Eveready Industries India

The financial year ended March 31,2008 Your Directors are pleased
 to present the Annual Report, together with the audited Accounts of
 your Company for the financial year ended March 31,2008.
 
 Amalgamation of Powercell Battery India Ltd with the Company
 
 The Scheme of Amalgamation between Powercell Battery India Ltd (PBIL),
 the wholly owned subsidiary of the Company, and the Company effective
 April 1,2007, as approved by the members on August 31,2008, as per the
 directions of the Honble High Court at Calcutta, has been sanctioned
 by the Honble High Court at Calcutta by its Order dated December 5,
 2007. The certified copy of the said Order has been filed with the
 Registrar of Companies, West Bengal on January 16,2008. Accordingly,
 the entire undertaking of PBIL with all its employees, assets,
 liabilities, rights and obligations were transferred to and vested in
 the Company with retrospective effect from April 1,2007.
 
 Financial results are summarized below:                  (rs in Crores)
                                      2007-08 (A)  2006-07 (B) 200647(C)
 
 Consolidated
 
 Net Sales                               847.18    772.52     839.70
 
 Other Income from operations              4.48      2.62       3.34
 
 Profit / (Loss) from sale of real estate (1.10)     0.37       0.37
 
 Provision no longer required              9.64      7.82       7.82
 
 Total Income                            860.20    783.33     851.23
 
 Total Expenditure adjusted for 
 increase/decrease of stocks             784.90    735.40     800.51
 
 Profits before Depreciation, 
 Interest and Taxation                    75.30     47.93      50.72
 
 Depreciation                             27.63     19.95      24.22
 
 Interest and Finance Cost                52.08     41.18      43.80
 
 Profit/(Loss) before Taxation            (4.41)   (13.20)    (17.30)
 
 Provision for Taxation including 
 Fringe Benefit Tax                      (14.91)    (0.23)     (5.25)
 
 ProfiV(Loss) after Taxation.            (19.32)   (13.43)    (22.55)
 
 (Previous years figures have been regrouped / rearranged where
 necessary.)
 
 Note : Figures related to 2007-08 (Column A) include those pertaining
 to an erstwhile subsidiary, Powercell Battery India Limited, which was
 amalgamated with the Company with effect from April 1,2007. Figures
 related to 2006-07 (Column B) are stand-alone numbers which do not
 include the same and hence the numbers for these 2 years are not
 comparable. To enable comparison, the figures consolidated with the
 erstwhile subsidiary for 2006-07 (Column C) are also provided above.
 
 Net sales for the year were only marginally higher over the previous
 financial year. However, Profit before Depreciation, Interest and
 Taxation (PBDIT) was higher by 48 % at Rs.75.30 crores as compared to
 Rs.50.72 crores in the previous year. Evidently, this was not
 sufficient to meet the charges on account of depreciation, interest and
 taxation, as a result of which the year ended at a net loss of Rs.
 19.32 crores.
 
 The loss was contributed by a very steep and unprecedented increase in
 raw material prices and lower volumes due to consumer resistance to
 price increases necessitated by the cost push. However, as mentioned,
 there was an improvement in operating performance as borne out by the
 improved PBDIT.
 
 Your Directors considered it prudent not to recommend any dividend for
 the year under review in view of lack of profits.
 
 Batteries and Flashlights
 
 In the recent past, your Company had to pass on significant price
 increases in batteries to the market to offset severe material cost
 push, fuelled by extreme hardening of price of zinc - a metal used
 significantly in dry batteries.  Cumulative price increases for the
 various battery types over the last 24 months or so ranged between 20
 per cent and 50 per cent. It did not seem to impact consumers
 initially, but eventually such pricing measures met with stiff consumer
 resistance and demand started slowing down. Unfortunately, the price
 increases had to be persisted with, due to input costs continuing to
 prevail at high levels. Last such price increase - attributable to cost
 push - was taken in January 2007. This de-growth was most pronounced in
 D size batteries, which is mostly consumed in the price sensitive
 rural segment.
 
 This trend of de-growth continued to prevail during the early part of
 the financial year under review. Volumes in Quarter 1 of the year were
 at 82% of those in the corresponding quarter of the previous year.
 Thereafter, however, a gradually improving trend emerged with respect
 to sales volumes.  Thus, by the end of the current year the overall
 de-growth was minimized to just 2%, with the last 3 quarters.accounting
 for an average growth of 4%.
 
