Welspun India

The directors have pleasure in presenting their 23rd Annual Report on
 the Audited Financial Statement of the Company for FY 07-08.
 
                                                        (Rs.in Million)
                             FY 07-08   % age to   FY 06-07   % age to
 Particulars                              Total                 Total
                                          Income                Income
 
 Turnover                   12,409.44      98.05    9735.61      96.25
 Other Income                  246.66       1.95     379.07       3.75
 Total Income               12,656.10     100.00   10114.68     100.00
 Profit before Interest, 
 Depreciation and 
 Tax (PBIDT)                  1935.04      15.29    1953.60      19.31
 PROFIT BEFORE TAX (PBT)       414.52       3.28     824.79       8.15
 Less: Provision for taxation  151.86       1.20     303.76       3.00
 PROFIT /(LOSS) AFTER 
 TAX (PAT)                     262.66       2.08     521.03       5.15
 Add: Balance brought forward 
 from the previous Year      1,430.29         -     1100.08
 Less: Provision for 
 Deferred Taxation for 
 Earlier Years                   -            -       1.50
 Profit available for 
 appropriation               1,692.95         -     1619.61
 Less: Transfer to Capital
 Redemption Reserve             30.00         -      182.83
 Less: Transfer to Debenture 
 Redemption Reserve              -            -        6.49
 Add: Transfer from Debenture 
 Redemption Reserve             29.67
 Balance carried to 
 Next Year                    1692.62         -     1430.29
 Earnings Per share 
 (Basic & Diluted) (Rs.)         3.59         -        7.06
 
 During FY 07-08, the Company registered a growth of 27.46% in Turnover
 over FY 06-07, but due to tough international business scenario,
 particularly for textiles, the Profitability could not sustain the
 levels achieved in FY 06-07. Due to lower profitability and the need to
 conserve resources for operations, your directors do not recommend any
 dividend.
 
 Product wise Production, Sales and Capacity Utilisation were as under:
 
                                       Towel (MTPA)
                                 FY 07-08        FY 06-07
 
 Production                         29822          24552
 Sales                              29098          24394
 Capacity Utilisation (% age to     80.44          81.41
 Installed Capacity)
 
   Bed Sheets (Mtrs p.a.)        Cotton Yarn (MTPA)
 FY 07-08         FY 06-07     FY 07-08       FY 06-07
 
 28381              17470        24465          18675
 26724              16993         2471           3569
 79.50              48.94        86.46          71.27
 
 During FY 07-08, the Company, in line with its past track record,
 fetched increased business volume reflecting growing acceptability of
 its products across its markets. This was despite price pressure caused
 by weak greenback and unaffected supply pressure from other competing
 countries.
 
 To add to the woes, a failure of a chain store in the US to withstand
 to the temporary business slowdown compelled one time discounts / mark
 downs by the Company. This scenario let to a significant rise in
 selling and distributing cost. Besides, this higher spend on raw
 materials and other consumables failed to yield proportionately higher
 realization, leading to pressure on the bottom line. Your directors are
 confident that with the great hold on supplies and deeper reach in the
 markets, your company should be able to consolidate its business to
 bring profitability on track.
 
 Your Company continues to emphasize qualitative growth and believes
 that quality of its product has to be its strength in this complex
 market environment. Your Company is committed to bringing about
 positive change in each and every process and has a team fully focused
 on Research & Development. Particulars of activities relating thereto
 have been given in Annexure I hereto.
 
 Following esteem awards received during the year reiterate recognition
 of your company as a leading home textile player in the global arena:
 
 Dun and Bradstreet in association with ECGC (Export Credit Guarantee
 Corporation of India) awarded Indian Exporters Excellence Award and
 Emerging Exporter of the Year Award in Textile Segment at an event
 held in Mumbai.
 
 - J C Penny, US one of the largest retailers in the World awarded
 Supplier of the Year Award for Quality in home products at a summit
 held in Piano, Texas, US.
 
