Notes to Accounts of Castrol India Ltd.

Dec 31, 2022

Segment information

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM) of the Company. The CODM is responsible for allocating resources and assessing performance of the operating segments of the Company.

The Company has integrated its organization structure with respect to its automotive and non-automotive business considering that the synergies, risks and returns associated with business operations are not predominantly distinct. The company has aligned its internal financial reporting system in line with the new organization structure. As a result the Company''s reportable business segment consists of a single segment of "Lubricants" in terms of Ind AS 108. The Managing Director (Chief Operating Decision Maker) is accountable for leading the growth agenda for an integrated Automotive and Industrial business.

(i) Contingent liabilities & commitments
Particulars	As at December 31, 2022 Rs. in Crores	As at December 31, 2021 Rs. in Crores
(a) Contingent liabilities [Refer note (i) below]
Claims against the Company not acknowledged as debts:
- Income tax matters in dispute under appeal	10.57	10.57
- Sales tax matter under appeals	29.32	29.93
- In respect of compensation claimed by third parties / workers / employees	1.09	3.65
(A)	40.98	44.15
(b) Commitments
- Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances)	68.68	60.66
(B)	68.68	60.66
Total (A B)	109.66	104.81

Note:

The management based on internal assessment/external legal opinion does not expect these demands / claims to succeed. Claims, where the possibility of outflow of resources embodying economic benefits is remote, have not been considered in contingent liability.

(II) The Company has received following demand orders from Maharashtra Sales Tax Department for disputes relating to the movement of goods from the Plant/ MWHs situated in Maharashtra to the CFAs for sale of goods made by the company in the states other than Maharashtra, where applicable taxes have been paid as per the provisions of law. The department alleged that the movement of goods was to fulfil pre-existing orders in the destination States, and were therefore in the nature of inter-State sales. The Company contends that the movement of goods from Maharashtra was not pursuant to any contract /order from customers in other States hence the understanding of operations/systems recorded in the assessment orders are not factually correct. The Company''s tax payment methodology in respect of the goods sold is adequately supported by robust legal grounds/precedents and in Company''s opinion the said demands are unjustified. Thus considering the favorable orders from MVAT Tribunal and based on the legal advice the Company has not made any provision in the books for the year ended 31^st December 2022 and the possibility of outflow of resources embodying economic benefits is considered to be remote.

Employee Benefits

I) Defined Contribution Plan

Contribution to Provident and Other Funds'' in Note 18 includes Rs. 0.90 Crores (December 31, 2021: Rs. 0.98 Crores) for ESIC and Labour Welfare Fund. Note 21 includes Insurance Rs. 3.68 Crores (December 31, 2021: Rs. 4.24 Crores) for Medical Insurance benefits and post retiral medical benefit scheme. Salaries, wages and bonus in Note 18 includes Rs. 1.33 Crores for share match (December 31, 2021: Rs. 1.39 Crores).

II) Defined Benefit Plan

A) General Description of Defined Benefit Plan

i) Gratuity

The Company operates gratuity plan wherein every employee is entitled to the benefit equivalent to fifteen days/one month salary last drawn for each completed year of service depending on the date of joining. The same is payable on termination of service, retirement or death, whichever is earlier. The benefit vests after five years of continuous service.

The Company has a defined benefit gratuity plan in India (funded).The Company defined benefit gratuity plan is a final salary plan for India employees, which requires contributions to be made to a separately administered fund.

The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member''s length of service and salary at retirement age. The fund has the form of a trust and it is governed by the Board of Trustees, which consists of an equal number of employer and employee representatives. The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy.

ii) Provident Fund

The Provident Fund (administered by a trust) is a defined benefit scheme whereby the Company deposits amounts determined as a fixed percentage of basic pay to the fund every month. The actuary has provided a valuation and determined the fund assets and obligations as at December 31, 2022. Further, it has been determined that the yield on the investments of the trust is adequate to meet the obligation towards the payment of the interest rate notified by the government.

iii) Pension Benefit to Past Employees

Under the Company''s pension scheme, certain categories of employees, on retirement, are eligible for monthly differential pension which is accounted for on an actuarial basis as on the Balance Sheet date.

iv) Compensated absences

The Company has a policy on compensated absences which is applicable to its executives joined upto a specified period and all workers. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each Balance Sheet date using projected unit credit method on the additional amount expected to be paid as a result of the unused entitlement that has accumulated at the Balance Sheet date.

B) The plans in India typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.

Investment risk	The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to government bond yields; if the return on plan asset is below this rate, it will create a plan deficit. Currently the plan has a relatively balanced investment in equity securities and debt instruments.
Interest risk	A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan''s debt investments.
Longevity risk	The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.
Salary risk	The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan''s liability.

