Balkrishna Industries

The Directors are pleased to present the 46th Annual Report and Audited
 Statement of Accounts for the year ended 31st March 2008.
 
 FINANCIAL RESULTS:
                                                     (Rs. in crores)
                                       Current Year       Prevous Year
                                       ended 31.03.08   ended 31.03.07
 
 
 Gross Turnover and Other Income               1018.21       908.48
 Less: Excise Duty Recovered on Sales            12.43        21.94
 Net Turnover and Other Income                 1005.78       886.54
 Gross Profit                                   207.75       165.06
 Less: Depreciation and Amortisation             43.83        36.00
 Prom before Tax                                163.92       129 06
 Less: Provision for Taxation
 Current Tax                                     49.30        37.67
 Deferred Tax (Net)                               7.24         7.65
 Fringe Benefit Tax                               0.55         0.59
                                                 57.09        45.91
 Profit after Tax                               106.83        83.15
 Less: Adjustments relating to earlier years      0.17         0.06
 Less: Extra ordinary Item                        1.09          NIL
 Profit after Extra ordinary Item               105.57        83.09
 Balance brought forward from last year          26.77        17.10
 PROFIT AVAILABLE FOR APPROPRIATIONS:           132.34       100.19
 APPROPRIATIONS:
 Transfer to General Reserve                     50.00        50.00
 Transfer to Capital Profit Reserve                NIL         0.27
 Interim Dividend                                 8.70        20.30
 Proposed Final Dividend                         11.60          NIL
 Tax on Dividends                                 3.45         2.85
                                                 73.75        73.42
 Balance Carried Forward to Balance Sheet        58.59        26.77
 
 Note: Current year figures represent performance of tyre business alone
 whereas previous year figures include figures of its erstwhile Paper &
 Textile Processing Divisions also.
 
 OPERATIONS:
 
 Your Company, operates mainly in one segment i.e.  pneumatic tyres and
 focus is on to manufacture wide range of Off Highway Tyres that
 includes Agricultural, Forestry, Industrial, Material Handling, Lawn &
 Garden, ATV, Construction and Earth Moving (OTR) equipment Tyres.
 
 During the year under review, Sales and related income of the company
 was higher at Rs. 1003.81 Crores as against Rs. 752.49 Crores in the
 previous year reflecting an increase of over 33%. The Exports and
 Export related income stood at Rs. 899.80 Crores as against Rs. 685.23
 Crores in the previous year - an increase of over 31%.  The Gross
 Profit is placed at Rs. 207.75 Crores as compared to Rs. 165.06 Crores
 in the previous year.
 
 DIVIDEND:
 
 Your Directors have declared Interim Dividend of 45% in its Board
 Meeting held on 29th May, 2008.
 
 Your Directors are now pleased to recommend a final Dividend of 60% for
 the year, taking the total Dividend to 105%, with a total payout of Rs.
 23.75 Crores, including Tax on Dividends.
 
 CAPITAL EXPENDITURE
 
 The capital expenditure programmes to enhance its production capacity
 across all the three locations and to create storage facility to store
 its finished goods at Chopanki initiated during the year have largely
 been completed. The commissioning of OTR radial plant is at an advance
 stage and commercial production is expected during calendar year 2008.
 
 EXPANSION PROGRAMS FOR FY. 2008 - 09:
 
 The company is planning to increase its capacity by adding extra
 equipments at its existing locations and by setting up a new green
 field Tyre plant into special economic zone (SEZ). Once land is
 acquired, it will take 1 1/2 ~ 2 years to setup the plant. The
 companys plans also include setting up of storage facilities at
 different location to store finished goods and raw materials.
 
 OPPORTUNITY & THREATS:
 
 OPPORTUNITIES:
 
 The segment in which your company operates is predominantly represented
 by large varieties and low volumes, making it un-attractive for fresh
 investments by major players. Your Company is fully geared up to take
 advantage of the peculiarities of the said segment and has developed
 more than 1800 Stock Keeping Units to meet the diverse needs and
 applications.
 
 Moreover, the segment in which the Company is operating is not exposed
 to any technological obsolescence and wild fluctuations in demand of
 its products.
 
 The Company has incremental opportunity to incubate the Earth Moving
 Tyres (OTR) markets and take advantage of radialization which is
 picking up the momentum rapidly. Your company has increased its radial
 tyre production capacity significantly over past few years and would be
 the first company in India to setup all steel OTR Radial Tyre plant
 which will be in operation during calendar year 2008.
 
 The company generates its revenue mainly through exports of its product
 - more than 90% of companys production is exported. The company enjoys
 the status of Three Star Export House.
 
 THREATS:
 
 Like any other Company, your Company is also exposed to various threats
 like competition from small players, retention of employees, labour
 un-rest, increase in raw material prices and other input cost etc.
 
