Britannia Industries

The Directors present their Annual Report together with the Statement
 of Accounts for the year ended March 31, 2008.
 
 1.  FINANCIAL RESULTS
 
                                                           Rs. Mn
 Particulars                                        Year        Year
                                               ended 31st    ended 31st
                                               March 08      March 07
 
 Gross Turnover and Other                       26,679          23,487
 Income
 Profit before Finance Cost,                     2,820           1,603
 Depreciation & amortisation
 and Exceptional items
 Finance Cost                                       97              89
 Profit before Depreciation                      2,723           1,514
 and Exceptional Items
 Depreciation and                                  291             253
 Amortisation
 Exceptional items                                 109              77
 Profit before tax                               2,323           1,184
 Less: Tax                                         413             108
 Net Profit                                      1,910.          1,076
 Add: Profit brought forward                       600             500
 Profit available for                            2,510           1,576
 appropriation
 Less: Dividend on Equity                          430             358
 Shares
 Less: Tax on Dividend                              73              61
 Less: Transfer to General                       1,407             557
 Reserve
 Balance carried forward to                        600             600
 Balance Sheet
 
 2.  COMPANY PERFORMANCE
 
 For the year ended 31st March, 2008, your Company achieved a sales
 growth of 17.5% on an expanded base arising from 27.5% growth in the
 previous year. Net Profit of the Company increased 77.5% to Rs. 1,910
 Mn compared to Rs. 1,076 Mn in 2006-07. Operating margin increased by
 307 basis points to 7.5%.
 
 The Company witnessed all round growth in key categories with Biscuits
 recording sales of Rs. 23,299 Mn. Bread, Cake and Rusk business crossed
 the Rs. 2,700 Mn mark during 2007-08.  This business has doubled in two
 years.
 
 In an intensely competitive biscuit environment, all Power Brands of
 the Company recorded double digit growth, with Tiger and Good Day
 growing in excess of 20%. Your Companys innovation forays have
 successfully addressed new benefit clusters and Nutri Choice Digestive
 has claimed its position in the health and vitality space. Your Company
 continues to maintain its leadership edge in 6 out of 7 key product
 segments, the only exception being Glucose.
 
 The business continued to face inflationary pressure in key raw
 materials such as wheat flour, refined palm oil, skimmed milk powder
 and other dairy products, as well as energy costs.  These were more
 than offset on the cost side through operational and procurement
 efficiencies, productivity improvements, cost reduction programs and on
 the revenue side through improved product mix and higher realisation,
 aided by strong consumer off take.
 
 Exceptional items for the year include Rs. 130.5 Mn towards
 amortisation of VRS costs. Earnings per share is Rs. 80 compared to Rs.
 45 last year.
 
 3.  DIVIDEND
 
 The Board of Directors is pleased to recommend a dividend of 180% on
 the paid up equity share capital of the Company, which works out to Rs.
 18 per share, for consideration and approval by the shareholders at the
 Annual General Meeting. The total payout amounts to Rs. 503 Mn
 including dividend distribution tax of Rs. 73 Mn.
 
 4.  BUSINESS OUTLOOK
 
 After several years of strong GDP growth, the Indian economy is
 witnessing a slowdown. We enter the new financial year, in the midst of
 a serious food crisis globally, which has led to high inflation in all
 staples like wheat, rice, corn, pulses etc. We expect this supply
 constrained inflationary environment to dampen industry growth in the
 coming year.
 
 In this scenario, your Company will continue to pursue a strategy to
 identify and exploit profitable growth opportunities by increasing the
 consumer preference and consumption of Britannia brands, leveraging the
 three growth vectors of brand, geography and channel. The key themes
 pursued by your Company are to increase brand relevance and
 differentiation, improve availability, structurally building capability
 and efficiencies to be cost competitive.
 
 The overall level of brand and infrastructure investment has increased
 with both national and regional players pursuing aggressive growth in
 an increasingly competitive market.
 
 From a consumer perspective, several new dimensions have opened up as
 others have gained strength, spurred by lifestyle and life stage
 choices. Your Company will continue to focus on providing a range of
 enjoyable and healthy choices to consumers.
 
 5.  BRAND INVESTMENT
 
 All Power Brands - Tiger, Good Day, Milk Bikis, Treat, MarieGold, 50:50
 and NutriChoice saw significant investment in increasing preference and
 purchase and secured double digit growth.
 
 Your Company also introduced several new and renovated offerings in
 Tiger, Good Day, Treat and MarieGold. The health and nutrition platform
 was buttressed by Tiger Banana with iron-zor, fortified Milk Bikis,
 renovated MarieGold and NutriChoice Digestive. To tap the more
 indulgent consumers, your Company launched Good Day Classic Cookies,
 while continuing to roll out individual consumption packs at the highly
 affordable Rs. 5 price point.
 
