported, growth was good in most parts of the
 country.
 
 PRODUCTS AND MARKET
 
 Paints
 
 It is estimated that the market for all paints produced by all
 companies big and small would have been about Rs. 13,400 crores
 in 2007-08. This is the result of a growth of about 18% over the
 previous year. The industry is estimated to have grown by about
 15% in volume terms during the year. Given the circumstances,
 your Company has done very well during 2007-08 and this is
 reflected in the financial results. Your Companys business in
 India consists of Decorative and Industrial coatings. Decorative
 paints form 80% of the Companys gropp sales.
 
 Decorative Paints
 
 Your Company has been the leader in the decorative paints
 segment for about four decades now. Decorative paints accounts
 for over 75% of the overall paint market in India. This segment
 includes Wall Finishes for interior and exterior use, Enamels,
 Wood Finishes and ancillary products such as Primer, Putties
 etc. The decorative paints market as a whole is estimated to
 have grown at about the same rate as the market as a whole.
 Turnover increase was ahead of volume growth largely due to
 change in the product mix. Emulsion paints for interior use have
 been growing much faster than the lower priced Distempers for
 quite some time now.  Exterior emulsion paints have grown
 explosively over the last decade at the cost of cement paints
 and lime colours.
 
 Prices of raw materials had increased sharply in the second and
 third quarter of the previous year 2006-07.  In the year under
 review, prices of raw materials were soft compared to the
 previous year especially during the first half. This was largely
 due to the strong Rupee and good supply situation which negated
 the impact of. rising crude oil prices in the international
 market.  Accordingly, your Company benefitted considerably.
 Price reductions were effected on 1st August, 2007 and on 3rd
 December, 2007 in exterior emulsion paints and a few other
 products. However, the spiraling prices of crude oil led to a
 sharp increase in the price of mineral turpentine and some other
 materials which caused your Company to raise prices of solvent
 based paints from 1st February, 2008. Availability of materials
 was good throughout the year.
 
 Market conditions were good in all parts of the country
 throughout most of the year. There was a temporary impact due to
 prolonged rains in September. The Diwali season was good all
 over Northern and Western India.  Robust growth continued after
 Diwali as well and your Company was able to expand its business
 across all markets and product segments.
 
 Your Company has been strongly committed to growth and, to this
 end, moved purposefully on several fronts.  Pricing was kept
 competitive and, when the opportunity arose due to benign
 material costs, selling prices were reduced so that
 opportunities in the market could be aggressively pursued.. Your
 Company strengthened its range of effect finishes with the
 addition of Royale Metallics and variants of products launched
 in previous year. Thus, your Company has significantly expanded
 the choices available to consumers. The exterior range of
 products continues to grow strongly and Apex Ultima, the top of
 the line offering has done very well.
 
 During the year, your Company invested in upgrading the ambience
 of its leading dealers and provided several customer friendly
 services so as to improve the quality of service to customers,
 so that the consumer is able to experience an informative and
 enjoyable shopping trip. Your Company continued to aggressively
 increase ColourWorld installations; these were over 10,000
 across the country by the end of the year. ColourWorlds are now
 located in many small towns and are taking to consumers in these
 towns the wide choice of products and shades that are now taken
 for granted by the urban consumer.
 
 Your Company also continued to invest in development of
 capability in the area of colour. ColourNext was the theme of
 the Annual Report last year; ColourNext 2008 was introduced to
 consumers early in 2008. Several Colour Guides and Decor
 booklets are now available to consumers at the dealers shops.
 
 Your Company has the widest range of products - from the economy
 and value-for-money ranges to the premium range, ft is committed
 to continually expand and improve its products and make them
 available in even small towns. Your Company believes that this
 together with continual investment in a wide variety of
 marketing activities will enable your Company to expand its
 business into the future and effectively meet the challenge from
 the many competitors in the market.
 