Each year, the Board of Trustees reviews the level of funding in the India gratuity plan. Such a review includes the asset-liability matching strategy and investment risk management policy. This includes employing the use of annuities and longevity swaps to manage the risks. The fair values of the above investments are determined based on prices in active markets. The Board of Trustees decides its contribution based on the results of this annual review. Generally, it aims to have a portfolio mix of equity and debt instruments. The Board of Trustees aim to keep annual contributions relatively stable at a level such that no plan deficits (based on valuation performed) will arise.

The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the year and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption, the same method used to calculate the liability recognized in the Balance Sheet has been applied. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous year.

Gratuity plan: Rs. 5.03 Crores (December 31, 2021: Rs 4.52 Crores)

Provident fund: Rs. 9.70 Crores (December 31, 2021: Rs. 4.43 Crores)

The Company''s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company''s focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the Company''s risk management policies. The Company''s risk management policies are established to identify and analyze the risks faced by the Company, to set and monitor appropriate risk limits and controls, periodically review the changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating actions are also placed before the Audit Committee of the Company. The primary market risk to the Company is foreign exchange risk. The Company uses forward contracts to mitigate foreign exchange related risk exposures. The Company''s exposure to credit risk is influenced mainly by the individual characteristic of each customer.

A. Liquidity Risk

The company''s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The company has no outstanding bank borrowings. The company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.

As of December 31, 2022 and December 31, 2021, the Company had a working capital of Rs. 1114.70 Crores and Rs. 1209.60 Crores respectively including cash and cash equivalents of Rs.554.50 Crores and Rs. 184.23 Crores respectively.

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: foreign currency risk and other price risk, such as commodity risk. Financial instruments that are affected by market risk include deposits and foreign exchange forward contracts. The sensitivity analysis in the following sections relate to the position as at 31 December 2022 and 31 December 2021. The analysis exclude the impact of movements in market variables on: the carrying values of gratuity and other post-retirement obligations; provisions; and the non-financial assets and liabilities. This is based on the financial assets and financial liabilities held at 31 December 2022 and 31 December 2021.

B1. Foreign Currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company''s exposure to the risk of changes in foreign exchange rates relates primarily to the Company''s operating activities (primarily material costs are denominated in a foreign currency). The Company manages its foreign currency risk by hedging certain material costs that are expected to occur within a range of 1 to 3 month period for hedges of purchases of base oil and additives. When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. For hedges of highly probable transactions the derivatives cover the period of exposure from the point of the commitment up to the point of settlement of the resulting payable that is denominated in the foreign currency. At 31 December 2022 and 31 December 2021 the Company hedged more than 80% of its expected foreign currency purchases for 1 to 3 months. Those hedged purchases were highly probable at the reporting date. This foreign currency risk is hedged by using foreign currency forward contracts. Details are as given below

B2. Commodity Price risk

The Company exposure to market risk with respect to commodity prices primarily arises from the fact that we are a purchaser of base oil. This is a commodity product whose prices can fluctuate sharply over short periods of time. The prices of base oil generally fluctuate in line with commodity cycles. Material purchases forms the largest portion of our operating expenses. The Company evaluates and manages commodity price risk exposure through operating procedures and sourcing policies. The Company has not entered into any commodity derivative contracts. It may also be noted that there are no direct derivatives available for base oil, but there are derivatives for crude oil.

C. Credit risk

Credit Risk : Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables), deposits with banks and foreign exchange transactions. The Company''s customer mainly consists of distributors and Original Equipment Manufacturers (OEMs). The Company has a credit policy, approved by the Management that is designed to ensure that consistent processes are in place to measure and control credit risk.

The Company has trade relationships only with reputed third parties. The receivable balances are constantly monitored, resulting in an insignificant exposure of the Company to the risk of non-collectible receivables. Credit risk is managed through credit approvals, establishing credit limits, obtaining collaterals from the customers in the form of deposits and/or bank guarantees and periodically monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The maximum credit exposure associated with financial assets is equal to the carrying amount.

The Company historical experience of collecting receivables, supported by the level of default, is that credit risk is low across territories and so trade receivables are considered to be a single class of financial assets. The Company makes an allowance for doubtful debts using expected credit loss model and also on a case to case basis, when required, for major clients.

In case of cash and cash equivalents, since the amount is in form of demand deposits with bank there is no credit risk perceived. Hence no provision for expected credit loss has been made.

The management assessed that cash and cash equivalents, loans, other balances with banks, trade receivables, trade payables and other current liabilities/assets approximate their carrying amounts largely due to the shortterm maturities of these instruments.

(B) Fair Value Hierarchy

The Company does not have any financial instrument other than derivatives which are measured at fair value through Profit & loss. The fair value of such derivatives is categorized as level 2 based on the valuation technique used to arrive at the fair value.

