Home  »  Company  »  Castrol India  »  Quotes  »  Directors Report
Enter the first few characters of Company and click 'Go'

Directors Report of Castrol India Ltd.

Dec 31, 2016

To the Members,

Your Company’s Directors are pleased to present the 39th Annual Report of the Company, along with Audited Financial Statement for the year ended 31 December 2016.

1. FINANCIAL RESULTS

Particulars

For the year ended 31 December 2016 (Rupees in Crores)

For the year ended 31 December 2015 (Rupees in Crores)

Profit before Depreciation, Exceptional Items & Tax

1,038.89

947.46

Interest Income (Net of Finance Cost)

51.77

42.46

Profit before Depreciation & Tax

1,090.66

989.92

Depreciation & Amortisation

44.96

38.97

Tax Expenses

Current Tax

388.04

323.80

Deferred Tax

(17.25)

11.89

Profit after Tax

674.91

615.26

Adding thereto:

Balance as per last Balance Sheet brought forward

166.33

87.50

Profit available for Appropriation

841.24

702.76

The Appropriations are:

Dividend

Interim

222.55

197.82

Special

98.91

—

Final

222.55

247.28

Tax on Dividend

Interim

45.31

40.27

Special

20.14

—

Final

45.31

50.34

Tax on Final Dividend - 2014

—

0.72

Net surplus in the Statement of Profit & Loss

186.47

166.33

841.24

702.76

2. PERFORMANCE

Net revenues from operations of your Company have increased by about 2% over the previous year to Rs. 3,370 Crores, mainly due to 4.4% rise in volumes driven by growth in Power Brands and personal mobility segment. Costs of materials were lower by about 4% over the previous year at Rs. 1,532 Crores mainly due to drop in input costs. operating and other expenses increased by Rs. 31.51 Crores as compared to the previous year. Profit Before Tax increased by about 10% over previous year to Rs. 1,046 Crores. Tax rate for the current year has remained at nearly the same level as that of the previous year. Profit After Tax increased by 10% over the previous year to Rs. 675 Crores.

Your Company’s performance has been discussed in detail in ‘Management Discussion and Analysis Report’.

Your Company does not have any subsidiary or associate or joint venture company.

3. DIVIDEND

Your Directors are pleased to recommend a final dividend of Rs. 4.50/- per equity share (2015: Rs. 5/per share) for the Financial Year ended 31 December 2016. This is in addition to the interim dividend of Rs. 4.50/- per share (2015: interim dividend Rs. 4/- per share) paid on 18 August 2016 and a special dividend of Rs. 2/- per share (2015: Nil per share) to be paid on or before 23 March 2017.

The final dividend, subject to approval of Members, will be paid within statutory period, to those Members whose names appear in the Register of Members, as on the date of book closure. The total dividend for the Financial Year ended 31 December

2016, including the proposed final dividend, amounts to Rs. 11/- per equity share (220% on paid-up equity share capital) (2015: Rs. 9/per share) and will absorb Rs. 544.01 Crores (2015: Rs. 445.10 Crores).

The dividend payout for the year under review is in accordance with your Company’s policy to pay sustainable dividend linked to long-term growth objectives of your Company to be met by internal cash accruals.

The dividend distribution policy is given as Annexure-I to this Report. The same is also available on the website of the Company at http://www.castrol.com/en_in/india/financials/ other-financial-documents-policies.html

4. TRANSFER TO RESERVE

Your Directors do not propose to transfer any amount to the General Reserves for the Financial Year ended 31 December 2016.

5. INDIAN ACCOUNTING STANDARDS (IND AS) -IFRS CONVERGED STANDARDS

Your Company will adopt Ind-AS with effect from 1 January 2017 pursuant to Ministry of Corporate Affairs’ notification dated 16 February

2015 notifying the Companies (Indian Accounting Standard) Rules, 2015.

6. SUPPLY CHAIN

Your Company’s Supply Chain function remained an important enabler for the organization. The five strategic pillars of Supply Chain continued to be:

(1) Contemporary, differentiated and competitive customer service;

(2) Premium quality - a source of enhanced customer experience;

(3) Supply Chain capabilities - assets and resources to support growth;

(4) Consistent processes;

(5) Generating value for business through efficiency initiatives.

Health, Safety, Security and Environment, along with Ethics and Values formed the core of operations.

The safety agenda continued to be driven strongly through plant safety and road safety initiatives. The Family Connect programme for heavy vehicle drivers continued to be an important forum for engagement with the drivers across multiple locations. Within plants, as part of the safe control and monitoring mechanism, Safety observations continued to be recorded and proactively addressed. The Control of Work guidelines and operating Management System processes across the plants and other Supply Chain functions continued to be strengthened.

Customer service and product availability were key priorities for Supply Chain. They were driven by proactively anticipating demand changes and variability, as well as continuous improvement in order fulfilment processes. The improvements in customer service were fully supported by plant production reliability as well as raw materials and packaging suppliers.

The team continued to focus on quality by using stringent input measures and processes - helping drive a premium image in the market. Strong inspection programmes at supplier and process levels continued through the year. As a result of continuous improvement in customer complaints, the quality complaint closure rate for the period was increased to 92.6%.

In order to support growth operations, your Company continued to invest in projects and initiatives to make the operations robust for future. The total capital investment across multiple Supply Chain projects for 2016 was about Rs. 22.5 Crores.

Throughout the year, there was strong focus on generating value through standardization and simplification. Efficient sourcing and transportation initiatives, focusing on cost optimization, were led successfully, helping deliver additional value for business.

7. DIRECTORS AND KEY MANAGERIAL PERSONNEL

At the 38th Annual General Meeting held on 5 May 2016, Members approved appointment of Mr. Omer Dormen as the Managing Director of the Company.

Mr. Ralph Hewins ceased to be a Nominee Director of the Company with effect from 31 August 2016 as your Company had received a letter from Castrol Limited UK intimating the withdrawal of his nomination, consequent to his resignation from Castrol Limited UK. Your Board places on record its appreciation for outstanding contributions made by Mr. Ralph Hewins during his tenure as the Nominee Director of the Company.

Mr. Sandeep Deshmukh resigned as Company Secretary with effect from 14 March 2016. Your Board places on record its appreciation for contributions made by Mr. Sandeep Deshmukh during his tenure as the Company Secretary of your Company.

Your Board at its meeting held on 16 December 2016 appointed Ms. Chandana Dhar, as Company Secretary and Compliance officer of the Company effective from 12 January 2017 on the recommendation made by Nomination and Remuneration Committee.

In accordance with the provisions of the Companies Act, 2013 (the "Act”) and the Articles of Association of the Company, Mr. omer Dormen and Ms. Rashmi Joshi, Directors of the Company, retire by rotation at the ensuing Annual General Meeting and being eligible have offered themselves for re-appointment.

A brief resume of each of the Directors proposed to be re-appointed at the ensuing Annual General Meeting, and the details of the Directorships held by them in other companies are given in the Corporate Governance section of this Annual Report. Appropriate resolutions for the re-appointment of the aforesaid Directors are being moved at the ensuing Annual General Meeting, which the Board recommends for your approval.

The Independent Directors of your Company have given the certificate of independence to your Company stating that they meet the criteria of independence as mentioned under Section 149 (6) of the Act.

There is no change in the composition of the Board of Directors and Key Managerial Personnel during the year under review, except as stated above.

8. BOARD EVALUATION

The Nomination and Remuneration Committee of your Company approved Board Performance Evaluation Policy (the "Policy”) during the year, which was adopted by the Board of Directors. The Policy provides for evaluation of the Board, the Committees of the Board and individual Directors, including the Chairman of the Board. The Policy provides that evaluation of the performance of the Board as a whole and the Board Committees and individual Directors shall be carried out annually.

Your Company has appointed a reputed agency that engages with the Chairman of the Board and Chairman of the Nomination and Remuneration Committee in respect of the evaluation process. The agency prepares an independent report which is used for giving appropriate feedback to the Board/Committees/Directors for discussions in the meetings.

During the year, the evaluation cycle was completed by the Company which included the evaluation of the Board as a whole, Board Committees and individual Directors. The evaluation process focused on various aspects of the Board and Committees'' functioning such as composition of the Board and Committees, experience and competencies, performance of specific duties, obligations and governance issues. A separate exercise was carried out to evaluate the performance of individual Directors on parameters such as attendance, contribution and exercise of independent judgment.

The results of the evaluation of the Board and Committees were shared with the Board and respective Committees. The Chairman of the Board had individual discussions with each member of the Board to discuss the performance feedback based on self-appraisal and peer review. The Nomination and Remuneration Committee Chairman discussed the performance review with the Chairman of the Board.

The Independent Directors met on 14 November 2016 to review performance evaluation of Non Independent Directors and the Board of Directors and also of the Chairman taking into account views of Executive Directors and Non-Executive Directors.

Based on the outcome of the evaluation, the Board and Committees have agreed on various action points, which would result in each Director, its Committees and the Board playing more meaningful roles to increase shareholder value.

9. POLICY ON DIRECTORS’ APPOINTMENTS, REMUNERATION, ETC.

Policy on Remuneration of Directors, Key Managerial Personnel (KMP) and Senior Management Employees and Policy on Appointment of Directors, Independence of Directors and Board Diversity are given as Annexure II & III to this report.

10. BOARD AND COMMITTEES

A calendar of proposed dates for meetings is prepared and circulated in advance to the Directors. The Board met five times during the year, details of which are given in the Corporate Governance Report that forms part of this Annual Report. The intervening gap between the meetings was within the period prescribed under the Act and the SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations 2015”). Details of all the Committee of the Board have been given in the Corporate Governance Report.

11. CORPORATE GOVERNANCE

Your Company is part of BP Group which is known globally for best standards of governance and business ethics. Your Company has put in place governance practices as prevalent globally. The Corporate Governance Report and the Auditor’s Certificate regarding compliance of conditions of Corporate Governance are made part of the Annual Report.

12. CORPORATE SOCIAL RESPONSIBILITY

Your Company recognizes the need and importance of a focused and inclusive social and economic development, especially of the industries and communities within which it operates. Your Company seeks to build open and constructive relationships with all its stakeholders and wants them to benefit from your Company’s presence and this is set out in the Code of Conduct and values of your Company. over the last hundred years of the Company’s presence in India, Castrol India’s Corporate Social Responsibility (CSR) activities have evolved from charitable giving to a strategic CSR programme, working in collaboration with key stakeholders. The CSR programme of your Company aligns business risks and opportunities with the national agenda of development priorities to meet the needs and aspirations of the populace.

