Nestle India

The Directors have pleasure in submitting their report and the
 statement of accounts for the year ended 31st December, 2007.
 
 Financial Results and Operations
 
                                                  (Rs. in Million)
                                                 2007       2006
 
 Gross Revenue                                  35,298     28,367
 Earning before Interest
 and Tax excluding
 Other Income (EBIT)                             6,215      4,752
 Interest                                            8          4
 Impairment Loss on Fixed
 Assets (Net)                                       12          4
 Additional Employee Cost                          753          -
 Provision for Contingencies (Net)                (590)       145
 Provision for Tax                               2,148      1,654
 Net Profit                                      4,138      3,151
 Profit Brought Forward                            105         72
 Balance Available for Appropriation             4,243      3,223
 Interim Dividends                               2,941      2,458
 Final Dividend Proposed                           241          -
 Corporate Dividend Tax                            522        345
 Transfer to General Reserve                       414        315
 Surplus carried in Profit
 and Loss Account                                  125        105
 Earnings per Share (Rs.)                        42.92      32.68
 Dividend per Share (Rs.)                        33.00      25.50
 
 Net Sales for the year 2007 increased by 24.4% over the previous year.
 Net Domestic Sales and Export Sales grew by 25.2% and 17.9%
 respectively, due to increase in volumes as well as realisations.
 Export realisations were adversely impacted by the appreciation of the
 Indian Rupee.
 
 The EBIT for the year 2007 excluding Other Income increased by 30.8%
 resulting in an EBIT margin of 17.7%, a 80 basis points increase over
 the year 2006. Scale efficiencies, cost reduction initiatives as well
 as the ongoing strategic transformation process allowed the business to
 more than offset higher raw materials costs.
 
 Pursuant to the adoption of Accounting Standard (AS) 15 on “Employee
 Benefits” effective 1st January, 2007, there has been an impact on the
 employees cost for the year; provision has been made for additional
 employee cost of Rs.753.7 Million representing certain employee
 benefits upto the year 2006 and an additional obligation of Rs. 138.9
 Million (net of tax), on account of certain employee benefits up to the
 year 2006, has been adjusted from the General Reserve as at 1st
 January, 2007.
 
 The credit in the Provision for Contingencies of Rs.590.4 Million has
 resulted mainly from a provision made in the past relating to an item
 requiring management judgement and discretion, which is no longer
 required. This has been partly offset by fresh provision of Rs.163.3
 Million, to provide for contingencies resulting mainly from issues,
 which are under litigation/dispute.
 
 In the year 2007, the Indian economy again clocked a good growth rate
 and the year was also marked by the strong appreciation of the Indian
 Rupee. Whilst the high foreign exchange inflows that were recorded
 reflect the continuing enthusiasm amongst entrepreneurs to invest in
 India, the consumer confidence and rising income levels helped
 accelerate momentum in the
 
 FMCG industry. During the year, there were some areas of concern as
 well. The low rate of agricultural growth, a marginal slowing down in
 the manufacturing sector, the continuing price spiral for agro-based
 and other primary commodities, as well as the concern with inflation
 were all challenging areas. However, despite the complexities, the
 Indian economy is projected to continue growing at a good pace in the
 future.
 
 During the year, the Government’s thrust on inclusive growth created a
 supportive environment, and the economic environment continued to be
 stable and in the right direction. With the young and growing
 population, the increase in the middle class, and the level of
 confidence that the Indian consumers have in the future, the consumers
 continued to evolve rapidly. There is a growing awareness that healthy
 eating is important and consumers are looking for options that are
 tasty, nutritionally balanced and healthy. Since Nutrition, Health and
 Wellness is in its DNA, your Company understood this transformation in
 the consumer much ahead of the others and has been using its immense
 nutritional knowledge, latest food technology and strong research and
 development expertise to develop relevant science based products.
 
