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Directors Report of GOCL Corporation Ltd.

Mar 31, 2015

The Directors have pleasure in presenting their Fifty Fourth Annual Report and Audited Accounts for the year ended 31st March 2015.

1. FINANCIAL RESULTS :

2014-15 2013-14 (Rs. Lakhs) (Rs.Lakhs)

Profit after providing for Depreciation of Rs.145.66 lakhs ( Rs.1443.08 lakhs ) and before extraordinary items and taxation 3161.85 8748.14

Exceptional Items 1025.31 (865.52)

Profit Before Taxation 4187.16 7882.62

Taxation:

Current Tax 874.00 2790.00

Deferred 245.00 (741.00)

Profit After Taxation 3068.16 5833.62

Balance brought forward from previous year 18425.02 16091.26

Balance available for appropriation 21493.18 21924.88 Adjustment on account of additional depreciation (Refer Note 3 of Financial Statements) Appropriations:

Interim Dividend paid - 2478.62

Proposed Dividend 991.45 -

Tax on dividend 198.24 421.24

Transfer to General Reserve 310.00 600.00

Balance carried to Balance Sheet 19846.50 18425.02

EPS (in Rs.) 6.19 5.88

Since the Company has demerged its erstwhile Lubricants Division effective from 1 st April 2014 and transferred the same to Gulf Oil Lubricants India Ltd., the financials for 2014 - 15, exclude the Lubricants business and hence not comparable with the fina ncials of the Company for the previous financial year.

2. DIVIDEND

The Directors are pleased to recommend the payment of Dividend of Rs. 2.00 per share (Rs. 2.50 per share, including Special Dividend of Rs. 0.30 equivalent to 15% on the occasion of Demerger of Lubricants Division) on the Paid Up Capital of the Company. The dividend of Rs. 11.90 crores (Rs. 24.79 crores), if approved by the Shareholders at the Fifty Fourth Annual General Meeting, will be paid out of the profits for the current year to all Shareholders of the Company whose names appear on the Register of Members as on the date of the Book Closure.

3. OPERATIONS

The total turnover of the Company was Rs. 116.10 crores ( previous year Rs. 1100.22 crores ). The profit before exceptional items and taxation was Rs. 31.62 crores (Rs. 87.48 crores). The profit before tax was Rs. 41.87 crores ( Rs. 78.83 crores ). The profit after provision for current tax of Rs. 8.74 crores and deferred tax of Rs. 2.45 crores was Rs. 30.68 crores ( Rs. 58.34 crores ) resulting in an EPS of Rs. 6.19 for the year ( Rs. 5.88 ).

4. DIVISIONAL PERFORMANCE MininlS

4.2 Detonators and Accessories (Energetics)

Domestic markets for explosives and detonators / accessories recorded a negative growth in 2014 – 15 mainly on account of slowdown in production in the metal sector, uncertainty in private coal mining and consequent over supply and price decline in the trade market.

However, the gross turnover of the Division was at Rs. 79.99 crores as against Rs. 69.77 crores in the previous year. The Division has manufactured 53.75 million Detonators (92.42 million), 19.05 million meters of Detonating Cord (4.05 million meters), Explosives 811.50 tonnes (272.50 tonnes) and e-det 84,025 Nos (27,200 Nos) during the year 2014-15.

The production for the domestic market and sales of non-electric detonators was high along with underground products. But surface detonators and trade detonators were affected due to market conditions. Export production however, was increased for surface dets, detonating fuse and non-electrics as the demand was good.

Overall the demand from the trade segment remained sluggish but larger mining projects'' requirements were steady and fully met. Production of Special Products for Defence and Space applications increased and several new products were developed during the year. All these new products found acceptance from the defence laboratories and companies. Production of these items will be increased during the current year.

The Division increased its focus on more value added products such as Raydets, E-dets and Cord Relays.

The Company markets its Detonators and Accessories through IDL Explosives Limited, a wholly owned subsidiary. This arrangement has been necessitated on account of market conditions, as customers prefer to place combined orders for industrial explosives and accessories.

4.3 Mining and Infrastructure

Mining and Infrastructure suffered in the last 4 years due to various issues with the Government / regulatory bodies and our operation was scaled down drastically. Commencement of mining projects is expected to take more time and is largely dependent on Government policy announcements. However, events in 2014- 15 have indicated that this sector being the life-line for the growth of the country, is going to be revived. During the year mining activity in parts of the country picked up with renewed business confidence and growing industrial activity.

In this background, the Division had taken up a few infrastructure projects along with a mining contract for reputed industrial house and achieved a turnover of Rs. 19.10 crores with a profit of Rs. 5.79 crores for the year.

The large equipment bank of excavators, heavy duty earth moving tippers, dozers, etc. which impaired during the last year in view of the bleak mining scenario, have now been sorted. The older equipment has been disposed and all the operating equipment are currently being put into use for various mining projects. Our current focus is in the mining areas in eastern India with large corporate where the Division had operations earlier.

4.4 Other Business Groups

The 4 Wind Mills ( 1 MW ) located at Ramagiri in Andhra Pradesh generated 33,100 units ( 1,44,307 units ). The Hyderabad facto ry received the benefit of the generation through the TRANSCO grid.

4.6 Exports

Export Sales of Explosive Accessories which declined to Rs. 9 crores in the previous year bounced back to Rs. 24.70 crores in the current year with the re-commissioning of the Detonating Cord production facility at Hyderabad. The Division is exploring higher volumes and new markets / opportunities to offset the high incidence of freight and handling costs on account of statutory compliances.

4.7 Property Development

Bangalore:

In the "Ecopolis" project, located at Yelahanka, Bangalore, out of the total built-up area of about 77.31 lacs sq. ft., the construction by the Developer Company ( "HRVL" ) has been completed to the extent of 14.54 lacs sq. ft. This comprises of one Main Building ( Block 3 ) plus a Multi-Level Car Park space.

All MEP services such as lifts, internal and external electrical & plumbing and HVAC services have been installed and completed . The main trunk road within the site from Bellary Road till Block 3 is completed. The external façade works are under completion.

Approvals for the start of construction of Block 2 are in place. Contract for the civil work has been finalized and excavation for start of the second block comprising of 10 lacs sq. ft. approx. is also completed.

The Company has undertaken civil construction works to the extent of Rs. 9 crores in this project. During Q1 of 2015-16, the Company will be undertaking further civil works of Rs. 4 crores approx.

Hyderabad:

The Master Plan for the project has been drawn up by the Developer Company, Hinduja Estates Private Ltd. ( "HEPL" ) through reputed Architects. The development will be an Integrated Residential Commercial Township which will comprise of residential apartments, IT / commercial office spaces, Health care and educational areas. The development will also have areas for the hospitality industry.

The Company has surrendered approximately 9 acres of land for development of new and widening of existing road to improve the infrastructure in the vicinity of the Hyderabad factory. For the areas surrendered Transferable Development Rights ( TDR ) and Impact fee concessions would be made available to the Company.

In the quarter ended December 2014, the Company sold its share of Transferable Development Rights ( TDR ) to the Developer Company at a value of Rs. 922 lakhs.

In the quarter ended March 2015, the Company earned further revenue of Rs. 350 lakhs, being the initial amount payable by the Developer Company towards remission of impact fees payable for approval of high rises.

5. OVERSEAS ACQUISITION

In December 2012, the Company had acquired 100% stake in Houghton International Inc, in USA through its 100% subsidiary HGHL Ltd in the UK, which was reduced to 10% as a result of infusion of fresh capital by Gulf Oil International into the Houghton intermediary holding entity, as a measure of de-risking and de-leveraging. Simultaneously, the Company has been released of all its obligations to the lenders. The new investor has taken over the obligations for repayment of the $ 180 mn loan obligation. Thus the Company retains 10% stake in Houghton through a subsidiary. The Company will realize the investment at an appropriate time so as to fetch optimum value to the Company. Further, the Company continues to receive commission towards providing of security of its properties for the said loan.

6. RESTRUCTURING OF THE COMPANY

The Company has demerged the Lubricants Undertaking into a separate company, namely Gulf Oil Lubricants India Limited (GOLIL ) with effect from 1st April 2014. The shares of GOLIL which were allotted to the Shareholders of the company are also listed on BSE Limited and the National Stock Exchange of India Limited, with effect from 31st July 2014. As part of the aforesaid Scheme, the share capital of the Company was reduced by half. The Demerger proved to be a substantial value enhancer to the Shareholders as expected.

7. PROMOTER OF THE COMPANY

As part of internal restructuring by the promoter group entities, Hinduja Power Limited, Mauritius ( HPL ) became the Holding Company and Promoter of the Company, by acquiring the entire shareholding from Gulf Oil International (Mauritius) Inc. by way of inter-se transfer on 17th March 2015. HPL has subsequently acquired further 4.99% of the equity share capital of the Company, increasing their shareholding to 64.94%.

8. INTERNAL CONTROL SYSTEMS

Your Company has in place a robust Internal and Financial control systems which assists the Board and Management to fulfill business objectives, safeguards the shareholders''interest, financial transactions and company''s assets. The primary objective of our internal control framework is to ensure that internal controls are established, properly documented, maintained and adhered to in each functional department for ensuring orderly and efficient conduct of business which includes proper use and protection of the Company''s resources, accuracy in financial reporting, compliance with the statutes, timely feedback on achievement of operational and strategic goals. The Company''s internal control system, supported by SAP ERP implemented a few years ago, is driven by well defined policies and procedures across its business divisions. In addition the Company is ISO 9001(QMS), ISO 14001(EMS) and ISO 18001 (OHSAS) compliant which provides added comfort to our business partners and regulatory bodies.

The Company has an Internal Audit function which provides the Audit Committee and the Board of Directors an independent, objective and assurance of the adequacy, efficiency and effectiveness of the Organization''s risk management, internal and financial control and corporate governance processes. The Audit Committee/Board approved annual audit plan prepared in consultation with business heads and inputs obtained from the Company''s statutory auditors ensures coverage of significant areas of operations with a risk based approach in order to conduct the audit in an efficient and timely manner. Process reviews for critical functions at all locations are performed in accordance with the audit plan. The function also assesses opportunities for improvement in business processes, systems and controls; provides recommendations to the Senior Management.

The Audit Committee of the Board of Directors regularly meets to review the significant audit findings, action taken thereon, adequacy of internal and financial controls and implementation of various comprehensive policies. During the year, the Audit Committee met six times to review the reports submitted by the Internal Audit Department. The Audit Committee also regularly meets the Company''s Statutory Auditors to ascertain their views on the business, adequacy of the internal control systems in the Company and their observations on the financial reports.

9. PUBLIC DEPOSITS

The Company has during the previous financial year repaid / prepaid all the public deposits and there are no outstanding public deposits at the beginning of the year under review. The Company has not accepted any public deposits during the year under review. The Board of Directors of the Company will consider accepting fresh public deposits at the appropriate time, in view of the regulatory changes under the Companies Act 2013.

10. TAXATION

Odisha Sales Tax

The matter pertaining to the transfer of finished goods from Rourkela factory (since transferred to IDL Explosives Limited as part of the Demerger) situated in the State of Odisha to other States.

Tax Revision Petition in respect of assessment years viz 1976-77 to 1983-84 filed before the Commissioner of Commercial Taxes at Cuttack had been dismissed in February 2012. Against the said dismissal fresh Writ Petitions were filed in March, 2013 in th e Odisha High Court.

In respect of assessment year 1998-99 application for rectification of apparent errors in its order was filed before the Odisha Sales Tax Tribunal in January 2014. The appeal filed before the Central Sales Tax Appellate Tribunal was withdrawn.

As regards the assessment years 2002-03, 2004-05 and 2005-06, the 2nd appeal filed before the Odisha Sales Tax Tribunal and application for stay filed before the Commissioner of CommercialTaxes. Against the order of Commissioner of Commercial Taxes in stay application, Writ Petition was filed in the Odisha High Court for the same assessment years. The Company filed Review Petition in the High Court of Odisha against its order in the Writ Petition.

11. RESEARCH & DEVELOPMENT

The in-house R&D developed and implemented a shift in the process technology of Delay Detonator Elements manufacture from Alloy Lead to Soft Lead metal thus simplifying the process with a more compact layout while achieving better quality and safety. Significant work was also done in manufacture of PETN to modify the crystallization/granulation that eliminates reprocessing of batches and enables better utilization in different products. R&D work on the Electronic Detonator system was carried out to double the capability of the system to handle single blasts of over 300 holes as against the earlier limitation of 150 holes making the system suitable for larger mines.

In the special products category, a host of critical components and chemicals were developed for Missile applications in the Defence sector. These included squibs, ignitors, fuseheads and pre-charge assemblies for various types of missiles.

12. SUBSIDIARIES:

The Company has four subsidiaries. Of which, only one is a material one, namely IDL Explosives Limited. The UK subsidiary is an SPV incorporated for the purpose of overseas acquisition. The remaining two subsidiaries do not, at present, undertake any business activity. The annual performance of the subsidiaries is as under:

- HGHL Holdings Limited, UK reported a profit of Rs. 486.45 lakhs (Rs. 412.68 lakhs).

- IDL Explosives Limited reported a profit of Rs. 722 lakhs (Rs. 431.13 lakhs).

- IDL Buildware Limited reported a profit of Rs. 553.51 lakhs ( Rs. 5.19 lakhs).

- Gulf Carosserie India Limited inucrreded a loss of Rs. 0.19 lakhs ( profit of Rs. 2.38 lakhs).

Gulf Oil Lubricants India Limited (formerly known as Hinduja Infrastructure Limited), ceased to be subsidiary of the Company during the year under review, consequent to the demerger of the Lubricants Division and transfer of the same to the said Company .

A statement containing salient features of the financial statement of the Company''s Subsidiaries (in Form-AOC-1) is attached as Annexure-A .

13. HUMAN RESOURCES / INDUSTRIAL RELATIONS:

The Energetics Division at Hyderabad has continued to maintain cordial industrial relations, with low absenteeism while maintaining output levels. Programmes were conducted to improve the competency levels of workmen.

As part of strategic plans and enhancing capability building for our employees in the Energetics Division, based on the perform ance Management System and training need identification, extensive training program on Statistical Quality control has been introduc ed at Hyderabad Works for core group comprising Production, Maintenance, Quality control, Materials and Safety Departments to improve Operational Efficiency without compromise on Quality and Safety standards. Regular Training programs have been conducted on Safety for Executive Staff and workmen to re-emphasize importance of Safety Systems.

As a measure to improve focus and ensure alignment of Organization goals, Strategic HR interventions are being implemented in the Energetics Division.

Staff Welfare

The Energetics Division has also demonstrated its commitment to recognizing employee performance by conducting employee of the Month awards to recognize exceptional performances by employees and inculcating a commitment to perform beyond the regular roles and responsibilities.

Safety

Various programmes have been conducted during the year covering Safety Awareness, Alteration Authority, Job Safety Analysis (JSA), Hazard Identification, Risk Assessment, Risk Control (HIRARC). In addition, Internal / External Safety Audits; Safety Committee Meetings on regular basis; Job Study Analysis; HIRA / HAAZOP studies, SQC ; First Aid Training; Fire & Safety aspects and Emergency Rescue methods, have helped to strengthen the overall safety and disaster management processes in the Hyderabad Factory.

Preventive Health Check-ups

As part of preventive healthcare, the Hyderabad Factory organized series of free medical check-ups, consisting of Diabetes, Cardiology, Orthopedic and General Medical Check up, to all the employees.

Security

As part of enhanced security of the Hyderabad Factory and other assets of the Hyderabad Works, compound walls have been reinforced, height raised and fencing of barbed wire & concertina coils provided. Other measures include CC TV monitoring at Ke y areas especially magazines relaying of patrolling route, erection of watch towers and construction of additional Security Check posts, installation of tower flood lights for better night illumination, installation of guard monitoring systems for effective patrolling checks. Communication systems from magazines watch towers through land lines have been streamlined. As such over the years considerable additions and precautions have been added to strengthen the Security of the Factory.

Employment Practices

The Company believes in fair employment practices and is committed to provide an environment that ensures that every employee is treated with dignity and respect and afforded equitable treatment. The Company has a large proportion of women on the workforce and has adopted a Policy in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules made thereunder. The Company has not received complaints in this regard, during the year.

14. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The Company has during the year under review acquired an additional 60,00,000 Equity Shares at par Face Value of Rs. 10 in its subsidiary, IDL Explosives Ltd., aggregating to Rs. 6.00 crores. The Company has further made an investment of Rs. 38,67,800 in the equity shares @ Rs. 100 per share at par, of Gulf Ashley Motor Limited, by way of Rights. The Company has provided guarantee/ security during the year to Gulf Oil Lubricants India Limited of an amount of Rs. 345.50 crores pursuant to the Scheme of Arrangement.