 Asian Paints Home Solutions (APHS) was extended to Chandigarh
 during the year. The service is now available in thirteen
 cities. APHS has benefitted from the introduction of the many
 novelty finishes and continues to add to the brand Asian Paints.
 
 The polymer plant in Sriperumbudur was commissioned in the first
 quarter of 2007-08. Thereafter, the further expansion of the
 Sriperumbudur plant was commenced; the new capacity will come on
 stream during the first quarter of 2008-09 raising the capacity
 of that plant to 100,000 KL.
 
 After reviewing the growth of the market and making projections,
 it was decided to expand capacity so , as to keep pace with
 expected production needs.  Accordingly, during the year under
 review, your Company has acquired land at Rohtak, Haryana.
 Environmental impact assessment was commenced and the required
 permissions are expected to be ^ received during the early part
 of 2008-09. Your Company will then commence the construction of
 the sixth Decorative paints plant at Rohtak with the first
 phase of 150,000 KL. Your Company expects the new plant to
 commence commercial production from early part of the calendar
 year 2010. 
 
 Automotive Coatings (APPG)
 
 You Company has a 50:50 Joint Venture with PPG Industries
 Securities Inc., which was formed in the year 1997, for
 manufacturing Automotive, OEM, Refinsh and certain other
 Industrial Coatings. APPG is the second largest automotive
 coatings supplier in the country catering to the automotive and
 industrial paint segment.
 
 The Indian automobile industry posted a good performance this
 year albeit at a lower rate compared to the strong growth
 registered in 2006-07. While the passenger vehicles recorded
 growth of 14% in builds, the two-wheeler industry declined by
 5.2%.
 
 APPG had another outstanding year out-performing the industry
 with record revenues and sales volumes. The full impact of
 advanced refinish 2K business acquired from ICI (India) Limited
 during the fourth quarter of the previous year, was seen during
 the year under review as a result of successful integration.
 These developments have resulted in improved top line
 performance during the year under review.  Total sales increased
 to Rs. 382.3 crores from Rs. 293.7 crores in the previous year -
 a growth of 30.2%. The profit after tax jumped to Rs. 32.9
 crores from Rs. 18.9 crores, representing a rise of 74.6%.  The
 consolidated sales were Rs. 391.9 crores and the profit after
 tax was Rs. 33.5 crores.
 
 The Board of Directors of APPG at their meeting held on 28th
 April, 2008, have recommended a dividend of Rs. 1.40 (14%).
 
 Faaber Paints Private Limited (FPPL), a wholly owned subsidiary
 of APPG, which was acquired last year for strengthening its
 supply link servicing to its automotive customers, reported
 Profit Before Tax of Rs. 0.8 crores this year as compared to Rs.
 0.1 crores for the financial year ended 31st March, 2007.
 
 The manufacturing facility at Sriperumbudur, near Chennai, was
 commissioned in March, 2008. At present, the installed capacity
 is 3,200 KL per annum.
 
 The hardening of consumer finance interest rates and tight
 liquidity in the second half of the last fiscal have already
 started to have an adverse impact on the automotive industry.
 Despite these trends that will make the current year
 challenging, your Company believes that APPGs strategy of
 offering better value to its customers by providing superior
 products and service will enable it to further strengthen its
 presence in the market.
 
 Non-Auto Industrial Coatings
 
 Your Company operates in the non-auto industrial coatings
 segment through its Growth Business Unit and a wholly owned
 subsidiary, Asian Paints Industrial Coatings Limited. This
 market segment is estimated to have grown by 28% as compared to
 the last year.
 
 Your Company has achieved significant growth in Industrial
 Protective Coatings. Companies involved in construction and
 fabrication work, provided the impetus to this business. In Road
 Marking Coatings, the pace of project execution was slower than
 expected in 2007-08, while regular maintenance demand helped
 maintain business growth. Input costs, which had been benign for
 most part of 2007-08, are showing an inflationary trend.
 