The fair value of Financial instruments (Non Current Investments) that are measured on the basis of entity specific valuation using inputs that are not based on observable market data (unobservable inputs). Fair Value of non current investment is determined basis revenue multiples (Level 3).

A one percentage point change in the unobservable inputs used in fair valuation of Level 3 assets and liabilities does not have a significant impact in its value.

31. Equity Settled Share-based payments a) Share Match Plan

During the year ended 31^st December, 2022 : 67,279 shares (31^st December, 2021 : 82,322 shares) were purchased by employees at weighted average fair value of GBP 4.26 per share (31^st December, 2021 : GBP 3.13 per share). The Company contribution during the year on such purchase of shares amounting to Rs. 1.34 Crores (31^st December, 2021 : Rs 1.38 Crores) has been charged under employee benefit expense under Note 27.

32. Capital Management

For the purpose of the Company''s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders. The primary objective of the Company capital management is to maximize the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio and is measured by net debt divided by total capital plus net debt. The Company includes within net debt trade and other payables, less cash and cash equivalents. The Company did not have any borrowings at any time during the year.

34. The Parliament of India has approved the Code on Social Security, 2020 (the Code) which may impact the contributions by the Company towards provident fund, gratuity and ESIC. The Code has been published in the Gazette of India however, the effective date has not yet been notified. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective, if any.

35. As per the MCA notification dated August 05, 2022, the Central Government has notified the Companies (Accounts) Fourth Amendment Rules, 2022. As per the amended rules, the Companies are required to maintain back-up of the books of account and other relevant books and papers in electronic mode that should be accessible in India at all the time. Also, the Companies are required to create backup of accounts on servers physically located in India on a daily basis.

The books of account along with other relevant records and papers of the Company are maintained in electronic mode. These are readily accessible in India at all times and currently a backup is maintained on a cloud-based server. The Company is in the process of complying with the requirement of maintaining server(s) physically located in India for back-up of books of account and other relevant books and papers, on a daily basis, pursuant to the amendment.

c) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.

d) The Company has not traded or invested in crypto currency or virtual currency during the financial year.

e) The Company is not declared wilful defaulter by any bank or financials institution or lender during the year.

f) The Company does not have any charges which is yet to be registered with ROC beyond the statutory period.

g) The Company has not granted any loans or advances in the nature of loans to promoters, directors, KMPs and the related parties (as defined under the Companies Act, 2013), either severally or jointly with any other person, except as disclosed in Note no. 4.1 of financial statements.

h) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall :

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (ultimate beneficiaries) or

(b) provide any guarantee, security or the like to, or on behalf of the ultimate beneficiaries.

i) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (funding party) with the understanding (whether recorded in writing or otherwise) that the Company shall :

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the funding party (ultimate beneficiaries)

or

(b) provide any guarantee, security or the like on behalf of the ultimate beneficiaries.

j) The Company does not have any such transaction which is not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).

k) Clause (87) of section 2 of the Act read with the Companies (Restriction on number of Layers) Rules, 2017 does not apply to the Company.

The accompanying notes 1 - 36 are an integral part of the financial statements.

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Dec 31, 2018

1. Corporate information

Castrol India Limited (the ‘Company’) is a public limited Company incorporated in India with its registered office at Technopolis Knowledge Park, Mahakali Caves Road, Chakala, Andheri (East), Mumbai-400 093. The equity shares of the Company are listed on two recognised stock exchanges in India. The Company is principally engaged in the business of manufacturing & marketing of automotive and industrial lubricants and related services.

2. Significant accounting policies

2.1 Basis of preparation

Statement of Compliance with Indian Accounting Standards (Ind AS): The financial statements have been prepared in accordance with Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended and notified under Section 133 of the Companies Act, 2013 (“the Act”) and other relevant provisions of the Act and other accounting principles generally accepted in India.

2.2 Use of estimates and judgements

The preparation of financial statements requires management to make judgments, estimates and assumptions in the application of accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Continuous evaluation is done on the estimation and judgments based on historical experience and other factors, including expectations of future events that are believed to be reasonable. Revisions to accounting estimates are recognised prospectively

2.3 Critical accounting estimates

A. Useful lives and residual values of property, plant and equipment

Property, plant and equipment represent a material portion of the Company’s asset base. The periodic charge of depreciation is derived after estimating useful life of an asset and expected residual value at the end of its useful life. The useful lives and residual values of assets are estimated by the management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on various external and internal factors including historical experience, relative efficiency and operating costs and change in technology.

B. Income taxes

The Company’s tax jurisdiction is India. Significant judgments are involved in determining the provision for income taxes including amounts to be recovered or paid for uncertain tax positions. Management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits.