The Company subsequently divested the shares of Gulf Ashley Motor Limited due to synergy issues.

15. OUTLOOK FOR THE CURRENT YEAR, OPPORTUNITIES AND THREATS

The growth of the industrial sector in India is dependent on the large extent on mining. Mining constitutes 10 – 11% of the total industrial sector. The Government plans to increase GDP by 7 – 8%, and, therefore development and growth of basic industries such as iron and steel, cement, aluminum, copper, etc. have to be nurtured. Mining activities supporting these basic industries will therefore be in the Government focus, if GDP target of 7.5% annual growth is to be achieved. In fact, during 2014 – 15 the new Union Government''s first year in office mining activities showed a marginal growth of 1.4% as against 0.6% negative in 2013 – 14.

15.1 Detonators and Accessories

The demand for explosives and accessories registered a contraction in volumes in 2014 – 15. With the growth of the economy in general & mining in particular demand pattern is expected to grow steadily in all coal and metal sectors. It is expected to grow around 50% over the next 4 /5 years. The products of the Division will, therefore, grow year on year. However, there is expected to be a change in product-mix as high volume trade items have changed to higher end initiating systems such as non electrics, electronic detonators due to the change in storage and licensing requirements for Ammonium Nitrate.

The Division has also recorded healthy growth in export where the demand has increased especially in Africa, Middle East and East European countries. In the meantime, with intense follow up from the industry the Government of India has permitted export of explosives material from Chennai port in addition to Mumbai. This will help to improve the flexibility of availing vessels and reduce handling as well as freight cost. This will increase the competitiveness of exports.

The improvement in production process and quality systems in the Hyderabad plant has helped to improve the demand for the products besides making them competitive. As a result, in the recent tenders from Coal India Limited, the major consumer of explosives and initiating devices in the country, the Company has won large orders compared to the previous years.

The Company is poised to grow steadily over the next few years on the basis of favourable decisions from tender driven PSUs such as Coal India, Singareni Collieries, NMDC, etc. and large non-PSU organizations, supported by growth in export business. Special products for Defence and Space agencies along with sophisticated products such as the electronic detonator range would add to the business volumes of this Division.

15.2 Mining and Infrastructure

The Division which has had rich exposure in providing support services to the mining industry with services such as mine planni ng, execution of mine plans, overburden removal, extraction of ore, crushing and grading of ore, etc. should be able to grow and recover its former activities levels. The Government has already fast tracked various mining related regulatory issues, a few actions are already visible but will take time to yield visible results. The Government has recently allotted / re-allotted coal blocks which were earlier cancelled by the Supreme Court. Most of these mines are expected to commence operations shortly giving ample opportunities for the Division. We expect the mine scenario in the country to grow at a healthy pace after nearly four years of downtrend.

The Division is already tendering / quoting for projects over the last few months and should be able to finalise some of the projects during the year.

In preparation for infrastructure work, which is also in the Government focus, the Division has started taking elevated road, bitumen roads and other building projects in order to qualify for larger projects.

15.3 Realty

In Bangalore, with the completion of the first building and multi-level car park of 15.54 lakhs sq.ft., the 2nd Building of another 10 lakhs sq.ft. has been started. The elevated approach road to the 2 buildings is also in place. Marketing of the space in the first building will be completed in the coming year.

Major initiatives for the economic development of the State announced by the new Telangana State Government such as industry specific clusters for IT, foundry, solar energy, cinema city, AIIMS, etc. is expected to increase the demand for realty space in Hyderabad. Planning work relating to the project is being modified anticipating the emerging demand pattern and approvals are being sought on sector-wise basis.

Based on an assessment and feedback on current market needs, detailing for Phase 1 of 11 lakh sft, which will mainly be a residential development alongwith neighbourhood shopping, is being readied for statutory approvals.

16. RISKS & CONCERNS AND RISK MANAGEMENT

Pursuant to the Companies Act 2013 and Clause 49 of the Listing Agreement, the Board has authorized the Audit Committee to review the risk management plan of the Company from time to time. The executive Management identifies, evaluates business risks from time to time and furnishes the same to the Audit Committee along with risk mitigation plan. The Audit Committee reviews and renders advice for minimizing adverse impact, if any.

The key business risks identified by the Company and its mitigation plans are as under:

16.1 Environmental Risks

Regular safety audits are carried out by internal safety audit teams and at regular intervals by external teams. General Safety Directions (GSDs) are strictly enforced in all factories and plants within the factories to ensure minimisation of risk. In addition, strict compliance of the requirements of the Explosives Act and Rules are ensured to protect the exposure of adjacent neighbourhoods to the explosives and accessories factories from undue risk. Operations are carried out to comply with emission, waste water and waste disposal norms of the local authorities of the respective factories. In addition, the Hyderabad Factory has implemented the Integrated Management System incorporating ISO 14001 and OHSAS 18001.

16.2 Operational Risk

Licensing

The Energetics Division operates in a highly regulated and licensed industry environment and amendment / revision in licenses a re required based on expiry of the licenses and change in production capacity and process. Amended / revised licenses for increase in license capacity for any of the explosives products may get delayed temporarily or for long periods thereby limiting our ability to cater to any increase in demand for these products from our customers. Non-availability of licenses / approvals for expansion of new products could affect our future growth and expansion plans. The Division, therefore, ensures that approvals are applied for well in advance to avoid launch dates / export of products and active follow up is maintained to get approvals in time.

Location Risks

Manufacturing facilities of our major subsidiary, are spread across six States. The optimum locations for packed explosives unit is determined by the customer location and the source of raw material. The advantage of the location of bulk explosives units is optimized to be close to the customer location. With changes in sources of raw material our location may not continue to be optimal in comparison with the competition. Moreover, if there is a consolidation in the industry, and the size of each manufacturing units go up, we may be disadvantaged by being sub-optimal.

Raw Materials

Many of the inputs of the Company and its major subsidiary are imported, availability of which is affected by global market situations. Also, prices of such items are volatile. Timely availability of raw materials is critical for continuous plant o perations. The Company seeks to mitigate the risk by entering into long-term relationship with global raw material suppliers, with suitable escalation clauses to ensure regular supplies.

With crude oil prices showing an uptrend after an unexpected fall during the last six months or so, the raw material prices and input costs are expected to increase. The Company seeks to mitigate the risk by entering into long-term relationship with global raw material suppliers, with suitable escalation clauses to ensure regular supplies.

16.3 Market Risks:

Markets

The Company and its major subsidiary operate in highly competitive markets where competition from all India players as well as regional players is high. The Energetics Division which manufactures explosive accessories and the Mining and Infrastructure Division operate in tender-driven markets, sometimes with onerous and unreasonable performance clauses. Therefore, there is a risk of cost increases not possible to be passed on to ultimate consumers. Any reversal in growth trend in the economy in general and weak monsoons in particular, could affect demand and consequent deceleration in manufacturing industry

Concentration of Customers

The Mining and Infrastructure Division which currently undertakes mining services in coal, iron ore and limestone sectors, is exposed to business risks on account of non-availability of environmental clearances in time and lack of adequate infrastructure for dispatch of ores from the mine, especially during the rainy seasons. In view of this, detailed review of approvals and quality of infrastructure is carried out before undertaking mining service contracts. Both the Energetics and Mining & Infrastructure Divisions are operating in the mining and infrastructure sectors, dominated by the PSUs, where the tendering system is in vogue, with the attendant risks. Missing L1 to L3 status in these tenders might result in loss of business opportunities for extended periods for the relevant tender(s).

16.4 Financial Risks:

Currency Value and Interest Rate Fluctuations

Financial risk management is done by the Finance Department at the various business Divisions and at Corporate Office under policies approved by the Board of Directors. Policies for overall foreign exchange loss risks and liquidity are regularly reviewed based on emerging trends. Interests'' risks arising out of financial debt, are normally done at fixed rates or linked to LIBOR and appropriate Bank lending rates. Adverse movement of Rupee from current levels may further impact base oil and ammonium nitrate rates.

Credit Risk

The Company and its major subsidiary sometimes sell its products by extending credit to customers, with the attendant risk of payment delays and defaults. To mitigate the risk, a credit risk policy is also in place to ensure that sale of products are made to customers after evaluation of their ability to meet financial commitments through allotment of specific credit limits to respective customers. Credit availability and exposure is another area of risk.

Liquidity Risk

The Company and its major subsidiary operate in working capital intensive industries. The Company realizes that its ability to meet its obligations to its suppliers and others is linked to timely and regular collection of receivables and maintaining a healthy credit rating. Review of working capital constituents like inventory of raw materials, finished goods and receivables are done regularly by the respective Divisions and closely monitored by Corporate Finance.

16.5 Legal and Statutory Risks:

Contractual Liability

All major contracts are reviewed / vetted by the in-house Legal department before the same are executed. In addition, the Company engages the services of reputed independent legal counsels, on need basis. In matters of tax law and other statutory obligations the outcome of litigation cannot always be predicted. Hence, appropriate financial provisions, insurance policies and credit lines are taken to limit the risk for the Company.

Litigation Risks:

The Company is exposed to the risk of litigation of prolonged nature. Apart from the Tax Matters referred to in the Financial Statements, Litigations having a major impact on the Company include those with Udasin Mutt pertaining to leased lands of Hyderabad Works, Competition Commission of India, which are being pursued by the Company with the appropriate Court/ Tribunal.

16.6 IT Risks

The Company is dependent on intra-office and inter-office networks, as well as several business software operated from the Corporate Office and the business Divisions. Failure of system networks and consequential loss of business is attempted to be minimised by critical systems being operated on secured servers with regular maintenance, regular back up and off-site storage of data, selection of suitable firewall and virus protection systems / software.

16.7 Other Risks

Various assets of the Company including plant and machinery, stocks, buildings, furniture, office equipment and computer system s could suffer damages / loss owing to occurrences like fire, accidental mishaps, etc. The Company has taken insurance covers to protect these assets from possible damage / loss.

While the Company undertakes regular review of remuneration structures, threat of poaching by competitors, especially, new entrants in the industry of key persons is possible. Such actions could lead to temporary drop in efficiency and performance in the specific areas.

17. DIRECTORS

During the year, Mr.Sanjay G Hinduja ceased to be Director of the Company. However, the Board has appointed him as the Chairman Emeritus of the Company in recognition of his valuable contributions made over the last more than twelve years and to be able to avail of his advice from time to time. Ms.Vinoo S Hinduja (Alternate: Mr.K.C.Samdani), Mr.Ramesh V Rao and Mr. Prakash Shah have resigned as Directors of the Company. The Board wishes to place on record its appreciation for the valuable guidance received from them from time to time.

Mr.Ajay P. Hinduja had been appointed as Director of the Company in the casual vacancy caused by the resignation of Mr.Ramesh V Rao. He is proposed to be appointed as Director liable to retire by rotation.

Mr. Ajay P. Hinduja holds a Degree in Economics from the University of Geneva, with specialisation in Finance. He has had varied experience in the International Banking arena, including as ''Director'' and ''Member'' of the Management Committee of Amas Bank (Switzerland) Ltd. {presently named "Hinduja Bank (Switzerland) Ltd."} since 1996.

In accordance with the provisions of the Companies Act 2013 and the Articles of Association of the Company Mr.Ramkrishan P. Hinduja retires by rotation at the 54th Annual General Meeting of the Company and is eligible for reappointment.

The number and details of the meetings of the Board and other Committees are furnished in the Corporate Governance Report.

The Independent Directors have furnished declaration of independence under Section 149 of the Companies Act 2013.

Familiarization Programme for Independent Directors

The Company familiarizes its Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company, etc. through various programmes on a continuing basis. The Familiarisation programme for Independent Directors is disclosed on the Company''s website.

Separate Meeting of Independent Directors

A separate meeting of Independent Directors of the Company, without the attendance of Non-Independent Directors and members of management, was held on 24th March, 2015, as required under Schedule IV to the Companies Act, 2013 (Code for Independent Directors) and Clause 49 of the Listing Agreement. At the Meeting, the Independent Directors:

- Reviewed the performance of Non-Independent Directors and the Board as a whole;

- Reviewed the performance of the Chairman of the Company, taking into account the views of Executive Director and Non- Executive Directors; and

- Assessed the quality, quantity and timeliness of flow of information between the Company management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

All the Independent Directors attended the Meeting of Independent Directors.

Board & Directors'' Evaluation

Pursuant to the provisions of the Companies Act 2013 and Clause 49 of the Listing Agreement, the Board, its Committees and the Directors have carried out annual evaluation / annual performance evaluation, covering various aspects of the Board''s functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance. The performance evaluation of the Independent Directors was carried out by the entire Board. The criteria for performance evaluation are as follows: Role & Accountability

- Understanding the nature and role of Independent Directors'' position.

- Understanding of risks associated with the business.

- Application of knowledge for rendering advice to management for resolution of business issues.

- Offer constructive challenge to management strategies and proposals.

- Active engagement with the management and attentiveness to progress of decisions taken. Objectivity

- Non-partisan appraisal of issues.

- Own recommendations given professionally without tending to majority or popular views. Leadership & Initiative

- Heading Board Sub-committees.

- Driving any function or identified initiative based on domain knowledge and experience. Personal Attributes

- Commitment to role & fiduciary responsibilities as a Board member.

- Attendance and active participation.

- Proactive, strategic and lateral thinking.

Directors'' Appointment and Remuneration Policy

The Nomination and Remuneration Committee is responsible for developing competency requirements for the Board based on the industry and strategy of the Company and formulates the criteria for determining qualifications, positive attributes and independence of Directors in terms of provisions of Section 178 (3) of the Act and Clause 49 of the Listing Agreement. The Board has, on the recommendations of the Nomination & Remuneration Committee framed a policy for remuneration of the Directors and Key Managerial Personnel. The objective of the Company''s remuneration policy is to attract, motivate and retain qualified and expert individuals that the company needs in order to achieve its strategic and operational objectives, whilst acknowledging the societal context around remuneration and recognizing the interests of Company''s stakeholders.

The Non-Executive Directors (NED) are remunerated by way of Sitting Fee for each meeting attended by them and an annual commission on the profits of the Company. Commission to respective non-executive directors is determined on the basis of an objective criteria discussed and agreed upon by the Committee Members unanimously. NEDs are reimbursed any out of pocket expenses incurred by them in connection with the attendance of the Company''s Meetings.

PARTICULARS OF EMPLOYEES AND REMUNERATION

The information required under Section 197 (12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed as Annexure B. The information required under Rule 5 (2) and (3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in the Annexure forming part of the Report. None of the employees listed in the said Annexure is related to any Director of the Company.

18. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is annexed herewith as Annexure C.

19. INFORMATION ON STOCK EXCHANGES

The Equity shares of the Company are listed on BSE Limited and the National Stock Exchange of India Limited and the Listing Fee s have been paid to them uptodate.

20. CORPORATE GOVERNANCE

A detailed report on the subject forms part of this report. The Statutory Auditors of the Company have examined the Company''s compliance and have certified the same as required under the SEBI Guidelines. Such certificate is reproduced in this Annual Report.

21. DIRECTORS'' RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134 of the Companies Act 2013:

(a) that in the preparation of the annual accounts/financial statements for the financial year ended 31st March 2015, the applicable accounting standards had been followed along with proper explanation relating to material departures, if any;

(b) that the accounting policies as mentioned in the financial statements were selected and applied consistently and reasonable and prudent judgments and estimates were made so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

(c) that proper and sufficient care had been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) that the annual accounts were prepared on a going concern basis;

(e) that proper internal financial controls were in place and that such internal financial controls are adequate and were operating effectively; and

(f) that proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively.

22. AUDITORS

Statutory / Financial Audit

M/s Deloitte Haskins and Sells, Chartered Accountants retire at the ensuing Annual General Meeting and are eligible for re- appointment. The Company has received confirmation that their appointment will be within the limits prescribed under Section 14 1 of the Companies Act, 2013.

Cost Audit

The Ministry of Corporate Affairs had, vide its Order dated 31st December, 2014 directed audit of cost records of companies covered under the Companies (Cost Records & Audit) Amendment Rules, 2014. The said Order is applicable to the Company, being manufacturer of Detonators, Detonating Fuse, Explosives, etc. Accordingly, the Company has appointed M/s Dhananjay V Joshi and Associates, Cost Accountants, Pune for audit of the Cost Records for the financial year 2014-15. The Cost Auditor is required to forward his report to the Central Government by 27th September 2015. The Board of Directors has appointed M/s. Narsimha Murthy & Co, Cost Accountants, Hyderabad as the Cost Auditors of the Company for the financial year 2015-16.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Messrs BS & Company, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit Report is annexed herewith as Annexure D .

There was no qualification, reservation or adverse remark or disclaimer in the auditors report or the secretarial audit report.