 Your Company recognises its role as the leading Nutrition, Health and
 Wellness Company and continued to sharpen its consumer insights and
 innovate and renovate its product portfolio. During the year, the
 Company increased support to its brands. During 2007, your Company took
 its concept of “NESTLe NUTRITIONAL COMPASS” beyond packaging and
 through special NUTRIWORLD activities extending to Shopping Malls and
 other large footfall areas, where the consumers are counselled about
 balanced and healthy diets, the benefits of an active lifestyle and how
 they can use the NESTLe NUTRITIONAL COMPASS to make informed choices.
 
 Your Company has been focused on profitable, sustainable and long-term
 growth.
 
 While the Nestle India business model with its Seven Value Drivers
 enabled the Company to build brands and invest in upgrading the
 manufacturing facilities, there was a significant focus on
 strengthening the culture of innovation and renovation to all areas of
 operation. During the year, your Company was presented with the ‘India
 Innovator of The Year’ award by CNBC Asia.
 
 Your Company is stable, healthy and with strong fundamentals. The
 brands of your Company continue to further strengthen their bond with
 the consumers. While
 
 Innovation and Renovation has accelerated and added science based
 products to the product portfolio, the Supply Chain and Sales
 Departments maintained focus on increasing the freshness and reach of
 products to more consumers and in newer geographies.  At the same time,
 the factories continue to implement best practices to further improve
 productivity and implementing the planned capacity expansions. Your
 Company remains steadfast in following the four strategic pillars for
 sustainable growth – ‘Low cost, highly efficient operations’;
 ‘Innovation and Renovation’; ‘Product availability’; and ‘Consumer
 communication’.
 
 In the recent past, your Company was restructured to a multi-focal
 business structure and, apart from other initiatives, the thrust on
 consumer insights and focus on Nutrition, Health and Wellness has been
 strengthened. Your Company is now witnessing the result of
 restructuring and efforts of stronger understanding of the consumer.
 While the Company closed 2007 with good growth and profitability, the
 current year has also commenced on a good note.
 
 Moving ahead, the big challenge is the continuing increase in the costs
 of various inputs. Raw material prices and energy cost continue to
 remain at record levels and your Company will maintain strong focus on
 measures to deal with it. We are positive with regard to the future and
 remain confident of the long-term business prospects of the Company and
 its ability to sustain fair returns to the shareholders.
 
 Exports
 
 Export Sales during 2007 at Rs.3,298 Million, increased by 17.9% over
 the year 2006.  This was largely influenced by increased volume of
 export and the increase in per unit realisation in export of Instant
 Coffee due to higher green coffee prices. Exports of Milk Powder were
 adversely impacted for most part of the year due to the restriction on
 their export. Instant Coffee exports increased both to the traditional
 market of Russia as well as to some new destinations. Exports of most
 other product categories also increased, particularly culinary
 products, which were exported to Australia and South Africa for the
 first time.
 
 The efforts to develop new geographies helped to reduce dependence on
 exports to Russia. Direction and composition of exports is being
 diversified. Initiatives to develop products for the Indian ethnic
 community abroad are continuing.
 
 Dividends
 
 The Board of Directors has recommended a final dividend of Rs. 2.50 per
 equity share of the face value of Rs.10/- each for the year 2007,
 amounting to Rs. 241 Million.
 
 This is in addition to the two Interim Dividends for the year 2007,
 first at the rate of Rs. 6.50 and the second at the rate of Rs. 24.00
 per equity share, which were paid on and from 29th March, 2007 and 24th
 December, 2007 respectively, aggregating to Rs. 30.50 per equity share
 (amounting to Rs.2, 941 Million).
 
 The total payout of Rs.3,702 Million (including the corporate dividend
 tax) for 2007 is once again the highest to date.
 
 Scheme of Arrangement
 
 On 15th January, 2007, the Board of Directors had approved a Scheme of
 Arrangement (hereinafter referred to as “Scheme”) between the Company
 and its Shareholders and Creditors, proposing utilization of the
 balance in the Share Premium Account (Rs.432.4 Million) and a part of
 the balance in the General Reserve Account formed by excess transfer of
 surplus profit in earlier years (Rs.430.8 Million), for payment to
 shareholders, subject to applicable taxes.  The equity shareholders
 approved the Scheme at the meeting held on 3rd May, 2007, as per the
 directions of the Hon’ble High Court of Delhi and subsequently the
 Company has filed a confirmation petition to the Hon’ble High Court
 seeking sanction of the Scheme. The Scheme would be effective upon
 approval by the Hon’ble High Court and the certified copy of the Order
 being filed by the Company with the Registrar of Companies.
 