Your Company aims to provide a safer and better quality of life for the communities it serves, whilst ensuring the long-term sustainability of the

Company’s operations in the relevant industries where it operates. In alignment with our core skills and vision of building a safer and better quality of life, underpinned by our focus on progressive technology and in line with the aspirations of the country’s youth, the Company focuses on the following programmes:

i. Eklavya: Strengthening skills in the automotive and industrial sectors, with a focus on technology

ii. Ehtiyat: Collaborating for safer mobility

iii. Ekjut: Community Development in areas of operation and presence

iv. Ehsaas: Humanitarian aid

Corporate Social Responsibility Committee of the Board has recommended and the Board has approved a CSR Policy in line with the requirements of Section 135 of the Act.

The Corporate Social Responsibility Policy is available on the website of the Company at http://www.castrol.com/en_in/india/about-us/csr. html.

The Annual Report on CSR activities is annexed to this report as Annexure-IV.

The Business Responsibility Report also contains information on work done on CSR.

13. DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Sections 134(3)(c) and 134(5) of the Act, with respect to the Directors’ Responsibility Statement, it is hereby confirmed:

(a) in the preparation of the annual accounts for the year ended 31 December 2016, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same;

(b) t he Directors 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 your Company as at 31 December 2016 and of the profit of your Company for the year ended on that date;

(c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

(d) the Directors have prepared the annual accounts on a ‘going concern'' basis;

(e) the Directors have laid down internal financial controls to be followed by your Company and that such internal financial controls are adequate and are operating effectively; and

(f) t he Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

14. RISK MANAGEMENT AND ADEQUACY OF INTERNAL FINANCIAL CONTROLS

Your Company has set up a Risk Management Committee. Your Company has also adopted a Risk Management Policy, the details of which are given in the Corporate Governance Report that forms part of this Annual Report.

Your Company maintains an adequate and effective Internal Control System commensurate with its size and complexity. We believe that these internal control systems provide, among other things, a reasonable assurance that transactions are executed with Management authorisation and that they are recorded in all material respects to permit preparation of financial statements in conformity with established accounting principles and that the assets of your Company are adequately safe-guarded against significant misuse or loss. An independent Internal Audit function is an important element of your Company''s internal control system. The internal control system is supplemented through an extensive internal audit programme and periodic review by Management and Audit Committee.

Your Company has in place, adequate Internal Financial Controls with reference to Financial Statements. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed.

15. RELATED PARTY TRANSACTIONS

Your Company has adopted a Related Party Transactions Policy. The Audit Committee reviews the Policy from time to time and also approves and reviews all Related Party Transactions, to ensure that the same are in line with the provisions of applicable law and the Policy. The Committee approves the Related Party Transactions and wherever it is not possible to estimate the value, approves limit for the Financial Year, based on best estimates. All Related Party Transactions are reviewed by an independent accounting firm to establish compliance with law and limits approved.

All Related Party Transactions entered during the year were in Ordinary Course of the Business and on Arm''s Length basis. No Material Related Party Transactions were entered during the year by your Company. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3)(h) of the Act, in Form AOC-2 is not applicable to your Company.

In conformity with the requirements of the Act, read with SEBI Listing Regulations, 2015 the policy to deal with Related Party Transactions is also available on Company’s website at http:// www.castrol.com/en_in/india/about-us/financials/ other-financial-documents-policies.html

16. DEPOSITS

Your Company has not accepted any Fixed Deposits under Chapter V of The Act during this Financial Year and as such, no amount on account of Principal or Interest on Deposits from Public was outstanding as on 31 December 2016.

17. PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN AND SECURITIES PROVIDED

Particulars of loans, guarantees and investments made by your Company pursuant to Section 186 of the Act, are given in the Notes to the Financial Statement which forms part of the Annual Report.

18. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, RESEARCH & DEVELOPMENT (R&D) AND FOREIGN EXCHANGE EARNING AND OUTGO

The particulars relating to conservation of Energy, Technology Absorption, Foreign Exchange Earnings and outgo, as required to be disclosed under the Act, are provided as Annexure-V.

19. MATERIAL CHANGES OCCURRED AFTER END OF FINANCIAL YEAR

Except as disclosed elsewhere in this Annual Report, no material changes and commitments which could affect your Company’s financial position have occurred between the end of the Financial Year of your Company and date of this Annual Report.

20. AUDITORS

M/s. SRBC & Co. LLP, Chartered Accountants, retire as Statutory Auditors of the Company from the conclusion of the ensuing Annual General Meeting. The Audit Report given by the Auditors on the financial statements of your Company is part of the Annual Report. There has been no qualification, reservation or adverse remark given by the Auditors in their Report.

I n accordance with Section 139 of the Act, listed companies cannot appoint or re-appoint the auditor for more than two terms of five consecutive years, if the auditor is an audit firm. Existing companies, which are covered under auditor rotation requirement, should comply with these requirements within three years from the date of commencement of the Act.

SRBC & Co, LLP, Chartered Accountants (ICAI Firm Registration No. 324982E), Mumbai have been the Auditors of your Company since 2001 and have completed a term of sixteen years (including three years of transitional period). It is now proposed to appoint M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration Number 117366W-100018) as Statutory Auditors of your Company. Further, M/s. Deloitte Haskins & Sells LLP have consented to be appointed as Statutory Auditors of the Company and have confirmed that their appointment, if made, would be in compliance with the provisions of Sections 139 and 141 of the Act and Rules framed there under.

The Audit Committee and the Board, at their respective meetings held on 21 February 2017, have recommended appointment of M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration Number 117366W-100018), as Statutory Auditors of the Company, from the conclusion of ensuing Annual General Meeting until conclusion of 44th Annual General Meeting.

M/s. Kishore Bhatia & Associates, Cost Accountants carried out the Cost Audit for applicable business segment. It is proposed to re-appoint them as Cost Auditors for the Financial Year ending 31 December 2017.

The Board had appointed M/s. S. N. Ananthasubramanian & Co., Company Secretaries in Whole-time Practice, to carry out Secretarial Audit under the provisions of Section 204 of the Act, for the Financial Year 2016. The Secretarial Audit report is annexed to this report marked as Annexure-VI.

The qualification made by the Secretarial Auditor in the Secretarial Audit Report is pertaining to non-appointment of Company Secretary within the statutorily permitted period of six months from the vacancy of office of the whole-time Key Managerial Personnel pursuant to Section 203(4) of the Companies Act, 2013 for which your Company has filed a suo-moto application for compounding of the contravention of said provision of the Act before the Hon''ble National Company Law Tribunal, Mumbai Bench.

Your Board has appointed Ms. Chandana Dhar as Company Secretary with effect from 12 January 2017.

21. EXTRACT OF THE ANNUAL RETURN

Details forming part of the extract of the Annual Return in Form MGT 9 as per provisions of the Act, and rules thereto are annexed to this report as Annexure VII.

22. PARTICULARS OF EMPLOYEES

Disclosures with respect to the remuneration of Directors and employees as required under Section 197 of the Act, and Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have been annexed to this report as Annexure-VIII.

Details of employee remuneration as required under provisions of Section 197 of the Act, and Rule 5(2) & 5(3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, form part of this Report. As per the provisions of Section 136 of the Act, the Report and Financial Statement are being sent to the shareholders of your Company and others entitled thereto, excluding the statement on particulars of employees. Copies of said statement are available at the Registered office of the Company during the designated working hours up to 21 days before the Annual General Meeting. Any Member interested in obtaining such details may also write to the Secretarial Department at the Registered Office of the Company.

23. PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE

Your Company firmly believes in providing a safe, supportive and friendly workplace environment - a workplace where our values come to life through the supporting behaviours. Positive workplace environment and a great employee experience are integral part of our culture. Your Company believes in providing and ensuring a workplace free from discrimination and harassment based on gender.

Your Company educates its employees as to what may constitute sexual harassment and in the event of any occurrence of an incident constituting sexual harassment, your Company provides the mechanism to seek recourse and redressal to the concerned individual subjected to sexual harassment.

Your Company has a Sexual Harassment -Prevention and Grievance Handling Policy in place to provide clarity around the process to raise such a grievance and how the grievance will be investigated and resolved. An Internal Complaints Committee has been constituted in line with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

During the year there was one complaint of sexual harassment that was reported which was reviewed by the Internal Complaints Committee. Pursuant to the review, disciplinary action was taken against the employee accused of sexual harassment.

24. VIGIL MECHANISM

Your Company has a very strong whistle blower policy viz. ‘Open Talk’. All employees of your Company also have access to the Chairman of the Audit Committee in case they wish to report any concern. Your Company has provided a dedicated e-mail address for reporting such concerns. All cases registered under Whistle Blower Policy of your Company are reported to and are subject to the review of the Audit Committee.

25. GENERAL DISCLOSURES

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. I ssue of Equity Shares with differential rights as to dividend, voting or otherwise.

2. Issue of Shares (including Sweat Equity Shares) to employees of your Company under any scheme. Your Company has not resorted to any buy back of its shares during the year under review.

3. Neither the Managing Director nor the Whole time Directors of your Company receive any remuneration or commission from any of its subsidiaries.

4. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company’s operations in future.

26. ACKNOWLEDGEMENT

The Board wishes to place on record its sincere appreciation of the efforts put in by your Company’s employees for achieving encouraging results under difficult conditions. The Board also wishes to thank its members, distributors, vendors, customers, bankers, government and all other business associates for their support during the year.

on behalf of the Board of Directors

omer Dormen Rashmi Joshi

Managing Director Director Finance &

DIN: 07282001 Chief Financial Officer

DIN: 06641898

Place : Mumbai

Date : 21 February 2017


Dec 31, 2014

Dear Members,

Report of the Directors to the Shareholders of the Company in respect of the year ended 31st December, 2014.