C. Defined benefit obligations

Defined benefit obligations are measured at fair value for financial reporting purposes. Fair value determined by actuary is based on actuarial assumptions. Management judgement is required to determine such actuarial assumptions. Such assumptions are reviewed annually using the best information available with the Management.

D. Contingencies

In the normal course of business, contingent liabilities may arise from litigation and other claims against the Company. Potential liabilities that are possible but not probable of crystalising or are very difficult to quantify reliably are treated as contingent liabilities. Such liabilities are disclosed in the notes but are not recognised.

2.4 Recent accounting pronouncements Standards issued but not yet effective

The amendments to standards that are issued, but not yet effective, up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective.

The Ministry of Corporate Affairs (MCA) has issued the Companies (Indian Accounting Standards) Amendment Rules, 2018 dated 28^th March 2018 and has amended the following standards.

Ind AS 115 Revenue from contracts with Customers

Revenue from contracts with customers Ind AS 115 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Ind AS 115 will supersede the current revenue recognition standard used by the Company. The core principle of Ind AS 115 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.

Under Ind AS 115, an entity recognises revenue when (or as) a performance obligation is satisfied i.e. when control of the goods and service underlying the particular performance obligation is transferred to the customer. The company is in process of evaluating the impact of Ind AS 115 and no material impact is expected.

The effective date of adoption of Ind AS 115 is for the periods beginning on or after 1^st April 2018.

Amendment to Ind AS 21

The standard clarified the “Date of transaction” to be used for the non-monetary assets or liabilities. As per the clarification, the date of transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income when an entity has received or paid advance consideration in a foreign currency

The standard will be effective from 1^st April 2018. The company is in process of evaluating the impact of amendment to Ind AS 21 and no material impact is expected.

3. Financial assets

(Unsecured, considered good, unless otherwise stated)

a. Terms / rights attached to equity shares

The Company has only one class of equity shares having par value of Rs. 5/- per share (December 31, 2017 : Rs. 5/- per share). Each holder of equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to the approvals of the shareholders in the ensuing Annual General Meeting (AGM). The Company declares and pays dividend in Indian Rupees.

The Board of Directors of the Company has at its meeting held on January 30, 2019 recommended a final dividend of Rs. 2.75 per share for the year ended December 31, 2018 (December 31, 2017: Rs. 2.50 per share).

In the event of the Company being liquidated, since the equity shares of the Company are fully paid up, there would be no additional liability on the shareholders of the Company. However, post settlement of the liabilities of the Company, the surplus, if any, would be distributed amongst the shareholders in proportion to the number of shares held by each one of them.

As per records of the Company, including its register of shareholders/ members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.

4. Leases

Operating lease: Company as lessee

Office premises and motor cars are obtained on operating lease. The lease terms range from one year to four years and are renewable at the option of the Company. These lease rentals are recognised under “Rent”.

The specified disclosure in respect of these agreements is given below :

5. Segment information

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM) of the Company. The CODM is responsible for allocating resources and assessing performance of the operating segments of the Company

The Company has integrated its organisation structure with respect to its automotive and non-automotive business considering that the synergies, risks and returns associated with business operations are not predominantly distinct. The company has aligned its internal financial reporting system in line with the new organisation structure. As a result the Company’s reportable business segment consists of a single segment of “Lubricants” w.e.f. January 1, 2016 in terms of Ind AS 108. The Managing Director (Chief Operating Decision Maker) is accountable for leading the growth agenda for an integrated Automotive and Industrial business.

There are no transactions with single customer which amounts to 10% or more of the Company’s revenue for the year ended December 31, 2018 and December 31, 2017.

Notes: (i) The management does not expect these demands / claims to succeed. Claims, where the possibility of outflow of resources emboyding economic benefits is remote, have not been considered in contingent liability,

(ii) The Company has received following demand orders from Maharashtra Sales Tax Department for disputes relating to the movement of goods from the Plant/ MWHs situated in Maharashtra to the CFAs for sale of goods made by the company in the states other than Maharashtra, where applicable taxes have been paid as per the provisions of law. The department alleged that the movement of goods was to fulfil pre-existing orders in the destination States, and were therefore in the nature of inter-State sales. The Company contends that the movement of goods from Maharashtra was not pursuant to any contract /order from customers in other States hence the understanding of operations/systems recorded in the assessment orders are not factually correct. The Company’s tax payment methodology in respect of the goods sold is adequately supported by robust legal grounds/precedents and in Company’s opinion the said demands are unjustified. Thus considering the favorable orders from MVAT Tribunal and based on the legal advice the Company has not made any provision in the books for the year ended 31^st December 2018 and considered this to be remote.

* The Company has initiated the process of identification of suppliers registered under Micro and Small Enterprises Development Act, 2006, by obtaining confirmations from all suppliers. Information has been collated only to the extent of information received.