23. CORPORATE SOCIAL RESPONSIBILITY (CSR )

In compliance with Section 135 of the Companies Act 2013 and other applicable provisions, the Company has constituted Corporate Social Responsibility Committee consisting of Mr.Prakash Shah, Chairman of the Committee (Independent Director), Mr.Ajay Hinduja (Non Executive Director and Chairman of the Company) and Mr.K.N.Venkatasubramanian (Independent Director) as the Members of the Committee. The Committee met once during the year and laid down the policy on Corporate Social Responsibility stating therein the objectives, implementation and other issues pertaining to the achievement of the CSR objectives of the Company.

The erstwhile Lubricants Division which was demerged from the Company, was the major profit generating Division. The remaining businesses of the Company does not have eligible profit on aggregate basis during the last three financial years. Gulf Oil Lubricants India Limited (GOLIL) to whom the Lubricants Division was transferred, has undertaken to incur the CSR expenditure, treating the profits of the erstwhile Lubricants Division as that of GOLIL for CSR purposes. In view of these circumstances, and based on legal advice, the CSR Committee concurred that the Company would not incur mandatory CSR expenditure. The Company, however, makes reasonable contributions to CSR purposes. Towards this objective, an ambulance was donated by the Company to Lions Club Eye Hospital, Balanagar, Hyderabad.

The CSR Policy of the Company is displayed on the website of the Company. The Annual Report on CSR activities is annexed herewith as Annexure-E .

24. VIGIL MECHANISM / WHISTLE BLOWER POLICY

In terms of the requirements of the Companies Act 2013 and Clause 49 of the Listing Agreement, the Company has a vigil mechanism to deal with instance of fraud and mismanagement. The details of the vigil mechanism are displayed on the website of the Company. The Audit Committee reviews the functioning of the vigil / whistle blower mechanism from time to time.

25. RELATED PARTY TRANSACTIONS

All related party transactions / arrangements that were entered into during the financial year were on an arm''s length basis and were in the ordinary course of business. There were no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel which may have a potential conflict with the interest of the Company at large.

All related party transactions / arrangements were placed before the Audit Committee for prior approval, supported by a statement from the Management as to the adherence of arm''s length basis and being in the ordinary course of business. The policy on Related Party Transactions as approved by the Board is displayed on the Company''s website. None of the Directors has any pecuniary relationships or transactions vis-à-vis the Company. Details of the material transactions are provided in Form AOC-2 which forms part of this Report.

26. CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of the Company prepared in accordance with relevant Accounting Standards (AS) viz. AS 21, AS 23 and AS 27 issued by the Institute of Chartered Accountants of India form part of this Annual Report.

27. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. Pursuant to a complaint filed before the Competition Commission of India (CCI) by Coal India Limited, CCI had vide their Order dated 16th April 2012 held that the Company had, along with a few other explosive manufacturers, contravened the provisions of Section 3 of the Competition Act 2002. The CCI had on that basis imposed a penalty on the Compan y of Rs. 28.94 crores. The Company has filed an Appeal before the Competition Appellate Tribunal (COMPAT) and the COMPAT had vide its Order dated 18th April 2013, reduced the penalty to Rs. 2.89 crores; and a further Civil Appeal in the Supreme Court of India and the matter is subjudice. Based on expert legal advice, the Company believes that it has a good case and expects a favourable decision in the matter.

28. EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as Annexure F.

ACKNOWLEDGEMENTS

Your Directors would like to express their appreciation for the assistance and co-operation received from the financial institutions, banks, Government of India and various State Government authorities and agencies, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services of all employees of the Company.



For and on behalf of the Board of Directors

Place : Mumbai Ajay P. Hinduja

Date : August 7, 2015 Chairman


Mar 31, 2014

Dear Members,

The Directors have pleasure in presenting their Fifty Third Annual Report and Audited Accounts for the year ended 31st March, 2014.

1. FINANCIAL RESULTS:

2013-14 2012-13 Rs Lakhs Rs Lakhs Profit after providing for Depreciation of 8748.14 6890.84 Rs 1443.08 lakhs (Rs 1448.13 lakhs) and before extraordinary items and taxation

Exceptional Items: (865.52) 430.88

Profit Before Taxation 7882.62 7321.72

Taxation:

Current Tax -Current Year 2790.00 2149.33

- Previous Year - 8.67

Deferred (741.00) 69.10

MAT Credit - (204.00)

Profit After Taxation 5833.62 5298.62

Balance brought forward from previous year 16091.26 13894.52

Balance available for appropriation 21924.88 19193.14

Appropriations:

Interim Dividend paid 2478.62 -

Proposed Dividend - 2181.19

Tax on Dividend 421.24 370.69

Transfer to General Reserve 600.00 550.00

Balance carried to Balance Sheet 18425.02 16091.26

EPS (Rs) 5.88 5.34

2. DIVIDEND

During the year the Board had decided to pay an Interim Dividend of – 2.50 per share, equivalent to 125% (consisting of – 2.20 per share Interim Dividend equivalent to 110% Special Interim Dividend of – 0.30 equivalent to 15% in view of the Demerger in progress), for the year 2013-14 (previous year – 2.20 per share). The Record Date for the purpose of determining the shareholders eligibility for the Interim Dividend was 14th April, 2014. The said Interim Dividend was paid from 22nd April 2014. The Board has decided to treat the interim dividend as final dividend and hence not recommended any additional dividend for the year. Interim Dividend aggregated to – 24.79 crores (Previous Year Dividend aggregated to – 21.81 crores).

3. OPERATIONS

The total turnover of the Company was – 1098.39 crores (previous year – 1081.95 crores). The profit before exceptional items and taxation was – 87.48 crores (– 68.9 crores). The profit before tax was – 78.83 crores (– 73.22 crores ). The profit after provision for current tax of – 27.90 crores and deferred tax write back of – 7.41 crores was – 58.34 crores (– 52.99 crores) resulting in an EPS of – 5.88 for the year (– 5.34).

4.2 Lubricants

The Lubricant industry has been adversely impacted by slower GDP, Industrial, Infrastructure and Automotive Industry growths.

Automotive Industry growth in volume terms has been negative in the commercial vehicle space which saw a 20% drop in domestic sales, Passenger vehicle sales also witnessed a negative drop of 6.8%. 2 wheeler ( with scooters showing good growth) came in positively at 7.3% growth. Tractors grew well at 15.75%. Overall the industry grew by 3.5% (sans Tractors). This has impacted Lubricants volumes for most players in the industry not only for OEM fills but also in the Bazaar market as vehicle movement came down considerably with complete slowdown in Infra and mining activities and overall industrial production.

Amid such a challenging environment, your Company''s Lubricants Division has been able to maintain volumes and grow its revenues for the year by around 5% and with many industry players recording negative growth rates, the Division has been able to gain further market share. The Division still hasaCAGR Revenue Growth rate of around 15% over last 6 years.

Another key impact for the industry during the year was extremely volatile Exchange Rate and depreciation of Rupee by around 13%. Since a major portion of demand of base oils and additives for the industry is catered from imports, it resulted in continuous increase in input costs. While Rupee started stabilizing from around February'' 14, it impacted the profitability of all import dependant companies and the Lubricants Division also had to face this challenge. However, the Division''s operating profits were maintained by timely passing on the burden of increase in input costs. The overall profitability was marginally lower due to forex losses.

Segment-wise Prognosis

The Lubricants Division currently operates in the Automotive, Industrial and Marine segments in India with some exports to markets like Bangladesh, Indonesia and Nepal. Within the Automotive segment the Division has been successfully increasing it''s presence on sub segments like New Generation Diesel Engine Oils for Commercial Vehicles, Motorcycle Oils and also expanding it''s focus in the passenger car and tractor lubricant areas.

Lower goods movement on account of the overall subdued economy and closure in mining, slowdown in infrastructure resulted in large number of vehicles remaining idle in the commercial vehicles (trucks, tippers, etc) - especially in Southern States like Tamil Nadu, Karnataka and Andhra Pradesh and construction equipment. Overall demand for lubricants for commercial vehicles was negative (estimated drop is 8-10%) in 2013-14and this impacted oursales directly.

Overall the OEM and bazaar segment volumes have contracted in single digit. However, the lubricants division has managed to minimise the impact of these macro factors to retain its volumes and market share with positive growth in the motorcycle and B2B segments in 2013-14.

New Business Development in terms of increased sales and addition of new customers in the Government sector, Infrastructure, Mining and Fleet segment, Marine, OEMs and Direct Industries resulted in retaining overall market shares.

The Division has continued its strategies to invest in building the Gulf Oil brand, strengthening our end customer value propositions, distribution and people competencies.

Brand Building in 2013-14

Media Campaigns featuring our brand ambassador and Indian Cricket Captain - MS Dhoni were continued, backed by retail visibility initiatives. Innovative distribution and below-the-line activities were implemented to increase consumer acceptance, reach and influencer engagement. Innovative consumer/retail promotions like the tie-up with the well known Dhoom 3 franchise (which became India''s biggest grossing film), enabled the Division to increase brand visibility and market share in the motorcycle segment. To strengthen the ''long drain,endurance'' leadership position and build the brand in the B2B segment, the Division associated as the main title sponsors for CNN-IBN''s - LeaderTalk -a unique talk show which juxtaposed Leading Corporate and Sports Leaders with Rajdeep Sardesai for a chat to share their thoughts and mantras on Leadership.

4.3 Detonators and Accessories (Energetics)

The gross turnover of the Division was at – 69.77 crores as against – 78.25 crores in the previous year. The decreased turnover was on account of subdued demand from the mining and infra sectors. Shut down of the Detonating Fuse (DF) Plant due to accident in the month of April''13 also affected the turnover of theDivision. The DF Plant has since commenced in the month of Februay''14 after the reconstruction. The Division has manufactured 92.42 million Detonators ( 96.89 million) and 4.05 million meters (17.584 million meters) of Detonating Cord during the year 2013-14. But value added products like Raydets and LDD for Domestic Market increased by 12.8% and 87% respectively. There was a significant growth of 175% over F13 in the Division''s sale of electronic detonators to large mining companies.

The Company markets its Detonators and Accessories through IDL Explosives Limited, a wholly owned subsidiary. This arrangement has been necessitated on account of market conditions, as the customers prefer to place a combined order for industrial explosives and accessories.

Considering that the Division is engaged mainly in manufacturing of pyrotechnic devices as well as special products for the defence, space and various R&D applications, it has been renamed as ''Energetics Division'' effective from 1st April 2014.

4.4 Mining and Infrastructure (IDLconsult)

Operations of the Mining and Infrastructure Division have been scaled down due to major projects being under temporary suspension for want of various Government / regulatory clearances in the non-coal sectors. Disposal / impairment of equipment at sites have been done during the year. Commencement of mining projects is expected to take more time and is largely dependent on Government policy announcements. As a result, the Division ended the year with a revenue of – 4.92 crores as against – 28 crores for the previous year.

4.5 Realty

Bangalore:

Major work of the first block of the –1800 crores project ''Ecopolis'' at Yelahanka, Bengaluru, consisting of a 30 acre IT / ITES SEZ park and a 10 acre Hotel / Hospitality / Retail areas being developed in association with Hinduja Realty Ventures Limited, is completed. The first block consists of a building (G 10 3 basements) of 10.46 lakh sft and a multi level car park of 74,000 sft is under construction in the SEZ sector. The project has been getting good response from potential customers. The external façade, MEP services and related infrastructure are expected to be completed by September 2014 and the revenue streams are expected to commence from Q3 of 2014-15. Work on the subsequent blocks of the project is being planned keeping the current demand pattern and other relevant factors.

Hyderabad:

For the Hyderabad property, where the Company has entered into a Development Agreement with Hinduja Estates Private Limited, the 100 feet road passing through the Company''s property has been completed after considerable delay. Uncertainty about the restructuring of the State of Andhra Pradesh during major part of the year under review, resulted in delay in planning the project.

In the meantime, with the announcement of bifurcation of the State of Andhra Pradesh the political environment is stabilising and the new State Government is expected to take major initiatives for the economic development of the State. Many high rise buildings have come up abutting the Company premises and along the Moosapet-Hitech City Road, which intersects the 100-feet IDL Road. Traffic on these roads has increased substantially, increasing the visibility and accessability of the Company''s properties.

4.6 Other Business Groups

Received the benefit of the generation through the APTRANSCO grid.

4.7 Exports

Export Sales of Explosive Accessories were–9crores duringthe current year asagainst–21 croresinprevious year. The shortfall was mainly on account of non availability of DetonatingCord from the Hyderabad factory and closure of all Exports through NAD, KaranjaJetty,for3monthsonaccountoflabourproblems.However,budgetedbottom- linewas achievedthroughhighervalue-added products evenwith the lower turnover.

Economic down-turn continued in Europe, Middle-East,S.E.Asia and Africa.However,thereare encouragingsigns of recoveryforthe upcoming year and our Detonating Cord plant is back in operation. Also, all our products continue to have the CE Certification for exports toEurope.This wouldenable the Companytomakefurther inroads inthe year ahead.

5. OVERSEAS ACQUISITION

In December 2012,the Company had acquired 100% stake in Houghton International Inc,in USA through its 100% subsidiary HGHL Ltd in theUK.

As a measure of de-riskingandde-leveraging,the Board had approved 90% dilution in the step down subsidiary through which Hought on International Inc.,USAs take was acquired. The dilution was by way of infusionof fresh capital by Gulf Oil International,CaymanIslands. As a result, the Company has since been released of all its obligations to the lenders.The new investor has agreed to take over the obligationsforrepaymentofthe$180mn obligation toSBI.TheCompanyhoweverretains10%stakeinHoughton throughasubsidiary, which isexpected tofetch good value totheCompany inthe future.Further,theCompany continues toreceivecommissiontowards providing ofsecurityofits properties for thesaid loan.

6. RESTRUCTURINGOFTHECOMPANY

During the year, the Company had announced demerger of the Lubricants Undertaking into a separate company. Accordingly, a Scheme of Arrangement between the Company and GulfOil Lubricants IndiaLimited(GOLIL),earlier known as Hinduja Infrastructure Limited, was sanctionedby the Hon''ble High Court of AndhraPradesh videits Order dated16th April2014,providingfortransfer ofthe Lubricants Undertakingofthe CompanytoGOLIL andcapital reorganizationofboth thecompanies. Appointed Datefor the Scheme was 1st April 2014. In terms of the Scheme of Arrangement, 1 equity share of GOLIL has been allotted to the shareholders of the Company, forevery 2 equityshares heldin the Company and as part ofthecapitalreduction/reorganization,facevalueof theequity shares hasbeenreduced from– 2 to –1and every2 shares of the Company have beenconsolidatedintoone equity share of –2face value.The sharesofGulfOil LubricantsIndiaLimited havealsobelistedonthestockexchanges, namely BSELimitedandtheNational

Stock Exchange of India Limited,with effect from 31st July2014.

The Demergeris expected to unlock and maximize valueto the shareholders through focused operations of GOLIL on the domestic lubricantsmarket.

7. PROMOTER BECOMES HOLDING COMPANY

GulfOil International(Mauritius)Inc.(GOIMI), the Promoter of the Company,has acquired4.99% additional equityshare capitalof the Company,enhancingtheir shareholding in the Company to 54.95%. With this,the Company became subsidiary of GOIMI from April 2014.The Promotershave subsequently,acquired an other 5% shareholding,enhancing their shareholding in the Company to59.95%.

8. INTERNAL CONTROL SYSTEMS AND RISK MANAGEMENT

Internal Control System:

Our system of internalcontrol assistsin ensuring that the Boardand management are able to fulfill the business objectives. An effective internal control framework contributes to safeguarding the shareholders'' investment and company''s assets. The objective of our internal controlframeworkis toensure thatinternalcontrolsare established,properly documented,maintainedandadheredtoineach functional department for ensuringefficient use and protection of the Company''s resources, accuracy in financial reporting and compliance withthestatutes.TheCompany''sinternal control system, wellsupportedbySAPERPimplemented afew yearsago,isdrivenbywell definedpoliciesandprocedures acrossitsmultifariousbusinessactivities.YourCompanyisISO9001(QMS), ISO 14001(EMS)&ISO 18001 (OHSAS)compliant whichprovides added comfortto our business partners and regulatory bodies.

Risk Managment :

The Company has an Internal Audit Function which provides the Audit Committee and the BoardofDirectorsanindependent, objective andreasonable assuranceof theadequacy,efficiencyandeffectiveness of theOrganization''s riskmanagement,internal control and corporate governance processes.TheAudit Committee/Board approvedannual auditplan preparedin consultation withbusiness heads andinputsobtainedfrom the Company''s statutory audit or sensures coverage of significant areas of operations with arisk based

approach in order to conduct the audit in an efficient and timely manner. Process reviews for critical functions at all locations are performed in accordance with the audit plan. The function also assesses opportunities for improvement in business processes, systems and controls; provides recommendations, designed to add value to the organization in consultation with the Senior Management.