For the year ended For the year ended Particulars 31st December, 2014 31st December, 2013 (Rupees in crores) (Rupees in crores)

Profit before Interest, Depreciation, Exceptional Items & Tax 732.78 722.54

Interest Income (Net of Finance Cost) 29.66 46.87

Exceptional items — 22.80

Profit before Depreciation & Tax 762.44 792.21

Depreciation & Amortisation 36.13 30.45

Tax Expenses

Current Tax 260.60 241.06

Deferred Tax (8.85) 12.13

Profit after Tax 474.56 508.57

Adding thereto:

Balance as per last Balance Sheet brought forward 94.86 43.53

Profit available for Appropriation 569.42 552.10

The appropriations are:

Dividend

Interim 173.10 173.10

Final 197.82 173.10

Tax on Dividend

Interim 29.42 29.42

Final 39.55 29.42

Final - 2013 — 1.34

Tax on Capital Reduction 42.03 —

Transfer to General Reserves — 50.86

Net surplus in the Statement of Profit & Loss 87.50 94.86

569.42 552.10

PERFORMANCE

Sales realisation of the Company has increased by about 7% over the previous year to Rs. 3,907 crores, mainly due to an increase in per unit sales realizations. However, the sales volumes have declined by 1% over the previous year. Cost of material, has increased by about 8% over the previous year to Rs. 1,938 crores primarily due to weakening of Rupee. Despite the challenging economic environment, its the performance of personal mobility brands which has helped your Company to improve its unit gross margins and gross profit. Operating and other expenses increased by about Rs. 40 crores as compared to the previous year mainly due to inflation. Profit from operations has increased by about 4%.

Profit Before Tax decreased by about 5% over previous year to Rs. 726.3 crores. Profit After Tax decreased by 7% over the previous year to Rs. 474.6 crores.

The Company''s performance has been discussed in detail in Management Discussion and Analysis Report.

DIVIDEND

Your Directors are pleased to recommend a Final Dividend of Rs. 4.00 per equity share of Rs. 5/- each, for the year ended 31st December, 2014. The Interim Dividend of Rs. 3.50 per equity share was paid in August, 2014.

The Final Dividend, subject to approval of members, will be paid within statutory period, to the members whose names appear in the Register of Members, as per the book closure. The total dividend for the financial year, including the proposed Final Dividend, amounts to Rs. 7.50 per equity share and will absorb Rs. 370.9 crores (Previous year Rs. 7.00 per equity share amounting to Rs. 346.20 crores). The Company also returned Rs. 5 per share to its shareholders (Rs. 247.28 crores) under Capital Reduction Scheme, in March, 2014.

DIRECTORS

In accordance with the provisions of Section 161 of the Companies Act, 2013 (the Act) and Article 115(a) of the Articles of Association, Mr. Jayanta Chatterjee was appointed as an Additional Director with effect from 30th October, 2014. Mr. Chatterjee was also appointed as Whole-time Director, designated as ''Director -

Supply Chain'' with effect from 30th October, 2014. His appointment has been put up for approval of Members of the Company through Postal Ballot and approval of Central Government is also being obtained.

Pursuant to provisions of the Act and Clause 49 of the Listing Agreement, Mr. S.M. Datta, Mr. R. Gopalakrishnan and Mr. Uday Khanna were appointed as Independent Directors for a period of 5 years from 1st October, 2014 and shall not be liable to retire by rotation. Mr. Ravi Kirpalani and Mr. Peter Weidner retire by rotation and being eligible, offer themselves for re-appointment. The information of directors seeking appointment/re-appointment as required under Clause 49 of the Listing Agreement has been given in Corporate Governance section of the Annual Report.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, with respect to Directors'' Responsibility Statement, it is hereby confirmed that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same.

(ii) the Directors 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, 2014 and of the profits of the Company for the year ended 31st December, 2014.

(iii) 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) t he Directors have prepared the annual accounts on a going concern basis.

AUDITORS

The present statutory auditors of the Company, M/s. S.R. Batliboi & Co. LLP, Chartered Accountants, have communicated that from FY 2015 the statutory audit will be conducted by their associate firm M/s. SRBC & Co. LLP, Chartered Accountants, due to internal restructuring. The Board of Directors, on recommendation of the Audit Committee, recommends the appointment of M/s. SRBC & Co. LLP, Chartered Accountants (Firm Registration No. 324982E), as the Statutory Auditors of the Company from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting of the Company. A certificate from them has been received, to the effect that their appointment as Statutory Auditors of the Company, if made, would be in accordance with the provisions of Sections 139 and 141 of the Companies Act, 2013 and rules framed thereunder.

Further, the Board of Directors, on recommendation of the Audit Committee, have appointed M/s. Kishore Bhatia & Co., Cost Accountants, as Cost Auditors of the Company, for the Financial Year 2015, subject to the approval of the Members, which is being obtained in the ensuing Annual General Meeting. A certificate from M/s. Kishore Bhatia & Co. has been received assuring that their appointment as Cost Auditors of the Company, if made, would be in accordance with the limits specified under of Section 141 of the Companies Act, 2013 and rules framed thereunder.

CONSERVATION OF ENERGY

(a) Energy conservation measures taken:

Following steps were taken at Patalganga, Silvassa and Paharpur factories:

- Usage of LED lights across different areas in the plant to reduce power consumption and increase in lux level.

- Maximize output in general shift by ensuring uptime of equipment, so as to minimize power and utility operations in second shift.

- Provide timers for ACs in IT server room, to run in alternate mode thereby reducing total power consumption.

- Change stacking in pail line from 3*3 to 3*4 matrix, resulting in reduction of cycle time.

- Replace the conventional float valves by SS PUF filled floats of water storage tank.

- Reduction in lighting power consumption by usage of automated plant lights during night time.

- Air leakage audits and addressing most of identified leak points.

- Usage of energy efficient luminaries in the filling area.

- Provision of solar tube on plant shed roofs for utilization of natural light.

- Fuel saving in Hot Oil System (HSD) by insulation & repair, and creating awareness by monitoring & sharing of information to run the operation efficiently.

- Replacement of water cooled induction sealers with energy efficient air cooled induction sealers.

- Provision of control with timer mechanism for switching on/off of air conditioners in administration office.

- Provision of aluminum cladding on thermic fluid heater line to minimize the heat transfer loss.

- Usage of Jet mixers for blenders which help in reducing the batch cycle time.

- Rationalization of certain blending operations for a few products with reduced temperature, to reduce energy consumption.

- Increasing awareness level amongst the work force for various energy conservation measures at the plant level.

(b) Additional investments and proposals, if any, being implemented for reduction of consumption of energy.

Nil

(c) Impact of Measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods.

The improvement measures have led to efficient use of energy and optimization in the production per unit cost.

TECHNOLOGY ABSORPTION

1. Your Company continues to derive sustainable benefits from its India Technology Centre located in Mumbai. The year 2014 was yet another year where your Company''s product development capability helped the business meet pressing consumer needs, partner closely with its customers and leverage strengths of its global affiliates to meet the needs of the local market.

2. In the year under review, your Company continued its investment in a world-class two-wheeler oil product development team, based out of the India Technology Centre to support the needs of the domestic and global market. To enable this team in its work, your Company further added state-of- the-art test rigs specific to two-wheeler engine oil development. This has helped us to study friction properties and screen candidates for further engine trials. It not only helps us develop differentiation, but also hastens the product development cycle.

3. With Intelligent Molecules that cling and protect, Castrol Magnatec is an engine-oil for cars with a unique proposition. But with unique requirements of city driving with multiple start and stops in a journey; Castrol embarked on a journey to launch a custom made oil for driving in these conditions - yet fulfilling the Magnatec promise of cling and protect. Your Company launched a project focused on the Indian passenger car market aimed to develop a fuel efficient, durable SAE 5W-30, ACEA A5/B5 2012 compliant Engine oil for Maruti Suzuki diesel engines. This was a first ever co-engineering project with this important passenger car OEM with dominant market share in the domestic market that resulted in Castrol being the only oil marketer to supply oil that optimized fuel efficiency performance, while maintaining engine protection. In 2014, your Company also focused on the Indian passenger car market to develop a fuel efficient, durable SAE 5W-30, ACEA A5/B5 2012 compliant engine oil common for Tata Motors covering entire range of Gasoline and Diesel engines. This product is extensively tested for durability and fuel efficiency in Tata Motors gasoline and diesel cars. This is also the only and first lubricant to be approved for the Tata new generation "Revotron Series of Engine" with optimized fuel efficiency performance while maintaining engine protection.

4. India, where the hub and spoke model plays a key role in its supply chain - has a large number of ultra-light commercial vehicles. To cater to this unique demand - where the engine is constantly under stress - your Company developed and launched Castrol CRB Mini Truck - specifically designed and locally tested for these vehicles.

5. Building capability within to sell the technologically superior products developed by your Company is a critical link to ensure our customers understand the superior value they are getting when they purchase our products. Towards this end, your company had invested in a "Liquid Engineering Centre" (LEC) a few years ago. This year your Company launched the virtual engine training program to bring multiple locations together using virtual reality platform. This created a huge impact in the market wherein the benefits of our products could be technically explained to the customers. Your Company invests in creating a state-of-the- art semi replica of the liquid engineering centre at our key customer - Maruti Suzuki India Ltd.

6. Another major milestone that was achieved in the year 2014 was the renewal of the ISO 14001 and 9001:2008 certification for the India Technology Centre. Both these certifications are effectively a license-to-operate today for a reputed organization such as your Company. The ISO 9001:2008 assures the management of your Company that the operations of the Centre continue to be streamlined and efficient. The ISO 14001 certification is a mark of your Company''s commitment to the customer and shareholder to be environmentally responsible and to adopt sustainable business practices.

RESEARCH & DEVELOPMENT(R&D)

(A) Specific areas in respect of which R&D was carried out:

(i) New product launches with stronger consumer benefit:

Following brands were re-launched during the year with strong consumer benefits viz.:

a. Magnatec 5W-30 Stop Start with intelligent molecules that give you instant protection from the moment you start - every time you start.

b. Magnatec Professional A1 5W-30

c. CRB Mini Truck - to cater to the fast growing category of mini trucks

d. SF0007 RP - a mid-flash rust preventive for tube industry

e. Optigear MX320 - for wind turbines

(ii) New products and offers for Original Equipment Manufacturers (OEM''s):

Your Company has been successful in obtaining endorsement for fuel efficient products from two of the leading car manufacturers viz. TATA Motors and Maruti Suzuki.

