To the Members
 
 The Directors have pleasure in presenting the Fifty-eighth Annual
 Report and Audited Financial Statements for the year ended March 31,
 2005.
 
 Financial Results:
 
                                                       (Rs. in Lakhs)
                                                   2004-2005   2003-2004
 Net Sales
 
 Domestic                                           26315.58    22192.48
 
 Exports                                             6894.04     9483.10
 
                                                                33209.62
 
 
 Profit before interest, depreciation & tax          3400.25     3477.39
 
 Depreciation & Amortisation                          593.98      526.09
 
 Interest (Net)                                       -18.36     -103.14
 
 Provision for Current/Deferred Tax                   972.75      969.68
 
 Net profit after tax                                1851.88     2084.76
 
 Balance in Profit & Loss Account brought forward     816.55      811.60
 
 Balance available for appropriation                 2668.43     2896.36
 
 Appropriation:
 
 Interim dividend                                     596.25      596.25
 
 Final dividend                                       715.50      715.50
 
 Tax on dividend                                      178.27      168.06
 
 Transfer to General Reserve                          350.00      600.00
 
 Profit & Loss Account balance carried forward        828.41      816.55
 
                                                                 2668.43
 
 Dividends:
 
 Considering the performance for the year, its future prospects and the
 policy for distribution of dividend consistently followed by the
 Company, the Board of Directors is pleased to recommend for the
 approval of shareholders a final dividend of Rs. 6 per share (60%)
 which together with interim dividend of Rs.5 per share (50%) declared
 by the Board at its meeting held on 28th October, 2004 and paid
 subsequently works out to a total dividend of Rs. 11 per share (110%)
 for the financial year 2004-05. The dividend and the tax payable
 thereon will absorb cash out flow of Rs. 1490 lakhs and amounts to a
 payout of 81% of the net profit as compared to 71% for the previous
 financial year.
 
 Management Discussion & Analysis:
 
 Financial and Operational Performance:
 
 The performance of the Company for the year is reflected by the
 following ratios:
 
                                                  2004-2005    2003-2004
 
 Sales Growth (%)                                       4.8         -0.7
 
 PBIDT (% to sales)                                    10.2         11.0
 
 PAT (% to sales)                                       5.6          6.6
 
 ROCE (%)                                              26.0         27.9
 
 Return on net worth (%)                               18.4         21.5
 
 Debt : Equity ratio                                   0.07         0.09
 
 W/Capital (% to sales)                                 6.8          7.5
 
 Earning per share (Rs.)                               15.5         17.5
 
 Cash earning p/share (Rs)                             20.5         21.9
 
 Book value per share (Rs)                             84.2         81.1
 
 The domestic sales recorded a growth of 18.6 percent over the previous
 year. However, due to competitive pressure and slackness in demand from
 global markets, exports sales were down by 27.3 percent over previous
 year. Growth in domestic sales was driven by record volume and value
 growth in Textiles. In view of competitive price pressure, sharp
 increase in input costs, lower income from investment of surplus funds
 and adverse impact due to exchange rate fluctuation, operating profit
 (PBDIT) as percent to sales is lower at 10.2 percent as compared to 11
 percent and net profit after tax for the year is lower by 11.2 percent
 over previous year. The Company has been able to withstand intense
 competition and price pressures in the domestic markets and with record
 growth in sales it has further consolidated its market leadership in,
 textile and leather industry segments.
 
 The Company has further improved its benchmarking performance in
 management of working capital. The net working capital at the year-end
 as a percent to net sales has come down from 7.5 percent in the
 previous year to 6.8 percent in the current year and this works out to
 25 days of net sales. With healthy liquid resources, which are
 prudently invested into debt oriented schemes of mutual funds, the
 Company is exploring business opportunities for expanding in its core
 competence market segments. The net cash flow from operating activities
 during the year was Rs. 2461 lakhs as compared to Rs. 2129 lakhs for
 the previous financial year.
 
