Shoppers Stop

The Directors are pleased to present the Eleventh Annual Report on the
 business and operations of the Company together with the Audited
 Statements of Accounts for the year ended March 31, 2008.
 
 Financial Performance
                                                    (Rs. in millions)
                                          Year ended      Year ended
 Particulars                          31 March, 2008  31 March, 2007
 
 Retail Sales (Net of taxes)                11345.69         8463.05
 
 Other Operating Income                       168.30          145.03
 
 Other Income                                  88.44          132.55
 
 Total Revenues                             11602.43         8740 63
 
 Profit before Depreciation & Tax             537.91          743.40
 
 Less: Depreciation                           392.74          256.27
 
 Profit before Tax                            145.17          487.13
 
 Less: Provision for Tax                       75.50          225.18
 
 Profit after Tax                              69.67          261.95
 
 Add/(Less): Balance brought forward 
 from previous year                           484.56          296.83
 
 Proposed Dividend (incl. 
 Dividend Distribution Tax)                    61.17           61.12
 
 Transfer to General Reserve                    3.48           13.10
 
 Balance carried forward                      489.58          484.56
 
 
 Performance Review
 
 Your Company has opened five department stores i.e one at Noida, one at
 Kolkata and three at New Delhi during the year, taking its chain of
 department stores to 27 stores spread across India. The revenue has
 touched Rs. 11,602 million (previous year Rs.8,741 million),
 registering a growth of 33% on y-o-y basis, whereas cash profit stood
 at Rs. 538 million and net profit at Rs. 70 million against Rs. 743
 million and Rs. 262 million respectively last year.
 
 Dividend
 
 Your directors are pleased to recommend a dividend of Rs.1.50 (previous
 year Rs.1.50) per equity share of Rs.10 each.
 
 The dividend, once approved by the members in the ensuing Annual
 General Meeting will be paid out of the profits of the Company for the
 year and will sum up to a total of Rs. 61.17 million, including
 dividend distribution tax, as compared to Rs. 61.12 million in the
 previous year.
 
 AWARDS AND RECOGNITION
 
 Your Company has been conferred with the following awards and
 recognitions during the year under review:
 
 - Retail Destination of the Year at the Image Fashion Forum;
 
 - Most Admired Retailer of the Year for technology applications at
 Image Retail Award, 2007;
 
 - Advertisement Campaign of the year CMAI APEX Awards;
 
 - Departmental Store of the year at Star Retailer Award.
 
 Further, Mr. B. S. Nagesh, Customer Care Associate & Managing Director
 of Company has been inducted in the World Retail Hall of Fame along
 with your company winning the Emerging Market Retailer of the Year
 Award, at World Retail Congress, Barcelona, Spain.
 
 Status on utilization of IPO proceeds
 
 As you are aware, your Company had made its initial public offerings
 (IPO) through 100% book building process in the year 2005 and raised
 Rs. 1653.16 million by issuing 6,946,033 Equity Shares of Rs.10 at a
 price of Rs. 238 per share inter-alia with the Object of the Issue
 for setting of 11 new stores, renovating and expanding some of our
 existing stores.
 
 As there was considerable delay in delivery of certain store premises
 which were forming part of the Object of the Issue, the Company has
 modified the aforesaid Object of the Issue with the approval of
 members at the last Annual General Meeting. Further, the renovation of
 Andheri store as envisaged was also replaced with renovation of Malad
 store.
 
 Out of the Rs. 1,653.16 million so raised, Rs. 1,578.50 million were
 utilized towards the objects of the IPO. The unutilized balance have
 been utilized in temporarily reducing exposure to working capital
 borrowings.
 
 Share Capital
 
 During the year under review, the paid up equity share capital of the
 Company has increased by Rs. 0.35 million on account of allotment of
 equity shares pursuant to exercise of stock options under various ESOP
 Schemes.
 
 The Company has filed draft Letter of Offer with Securities & Exchange
 Board of India (SEBI) for issue of equity shares and detachable
 warrants thereto for raising a sum upto Rs. 5000 million by way of
 Right Issue to its existing equity shareholders.
 
