Voltas

The Directors have pleasure in presenting their Fifty-fourth Annual
 Report and the Accounts for the year ended 31st March, 2008.
 
 FINANCIAL RESULTS
 
                                            2007-2008         2006-2007
                                         Rs. in Lakhs      Rs. in Lakhs
 
 2.    The Proft for the year after 
 meeting all expenses but before
 financial items, depreciation and 
 exceptional items                             28253             13963
 
 Adjusting from the above:
 
 Financial items                                (869)            (2781)
 
 Depreciation                                   1356              1232
 
 Proft before exceptional items                27766             15512
 
 Exceptional Items                              2987              6771
 
 Proft before tax                              30753             22283
 
 Deducting provision for taxation including 
 deferred tax                                   9917              3675
 
 Proft after tax                               20836             18608
 
 Adding thereto:
 
 Balance brought forward from the 
 previous year                                  4000              2485
 
 Amount transferred from Foreign Projects 
 Reserve                                         250               344
 
 Proft available for appropriations            25086             21437
 
 Appropriations:
 
 General Reserve                               14000             13566
 
 Proposed Dividend                              4467              3309
 
 Tax on Dividend                                 759               562
 
 Leaving a balance to be carried forward        5860              4000
 
 DIVIDEND
 
 3.  The Companys dividend policy is based on the need to balance the
 twin objectives of appropriately rewarding the shareholders with cash
 dividend and of conserving resources to meet the Company’s needs. The
 Directors recommend a dividend of 135% for the year 2007-08 (2006-07 :
 100%).
 
 OPERATIONS
 
 4.  The turnover of the Company has increased by 26% over the previous
 year to Rs. 3086 crores, mainly contributed by Electro-mechanical
 Projects and Unitary Products Business.
 
 5.  There has been a significant improvement in the profitability of
 the Company during the year, with an increase of 102% over the previous
 year in ProfIt before Financial Items and Depreciation (EBITDA) to Rs.
 283 crores against Rs. 140 crores for the year 2006-07. EBITDA margins
 which were at 5.7% in the previous year, rose to 9.2%.
 
 6.  The ProfIt before Exceptional items and Taxation (PBT) for the year
 2007-08 stood at Rs. 278 crores. The PBT for 2006-07 was Rs. 155 crores
 which included a one-time equity dividend of Rs.12 crores from Simto
 Investment Company Limited, a subsidiary company, arising from the
 large profIt it earned from sale of one of its investments and interest
 income of Rs.4 crores on tax refund. If these items are excluded, the
 PBT of 2006-07 works out to Rs. 139 crores. The growth in PBT of
 2007-08 in thus 100%.
 
 7.  The Company achieved an operating EPS of Rs. 5.74 per share of Re.1
 face value against Rs. 3.13 per share, in the previous year, an
 increase of 83%.
 
 8.  The Engineering businesses witnessed slow down during the year
 under review. Rupee appreciation against US Dollar and higher interest
 rates impacted the capital investments in Textiles and Auto/Auto
 ancillary sectors which adversely afected the Textile Machinery and
 Machine Tool businesses. Substantial growth in the Materials Handling
 Business, and in particular, in Forklift market attracted a number of
 international players in the high-end and low-end sectors resulting in
 increased competition and an impact on the profitability of this
 business. However, Mining and Construction business continued to remain
 buoyant. Electro- mechanical Projects Business, performed well, both in
 the international and domestic markets and contributed to much higher
 turnover and profitability. Even more encouraging was the order booking
 of Rs. 3736 crores and the carry forward order book position as on 31st
 March, 2008 was Rs. 4300 crores for this segment, an increase of 79% as
 compared to Rs.2400 crores per end 31st March, 2007. This augurs well
 for the future.
 
 9.  Most heartening was the performance of Unitary Products Business
 Group. The closure of Hyderabad facility, introduction of star rated
 energy efcient products, commencement of a factory for Commercial
 Coolers in the Excise free zone in Pantnagar, rationalization of
 product pricing and Rupee appreciation, all combined to give a
 substantial jump in EBIT (Earnings before interest and tax) margins of
 this business to 6.58% from 1.82% achieved in the previous year.  The
 entire marketing team had devised a successful strategy for achieving
 these creditable results, while increasing the market share to 16%. The
 turnover of the business improved by 37% and volume growth exceeded
 30%.
 