The Audit Committee of the Board of Directors regularly meets to reviewthesignificantauditfindings, action taken thereon, adequacy of internal controls and also the implementation of various comprehensive policies forcompliance and governance. During theyear, theAudit Committee metsix times to reviewthe reports submitted by the Internal Audit Department. TheAudit Committee also regularly meets the Company''s Statutory Auditors to ascertain their views on the business, adequacy of the internal control systems in the Company and their observations on the financial reports.

9. PUBLIC DEPOSITS

The Company hasduring theyear repaid/prepaidall the public deposits and therearenooutstanding public depositsattheendof the year under review. The Board of Directorsof the Company will consider accepting fresh public depositsatthe appropriate time, in view of the regulatory changes underthe Companies Act 2013.

10. TAXATION

Orissa Sales Tax

The matter pertains to transfer of finished goods from Rourkela factory (since transferred to IDL Explosives Limited as part of the Demerger) situated in the State of Odisha to other States.

Tax Revision Petition in respect of assessmentyears viz 1976-77 to 1983-84 filed before the Commissionerof Commercial Taxes at Bhubaneswar had been dismissed in February 2012. Against the said dismissal fresh Writ Petitions were filed in March, 2013 in the Orissa High Court. In respect of the assessmentyear 1998-99, fresh appeal has been filed in the Orissa Sales TaxAppellate Tribunal. As regards the assessmentyears 2002-03,2004-05 and 2005-06. Review Petition was filed in the High Court of Orissa and also appeal filed in the Orissa SalesTaxAppellateTribunal.

11. RESEARCH & DEVELOPMENT

During theyear under review, improvements have been made to in-house developed electronic detonators and manufactured very extensively and successfully evaluated in the field. Based on the feed-back received from the field, new features in the electronic instruments were introduced thatare used in conjunction with these detonators as well improved theirhardwareformaking them more userfriendly. Imported Electronic Detonators have also been evaluated extensively. Electronic delay modules have been developed with precise delay times and supplied them for Defense and Space Applications where these have been successfully utilized in their intended applications.

Pyrotechnic Ignitors have been developed and delivered to users. Booster Pellet supplied and flight trials completed successfully. Different Fuse Heads were made as perthe user requirements. Improvements are made in the precision of delay-timingsof shock- tube delay detonators.

The R&D Centreof Lubricants Division located at Silvassadeveloped various products/formulations tocaterto the emerging market requirements.

High performance commercial vehicleand farm tractorengineoilswere developed and validated in respectiveapplications. Customised superior performance gear oils and rear axle oils were developed for specific OEM requirements evaluated and commercialised. Motorcycle oils catering to specific to certain customer/vehicle segments were developed. Niche/ Differentiated products for industrial segmentwere developed including high quality waterbased metal workingfluid and customised rust preventive. Alternate formulations forvarious products developed in linewith the recent technological developments/ market requirements is expectedto provide enhanced product performance/customersatisfaction and contribute to cost effectiveness and supply chain efficiency/flexibility.

12. SUBSIDIARIES:

The Company has during theyearunderreviewdivested the three overseassubsidiaries, namely, Gulf Oil Yantai Co. Ltd., PTGulf Oil Lubricants Indonesiaand Gulf Oil Bangladesh Limited effective from the close of 31 stDecember2013, as those investments were not generating any major returns even after7 to 10years; the Company needing cash inflow to meet various commitments; the Company''s declared intent of concentrating and strengthening its core competencies to have greater focus on Indian operations and to create more value forthe Lubricants business by way of Demergerof the Lubricants business into a separate company.

The annual performance of the subsidiaries is as under:

Rs HGHL Holdings Limited, UK reported a profit of –412.68 lakhs (–179.16 lakhs).

Rs IDL Explosives Limited reported a profit of –431.13 lakhs (loss of –244.56 lakhs).

Rs IDL Buildware Limited reported a profit of–5.19 lakhs (profit of– 16.70 lakhs).

Rs Gulf Carosserie India Limited reported a profit of –2.38 lakhs (loss of –0.49 lakhs).

Rs Gulf Oil Lubricants India Limited (formerlyknown asHinduja Infrastructure Limited) reported a loss of –0.57 lakhs (profit of – 0.13 lakhs).

Rs Gulf Oil Bangladesh Limited reported a loss of –119.63 lakhs (loss of– 149.41 lakhs).

Rs PT. Gulf Oil Lubricants Indonesiareportedaprofitof–40 lakhs (– 160.46 lakhs).

Rs GulfOil(Yantai)Co.Ltd.reportedaprofitof –375.65 lakhs(lossof –476.97 lakhs)

13. HUMAN RESOURCES/INDUSTRIALRELATIONS:

The Energetics Division at Hyderabad has continued to maintain cordial industrial relations, with low absenteeism while maintaining high output levels. Programmes were conducted to improve the competency levels. Periodical medical checkups have been conducted by tying up with corporate hospitals. The workmen are also provided medical insurance. The Division has entered into a3yearwage settlement with the workmen amicably.

As part of strategic plans and enhancing capability buildingforouremployees in the Lubricants Division, the training need identification and delivery processes were strengthened during theyear. Extensive programs covering the following 4 areas- Product andTechnical knowledge, 5 S/Kaizen initiatives at our Plant and Effective Communication Skills were undertaken. The capability building initiatives also focused on developing Internal Trainers through"Trainer Boot Camps" as well as an extended arm for"DSRs" (Distributor''s Sales Representatives) at Distributor''s end to enhance frontline effectiveness. Specific post programme initiatives are planned so as to sustain the capability building initiatives.

Staff Welfare

The Lubricants Division has also demonstrated its commitment by introducing another milestone in the long service award policy (20 years completion award).

Safety

To enforce a system of rewards for scrupulous practice of safety procedures by workers, existing annual awards system changed to monthly system of awards in the Energetics Division. Safety projects such as translation and dissemination of all Safe Operating Procedures (SOPs) in local language continued during theyear and the sameare being reviewed/read out on monthly basis at each department forbetterunderstanding and to enhance safety awareness among employees. Internal Audits are being done on regular basis to identify unsafe condition/acts and theaction plan forfollowupwasin place to minimize the risk. Awareness/training programmes on the Explosives Rules, 2008 have been conducted by external experts/senior resource persons. 5 ''S'' Workplace Management Systems implemented afterconducting awareness/training programs among the employees. 5"S" Audits beingconducted by cross functionalteams.

ISO 9001:2008recertification and ISO14001:2004 and OHSAS 18001:2007 surveillance External Audit successfully completed in April 2013.

Pulsejet bag filters system has been installed for3M.T coal boilerstackto minimize stack emission. Fortreatment of domestic effluents, a sewage treatment plant of the capacity of 30,000 liters/day has been installed. Free medical camps have been conducted forthe benefit of the workmen at the Energetics Division.

Measures to enhancesafety at the Silvassa plant were taken in terms of-100% use of personal protection equipments, safety related processes, stringent electrical safety inspections, safety briefings/training in all shifts forcontractworkmen. Strengthening hazardous waste management systems was also undertaken.

Security

As part of enhanced security of Explosives Magazine and otherassets of the Hydearbad Works, compound walls have been reinforced and height raised. As such over theyears considerable additions and precautions have been added up the Security wherewithal of the Magazines which include installation of PTZcameras, linking of watch towers through land line communication, repairand relaying of patrolling route along the inside magazine perimeter, compound wall construction and overhang barbed wire fencing, erection of watch towers using local resources, curbingsoil/boulderdumping in the Company''s land.

Quality Systems - ISI/TS Certification

The Lubricants Division achieved the coveted certification of ourquality management system in line with the requirements of ISO/TS 16949:2001 for Silvassa Plant and Corporate office-a global standard forautomotivesuppliers

14.OUT LOOK FOR THE CURRENT YEAR,OPPORTUNITIES AND THREATS

14.1 Lubricants

expected to pose challenges in terms of volume growths. The positive areas where demand conditions should pick-up will be light commercial vehicles,tractorsand motorcycles(scooters).The Division has plans to grow ahead ofthemarket in these segmentsand

also establish new OEM tie-ups. The strategic levers of segment wise focus, distribution reach increase initiatives and brand building will be utilised to retain and grow market shares in the core segments. Competition levels will continue to be high.

The Lubricants Division has already acquired land for its second plant in Southern India and is expected to commence construction during the year. The new plant, once operational, will add to the Division''s strategic presence in South India. The Lubricants Division has been demerged into a separate listed company – Gulf Oil Lubricants India Limited from the Financial Year 2014-15 and will continue to focus on strengthening its position in domestic lubricant market. The new Company has been listed on the BSE Limited and the National Stock Exchange of India Limited with effect from 31st July, 2014.

14.2 Detonators and Accessories (Energetics)

The outlook for F 15 is one of the cautious optimism. Though the demand for conventional detonators is likely to remain depressed, it will get compensated to some extent by increase in demand for value-added products – particularly Electronic Detonators. The economic growth of the Country is long overdue for a turnaround that should bring commensurate growth in demand from the coal, metals and construction sectors. The Division is prepared to take aggressive advantage of this up-swing.

14.3 Mining and Infrastructure (IDLconsult)

The mining scenario in the country is changing after nearly 3 years after the downturn started. The growth of the economy is also dependent on the mining activity in the country and the manufacturing indices are to a great extent dependent on to the mining activity in major industries such as iron and steel, cement, aluminium and copper. All these basic industries are expected to grow in the coming year. The new Government which will be taking over the reins from May 2014 is expected to address all these issues.

The Division is therefore expecting inflow of orders, resumption of pending contract which were held up due to regulatory clearances being suspended in several mines in the Orissa / Jharkhand sector where orders were in hand in 2012.

15. RISKS AND CONCERNS

15.1 Environmental Risks

Safety audits are carried out by internal safety audit teams at regular intervals in addition audits by external teams. General Safety Directions (GSDs) are strictly enforced in all factories and plants within the factories to ensure minimisation of risk. Safety trainings on different aspects are conducted to further develop the safe working culture. In addition, strict compliance of the requirements of the Explosives Act and Rules are ensured to protect the exposure of adjacent neighborhoods. Operations are carried out to comply with emission, waste water and waste disposal norms of the local authorities of the respective factories. In addition, the Hyderabad Factory has implemented the Integrated Management System incorporating ISO 14001 and OHSAS 18001 whilst the Silvassa Factory is certified under ISO 14001 incorporating the Environment Management System.

The Lubricants plant at Silvassa has also obtained certification in ISO/TS 16929-2009 which helped in monitoring and improving quality in process and products. The standard is in sync with the ISO 9001-2008 standard, which is being maintained across the organization.

15.2 Operational Risk

Licensing

The Energetics Division operates in a highly regulated and licensed industry. Amended / revised licenses for increase in license capacity for any of the explosives products may get delayed temporarily or for long periods thereby limiting our ability to cater to any increase in demand for these products from our customers. Non availability of licenses / approvals for expansion of new products could affect our future growth and expansion plans. The Division, therefore, ensures that approvals are applied for well in advance to avoid launch dates / export of products.

Location

Manufacturing facilities, for our major Subsidiary, are spread across six states. The optimum locations for packed explosives unit is determined by the customer location and the source of raw material. The advantage of the location of bulk explosives units is optimized to be close to the customer location. With changes in sources of raw material our location may not continue to be optimal in comparison with the competition. Moreover, if there is a consolidation in the industry, and the size of each manufacturing units go up, we may be disadvantaged bybeing sub-optimal.

Further since the lubricants are manufactured at one location and distributed throughout India, the cost of transportation and storage are higher in comparison to some of our competitors operations. As a mitigation measure the Company is working towards setting up a second plant in the south India.

Raw Materials

Many of the inputs of the three major Divisions are imported, availability of which is affected by global market situations. Also, prices of such items are volatile. Timely availability of raw materials is critical for continuous plant operations. The Company seeks to mitigate the risk by entering into long-term relationship with global raw material suppliers, with suitable escalation clauses to ensure regular supplies.

As the World economy is facing a rising commodity price cycle currently, with Crude Oil prices also firming up, the raw material prices and input costs are expected to increase. Base oils are showing a rapidly increasing trend and this is expected to impact margins/profitability. The Company seeks to mitigate the risk by entering into long-term relationship with global raw material suppliers, with suitable escalation clauses to ensure regular supplies.

The IDLConsult Division which currently undertakes mining services in coal, iron ore and limestone sectors, is exposed to business risks on account of non-availabilityor delayof environmental clearance by clients in time and lack of adequate infrastructure for dispatch of ores from the mine, especially during the rainy seasons. In view of this, detailed review of approvals and commitments is carried out before undertaking mining service contracts.

15.3 Market Risks:

Markets

All the Divisions of the Company operate in highly competitive markets where competition from all India players as well as regional players is high. Of which, two major divisions, namely Explosive accessories and IDLConsult Divisions operate in tender-driven markets, sometimes with onerous and unreasonable performance clauses. In the Lubes Division, increased competition from existing players and entry level pricing by new entrants leading to price undercutting could affect revenues. Therefore, there is a risk of cost increases, especially of petro product inputs, if not possible to be passed on to ultimate consumers.

Any reversal in growth trend in the economy in general and weak monsoons in particular, could affect demand in the automobile industry and consequent deceleration in manufacturing industry. This is likely to have an adverse impact on the lube industry. In order to minimise such adverse impact, the Lubes Division has taken various product and marketing initiatives.

Concentration of Customers

Both the Explosives and Contract Divisions are operating in the mining and infrastructure sectors, dominated by the PSUs, where the tendering system is in vogue, with the attendant risks. Missing L1 status in these tenders might result in loss of business opportunities for extended periods for the relevant tender(s).

15.4 Financial Risks:

Currency Value and Interest Rate Fluctuations

Financial risk management is done by the Finance Department at the various business Divisions and at Corporate Office under policies approved by the Board of Directors. Policies for overall foreign exchange loss risks and liquidity are regularly reviewed based on emerging trends. Interests'' risks arising out of financial debt, are normally done at fixed rates or linked to LIBOR and appropriate Bank lending rates. Adverse movement of Rupee from current levels may further impact base oil and ammonium nitrate rates.

Credit Risk

The Company sells its products through the customary trade channels, with the attendant risk of payment delays and defaults. To mitigate the risk, a credit risk policy is also in place to ensure that sale of products are made to customers after evaluation of their ability to meet financial commitments through allotment of specific credit limits to respective customers. Credit availability and Exposure (with the trade channels) is another area of risk.

Liquidity Risk

Liquidity conditions in the money market and the commercial interest rates may impact the capability of distribution channel of the Lubes Division to support growth in business. Steps are being taken up for tie–up with financing partners to support distributors.

All the three major Divisions operate in working capital intensive industries. The Company realizes that its ability to meet its obligations to its suppliers and others is linked to timely collection of receivables and maintaining a healthy credit rating. Review of working capital constituents like inventory of raw materials, finished goods and receivables are done regularly by the respective Divisions and Corporate Finance.

15.5 Legal and Statutory Risks: Contractual Liability

engages the services of reputed independent legal counsels, on need basis. In matters of tax law and other statutory obligations the outcome of litigation cannot always be predicted. Hence, appropriate financial provisions, insurance policies and credit lines are taken to limit the risk for the Company. Concerted efforts by company for recovery of overdue receivables through legal proceedings have been fruitful.

Litigation Risks:

The Company is exposed to the risk of litigation of prolonged nature. Apart from the Tax Matters referred to in the Financial Statements, Litigations having a major impact on the Company include those with Udasin Mutt pertaining to leased lands of Hyderabad Works, Competition Commission of India, which are being pursued by the Company with the appropriate Court/ Tribunal.

15.6 IT Risks

The Company is dependent on intra-office and inter-office networks, as well as several business software operated from the Corporate Office and the business Divisions. Failure of system networks and consequential loss of business is attempted to be minimised by critical systems being operated on secured servers with regular maintenance, regular back up and off-site storage of data, selection of suitable firewall and virus protection systems / software. Your company is operating on SAP ERP system closely monitored internally and also serviced by external professional agencies, which helped in minimizing downtime.

15.7 Other Risks

Various assets of the Company including plant and machinery, stocks, buildings, furniture, office equipment and computer systems could suffer damages / loss owing to occurrences like fire, accidental mishaps, etc. The Company has taken insurance covers to protect these assets from possible damage / loss.

While the Company undertakes regular review of remuneration structures, threat of poaching by competitors, especially, new entrants in the industry of key persons is possible. Such actions could lead to temporary drop in efficiency and performance in the specific areas.

16. DIRECTORS

During the year, Mr.H.C.Asher has resigned as Director and Member of the Audit Committee. The Board wishes to place on record its appreciation for the valuable guidance received from him from time to time.