 - Indias largest media house Times of India and Jindal Steel Works
 (JSW) on 22nd April 2008, the Earth day awarded 1st runner-up in the
 Earth Care Awards for reduction in emission and mitigation of
 Greenhouse Gases.
 
 - The Cotton Textiles Export Promotion Council (TEXPROCIL) felicitated
 with 4 Gold Trophies in the Councils Annual Export Award function:
 
 ¦ Highest Global Exports
 
 ¦ Special Achievement - Madeups
 
 ¦ Madeups in Bed Linen / Bed sheets /Quilts
 
 ¦ Madeups in Terry Towels
 
 Since the last report, Ms. Renuka Ramnath, a nominee of the Western
 India Trustee and Executor Company Ltd. and Mr. Padmanabh Sinha, a
 nominee of Dunearn Investments (Mauritius) Pte. Ltd.  resigned as a
 director w.e.f. 9th August, 2007. Further, Mr. Arun Kumar resigned as a
 director w.e.f. 28th February, 2008. Mr. Arun Kumar was nominated as a
 director by IFCI Ltd., which has withdrawn his nomination. Your
 directors appreciate the services rendered by Ms. Renuka Ramnath, Mr.
 Padmanabh Sinha and Mr. Arun Kumar.
 
 Mr. Arun Todarwal has been appointed as a director of your Company as
 nominee of Dunearn Investments (Mauritius) Pte. Ltd. w.e.f. 9th August,
 2007 not being liable to retire by rotation. Your Directors welcome him
 on the Board.
 
 In the forthcoming Annual General Meeting, Mr. M. L. Mittal and Mr. D.
 B. Engineer are liable to retire by rotation and being eligible have
 offered themselves to be reappointed. Mr. M. L. Mittal is Executive
 Director (Finance) of your Company whereas Mr. Dadi B. Engineer is an
 independent non-executive director.
 
 Further details about these directors are given in the Notice of the
 ensuing Annual General Meeting being sent to the shareholders along
 with Annual Report. Board recommends their reappointment.
 
 M/s. Price Waterhouse & Co., Chartered Accountants retire at the
 conclusion of the ensuing Annual General Meeting and being eligible
 have expressed their willingness for their re-appointment. A written
 certificate from the proposed Auditors has been obtained by the Company
 to the effect that the re- appointment, if made, would be in accordance
 with the limits specified under Section 224(1B) of the CompaniesAct,
 1956.
 
 Information in accordance with the provisions of Section 217 (1) (e) of
 the Companies Act, 1956, read with Companies (Disclosure of Particulars
 in the Report of Board of Directors) Rules, 1988, regarding
 conservation of energy, technology absorption and foreign exchange
 earnings and outgo is given in the Annexure I forming part of this
 report.
 
 Ministry of Company Affairs, Government of India, vide its letter dated
 28th May, 2008 has directed the Company that provisions of section
 212(1) of the Companies Act, 1956 in respect of Balance Sheet, etc.  of
 the following subsidiary companies viz. (1) Welspun USA Inc. (2)
 Welspun Holdings Pvt. Ltd. (3) Welspun Home Textiles UK Ltd. (4) CHT
 Holdings Ltd. (5) Christy Home Textiles Ltd. (6) Christy UK Ltd.  (7) E
 R Kingsley (Textiles) Ltd. (8) Christy 2004 Ltd. (9) Flyspark Limited
 (10) Christy Europe GmbH (11) Christy US LLC (12) Welspun AG (13)
 Welspun Mexico SAde CV (14) SOREMA-Tapetes E Cortinas DE Banho, S.A.
 and (15) Besa Developers and Infrastructure Private Limited, shall not
 be applicable. Hence the same are not attached herewith. However, a
 statement giving certain information as required vide the aforesaid
 letter is placed along with the Consolidated Accounts.
 