 Business Development
 
 Understanding the food and nutrition needs of the consumer is amongst
 the strengths of your Company and the vision is to be the respected and
 trustworthy leading Food, Nutrition, Health and Wellness Company.
 During 2007, the Company accelerated the pace of innovation and
 renovation to focus on science based products that increase Nutrition,
 Health and Wellness and to provide high quality food products that
 deliver taste and pleasure.
 
 The ‘Milk Products and Nutrition’ business innovated and renovated
 extensively to strengthen its product portfolio and performed very
 satisfactorily.  The ambient dairy business saw good growth on the key
 brands NESTLe EVERYDAY Dairy Whitener and NESTLe MILKMAID Sweetened
 Condensed Milk.  In addition, new opportunities were targeted with the
 launch of three Health and Wellness based propositions which are (a)
 NESTLe NIDO, a nutritious milk powder for growing children above the
 age of 2 years; (b) extension of the trusted NESTLe MILKMAID brand into
 the healthy refreshment opportunity with NESTLe MILKMAID Funshakes; and
 (c) NESTLe CEREVITA Multigrain Cereal, developed to address the growing
 consumer needs and expanding market for a nutritious breakfast.
 
 The Fresh Dairy category had a good growth and further strengthened the
 image of your Company as an innovator based on the launches of (a)
 NESTLe FRESH ‘N’ NATURAL Slim Dahi, a 98% fat free formulation; (b)
 NESTLe MILKMAID Fruit Yoghurt which is 98% fat free and has real fruit;
 and (c) NESTLe NESVITA, a 98% fat free, probiotic dahi, in plain and
 fruit varieties, which was developed based on Nestle Group’s extensive
 experience with probiotics. Proboitic Dahi helps consumers maintain a
 healthy digestion and, in turn, helps them manage their lifestyles
 better.
 
 The Infant Nutrition business continued to leverage its science based
 innovation and renovation efforts for high quality products to address
 relevant consumer needs. During the year, NESTLe CERELAC Stage 4 was
 introduced to provide infants from 12 months of age with Multi Grain 5
 Fruits and Multi Grain Dal Vegetable formulations. Your Company
 supports the fact that mother’s milk is best for the child and is also
 aware that there are situations where mother’s milk is not available to
 the child.
 
 Therefore, the Company is constantly using latest scientific knowledge
 to bring its products closer to mother’s milk. During the year, NESTLe
 NAN was renovated with DHA, which is a fatty acid naturally found in
 breast milk and believed to have a beneficial impact on the development
 of the immune system and eyesight of infants.
 
 The business for ‘Prepared Dishes and Cooking Aids’ demonstrated rapid
 growth.  The pioneering concept of ‘Taste Bhi, Health Bhi’ was further
 strengthened as the business launched more products that offer health
 and wellness. After the very successful launch of MAGGI Vegetable Atta
 Noodles in the previous year, the business leveraged its deep consumer
 insights, research and development strengths and knowledge of
 Nutrition, Health and Wellness to roll out MAGGI Rice Noodles, with the
 goodness of rice, and designed to provide ‘Balanced Energy’ as
 recommended by nutritionists.  These were launched in three unique
 flavours, suited to regional preferences.
 
 The Taste Bhi, Health Bhi’ proposition is also relevant for MAGGI
 Soups.  MAGGI Healthy Soups have the goodness of vegetables, are low in
 fat and cholesterol, have no added MSG or synthetic colors.  During the
 year this range was strengthened with new variants like MAGGI Sweet
 Corn Vegetable, MAGGI Sweet & Sour Noodle and MAGGI Hot & Sour Chicken
 Soups. A new range of Instant Soups was launched during the year under
 the brand MAGGI Healthy Soups – SANJEEVNI that met with very good
 consumer response. This new range of Instant Soups brings together the
 Nestle know-how in developing Soups with sharper consumer insight into
 the relevance of traditional ingredients like ‘Amla’ and ‘Badam’ that
 are ‘good for you’ and known to ensure health and well being.
 