Mr.Ramesh V Rao has resigned in the month of August 2014, as Director and Member of the Stakeholders Relationship Committee and Chairman of Safety Review Committee. The Board wishes to place on record its appreciation for the valuable guidance received from him from time to time.

Mr.Ajay P. Hinduja has been appointed as Director of the Company in the casual vacancy caused by the resignation of Mr.Ramesh V Rao, who will retire by rotation at the AGM of the Company to be held in the year 2016. Mr. Ajay P. Hinduja holds a Degree in Economics from the University of Geneva, with specialisation in Finance. He has had varied experience in the International Banking arena, including as ''Director'' and ''Member'' of the Management Committee of Amas Bank (Switzerland) Ltd. {presently named "Hinduja Bank (Switzerland) Ltd.}since 1996.

In accordance with the provisions of the Companies Act 1956 and the Articles of Association of the Company, Mr.Sanjay G . Hinduja, Mr.Ramkrishan P. Hinduja and Ms. Kanchan Chitale retire by rotation at the 53rd Annual General Meeting of the Company and are eligible for reappointment. However, Mr.Sanjay G. Hinduja has not offered for re-appoinment.

In terms of the Companies Act, 2013 the Independent Directors – Ms.Kanchan Chitale, Mr.M.S.Ramachandran, Mr.Ashok Kini, Mr.K.N.Venkatasubramanian and Mr.Prakash Shah are proposed to be appointed for a term of 5 years, not liable for retirement by rotation.

Mr.S Pramanik, Managing Director was reappointed effective 8th July, 2014 for a period of 3 years, after completion of his earlier term of appointment.

17. STATUTORY INFORMATION

Information on Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and the Statement under Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees ) Rules, 1975 as amended, are annexed to this full Report. However, as per the provisions of Sec.219 (1) (b) (iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company.

18. INFORMATION ON STOCKEXCHANGES

Fees have been paid to them uptodate.

19. CORPORATE GOVERNANCE

A detailed report on the subject forms part of this report. The StatutoryAuditors of the Company have examined the Company''s compliance and have certified the same as required under the SEBI Guidelines. Such certificate is reproduced in this Annual Report.

20. DIRECTORS''RESPONSIBILITY STATEMENT

The Directors, on the basis of informative documents made available to them, confirm that:

a. In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures.

b. They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period.

c. They have taken proper and sufficient care for the maintenance of the adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

d. They have prepared the annual accounts on a going concern basis.

21. SUBSIDIARY COMPANIES

In the context of mandatory requirement to present consolidated position of the Company including subsidiaries, at the first instance, members are being provided with the Report and Accounts of the Company treating these as abridged accounts as contemplated by Section 219 of the Companies Act, 1956. Members desirous of receiving the full Report and Accounts of the subsidiaries, which are available for inspection at the Registered Office of the Company, will be provided the same on receipt of a written request from them. The Board has given consent for not attaching balance sheets and other financial statements of the subsidiary companies, by passing a resolution to this effect. However, specified information of each of the subsidiary company has been provided in this annual report.

22. AUDITORS

M/s Deloitte Haskins & Sells, Chartered Accountants retire at the ensuing Annual General Meeting and are eligible for re- appointment. The Company has received confirmation that their appointment will be within the limits prescribed under Section 139 of the Companies Act, 2013, read with the applicable Rules.

Cost Audit

The Ministry of Corporate Affairs, Cost Audit Branch had, vide its Order dated 2nd May, 2011 directed audit of cost records of companies covered under the Cost Accounting Records (Petroleum Industry) Rules, 2002. The said Order is applicable to the Company, being manufacturer of Lubricating Oils and other products. Accordingly, the Company has appointed M/s Dhananjay V Joshi and Associates, Cost Accountants, Pune for audit of the Cost Records for the financial year 2013-14.

The Cost Auditor is required to forward his report to the Central Government by 27th September 2014.

ACKNOWLEDGEMENTS

Your Directors would like to express their appreciation for the assistance and co-operation received from the financial institutions, banks, Government of India and various State Government authorities and agencies, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services of all employees of the Company.

For and on behalf of the Board of Directors

Place:Mumbai S.G.HINDUJA Date : August 11, 2014 Chairman


Mar 31, 2013

The Directors have pleasure in presenting their Fifty Second Annual Report and Audited Accounts for the year ended 31st March 2013.

1. FINANCIAL RESULTS:

2012-13 2011-12 Rupees Rupees Lakhs Lakhs

Profit after providing for Depreciation of Rs. 1448.13 lakhs (Rs. 1441.61 lakhs) and before extraordinary items and taxation 6890.84 4939.06

Exceptional Income: 430.88 2092.17

Profit Before Taxation 7321.72 7031.23

Taxation:

Current - Current Year 2149.33 1585.00

- Previous Year 8.67 Nil

Deferred 69.10 (95.00)

MAT Credit (204.00) (670.00)

Profit After Taxation 5298.62 6211.23

Balance brought forward from previous year 13894.52 10868.32

Balance available for appropriation 19193.14 17079.55

Appropriations:

Proposed Dividend 2181.19 2181.19

Provision for tax on proposed dividend 370.69 353.84

Transfer to General Reserve 550.00 650.00

Balance carried to Balance Sheet 16091.26 13894.52

EPS 5.34 6.26

2. DIVIDEND

The Directors recommend the payment of Dividend of Rs. 2.20 per share (Rs.2.20 per share) on the Paid Up Capital of the Company. The dividend of Rs. 21.81 crores (Rs. 21.81 crores), if approved by the Shareholders at the Fifty Second Annual General Meeting, will be paid out of the profits for the current year to all Shareholders of the Company whose names appear on the Register of Members as on the date of the Book Closure.

3. OPERATIONS

The total turnover of the Company Rs. 1081.95 crores (previous year - Rs. 1009.30 crores). The profit before exceptional items and taxation was Rs.68.91 crores (Rs. 49.39 crores). The profit before tax was Rs.73.22 crores (Rs.70.31 crores). The profit after provision for current tax of Rs. 21.58 crores and write back of deferred tax of Rs. 0.69 crores and adjustment of MAT credit of Rs.2.04 crores, was Rs. 52.99 crores (Rs. 62.11 crores) resulting in an EPS of Rs. 5.34 for the year (Rs.6.26).

The business operations were satisfactory in the background of the Indian economy in which industrial performance in the financial year was one of the worst in the past 20 years.

Industrial output has grown at only 1.2%. All activities in mining, manufacturing, electricity outputs across sectors have either contracted or halved compared to the previous fiscal. Capital goods and consumer goods have been growing at a worryingly low pace through FY 13. In fact, capital goods contracted to 6.3% in FY 13, more than in FY 12. With consumption collapsing over the last couple of quarters, manufacturing has been severely hit along with mining and electricity.

Mining production index dipped to -2.5% as against -1.9% in the previous year and electricity generation dropped from 8.2% in the previous year to 4.0% in the current year. Vehicle sales along with the consumer durables saw around 4.5% contraction in output. Overall, slowdown in economic activities during 2012-13 along with consumer demand constrained manufacturing growth. Higher interest rates also moderated the industrial activity.

4. DIVISIONAL PERFORMANCE

4.1 Business Operations

4.2 Lubricants

Twin achievements by crossing the coveted Rs. 1000 crores Gross Revenue & Rs. 100 crores segment profit mark.........

The Lubricants Division for the first time crossed Rs. 1000 crores by achieving Rs. 1051 crores Gross Revenue during the Financial Year 2012-13, a growth of 12% over 2011-12. At the same time, the Lubricants Division has also delivered segment profits of Rs. 106 crores, a growth of 13% over previous year. With this, the Division is continuing its journey of consistent growth even in the backdrop of the challenging economic scenario during 2012-13.

Outperforming Industry and Competition.......

Overall the Lubricant Industry witnessed marginally negative to flat volume growth in 2012-13. The bazaar market segment growth also slowed down considerably in line with our forecast of 2-3% vs 5-6% growth last year. The

Automobile Industry is passing through a very lean phase with Commercial Vehicles segment posting a negative growth of 2%, Passenger Vehicles and Two Wheelers sales grew at much slower pace than earlier years at 2.2% and 2.9% respectively. The overall growth of the automobile industry was modest at 2.6%. Accordingly, demand conditions in the lube industry mainly the OEM and related sales remained quite subdued for Automotive Lubricants. With industrial growth also severely affected due to delayed policy decisions mainly in mining and infrastructure segments, all through the year, the demand for industrial lubricants in particular was also lower.

In spite of these constraints, in the Lubricants industry, your Division has been able to register positive growth in volumes and revenues, which is well ahead of most of the top industry players. This higher growth is resulting in increased market share for the Division across segments.

The industry witnessed major volatility in input costs throughout the year with significant upward bias in Base Oil prices in first quarter, sharp drop in Q2 and sideways movements thereafter. In addition, fluctuations in the exchange rates of the Rupee against US Dollar continued during the year resulting in significant uncertainty in input costs putting pressures on margins. The Division''s procurement strategies, market growth and pricing initiatives resulted in the Division attaining better margins coupled with volume and revenue growth, which is reflected in the improved financial results of the Division.

Brand and Distribution initiatives......

The Division continued its Brand building initiatives and launched a campaign with its Brand Ambassador, Mr. Mahendra Singh Dhoni and introduced special edition packs to communicate and highlight the longer drain interval "value proposition". Innovative below the line initiatives like Gulf Cricket League targeted at our consumers, trade and influencers in major trucking centres around the country were successfully executed. Focussed consumers and retailers loyalty programs like - King of the Road 3 and Winners Circle targeted at Passenger Car Motor Oil (PCMO) retail outlets were successfully launched and executed. Specialised distribution initiatives like ''Non-Stop Express'' were launched to increase our distribution width & depth. Pilots to tap the rural market were also intitiated by the division to enhance the rural penetration levels in terms of distribution.

Fortifying ourposition as Pioneers ofLongerDrain, Higherperformance Lubricants in India....

The division continued to increase its customer base for our Co-Branded ranges of Gulf Super Fleet LE Max (40,000 kms long drain interval engine oils), Gulf Super Fleet LE Duramax(80,000 kms long drain interval engine oils) for Ashok Leyland commercial vehicles. Gulf Super Fleet Turbo range of products was launched to meet the requirements of latest generation of commercial vehicles like TATA Motors, Eicher, etc. The product range has received very positive response from consumers, trade & influencers.

Gulfin Motorsports.....

Gulf Speed Bolt 2012

Gulf Speed Bolt is an initiative to showcase global motorsport events for the Indian audience by leveraging on Gulf''s international associations. In its 2012 edition, Gulf debuted the Aston Martin GTE, one of the most powerful cars in its class, at the Buddh International Circuit in Greater Noida on 19-November 2012. The car, with a top speed of 300 km/h and capable of reaching 100 km/h in just 3 seconds, set the track on fire as it covered the 5.14 km track in just under a minute. Putting the pedal to the metal was Mr. Stefan Mucke, an experienced endurance motorsport specialist. In fact, this very driver-car combo had scored a podium finish at the 24 Hours of Le Mans in June this year.

Gulf Dirt Track National Championship & Monsoon Scooter Rally:

Gulf sponsored Dirt Track National Championship carries Gulf''s international motorsports legacy in India. Last year four rounds of races were held - one each in Mangalore, Aurangabad and Jodhpur. The 4th and the final round was held successfully in Nasik. Also, for more than a decade now Gulf has been sponsoring the one of its kind rally for scooters - Gulf Monsoon Scooter Rally. The rally took place in the month of July 2012.

Gulf Foster A Child Car Drive:

As a part of Gulf''s CSR initiative Gulf Foster A Child Car Drive was held in the month of January'' 2013. This event is born out of desire to bring smile on the face of under privileged children. The car drive saw more than 50 cars participating. The participating cars are usually driven & navigated by a husband and wife team along with their children and one or more under -privileged children. The under privileged child becomes the one day foster child for the parents driving and navigating the car. The final aim of the drive is to reach the destination within the shortest possible time (and with as much fun along the way !).

4.3 Detonators and Accessories (Explosives)

The gross turnover of the Division was at Rs.83 crores as against Rs.95 crores in the previous year. The decreased turnover was on account of reduced export shipments and power shortages faced by the converters in Hyderabad and low demand from the mining and infra sectors. The Division has manufactured 96.692 million Detonators (109.434 million) and 17.584 million meters (24.239 million meters) of Detonating Cord during the year. Growth in production of Electronic detonators was significant.

The Company markets its Detonators and Accessories through IDL Explosives Limited, a wholly owned subsidiary. This arrangement has been necessitated on account of market conditions, as certain customers preferred to place combined orders for industrial explosives and accessories.

4.4 Mining and Infrastructure (IDLconsult)

Concerns over the Mining activities across the country continued. 2012-13 was even worse than the previous year for the Mining Industry in India and for the IDLconsult Division. Mine owners are still struggling to clear their various regulatory and governmental issues. Iron ore mining in Orissa was one of the major contributors to the Division in the previous year, but the clients continue to remain badly affected by the statutory restrictions imposed by the State & Central Governments on account of forest, environmental and land issues. As a result, the Division ended the year with a revenue of Rs. 28 crores as againstRs. 51 crores for the previous year.

4.5 Other Business Groups

The 4 Wind Mills (1 MW) located at Ramagiri in Andhra Pradesh generated 2,38,100 units (2,61,000 units). The Hyderabad factory received the benefit of the generation through the APTransco grid.

4.6 Exports

Export Sales of Explosive Accessories were Rs. 21 crores during the current year as against Rs. 18 crores in previous year.

Economic depression worsened in Europe and the Middle-East and spread to S.E. Asia (except Indonesia & Thailand) and also to Africa. Political uncertainty not only delayed several major projects in Sri Lanka and Nepal but also lead to stopping of on-going projects.

In Europe the EU authority issued new guidelines on packing and marking of products that require significant changes in our plant processes.

The down-turn in world trade hit the shipping industry resulting in reduced availability of ships and increase in freight on explosives cargoes due to reduced spread on general cargo. Margins were maintained by judicious price increases, rationalizing the volume/value ratio by redesign of packing, clubbing different ports in the same voyage and by focusing on securing orders with more profitable product-mix.

Export turnover of lubricant products was marginally higher at Rs.10 crores during 2012-13 against Rs. 9 crores in 2011-12. The Division is exporting its products mainly to Asian markets and highly competitive Middle East markets.

4.7 Property Development Bangalore:

Work on the Rs.1800 crores project at Yelahanka, Bengaluru, consisting of a 30 acre IT / ITES SEZ park and a 10 acre Hotel / Hospitality / Retail areas being developed in association with Hinduja Realty Ventures Limited, is processing. Foundation work on the first building in SEZ sector is under construction. Bulk materials such as aggregates, cement, steel, etc. have been procured after receiving tax and duty exemption. Erection and testing of the batching plant was completed.

Our project is situated on the expressway from Bangalore City to the Airport. Infrastructure works such as signal-free 6 lane expressways from Hebbal and Yelahanka to Bengaluru Airport, are expected to be completed by mid 2014, providing excellent and fast access to our project site. This will give a boost to the real estate developments in North Bengaluru, the emerging growth corridor.

Hyderabad:

For the Hyderabad property, where the Company has entered into a Development Agreement with Hinduja Estates Private Limited, work by GHMC on the 100 feet road passing through the Company''s property, is about 70% complete. In the meantime, investments in developments outside the Company premises, abutting the new 100-feet road, are increasing rapidly. As a result of this infrastructure initiative of the Government of Andhra Pradesh and as per reports from leading property consultants, Kukatpally will witness higher demand in the near future. However, uncertainty over the restructuring of the State is delaying the finalization of plans.

5. OVERSEAS ACQUISITION

The Company through its subsidiary in the United Kingdom has acquired 100% stake in Houghton International Inc. for USD 1.045 billion, after satisfactory conclusion of regulatory approvals in the USA, for maximization of shareholder value including by divesting the stake at a future date. The acquisition through the step-down subsidiary ensured that the financials of GOCL did not get affected. A major portion of the debt will be serviced through Houghton International Inc.''s cash flows.

The acquisition has put some pressure due to the high leveraged position on account of foreign currency loan being taken by the Company.

The Company is seized of the matters and is exploring several restructuring operations to derisk the high leveraged position.

6. RESTRUCTURING OF THE COMPANY

In view of the diverse nature of the Company''s businesses, the Company is actively considering restructuring of the various businesses of the Company including demerger of the Lubricants business into a separate listed company.

7. INTERNAL CONTROL SYSTEMS AND RISK MANAGEMENT

Internal Control System:

The Company''s internal control system is driven by well defined policies and procedures across its diverse business activities. The objective of the internal control system is to ensure efficient use and protection of the Company''s resources, accuracy in financial reporting and compliance with the statues. The Company has an Internal Audit Function which provides the Audit Committee and the Board of Directors, an independent, objective and reasonable assurance of the adequacy, efficiency and effectiveness of the Organization''s risk management, internal control and corporate governance processes. The SAP system implemented a few years ago in your Company serves well in integrating the functioning of various departments and provides enhanced system controls.