 RISKS / CONCERNS AND RISK MITIGATION
 
 Fluctuation in Raw Material prices: The Companys major raw material is
 Natural Rubber, which is an agricultural commodity and its prices have
 moved upward very significantly in this year. Besides this, the prices
 of other raw materials have also moved up sharply and have witnessed a
 level never seen in the past due to un- precedent increase in the crude
 oil prices.
 
 Though the Company enjoys the pricing power, it is not possible to pass
 on the increase in prices immediately and to the fullextent. Thus, the
 Company has to bear the brunt of the said fluctuations to some extent.
 The increase in utility cost and other administrative cost may also
 marginally impact the profitability of the company adversely.
 
 In order to minimize such risks, the Company not only enters into
 medium-term contracts but also adopts the policy of Buy and Stock
 large quantities during the lean period.
 
 Labour Relations: Since, the nature of Companys manufacturing process
 are that of batch processing, it requires lot of skilled as well as
 un-skilled workmen.  Maintaining a huge work force always poses a risk.
 
 In order to mitigate the said risk, the Company follows good HR
 practices and spends a lot of money and Managements time for their
 welfare, safety and up- liftment. All workers are paid more than
 adequate remuneration for their work.
 
 Retention of skilled Manpower: This is not a unique area of concern for
 the Company and it is being faced by all the Companies.
 
 The Company is able to manage the said risk by good HR practices and
 rewarding its employees handsomely.
 
 Currency fluctuation: Since approximately 90% of the Companys revenues
 are generated through exports and the Company also imports lot of its
 raw materials and capital equipments, it is exposed to risks due to
 currency fluctuations.
 
 The Company follows the system of hedging its receivables and major
 payments well in advance by entering into Forward Contracts, thereby
 protects itself to a great extent from fluctuations in currencies.
 
 INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:
 
 The Company has adequate system of internal controls to ensure that all
 the assets are safeguarded and are productive.  Necessary checks and
 balances are in place to ensure that transactions are adequately
 authorised and reported correctly. The Internal Auditors of the Company
 conduct Audits of various departments to ensure that internal controls
 are in place. These are being reviewed by the Audit Committee of the
 Board and corrective actions are taken by the Company, when needed.
 
 HUMAN RESOURCES:
 
 The Companys human resources continue to be the biggest asset of the
 Company. The team has remained as committed as ever and produced
 results that are considered significant. Quality, quick delivery and
 focus on resolving customer issues are the hallmark of the team
 performance. There is a strong focus on TEAM spirit.  During the year,
 many events were conducted to develop the personality and outlook of
 its employees. Employees relations continue to be cordial.
 
 OUTLOOK FOR THE CURRENT YEAR 2008-09:
 
 The Company is continuously developing its production base and has
 expanded its product range significantly.  The Company is also
 expanding its market base not only through increase in its business
 with its existing customers but also through new customers in existing
 markets as well as new markets. The company also participates in
 various trade fare and exhibition held across the globe to promote its
 product.
 
 The Company has established its brand image through quality and after
 sales services and its brand BKT enjoys good reputation in the
 domestic as well as International market that is reflected through the
 growth rate of Companys business as well as a healthy order position
 of its products throughout the year.
 
 TRANSFER OF BUSINESS:
 
 During the year under review, the company has transferred its paper and
 textile processing businesses to two separate wholly owned subsidiary
 companies namely Balkrishna Paper Mills Limited and Balkrishna
 
 Synthetics Limited respectively through a court approved scheme.
 
 The order of the Honorable High Court of Bombay was passed on 10th
 October, 2007 which was filed with the Registrar of Companies, Mumbai
 on 8th November 2007 (the effective date). The appointed date for
 transfer of above business was 1st April, 2007. The company has
 completed all the post approval formalities to complete the
 transaction.
 
 SUBSIDIARY COMPANIES:
 
 The company has following subsidiary companies:
 
 1. Balkrishna Paper Mills Limited (100%)
 
 2. Balkrishna Synthetics Limited (100%)
 
 3. BKT EXIM Limited (100%)
 
 4. BKT Tyres Private Limited (80%)
 
 The following companies have ceased to be subsidiaries due to
 disinvestment:
 
 1. BKT (EUROPE) Limited
 
 2.  BKT Europe s.r.l.
 
 The investment of the company into above subsidiaries has been bought
 over by its wholly owned subsidiary company - BKT EXIM Limited as per
 the prescribed procedure of Reserve Bank of India.
 
 The Statement pursuant to Section 212 of the Companies Act, 1956
 containing details of the Companys Subsidiaries, to the extent
 applicable, is attached.
 