 The Bread, Cake and Rusk portfolio was strengthened with the successful
 relaunch of Breads, fortified with vitamins and minerals, positioning
 them firmly as the healthy start to your day. This innovation combined
 with relevant consumer activation in key markets has seen a 30%+ growth
 in the Bread, Cake and Rusk business.
 
 6.  INTELLECTUAL PROPERTY RIGHTS (IPR)
 
 Last year we reported the creation of the IPR Committee of the Board to
 monitor and direct the Companys IPR. The key issue addressed by the
 Committee was the unauthorised use by Generate Biscuit, a subsidiary of
 Groupe Danone, of your Companys Tiger brand in five countries and
 registration in a large number of other countries.  Based on legal
 advice, your Company initiated proceedings against Generale Biscuit,
 and its
 
 Associates in Singapore and Malaysia. Further, during the year, Groupe
 Danone divested its biscuit business worldwide (with the exception of
 India and Latin America) including Generale Biscuit, in favour of M/s
 Kraft Inc. USA and your Company continues to pursue the return of its
 Tiger IPR under the direction of the Committee.
 
 7.  MANUFACTURING OPERATIONS
 
 Following the significant addition to manufacturing capacity in the
 previous year, the focus in 2007- 08 was to increase responsiveness and
 cost effectiveness of the supply chain.
 
 Several technology innovation projects to secure cost and quality
 advantages and support introduction of differentiated products were
 completed. New technology based products were successfully manufactured
 using equipment designed internally. During the year your Company filed
 for 2 patents.
 
 Uttarakhand factory continued to perform at high efficiency levels and
 reached full capacity utilisation of 5,000 Tonnes/month. Overall
 conversion costs were reduced due to efficiency and productivity
 improvements in manufacturing.
 
 Capacity for Bread, Cakes and Rusks was also expanded with a
 greenfield, state of the art, cake manufacturing facility in Assam.
 
 With a view to optimise capacities and manufacturing cost, your
 Company, in April 2008, offered a Voluntary Retirement Scheme (VRS) to
 workmen at its Chennai unit. The same was accepted by all the workmen
 and consequently manufacturing operations have been suspended.
 
 8.  QUALITY STANDARDS
 
 Notable progress was made in quality, the drive for ongoing quality
 training, including the development of an e-learning portal. The vendor
 quality improvement program was intensified and the continuous
 grinding in of quality practices at all manufacturing units formed a
 key plank of building a quality culture.
 
 A retail audit system was rolled out to monitor quality of products at
 point of sale.
 
 9.  INFORMATION TECHNOLOGY
 
 Several initiatives were undertaken to enhance business performance,
 enabled by IT infrastructure and processes. These included availability
 of timely and granular information to improve planning and performance
 measurement in manufacturing, logistics, distribution, sales and
 quality.
 
 Information protection infrastructure and systems were significantly
 strengthened. With the objective of securing the best IT competencies,
 higher service levels for users, better infrastructure management and
 inflation proofing cost, IT was outsourced in its entirety to Hewlett
 Packard (HP) with a lock in period of 3 years.
 
 10.  ENVIRONMENT AND SAFETY
 
 The drive to reduce energy consumption through process innovations and
 technology upgradation continued during the year. Burner efficiency
 improvement was achieved through use of magnetic resonance energisers
 for fuel.
 
 Recycling of the waste heat was extended to manufacturing locations as
 also the usage of alternate energy sources like gas which was extended
 wherever available, including Delhi factory as well as contract
 packers.
 
 Your Company has filed an application for availing carbon reduction
 benefits under the Clean Development Mechanism of the Ministry of
 Environment and Forests, Government of India as part of the United
 Nations Framework for Climate Change Control (UNFCCC) for the Delhi
 factory.
 
 11.  CORPORATE SOCIAL RESPONSIBILITY
 
 The partnership your Company has created with Global Alliance for
 Improved Nutrition (GAIN) and the Naandi Foundation to supply iron
 fortified Tiger biscuits to supplement the Mid-Day Meal program in
 schools, has been recognised as a unique program globally by GAIN. This
 prompted the World Bank Institute to write a case study and your
 Company was invited to make a commitment to the Clinton Global
 Initiative, a non-partisan catalyst for action that brings together a
 community of global leaders to devise and implement solutions for some
 of the worlds pressing challenges like nutrition.
 
 Iron deficiency among Indian children is a key cause of school dropouts
 as well as decreased productivity. Based on the experience from the
 Britannia-GAIN-Naandi partnership, your Company created a new offering
 for all consumers - Tiger Banana, a delightful banana biscuit fortified
 with vitamins and minerals.
 
 In keeping with its core essence of Swasth Khao Tan Man Jagao, your
 Company constantly strives to find sustainable opportunities to drive
 home the message of nutrition and good food habits among children at
 the right age. Britannia is committed to help secure every childs
 right to growth and development through good food everyday. Its largest
 power brand, Tiger, is also being rolled out, fortified with iron.
 