(iii) Driving efficiencies:

Several initiatives were taken during the year to ensure that your Company availed of the maximum efficiencies by creating alternative raw material options. This will also ensure a strong security of supply in case of any crisis.

(B) Benefits derived as a result of R&D

Based on the R&D activities mentioned above being implemented, your Company was able to further strengthen its connect with its consumers and the OEM''s. It also helped your Company in forging new partnerships with OEM''s and demonstrating its technical superiority.

(C) Future plan of action

Innovation is a journey and your Company is well placed to ensure that it continues to maintain a strong track record in this field. Your Company will continue its focus on generating fuel efficient products for its consumers, strengthening its synthetic technology based portfolio and working on the state-of-the-art technologies of modelling to fast track product development cycles.

(D) Expenditure on R&D (Rs. in crores)

(i) Capital 3.65

(ii) Recurring 10.56

(iii) Total 14.21

FOREIGN EXCHANGE EARNING AND OUTGO

1. Activities relating to Export

There were no significant exports by the Company during the year. However, some quantities of the products were exported to China, Thailand & Saudi Arabia.

2. Earning and Outgo

Members are requested to refer to note Nos. 32 and 33 of notes to Financial Statements for the year ended 31st December, 2014.

PARTICULARS OF EMPLOYEES

The information required to be published under the provisions of Section 217(2A) of the Companies Act, 1956 (the Act) read with Companies (Particulars of Employees) Rules, 1975 as amended, is provided in the Annexure forming part of the Report. In terms of Section 219(1 )(b)(iv) of the Act, the Report and Accounts are being sent to the Members excluding the aforesaid Annexure. Any member interested in obtaining a copy of the same may write to the Company Secretary at the Registered Office address.

ACKNOWLEDGEMENT

The Board wishes to place on record its sincere appreciation of the efforts put in by the Company''s workers, staff and executives for achieving encouraging results in difficult environment. The Board also wishes to thank its members, distributors, vendors, customers, bankers, government and all other business associates for their support during the year.

On behalf of the Board of Directors

Ravi Kirpalani Rashmi Joshi

Managing Director Director - Finance

Mumbai

Dated: 25th February, 2015


Dec 31, 2013

Dear Members

Report of the Directors to the Members of the Company in respect of the year ended 31st December, 2013.

For the year ended For the year ended 31st December, 2013 31st December, 2012 (Rupees in crores) (Rupees in crores)

Profit before Depreciation, Exceptional Items & Tax 769.41 692.96

Exceptional items 22.80 -

Profit before Depreciation & Tax 792.21 692.96

Depreciation & Amortisation 30.45 26.64

Tax Expenses

Current Tax 241.06 227.78 Deferred Tax 12.13 (8.85)

Profit after Tax 508.57 447.39

Adding thereto:

Balance as per last Balance Sheet brought forward 43.53 43.24

Profit available for Appropriation 552.10 490.63

The appropriations are:

Dividend

Interim 173.10 173.10

Final 173.10 173.10

Tax on Dividend

Interim 29.42 28.08

Final 29.42 28.08

Final-2012 1.34 -

Transfer to General Reserve 50.86 44.74

Net surplus in the Statement of Profit & Loss 94.86 43.53

552.10 490.63

PERFORMANCE

Sales realisations of the Company have increased by about 2% over the previous year to Rs. 3,664 crores, mainly due to an increase in unit sales realizations. However, the sales volumes have declined by 3% over the previous year. Costs of materials have decreased by about 2% over the previous year to Rs. 1,788 crores. Despite the challenging economic environment, a pro-active margin management strategy helped your Company to improve its unit gross margin and gross profit. Operating and other expenses increased by about Rs. 34 crores as compared to the previous year mainly due to inflation. Profit Before Tax increased by about 14% over previous year to Rs. 762 crores.

Tax rate for the current year has remained at nearly the same level as that of the previous year. Profit after tax increased by 14% over the previous year to Rs. 509 crores.

The Company''s performance has been discussed in detail in ''Management Discussion and Analysis Report'' at Annexure ''A'' and is part of this Report.

DIVIDEND

The Interim Dividend in respect of the year ended 31st December, 2013 of Rs. 3.50 per share on 49,45,61,192 Equity Shares was paid to the Members of the Company whose names appeared in the Register of Members on 7th August, 2013.

The Directors have recommended payment of Final Dividend of Rs. 3.50 per share on 49,45,61,192 Equity Shares. The dividend, if approved by the Members will be paid to all the eligible Members and reduction in share capital from Rs. 10/- to Rs. 51- per share, will not affect the entitlement (amount) of the dividend to be received.

REDUCTION OF SHARE CAPITAL

The Board of Directors had approved the reduction of Share Capital so as to reduce the fully paid-up face value of equity shares from Rs.10/- per share to Rs. 5/- per share, subject to the approval of the Members and the Hon''ble Bombay High Court. Accordingly, the reduction of Share Capital was approved by the Members by Postal Ballot on 9th October, 2013 and was confirmed by the Hon''ble Bombay High Court on 20th December, 2013. The said Reduction of Share Capital became finally effective on 20th January, 2014 upon obtaining the Certificate of Registration of Order and minutes of reduction of Capital from Registrar of Companies, Maharashtra, Mumbai. Consequently, the existing Issued, Subscribed and Paid-up Capital Share Capital of the Company is reduced from Rs. 494,56,11,920 (Rupees Four Hundred Ninety Four Crores Fifty Six Lakhs Eleven Thousand Nine Hundred and Twenty only) comprising of 49,45,61,192 (Forty Nine Crores Forty Five Lakhs Sixty One Thousand One Hundred Ninety Two) Equity Shares of the face value of Rs. 10/- each fully paid-up to Rs. 247,28,05,960 (Rupees Two Hundred Forty Seven Crores Twenty Eight Lakhs Five Thousand Nine Hundred Sixty only) comprising of 49,45,61,192 (Forty Nine Crores Forty Five Lakhs Sixty One Thousand One Hundred Ninety Two) Equity Shares of the face value of Rs. 5/- each fully paid-up.

DIRECTORS

Mr. Sujit Vaidya, Director - Finance of the Company (since November, 2010), resigned from the Board of Directors of the Company with effect from 17th May, 2013.

Mr. Bijay Kamath, Director - Supply Chain of the Company (since November, 2012), resigned from the Board of Directors of the Company with effect from 31st July, 2013.

The Board places on record its appreciation of the contributions made by them during their respective tenures on the Company''s Board as Directors of the Company.

Mr. Ravi Kirpalani was appointed as a Whole-time Director designated as Managing Director of the Company for the period of 5 years effective from 27th April, 2013, subject to the approval of the Members. An abstract and memorandum of interest under Section 302 of the Act, was sent to the Members of the Company.

Ms. Rashmi Joshi was appointed as Additional Director effective from 1st August, 2013. In accordance with the provisions of Section 260 of the Companies Act, 1956 (the Act) and Article 115(a) of the Company''s Articles of Association, she will cease to hold this office at the forthcoming Annual General Meeting and is eligible for re-appointment. Ms. Rashmi Joshi is also appointed as the Whole-time Director designated as ''Director - Finance'' of the Company for a period of 5 years with effect from 1st August, 2013, subject to the approval of the Members and the Central Government. An abstract and memorandum of interest under Section 302 of the Act, was sent to the Members of the Company. Pursuant to Section 257 of the Companies Act, 1956, notice has been received from a Member, together with necessary deposit, proposing the appointment of Ms. Rashmi Joshi as a Director retiring by rotation on the Board of the Company.

Mr. S.M. Datta and Mr. Uday Khanna retire by rotation and being eligible, offer themselves for re-appointment at the ensuing Annual General Meeting.

The brief profile of directors seeking appointment/ re-appointment, as required under Clause 49 of the Listing Agreement has been given in the Report on Corporate Governance.

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 that:

(i) in the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same.

(ii) the Directors 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, 2013 and of the profits of the Company for the year ended 31s'' December, 2013.

(iii) 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) the Directors have prepared the annual accounts on a going concern basis.

AUDITORS

M/s. S.R. Batliboi & Co. LLP, Chartered Accountants, the Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received letters from them to the effect that their re-appointment, if made, would be within the prescribed limits under Section 224(1 B) of the Companies Act, 1956 and that they are not disqualified for re-appointment within the meaning of Section 226 of the said Act.

COST AUDITORS

The Board of Directors had on the recommendation of the Audit Committee appointed M/s. N. I. Mehta & Co. as the Cost Auditors of the Company for the financial year 2013 to carry out a Cost Audit in relation to the cost accounting records for the manufacture of Lubricants. The said appointment has also been filed in the prescribed format with the Central Government. The Cost Auditors had certified that their appointment was within the limits of Section 224(1 B) of the Act. The Audit Committee had also received a certificate from the Cost Auditors certifying their independence and arm''s length relationship with the Company.

CONSERVATION OF ENERGY

(a) Energy conservation measures taken:

Energy conservation during the financial year has accrued as a result of the following steps taken at the various factories of the Company:

Patalganga:

1) In Boilers

Addition of Fuel Additives.

- Survey on Hi-Firing/Low Firing was done. Based on that modulation was fine tuned to optimum pressure.

- Regular blow down and effective maintenance of condensate recovery system.

- Installation of flash steam recovery system for tanker heating system.

Providing condensate return line for tanker unloading system.

2) Electricity Energy reduction

- Installation of VFD (Variable Frequency Drive) for most of the pumps in the system.

- Maintaining unity power factor through Auto Power Factor Controller.

- Installation of harmonics filtration system.

- Provided sensor and timer for barrel conveyor.

- Sensor for switching on/off the street lights automatically based on the natural light.

3) Water Conservation measures

- Maintaining water sprinklers provided on all gardens which operates at set intervals.

- Identified water leakage from many places and plugged them.

- Replaced conventional float valves by SS Puf filled float valves which prevented water overflowing from water tank.

Savings in water consumption from the year 2012 to 2013 is 3320 cubic meters which is about 24.5% reduction.

Silvassa:

Optimizing power and utility operations by

- Running of utility pumps closer to their best efficiency point.

- Air leakage audit conducted for site and arrested leakages.

- Energy efficient luminaries changed in production area.