6 Employee Benefits

I) Defined Contribution Plan

Contribution to Provident and Other Funds in Note 18 includes Rs. 1.10 crores (December 31, 2017: Rs. 1.10 crores) for ESIC and Labour Welfare Fund. Note 21 includes Insurance Rs. 2.50 crores (December 31, 2017: Rs. 2.10 crores) for Medical Insurance benefits and post retiral medical benefit scheme. Salaries, wages and bonus in Note 18 includes Rs. 0.30 crores for share match (December 31, 2017: Rs. 2.10 crores).

II) Defined Benefit Plan

A) General Description of Defined Benefit Plan i) Gratuity

The Company operates gratuity plan wherein every employee is entitled to the benefit equivalent to fifteen days/one month salary last drawn for each completed year of service depending on the date of joining. The same is payable on termination of service, retirement or death, whichever is earlier. The benefit vests after five years of continuous service.

The Company has a defined benefit gratuity plan in India (funded).The Company defined benefit gratuity plan is a final salary plan for India employees, which requires contributions to be made to a separately administered fund.

The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the Act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member’s length of service and salary at retirement age. The fund has the form of a trust and it is governed by the Board of Trustees, which consists of an equal number of employer and employee representatives. The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy.

ii) Provident Fund

The Provident Fund (administered by a trust) is a defined benefit scheme whereby the Company deposits amounts determined as a fixed percentage of basic pay to the fund every month. The actuary has provided a valuation and determined the fund assets and obligations as at December 31, 2018. Further, it has been determined that the yield on the investments of the trust is adequate to meet the obligation towards the payment of the interest rate notified by the government.

iii) Pension Benefit to Past Employees

Under the Company’s pension scheme, certain categories of employees, on retirement, are eligible for monthly differential pension which is accounted for on an actuarial basis as on the Balance Sheet date.

iv) Compensated absences

The Company has a policy on compensated absences which is applicable to its executives joined upto a specified period and all workers. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each Balance Sheet date using projected unit credit method on the additional amount expected to be paid as a result of the unused entitlement that has accumulated at the Balance Sheet date.

B) The plans in India typically expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.

Each year, the Board of Trustees reviews the level of funding in the India gratuity plan. Such review includes the asset-liability matching strategy and investment risk management policy. This includes employing the use of annuities and longevity swaps to manage the risks. The fair values of the above investments are determined based on prices in active markets. The Board of Trustees decides its contribution based on the results of this annual review. Generally, it aims to have a portfolio mix of equity instruments, property and debt instruments. The Board of Trustees aim to keep annual contributions relatively stable at a level such that no plan deficits (based on valuation performed) will arise.

The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the year and may not be representative of the actual change. It is based on a change in the key assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption, the same method used to calculate the liability recognised in the Balance Sheet has been applied. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous year

The expected contribution payable for next year is as under:

Gratuity plan: Rs. 8.83 crores (December 31, 2017: Rs 5.38 crores)

Provident fund: Rs. 6.90 crores (December 31, 2017: Rs. 6.25 crores)

7. Financial Risk Management

The Company’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company’s focus is to foresee the unpredictability of financial markets and seek to minimise potential adverse effects on its financial performance. The Company has constituted a Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set and monitor appropriate risk limits and controls, periodically review the changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating actions are also placed before the Audit Committee of the Company. The primary market risk to the Company is foreign exchange risk. The Company uses forward contracts to mitigate foreign exchange related risk exposures. The Company’s exposure to credit risk is influenced mainly by the individual characteristic of each customer.

A. Liquidity risk

The company’s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The company has no outstanding bank borrowings. The company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.

As of December 31, 2018 and December 31, 2017, the Company had a working capital of Rs. 801.39 Crores and Rs. 630.88 Crores respectively including cash and cash equivalents of Rs. 263.65 Crores and Rs. 215.47 Crores respectively.

The table below provides details regarding the contractual maturities of significant financial liabilities as on reporting date.

B. Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: foreign currency risk and other price risk, such as commodity risk. Financial instruments that are affected by market risk include deposits and foreign exchange forward contracts. The sensitivity analysis in the following sections relate to the position as at 31 December 2018 and 31 December 2017. The analyses exclude the impact of movements in market variables on: the carrying values of gratuity and other post-retirement obligations; provisions and the non-financial assets and liabilities. This is based on the financial assets and financial liabilities held at 31 December 2018 and 31 December 2017.