 Credit Rating
 
 Fitch Ratings India Private Limited has continued its rating of F1 +
 (ind) [F one plus ind] for short term debt/commercial paper programme
 which is now increased to Rs. 800 million, indicating highest credit
 quality with strongest capacity for timely payment of financial
 commitments.
 
 We have also got rated by CRISIL for short term and long term
 borrowings for a sum of Rs.500 million each. For short term, CRISIL has
 assigned us a rating of P1 + whereas for long term, a rating of A+ has
 been assigned.
 
 Finance
 
 Your Company continues with various initiatives for bringing down the
 cost of borrowings which includes application of new dynamic short term
 instruments so as to have an increase in cash flow, reducing interest
 cost and improving working capital management.
 
 Employees Stock Option Plan
 
 Your Company has formulated and designed Employees Stock Option Plan
 Schemes (ESOP Schemes) for its employees. During the year under review,
 the Company has allotted 35,096 Equity Shares of Rs.10 each under the
 said ESOP Schemes.
 
 Under Employees Stock Option Plan Scheme V (ESOP 2005), during the year
 under review, the Company has granted 400,000 Stock Options and 20,000
 Stock Options on August 23, 2007 and January 28, 2008 respectively to
 the specified employees.
 
 Since Stock options issued under ESOP Scheme I and II have been fully
 vested and exercised by the employees, the schemes are already over.
 ESOP Scheme III, IV and V are in force and their vesting is scheduled
 in due course of time.
 
 The particulars of Employees Stock Option Plan (ESOP) Schemes, as
 required by SERI (Employee Stock Option Scheme and Employee Stock
 Purchase Scheme) Guidelines, 1999, as amended, are appended herewith
 and forms part of this Report.
 
 Since, substantial portion of earlier 10,00,000 options approved by
 members under Employee Stock Option Plan V (ESOP 2005) has been
 exhausted, it is proposed to seek your approval at the forthcoming
 Annual General Meeting, for grant of further 10,00,000 Employee Stock
 Options (ESOPs) to the employees of the Company and its subsidiaries
 under Employee Stock Option Scheme 2008 (ESOP 2008).
 
 Fixed Deposits
 
 During the year under review, the Company has not accepted any deposit
 under Section 58A of the Companies Act, 1956, read with Companies
 (Acceptance of Deposits) Rules, 1975. No amount of principal or
 interest was outstanding as on the Balance Sheet date.
 
 Subsidiary Companies
 
 As required under section 212 of the Companies Act, 1956, the Audited
 Balance Sheet and Profit & Loss Account along with respective Reports
 of the Board of Directors and Auditors thereon of the following
 subsidiary companies for the year ended March 31, 2008 are attached:
 
 a) Crossword Bookstores Ltd.
 
 b) Upasna Trading Ltd.
 
 c) Shoppers Stop.Com (India) Ltd.
 
 d) Shoppers Stop Services (India) Ltd.
 
 e) Gateway Multichannel Retail (India) Ltd.
 
 In compliance with Clause 32 of the Listing Agreement, and Accounting
 Standard AS 21, prescribed by the Institute of Chartered Accountants of
 India, audited consolidated financial statements forms part of this
 Annual Report.
 
 Human Resources
 
 As an organization we are committed towards achieving exponential
 growth in our quest to become the leader in the department store
 category, delivering higher levels of sensory experience touching the
 hearts and minds of our consumers, stakeholders and employees.
 
 In continuation of our belief that people are the primary source of
 sustainable competitive advantage, your Company has worked continuously
 towards ensuring that its people practices are in line with being an
 employer of choice.
 
 As on date of the Balance Sheet, the Company had a total of 3,754
 Customer Care Associates.
 
 Auditors
 
 Your Companys Statutory Auditors, Deloitte Haskins & Sells, Chartered
 Accountants, Mumbai, retire at the conclusion of the forthcoming Annual
 General Meeting. Deloitte Haskins & Sells have sought the
 re-appointment and have confirmed that their re-appointment, if made,
 shall be within the limits laid down under Section 224(1 B) of the
 Companies Act, 1956.
 
 The Audit Committee and the Board of Directors recommends the
 re-appointment of Deloitte Haskins & Sells, Chartered Accountants, as
 the Statutory Auditors of the Company.
 