 The trend of growth in the non-auto Industrial coatings segment
 is expected to continue in the current year.
 
 The industrial liquid paints plant at Taloja has a capacity of
 14,000 KL. This facility has helped in rationalizing the number
 of Contract Manufacturers and has led to efficiencies in
 production and improvement in customer service through the
 manufacture and supply of bulk products from a single location.
 
 Asian Paints Industrial Coatings Limited (APICL), a wholly owned
 subsidiary of the Company engaged in manufacturing and selling
 Powder Coatings, reported Profit Before Tax of Rs. 3.2 crores in
 2007-08 as compared to Rs. 0.9 crores in the previous financial
 year. The Powder Coatings market has witnessed robust growth in
 the recent past and the same trend is expected to continue.
 Therefore, APICL has expanded capacity at its plant at Sarigam
 and commissioned the new facility in March, 2008.
 
 In order to fund the expansion plans of APICL, your Company .has
 made an investment of Rs. 5 crores in its Equity Share Capital
 during the financial year 2007-2008.  Further, an additional
 investment of Rs. 2.7 crores was also made on,9th May, 2008.
 
 The growth recorded in Powder Coatings was led by excellent
 demand in the heavy and light electrical equipment segments.
 Business has also been obtained from appliance, furniture and
 hardware manufacturers.  Demand conditions for many Original
 Equipment Manufacturers using Powder Coatings are expected to be
 good, while Powder Coatings are also replacing liquid paints in
 specific applications.
 
 Your Companys other businesses comprises of plants
 manufacturing Phthalic Anhydride, and Pentaerythritol, located
 at Ankleshwar (Gujarat) and Cuddalore (Tamil Nadu),
 respectively.
 
 Durihg the year 2007-2008, the in-house consumption of Phthalic
 Anhydride and Pentaerythritol was 45% and 55% of the plants
 output respectively. The remaining quantity was sold in the open
 market.
 
 The profitability of the Phthalic Anhydride business was
 marginally lower compared to the previous year partly due to
 sluggish demand from the plasticizer industry.  Price
 realisation in the Pentaerythritol business improved in the last
 quarter, resulting in higher profits compared to the previous
 year.
 
 Technical Instruments Manufacturers (India) Limited (TIM) is a
 100% subsidiary of your Company. It owns the building which
 houses your Companys Corporate Office. It has no income except
 the rent it receives from your Company.
 
 During the year under review, the International Business Unit of
 your Company continued to focus on top line growth and gaining
 market share. This was achieved through introduction of new
 products, expanding the dealer network, implementing initiatives
 to strengthen equity with architects, builders and the trade,
 increasing exports and sharper focus on the protective and
 industrial coating segments. During the year under review, the
 volume of paint sold increased by 23.4% to 1,16,200 KL and the
 revenue from paint sales increased by 12.0% to Rs. 699 crores;
 adjusted for exchange rate impact, the revenue from paint sales
 has increased by 18.1%. New products sale in volume terms
 contributed approximately 7% of total paint sales of overseas
 subsidiaries and over 875 dealer tinting systems have been
 installed so far in various subsidiaries.
 
 Material prices went up and impacted input cost.  However, the
 impact was neutralized to a large extent by global sourcing and
 economies of scale in purchasing, formulation engineering and
 reduction in material losses in manufacturing.
 
 Profit after tax for the overseas operations of the group during
 the year is Rs 36.7 crores as compared to Rs 2.1 crores during
 the previous year. If may be noted that during the second half
 of the year, the profit after tax is Rs. 27.1 crores as compared
 to Rs 0.5 crores during the corresponding period of the previous
 year.
 
 During the financial year 2007-2008, Asian Paints
 (International) Limited, your Companys direct subsidiary
 divested its entire state in Asian Paints (Queensland) Pty.
 Limited, Australia.
 
 The profitability of the overseas operations of the group was
 impacted by the following extraordinary items:
 
 * Loss of Rs. 6.8 crores arising from the disposal of the
 groups stake in its subsidiary in Australia.
 