Fire pump & water line leakages arrested to reduce raw water consumption.

- Created awareness by monitoring/forecasting and sharing the information to run the operations, efficiently.

Paharpur:

- Installed new capacitor panel to improve the power factor of the site saving electrical losses.

- Rationalised blending of few products with reduced temperature which reduced the fuel consumption.

- Executed three key de-bottlenecking projects and improved the efficiency- viz batch cycle time i.e. producing identical volumes in lesser number of days in a month.

- Reduced water consumption by providing additional water meters, on/off type of sanitary fittings, better management of water supply during out of office hours and reduced the annual water consumption by around 300 KL. This also helped in reducing the power consumed by water pump saving electricity.

(b) Additional investments and proposals, if any, being implemented for reduction of consumption of energy.

Nil

(c) Impact of Measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods.

The measures mentioned above have led to reduction in fuel and electricity consumption as well as improvement in the productivity.

TECHNOLOGY ABSORPTION

1. Your Company continues to derive sustainable benefits from its India Technology Centre located in Mumbai. The year 2013 was yet another year where your Company''s product development capability helped the business meet pressing customer needs, partner closely with its customers and leverage strengths of its global affiliates to meet the needs of the local market.

2. In the year under review, your Company continued its investment in a world-class motorcycle oil product development team based out of Technology Centre in India to support the needs of the domestic market. To support this team in its work, your Company also installed state-of-the- art test rigs specific to motorcycle oil development. This was imperative as India has emerged as the world''s second largest two-wheeler market and winning in this category in India has been identified as a part of your Company''s core strategy.

3. In a scenario where goods movement is impaired, freight rates are soft and diesel prices are rising, a product that reduces cost of operations for commercial vehicle customers was the need of the hour. Your Company''s OEM Technology and Global product development team, had the opportunity to work with the engineers at Tata Motors, one of the most esteemed customers, to co-engineer the first-ever OEM-endorsed fuel-efficient engine oil - RX Turbo Fuel Saver. The product was launched at a glittering event attended by the leadership team of our customer organization, bearing testimony to the landmark joint achievement.

4. With Intelligent Molecules that cling and protect, Castrol Magnatec is an engine-oil for cars with a unique proposition. But with leaps in diesel engine technology and OEMs introducing diesel variants for all their popular models, there was an opportunity to expand the application of the Magnatec portfolio from beyond its main-stay of petrol engines. Support from BP''s research facility at Pangbourne, UK, helped in shortening development cycle for a diesel variant for Magnatec and your Company could respond to the market quickly.

5. Building capability within the organization to sell the technologically superior products developed by your Company is a critical link to ensure our customers understand the superior value they are getting when they purchase our products. Towards this end, your Company had invested in a "Liquid Engineering Centre" (LEC) a few years ago. The year witnessed significant improvements to the customer experience and knowledge transfer capabilities of the Liquid Engineering Centre. It also served as a platform to showcase your Company''s product capabilities to key members of business-to-business customer organizations. In the year under review, over 450 customers visited the LEC. Using modern technology and innovative ideas we were able to contact more than 2000 customers (and OEM employees) through in field demonstrations. We also conducted training to more than 400 employees and partners.

6. The year was also marked by an organization- wide initiative, titled PICASSO, within your Company to further raise the profile of quality within the organization, especially on the aspect of product development. The initiative involved internal audits conducted by the BP Group on quality processes and assurance programs, and the auditors found all processes satisfactory. Another major milestone that was achieved in the year 2013 was the renewal of the ISO 14001 and 9001:2008 certification for the Centre. Both these certifications are effectively a license-to- operate today for a reputed organization such as your Company. The ISO 9001:2008 assures the management of your Company that the operations of the Centre continue to be streamlined and efficient. The ISO 14001 certification is a mark of your Company''s commitment to the customer and shareholder to be environmentally responsible and to adopt sustainable business practices.

RESEARCH & DEVELOPMENT (R&D)

(A) Specific areas in respect of which R&D was carried out:

(i) New product launches with stronger consumer propositions/benefits:

Following brands were re-launched during the year with strong consumer benefits viz.

(i) Castrol Magnatec Diesel with intelligent molecules;

(ii) RX Turbo Fuel Saver;

(iii) Power 1; and

(iv) Safecoat DW27 VC - high flash rust preventive oil.

(ii) New products and offers for Original Equipment Manufacturers (OEMs):

Your Company was successful in obtaining endorsements for its product RX Turbo Fuel Saver from Tata Motors with fuel efficiency numbers.

Your Company has obtained an approval for fuel efficient diesel engine oil for Maruti diesel cars.

(Hi) Driving efficiencies:

Several initiatives were taken during the year to ensure that your Company availed of the maximum efficiencies by creating alternative raw material options. This will also ensure a strong security of supply in case of any crisis. During the year, your Company also renewed its ISO certificates of 9001:2008 and 14001 in 2013.

(B) Benefits derived as a result of R&D

Based on the R&D activities mentioned above being implemented, your Company was able to further strengthen its connect with its consumers and the OEMs. It also helped your Company in forging new partnerships with OEMs and demonstrating its technical superiority.

(C) Future plan of action

Innovation is a journey and your Company is well placed to ensure that it continues to maintain a strong track record in this field. Your Company will continue its focus on generating fuel efficient products for its consumers, strengthening its synthetic technology based portfolio and working on the state of the art technologies of modelling to fast track product development cycles.

PARTICULARS OF EMPLOYEES

The information required to be published under the provisions of Section 217(2A) of the Companies Act, 1956 (the Act) read with Companies (Particulars of Employees) Rules, 1975 as amended, is provided in the Annexure forming part of the Report. In terms of Section 219(1)(b)(iv) of the Act, the Report and Accounts are being sent to the Members excluding the aforesaid Annexure. Any member interested in obtaining a copy of the same may write to the Company Secretary at the Registered Office address.

ACKNOWLEDGEMENT

The Board wishes to place on record its sincere appreciation of the efforts put in by the Company''s workers, staff and executives for achieving encouraging results under difficult conditions. The Board also wishes to thank its Members, distributors, vendors, customers, bankers, government and all other business associates for their support during the year.

On behalf of the Board of Directors

Ravi Kirpalani Rashmi Joshi

Managing Director Director - Finance

Mumbai

Dated: 17th February, 2014


Dec 31, 2012

The Directors have pleasure in presenting their Report and Statement of Accounts for the year ended 31st December, 2012

For the year ended For the year ended 31st December, 2012 31st December, 2011 (Rupees in Crores) (Rupees in Crores)

Proft before Depreciation, Exceptional Items & Tax 692.96 741.06

Deducting therefrom:

Depreciation & Amortisation 26.64 25.11

Tax Expenses

Current Tax 227.78 255.44

Deferred Tax (8.85) (19.13)

Short/(Excess) provision for tax relating to earlier years - (1.39)

Proft after Tax 447.39 481.03

Adding thereto:

Balance as per last Balance Sheet brought forward 43.24 40.65

Proft Available for Appropriation 490.63 521.68

The appropriations are:

Dividend

Interim 173.10 173.10

Final 173.10 197.82

Tax on Dividend

Interim 28.08 28.08

Final 28.08 32.09

Final – 2010 - (0.76)

Transfer to General Reserve 44.74 48.11

Net surplus in the Statement of Proft & Loss 43.53 43.24

490.63 521.68

PERFORMANCE

Sales realizations have increased by 5% over the previous year to Rs. 3593 crores mainly due to an increase in unit sales realizations. However the sales volumes have declined by 2% over the pervious year.

Costs of materials have increased by 8% over the previous year to Rs. 1824 crores mainly driven by the devaluation of Indian Rupee against US Dollar.

Despite increasing cost pressures and lower volumes, pro-active margin management strategy helped your Company to maintain its Gross Proft and Unit Gross Profts.

Operating & other expenses increased by Rs. 45 crores as compared to 2011 as your Company continued to invest in its brands, business growth opportunities and people.

Proft before tax decreased by 7% over previous year to Rs. 666.3 crores.

Tax rate for the current year has remained at nearly the same level as that of the previous year. Proft after tax decreased by 7% over the previous year to Rs. 447.4 crores.

BONUS SHARES

As the members are aware, the Board of Directors had recommended, subject to the approval of the shareholders, one Bonus equity share for every one equity share of Rs. 10/- each held on the Record Date. Accordingly, the approval of the shareholders was obtained on 23rd August, 2012 to the said issue of Bonus shares through a Postal Ballot. The Bonus shares were allotted on 6th September, 2012 to those who were the shareholders of your Company on the Record Date fxed in consultation with the stock exchanges.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement, a Management Discussion and Analysis Report and a Report on Corporate Governance are given as Annexure ''A'' and ''B'' respectively to this Report.

A certifcate from the Statutory Auditors of your Company regarding the Compliance by the Company of the conditions stipulated under Clause 49 of the Listing Agreement is also attached to this Report.

The declaration by the Chief Operating Offcer pursuant to Clause 49(1)(D) of the Listing Agreement stating that all the Board Members and Senior Management Personnel have affrmed their compliance with the Company''s Code of Conduct for the year ended 31st December, 2012 is given as Annexure "C" in this Report.

BUSINESS RESPONSIBILITY REPORT

In terms of the new Clause 55 of the Listing Agreement, your Company is required to inform the shareholders in a prescribed format, viz. Business Responsibility Report (BR Report), of the initiatives taken by your Company from an Environmental, Social and Governance perspective.

Accordingly, the BR Report forms part of this Report.

DIRECTORS'' RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies Act, 1956, your Directors confrm that:

(i) In the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same.

(ii) The Directors 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 your Company as on 31st December, 2012 and of the profts of the Company for the year ended 31st December, 2012.

(iii) The Directors have taken proper and suffcient 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) The Directors have prepared the annual accounts on a going concern basis.

DIVIDEND

The Interim Dividend in respect of the year ended 31st December, 2012 of Rs. 7/- per share on 24,72,80,596 Equity Shares was paid to the Shareholders of your Company whose names appeared in the Register of Members on 3rd August, 2012.

The Directors recommend a payment of final dividend of Rs. 3.50/- per share on 49,45,61,192 Equity Shares of Rs. 10/- each i.e. inclusive of the Bonus Shares allotted on 6th September, 2012.