 Further pursuant to Accounting Standard AS-21 issued by the Institute
 of Chartered Accountants of India, consolidated Financial Statements of
 the Company and it Subsidiaries form part of the Annual Report and
 Accounts.
 
 The Company has made application under section 212(8) of the Companies
 Act, 1956 to the Department of Company Affairs, Ministry of Finance
 seeking their exemption from attaching the Balance Sheet, Profit and
 Loss Account, and Report of the Board of Directors and Auditors of its
 Subsidiary Companies with the Balance Sheet of the parent Company. The
 Company has received approval from Department of Company Affairs vide
 its letter No.47/203/2008-CL-III DT. 10th April, 2008. However, these
 documents will be submitted to any shareholder wishing to have a copy
 on receipt of such request. These documents will also be available for
 inspection by any shareholder at the Corporate Office of the Company.
 However as directed by the Central Government, the financial data of
 the Subsidiaries Companies have been furnished under Details of
 Subsidiaries forming part of the Annual Report.
 
 DIRECTORS:
 
 Shri Ashok M. Saraf has been inducted as an Additional Director w.e.f
 29th May, 2008 and holds office till the date of the ensuing Annual
 General Meeting.
 
 The Company has received notice from one of the Shareholder proposing
 the name of Shri Ashok M. Saraf as a Director of the Company.
 
 Shri Sachin Nath B. Chaturvedi, Shri Khurshed M.  Doongaji and Shri
 Rakesh N. Garodia retire by rotation and being eligible, offer
 themselves for re-appointment.
 
 Necessary resolutions for their re-appointment are placed before the
 Shareholders. Your Directors commend the resolutions.
 
 CORPORATE GOVERNANCE:
 
 Pursuant to Clause 49 of the Listing Agreement with the Stock
 Exchanges, Management Discussion and Analysis, Corporate Governance
 Report and Auditors Certificate regarding Compliance of the same are
 made a part of this Annual Report.
 
 FIXED DEPOSITS:
 
 There were no unclaimed deposits as on 31st March 2008.
 
 INDUSTRIAL RELATIONS:
 
 The industrial relations with staff and workmen during the year under
 review continue to be cordial.
 
 PARTICULARS OF EMPLOYEES:
 
 Particulars of remuneration paid to the employees as required under
 Section 217 (2A) of the Companies Act, 1956 read with the Companies
 (Particulars of Employees) Rules, 1975, are given in the Annexure-I
 attached hereto and form part of the Report.
 
 CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
 EARNING AND OUTGO:
 
 Information pursuant to Section 217 (1) (e) of the Companies Act, 1956,
 read with the Companies (Disclosure of particulars in the Report of
 Board of Directors) Rules, 1988, is given in the Annexure-ll to the
 report.
 
 RESPONSIBILITY STATEMENT:
 
 Pursuant to the requirement under Section 217 (2AA) of the Companies
 Act, 1956, with respect to Directors Responsibility Statement, it is
 hereby confirmed:
 
 (i) In the preparation of the accounts for the financial year ended
 31st March, 2008, the applicable accounting standards have been
 followed along with proper explanation relating to material departures;
 
 (ii) The Directors have 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 of
 the Company for the year under review;
 
 (iii) The Directors have taken proper and sufficient care for
 maintenance of adequate accounting records in accordance with
 provisions of the Companies Act, 1956, for safeguarding the assets of
 the Company and for preventing and detecting fraud and other
 irregularities;
 
 (iv) The Directors have prepared the accounts for the financial year
 ended 31st March, 2008 on a going concern basis.
 
 AUDITORS:
 
 The members are requested to appoint Auditors and fix their
 remuneration. Messers Jayantilal Thakkar & Co , Chartered Accountants,
 the retiring Auditors and who have furnished certificates of their
 eligibility for re-appointment as required under Companies Act, 1956.
 
 CAUTIONARY STATEMENTS:
 
 Certain statements in the Management Discussion and Analysis
 describing the Companys views about the Industry,
 expectations/predictions, objectives etc., may be forward looking
 within the meaning of applicable laws and regulations. Actual results
 may differ materially from those expressed in the Statement. Companys
 operations may inter-alia affect with the supply and demand
 stipulations, input prices and their availability, changes in
 Government regulations, taxes, exchange fluctuations and other factors
 such as Industrial relations and economic developments etc. Investors
 should bear the above in mind.
 
 APPRECIATION:
 
 Your Company is grateful for the continued co-operation and assistance
 extended to it by the Financial Institutions and Banks in meeting the
 financial requirements of the Company.
 
 Your Directors also wish to place on record their warm appreciation for
 the services rendered by the employees and Dealers/Distributors/Agents
 of the Company.
 
                          For and on behalf of the Board of Directors
 
                                             DHARAPRASAD PODDAR 
                                                       Chairman
 Mumbai,
 Dated: 14th June, 2008