 * Gain of Rs. 2.5 crores on sale of land/property in Trinidad,
 Egypt and China.
 
 * Prior year tax write back of Rs 1.2 crores in Berger
 International Limited (BIL-), a subsidiary listed on the
 Singapore Stock Exchange.
 
 The revenue from paint sales of BIL has increased by 10.9% toS$
 141.6 million (equivalent to. Rs. 388.8 crores). BIL has earned
 a profit after tax of S$ 2.2 million (equivalent to Rs 5.9
 crores) as compared to a loss of S$ 5 million (equivalent to Rs.
 14.4 crores) during the previous year.
 
 The group operates in five regions across the world as given
 here below;
 
 Region : , Countries
 
 Caribbean : Barbados, Jamaica, Trinidad & Tobago
 
 Middle East : Egypt, Oman, Bahrain & UAE
 
 South Asia : Bangladesh, Nepal & Sri Lanka
 
 East Asia : Chines, Malaysia.  Singapore, Thailand & Hongkong
 
 South Pacific : Fiji, Solomon Islands, Samoa, Tonga & Vanuatu
 
 During the year under review, the volume of paint sold in the
 region has increased by 9.4 % to 9,599 KL. The revenue from
 paint sales has decreased by 1.4% to Rs. 150.1 crores. Adjusted
 for exchange rate impact, the revenue from paint sales has
 increased by 12.0%.  PBIT (Profit before Interest and Tax) for
 the region has increased by 80.7 % to Rs. 7.1 crores.
 
 Sales in local currency increased by 9-13% in the units in the
 region. However, devaluation of the respective currencies
 resulted in lower growth in rupee terms.
 
 The subsidiaries in Jamaica and Barbados have registered an
 increase in profit, while the subsidiary in Trinidad has
 incurred a loss and corrective steps have been taken to reduce
 the same.
 
 During the year under review, the volume of paint sold in the
 region has increased by 28.0% to 80,172 KL and the revenue from
 paint sales has increased by 22.6% to Rs. 319.4 crores. Adjusted
 for exchange rate impact, the revenue from paint sales has
 increased by 33.3%. PBIT has increased by 55.7% to Rs. 42
 crores.
 
 The Middle East region is the largest operating region for the
 broup outside India. The region now contributes 45.4% of .the
 sales from overseas operations. All the subsidiaries in the
 region have performed well. Sales of the Egyptian, Oman, UAE and
 Bahrain subsidiaries have grown by 38.5%, 46.8%, 32.0% and 16.8%
 respectively in local currency. The subsidiaries in Egypt, Oman
 and UAE have registered good increase in profit, while the
 subsidiary in Bahrain continues to be profitable. The Oman
 subsidiary which has now migrated to Berger as the operating
 brand has had good sales growth due to strong performance in the
 retail and wood finish segments. The region has had excellent
 growth in profit.
 
 South Asia Region
 
 During the year under review, the volume of paint sold in the
 region has increased by 51.3% to 14,555 KL and revenue from
 paint sales has increased by 33.4% to Rs. 82.9 crores. Adjusted
 for exchange rate impact, the revenue from paint sales has
 increased by 46.2%.  The PBIT for the region has increased by
 210.3% to Rs. 6 crores.
 
 All subsidiaries in the region have performed well. The Sri
 Lanka, Bangladesh and Nepal subsidiaries have registered sates
 growth of 36.7%, 76.7% and 24.9% respectively in local currency.
 New product launches and several other sales and marketing
 initiatives have helped all the subsidiaries to achieve healthy
 sales growth. The subsidiaries in Sri Lanka and Nepal have
 improved profits while the subsidiary in Bangladesh has reduced
 losses.
 