 Relevant products and focused advertising and consumer communication
 helped the business sustain its momentum across the key categories of
 Noodles, Sauces and Soups. The ‘Its different’ campaign for
 
 MAGGI Sauces that was revived recently, led to good growth in the
 category. MAGGI continued to be the leader and this was brought out in
 a survey by Brand Equity where MAGGI was rated as the 5th Most Trusted
 Food Brand.
 
 In recent years the ‘Chocolate and Confectionery’ business has
 anticipated the needs of the emerging consumer and developed
 appropriate brands. The Company is a leader in the lighter-wafer-
 confectionery segment with NESTLe MUNCH and NESTLe KIT KAT and in the
 white chocolayer segment with NESTLe MILKYBAR. The Company is also a
 leader in Eclairs and Fruit/Mint roll categories. Well targeted
 consumer advertising made our brands more vibrant. During the year, the
 focus on consumer insights, innovation and renovation as well as well
 as improved distribution contributed to a good performance on the key
 brands. The efforts made on distribution in the Chocolate and
 Confectionary category are reflected in the Company now being the
 leader in distribution and availability of this category.
 
 During the year, NESTLe MUNCH Pop Chocs was successfully launched to
 grow the nibbling segment and has created a new consumption occasion
 with the popular “Nikalo, Uchalo, Khalo” campaign. The Company test
 marketed KIT KAT Mini at Rs.2/- price point to further drive
 accessibility and TANGEEZ, a soft functional candy with the unique
 ingredients of Ajwain and Kala Namak. To tap consumers seeking flavour
 options in confectionery category, a limited edition POLO Cinnamon
 flavour and Butter Scotch Eclairs were introduced, both of which
 received good response from consumers.
 
 The Beverages business launched a new instant coffee NESCAF MILD
 during the year. NESCAFe MILD uses the finest selection of carefully
 selected Arabica and Robusta beans, which are lightly roasted to
 provide an aroma and flavour for a Mild, Rich and Smooth tasting
 coffee. NESCAFe MILD has also been launched in sachet at Re.1/- price
 point, to provide to the consumer good value, affordability and
 convenience.  The sachet is also expected to generate more trials for
 the product and improve consumption. NESCAFe continued to be the
 largest brand of Instant Coffee in the Indian market and had
 satisfactory growth during the year.
 
 The business continued to renovate the MILO brand and has developed an
 affordable and nutritionally fortified product which is currently being
 test marketed.
 
 Your Company continued to strengthen its presence in the ‘Out-Of-Home’
 segment through ‘NESTLe Consumption Zones’, Cafe NESCAFe outlets and
 vending machines in offices, colleges and other locations that
 experience high footfalls. Your Company continued to lead the market
 with the largest number of vending machines installed in the market and
 several hundred NESTLe Consumption Zones. Your Company sees increasing
 opportunities in the ‘Out-Of-Home’ segment, and is well placed to
 address consumer needs.
 
 Technology and Quality
 
 Your Company is trusted for the high quality and safety of its
 products, and recognized for the taste and nutrition that they provide
 in a convenient and affordable manner. To ensure this, all seven
 factories of your Company are state-of-the-art and are functioning
 efficiently.  Also, the Company has a General Licence Agreement with
 the Nestle Group, Switzerland that enables it to access their
 continuing investment in Research and Development and the most advanced
 technology for foods and beverages.
 
 Your Company continuously upgrades and implements best practices at its
 factories, while following strict norms. During the year, the Company
 continued to upgrade its production capability. New production lines/
 technology were put up at the plants in Pantnagar, Moga, Ponda and
 Nanjangud; initiatives were taken to strengthen the capabilities for
 efficient execution of capital projects to support the strong business
 growth and focus was maintained on measures to ensure availability of
 the required human resources.
 