DIRECTORS

Mr. N. K. Kshatriya, Vice Chairman & Nominee Director ceased to be a Director of your Company with effect from 5th April, 2012 and in his place, with effect from the said date, Mr. P. Weidner was nominated as a Director of your Company pursuant to Article 112 of the Articles of Association of your Company.

Mr. Soren Malekar resigned with effect from the close of business hours on 31st October, 2012 as the Wholetime Director of your Company, designated as Director – Supply Chain.

Mr. Bijay Kamath was with effect from 1st November, 2012 appointed as an Additional Director of your Company. Consequent to the said appointment, he was appointed as a Wholetime Director of the Company designated as Director – Supply Chain. In accordance with Section 260 of the Companies Act, 1956 (the Act), Mr. Kamath holds offce upto the date of the forthcoming Annual General Meeting of your Company. Notice has been received under Section 257 of the Act along with the requisite deposit from a shareholder proposing Mr. Kamath as a candidate for the offce of Director.

Mr. A. Moore was nominated with effect from 18th July, 2012 to the Board pursuant to Articles 112 & 114 of the Articles of Association of your Company as Alternate Director to Mr. R. Hewins in place of Ms. H. McCabe.

Your Directors wish to place on record their gratitude for the guidance and advice received from Mr. Kshatriya, Mr. Malekar & Ms. H. McCabe during their tenures as Directors of the Company.

Mr. R. Gopalakrishnan and Mr. S. Vaidya retire by rotation and are eligible for re-appointment.

The information on the particulars of Directors seeking appointment/re-appointment as required under Clause 49 of the Listing Agreement executed with the BSE Limited and the National Stock Exchange of India Limited have been given under Corporate Governance (Annexure ''B'') of this Report.

CONSERVATION OF ENERGY

(a) Energy conservation measures taken:

Energy conservation during the fnancial year has accrued as a result of the following steps taken at the various plants of the Company:

Patalganga:

1. Installed new energy effcient Variable Frequency Drive (VFD) to pumps resulting in reduction of electrical energy.

2. Installation of solar tube units in A-14 flling area, LED street lights across plant and replacement of 40W tubelight with energy effcient 27W CFL ftting.

3. Replacement of old MCC-5 and PDB electrical panels with new and safe panels.

4. Synchronization of 130 CFM air compressor which has VFD for the motor with 200 CFM air compressor to have a balanced load.

5. Using fuel additive with furnace oil to obtain best fuel effciency.

6. Boiler condensate recovery and maintenance done resulting in lower furnace oil consumption.

Silvassa:

1. Optimizing power and utility operations by:

- Running of utility pumps closer to their best effciency point.

- Decreasing head of thermic fuid pump.

- Optimum temperature supply for hot oil supply.

- Voltage optimizing of transformer for energy saving.

2. Creating awareness by:

- Monitoring/forecasting and sharing of information to run the operation effciently.

- Stabilizing lighting costs.

Paharpur:

1. Installation of LED street lights led to reduction in the unit consumption of street lights.

2. Reduction in water consumption by plugging leaks and other control measures. This also saved energy by stopping running hours of water pumps.

3. All street lights ftted with solar sensors thereby eliminating manual switching.

4. Installation of VFD for flling pump helped reduced the power consumption considerably.

5. Change of fuel: Site shifted from LDO to HSD which is a cleaner fuel and helps in greater combustion. This reduced the specifc fuel consumption of the site.

6. Recycling water: The treated water from ETP which used to be drained in public drain is now being used for sanitation. This has reduced the water consumption of the site by 10%.

(b) Additional investments and proposals, if any, being implemented for reduction of consumption of energy.

New high capacity air compressor, energy effcient boiler and new generation auto power factor control panel to maintain power factor to unity.

(c) Impact of Measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods.

The measures mentioned above in (a) and (b) above have led to reduction in fuel and electricity consumption as well as improvement in the productivity which in turn has impacted the cost of production.

TECHNOLOGY ABSORPTION

1. Site safety and security continued to remain an area of focus at the Technology Centre. The Technology Centre was audited and certifed for the ''Operating Management System'' by the BP Group.

2. The focus on safety at all levels ensured that your Company completed the year without a single incident. The Technology Centre also installed a state of the art fre hydrant system to take care of any exigencies that could occur.

3. Both ISO specifcations viz. 9001 – 1998 as well as 14001 were renewed during the year vis-a-vis the Technology Centre.

4. Huge emphasis was laid to ensure product integrity and formulation compliance. Several internal and external audits were carried out both at the plant level as well as at the formulation level to ensure that only compliant products reached the customers.

5. Your Company secured approvals for various new products from Original Equipment Manufacturers (OEMs) in India like Daimler – Bharat Benz, Mahindra two-wheelers, Ford.

6. The agreement with TELCON was renewed in 2012.

7. Your Company partnered with Volkswagen to set up a training centre in their premises.

8. Your Company conducted a technology day at the premises of Ford India Limited.

9. Your Company launched various products throughout the year with superior properties and stronger differentiations. Some key launches were Castrol CRB plus and Castrol CRB Turbo with Durashieldtm Boosters, re-launch of BP brand of lubricants, revamp of the Castrol RX portfolio, Castrol Activ with Actibondtm molecules and Castrol Magnatec with Intelligent molecules. Work is already in progress to make sure your Company has the product pipeline managed for product launches throughout 2013 and beyond.

10. Formulation optimization initiatives by Technology team with support from Supply Chain and Marketing was an area of focus during 2012, which resulted in signifcant savings in raw material costs as well helped to manage the security of supplies for your Company''s raw materials.

RESEARCH & DEVELOPMENT (R&D)

(a) Specifc areas in respect of which R&D was carried out.

There were three specifc areas under which R&D activities can be clubbed. These were:

(a) New product launches with stronger consumer propositions/benefts: In this category, three major brands were re-launched during the year with strong consumer benefts viz. (i) Castrol Magnatec with Intelligent molecules, (ii) Castrol Activ with Actibondtm molecules and (iii) Castrol CRB Plus and Castrol CRB Turbo were re-launched with Durashieldtm Boosters which provide stronger wear protection to the engines.

(b) New products and offers for Original Equipment Manufacturers (OEMs): In this connection, your Company was successful in obtaining approvals for its products with three OEM''s namely Bharat Benz (Daimler), Mahindra for two-wheelers and Ford motors. Your Company also took its offer to the next level by partnering with Volkswagen to build a technology centre in their premises and conducting a technology day at Ford India.

(c) Driving effciencies: Several initiatives were taken during the year to ensure that your Company availed of the maximum effciencies by creating alternative raw material options. This will also ensure a strong security of supply in case of any crisis. During the year, your Company also renewed its ISO certifcates of 9001:2008 and 14001 in 2012.

(b) Benefts derived as a result of the above R&D.

Based on the R&D activities mentioned above being implemented, your Company was able to further strengthen its connect with its consumers and the OEMs. It also helped your Company in forging new partnerships with OEMs and demonstrating its technical superiority.

(c) Future plan of action.

Innovation is a journey and your Company is well placed to ensure it continues to maintain a strong track record in this feld. Your Company will continue its focus on generating fuel effcient products for its consumers, strengthening its synthetic technology based portfolio and working on the state of the art technologies of modeling to fast track product development cycles.

(d) Expenditure on R&D (Rs. in crores)

(i) Capital 1.25

(ii) Recurring 8.58

(iii) Total 9.83

(iv) Total R&D expenditure as a percentage of Net Sales 0.32

FOREIGN EXCHANGE EARNINGS AND OUTGO

1. Activities relating to export

There were no signifcant exports by your Company during the year. However, some products were exported to Group companies in China and Malyasia.

2. Earnings and outgo

Members are requested to refer to note Nos. 32 & 33 forming part of the fnancial statements for the year ended 31st December, 2012.

PARTICULARS OF EMPLOYEES

The information required to be published under the provisions of Section 217(2A) of the Companies Act, 1956 (the Act) read with Companies (Particulars of Employees) Rules, 1975 as amended, forms part of this Report.

AUDITORS

The Shareholders of the Company are requested to appoint Auditors and to fx their remuneration. M/s. S.R. Batliboi & Co., Chartered Accountants, the retiring Auditors, have furnished to the Company the required certifcate under Section 224(1B) of the Companies Act, 1956 and are therefore eligible for re- appointment as Auditors of the Company.

Cost Auditors

The Board of Directors pursuant to the Notifcation No. GSR 430 (E) dated 3rd June, 2011 issued by the Central Government under Section 233B of the Companies Act, 1956 (the Act) had on the recommendation of the Audit Committee appointed M/s. N. I. Mehta & Co. as the Cost Auditors of the Company for the fnancial year 2012 to carry out a

Cost Audit in relation to the cost accounting records for the manufacture of "Lubricants". The said appointment has also been fled in the prescribed format with the Central Government.

The Cost Auditors had certifed that their appointment was within the limits of Section 224(1B) of the Act. The Audit Committee had also received a certifcate from the Cost Auditors certifying their independence and arm''s length relationship with the Company.

PERSONNEL

The Board wishes to place on record its sincere appreciation of the efforts put in by your Company''s workers, staff and executives for achieving excellent results under diffcult conditions.

STAKEHOLDERS

The Board also wishes to thank its Shareholders, Distributors, Bankers and other business associates for their support during the year.

On behalf of the Board of Directors

R. Kirpalani S. Vaidya

Director – Automotive & Director – Finance

Chief Operating Offcer

B. Kamath

Director – Supply Chain

Mumbai

Dated: 15th March, 2013


Dec 31, 2010

The Directors have pleasure in presenting their Report and Statement of Accounts for the year ended 31st December, 2010.

For the year ended For the year ended 31st December, 2010 31st December, 2009 (Rupees in Crores) (Rupees in Crores)

FINANCIAL RESULTS

Profit before Depreciation, Exceptional Items & Tax 762.17 607.98

Deducting therefrom:

Depreciation 24.33 27.18

Provision for Tax

Current [Including Wealth Tax of Rs. 0.16 Crore

(2009: Rs. 0.16 Crore)] 251.09 206.83

Deferred Taxation (2.49) (7.80)

Fringe Benefit Tax - 0.71

Excess Income Tax provision for earlier years written back (1.07) --

Prof it after Tax 490.31 381.06

Adding thereto:

Balance as per last Balance Sheet brought forward 31.18 50.75

Profit Available for Appropriation 521.49 431.81

The appropriations are:

Dividend

Interim 173.10 123.64

Final 197.82 61.82

Special - 123.64

Tax on Dividend

Interim 28.75 21.01

Final 32.86 10.51

Final 2009 (0.24) -

Special-2009 (0.48) 21.01

Transfer to General Reserve 49.03 39.00

Balance carried forward 40.65 31.18

521.49 431.81

PERFORMANCE

Sales increased by 18% over the previous year to Rs. 2735 crores mainly due to an increase in unit sales realizations and higher volumes.