 FINANCE
 
 10.  The Company’s liquidity position remained comfortable during the
 year. Investments in Mutual Funds stood at Rs. 221 crores per year-end.
 In addition, cash and bank balances also stood at a comfortable level
 of Rs. 86 crores. The amounts lying with Non-scheduled banks
 aggregating Rs.188 crores represent balances held overseas against
 specifc projects which are not available for other purposes.
 
 11.  In view of the comfortable liquidity position, the Company was not
 impacted by the volatility of interest rates in the economy and
 tightening of liquidity.
 
 12.  Net working capital requirements of the Company went up during the
 year 2007-08 in line with the expansion in various businesses. However,
 excluding cash and bank balances, the net working capital has actually
 dropped from Rs. 26 crores to a negative Rs. 84 crores which indicates
 prudent resource management across the businesses.  Improved IT systems
 have helped control the working capital significantly.
 
 13.  Despite Rupee appreciation against US Dollar, the Company’s net
 foreign currency exposure was minimal and was therefore not much
 impacted by the fuctuations in the exchange rates. The Company has no
 exposure to derivatives.
 
 TATA BUSINESS EXCELLENCE MODEL (TBEM)
 
 14.  The Company’s business excellence journey continues satisfactorily
 with key focus on total employee involvement.  In line with this,
 several new initiatives such as 5S and Kaizen have been rolled out.
 Going forward, the Company proposes to undertake comprehensive process
 improvements as well as several other initiatives which include Six
 Sigma, innovation and knowledge management. There will also be emphasis
 on generating a more robust process for the employee engagement across
 the organization.
 
 15.  The Tata Business Excellence Model (TBEM) provides a platform on
 which the Company continued to strengthen its endeavours towards
 sustainable improvement in business excellence. The Strategic Planning
 Process and Balanced Scorecard (BSC) mechanisms proved their value in
 formulating strategic objectives and goals and ensuring alignment
 across all the business units of the Company. There has been good
 progress in TBEM deployment, as indicated by the outcome of the
 internal/external assessments as a part of the TBEM assessment process,
 in which certain Business Units of the Company participated. The
 feedback from these assessments played a vital role in providing useful
 inputs to the Business Units on areas of improvement. The Company has
 an adequate number of trained internal assessors to carry out the
 assessment process efectively.
 
 IT INITIATIVES
 
 16.  The strategic outsourcing of the IT function to a specialized
 consultant has yielded good results in operational areas, with an
 improvement in Service Level Agreement (SLA) parameters.
 
 17.  New IT projects of strategic importance were implemented during
 the year under review. These include CRM for Unitary Products Business,
 Business Intelligence for service operations of Textile Machinery
 Business, SAP/ HR & Payroll, project systems for Electro-mechanical and
 Refrigeration Business and BSC for Corporate. These will be
 operationalized during the current year.
 
 18.  Hosting of a new Data Centre, with state-of-the-art hardware to
 cater to the increased number of SAP users, was carried out
 successfully in the premises of a Group Company in Mumbai. This will be
 of value in yielding better uptime and processing speed for the
 ever-increasing demands of businesses.
 
 COMMUNITY DEVELOPMENT AND ENVIRONMENTAL PROTECTION
 
 19.  There was a significant degree of enhancement in volunteering
 activity among Voltas employees, serving numerous identifed causes by
 donating their time and talents. For the Akanksha mentoring programme,
 now in its 7th year, several consultative meetings were held with a
 view to improving the mentoring process and outcomes. A Leadership
 Programme was conducted for the mentally and physically challenged
 children of the ANZA Special School, which was highly appreciated by
 the parents. The children of Our Lady’s Home, an orphanage for boys,
 were given special coaching classes in mathematics, ensuring good
 results in the SSC examinations. At Ma Niketan, an orphanage for girls,
 Voltas continued its eforts in cultivating 1.5 acres of land to grow
 vegetables towards self-sufciency at home. Voltas spearheaded the
 training of key volunteers for Tata Council for Community Initiatives
 (TCCI), Mumbai Region.
 
 20.  In its Core Competency Project, which Voltas partners with Joseph
 Cardijn Technical School in Mumbai to impart hands-on technical
 education to the underprivileged and those not academically inclined,
 the 12th batch of successful students graduated. Voltas also conducted
 a special batch in 2007 for the youth of Assam in which 10 students
 completed the course successfully and were awarded certifcates. Soft
 skills training was introduced in personality development, smart
 thinking and customer care. An appreciation letter was received from
 the Government of Assam.
 