 Consumer trust is very important and your Company has always attached
 tremendous importance to the process of quality assurance required to
 ensure this. As the leader, your Company continues to further
 strengthen the processes in this key area.  During the year, the
 Company commenced the implementation of the new Nestle Quality
 Management System that has a stronger business focus and encompasses
 all functions across the value chain. The new system is an improvement
 over the earlier system and focuses on measures that lead to sustained
 consumer trust and preference.
 
 Safety and environmental performance have been integral to the business
 performance of your Company. Continued focus ensured that high
 standards of safety and environmental performance were maintained in
 all the factories. During the year, four factories were awarded the
 internationally recognised external certification ISO 14001 for
 adherence to environmental processes and OSHAS 18001 for Health and
 Safety. Certifications for the remaining three factories would be
 sought during the current year.
 
 Human Resources
 
 The performance expected from your Company requires a disciplined,
 focused work culture and demands an ongoing effort to sustain an
 engaged workforce. During the year, significant resources and efforts
 were devoted to people engagement initiatives to support a performance
 driven culture and to enhance a Passion to Win mindset for a higher
 level of productivity.  Key areas of focus were talent management,
 performance management, reward and recognition, business processes,
 training, and work-life balance. The performance culture was made more
 robust by focusing on employee development, encouraging greater
 leadership skills and improved motivation. A greater understanding of
 employee engagement enabled the Company to improve employee
 performance.
 
 One of the cornerstones of the Company culture is teamwork and
 continuous learning.  To promote this, the Company focused on
 supporting people to unlock their own potentials and to enable them to
 work with a superior team spirit. A key initiative was the
 implementation of the Mini Business Unit (MBU) programme across all the
 factories.  The MBU concept has improved productivity levels as it also
 empowers employees to better align their goals with the overall
 organisational objective, and motivates them to continuously improve
 their skills.
 
 To empower talent and prepare its people with necessary skills, the
 Company continued to provide employees with appropriate access to
 training and corresponding development plans including international
 exposures, where feasible.
 
 SWOT Analysis for the Company
 
 Strengths:
 
 - Access to the Nestle Group’s proprietary technology/brands, expertise
 and the extensive centralised Research and Development facilities under
 the General Licence Agreement.
 
 - High quality and safe food products at affordable prices, endorsed by
 the Nestle Seal of Guarantee.
 
 - Strong and well differentiated brands with leading market shares.
 
 - Ongoing product innovation and renovation, to convert consumer
 insights.
 
 - Well diversified product portfolio.
 
 - Efficient supply chain.
 
 - Multi focal business structure.
 
 - Distribution structure that allows wide reach and coverage in the
 target markets.
 
 - Capable and committed human resources.
 
 - Integrated and advanced information systems - GLOBE
 
 Weakness:
 
 - Complex supply chain configuration.
 
 - Export of coffee to Russia, still constitutes significant part of
 overall exports.
 
 - Ability to pass through cost increases in price point Stock Keeping
 Units.
 
 Threat:
 
 - Rising prices of raw materials and fuels.
 
 - Change in fiscal benefits/ laws.
 
 - People attraction and retention.
 
 - Competitive environment with diverse players.
 
 Opportunities:
 
 - Potential for expansion in the smaller towns and other geographies.
 
 - Development of modern retail formats.
 
 - Potential for growth through increased penetration.
 
 - Growing trend for ‘Out of Home’ consumption.
 
 - Leverage Nestle Technology to develop more products that provide
 Nutrition, Health and Wellness.
 
 - Growing per capita income.
 
 Environment
 
 While your Company has been delivering sustained and profitable growth
 over the years, it has maintained strong focus on greater efficiency in
 the use of natural resources and on reducing waste and emissions. The
 usage of water and energy and emission of Green House gas and waste
 water, per tonne of production, has been drastically reduced over the
 last decade. These efforts reinforce the trust that people have in your
 Company. The results of these measures, are contained in the write up
 on Creating Shared Value”.
 