 East Asia Region
 
 During the year under review, the volume of paint sold in the
 region has decreased by 2.5% to 8,975 KL. However, the revenue
 from paint sales has increased by 5.2% to Rs. 88.7 crores.
 Adjusted for exchange rate impact, the revenue from paint sales
 has increased by 8.5%. Loss before interest and tax has reduced
 to Rs. 3.6 crores from Rs. 14.3 crores during the previous year.
 
 The subsidiary in Singapore has performed well. The subsidiary
 in Hongkong has made a nominal profit as compared to a loss in
 the previous year. The other subsidiaries in Thailand, China and
 Malaysia have managed to reduce their losses significantly.
 
 South Pacific Region
 
 During the year under review, the volume of paint sold in the
 region (adjusted for sales of the Australian subsidiary which
 was divested during the year) decreased by 17.1 % to 2,940 KL
 and revenue from paint sales decreased by 7.2% to Rs. 54.8
 crores. Adjusted for exchange rate impact, the revenue from
 paint sales has decreased by 4.3%. EBIT for the region
 (excluding Australia) has increased by 16.6% to Rs. 7.3 crores.
 
 The region has underperformed in sales mainly due to the largest
 unit in the region, Fiji, being impacted by the uncertain
 political climate and a slowdown in its economy which has
 resulted in its sales declining by 15.3% in local currency.
 
 Your Company is committed to providing a safe environment to all
 its employees. During the year 2007-08, the Company continued
 its efforts on improving the safety capability in the plants.
 External audits were carried out at all plants to identify
 further areas of improvement. Further, your Company undertook
 steps to strengthen the existing safety management system at the
 plants.
 
 The specific generation of industrial effluents was further
 reduced in 2007-08 as also the specific generation of total
 effluents.
 
 During the year, the Company continued to focus on resource
 conservation and reduction in generation of hazardous wastes.
 Rainwater harvesting schemes continued to be in operation in all
 plants. Water harvested is about 7% of the total water consumed.
 The consumption of power and fuel was reduced in 2007- 08.
 
 During the year, the hazardous waste incineration facilities at
 all plants of your Company were upgraded to ensure compliance to
 new guidelines issued by the Central Pollution Control Board
 (CPCB) in this regard.
 
 It is the commitment of employees at all levels and their
 contribution to innovation and change that is essential to
 compete successfully in an increasingly competitive global
 market-place and achieve sustained growth and profitability.
 Attracting, retaining and motivating employees and creating an
 environment that nurtures them to deliver their best has been a
 constant challenge for your Company. Your Company continues to
 invest in training, refining its goal setting and performance
 evaluation processes through which employees can share best
 practices and seek support to drive change and improvement.
 
 Three year wage settlements were signed at Ankleshwar and Kasna
 plants. These are productivity settlements.  Your Company has a
 thirty-year history of productivity settlements now. The
 employee relations continue to be cordial and productive.
 
 IV. CORPORATE SOCIAL RESPONABILE
 
 Your Company continued its efforts to positively impact the
 environment in which it operates. In the area of healthcare,
 camps for cataract surgeries, audiometry, electrocardiography,
 diabetes detection, oral examination and immunization were
 organized in the vicinity of the plants at Ankleshwar,
 Patancheru, Kasna and Sriperumbudur. Further, mobile medical
 care was rendered to communities near the Patancheru, Kasna and
 Sriperumbudur plants with the help of Helpage India.
 
 Your Company supported needy schools near the Ankleshwar,
 Patancheru and Sriperumbudur plants through provision of safe
 drinking water facilities, infrastructure and educational aids.
 
 Your Company continues to enhance the awareness of interested
 parties on water conservation and Rain Water Harvesting through
 the Total Water Management Centre installed at the Mumbai plant.
 It also provides expert advice on implementation of Rain Water
 Harvesting projects at no cost.
 
 The Total Water Management Center of your Company was conferred
 the Excellence Award in the Environmental Excellence Category
 at the Asian CSR Awards 2007 by the Asian Institute of
 Management, Philippines. Your Company was accorded this
 recognition from amongst 186 entries from 14 countries across
 the world.
 