B1. Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (primarily material costs are denominated in a foreign currency). The Company manages its foreign currency risk by hedging certain material costs that are expected to occur within a range of 1 to 3 month period for hedges of purchases of base oil and additives. When a derivative is entered into for the purpose of being a hedge, the Company negotiates the terms of those derivatives to match the terms of the hedged exposure. For hedges of highly probable transactions the derivatives cover the period of exposure from the point of the commitment up to the point of settlement of the resulting payable that is denominated in the foreign currency. At 31 December 2018 and 31 December 2017 the Company hedged approximately ~ 80-85% of its expected foreign currency purchases for 1 to 3 months. Those hedged purchases were highly probable at the reporting date. This foreign currency risk is hedged by using foreign currency forward contracts. Details are as given below:

Sensitivity analysis

The Company is mainly exposed to changes in USD and Euro. The sensitivity analyses demonstrate a reasonably possible change in USD and Euro exchange rates, with all other variables held constant. 5% appreciation/depreciation of USD and Euro with respect to functional currency of the Company will have impact of following (decrease)/increase in profit (Rs. in crores)

B2. Commodity price risk

The Company exposure to market risk with respect to commodity prices primarily arises from the fact that we are a purchaser of base oil. This is a commodity product whose prices can fluctuate sharply over short periods of time. The prices of base oil generally fluctuate in line with commodity cycles. Material purchases forms the largest portion of our operating expenses. The Company evaluates and manages commodity price risk exposure through operating procedures and sourcing policies. The Company has not entered into any commodity derivative contracts. It may also be noted that there are no direct derivatives available for base oil, but there are derivatives for crude oil.

Sensitivity : 1% decrease in commodity rates would have led to approximately an additional Rs. 1.08 crores (December 31, 2017 - Rs. 0.60 crores) gain in the statement of profit and loss. 1% increase in commodity rates would have led to an equal but opposite effect.

C. Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables), deposits with banks and foreign exchange transactions. The Company’s customer mainly consists of it distributors and Original Equipment Manufacturers (OEMs). The Company has a credit policy, approved by the Management that is designed to ensure that consistent processes are in place to measure and control credit risk.

The Company has trade relationships only with reputed third parties. The receivable balances are constantly monitored, resulting in an insignificant exposure of the Company to the risk of non-collectible receivables. Credit risk is managed through credit approvals, establishing credit limits, obtaining collaterals from the customers in the form of deposits and/or bank guarantees and periodically monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The maximum credit exposure associated with financial assets is equal to the carrying amount.

The Company’s historical experience of collecting receivables, supported by the level of default, is that credit risk is low across territories and so trade receivables are considered to be a single class of financial assets.

An impairment analysis is performed at each reporting date on an individual basis for major clients. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in financial statements. As a practical expedient, the Company follows the policy of providing for debtors which are due for more than 90 days.

In case of cash and cash equivalents, since the amount is in form of demand deposits with bank there is no credit risk perceived. Hence no provision for expected credit loss has been made.

8. Fair value measurement

The Carrying value and fair value of financial instruments by categories as of December 31, 2018 and December 31, 2017 were as follows:

The management assessed that cash and cash equivalents, loans, other balances with banks, trade receivables, trade payables and other current liabilities/assets approximate their carrying amounts largely due to the short-term maturities of these instruments.

9. Equity Settled Share-based payments

a) Share Match Plan

During the year ended 31^st December, 2018, 49,310 shares were purchased by employees at weighted average fair value of $. 5.75 per share. The Company’s contribution during the year on such purchase of shares amounting to Rs. 0.30 crores (31^st December, 2017: Rs 2.10 crores) has been charged under employee benefit expense under Note 23.

b) Share Value Plan

The expense recognised for employee services received during the year is shown in the following table:

The BP group operates a number of equity-settled employee share plans under which share units are granted to the group’s senior leaders and certain other employees. These plans typically have a three-year performance or restricted period during which the units accrue net notional dividends which are treated as having been reinvested. Leaving employment will normally preclude the conversion of units into shares, but special arrangements apply for participants that leave for qualifying reasons. The number of shares that are expected to vest each year under employee share plans are shown in the table below.

10. Fair value hierarchy

The Company does not have any financial instrument other than derivatives which are measured at fair value through Profit and loss.

The fair value of such derivatives is categorised as level 2 based on the valuation technique used to arrive at the fair value.

11. Capital Management

For the purpose of the Company’s capital management, capital includes issued equity capital and all other equity reserves attributable to the equity holders. The primary objective of the Company’s capital management is to maximize the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio and is measured by net debt divided by total capital plus net debt. The Company includes within net debt trade and other payables, less cash and cash equivalents. The Company did not have any borrowings at any time during the year

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Dec 31, 2016

b. Terms/rights attached to equity shares:

The Company has only one class of equity shares having par value of Rs. 5/- per share (2015 : Rs. 5/- per share). Each holder of equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to the approvals of the shareholders in the ensuing Annual General Meeting. The Company declares and pays dividend in Indian Rupees.