Costs of materials have increased by 23% over the previous year to Rs.1385 crores due to an increase in Base oil prices and higher volumes.

Pro-active Cost Containment Strategies helped your Company to grow its gross profits by 13%.

Operating & other expenses increased by Rs. 6 Crores only compared to 2009, though there was an increase in spend on Advertisement & Sales Promotion expenses by Rs. 13 Crores, the same being offset by savings in processing charges and miscellaneous expenditure.

Profit before tax increased by 27% over the previous year to Rs. 738 Crores.

Tax rate for the current year has remained at nearly the same level as that of the previous year. Profit after tax increased by 29% over the previous year to Rs. 490 Crores.

BONUS SHARES

As the members are aware, the Board of Directors had recommended, subject to the approval of the shareholders, one Bonus Equity Share for every one Equity Share of Rs. 10/- each held on the Record Date. Accordingly, the approval of the shareholders was obtained by way of a Postal Ballot on 30th March, 2010. The Bonus Shares were thereafter allotted on 13th April, 2010.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement, a Management Discussion and Analysis Report and a Report on Corporate Governance are given as Annexure A and B respectively to this Report.

A certificate from the Statutory Auditors of the Company regarding the Compliance by the Company of the conditions stipulated under clause 49 of the Listing Agreement is also attached to this Report.

The declaration by the Chief Operating Officer pursuant to clause 49(1) (ii) of the Listing Agreement stating that all the Board Members and Senior Management Personnel have affirmed their compliance with the Companys Code of Conduct for the year ended 31st December, 2010 is also attached to this Report and marked Annexure "C".

DIRECTORS RESPONSIBILITY STATEMENT

As required under Section 217 (2AA) of the Companies Act, 1956 your Directors confirm that:

(i) In the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same.

(ii) The Directors 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, 2010 and of the profits of the Company for the year ended 31st December, 2010.

(iii) 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) The Directors have prepared the annual accounts on a going concern basis.

DIVIDEND

The Interim Dividend in respect of the year ended 31st December, 2010 of Rs. 71- per share on 24,72,80,596 Equity Shares was paid to the Shareholders of the Company whose names appeared on the Register of Members on 2nd August, 2010.

The Directors recommend a payment of final dividend of Rs. 8/- per share on 24,72,80,596 Equity Shares.

DIRECTORS

Mr. Amish Mehta resigned with effect from close of business hours of 15th November, 2010 as the Wholetime Director of the Company designated as Director - Finance.

Mr Sujit Vaidya was at the Board Meeting held on 12th October, 2010 and was appointed with effect from the said date as an Additional Director of the Company. At the said Board Meeting, he was also appointed with effect from 16th November, 2010 as a Wholetime Director of the Company designated as Director - Finance.

In accordance with section 260 of the Companies Act, 1956 (the Act), Mr. Vaidya holds office up to the date of the forthcoming Annual General Meeting of the Company. Notice has been received under section 257 of the Act along with the requisite deposit from a shareholder proposing Mr. Vaidya as a candidate for the office of Director.

Your Directors wish to place on record their gratitude for the guidance and advice received from Mr. Mehta during his tenure as a Director of the Company.

Mr. R. Gopalakrishnan and Mr. S. Malekar retire by rotation and are eligible for re-appointment.

The information on the particulars of Directors seeking appointment/re-appointment as required under Clause 49 of the Listing Agreement executed with the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited have been given under Corporate Governance (Annexure B) of this Report.

CONSERVATION OF ENERGY

(a) Energy conservation measures taken:

Energy conservation during the financial year has accrued as a result of the following steps taken at the various factories of the Company:

Patalganga:

1. Tube lights were replaced with compact fluorescent lamps

2. Variable Frequency Drives have been installed on pumps.

3. Energy savers have been installed on air conditioners.

4. Auto on /off system provided for street lighting with day light sensor.

Silvassa:

1. Installation of Variable Frequency Drive for transfer and filling pumps.

2. Automatic stoppage of blending agitators on completion of blending recipe.

Paharpur:

1. Automation of power factor panel to ensure high power factor close to one.

2. Optimising the thermopack efficiency by preventive maintenance.

3. Installation of solar lighting panel for street lights during the night.

4. Variable Frequency Drives installed for air compressor & thermopack pump which has led to energy efficiency.

5. Replacement of pumps with energy efficient pumps.

6. Optimising blending temperature of products which helped reduce energy consumption.

(b) Additional Investments and proposals, if any, being implemented for reduction of consumption of energy.

The measure mentioned in (a) above have led to reduction in fuel and electricity consumption as well as improvement in the productivity.

Further energy efficient luminaries have been installed in the laboratory, supply and dispatch area.

(c) Impact of measures at (a) and (b) above for reduction of energy consumption and the consequent impact on the cost of production of goods.

The measure mentioned above have led to reduction in fuel and electricity consumption as well as improvement in the productivity.

TECHNOLOGY ABSORPTION

1. Site Safety and Security continued to remain an area of focus at the Technology Centre. The Technology Centre transitioned into the "Operating Management System" with a management of change to align with Global Standards.

2. The year 2010 was a year of site upgradation for the Technology Centre. The focus on safety at all levels ensured that your Company completed the year without a single incident.

3. The Research & Development centre was recertified to the latest ISO specification of 9001 - 2008.

4. Huge emphasis was laid on technology protection and alignment with global requirements by ensuring that all product formulations and raw materials have global codes and are entered in databases like Streamline and Fusion.

5. Your Company secured business for various new products with OEMs in India to further strengthen its partnership (TATA Nano, Mahindra & Mahindra, Maruti etc.).

6. Various products were launched throughout the year with superior properties and stronger differentiations. Some key launches were Magnatec 5W-30 and RX CNG. Work is already in progress to make sure your Company has the pipeline managed for product launches throughout the years 2011 and 2012.

7. Formulation optimization initiatives by Technology team with support from Supply Chain and Marketing was an area of focus, which brought about significant savings in raw material costs as well help to manage the security of supplies for our raw materials.

8. Your Company has developed and installed "Truck Driving Simulator" at their Technology Centre to meet increasing requirement for fuel economy and safe driving in India. The project, costing Rs. 4.8 million is aimed at providing such training to drivers. Fuel Economy is a key development area for all the OEMs but limitations are being faced in significantly improving the same by conventional means. A two hour training session of drivers can improve their driving habits resulting in fuel efficient and safe driving contributing to cleaner environment and reduced number of accidents.

FOREIGN EXCHANGE EARNINGS AND OUTGO

1. Activities relating to Export

There were no significant exports by the Company during the year. However, some of the countries where our products were exported were China, Saudi Arabia, and Thailand.

2. Earnings and Outgo

Members are requested to refer to note Nos. 18 & 19 and of Schedule L forming part of the Balance Sheet and Profit and Loss Account for the year ended 31st December, 2010.

PARTICULARS OF EMPLOYEES

The information required to be published under the provisions of section 217(2A) of the Companies Act, 1956 (the Act) read with Companies (Particulars of Employees) Rules, 1975 as amended, forms part of this Report.

AUDITORS

The Shareholders of the Company are requested to appoint Auditors and to fix their remuneration. M/s. S. R. Batliboi & Co., Chartered Accountants, the retiring Auditors have furnished to the Company the required certificate under section 224(1 B) of the Companies Act, 1956 and are therefore eligible for re-appointment as Auditors of the Company.

PERSONNEL

The Board wishes to place on record its sincere appreciation of the efforts put in by the Companys workers, staff and executives for achieving excellent results under difficult conditions.

STAKEHOLDERS

The Board also wishes to thank its Shareholders, Distributors, Bankers and other business associates for their support during the year.

On behalf of the Board of Directors

N. K. Kshatriya R. Kirpalani Vice Chairman Director - Automotive & Chief Operating Officer

S. Malekar S. Vaidya

Director - Supply Chain Director - Finance

Mumbai

Dated: 27th April, 2011


Dec 31, 2009

The Directors have pleasure in presenting their Report and Statement of Accounts for the year ended 31st December, 2009.

For the year ended For the year ended 31st December, 2009 31st December, 2008 (Rupees in Crores) (Rupees in Crores) FINANCIAL RESULTS

Profit before Depreciation, Exceptional Items & Tax 607.98 437 88

Deducting therefrom:

Depreciation 27.18 25.68l Provision for Tax Current [Including Wealth Tax of Rs. 0.16 Crore (2008: Rs. 0.12 Crore)] 206.83 151.00

Deferred Taxation (7.80) (8.60)

Fringe Benefit Tax 0.71 5.75

Excess Income Tax provision for earlier years written back -- 1.68

Profit after Tax 381.06 262.37 Adding thereto:

Balance as per last Balance Sheet brought forward 50.75 32.36

Profit Available for Appropriation 431.81 294.73

The appropriations are:

Dividend

Interim 123.64 74.18

Final 61.82 111,28

Special 123.64 _

Tax on Dividend

Interim 21.01 12.61

Final 10.51 18.91

Special 21.01 __

Transfer to General Reserve 39.00 27.00

Balance carried forward 31.18 50.75

431.81 294.73

PERFORMANCE

Sales increased by 6% over the previous year to Rs. 2685 Crores mainly due to an increase in unit sales realizations and better sales mix.

Costs of Materials have reduced by 14% over the previous year to Rs. 1124 Crores due to a reduction in Base Oil prices.

Pro-active Margin Management strategy helped us to grow our gross profits by 34%.

Operating & other expenses increased by 26%, mainly due to increase in advertisement cost, sales promotion expenses & Salaries.

Profit before tax has increased by 41% over previous year to Rs. 581 Crores.