The audit function, in consultation with the Senior Management, assesses opportunities for improvement in business processes, systems and controls and also provides recommendations designed to add value to the organization. After review by the Audit Committee, follow up of corrective actions are monitored for implementation.

The Internal Audit function during the course of monitoring the effectiveness of the internal controls also reviews and reports to the management and the Audit Committee on compliance with internal controls and statutory norms related to the industry in which the businesses operate as well the efficiency and effectiveness of operations and the key process risks. The Audit Committee ofthe Board of Directors regularly meets to review the significant audit findings, action taken thereon, adequacy of internal controls, and also the implementation of various comprehensive policies for compliance and governance.

The annual audit plan prepared by the Internal Audit Department in consultation with the statutory auditors and duly approved by the Audit Committee does consider the scope of coverage of the company''s activities including subsidiaries based on the risk profile of the business. Process reviews for critical functions are performed by the function in an efficient and timely manner for ensuring effective coverage as per the annual audit plan.

During the year, the Audit Committee met seven times to review the reports submitted by the Internal Audit Department. The Audit Committee regularly meets the Company''s Statutory Auditors to ascertain their views on the business, adequacy of the internal control systems in the Company and their observations on the financial reports.

8. FIXED DEPOSITS

Fixed Deposits from the public and the shareholders as on 31st March 2013 amounted to Rs. 114.13 lakhs (Rs.346.44 lakhs). Out of the above, 16 deposits amounting to Rs.71.35 lakhs (Rs.236.33 lakhs), which had matured, remained unclaimed. Of these, 14 deposits amounting to Rs.65.35 lakhs had matured only on 31st March 2013, most of which have been renewed / repaid to the depositors in the month of April/May 2013.

9. TAXATION

Orissa Sales Tax

The matter pertains to transfer of finished goods from Rourkela factory (since transferred to IDL Explosives Limited as part of the Demerger w.e.f. 1st October 2010) situated in the State of Orissa to other States, in respect of 10 assessment years viz 1976-77 to 1983-84, 1989-90 & 1990-91. Tax Revision Petitions were filed before the Commissioner of Commercial Taxes at Bhubaneswar. Against the dismissal of the Tax Revision Petition by the Commissioner of Commercial Taxes in February 2012, Writ Petitions were filed in the High Court of Orissa in March, 2012. Fresh Writ Petitions were filed in March, 2013 along with additional documents and the Writ Petitions filed earlier were withdrawn. For the assessment year 1998-99, appeal has been filed in the March, 2013 in the Central Sales Tax Appellate Tribunal, Delhi against the order of the Sales Tax Appellate Tribunal at Cuttack and order passed in October, 2012. However, for the assessment years 2002-03, 2004-05 and 2005-06 Review Petition was filed in the High Court of Orissa against the order dated 05.03.2013 of the High Court in the stay petitions.

10. RESEARCH & DEVELOPMENT

During the year under review, improvements have been made to in-house developed electronic detonators and their large-scale field evaluation is being done. Electronic support instruments that are used in conjunction with these detonators have been also improved by including more diagnostics features and making them more user friendly. Field trials of imported Electronic Detonators are also carried out and are being continued. Electronic modules have also been designed and customised with precise delay times for specific defense and space applications.

New products have been developed for Boostering and Metal forming applications for commercial manufacture, for special applications. High Energetic materials for defense applications have been developed for DRDO applications.

Lubricants Division''s R&D Centre at Silvassa developed formulations for high performance engine oils, driveline fluids and motor cycle oils to meet current and future market requirements.

High performance diesel engine oils and driveline fluids were validated across different makes of commercial vehicles. Different motorcycle oils were also developed to meet the requirements of the mass market segment and requirements of the specific makes of motorcycles. In the Industrial portfolio, metal working fluids were developed for special applications. Various alternate formulations were developed which helped in improving product performance and customer satisfaction, cost reduction and besides providing improved operational flexibility.

11. SUBSIDIARIES

HGHL Holdings Limited, UK, incorporated during the year for the purpose of overseas acquisition, reported a profit ofRs.179.16 lakhs. PT. Gulf Oil Lubricants Indonesia reported a profit ofRs. 160.46 lakhs (Rs. 122.94 lakhs).

IDL Buildware Limited reported a profit of Rs.16.70 lakhs (Rs. 14.27 lakhs).

Hinduja Infrastructure Limited reported a profit ofRs.0.13 lakhs (Rs. 0.11 lakhs).

Gulf Oil (Yantai) Co. Ltd. reported a loss of Rs. 476.97 lakhs (profit ofRs. 225.59 lakhs).

IDL Explosives Limited reported a loss of Rs. 244.56 lakhs (Rs.1270.44 lakhs).

Gulf Oil Bangladesh Limited reported a loss of Rs. 149.41 lakhs (profit ofRs. 100.29 lakhs).

Gulf Carosserie India Limited reported a loss of Rs.0.49 lakhs (Rs. 0.13 lakhs).

12. HUMAN RESOURCES / INDUSTRIAL RELATIONS:

Talent Acquisition has been the key activity throughout the yearwith specific focus on strengthening the Channel Sales, B2B, Infrastructure, Mining and Fleet verticals with the objective of "Right Skill at Right Place at Right Time" in the Lubes Division. Competency Development has been the key strategic focus for the year. Training programs on ISO / TS 16949, FMEA, problem solving techniques, relationship building for middle management, and safety were held in the Division.

The HR function in the explosives and mining Divisions were revamped and all the process and procedures were reviewed. Training programmes on general management, quality, safety and health management and also Focus on periodical medical checkups were emphasised. In addition, other internal and external functional training programs were imparted during the year.

The Divisions have continued to maintain cordial industrial relations, with low absenteeism. Programmes were conducted to improve the competency levels. Periodical medical checkups have been conducted by tying up with corporate hospitals.

Safety

The Explosives Division completed translation of all Safe Operating Procedures (SOPs) in local language i.e. Telugu and the same are being reviewed / read out on monthly basis at each department for better understanding and to enhance safety awareness among employees at the Hyderabad factory. Audits are being done on regular basis to identify probable unsafe condition / acts to minimize risks. Awareness training programmes on recent amendments to the Explosives Rules, 2008 have been conducted by internal trainers in June 2012 and March 2013. IMS 14001 and OHSAS 18001 External Audit were successfully completed in the month of April 2012.

Pulse jet bag filters system has been installed for 3 M.T. coal boiler stack to minimize stack emissions in October 2012. For treatment of domestic effluents as per Pollution Control Board requirements at 30 KL per day is in progress.

Security

Security of Explosives Magazine and other assets tops the list of priorities at Hyderabad Works. Over the years considerable additions and surveillance equipment have been added to strengthen the Security of the factory and of the Magazines. Additional security measures taken during the year include - installation of PTZ (Pan Tilt and Zoom) Cameras, linking of watch towers through land line communication, repair and relaying of patrolling route along the inside magazine perimeter, compound wall construction and overhang barbed wire fencing, erection of watch towers at strategic locations on the factory land.

13. OUTLOOK FOR THE CURRENT YEAR, OPPORTUNITIES AND THREATS

The positive surge in the industrial activity in March 2013 as against a major slowdown in the economy observed over the last 2 years indicates a possible improvement in the Indian economy in 2013-14.

The Government has taken steps to boost economic growth from Q-3 of the last year such as reduction in energy subsidies, withholding tax on interest earned by foreign investors and FDI in aviation and retail. It is expected that the GDP would grow at approximately 5 - 6% with stimulus from the Reserve Bank of India in moderating interest rates further and increasing liquidity in the banking system. However, the growing current account deficit which has been a worrying factor last year may continue to impact dramatically in the current year and, therefore, pressures in the economy are likely to continue with marginal improvements.

13.1 Lubricants

The automotive industry growth is pegged at 6-8 % (as per SIAM). Volume growth in the lubricant industry is expected to be subdued at similar levels as in the last year at flat to very marginal growth. In the bazaar market the growth is estimated at an overall 2-3 %. Increasing input costs and adverse exchange rates are likely to put pressure on margins.

The Division will focus on maintaining its volume growths at double the rate of the industry and further increase its presence in the B2B / OEM segments. Additional opportunities to extend the distribution base and network in the automotive and industrial markets are also being tapped to increase market shares. New Synthetic lubricant products and mineral based ''long life'' products are planned to be launched in 2013-14.

Competition is expected to increase to make up for lost volumes with higher discounts and promotions, putting pressure on margins and market share.

The Division will continue and further strengthen its strategies and executions to counter these possible threats and tap the emerging opportunities.

13.2 Detonators and Accessories

The outlook for F 2014 is marginally optimistic with signs of economic recovery and revival of infrastructure/mining activity in Africa, S. E. Asia, Oman, Qatar, Nepal & Sri Lanka.

In India, the mining sector which is dominated by coal mining accounts for 80% demand for industrial explosives and the balance 20% is for infrastructure projects like roads, hydro engineering, irrigation etc. Operations of various coal and iron ore mining projects have been affected over the past 3 years on account of regulatory and other approval / reviews and issues relating to rehabilitation of the mine-displaced people. These have adversely affected the demand for the products and growth of the Division.

In F 2014 mining activities which have grown negatively in the last 2 years is expected to perk up and show some positive growth in the coal and iron ore sectors. The Division is geared to increase business in keeping with the expected higher demand.

13.3 Mining and Infrastructure (IDLconsult)

Contract Mining business may suffer again in the coming year and our turnover may be similar to the last year. However, we will be reducing on costs by reviewing all the operations of the Division.

We are hopeful that the Government of India will act positively for the clearances of 200 coal blocks and once these blocks are cleared, a flood-gate of opportunities will open up for contract mining. Our hope lies on two facts, first, India is self-sufficient in non-coking coal reserves and second, India will reduce import of coal to conserve foreign exchange.

14. RISKS AND CONCERNS

14.1 Environmental Risks

Regular safety audits and mock drills are carried out by internal safety audit teams and at regular intervals by external teams. Standard Operating Procedures (SOPs) are strictly enforced in all plants within the factories to ensure minimisation of risk. In addition, strict compliance of the requirements of the Explosives Act and Rules are ensured to protect the exposure of adjacent neighbourhoods from undue risk. Operations are carried out to comply with emission, waste water and waste disposal norms of the local authorities of the respective factories. In addition, the Hyderabad Factory has implemented the Integrated Management System incorporating ISO 14001 and OHSAS 18001 whilst the Silvassa Factory is certified under ISO 14001 incorporating the Environment Management System.

14.2 Operational Risk Licensing

The Explosives Division operates in a highly regulated and licensed environment and amendment / revision in licenses are required based on expiry of the licenses and change in production capacity and process. Amended / revised licenses for increase in license capacity for any of the explosives products may get delayed temporarily or for long periods thereby limiting our ability to cater to any increase in demand for these products from our customers. Non availability of licenses / approvals for exports and expansion of new products could affect our future growth and expansion plans. The Division, therefore, ensures that approvals are taken up well in advance to avoid launch dates / export of products.

Location Risks

Since the lubricants are manufactured at one location and distributed throughout India, the cost of transportation and storage are higher in comparison to some of our competitors'' operations. An analysis of business growth areas have indicated the requirement of a second plant in South India. This is under active consideration.

Raw Materials

Many of the inputs of the two major Divisions are imported. Availability of which is affected by global market situations. Also, prices of such items are volatile and subject to forex fluctuation. Timely availability of raw materials is critical for continuous plant operations. The Company seeks to mitigate the risk by entering into long-term relationship with global raw material suppliers, with suitable escalation clauses to ensure regular supplies as well as hedging to minimise forex risks.

As the World economy is facing a rising commodity price cycle currently, with Crude Oil prices also firming up, the raw material prices and input costs are expected to increase. Base oils are showing a rapidly increasing trend and this is expected to impact margins/profitability. The Company seeks to mitigate the risk by entering into long-term relationship with global raw material suppliers, with suitable escalation clauses to ensure regular supplies.

14.3 Market Risks: Markets

All the Divisions of the Company operate in highly competitive markets where competition from all India players as well as regional players is high. Of which, two major divisions, namely Explosives and IDLconsult Divisions operate in tender-driven markets, sometimes with onerous and unreasonable performance clauses. In the Lubes Division, increased competition from existing players and entry level pricing by new entrants leading to price undercutting could affect revenues. Therefore, there is a risk of cost increases, especially of petro product inputs, if not possible to be passed on to ultimate consumers.

Any reversal in growth trend in the economy in general and weak monsoons in particular, could affect demand in the automobile industry and consequent deceleration in manufacturing industry. This is likely to have an adverse impact on the lube industry. In order to minimise such adverse impact, the Lubes Division is taking various product and marketing initiatives.

Concentration of Customers

The IDLconsult Division which currently undertakes mining services in coal, iron ore and limestone sectors, is exposed to business risks on account of non-availability of environmental clearances in time and lack of adequate infrastructure for dispatch of ores from the mine, especially during the rainy seasons. In view of this, detailed review of approvals and quality of infrastructure is carried out before undertaking mining service contracts. Both the Explosives and Contract Divisions are operating in the mining and infrastructure sectors, dominated by the PSUs, where the tendering system is in vogue, with the attendant risks. Missing L1 status in these tenders might result in loss of business opportunities for extended periods for the relevant tender(s).

14.4 Financial Risks:

Currency Value and Interest Rate Fluctuations

Financial risk management is done by the Finance Department at the various business Divisions and at Corporate Office under policies approved by the Board of Directors. Policies for overall foreign exchange loss risks and liquidity are regularly reviewed based on emerging trends. Interests'' risks arising out of financial debt, are normally done at fixed rates or linked to LIBOR and appropriate Bank lending rates. Adverse movement of Rupee from current levels may further impact base oil and ammonium nitrate rates.

Credit Risk

The Company sells its products through the customary trade channels, with the attendant risk of payment delays and defaults. To mitigate the risk, a credit risk policy is also in place to ensure that sale of products are made to customers after evaluation of their ability to meet financial commitments through allotment of specific credit limits to respective customers. Credit availability and Exposure (with the trade channels) is another area of risk.

Liquidity Risk

Liquidity conditions in the money market and the commercial interest rates may impact the capability of distribution channel of the Lubes Division to support growth in business. Steps are being taken up for tie-up with financing partners to support distributors.

All the three major Divisions operate in working capital intensive industries. The Company realizes that its ability to meet its obligations to its suppliers and others is linked to timely collection of receivables and maintaining a healthy credit rating. Review of working capital constituents like inventory of raw materials, finished goods and receivables are done regularly by the respective Divisions and Corporate Finance.

14.5 Legal and Statutory Risks:

Contractual Liability

All major contracts are reviewed / vetted by the in-house Legal department before the same are executed. In addition, the Company engages the services of reputed independent legal counsels, on need basis. In matters of tax law and other statutory obligations the outcome of litigation cannot always be predicted. Hence, appropriate financial provisions, insurance policies and credit lines are taken to limit the risk for the Company.

Litigation Risks:

The Company is exposed to the risk of litigation of prolonged nature. Apart from the Tax Matters referred to in the Financial Statements, Litigations having a major impact on the Company include those with Udasin Mutt pertaining to leased lands of Hyderabad Works, Competition Commission of India and Orissa Sales Tax cases as old as 25 years which are being pursued by the Company with the appropriate Court/Tribunal.

14.6 IT Risks

The Company is dependent on intra-office and inter-office networks, as well as several business software operated from the Corporate Office and the business Divisions. Failure of system networks and consequential loss of business is attempted to be minimised by critical systems being operated on secured servers with regular maintenance, regular back up and off-site storage of data, selection of suitable firewall and virus protection systems / software.

14.7 Other Risks

Various assets of the Company including plant and machinery, stocks, buildings, furniture, office equipment and computer systems could suffer damages / loss owing to occurrences like fire, accidental mishaps, etc. The Company has taken insurance covers to protect these assets from possible damage / loss.

While the Company undertakes regular review of remuneration structures, threat of poaching by competitors, especially, new entrants in the industry of key persons is possible. Such actions could lead to temporary drop in efficiency and performance in the specific areas.

15. DIRECTORS

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Mr.M.S.Ramachandran, Ms.Vinoo S Hinduja and Mr.V.Ramesh Rao retire by rotation at the 52nd Annual General Meeting of the Company and are eligible for reappointment.

Profile of members of the Board of Directors being appointed I reappointed :

M.S.Ramachandran

Mr. M.S.Ramachandran is a Bachelor in Mechanical Engineering. He has vast knowledge and experience of Oil and Gas industry. He was Chairman of Indian Oil Corporation Limited, Chennai Petroleum Corporation Limited, IBP Co. Ltd., Bongaigaon Refineries & Petrochemicals Ltd., Indian Oil Tanking Ltd., Indian Oil Petronas and Director, ONGC Ltd., Petronet LNG Ltd. He has received several awards including Chemtech Pharma Bio Hall of Fame Award in 2005 and National Institute of Industrial Engineers Lakshya Business Visionary Award in 2004.