 21.  The Voltas Organisation of Women (VOW), exclusively run by lady
 employees and the wives of male employees, continued to reach out to
 the underprivileged by way of educational and medical relief. Two new
 projects were taken up, the Brihaspati Academy at Pantnagar and
 vocational training at Regina Pacis in Mumbai, with focus on the
 upliftment of tribal women.
 
 22.  The Company also extended financial support in the form of
 donations and contributions to institutions, including the TCCI, VOW,
 Leslie Sawhny Endowment, Cancer Patients Aid Association, Yusuf
 Meherally Centre, Our Lady’s Home for Boys and Bombay Environmental
 Action Group.
 
 GLOBAL COMPACT
 
 23.  The Company had earlier signed the Global Compact with United
 Nations. The Compact lays down ten key principles based on universally
 agreed and internationally applicable values and goals in the areas of
 Human Rights, Labour Standards and Environment. Workshops were
 conducted to enhance the awareness regarding Global Compact among the
 employees.
 
 CORPORATE SUSTAINABILITY REPORT
 
 24.  In the year under review, the Company embarked upon a new
 initiative to further reinforce its commitment to “improving the
 quality of life of communities we serve”, by adopting the GRI framework
 for Corporate Sustainability Reporting. While the Company was already
 working towards sustainability by instituting systems for balancing the
 needs of all stakeholders as enshrined in the Tata Business Excellence
 Model, the GRI framework brings in a sharper focus on the implications
 of the emergent global debate on sustainable development for Voltas’
 businesses. The Company has extended the framework of Sustainability
 Report to all its Divisions and Establishments.
 
 STATEMENT OF EMPLOYEES’ PARTICULARS
 
 25.  As required by Section 217(2A) of the Companies Act, 1956 read
 with the Companies (Particulars of Employees) Rules, 1975, as amended,
 a statement of information relating to employees has been given by way
 of an Annexure to this Report.
 
 APPOINTMENT OF COST AUDITOR
 
 26.  As per the directions given by the Central Government, the Company
 has, based on an application made, received the Government’s approval
 for re-appointment of M/s. Sagar & Associates, a firm of Cost
 Accountants as the Cost Auditors of the Company for the year ending
 31st March, 2009 in respect of refrigerator products manufactured by
 the Company.
 
 SUBSIDIARIES AND JOINT VENTURES
 
 27.  Pursuant to the Accounting Standard - 21 issued by the Institute
 of Chartered Accountants of India, Consolidated Financial Statements
 presented by the Company include the financial information of its
 subsidiary companies, namely Metrovol FZE, VIL Overseas Enterprises
 B.V. (VOEBV), Voice Antilles N.V. (VANV), Weathermaker Limited (WML),
 Simto Investment Company Limited (Simto) and Auto Aircon (India)
 Limited. In terms of approval granted by the Central Government under
 Section 212(8) of the Companies Act, 1956, a copy of the Balance Sheet,
 Profit and Loss Account, Directors’ Report, Auditors’ Report and other
 documents of the aforesaid subsidiary companies for the year ended
 
 31st March, 2008 (31st December, 2007 in case of WML), have not been
 attached to the Balance Sheet of the Company.  However, the Annual
 Accounts of these subsidiary companies are open for inspection by any
 member/investor and the Company will make available these
 documents/details upon request by any member of the Company or its
 subsidiaries interested in obtaining the same.
 
 28.  Metrovol and VOEBV had reported higher turnover/ income as
 compared to the previous year and Metrovol, VOEBV and VANV (foreign
 subsidiaries) have also paid/ declared dividends.
 
 29.  Universal Comfort Products Private Limited (UCPL), a joint venture
 company between Voltas and Fedders is engaged in the business of
 manufacturing air conditioners and has its plants at Dadra and
 Pantnagar in Uttarakhand.  The existing paid-up capital of UCPL of Rs.
 2764.20 lakhs is held in equal proportion of Rs. 1382.10 lakhs each, by
 Voltas and Fedders. Fedders have agreed to divest and ofered their
 entire shareholding in UCPL to Voltas Limited for a consideration upto
 Rs. 750 lakhs (including refund of share application money), subject to
 requisite approvals/clearances in that behalf. Upon transfer of shares,
 UCPL would cease to be a joint venture company and become a wholly
 owned subsidiary of the Company. In view of substantial volume growth
 in Unitary Products business and the cost increases in imported
 products, UCPL is expected to be a significant source of procurement
 for the Company.
 