 Directors
 
 In accordance with the provision of the Companies Act, 1956 and
 Articles of Association of the Company, Mr. B.S. Nagesh and Mr.
 Shahzaad Dalai, Directors of the Company, retire by rotation at the
 ensuing Annual General Meeting and being eligible, offer themselves for
 re-appointment.
 
 Mr. Govind Shrikhande, who has been appointed as an Executive Director
 and CEO of the Company for a period of 3 years w.e.f. July 29, 2006; is
 proposed to be re-appointed as an Executive Director and CEO of the
 Company for further period of three years w.e.f. July 29, 2009; subject
 to necessary approval of the Shareholders of the Company.
 
 Mr. Nirvik Singh, was appointed as an Additional Director on the Board
 of your Company with effect from 16 June, 2008. The Company has
 received a notice in writing from a member of the Company under Section
 257 of the Companies Act, 1956 signifying his intention to propose the
 appointment of Mr. Nirvik Singh, as a Director of the Company.
 
 A brief resume, expertise and details of other directorship and
 committee membership thereof of these directors are given in the
 explanatory statement annexed to the Notice convening the Eleventh
 Annual General Meeting.
 
 Corporate Governance
 
 The Company has been pro-active in following the principles and
 practices of good Corporate Governance. The Company has taken adequate
 steps to ensure that the conditions of Corporate Governance as
 stipulated in clause 49 of the listing agreement with the Stock
 Exchanges are complied with.
 
 A separate section on Corporate Governance and Auditors Certificate is
 annexed hereto and forms part of this Report.
 
 Compliance with the Code of Conduct
 
 The Company had evolved and adopted a Code of Conduct for its Board of
 Directors and its managerial personnels based on the principles of good
 corporate governance and best management practices. The declaration of
 compliance with the Code of Conduct has been received from all Board
 Members and the managerial personnels. The Code is available on the
 website of the Company.
 
 A certificate in this effect from Mr. Govind Shnkhande, Executive
 Director and Chief Executive Officer forms part of this Report.
 
 Conservation of Energy, Technology absorption and Foreign Exchange
 earnings & outgo
 
 The particulars regarding foreign exchange earnings and expenditure are
 annexed hereto and forms part of this report. The other particulars
 relating to conservation of energy and technology absorption stipulated
 in the Companies (Disclosure of Particulars in the Report of the Board
 of Directors) Rules, 1988 are not applicable to the Company.
 
 Particulars of Employees
 
 Information on particulars of employees remuneration as per Section
 217(2A) of the Companies Act, 1956, read with Companies (Particulars of
 Employees) Rules 1975 forms part of this report. However, as per
 provisions of Section 219(1)|b)(iv) of the Companies Act, 1956, the
 report and accounts are being sent to all shareholders of the Company,
 excluding the Statement of Particulars of Employees, which is available
 for inspection at the Registered office of the Company during working
 hours. Any shareholder interested in such particulars may inspect the
 same.
 
 Directors Responsibility Statement
 
 Pursuant to Section 217 (2AA) of the Companies Act, 1956, the Board of
 Directors confirm that:
 
 1.  In the preparation of Annual Accounts, the applicable accounting
 standards had been followed along with proper explanation relating to
 material departures;
 
 2.  they have selected such accounting policies and applied them
 consistently and made judgements 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 at March 31, 2008 and of the profit of the Company for
 the year ended on that date;
 
 3.  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 frauds and other irregularities;
 
 4.  they have prepared the annual accounts on a going concern basis.
 
 Auditors Report
 
 The Board has duly examined the Statutory Auditors report to accounts
 and the clarifications, wherever necessary, have been included in the
 Notes to Accounts, section of Annual Report.
 
 Acknowledgement
 
 Your Directors express their warm appreciation to all the employees of
 the Company for their diligence and contribution.
 
 Your Directors acknowledge with sincere gratitude the co-operation and
 assistance extended by customers, business partners, associates, banks
 & financial institutions, suppliers, solicitors, advisors and all well
 wishers for their continuous guidance and support.
 
 And to you our shareholders, we are deeply grateful for the confidence
 and faith that you have always placed in us.
 
                           For and or; behalf of the Board of Directors
 
 Mumbai,                                              Chandru L. Raheja
 16 June, 2008                                                 Chairman