 The improvement came primarily due to a handsome growth in AA size
 batteries in the last 3 quarters, with an average growth of 22% over
 the corresponding period of the previous year - total years growth
 being at 14%. The improvement was off-set by the continuing de-growth
 of the D segment. However, the impact of de-growth of the D segment
 became lower over the last 3 quarters.
 
 This phenomenon of volumes being affected was not unique to the Company
 but was experienced by the market as a whole. The Companys market
 share remained by and large unaltered at 52.7% - brand Eveready -
 46.5%: brand Powercell - 6.2% (Source: AC Nielson : April 2007 -
 March 2008).
 
 The phenomenon of consumer resistance to pricing actions was also very
 significant in the flashlights business. Similar to the trend in
 batteries, flashlights business also experienced de-growth of volumes.
 The impact was most significant in the brass (an alloy of zinc and
 copper) segment of flashlights - predominantly used in the rural areas.
 
 As a mitigation measure and with a view to giving consumers a
 value-for- money option, the Company introduced a new class of
 flashlights. This new segment has popularly come to be known as the
 LED segment due to usage of LED bulbs as the light source. The
 Company has been at the forefront of introduction of this new segment
 and has encouraged consumers to take to it due to the value proposition
 of lower battery consumption. While
 
 LED flashlights may not fully meet all traditional consumer
 expectations, these have been taken on enthusiastically by the value
 conscious consumers.
 
 From the Companys perspective, this measure is positive. The brass
 flashlights were profitable and were good for consumption of D size
 batteries but remained for long period of in-use with consumers. The
 new LED torches are equally profitable, but have much lower in-use
 period and is good for AA battery consumption. Early trends indicate
 that these will increase overall torch user-ship significantly and will
 thus be beneficial to higher battery consumption.
 
 The LED flashlights were introduced at the beginning of the year
 under review and their impact is evident from the sales growth from
 Quarter 2 of the year. While sales volume in Quarter 1 of the year was
 at 61% of the corresponding quarter of the previous year, those in the
 subsequent 3 quarters grew by 32%.
 
 Your Company believes that the difficulties experienced in batteries
 and flashlights businesses have been suitably tackled. There has not
 been any change in the basic fundamentals of these products. The demand
 drivers continue to be the same and the Indian market continues to
 offer major potential for growth being a consumer of perhaps the lowest
 number of batteries and flashlights in the world. The recent downturn
 related to a severe cost push and consequential price hikes, which the
 consumers were not able to absorb immediately. However, it now appears
 that after the initial difficulty in adjusting to the new high cost
 regime, the market is gradually coming back to consumption levels as
 determined by fundamental demand.
 
 It is also worthwhile to note that over the past few months, there has
 been significant softening in the price of zinc. Though other prices of
 other commodities used in batteries have increased, lower zinc price
 has resulted in margin expansion.
 
 The pillars behind your Companys sustained good performance over time
 continue to be its fundamental strengths on distinct quality edge,
 penetrative distribution and effective marketing. These strength areas
 will eventually take the Company to a path of sustainable growth and
 accordingly these were persisted with during the year under review.
 
 The manufacturing operations of your Company continued to focus on
 total quality management, safety, energy conservation and cost control.
 This helped your Company in achieving efficiency in the manufacturing
 function.
 
 Your Companys new plant at Haridwar commenced commercial production on
 schedule on April 2,2007. This AA facility with capacity of 360
 million units will augment your Companys capability in this growing
 product segment. This unit is also entitled to excise and tax benefits.
 
 Packet Tea
 
 The packet tea business continued with its steady performance through
 leveraging of the distribution network of the Company. Current share of
 the market stands at 2 - 8 per cent in the various markets of the
 country. Sales volumes were in line with previous year in a very
 competitive market scenario.  Turnover for the year under review was at
 Rs.78.03 crores.
 