 Your Company was also the first in the industry to remove trans fat
 from most its biscuits as yet another meaningful step in offering
 products that are both healthy and enjoyable.
 
 12.  PENSION
 
 The Britannia Industries Limited Covenanted Staff Pension Fund (Trust)
 received a Show Cause Notice from the Commissioner of Income Tax,
 Kolkata, asking the Trust to show cause why the recognition granted to
 the Trust should not be withdrawn for refund of excess contribution of
 Rs. 121.2 Mn to the Company. The matter has been dealt with in note No.
 29 of Schedule T to the Accounts, which is self explanatory.
 
 13. ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE
 
 Details of energy conservation, technology absorption, foreign exchange
 earnings and outgoings in accordance with the provisions of clause (e)
 of sub-section (1) of Section 217 of the Companies Act, 1956, read with
 the Companies (Disclosure of the Particulars in the Report of Board of
 Directors) Rules, 1988, are given as an annexure to the Directors
 Report.
 
 14.  CONSOLIDATED FINANCIAL RESULTS
 
 Your Company has prepared Consolidated Financial Statements in
 accordance with Accounting Standard 21(AS-21) issued by the Institute
 of Chartered Accountants of India. The Consolidated Statements reflect
 the results of the Company with that of its Subsidiaries, Joint
 Ventures and Associates. As required by Clause 32 of the Listing
 Agreement with the Stock Exchanges, the Audited Consolidated Financial
 Statements together with the Auditors Report thereon are annexed and
 form part of this Annual Report.
 
 The Consolidated turnover and net profits of the Company for the year
 ended 31st March, 2008 were Rs. 28,099 Mn and Rs. 1,774 Mn
 respectively.
 
 15.  SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
 
 Your Directors present herewith a broad overview of the operations and
 financials of its Subsidiaries, Joint Ventures and Associates.
 
 Subsidiaries
 
 Investment and Holding Companies
 
 M/s Boribunder Finance and Investments Private Limited (Boribunder),
 M/s Flora Investments Company Private Limited (Flora) and M/s Gilt Edge
 Finance and Investments Private Limited
 
 (Gilt Edge) form the Investment Associates of your Company. During
 2007-08, M/s Boribunder Finance and Investments Private Limited
 (Boribunder) became a wholly owned subsidiary of your Company.
 
 The combined revenue and loss of investment companies for the year
 ended 31st March, 2008 was Rs. 24 Mn and Rs 14 Mn respectively. The
 losses are due to provision for diminution in value of investments.
 
 Further, pursuant to Section 4 of the Companies Act, 1956, the
 following companies engaged in manufacture of biscuits at various
 locations are also deemed to be subsidiaries of your Company.  The
 Gross Income and Net Profit of the said subsidiaries during 2007-08 are
 as under:
 
 Name of Subsidiary Gross Net Profit/ Income (Loss)
                                        Rs.Mn       Rs.Mn
 
 International Bakery                    106              3.5
 Products Limited, TC
 Balam, Tamil Nadu
 J B Mangharam Foods                      98            (7.4)
 Private Limited, Gwalior
 Manna Foods Private                      30              1.6
 Limited, Bangalore
 Ganges Vally Foods                       96              0.6
 Private Limited, Kolkata
 Sunrise Biscuit                          83             (0.3)
 Company Private
 Limited, Guwahati
 
 Britannia and Associates (Mauritius) Private Ltd.
 
 Britannia and Associates (Mauritius) Private Ltd, (BAMPL) a Company
 formed in Mauritius is the holding Company of Britannia and Associates
 (Dubai) Private Co. Ltd, (BADCO) a Jebel Ali Free Zone Company, which
 in turn holds strategic investments in Strategic Food International Co.
 LLC, Dubai and Al Sallan Food Industries Company SAOG, Oman.
 
 The combined revenue and loss of the holding companies for the year
 ended 31st December, 2007 was USD 0.62 Mn and USD 0.77 Mn respectively.
 
 Joint Ventures
 
 Britannia New Zealand Foods Private Limited (BNZF)
 
 BNZF, the Joint Venture with M/s Fonterra Co-operative Group Limited of
 New Zealand is engaged in the business of dairy products, comprising
 cheese, skimmed milk powder, butter and ghee. BNZF brands are available
 nationally and lead the cheese segment. For the year ended 31st March
 2008, BNZF recorded a turnover of Rs. 1,424 Mn and incurred a net loss
 of Rs. 51 Mn compared to a turnover of Rs. 1,186 Mn and a net loss of
 Rs. 112 Mn in the previous year.
 