During the year ended December 31, 2016, the Board declared an amount of Rs. 4.50 (2015 : Rs. 4.00) per share as interim dividend which was distributed to equity shareholders. The amount of interim dividend distributed to equity shareholders was Rs. 222.55 crores (2015 : Rs. 197.82 crores). In addition, the Board has also declared a Special Dividend of Rs. 2.00 per share (2015 : Nil). The amount of Special Dividend to be distributed to equity shareholders is Rs. 98.91 crores (2015 : Rs. Nil). The Board has also proposed a final dividend of Rs. 4.50 (2015 : Rs. 5.00) for distribution to equity shareholders. The amount of final proposed dividend to be distributed to equity shareholders shall be Rs. 222.55 crores (2015 : Rs. 247.28 crores). All dividends aggregating to Rs. 11.00 per share (2015 : Rs. 9.00 per share).

I n the event of the Company being liquidated, since the equity shares of the Company are fully paid-up, there would be no additional liability on the shareholders of the Company. However, post settlement of the liabilities of the Company, the surplus, if any, would be distributed amongst the shareholders in proportion to the number of shares held by each one of them.

As per records of the Company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.

1. Employee benefits

Defined contribution plan Amounts recognised as an expense

Contribution to Provident and Other Funds'' in Note 18 includes Rs. 2.92 crores (2015 : Rs. 3.23 crores) for Pension Fund, ESIC and Labour Welfare Fund. Note 19 includes ‘Insurance'' Rs. 1.51 crores (2015 : Rs. 1.83 crores) for Medical Insurance benefits and post retrial medical benefit scheme. Salaries, wages and bonus in Note 18 includes Rs. 2.01 crores (2015 : Rs. 2.11 crores) for Share match.

The company has incurred redundancy cost of Rs. 3.24 crores (2015 : Rs. 4.82 crores) due to the re-organisation activity, this is included in ‘Employee benefits expense'' - Note 18.

General description of defined benefit plan Gratuity

The Company operates gratuity plan wherein every employee is entitled to the benefit equivalent to fifteen days/one month salary last drawn for each completed year of service depending on the date of joining. The same is payable on termination of service, retirement or death, whichever is earlier. The benefit vests after five years of continuous service.

Provident fund

The Provident Fund (administered by a trust) is a defined benefit scheme whereby the Company deposits amounts determined as a fixed percentage of basic pay to the fund every month. The actuary has provided a valuation and determined the fund assets and obligations as at December 31, 2016. Further, it has been determined that the yield on the investments of the trust is adequate to meet the obligation towards the payment of the interest rate notified by the Government.

2. Employee benefits (contd.)

Pension benefit to past employees

Under the Company''s pension scheme, certain categories of employees, on retirement, are eligible for monthly differential pension which is accounted for on an actuarial basis as on the Balance Sheet date.

Amounts recognised as an expense

Defined benefit plan

Gratuity in note 18 includes gratuity cost of Rs. 3.37 crores (2015 : Rs. 6.44 crores). Contribution to Provident and other funds in note 18 includes Rs. 2.92 crores (2015 : Rs. 6.06 crores) for Provident fund. Salaries, wages and bonus in note 18 includes pension benefit to past employees, Rs. 0.20 crore (2015 : Rs. 0.20 crore).

Basis used to determine expected rate of return on assets:

Expected rate of return on investments for all defined benefit plans is determined based on the assessment made by the Company at the beginning of the year on the return expected on its existing portfolio since these are generally held to maturity, along with the estimated incremental investments to be made during the year. Expected rate of return on plan assets is 6.80% (2015 : 8.05%).

3. Leases

Operating Lease: Company as lessee

Office premises, residential flats, motor cars and equipments are obtained on operating lease. The lease terms range from one year to four years and are renewable at the option of the Company.

4. Segment information

The business segment has been considered as the primary segment.

The Company has integrated its organisation structure with respect to its automotive and non-automotive business considering that the synergies, risks and returns associated with business operations are not predominantly distinct. The Company has aligned its internal financial reporting system in line with the new organisation structure. As a result the Company''s business segment consists of a single segment of “Lubricants” w.e.f. January 1, 2016 in terms of Accounting Standard -17.

During the previous year the Company was organised into two business segments, Automotive and Non-Automotive.

The above business segments have been identified considering:

- The customers

- The differing risks and returns

- The organisation structure

- The internal financial reporting system

Segment revenue, results, assets and liabilities have been accounted for on the basis of their relationship to the operating activities of the segment and amounts allocated on a reasonable basis.

* The Company has initiated the process of identification of suppliers registered under Micro and Small Enterprise Development Act, 2006, by obtaining confirmations from all suppliers. Information has been collated only to the extent of information received.