 30.  Saudi Ensas Company for Engineering Services WLL (Saudi Ensas), a
 joint venture company incorporated in Jeddah, Kingdom of Saudi Arabia
 (KSA), has a paid-up capital of SR 2.600 million. The Company along
 with its subsidiary holds 49% of the capital and the balance 51% is
 held by the local partner. Saudi Ensas is engaged in the execution and
 operations/maintenance of electro-mechanical installations in KSA and
 has for the past few years incurred losses and its liabilities are in
 excess of its assets. As part of rehabilitation/ financial
 restructuring, the local partner has agreed to transfer its entire 51%
 shareholding in Saudi Ensas to Voltas for ‘Nil’ consideration. The
 transfer of shares is subject to statutory approvals and legal process
 in KSA and India. Upon completion of the legal process, Saudi Ensas
 would cease to be a joint venture company and become a wholly owned
 subsidiary of the Company. KSA provides good opportunity to the
 Company’s international Electro-mechanical business and with full
 ownership of Saudi Enas, the Company would be able to leverage its
 market reputation to gain a reasonable share of these opportunities in
 the coming years.
 
 CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
 EARNINGS AND OUTGO
 
 31.  Information pursuant to 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, relating to conservation of energy
 and technology absorption is given by way of an Annexure to this
 Report.  As regards the information in respect of foreign exchange
 earnings and outgo, the same has been given in the notes forming part
 of the accounts for the year ended 31st March, 2008.
 
 DIRECTORS’ RESPONSIBILITY STATEMENT
 
 32.  Pursuant to Section 217(2AA) of the Companies Act, 1956, the
 Directors, based on the representations received from the Operating
 Management, confirm that:
 
 (a) in the preparation of the annual accounts, the applicable
 accounting standards have been followed and that there are no material
 departures;
 
 (b) they have, in the selection of the accounting policies, consulted
 the Statutory Auditors and have applied their recommendations
 consistently and made judgements and estimates that are reasonable and
 prudent so as to give a true and fair view of the state of afairs of
 the Company at the end of the financial year and of the profit of the
 Company for that period;
 
 (c) they have taken proper and sufcient care to the best of their
 knowledge and ability, 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;
 
 (d) they have prepared the annual accounts on a going concern basis.
 
 CORPORATE GOVERNANCE
 
 33.  Pursuant to Clause 49 of the Listing Agreement with the Stock
 Exchanges, Management Discussion and Analysis, Corporate Governance
 Report and Auditors’ Certifcate regarding compliance of conditions of
 Corporate Governance are made a part of the Annual Report. A
 declaration signed by the Managing Director in regard to compliance
 with the Code of Conduct by the Board Members and Senior Management
 personnel forms part of the Annual Report.
 
 DIRECTORATE
 
 34.  In accordance with the provisions of the Companies Act, 1956 and
 the Company’s Articles of Association, Mr. Nasser Munjee, Mr. Ravi Kant
 and Mr. N. D. Khurody retire by rotation and being eligible, offer
 themselves for re-election.
 
 AUDITORS
 
 35.  At the Annual General Meeting, members will be required to appoint
 Auditors for the current year. Messrs.  Deloitte Haskins & Sells, the
 present Auditors of the Company have, pursuant to Section 224(1B) of
 the Companies Act, 1956, furnished a certificate regarding their
 eligibility for re-appointment. The approval of the members is also
 sought for the appointment of Branch Auditors of the Company in
 consultation with the Company’s Auditors. In this connection, the
 attention of the members is invited to Item No.6 of the Notice of the
 Annual General Meeting and the relevant Explanatory Statement.
 
 GENERAL
 
 36.  The Notes forming part of the Accounts are self- explanatory or to
 the extent necessary, have been dealt with in the preceding paragraphs
 of the Report.
 
 
                             On behalf of the Board of Directors
 
                                                  ISHAAT HUSSAIN
 
                                                        Chairman
 
 Mumbai, 15th May, 2008