 The capacity utilisation of production facilities of the Company
 located at its site at Kolshet viz. dyes, chemicals, leather chemicals
 and masterbatches were higher during the year as compared to previous
 year. There was no major increase in the capacity of any of the plant.
 
 The Company holds certification under ISO 14001 and under ISO 9001 -
 2000 from KPMG Quality Registrar.
 
 Segment-wise Performance:
 
 The Company is dealing in Dyes and Chemicals and Masterbatches. In
 pursuance of the provisions of the Accounting Standard 17 concerning
 Segment Reporting issued by the Institute of Chartered Accountants of
 India, Dyes and Intermediates and Speciality Chemicals segments
 reported by the Company in earlier years as two segments, have been
 regrouped as Dyes and Chemicals as these pertain to the same group of
 related products used in textile, leather and paper industries and
 accordingly the performance is dealt with.
 
 1. Dyes and Chemicals:
 
 This segment caters to the requirement of dyes and speciality chemicals
 for textile, leather and paper industries. While dyes provide
 customized shades catering to the ever changing fashion and preferences
 of people, the chemicals add value by enhancing the quality of feel and
 finish of the fabric, leather and paper.
 
 The sales performance of the Company for the year under review in this
 segment is as under:
 
                                              (Rs. lakhs)
                  Textile   Leather      Paper     Totals
 
 Domestic           16832      6611       1641      25084
 
 Exports             5574       862        422       6858
 
 Total 2003-04      20024      6965       3767     307561
 
 Dyes and Chemicals segment has contributed 96 percent of total sales
 revenue for the year. The growth in domestic sales was 17.8 percent;
 however, negative growth of 27.5 percent in exports restricted the
 overall sales growth to 3.9 percent over the previous year.
 
 Aggressive promotion of products and increased demand from the textile
 sector has resulted into record sales growth of 21.2 percent in
 products catering to requirement of textile industry in the domestic
 markets, This is the highest growth the Company has ever recorded in
 this industry segment in the past.
 
 Textile dyes include Disperse, Reactive, Acid and Sulfur dyes. With a
 wide range of product portfolio, the Company has positioned itself as
 one of the leading suppliers of eco friendly dyes catering to all
 variety of fibres and fabrics viz. cotton, polyester & blends, wool and
 silk etc. During the year, the textile dyes registered a record growth
 both in volume and value in domestic markets. The Company has developed
 various concepts such as Ecoswat C for optimization of exhaust dyeing
 process for cotton, Scholl-Then airflow technology with Foron®
 S-WF/Drimarene® HF for minimizing process time and comprehensive colour
 management through MatchWizard™. These cost effective solutions have
 created added value to the customers.
 
 Speciality chemicals for textile cover chemicals for pretreatment,
 dyeing, printing and finishing of textiles. Optical brighteners and
 chemicals for functional treatment are also part of the range. The
 Company is market leader and caters to the requirement of broad
 spectrum of textile industries in adding value to their end products by
 supplying the speciality products to impart different feel and finishes
 to the fabric such as Sanitized and Actigard® for anti-microbial,
 Nuva for stain repellent, Pekoflam for flame retardant, Rayosan for
 UV protection, SandotexIR for insect repellent, Actifresh for odor
 absorbent, Appretan for stiffness. With large product range, strong
 brand image created by the parent company coupled with technical
 competencies and capabilities of the people in customising the process
 package for high productivity, quality consistency, and cost
 effectiveness, textile chemicals with record sales growth has emerged
 as significant contributor in overall performance of the Company.
 