 During the financial year 2007-08, your Company has implemented
 a Sales Force Automation platform deployed on a smart phone for
 salesmen on the move.  This has increased the agility and
 responsiveness of the sales force enabling the organization to
 respond faster to customer needs. The applications supporting
 the service business of your Company have been enhanced to
 support surveys, customer complaints and closer tracking of
 turn-around times of services. In the current year we have also
 upgraded the website to a new platform to leverage some of the
 emerging internet technologies.
 
 To facilitate better collaboration between employees based in
 various locations your Company has implemented a new mail
 messaging and collaboration suite which leverages the latest
 internet technologies.
 
 To IT enable the rapidly changing business processes, your
 Company is adbpting tools and technology that support the
 Enterprise Services Oriented Architecture paradigm. Your Company
 has acquired skills on a leading platform in this technology
 area by developing and implementing applications using this
 approach. We are proud to report that your Company has received
 global innovation awards for these applications.
 
 You are aware that your Comparvy has been an aggressive user of
 IT for improving business processes. The health of master data
 is critical to the smooth functioning of IT applications and the
 reporting emanating out of the same. In the current year your
 Company has implemented a Master Data Management platform to
 manage the process of introduction and updation of various
 master data elements like - product, customer and vendor to
 different IT applications.
 
 In the current year, your Company has upgraded a significant
 part of the IT server and data storage infrastructure. While
 doing so we have deployed visualization technology which has
 significantly improved the uptime and scalability of
 applications.  This technology improves percentage utilization
 of hardware leading to reduced cost and uses lesser energy for
 power and cooling and thus contributes to energy conversation.
 
 Your Company is executing an integrated strategy for technology
 development and deployment. The technology function is
 supporting your Companys strategy around four missions:
 technology development, ¦ development of substantially new
 products, productivity improvement, and cost reductions. The
 focus for your Company in the financial year 2007- 08 had been
 to lay the foundation for improving its research and development
 capabilities and further improve the productivity of the
 technology function.  Your Company further continues to focus on
 innovation and collaboration which are essential for sustaining
 our market position.
 
 In keeping with environmental legislation in the developed
 world, your Company needs to be prepared with products that will
 be required in future to conform to new rules and restrictions.
 The Labs are giving priority to ensuring that your Companys
 product range will meet these emerging requirements.
 
 Your Company has also started developing a network of partners
 to leverage its internal capabilities with the outside
 organization. Your Company would endeavour to attract, motivate
 and retain competent and committed people in the Technology
 function.
 
 Also, a state-of-art R&D Center is being built at Turbhe, Navi
 Mumbai for which the construction and other related activities
 are nearing completion.
 
 Net sales and operating income of the standalone entity
 increased to Rs. 3,416.2 crores from Rs. 2,821.3 crores
 recording a growth of 21.1 %. This is driven mainly on account
 of good paint volume sales growth of 17.5%.  For the group, net
 sales and operating income shows an increase of 20.0% to Rs.
 4,404 crores. Operating profit (PBDIT) margin of the standalone
 Company has increasecj from 16.4% to 18.0% this year. This
 increase is mainly on account of savings in material cost with
 rising rupee helping it further. Material cost as a percentage
 to Net sales and operating income as a result has reduced to
 57.3% from 58.9% last year. Profit before tax, for the
 standalone entity has increased by37.7% to Rs. 564.5 crores.
 For the group, Profit before tax and extraordinary items has
 increased by 47.1% to Rs. 639.9 crores. Net profit for the
 standalone entity in 2007-08 stands at Rs.  375.2 crores as
 against Rs. 272.1 crores in the previous year, showing an
 increase of 37.9%. Net profit after minority interest for the
 group stands at Rs. 409.2 crores, an increase of 45.6% over the
 corresponding figure of Rs. 281 crores in the previous year.
 Your Company continues to maintain tight working capital
 control. The net core working capital turnover ratio for the
 year has improved to 17 times from 12 times in the previous
 year.
 