Vinoo S Hinduja

Ms. Vinoo S Hinduja is a degreeholder in Business Administration from UK and a Diploma holder in Health Policy Management from USA. She has completed her internship and training in Finance and Banking at the Credit Suisse Bank, Geneva and Chase Manhattan Bank, London and in Hospital Administration and Management from Cromwell Hospital, London. She is also a memberofthe National Health and Education Society, Hinduja National Hospital in Mumbai.

V Ramesh Rao

Mr.V.Ramesh Rao is a postgraduate in Mechanical Engineering with specialization in Industrial Tribology from IIT, Madras and is a President''s Gold Medalist. He has been working in the lubricants industry since 1984 in various companies such as Lubrizol India Limited, Gulf Lubricants Systems and in Gulf Oil International companies in China, Korea, Taiwan and Philippines. He is a member of the Gulf Oil Core Technical Team and assisted Gulf Oil''s international operations and handles the operations in the Asia Pacific Region.

Names of companies in which the Directors, seeking appointed/reappointed at the ensuing AGM, hold positions of directorship and the membership/chairmanship of committees of the Board, are as per the Annexure to the Report on Corporate Governance.

16. STATUTORY INFORMATION

Information on Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo under Section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and the Statement under Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, are annexed to this full Report. However, as per the provisions of Sec.219 (1) (b) (iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company.

17. INFORMATION ON STOCK EXCHANGES

The Equity shares of the Company are listed on Bombay Stock Exchange Limited and the National Stock Exchange of India Limited and the Listing Fees have been paid to them uptodate.

18. CORPORATE GOVERNANCE

A detailed report on the subject forms part of this report. The Statutory Auditors of the Company have examined the Company''s compliance and have certified the same as required under the SEBI Guidelines. Such certificate is reproduced in this Annual Report.

19. DIRECTORS'' RESPONSIBILITY STATEMENT

The Directors, on the basis of informative documents made available to them, confirm that:

a. In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures.

b. They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period.

c. They have taken proper and sufficient care for the maintenance of the adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

d. They have prepared the annual accounts on a going concern basis.

20. SUBSIDIARY COMPANIES

In the context of mandatory requirement to present consolidated position of the Company including subsidiaries, at the first instance, members are being provided with the Report and Accounts of the Company treating these as abridged accounts as contemplated by Section 219 of the Companies Act, 1956. Members desirous of receiving the full Report and Accounts of the subsidiaries, which are available for inspection at the Registered Office of the Company, will be provided the same on receipt of a written request from them. The Board has given consent for not attaching balance sheets and other financial statements of the subsidiary companies, by passing a resolution to this effect. However, specified information of each of the subsidiary company has been provided in this annual report.

21. AUDITORS

M/s Deloitte Haskins and Sells and M/s Shah and Co., Chartered Accountants retire at the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received confirmation that their appointment will be within the limits prescribed under Section 224(1B) of the Companies Act, 1956.

Cost Audit

The Ministry of Corporate Affairs, Cost Audit Branch had, vide its Order dated 2nd May, 2011 directed audit of cost records of companies covered under the Cost Accounting Records (Petroleum Industry) Rules, 2002. The said Order is applicable to the Company, being manufacturer of Lubricating Oils. Accordingly, the Company has appointed M/s Dhananjay V Joshi & Associates, Cost Accountants, Pune for audit of the Cost Records ofthe Lubricants Division for the financial year 2012-13.

The Cost Auditor is required to forward his report to the Central Government by 27th September 2013.

ACKNOWLEDGEMENTS

Your Directors would like to express their appreciation for the assistance and co-operation received from the financial institutions, banks, Government of India and various State Government authorities and agencies, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services of all employees of the Company and the members for their continued support.

For and on behalf of the Board of Directors Place : Mumbai S. G. HINDUJA

Date : May 25, 2013 Chairman


Mar 31, 2012

The Directors have pleasure in presenting their Fifty First Annual Report and Audited Accounts for the year ended 31st March 2012.

1. FINANCIAL RESULTS: (Rs. in lakhs)

2011-12 2010-11

Profit after providing for Depreciation of Rs.1441.61 lakhs (Rs. 1605.22 lakhs) and before extraordinary items 4939.06 4690.29 and taxation

Exceptional Income: 2092.17 2011.74

Profit Before Taxation 7031.23 6702.03

Taxation:

Current 1585.00 866.00

Deferred (95.00) 417.00

MAT Credit (670.00) -

Profit After Taxation 6211.23 5419.03

Balance brought forward from previous year 10868.32 8303.87

Balance available for appropriation 17079.55 13722.90

Appropriations:

Proposed Dividend 2181.19 1982.90

Provision for tax on proposed dividend 353.84 321.68

Transfer to General Reserve 650.00 550.00

Balance carried to Balance Sheet 13894.52 10868.32

EPS 6.26 6.11



2. DIVIDEND

The Directors recommend the payment of Dividend of Rs. 2.20 per share (Rs. 2.00 per share) on the Paid Up Capital of the Company. The dividend of Rs.21.81 crores (Rs.19.83 crores), if approved by the Shareholders at the Fifty First Annual General Meeting, will be paid out of the profits for the current year to all Shareholders of the Company whose names appear on the Register of Members as on the date of the Book Closure.

3. OPERATIONS

The total turnover of the Company was Rs. 1075.76 crores (previous year - Rs.1001.02 crores). The profit before exceptional items and taxation was Rs. 49.39 crores (Rs. 46.90 crores ). The profit before tax was Rs. 70.31 crores (Rs. 67.02 crores). The profit after provision for current tax of Rs. 15.85 crores and write back of deferred tax of Rs. 0.95 crores and adjustment of MAT credit of Rs. 6.70 crores, was Rs. 62.11 crores (Rs. 54.19 crores) resulting in an EPS of Rs. 6.26 for the year (Rs. 6.11).

4. DIVISIONAL PERFORMANCE

4.1 Business Operations

4.2 Lubricants

Continuing the Growth Journey

The Lubricants Division continued its growth journey by delivering significantly higher revenues and profits during the Financial Year 2011-12. The gross turnover of the Division was at Rs. 931 crores as against Rs. 679 crores, an increase of 37% over previous year and segment profits increased by 28%.

Outperforming Industry and Competitor growth rates

The Lubricant Industry estimated annual growth in overall volumes was 2-3% and the bazaar market segment growth slowed down to 5-6 %. The Automobile Industry witnessed positive growth throughout the year but at a slower pace with Commercial Vehicles segment posting a growth of 18%, mainly due to the increase in sales of Light Commercial Vehicles. Passenger Cars and Two Wheelers sales grew at 2 % and 14% respectively. The overall growth of the automobile industry was moderate at 12%. Accordingly, demand conditions in the lube industry remained positive for Automotive Lubricants. With industrial growth slowing down all through the year, the demand for industrial lubricants in particular was lower.

Rising Input costs Increased Volumes Increased Profits

The Lubes Division has achieved significant growth in volumes which was well ahead of the industry and achieved faster growth resulting in increased market share in spite of the situation wherein prices of major raw materials were volatile throughout the year with an upward bias coupled with increase in prices of additives, packaging, etc. Fluctuations in the exchange rates and weakening of the Rupee against US Dollar to unprecedented levels led to significant uncertainty in input costs and the margins were under pressure throughout the year. The Division's focused strategies and execution resulted in the Division attaining one of the highest volume and revenue growth in the industry which directly contributed to the improved financial results of the Division.

On ground activations and Brand Building

The volume growths were higher in the focus segments namely New Generation Diesel Engine Oils and Motorcycle Engine Oils. Continued on-the-ground below-the-line initiatives and distribution increase across segments resulted in increased retail shares and product usage. Sales from co-branded ranges with Ashok Leyland and Mahindra also contributed to the growth.

Brand Building efforts like campaigns with the Champions of IPL - the Chennai Super Kings and also other multi-media campaigns featuring our newly appointed Brand Ambassador - Indian cricket captain and India's leading Youth Icon - Mahendra Singh Dhoni, were instrumental in driving brand awareness, communicating the brand value of 'longer drain' and strengthening the brand equity. The Division also achieved success in the Fleet, Construction and Mining segments by increasing its customer base.

Motor Sports revving up excitement levels

The Division continued its association with motor sports with many regular and new events. The annual Gulf Dirt Track Championship was staged in Nashik, Jodhpur and Bhopal. The unique Gulf Foster A Child Car Drive - A Corporate Social Responsibility activity and Gulf Monsoon Scooter Rally were organized in Mumbai.

To promote 'young talent' in motor racing, two Gulf sponsored cars participated and won the MRF Formula 1600 Championship 2011 and also featured in the Support Race at the Indian F1 track at the Buddh International Circuit in Noida before the main F1 race Gulf's Top Fuel Bike driven by 5 times European Drag Bike Champion - Ian King (sponsored by Gulf Oil International) which is one of the fastest bikes in the world, was flown in to Mumbai to demonstrate its awesome speed and endurance powers to bike enthusiasts and media.

OEM tie-ups with Global Majors

The technical and business development teams secured and announced tie-ups with Leyland Nissan, Leyland Deere, MANForce for co-branded products and also secured approval for its products from Mahindra Navistar to consolidate it's position as one of the foremost lubricant companies in the diesel engine space.

4.3 Detonators and Accessories (Explosives)

The gross turnover of the Division was at Rs.94 crores as against Rs. 194 crores in the previous year which includes the turnover of the demerged undertaking from 1st April 2010 to 30th September 2010.

The Company markets its Detonators and Accessories through IDL Explosives Limited, a wholly owned subsidiary. This arrangement has been necessitated on account of market conditions, as the customers prefer to place a combined order for industrial explosives and accessories. The industrial explosives business was transferred to IDL

Explosives Limited during the last year, as part of Scheme of Arrangement. The Explosives Division of the Company now consists of the manufacturing plant and other facilities of the Hyderabad Works only.

The Division has manufactured 109.434 million Detonators (103.293 million) and 24.239 million meters (22.903 million meters) of Detonating Cord during the year 2011-12, registering a growth of 6% over the previous year. Growth in the production of Detonating Cords was in high value added products.

4.4 Mining and Infrastructure (IDLconsult)

The Year 2011-12 was no better for the Mining Industry over the previous year and the performance of Mining and Infrastructure Division (IDL Consult) is held back by various Governmental issues faced by mine owners. The mining contracts in the Iron ore block of Orissa which was contributing to the business of the Division in the previous years were affected due to the statutory restrictions from the State and Central Government on account of lease areas allowed for mining and environmental exigencies. As a result, the Division ended the year with the revenue of Rs. 51 crores as against Rs. 126 crores in the previous year.

However the Division has taken up one Irrigation Project in Andhra Pradesh to build canals for the Pranahita Chevella Project.Division's contract is in the first package of this prestigious Project in AP.

Uranium ore mining project for Uranium Corporation of India under the Department of Atomic Energy suffered due to issues amongst the management of UCIL and the land losers for few months. The Project picked up in the later part of the year.

The Division had undertaken an ambitious project for implementing and integrating Management system covering Quality, Safety, Occupation health and environment. This Division is the only Mining Service Provider in India with all certification under ISO 9001, ISO 14001 and BS OHSAS 18001.

4.5 Other Business Groups

The 4 Wind Mills ( 1 MW ) located at Ramagiri in Andhra Pradesh generated 2,61,000 units (2,01,600 units). The Hyderabad factory received the benefit of the generation through the APTRANSCO grid.

4.6 Exports

Sales of Explosive accessories was Rs. 28 crores during F 12 as against Rs. 31 crores in previous year. This was despite continuing economic slow down in both Europe and Middle East and more stringent shipping procedures and increased competition. Margins were maintained by optimizing product mix, clubbing shipments and better cost management.

Exports of the Lubricants Division were at 658 KL during 2011-12 as compared to 1487 KL in 2010-11. Export turnover of lubricant products was lower at Rs. 9.14 crores during 2011-12 against Rs. 13.34 crores in 2010-11. The Division is exporting its products mainly to ASEAN markets and highly competitive Middle East markets.

4.7 Property Development Bangalore:

During the year, the Bangalore project of the Company was notified by the Ministry of Commerce and Industry, Government of India as Special Economic Zone (SEZ) comprising of an area of 12.14 hectares (30.35 acres). The remaining area of 9.32 acres is being developed as non-SEZ property. Auspicious Bhoomi Puja for the project was performed in the month of April 2012. Designed by renowned Architects - RSP Design Consultants, the project will consist of a total of 8.00 million sq ft out of which revenue area is 3.82 million sq ft of IT SEZ and 1.23 million sq ft of non-SEZ space encompassing a Hotel, Serviced Apartments, Commercial Offices and a Retail Mall.

It is being developed at a total cost of Rs 1800 crores on a Joint Development basis with Hinduja Realty Ventures Ltd who are responsible for all Architectural Scheme design, project funding, permissions, approvals, construction and development, marketing / leasing and eventual maintenance of the entire complex.

There will be no additional cost to be incurred by the Company on the development. In return for making available the land for the project, the Company is entitled to 30% of the entire developed area totalling 2.4 million sq ft out of which revenue area will be 1.5 million sq ft. Revenues are planned in a phased manner from the last quarter of the FY 2013-14.

The Co-Developers are involving reputed contractors and consultants for adherence to quality and timely completion of the project in a phased manner in about 5 A years.

Hyderabad:

Work on the 100 ft. road through the property of the Company being laid by Greater Hyderabad Municipal Corporation (GHMC) has been progressing well. The Company had handed over 8 acres and 11 guntas of land for the road, in lieu of which the Company is entitled to waiver of impact fee in respect of the proposed development of the property.

The Company is in advanced stage of entering into of agreement for developing the property with Hinduja Realty Ventures Limited, sharing ratio based on the recommendations of reputed property consultants is being considered.

5. INTERNAL CONTROL SYSTEMS AND RISK MANAGEMENT Internal Control System:

The Company has an Internal Audit Department with an objective to provide to the Audit Committee and the Board of Directors, an independent, objective and reasonable assurance of the adequacy and effectiveness of the Organisation's risk management, control and governance processes. The function also assesses opportunities for improvement in business processes, systems and controls; provides recommendations, designed to add value to the organization in consultation with the Senior Management. After review by the Audit Committee, follow through on the implementation of corrective actions are monitored.

The Audit function in its process of monitoring the effectiveness of the internal controls also reviews and reports to the management and the Audit Committee about the compliance with internal controls and the efficiency and effectiveness of operations and the key process risks. The Audit Committee of the Board of Directors regularly review the significant audit findings, adequacy of internal controls, action taken reports as well as implementation of various comprehensive policies for compliance and governance.

The Internal Audit Department in consultation with the Statutory Auditors and the Audit Committee develop and document annual audit plans and coverage on significant areas of operations with a risk based approach. Based on the annual audit plan, the Internal Audit Department carries out process reviews for critical functions at all locations in an efficient and timely manner.

During the year, the Audit Committee met six times to review the reports submitted by the Internal Audit Department. The Audit Committee regularly meets the Company's Statutory Auditors to ascertain their views on the adequacy of business and control systems in the Company and their observations on financial reports.

6. FIXED DEPOSITS

Fixed Deposits from the public and the shareholders as on 31st March 2012 amounted to Rs. 346.44 lakhs (Rs. 557.43 lakhs). Out of the above, 49 deposits amounting to Rs. 236.33 lakhs (Rs. 172.76 lakhs), which had matured, remained unclaimed. Of these, 45 deposits amounting to Rs. 224.95 lakhs had matured only on 31st March 2012, most of which have been renewed / repaid to the depositors in the month of April/May 2012.

7. TAXATION Orissa Sales Tax

The matter pertains to transfer of finished goods from the Rourkela factory situated in the State of Orissa to other States, in respect of 10 assessment years viz., 1976-77 to 1983-84, 1989-90 and 1990-91. Subsequent to the dismissal of the Review Petition in the Orissa High Court, the Company had filed a Special Leave Petition in the Supreme Court and in terms of the liberty granted by the Supreme Court, the Company had filed Tax Revision Petition and a Stay Petition against demand notices, before the Commissioner of Commercial Taxes at Bhubaneswar. The Stay Petition was dismissed and the Company has filed a Writ Petition before the Orissa High Court. The Tax Revision Petition was dismissed in February 2012 and the Company filed Writ Petition in the Orissa High Court in March, 2012 against the order of the Commissioner of Commercial Taxes.

8. RESEARCH & DEVELOPMENT

During the year under review, the R & D of the Explosives Division has obtained relevant statutory permissions for trial manufacture and field-evaluation of improved indigenous version and imported version of detonators. Field trials of indigenously developed improved version Electronic Detonators are successfully completed. Initial field trials of programmable electronic detonators using imported electronic systems were also completed. More field trials are planned at various customer locations during the current year.