Tax rate for the current year has remained at nearly the same level as that of the previous year. Fringe Benefit Tax was lower by Rs. 5 Crores during the year as the same was abolished from 1st April, 2009. As a result Profit after Tax increased by 45% over the previous year to Rs. 381 Crores.

BONUS SHARES

The Board of Directors, have at their Board Meeting held on 18th February, 2010, recommended the issue of Bonus shares in the ratio of one Bonus Equity Share for every one Equity Share of Rs. 10/- each held on the Record Date to be fixed in consultation with the stock exchange and subject to the approval of the shareholders and other requisite approvals.

The approval of the shareholders would be obtained by way of a Postal Ballot.

The Bonus shares are entitled to receive dividend that may be declared/paid on or after the allotment of Bonus shares for the financial year ending 31st December, 2010.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement, a Management Discussion and Analysis Report and a Report on Corporate Governance are given as Annexures A and B respectively to this Report.

A certificate from the Statutory Auditors of the Company regarding the Compliance by the Company of the conditions stipulated under Clause 49 of the Listing Agreement is also attached to this Report.

The declaration by the Chief Operating Officer pursuant to Clause 49(1)(D)(ii) of the Listing Agreement stating that all the Board Members and Senior Management Personnel have affirmed their compliance with the Companys Code of Conduct for the year ended 31st December, 2009 is also attached to this Report and marked Annexure "C".

DIRECTORS RESPONSIBILITY STATEMENT

As required under Section 217(2AA) of the Companies Act, 1956 your Directors confirm that:

(i) In the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same.

(ii) The Directors 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, 2009 and of the profits of the Company for the year ended 31st December, 2009.

(iii) 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) The Directors have prepared the annual accounts on a going concern basis.

DIVIDEND

The Interim Dividend in respect of the year ended 31st December, 2009 of Rs. 10/- per share on 12,36,40,298 Equity Shares was paid to the Shareholders of the Company whose names appeared on the Register of Members on 3rd August, 2009.

The Directors recommend a payment of final dividend of Rs.15/- per share (which includes a Special Dividend of Rs. 10/- per share) on 12,36,40,298 Equity Shares.

FIXED DEPOSITS

There were no fixed deposits outstanding and unclaimed as on 31st December, 2009.

DIRECTORS

Mr. S. Mukundan was nominated with effect from 21st April, 2009 to the Board pursuant to Article 112 : of the Articles of Association of the Company in place of Mr. A. K. Jhawar.

Ms. Helen McCabe was nominated with effect from 21st April, 2009 to the Board pursuant to Articles 112 & 114 of the Articles of Association of the Company as an Alternate Director to Mr. P. Hughes in place of Mr. Udayen Sen.

Mr. A. S. Ramchander Wholetime Director of the Company designated as Director - Automotive resigned as a Director of the Company with effect from 30th April, 2009.

Mr. Naveen Kumar Kshatriya resigned with effect from 8th May, 2009 as the Managing Director of the Company. He was thereafter nominated to the Board pursuant to Article 112 of the Articles of Association of the Company as a Non-Executive Director designated as Vice Chairman.

Mr. Ravi Kirpalani was with effect from 1st May, 2009 appointed as an Additional Director of the Company. Consequent to the said appointment, he was also appointed as a Wholetime Director of the Company designated as Director - Automotive and Chief Operating officer. In accordance with Section 260 of the Companies Act, 1956 (the Act), Mr. Kirpalani holds office upto the date of the forthcoming Annual General Meeting of the Company. Notice has been received under Section 257 of the Act along with the requisite deposit from a shareholder proposing Mr. Kirpalani as a candidate for the office of Director.

Mr. R. Hewins was nominated with effect from 28th December, 2009 to the Board pursuant to Article 112 of the Articles of Association of the Company in place of Mr. P. Hughes. Therefore, Ms. H. McCabe who was nominated as an Alternate Director to Mr. Hughes was nominated as an Alternate Director to Mr. Hewins.

Your Directors wish to place on record their gratitude for the guidance and advice received from Mr. Naveen Kumar Kshatriya and Mr. A. S. Ramchander during their tenures as Managing Director and Wholetime Director respectively of the Company.

Your Directors also wish to place on record their gratitude for the guidance and advice received from Mr. A. K. Jhawar, Mr. Udayen Sen and Mr. P. Hughes during their respective tenures as Directors of the Company.

Mr. S. M. Datta and Mr. D. S. Parekh retire by rotation and are eligible for re-appointment.

The information on the particulars of Directors seeking appointment/re-appointment as required under Clause 49 of the Listing Agreement executed with the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited have been given under Corporate Governance (Annexure B) of this Report.

CONSERVATION OF ENERGY

(a) Energy conservation measures taken:

Energy conservation during the financial year has accrued as a result of the following steps taken at the various factories of the Company:

Patalganga:

1. Provision of CFL in the filling and blending plant, Administration block and Quality Control laboratory.

2. Replacement of old air-conditioners with 3 star rating air-conditioners which are more energy efficient.

3. Provision of Variable Frequency drives for few pumps for higher motor rating for energy consumption reduction.

4. Power factor improvement to 0.99 with the installation of additional capacitor banks.

5. Replacement of old defective insulation for a few blenders in the plant for improved heat transfer and reduced heat losses.

6. Reduction in batch cycle time through lean six sigma methodology.

7. Boiler and steam distribution system audit through external agency.

Silvassa:

1. Installation of servo controlled stabilizer in lighting circuits has helped to cut down the wastage of electrical energy.

2. Installation of new air receiver of similar capacity to reduce the energy waste.

3. Fuel Saving through measures such as use of combustion efficiency enhancing additives, regular monitoring of excess air in Thermopack & Operational control to switch off firing of thermopack 2 hours before switching of the unit.

4. Variable Frequency Drive installed to regulate the speed and optimize the head of hot oil circulation pump leading to energy saving.

Tondiarpet:

1. Reduction in the specific consumption of electricity by optimizing its usage.

2. Initiatives in maintaining the power consumption and demand within the sanctioned load. This includes auto cut off switch for the air-conditioners in the plant and monitoring of the light load.

3. Effective planning of blending operations leading to reduction in boiler run hours.

4. Insulation of few blenders done to improve heat transfer and reduce heat losses. Automatic blow down control for boiler thereby eliminating wastages due to uncontrolled/ manual operation.

5. Process Improvements through implementation of lean project recommendations on process optimizing and elimination of wastages.

Paharpur:

1. Replaced a few inefficient pumps by energy efficient pumps.

2. Old office air-conditioners replaced by energy efficient air-conditioners.

3. Effective monitoring and corrective actions to eliminate water leakages & wastages.

4. Up-gradation of Capacitor Panel and replacement of Automatic Power Factor controller relay for maintaining close to unity power factor.

5. Up-gradation of Temperature Controller Panel to eliminate wastages and conserve energy.

6. Reduction in Batch Cycle Time of some of the blends through process optimization.

(b) Additional investments and proposals, if any, being implemented for reduction of consumption of energy:

1. Steam pipeline modification in blending Plant. Additional steam traps and flash vessels for better condensate recovery.

2. Variable frequency drive for tanker unloading & additive transfer pumps.

3. Solar lights for the boundary wail.

(c) Impact of measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods:

The measure mentioned in (a) and (b) above have led/would lead to reduction in fuel and electricity consumption as well as improvement in the productivity.

TECHNOLOGY ABSORPTION

1. Site Safety and Security remained an area of focus at the Technology Center. Operating Management System was initiated to identify safety critical processes and align compliance with Giobal Standards. Integrity Management was also implemented.

2. Year 2009 was a year of Site upgradation for the Technology Center. The focus on safety at all levels ensured that the Company completed the year without a single incident.

3. Old Electrical Panels were removed and modern compact Electrical room with possibility of reduced power factor was constructed.

4. Critical contributions made towards Project Tansen, which was launched globally for creating superior technology communications for target customers.

5. Old Machine Test Laboratory was renovated to design a world class Customer Engagement Centre as well as Canteen Extension was carried out.

6. Plant area which was being used for storage was demolished and the Company is in the process of having a recreation centre along with car parking facilities.

7. Automotive and Industrial laboratories were audited by global teams and found to comply with global standards.

8. Greater emphasis was laid on technology protection and alignment with global requirements by ensuring all product formulations and raw materials have global codes and are entered in databases like Stremline and Fusion.

9. Syntheticisation journey continued with more products like Activ4T being manufactured with synthetic technology and product superiority communications made for the target customer segments.

10. Project Pavarotti activities continued in India to improve awareness of lubricant technology amongst all levels of staff. More than 100 staff members at Plants and offices were trained for the basic Bronze module. Advanced training was also provided to marketing/sales staff as well as new recruits through Silver and product immersion modules. This was extended to cover external customers through conducting technology CAFE.

11. Formulation optimization initiatives by the Technology team with support from Supply Chain and Marketing departments was an area of focus, which brought about significant savings in raw material costs.

FOREIGN EXCHANGE EARNINGS AND OUTGO

1. Activities relating to Export

There were no significant exports by the Company during the year.

2. Earnings and Outgo

Members are requested to refer to note Nos. 18 and 19 of Schedule M forming part of the Balance Sheet and Profit and Loss Account for the year ended 31st December, 2009.

PARTICULARS OF EMPLOYEES

The information required to be published under the provisions of Section 217(2A) of the Companies Act, 1956 (the Act) read with Companies (Particulars of Employees) Rules, 1975 as amended, forms part of this Report.

AUDITORS

The Shareholders of the Company are requested to appoint Auditors and to fix their remuneration. M/s. S. R. Batliboi & Co., Chartered Accountants, the retiring Auditors have furnished to the Company the required certificate under Section 224(1 B) of the Companies Act, 1956 and are therefore eligible for re-appointment as Auditors of the Company.

PERSONNEL

The Board wishes to place on record its sincere appreciation of the efforts put in by the Companys workers, staff and executives for achieving excellent results under difficult conditions.

STAKEHOLDERS

The Board also wishes to thank its Shareholders, Distributors, Bankers and other business associates for their support during the year.

On behalf of the Board of Directors

N. K. Kshatriya R. Kirpalani Vice Chairman Director - Automotive & Chief Operating Officer

A. P. Mehta S. Malekar Finance Director Director - Supply Chain

Mumbai

Dated: 19th March, 2010

Find IFSC