 Leather dyes comprises of wide range of dyes to impart shades into
 different variety of leather hides and skins. Leather chemicals
 comprise of chemicals for finishing and dyeing as well as complete
 range of wet-end chemicals. Leather dyes adds life to the hides and
 skins through wide spectrum of eco-friendly colourful dyes, which makes
 the Company market leader in leather dyes for over a decade. In fast
 changing fashion trend, the leather finishing plays a major role in
 upgrading the quality of raw hide and skin and making it ultra-modern
 fashionable leather catering to the needs and preferences of the
 ultimate users. The Company with its global expertise in leather
 industry, extensive research and development facilities and highly
 experienced technical support team has made major impact in leather
 finishing and providing solutions to enhance the quality of fashionable
 leather at optimum cost. The Company has developed fabulous collection
 of shades and finishes through the transfer of international technology
 split into five themes; Jet set:
 
 Life line for urban handbag leather, Reversible:
 
 Double for womens reversible garment and accessories, Geometric:
 Urban Elegance for sophisticated accessory of the summer in pastel
 colours, Gommato: Acid Vibration for free spirit leather articles of
 spring and summer and Cosmic Energy:Explorer for luggage and
 accessories. The Company is a regular participant in international
 fashion fair ModEurope held in Germany every year and the shades
 specially developed by it are regularly selected as fashion colours of
 the fair. The Company has launched its products in emerging new segment
 such as furniture upholstery and is meeting stringent specifications of
 reputed international buyers. With sales growth of over 12 percent over
 the previous year driven by record growth in both wet end finishing
 chemicals it has further consolidated its market share in domestic
 markets.
 
 In the industry segment for paper dyes and chemicals, the Company has
 developed unique insight into the needs of consumers and understanding
 of many challenges faced by the paper industry. Clariant has emerged as
 market leaders in Cartasol range of direct dyes and has established
 range of products and processes which provide value addition to its
 customers such as Cartabond Crosslinker/insolublisher, Cartacol®
 surface sizing, Cartacoat coating additives, Cartafluor® grease/oil
 resistant, Cartaseal anti-slip/barrier coating, Cartaflam® flame
 retardant additive, Leucophor® range of optical brightening agents and
 range of other process chemicals. In a very small and highly
 competitive domestic market, the company is improving its presence and
 expanding its market share by introducing new formulations and working
 together with paper manufacturers as their extended R & D facility to
 help maximize the productivity and profitability. The Company has
 registered good growth in paper dyes and chemicals during the year and
 improved its market share with major customers groups.
 
 Export of dyes, intermediates and chemicals constitute 21 percent of
 total sales of Dyes and Chemicals segment of the Company. The company
 is one of the global sourcing centers for Clariant group and is meeting
 the required demand of Clariant affiliates located in all five
 continents for quality dyestuff and intermediates mainly sourced from
 Indian manufacturers. With emergence of China as large global supplier
 of commodity dyes and dyes intermediates offering inconceivable prices,
 the competition has become very intense and the Company had to withdraw
 from various market segments. As a result, export sales of dyes, dyes
 intermediates and chemicals during the year have declined by 27 percent
 over the previous year. The Company continues to enjoy the status of a
 Trading House in respect of its export business.
 
 2. Masterbatches:
 
 Masterbatches segment of the company deals in colour and additive
 concentrates and special mixtures of these compounds for use by
 automotive, textile and technical fibers, electronic and electrical
 devices, home appliances, toys, medical devices, sporting goods and
 packaging. The segment recorded sales of Rs. 1267.62 lakhs during the
 year as compared to Rs. 919.19 lakhs in the previous year registering a
 record growth of 38 percent driven by impressive growth in fiber
 masterbatches for textile industry.
 
 Market size for coloured masterbatches is very small and is dominated
 by small scale units with intense competition in prices restricting the
 entry of international players for quality masterbatches of newly
 developed fashion colours. The Company, with its global strength, is
 focusing to expand its product range and is working together with its
 customers to provide cost effective quality products with rapid
 response. The Company is making inroads in this niche segment by
 offering premium grade masterbatches in the range of Remafin®, Renol®,
 Omnicolor® for quality conscious customers. The Company installed a new
 machine and the capacity utilization of its manufacturing facilities is
 improved significantly.