 Lighting Products
 
 Your Company started distributing compact fluorescent lamps (CFL)
 through the Companys distribution network during the year under
 review. It was initiated as a marketing arrangement with Phoenix Lamps
 Limited (PLL), a reputed manufacturer of CFL, for the products to be
 distributed through your Companys distribution network, under the dual
 brands of Eveready and Halonix (the latter belonging to PLL). The
 launch of the products took place in June 2007. The products were
 received quite enthusiastically by the market and turnover for the
 current year during the year stood at Rs.44.22 crores in the few months
 of operation.
 
 The Companys distribution which is at a tangible differentiation from
 usual trade for this product segment, and brand Eveready is set to
 create a long term value-enhancing proposition in this business. In
 recognition of this, the Company recently disengaged from the marketing
 arrangement it had with PLL. This will enable the Company to use its
 own branding, distribution and sourcing strategies to harness the full
 potential offered by this business.
 
 Insect Repellents
 
 The launch of Mosquito Coils over the target markets across the country
 became complete by the end of the last financial year. Liquid
 vaporizers were launched from October 2007. The trade and consumer
 response to the Companys mosquito coils was encouraging. The business
 is still in a nascent stage with a market share varying between 1 per
 cent and 4 per cent in the various states. Turnover of Rs.10 crores was
 achieved during the current year.
 
 New Products
 
 Your Company is committed to bringing new FMCG products to its selling
 basket with a view to improving turnover and profitability. Towards
 this, test marketing of dishwash detergents was initiated during the
 year under review, on successful completion of which, the products will
 be formally launched.
 
 Value unlocking and reducing debt
 
 Your Company is seized of the need to reduce its debt. It has thus been
 alert to opportunities whereby value is unlocked from surplus assets
 with a view to reducing debt and thereby improving its financial
 sustainability.
 
 The Company entered into an MOU on August 29, 2007 with Housing
 Development & Infrastructure Limited (HDIL) for the transfer of its
 leasehold premises at Navi Mumbai for a consideration of Rs.115 crores.
 The Company received Rs.11.50 crores as Earnest Money Deposit for the
 same and a further advance of Rs.50 crores, thereby leaving a balance
 amount of Rs.53.50 crores receivable on completion. The proceeds have
 been and will be utilized for repayment of debt, which will reduce
 interest cost.
 
 Prospects
 
 While the financial results for the year under review were
 disappointing, these have to be read in the perspective of the severe
 challenging environment of somewhat unique cost push and consequent
 market shrinkage of the two main product categories. However, all
 pointers seem to indicate that these difficulties have been adequately
 tackled.
 
 It is firmly believed that there has not been any change in the basic
 fundamentals of the market. The demand drivers and the potential
 offered by the presently low-consuming Indian market will continue to
 offer major potential for growth. Also, after the consumers initial
 difficulty in adjusting to the new high cost regime, the market seems
 to be gradually coming back to the consumption levels determined by
 fundamental demand.
 
 Though the challenge of high input costs remain, softening price trend
 of zinc - a major input to dry cell batteries - has resulted in margin
 expansion.  The outlook with respect to overall input costs is set to
 be favorable in the foreseeable future.
 
 Other products like packet tea, insect repellents and lighting products
 (CFLs) are poised for a success in the future. These new products
 leverage your Companys existing brand and distribution and will play a
 key role in improving scale and profitability of your Companys
 business.
 
 All these factors are expected to combine and pave the way for a quick
 revival and thereafter a sustained performance.
 
 During the year under review, your Company had issued and allotted
 45,00,000 Convertible Warrants on a preferential basis to one proposed
 allottee on October 17, 2007. The Convertible Warrants are convertible
 at the sole option of the Warrant holder within a period of 18 months
 from the date of allotment of the warrant (i.e. April 16, 2009) in one
 or more tranches. An amount of Rs. 2,61,00,000/-being 10% of the price
 of the underlying equity shares @ Rs. 58/- per share was received from
 the proposed allottee on the date of allotment of the Warrants.
 Proceeds on this account were utilized in the business of the Company.
 
 The financial position of your Company remained somewhat tight given
 its operating performance. However, significant improvement in the
 management of working capital helped your Company coming through this
 difficult situation.  Your Company met its financial commitments in
 servicing debt and repayments thereof in a timely manner. Capital
 expenditure programme - mainly that related to making the new
 generation LED flashlights available to the market - was fully met.
 In view of lack of profits during the year under review, there was no
 transfer to reserve.
 