Initial designs are being tested in the lab for high security initiating systems/detonators which can be initiated only by authorized persons at authorized locations. Regulatory approvals have been received for manufacture of new products developed by the inhouse R & D for Boostering and Metal Forming applications. High energetic materials for defense applications have been developed for premier Defense establishments of the Government of India and pyrotehnic igniters for Space applications.

9. SUBSIDIARIES

Gulf Oil Bangladesh Limited reported a profit of Rs.100.29 lakhs ( Rs. 67.45 lakhs ). PT. Gulf Oil Lubricants Indonesia reported a profit of Rs.122.94 lakhs ( Rs. 48.14 lakhs ) Gulf Oil (Yantai) Co. Ltd. reported a profit of Rs. 225.59 lakhs ( Rs. 261.43 lakhs )

Hinduja Infrastructure Limited reported a profit of Rs.0.11 lakhs ( Rs. 0.02 lakhs ).

IDL Buildware Limited reported a profit of Rs. 14.27 lakhs (loss of Rs. 144.47 lakhs ) after closure of the factory at Vizag.

Gulf Carosserie India Limited reported a loss of Rs. 0.13 lakhs ( Rs. 0.20 lakhs ).

IDL Explosives Limited reported a loss of Rs. 1270.44 lakhs ( profit of Rs.27.69 lakhs).

10. HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Explosives Division has maintained cordial industrial relations, with low absenteeism. The Division conducted various training programmes on quality, safety and health management and also programmes to improve the competency levels. Focus on periodical medical checkups was emphasised. Specialised programmes were conducted and discussion sessions were arranged on "Stress Management" to create a healthy work atmosphere which would lead to reduction in absenteeism and thereby better levels of productivity. Also, programmes were started for upgrading skill levels of the employees in their respective areas of work to overcome challenges in more competitive market conditions.

The Lubes Division's focus has been on the developing competencies by conducting training programmes in the areas of 'Creating a Selling Edge', Understanding of Business Processes using SAP technology and enhancing ISO awareness levels across the Division's employees . For the Division's Core Sales Team, programs to learn and practice Conceptual Thinking models based on Dr. Edward de Bono's techniques, were imparted through "Six Thinkings Hats" workshops. Also modules of Persuasive Selling Skills and Merchandising programs were conducted for the sales teams across regions. In addition, other internal and external functional training programs were imparted during the year.

Safety

The Explosives Division has implemented safety projects during the year such as IMS Surveillance Audit by reputed auditors, installation of new Dissolver and replacement of flooring with new chequered plates at PETN Crystallization plant, safety awareness programmes and fire-fighting training sessions covered for all categories of employees including contract workmen working in process plants.

Security

With a view to beef up enhanced security around the explosives magazines, CC cameras are being installed, height of the boundary walls surrounding the magazines increased to 10 feet secured by blade edged coils. Watch towers with illumination facility have been erected in the magazines areas. Entry of people and authorised vehicles into the factory are being subjected to stricter monitoring by way of entry passes and such other measures.

11. OUTLOOK FOR THE CURRENT YEAR, OPPORTUNITIES AND THREATS

11.1 Lubricants

Volume growth in the lubricant industry is expected to be subdued at similar levels as in the last year at 5 % in the bazaar market and 2-3 % overall. The automotive industry growth is pegged at 10-11 % (as per SIAM). Increasing input costs and adverse exchange rates are likely to put pressure on margins.

The Division will focus on maintaining its volume growth at double the rate of the industry and increase its presence in the B2B / OEM segments. Additional opportunities to extend the distribution base and network in the automotive and industrial markets are also being tapped to increase market shares. New Synthetic lubricant products and mineral based 'long life' products will be launched in 2012-13.

Competition is expected to increase as they have been loosing volumes with more price discounts and promotions, putting pressure on margins and market share.

The Division will continue and further strengthen its strategies and executions to counter these possible threats and tap the opportunities.

11.2 Detonators and Accessories

In India, the mining sector accounts for 80% demand for industrial explosives which in turn is dominated by coal mining and the balance 20% is for other minerals and infrastructure projects like roads, hydro engineering, irrigation etc. Operations of various coal and iron ore mining projects have been affected in recent times on account of regulatory and other approvals and issues relating to rehabilitation of the mine-displaced people, thus affecting the demand for the products of the Division. However, with both Central and State Governments, focusing their policies towards resolving these issues, the mining sector is expected to improve in the coming months.

11.3 Mining and Infrastructure (IDLconsult)

Mining contract business in the country may continue to suffer also in the current year and our results may be similar to the last year in the Mining sector. The major reasons being the temporary closure of many iron ore and manganese ore mines of our major clients due to various statutory and environmental issues under review by the Central and State governments and entry level pricing by new entrants with an eye on future growth of these sectors. However, the Governments are expected to act positively in view of the importance of mining in the growth of the economy.

In the coal sector, the Government of India has started acting at an accelerated pace to clear about 200 coal-blocks in the country, which provides ample scope for mining contract business since India is currently importing about 100 million of coal annually while having large coal reserves. In short there are strong indications that the Governments will be clearing the decks soon to increase mining activities in the country.

Increased Government attention to the infrastructure sector and its financing is also expected to give a fillip to activities such as irrigation and tunneling in which the Division is engaged.

12. RISKS AND CONCERNS

12.1 Environmental Risks

Regular safety audits are carried out by internal safety audit teams and at regular intervals by external teams. General Safety Directions (GSDs) are strictly enforced in all factories and plants within the factories to ensure minimisation of risk. In addition, strict compliance of the requirements of the Explosives Act and Rules are ensured to protect the exposure of adjacent neighbourhoods to the explosives and accessories factories from undue risk. Operations are carried out to comply with emission, waste water and waste disposal norms of the local authorities of the respective factories. In addition, the Hyderabad Factory has implemented the Integrated Management System incorporating ISO 14001 and OHSAS 18001 whilst the Silvassa Factory is certified under ISO 14001 incorporating the Environment Management System.

12.2 Operational Risk Licensing

The Explosives Division operates in a highly regulated and licensed industry and amendment / revision in licenses are required based on expiry of the licenses and change in production capacity and process. Amended / revised licenses for increase in license capacity for any of the explosives products may get delayed temporarily or for long periods thereby limiting our ability to cater to any increase in demand for these products from our customers. Non availability of licenses / approvals for expansion of new products could affect our future growth and expansion plans. The Division, therefore, ensures that approvals are applied for well in advance to avoid launch dates / export of products.

Location Risks

Manufacturing facilities, for our Industrial Explosives Division, are spread across six states. The optimum locations for packed explosives unit is determined by the customer location and the source of raw material. The advantage of the location of bulk explosives units is optimized to be close to the customer location. With changes in sources of raw material our location may not continue to be optimal in comparison with the competition. Moreover, if there is a consolidation in the industry, and the size of each manufacturing units go up, we may be disadvantaged by being sub-optimal.

Further since the lubricants are manufactured at one location and distributed throughout India, the cost of transportation and storage are higher in comparison to some of our competitors operations.

Raw Materials

Many of the inputs of the three major Divisions are imported, availability of which is affected by global market situations. Also, prices of such items are volatile. Timely availability of raw materials is critical for continuous plant operations. The Company seeks to mitigate the risk by entering into long-term relationship with global raw material suppliers, with suitable escalation clauses to ensure regular supplies.

As the world economy is facing a rising commodity price cycle currently, with Crude Oil prices also firming up, the raw material prices and input costs are expected to increase. Base oils are showing a rapidly increasing trend and this is expected to impact margins/profitability. The Company seeks to mitigate the risk by entering into long-term relationship with global raw material suppliers, with suitable escalation clauses to ensure regular supplies.

12.3 Market Risks: Markets

All the Divisions of the Company operate in highly competitive markets where competition from all India players as well as regional players is high. Of which, two major divisions, namely Explosive Accessories and IDLconsult Divisions operate in tender-driven markets, sometimes with onerous and unreasonable performance clauses. In the Lubes Division, increased competition from existing players and entry level pricing by new entrants leading to price undercutting could affect revenues. Therefore, there is a risk of cost increases, especially of petro product inputs, if not possible to be passed on to ultimate consumers.

Any reversal in growth trend in the economy in general and weak monsoons in particular, could affect demand in the automobile industry and consequent deceleration in manufacturing industry. This is likely to have an adverse impact on the lube industry. In order to minimise such adverse impact, the Lubes Division is taking various product and marketing initiatives.

Concentration of Customers

The IDLconsult Division which currently undertakes mining services in coal, iron ore and limestone sectors, is exposed to business risks on account of non-availability of environmental clearances in time and lack of adequate infrastructure for dispatch of ores from the mine, especially during the rainy seasons. In view of this, detailed review of approvals and quality of infrastructure is carried out before undertaking mining service contracts. Both the Explosives and Contract Divisions are operating in the mining and infrastructure sectors, dominated by the PSUs, where the tendering system is in vogue, with the attendant risks. Missing L1 status in these tenders might result in loss of business opportunities for extended periods for the relevant tender(s).

12.4 Financial Risks:

Currency Value and Interest Rate Fluctuations

Financial risk management is done by the Finance Department at the various business Divisions and at Corporate Office under policies approved by the Board of Directors. Policies for overall foreign exchange loss risks and liquidity are regularly reviewed based on emerging trends. Interests' risks arising out of financial debt, are normally done at fixed rates or linked to LIBOR and appropriate Bank lending rates. Adverse movement of Rupee from current levels may further impact base oil and ammonium nitrate rates.

Credit Risk

The Company sells its products through the customary trade channels, with the attendant risk of payment delays and defaults. To mitigate the risk, a credit risk policy is also in place to ensure that sale of products are made to customers after evaluation of their ability to meet financial commitments through allotment of specific credit limits to respective customers. Credit availability and Exposure (with the trade channels) is another area of risk.

Liquidity Risk

Liquidity conditions in the money market and the commercial interest rates may impact the capability of distribution channel of the Lubes Division to support growth in business. Steps are being taken up for tie-up with financing partners to support distributors.

All the three major Divisions operate in working capital intensive industries. The Company realizes that its ability to meet its obligations to its suppliers and others is linked to timely collection of receivables and maintaining a healthy credit rating. Review of working capital constituents like inventory of raw materials, finished goods and receivables are done regularly by the respective Divisions and Corporate Finance.

12.5 Legal and Statutory Risks:

Contractual Liability

All major contracts are reviewed / vetted by the in-house Legal department before the same are executed. In addition, the Company engages the services of reputed independent legal counsels, on need basis. In matters of tax law and other statutory obligations the outcome of litigation cannot always be predicted. Hence, appropriate financial provisions, insurance policies and credit lines are taken to limit the risk for the Company.

Litigation Risks:

The Company is exposed to the risk of litigation of prolonged nature. Apart from the Tax Matters referred to in the Financial Statements. Litigations having a major impact on the Company include those with Udasin Mutt pertaining to leased lands of Hyderabad Works, Competition Commission of India, which are being pursued by the Company with the appropriate Court/ Tribunal.

12.6 IT Risks

The Company is dependent on intra-office and inter-office networks, as well as several business software operated from the Corporate Office and the business Divisions. Failure of system networks and consequential loss of business is attempted to be minimised by critical systems being operated on secured servers with regular maintenance, regular back up and off-site storage of data, selection of suitable firewall and virus protection systems / software.

12.7 Other Risks

Various assets of the Company including plant and machinery, stocks, buildings, furniture, office equipment and computer systems could suffer damages / loss owing to occurrences like fire, accidental mishaps, etc. The Company has taken insurance covers to protect these assets from possible damage / loss.

While the Company undertakes regular review of remuneration structures, threat of poaching by competitors, especially, new entrants in the industry of key persons is possible. Such actions could lead to temporary drop in efficiency and performance in the specific areas.

13. DIRECTORS

In accordance with the provisions of the Companies Act 1956 and the Articles of Association of the Company, Mr.K.N.Venkatasubramanian, Mr.H.C.Asher, Mr.Prakash Shah and Mr.Ashok Kini retire by rotation at the 51st Annual General Meeting of the Company and are eligible for reappointment.

Profile of members of the Board of Directors being appointed / reappointed :

K.N.Venkatasubramanian

K.N. Venkatasubramanian is a Chemical Engineer and M.Tech from IIT-Khargpur. He was Executive Director - Marketing and later Director (Operations) in Indian Petrochemicals Corporation Limited (IPCL) and also a Director on the Board of State Trading Corporation of India and also served as Chairman of Cashew Corporation of India. He was the Chairman of the Sub-Committee on "Petrochemicals" constituted by the Department of Chemicals and Petrochemicals for formulating the perspective plan of petrochemicals during the 8th and 9th Plans periods. He was Chairman and Managing Director of Engineers India Limited and Chairman of Indian Oil Corporation from where he retired.

H.C.Asher

Hemraj Chaturbhuj Asher is a Senior Solicitor and Senior Partner of M/s. Crawford Bayley & Co., a leading firm of Solicitors and Advocates in Mumbai. He specializes in broad spectrum of Corporate Laws.

Prakash Shah

Mr.Prakash Shah was a Member of the Indian Foreign Service for over 35 years. In his distinguished career, Mr.Prakash Shah has served as India's ambassodor to Japan and Venezuela, India's High Commissioner to Malaysia and Brunei and India's Permanent Representative to the United Nations Offices in Geneva and New York. He had also served as Under Secretary General, the UNO and Secretary General's Special Envoy for Iraq.

Ashok Kini

Mr. Ashok Kini graduated from Mysore University in 1965 majoring in Science and obtained a Master's degree in English Literature from Madras Christian College, Chennai before joining State Bank of India ( SBI ) as Probationary Officer in 1967 and reached the position of Managing Director (National Banking) of SBI. During his career, Mr. Ashok Kini was responsible for the Bank's IT plans, from concept and RFP to execution and vendor management, domestic distribution, retail business, consumer banking, marketing/brand management, etc.

Names of companies in which the Directors, being appointed/reappointed at the ensuing AGM, hold positions of directorship and the membership/chairmanship of committees of the Board, are as per the Annexure to the Report on Corporate Governance.

14. STATUTORY INFORMATION

Information on Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo under Section 217(1)

(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and the Statement under Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, are annexed to this full Report. However, as per the provisions of Sec.219 (1) (b) (iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company.

15. INFORMATION ON STOCK EXCHANGES

The Equity shares of the Company are listed on Bombay Stock Exchange Limited and the National Stock Exchange of India Limited and the Listing Fees have been paid to them uptodate.

16. CORPORATE GOVERNANCE

A detailed report on the subject forms part of this report. The Statutory Auditors of the Company have examined the Company's compliance and have certified the same as required under the SEBI Guidelines. Such certificate is reproduced in this Annual Report.

17. DIRECTORS' RESPONSIBILITY STATEMENT

The Directors, on the basis of informative documents made available to them, confirm that:

a. In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures.

b. They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period.

c. They have taken proper and sufficient care for the maintenance of the adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

d. They have prepared the annual accounts on a going concern basis.

18. SUBSIDIARY COMPANIES

In the context of mandatory requirement to present consolidated position of the Company including subsidiaries, at the first instance, members are being provided with the Report and Accounts of the Company treating these as abridged accounts as contemplated by Section 219 of the Companies Act, 1956. Members desirous of receiving the full Report and Accounts of the subsidiaries, which are available for inspection at the Registered Office of the Company, will be provided the same on receipt of a written request from them. The Board has given consent for not attaching balance sheets and other financial statements of the subsidiary companies, by passing a resolution to this effect. However, specified information of each of the subsidiary company has been provided in this annual report.

19. AUDITORS

M/s Deloitte Haskins and Sells and M/s Shah and Co., Chartered Accountants retire at the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received confirmation that their appointment will be within the limits prescribed under Section 224(1B) of the Companies Act, 1956.

Cost Audit

The Ministry of Corporate Affairs, Cost Audit Branch had, vide its Order dated 2nd May, 2011 directed audit of cost records of companies covered under the Cost Accounting Records (Petroleum Industry) Rules, 2002. The said Order is applicable to the Company, being manufacturer of Lubricating Oils. Accordingly, the Company has appointed M/s Dhananjay V Joshi & Associates, Cost Accountants, Pune for audit of the Cost Records of the Lubricants Division for the financial year 2011-12.

The Cost Auditor is required to forward his report to the Central Government by 30th September 2012.

ACKNOWLEDGEMENTS

Your Directors would like to express their appreciation for the assistance and co-operation received from the financial institutions, banks, Government of India and various State Government authorities and agencies, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services of all employees of the Company.

For and on behalf of the Board of Directors

Place : Mumbai S. G. Hinduja

Date : May 30, 2012 Chairman

 
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