 The Company shall provide a copy of Annual Report and other documents
 of its subsidiary companies as required u/s. 212 of the Companies Act
 to the shareholders upon their request, free of cost.
 
 IX.  FIXED DEPOSIT
 
 During FY 07-08, your Company has not accepted any fixed deposit within
 the meaning of Section 58-A of the Companies Act, 1956 and the Rules
 made thereunder.
 
 X.  PERSONNEL AND HUMAN CAPITAL
 
 Human capital is the most coveted resource in todays competitive
 environment. Organizations that are able to attract, develop and retain
 human capital will always have an edge over their competitors. Your
 Company recognizes this fact and carried out various initiatives on all
 these fronts. Some of these are:
 
 - Organization Design, Business Process Mapping and Restructuring along
 with Hay Group - the international Human Resource experts
 
 - More than 30,000 man hours of training and development activities
 were carried out
 
 - Leadership development initiatives carried out through Leadership
 Management Institute
 
 - Improving managerial talent by providing them the opportunity to
 upgrade their skills through AIMA
 
 - Inducting leadership talent across all locations
 
 No of employees engaged by the Company as at 31st March, 2008 were
 11,546.
 
 Your Company is also in the process of introducing world class
 automation across all HR areas. This will help your Company to achieve
 competitive advantage through use of technology.
 
 XI.  EMPLOYEE STOCK OPTION SCHEME:
 
 The particulars required to be disclosed pursuant to Clause 12 of SEBI
 (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
 Guidelines, 1999 are as under:
 
 During FY 07-08, no new stock options were granted. Your Company had
 granted 20,58,000 stock options on 17th May, 2006 (each option carrying
 entitlement for one equity share of the face value of Rs. 10/- each) to
 a whole-time director and employees including an employee of a
 subsidiary company at an exercise price of Rs. 110.80 per share i.e.
 the closing market price of the Companys equity share at the time of
 grant. The stock option can be exercised during a period of 3 years
 from the date of vesting. So far 40% of the outstanding options have
 been vested. The dates of vesting of remaining options are 17.05.09
 (30%) and 17.05.10 (30%). The exercise price was determined as the
 latest available closing market price of the companys equity shares
 prior to the date of grant.
 
 The Company has adopted intrinsic value method for the valuation and
 accounting of the aforesaid stock options as per SEBI guidelines.
 Since the grants were made at an exercise price equal to the closing
 market price at the time of grant, no amount was required to be
 accounted as employee compensation cost. The fair value of the options
 as per the Black Scholes model comes to Rs. 63.39 per option. Had the
 company valued and accounted the aforesaid options as per the Black
 Scholes model, the net profit for the year would have been lower by
 Rs. 20.22 mn and the Basic and Diluted earning per share (with face
 value of Rs. 10/- each) would have been Rs. 3.31 instead of Rs. 3.59
 per share.
 
 The Black Scholes model captures all the variables with their
 respective appropriateness which influences the fair value of stock
 options. The significant assumptions to estimate the fair value of
 options as per Black Scholes model are:
 
 1.  Risk-free interest rate : 7.06%
 
 2.  Expected life of the option : 4.2 years
 
 3.  Expected volatility : 63.71%
 
 4.  Expected dividend yield : 0.00%
 
 During FY 07-08, 597,600 options (being 40% of the options granted but
 not lapsed) granted have been vested. No employee or Director has been
 granted options in excess of 1% of the issued equity share capital of
 the Company. None of the grantees have been granted options of more
 than 5% of the total options granted during the year.
 
 Mr. M. L. Mittal, Executive Director (Finance), being a senior
 management personnel has been granted 90,000 stock options.
 