 Employee Relations
 
 One of your Companys key strengths is its people. Relations with
 employees remained cordial and satisfactory. Your Board would like to
 place on record its appreciation of employees for their contributions
 to the business.
 
 Your Company believes in a system of Human Resource Management which
 rewards merit based performance and playing an active role in improving
 employee skills. Actions during the year under review were supportive
 of this policy.
 
 A statement of particulars of employees as required under section 217
 (2A) of the Companies Act, 1956 forms a part of this report as a
 separate Annexure. In terms of section 219 (1)(b)(iv) of the Act, this
 Report is being sent to all members without the said annexure. Any
 member interested in taking inspection or obtaining a copy of the
 statement may contact the Secretary of the Company at its Registered
 Office during working hours.
 
 Public Deposits
 
 Deposits amounting to Rs. 8.58 lakhs due for repayment remained
 unclaimed by depositors as on March 31,2008. The concerned depositors
 have been intimated for completing the procedure for repayment.
 
 Exports and Foreign Exchange Earning and Outgo
 
 During the year under review, your Company exported batteries of 62.16
 million pcs and flashlights of 133.67 K pcs against 61.86 million pcs
 and 413.71 K pcs respectively in 2006-07.
 
                                               Rs. Lskns
 
                                     Year ended        Year ended
 
 Foreign Exchange Earnings             1,602.85          1,424.73
 
 Foreign Exchange Outgo                8,830.17         14,977.45
 
 A statement giving details of conservation of energy and technology
 absorption in accordance with the Companies (Disclosure of Particulars
 in the Report of the Board of Directors) Rules, 1988, is annexed.
 
 Directors Responsibility Statement
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors
 state as follows:
 
 1.  That in the preparation of the annual accounts for the financial
 year ended March 31,2008, the applicable accounting standards had been
 followed with no material departures;
 
 2.  That the Directors had selected such accounting policies and
 applied them consistently and made judgments and estimates that are
 reasonable and prudent so as to give a true and fair view of the state
 of affairs of the Company at the end of the financial year and of the
 profit or loss of the Company for that period;
 
 3.  That the Directors had taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of this Act for safeguarding the assets of the Company and
 for preventing and detecting fraud and other irregularities;
 
 4.  That the Directors had prepared the annual accounts on a going
 concern basis.
 
 In accordance with the Articles of Association, Mr. B.Mitter, Mr. D. A.
 Nanda and Mr. V. Bhandari will retire by rotation at the forthcoming
 Annual General Meeting, and being eligible, offer themselves for
 re-appointment.
 
 Mr. A. Roy, Wholetime Director, relinquished his services as Director,
 effective December 8, 2008. The Board places on record its appreciation
 of the contributions made by him during his tenure as a Director to the
 Company.
 
 Mr. S. Saha has been re-appointed as Wholetime Director for a further
 period of three years effective March 22,2008.
 
 Mr. D. Khaitan has been re-appointed as Executive Vice Chairman &
 Managing Director for a further period of three years effective June
 1,2008.
 
 The above re-appointments of the executive directors are subject to the
 approval of the shareholders at the forthcoming Annual General Meeting
 and/or the Central Government.
 
 On a Reference Application made by the Central Government to the
 Company Law Board (CLB) under Section 408 of the Companies Act, 1956,
 the CLB, by an order dated December 20, 2004 directed the Central
 Government to appoint three Directors on the Companys Board for three
 years. As the CLBs order suffers from various legal infirmities, the
 Company, based on legal advice, has challenged this order of the CLB
 before the High Court at Calcutta, which has, by an interim order,
 stayed the operation of the CLBs order. The stay is continuing.
 
 Messrs. Deloitte Haskins & Sells retire as Auditors at the conclusion
 of the forthcoming Annual General Meeting and, being eligible, offer
 themselves for re-appointment.
 
 Mangemet Discussion Analysis Report and Report on Corporate Governance
 As required in terms of the Listing Agreement with Stock Exchanges a
 Management Discussion and Analysis Report and a Report on Corporate
 Governance are annexed.
 
                            For and on behalf of the Board 
 
 Kolkata                    B. M. Khaitan
 6th May, 2008              Chairman