INEOS ABS (India)

The Directors have pleasure in presenting their 35th report with
 audited accounts for the year ended 31st December, 2007.
 
 Financial Performance
 
 The financial performance of your Company for the year ended 31st
 December, 2007.
                                                            Rs. In 000
 Particulars                               2006       2007     % Change
 
 Sales and other operating Income      5,683,854   6,439,180     13.29
 Other Income                             50,824      55,184      8.58
 Total Income                          5,734,678   6,494,364     13.24
 Gross Profit before Interest & 
 Depreciation                            551,489     677,280     22.81
 Less: Depreciation                      132,703     135,557      2.15
 Profit Before Taxation                  418,786     541,723     29.36
 Less: Provision for Taxation            157,580     199,960     26.89
 Less: Provision for Deferred Tax         (9,580)     (7,778)    18.81
 Profit After Taxation                   270,786     349,541     29.08
 Add: Balance of Profit Brought Forward  702,346     812,976
 Amount Available for Appropriation      973,132   1,162,517
 Appropriations:
 Proposed Dividend                        52,757      52,757
 Tax on Proposed Dividend                  7,399       8,966
 Transfer to General Reserve             100,000      35,000
 Balance of Profit Carried Forward       812,976   1,065,794
                                         973,132   1,162,517
 
 Review of operations
 
 The net sales of the Company for the year under review increased to
 Rs.643.92 Cr. as compared to Rs.568.39 Cr. in the previous year,
 registering a growth of 13.29% The operating profit of the Company grew
 by 22.81% from Rs.55.15 Cr. to Rs.  67.73 Cr. and the net profit
 increased by 29.08% from Rs.27.08 Cr. to Rs.34.95 Cr.
 
 The Earning per Share (EPS) increased from Rs.15.40 to Rs.19.88. The
 total paid up capital of your company remained un- changed at Rs.17.58
 Cr.
 
 During the year oil prices touched a new high close to 100 USD per
 barrel. As a result,the prices of polymers also went up.  Prices of our
 main three raw materials ruled high throughout the year. The high price
 was accompanied by a lot of volatility in case of our principal raw
 material styrene. Further, the year witnessed sharp appreciation of
 Indian Rupee vis-à-vis US Dollar.  This disturbed the price parity of
 imported products vis-a-vis locally produced products putting pressure
 on margins.
 
 The market generally grew on expected lines. The growth of two wheelers
 – one of the major user industries – was not up to the level projected
 for the year and consequently there was a resistance in demand from
 that sector.Overall market however, still grew by double digits. The
 market is expected to grow continuously for next few years. We are
 confident of maintaining our market leadership.
 
 During the year the company implemented its expansion plans for
 augmenting compounding facilities by installing a state-of-the art
 compounding unit at its Moxi plant. The facility went on stream in
 February 2008. With this, the com- pounding capacity for ABS will be
 enhanced to 80,000 tpa. The Company is engaged in enhancing capacity in
 the polymer section and other areas by debottelnecking resulting in
 it’s ABS capacity reaching 80,000 tpa which is expected to be available
 for the year 2009.
 
 During the year we have developed and produced products specific to the
 customer demands. This has helped the company in achieving better
 profitability particularly in the automotive sector. In view of the
 improved realization, the profit for the year under review rose
 significantly over the last year.
 
 Management discussion and analysis reviews the coming year’s business
 prospects separately The Company continues its high quality service
 standards and is geared up to meet with higher demands from IT,Consumer
 durables,Electronics and other user industries showing greater promise.
 
 Your Board of Directors is pleased to record that for the fifth year in
 succession the company continues to be debt free.
 
 Income from Sale of immovable Properties
 
 During the year the company sold off some unrelated immovable
 properties which includes transactions involving related party
 generating additional income for the year under review which is
 included under other income (see Schedule12).
 
 Dividend
 
 The Directors of your company are pleased to recommend a dividend of
 Rs. 3.00 per equity share i.e. 30 % on a paid up share value of Rs.
 10/- each, for the financial year ended on December 31, 2007 subject to
 the shareholders’ approval at the ensuing Annual general Meeting (AGM)
 which when approved will be paid to all those shareholders whose names
 appear in the Register of Members as on 10th April, 2008.
 
 The register of members and share transfer books shall remain closed
 from (7th April 2008 to 10th April 2008) both days inclusive, for the
 purpose of annual general meeting and payment of dividend.
 
 Takeover offer/ Promoters Agreement for Transfer of Equity
 
 INEOS ABS (Jersey) Ltd along with other persons acting in concert in
 terms of SEBI (Substantial Acquisition of Shares and Takeovers)
 Regulations,1997and amendments thereafter, made a public announcement
 in June 2007 stating the proposal to acquire your company’s controlling
 block of shares from the existing promoters-Lanxess India Pvt Ltd (
 holding 50.97%)and Mr.Rakesh Agrawal and his associates ( holding
 19.00%). In accordance with the SEBI regulations applicable, the
 acquirer has made a public offer to the other shareholders to consider
 accept- ing maximum 20% of the share capital of the company.
 
 Contribution to the national exchequer
 
 The Company contributed a sum of Rs.111.34 Cr. to the exchequer by way
 of direct and indirect taxes and state taxes/ duties during the year
 under review.
 
 Exports
 
 During the year under review the company’s exports amounted to Rs. 315
 lakhs covering 411 MT of goods. In the current year as well, we expect
 to improve exports.
 