 Strategic Foods International Co. LLC, Dubai (SFIC)
 
 Your Company acquired 70% stake in SFIC in March 2007. For the year
 ended 31st December, 2007, SFIC recorded a turnover of AED 104.02 Mn
 and operating profit (before finance charges and depreciation) of AED
 6.48 Mn and Net Loss of AED 3.14 Mn. During 2007 the business
 encountered severe cost challenges due to unprecedented increases in
 market prices of all key commodities like flour, skimmed milk powder,
 etc. The Company has implemented several cost effectiveness programs
 which, together with efficient buying, managed to contain part of the
 input cost inflation.
 
 Al Sallan Food Industries Company SAOG, Oman (Al Sallan)
 
 Your Company acquired 65.5% stake in Al Sallan in March 2007. Al Sallan
 recorded a turnover of RO 3.24 Mn for the year ended 31st December,
 2007.
 
 Both these acquisitions have given your Company the opportunity,
 infrastructure and competence to effectively compete in the rapidly
 growing markets of the Middle East.
 
 Daily Bread Gourmet Foods (India) Private Limited (Daily Bread)
 
 Daily Bread, another acquisition made last year, is engaged in the
 business of premium bakery products. The Company registered a growth of
 47% last year. It has continued to focus on expanding its retail
 presence as well as drive institutional business through addition of
 new customers. As a part of this strategy, new manufacturing facilities
 were set up in Delhi and Hyderabad while expanding capacity at
 Bangalore.
 
 Welfare Companies
 
 M/s Britannia Employees General Welfare Association Private Limited,
 M/s Britannia Employees Educational Welfare Association Private Limited
 and M/s Britannia Employees Medical Welfare Association Private Limited
 are the three other associates of your Company.
 
 These are companies limited by guarantee and have no share capital.
 These have been set up for general, educational and medical welfare of
 the employees of your Company.
 
 16.  CORPORATE GOVERNANCE
 
 In accordance with Clause 49 of the Listing Agreement with the Stock
 Exchanges, a separate report on Corporate Governance along with the
 Auditors Certificate on its compliance is attached to this Report.
 
 17.  DIRECTORS
 
 Consequent to taking over as Chairman of the Finance Commission
 constituted by the Government of India, Dr. Vijay Kelkar resigned as
 Director of your Company with effect from 31st December, 2007. Your
 Board records its deep gratitude and appreciation for the various
 contributions made by Dr. Kelkar during his association with the
 Company.
 
 Mr. Georges Casala resigned as a Director of your Company with effect
 from 28th May, 2008. Your Board records its deep gratitude and
 appreciation for the various contributions made by Mr. Casala during
 his association with the Company.
 
 Your Board appointed Mr. Philippe Loic Jacob as an Additional Director
 at its meeting on 28th May, 2008. Mr. Jacob will hold office upto the
 date of the forthcoming Annual General Meeting of the Company.
 
 In accordance with the provisions of the Companies Act 1956 and the
 Articles of Association of the Company, Mr. S S Kelkar, Mr. Pratap
 Khanna, Mr. Nusli N Wadia and Mr. Francois-Xavier Roger, Directors,
 retire by rotation at the forthcoming Annual General Meeting and are
 eligible for reappointment.
 
 18.  PARTICULARS OF EMPLOYEES
 
 Information in accordance with sub-section (2A) of Section 217 of the
 Companies Act, 1956, read with the Companies (Particulars of Employees)
 Rules, 1975, and forming part of the Directors Report for the year
 ended 31st March, 2008 is also given in the annexure to this report.
 
 19.  AUDITORS
 
 M/s. Lovelock & Lewes retire in accordance with the provisions of the
 Companies Act, 1956. They have indicated their willingness to continue
 in office and are recommended for reappointment as the Companys
 Auditors for the ensuing year.
 
 20.  DIRECTORS RESPONSIBILITY
 
 Pursuant to sub-section (2AA) of Section 217 of the Companies Act,
 1956, your Directors, based on representations from the Operating
 Management, confirm that:
 
 I.  In the preparation of annual accounts, the applicable accounting
 standards have been followed and there are no material departures;
 
 II.  They have, in selection of the accounting policies, consulted the
 statutory auditors and applied these policies consistently, making
 judgments and estimates that are reasonable and prudent, so as to give
 a true and fair view of the state of affairs of the Company as on 31st
 March, 2008 and of the profit of the Company for the year ended 31st
 March, 2008;
 
 III.  They have taken proper and sufficient care, to the best of their
 knowledge and ability, 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.  They have prepared the annual accounts on a going concern basis.
 
 21.  ACKNOWLEDGEMENTS
 
 The Directors would like to thank all stakeholders, namely, customers,
 shareholders, dealers, suppliers, bankers, employees and all other
 business associates for the continuous support given by them to the
 Company and its management.
 
                                              On behalf of the Board
 
 Mumbai                                               NUSLI N WADIA
 28th May, 2008                                           CHAIRMAN