 The overall outlook for 2008-09 appears to be positive but
 nevertheless challenging. The Indian economy is expected to
 register growth of 7.5% to 8% in 2008-09. The expected growth,
 albeit lower than the previous two years, is still strong to
 support consumer demand. In addition, recent policy initiatives
 like increasing the income tax exemption slabs, implementation
 of Sixth Pay Commission and the farmer loan waiver scheme is
 expected to provide further support to consumer demand. Also,
 with early prediction of normal monsoon in 2008-09, your Company
 expects the rural economy to also perform well and support paint
 demand in the rural areas. The market for industrial coatings is
 expected to maintain its growth momentum on the back of
 continued thrust on infrastructure development and capacity
 additions across industries.  However, there are certain risks
 that can impact the performance of your Company. Disruptions in
 the global financial markets continue to pose threat to the
 world economy and its possible ripple effect on India cannot be
 neglected. The foreign exchange market continues to be volatile.
 Rising commodity prices including crude oil prices and the
 resulting high inflation could lead to further tightening of
 monetary conditions. This can have an adverse impact on demand,
 particularly in interest rate sensitive sectors like automobiles
 and housing.  Adverse impact of global financial turmoil,
 political, economic and natural conditions in geographies where
 your Company has significant presence, can affect the business
 performance.
 
 Mineral Turpentine prices have been raised very sharply by the
 refineries. Fcom Rs. 26.60 per liter in early 2007, the price
 went up to Rs. 34.40 by year end and is, in May 2008, at Rs.
 45.40. Prices of solvent based paints were raised in January
 2008 and a very large hike in prices for such products will take
 effect from 1st June, 2008. As there is no let up in the price
 of crude oil, further hikes cannot be ruled out. The impact of
 these unprecedented price hikes may impact demand for this class
 of products; these account for about a third of the decoratives
 business in India.
 
 The Internal Control Structure of your Company is adequately
 designed to ensure the effectiveness of its operations (both
 domestic & overseas), propriety in the utilization of funds,
 safeguarding of assets against unauthorized use or disposition,
 true and fair reporting and compliance with all the applicable
 regulatory laws and company policies. Your Company has a well
 defined organization structure with state of the art ERP systems
 to connect its different business locations, dealers and vendors
 for real time information exchange. Clear and well defined
 policies governing limits on financial authority exist at each
 level of hierarchy. Budgetary and other control and review
 mechanisms are established, whereby the management regularly
 reviews actual performance with reference to the plan and
 forecasts.  The Internal Audit function ensures the adequacy of
 internal controls from Operating, Financial and Statutory
 Compliances point of view as well as adherence to management
 policies through a blend of process and transaction audits, on
 an ongoing basis. A summary of Audit Observations and Action
 Taken Reports are placed before the Audit Committee on a
 periodical basis, for review.
 
 Statements in this Management Discussion and Analysis describing
 the Companys objectives, projections, estimates and expectation
 may be forward looking statement within the meaning of
 applicable laws and regulations/Actual results might differ
 materially from those either expressed or implied.
 
 Pursuant to Clause 49(VII) of the Listing Agreement, a separate
 report on Corporate Governance forms part of the Annual Report.
 Your Company is compliant with the requirements of the Listing
 Agreement and necessary disclosures have been made in this
 regard in the Corporate Governance Report. The Management
 Discussion and Analysis and the report on Corporate Governance
 are included as a part of the Directors Report.
 
 A certificate from the Joint Statutory Auditors of the Company
 regarding compliance with the conditions of Corporate Governance
 as stipulated under Clause 49 of the Listing Agreement is
 attached to this report.
 
 The Company has received confirmation as to the delisting of
 its securities from the Delhi Stock Exchange Association Limited
 and with this, the Companys securities have been delisted from
 all the regional Stock Exchange(s). Your Companys securities
 continue to be listed on the Bombay Stock Exchange Limited and
 the National Stock Exchange of India Limited.
 