 Community Development
 
 Your Company has always recognized that its business is part of social
 fabric of the community where it operates. The Company believes that
 its investments must result in long-term sustainable growth as well as
 economic and social progress for the community. The relationships with
 the community as ‘Partners in Progress’ are based on business ethics
 and long-term commitment to creating Shared Value.
 
 The most obvious benefit that your Company brings to the place that it
 operates in, is the creation of both direct and indirect employment
 that leads to the development of the whole community, as well as
 inclusive growth. Economic prosperity is only one aspect of your
 Company’s relationship with the communities. The activities of your
 Company help in the transfer of technology and knowledge that takes
 Indias success story to the people who need it most.
 
 Your Company has done extensive work at Moga to develop dairy farmers.
 Dedicated agronomists and veterinarians continuously educate farmers
 with good dairy practices and improved the supply chain infrastructure
 for milk collection through installation of farm cooler and chillers.
 
 While all this directly benefits close to 100,000 farmers, your Company
 is aware that women can play a much more productive role in the
 villages. For the past few years your Company has been conducting dairy
 development programs amongst village women to train them in good dairy
 practices as well as spread awareness about personal health, hygiene,
 water conservation and economic independence. Already 30,000 women from
 over 500 villages benefit from this initiative.
 
 Your Company endorses the United Nations Global Compact and the
 Millenium Development Goals to promote prosperity in society. Access to
 clean drinking water is necessary and your Company believes that it is
 important to create awareness towards this in society. Over the past
 few years, your Company has been working on this programme and setting
 up clean drinking water facilities in village schools around its
 factories. Clean and hygienic drinking water has been found to reduce
 illnesses amongst the children and the community is able to better
 appreciate the water education that your Company provides to the
 children. The unique clean drinking water facilities are already
 directly benefiting 33,000 school children every year, who also become
 more aware of the role they can play in protecting these resources and
 become ambassadors for water conservation.
 
 Awards & Recognitions
 
 Over the years your Company has earned the trust of every strata of
 society that it comes in contact with. These have grown into rewarding
 and enduring partnerships that are based on shared values, business
 ethics and long-term commitments that actively benefit thousands of
 farmers and their families and strengthen the bonds with consumers
 across the country. This is evident in the recognitions awarded to your
 Company.
 
 During the year, CRISIL assigned Nestle India a credit rating ‘AAA’
 with stable outlook, indicating highest safety for long- term borrowing
 programme of Rs.500 Million and also reaffirmed P1+ rating indicating
 very strong safety for short term debt plan of Rs.350 Million. Though
 your Company did not borrow during the year, this evaluation reiterates
 the strong business and financial strength of your Company.
 
 During the year, A.C. Nielsen surveyed consumers for the CNBC Awaaz
 Consumer Awards and it is an honour that NESCAFE was voted as the most
 preferred coffee for the second successive year.
 
 The success of the business model adopted by your Company is evident to
 the shareholders through the performance. This was also acknowledged
 for the second successive year when Business India rated your Company
 as No.1 on Return On Capital Employed amongst what they consider the
 Super 100 companies.
 
 For the past several years the Coffee Board of India has recognized
 your Company for the outstanding performance in exports of Instant
 Coffee. For the year 2006-2007, your Company received the awards for
 ‘Best Exporter of Instant Coffee’, ‘Highest Exporter to Russia and CIS”
 and ‘Highest Exporter to Far East Countries’.
 
 Directors’ Responsibility Statement
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors
 confirm that:
 
 - in the preparation of the annual accounts, the applicable accounting
 standards have been followed and no material departures have been made
 from the same;
 
 - 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 at the end of the financial year and of the profits for
 that period;
 
 - 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;
 
 - they have prepared the annual accounts on a going concern basis.
 
 Corporate Governance
 
 In compliance with the requirements of Clause 49 of the Listing
 Agreement with the Stock Exchange, a separate report on Corporate
 Governance along with Auditors certificate on its compliance is
 attached as Annexure –1 to this Report.
 