 The other employees have been granted 14,04,000 options. The details of
 options granted to other employees are:
 
 Total number of employees : 46
 
 Max. number of options granted : 14,04,000
 
 Avg. number of options granted : 30,522
 
 Cumulative disclosure
 
 The particulars with regard to the stock options as on 31st March, 2008
 as required to be disclosed under the SEBIs guidelines are as follows:
 
 Cumulative position as on 31st March, 2008
 
 Nature of disclosure
 
 a.  Options granted
 
 b.  The pricing formula
 
 c.  Options vested
 
 d.  Options exercised
 
 e.  The total number of shares arising as a result of exercise
     of Options.
 
 f.  Options lapsed /surrendered
 
 g.  Variation of terms of Option
 
 h.  Money realized by exercise of Options
 
 i.  Total number of Options in force
 
 j. (a) Details of options granted to / exercised by the
        Whole-time Directors
     1. Mr. M.L. Mittal
    (b) Any other employee who received a grant in any one
        year of option amounting to 5% or more of options
        granted during that year.
 
 k.  Employees who were granted options, during any one
     year, equal to or exceeding 1% of the issued capital of
     the Company at the time of grant
 
 l.  Diluted Earnings Per Share (EPS) of Option calculated in
     accordance with Accounting Standard AS-20.
 
 m.  Weighted average exercise price of options
     Weighted average fair value of options.   
 
 Particulars
 
 20,58,000
 
 The exercise price is Rs. 110.80 per
 equity share i.e. the latest available
 closing market price of share prior to the
 date of grant i.e. 17th May, 2006.
 
 597,600
 
 NIL
 
 Total number of shares arising as a result
 of exercise of options shall be 14,94,000
 of Rs. 10/- each.
 
 5,64,000
 
 -
 
 NIL
 
 14,94,000
 
 No. of Options    No. of Options
 granted           exercised
 
 90,000            NIL
 NIL               NIL
 
 NIL
 
 Rs. 3.59
 
 NIL
 
 Rs.63.3
 
 Particulars of Employees:
 
 As required by the provisions of Section 217(2A) of the Companies Act,
 1956 read with the Companies (Particulars of Employees) Rules, 1975 as
 amended, the names and other particulars of the employees are set out
 in the Annexure to the Directors Report. However, as per the
 provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the
 Report and Accounts are being sent to all the shareholders of the
 Company excluding the aforesaid information. Any shareholder interested
 in obtaining such particulars may write to the Company Secretary at the
 Registered Office of the Company.
 
 XII.  DIRECTORS RESPONSIBILITY STATEMENT
 
 Pursuant to the requirement under section 217(2AA) of the Companies
 Act, 1956, with respect to Directors Responsibility Statement, it is
 hereby confirmed:
 
 i) That in the preparation of the accounts for the financial year ended
 31st March, 2008, the applicable accounting standards have been
 followed along with proper explanation relating to material departures;
 
 ii) That the Directors have selected such accounting policies and
 applied them consistently and made judgements and estimates that were
 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 the year under review;
 
 iii) That the Directors 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) That the Directors have prepared the accounts for the financial
 year ended 31st March, 2008 on a going concern basis.
 
 XIII. CORPORATE GOVERNANCE
 
 Your Company believes that Corporate Governance is a voluntary code of
 self-discipline. Your Company continuously endeavors to follow healthy
 Corporate Governance practices to nurture interest of all stakeholders
 in the Company.
 
 A separate report on Corporate Governance is annexed hereto as a part
 of this report. A certificate from a practicing company secretary
 regarding compliance of conditions of Corporate Governance as
 prescribed under Clause 49 of the Listing Agreement is attached to this
 report. Management Discussion and Analysis Report is separately given
 in the Annual Report.
 
 XIV.  ACKNOWLEDGEMENT
 
 Your directors express deep sense of appreciation for the assistance
 and co-operation received from the Financial Institutions, Banks,
 Government Authorities, creditors and Shareholders and for the devoted
 services rendered, by the Executives, Staff and Workers of the Company.
 
                                      For and on behalf of the Board
 
 Mumbai                    B. K. GOENKA                R. R. MANDAWEWALA
 July 28, 2008    Vice Chairman & Managing Director     Joint Managing 
                                                            Director