 Your Company has not accepted any fixed deposits during the year
 2007-2008 and there are no outstanding fixed deposits from the
 public as on 31st March, 2008.
 
 Your Company continues to avail sales tax deferment benefit for
 the expanded capacity at Kasna plant for which eligibility
 certificate for Rs. 38.2 crores has been received. A sum of Rs.
 5.1 crores has been availed during the year 2007-2008 and with
 this, the total amount of deferment availed upto 31st March,
 2008 is Rs. 23,1 crores.
 
 All the insurable interests of your Company including
 inventories, buildings, plant and machinery and liabilities
 under legislative enactments are adequately insured.
 
 Particulars in respect of conservation of energy and technology
 absorption by the Company as per Section 217(1) (e) of the
 Companies Act, 1956, are given as Annexure to this report in
 Form A and B, respectively.
 
 Details of expenditure and earnings in foreign currencies are
 given under Schedule M to the financial statements.
 
 In terms of the provisions of Section 217(2A) of the Companies
 Act, 1956 and the Companies (Particulars of Employees) Rules,
 1975, names and other particulars of the employees are required
 to be set out in the annexure to this report. However, as per
 the provisions of Section 219(l)(b)(iv) of the Companies Act,
 1956, the Report and Annual Accounts of -the Company sent to the
 shareholders do not contain the said annexure. Any shareholders
 desirous- of obtaining a copy of the said annexure may write to
 the Company Secretary at the Registered Office of the Company.
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, the
 Directors hereby confirm that:
 
 * In preparation of the annual accounts, the applicable
 accounting standards have been followed.
 
 * The accounting policies have been selected and applied
 consistently and the judgements and estimates made, are
 reasonable and prudent, so as to give a true and fair view of
 the state of affairs of the Company at the end of the financial
 year and of the profit and loss of the Company for that period.
 
 * Proper and sufficient care has been taken for the maintenance
 of adequate accounting records in accordance with the provisions
 of the Companies Act, 1956, for safeguarding the assets of the
 Company and for preventing and detecting fraud and other
 irregularities.
 
 * The annua) accounts have been prepared on a going concern
 basis.
 
 Ms. Tarjani Vakil, Mr. Dipankar Basu and Mr. Deepak , Satwalekar
 are due to retire by rotation at the conclusion of the
 forthcoming Annual General Meeting and being eligible, offer
 themselves for re-appointment.  Appropriate resolutions for
 their re-appointment are being placed before you for your
 approval at the ensuing Annual General Meeting. The brief resume
 of the aforesaid Directors and other information have been
 detailed in the Corporate Governance Section of this report.
 Your Directors recommend their re-appointment as Directors of
 your Company.
 
 Last year, your Company had sought an approval of the
 shareholders at the Annual General Meeting held on 26th June,
 2007, as to the appointment of BSR & Associates, Chartered
 Accountants, as Joint Statutory Auditors of the Company. At the
 forthcoming Annual General Meeting, M/s. Shah & Co., Chartered
 Accountants and M/s. BSR & Associates, Chartered Accountants,
 Joint Auditors of your Company retire and are eligible for
 re-appointment.  Your Directors recommend their re-appointment
 for the ensuing year.
 
 The Company has received the approval of the Central Government
 for appointment of Mr.  Damji Keshavji Visariya as Cost Auditor
 to conduct the audit of the cost records of your Company for the
 financial year 2007-2008.
 
 Your Directors wish to place on record their appreciation of the
 contribution made by employees at all levels to the continued
 growth and prosperity of your Company. Your Directors also wish
 to place on record their appreciation of banks and other
 financial institutions, shareholders, dealers and consumers for
 their continued support.
 
                                        For and on behalf of the Board
 
                                                   Chairman
 Mumbai:
 9th May, 2008