 Cautionary Statement
 
 Statements in this Report, particularly those which relate to
 Management Discussion and Analysis as explained in the Corporate
 Governance Report, describing the Company’s objectives, projections,
 estimates and expectations may constitute “forward looking statements”
 within the meaning of applicable laws and regulations.  Actual results
 might differ materially from those either expressed or implied in the
 statement depending on the circumstances.
 
 Directors
 
 Mr. Tejendra Khanna resigned as a Director of the Company with effect
 from 5th April, 2007. The Directors wish to place on record their
 appreciation for the contributions made by Mr. Khanna during his
 tenure.
 
 Mr. Pradip Baijal, appointed in the casual vacancy, is a retired IAS
 officer with a distinguished career spanning four decades.  He has held
 diverse portfolios in both the Central and State Governments, and from
 2003 to 2006 was the Chairman of the Telecom Regulatory Authority of
 India. His experience would be of immense benefit to your Company and
 adds a valuable perspective in the Board of Directors.  Mr. Baijal
 holds office till the Annual General Meeting and is eligible for
 reappointment.  Notice has been received from a member signifying his
 intention to propose Mr. Baijal as a Director.
 
 In accordance with Article 119 of the Articles of Association, Mr.
 Rajendra S. Pawar retires by rotation and being eligible offers himself
 for re-appointment.
 
 Auditors
 
 The Statutory Auditors of the Company, M/s. A. F. Ferguson & Co.,
 Chartered Accountants, New Delhi, retire in accordance with the
 provisions of the Companies Act, 1956 and are eligible for
 re-appointment. M/s. A. F. Ferguson & Co., Chartered Accountants, New
 Delhi have sought the re-appointment and have confirmed that their
 re-appointment if made, shall be within the limits of Section 224(1)(B)
 of the Companies Act, 1956. The Audit Committee and the Board
 recommends the re-appointment of M/s. A.F. Ferguson & Co., Chartered
 Accountants, as the Auditors of the Company.
 
 Complying with the provisions of Section 233-B of the Companies Act,
 1956, the Board of Directors have appointed, subject to the approval of
 the Central Government, M/s. Ramanath Iyer and Co., Cost Accountants,
 New Delhi, to carry out an audit of cost accounts of the Company in
 respect of Milk Foods for the year 2008.
 
 Information regarding Conservation of Energy etc. and Employees
 
 Information required under Section 217 (1) (e) of the Companies Act,
 1956 (hereinafter referred to as “the Act”) read with Rule 2 of the
 Companies (Disclosure of Particulars in the Report of Board of
 Directors) Rules, 1988 is given in the Annexure - 2 forming part of
 this Report.  Information as per Section 217(2A) of the Act, read with
 the Companies (Particulars of Employees) Rules, 1975, as amended from
 time to time, forms part of this Report.  However, as per the
 provisions of Section 219 (1) (b) (iv) of the Act, the Report and
 Accounts are being sent to all the members excluding the statement
 containing the particulars of employees to be provided under Section
 217(2A) of the Act. Any member interested in obtaining such particulars
 may inspect the same at the Registered Office of the Company or write
 to the Company Secretary for a copy.
 
 Trade Relations
 
 The Company maintained healthy, cordial and harmonious industrial
 relations at all levels. Despite severe competition, the enthusiasm and
 unstinting efforts of the employees have enabled the Company to remain
 at the forefront of the Industry.
 
 Your Company continued to receive co-operation and unstinted support
 from the distributors, retailers, stockists, suppliers and others
 associated with the Company as its trading partners. The Directors wish
 to place on record their appreciation for the same and your Company
 will continue in its endeavour to build and nurture strong links with
 trade, based on mutuality, respect and co-operation with each other and
 consistent with consumer interest.
 
 Appreciation
 
 Your Company has been able to operate efficiently because of the
 culture of professionalism, creativity, integrity and continuous
 improvement in all functions and areas to ensure efficient utilisation
 of the Company’s resources for sustainable and profitable growth. The
 Directors wish to thank each and every employee for their contribution
 to the good performance of the Company.
 
                                   On behalf of the Board of Directors
 
 4th March, 2008                            MARTIAL G. ROLLAND
 Gurgaon                                         CHAIRMAN