 Expansion / Modernisation
 
 Your Company is committed to implement plans of expansion and
 modernization of its operations to meet growth in the market demand and
 is confident of maintaining its leadership position.
 
 Research and Development
 
 We have made considerable progress in the development of ABS / Nylon
 blends for the automotive sector in different colours displaying
 optimal performance. Extensive CAD/CAE support was provided
 successfully and variety of customer’s jobs undertaken.
 
 Risk Management
 
 The Company has undertaken a total awareness programme across all its
 functions and operations.We have introduced regular review/followup so
 as to have continuous monitoring of each risk ascribed and acertaining
 such specific rating and likely impact. Action plan is put in practice
 thereafter.
 
 The Managing Director is in direct command of the implementation of
 practices and takes such remedial actions wherever deemed fit.
 
 The senior and middle level managerial personnel have imbibed the
 spirit of objectives behind the Company’s risk management framework The
 Managing Director gives overall directions in controlling / mitigating
 risks generally and is in complete know of the organizational risks
 potential.
 
 All functional heads periodically review risks in their areas of
 responsibility and implement an effective system of internal controls
 to manage them and the same is being shared among the common forum of
 management teams. Risk appetite is regulated in consultation with the
 managing director within the given ambit of the Company objectives.
 
 Environment and Safety
 
 Your Company is conscious of its’ Societal and Corporate responsibility
 relating to environment and continues to promote safety as an integral
 part of the work culture. It is given top most priority ranking and
 very high importance across all Corporate activities, be at plants or
 other office work places. Onsite emergency plans continue to be in
 state of alert and updated in all divisions. Regular drills and trials
 conducted at various divisions prepare, in case of need, the employee
 responses for eventual preparedness.
 
 The internal and external safety audits have shown satisfactory
 results. There is a day to day safety system followed to resolve safety
 issues. Besides employees, the contractors and workmen are also given
 exhaustive training on safety, first- aid and fire fighting. On site
 education on safety and security methods continue in earnest to bring
 in required awareness among contract labour as well. The Company has
 appointed and trained safety stewards to promote safety in all
 divisions.
 
 Your Company continues to maintain ISO certification standards.
 
 Insurance
 
 As at year end 2007, your Company’s assets were adequately insured
 against risk from fire, riot, earthquake, floods, terrorism etc and
 have also taken loss of profits policy.
 
 As an additional coverage, a statutory Public Liability Insurance
 Policy has been taken to cover public liability arising out of
 industrial accidents and also product liability insurance as per global
 standards.
 
 Directors
 
 During the year Dr Hans Koglenik, Mr Jal Patel and Mr Vishal Agrawal,
 are to retire at the AGM. As they are retiring by rotation and being
 eligible, they have offered themselves for reappointment.
 
 Quality systems and ISO certification
 
 During the year the Company continues to observe all pre-requisites in
 maintaining the quality systems and standards and ISO audit methods as
 required within the certification and guidelines in this regard.
 
 Corporate Governance
 
 Your Company has strengthened it’s adherence to clause 49 of Listing
 Agreement and maintains vigilance to meet with expected compliance
 standards. This proactive approach and constant monitoring of
 compliances in all the Corporate activities helps providing greater
 comfort levels for the stakeholders and better results from business
 operations while adhering to regulatory requirements..
 
 The report on Clause 49 of the listing agreement and Auditor’s
 certificate on compliance with Corporate Governance norms for the year
 2007, forms part of the report.
 
 Human Resource and Industrial Relations
 
 The Human Resources form a backbone of the Company and is guided by a
 strong set of values and policies and plays a key pivotal role in
 maintaining Company’s strength across all activity centers. The Company
 maintains healthy, cordial and harmonious industrial relations at all
 levels. Despite severe competition, the enthusiasm and unstinting
 efforts of the employees enabled the Company to remain at the forefront
 of its present business areas.
 
 Particulars of Employees
 
 The information required under the provisions of Sec 217(2A) of the
 Companies Act, 1956 read with the Companies (Particulars of Employees)
 Rules, 1975, forms part of this report.
 
 Auditors
 
 M/s. Price Waterhouse, Chartered Accountants, Mumbai, Statutory
 Auditors’ of the Company hold office until the conclu- sion of Annual
 General Meeting and are eligible for reappointment. The company has
 received a certificate from M/s. Price Waterhouse, Chartered
 Accountants, under Section 224(1) of the Company’s Act, 1956 confirming
 their eligibility and willingness to accept the office of the Statutory
 Auditors, if re-appointed.
 
 Consumption of energy, technology absorption and foreign exchange
 earnings and outgo
 
 A statement giving details of the conservation of energy, technology
 absorption, foreign exchange earnings and outgo, in accordance with
 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 annexed hereto and forms part of this report.
 
 Directors’ Responsibility Statement Pursuant to section 217(2AA)
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, your Directors
 based on the representation received from the operating management,
 confirm that:
 
 i) in the preparation of the annual accounts, the applicable accounting
 standards have been followed.
 
 ii) they have 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 as on 31st December, 2007 and of the profit of the Company
 for the year ended on that date;
 
 iii) they have taken proper and sufficient care 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.
 
 Acknowledgements
 
 The Directors would like to thank the shareholders, customers, dealers,
 suppliers, bankers, and all the other business associates for the
 continuous support given by them to the Company and their confidence in
 its management.
 
                                         For and on behalf of the Board
 
 Mumbai                                    Dr. Hans J Kogelnik
 Dated : February 19, 2008                        Chairman