5. Capitalisation of expenditure

During the year, the Company has capitalised the following expenses which is attributable to the construction activity in general and included in the cost of fixed asset/capital work-in-progress (CWIP). Consequently, expenses disclosed under the respective notes are net of amount capitalised by the Company.

6. Related party disclosures as required under AS-18, “Related Party Disclosures”, are given below:

A. Name of the related party and nature of relationship where control exists:

(a) Holding Companies Castrol Limited, U.K. (Holding Company of Castrol India Limited)

Burmah Castrol PLC (Holding Company of Castrol Limited, U.K.)

BP PLC (Holding Company of Burmah Castrol PLC), Ultimate Holding Company

B. Name of the related party and nature of relationship where transaction have taken place during the year:

(a) Fellow Subsidiaries AsPac Lubricants (Malaysia) Sdn. Bhd. BP Korea Limited (where transaction exists)

BP (China) Industrial Lubricants Limited BP Lubricants USA Inc.

BP Australia Pty Limited BP Marine Limited

BP Business Service Centre Asia BP Mauritius Limited

BP Castrol Lubricants (Malaysia) Sdn. Bhd. BP Middle East (Auto and Marine Lubes)

BP - Castrol (Thailand) Limited BP Petrolleri Anonim Sirketi

BP Corporation North America Inc. BP S.A. Pty Oil Hq

BP Europa SE BP Shipping Limited

BP Europa SE BP Belgium BP Singapore Pte. Limited

BP Europa SE Zweigniederlassung - BP BP Southern Africa Proprietary Limited Austria

BP Exploration (Alpha) Limited Castrol (Shenzhen) Company Limited

BP France Castrol Australia Pty Limited

BP India Services Private Limited Castrol Industrial North America Inc.

BP International Limited Lubricants UK Limited

BP Italia SPA PT Castrol Indonesia

BP Japan K.K.

(b) Key management personnel Omer Dormen Managing Director (w.e.f. 12.10.2015)

(where transaction exists)

Rashmi Joshi Director Finance Jayanta Chatterjee Director Supply Chain

Ravi Kirpalani Managing Director (up to 11.10.2015) & thereafter Executive Director (up to 31.12.2015)

7. The Company has received an order from Maharashtra Sales Tax Department for the financial year 2009-10, 2007-08 and 2010-11 demanding Rs. 255.00 crores, Rs. 306.00 crores and Rs. 264.00 crores respectively towards sales tax (including interest). The demand pertains to sale of goods made by the Company in the states other than Maharashtra, where applicable taxes have been paid as per the provisions of law. Also the movement of goods from Maharashtra was not pursuant to any contract/order from customers in other states hence the understanding of operations/systems recorded in the assessment orders are not factually correct. The Company''s tax payment methodology in respect of the goods sold is adequately supported by robust legal grounds/ precedents and in Company''s opinion the said demand is unjustified. The Company has filed the appeal against these orders. The management believes that the findings in the orders are not sustainable and that the Company has a strong case based on the facts of the matter. The Company does not expect any liability on account of the order received from Maharashtra Sales Tax Department. Hence, the Company has not made any provision for any liability in this regard in the current financial statements.

8. Previous year figures

The Company has reclassified previous year figures to conform to this year''s classification.

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Dec 31, 2014

A. Terms/rights attached to equity shares:

The Company has only one class of equity shares having par value of Rs. 5/- per share (2013: Rs. 10/- per share). Each holder of equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to the approvals of the shareholders in the ensuing Annual General Meeting. The Company declares and pays dividend in Indian Rupees.

During the year ended December 31, 2014, the amount of per share interim dividend recognised as distribution to equity shareholders was Rs. 3.50 (2013 : Rs. 3.50). The amount of interim dividend distributed to equity shareholders is Rs. 173.10 crores (2013 : Rs. 173.10 crores). In addition, the Company has also proposed a per share final dividend recognised as distribution to equity shareholders of Rs. 4.00 (2013 : Rs. 3.50). The amount of final proposed dividend distributed to equity shareholders is Rs. 197.82 crores (2013 : Rs. 173.10 crores). Both dividends aggregating to Rs. 7.50 per share (2013 : Rs. 7.00 per share).

In the event of the Company being liquidated, since the equity shares of the Company are fully paid-up, there would be no additional liability on the shareholders of the Company. However, post settlement of the liabilities of the Company, the surplus, if any, would be distributed amongst the shareholders in proportion to the number of shares held by each one of them.

1.1.a Exceptional item

During the year ended December 31, 2013, the Company completed the sale of two of its non-operating plants. The resulting gain of Rs. 22.80 crores has been disclosed as an exceptional item.

2. Employee benefits

Defined contribution plan Amounts recognised as an expense

Contribution to Provident and Other Funds'' in Note 18 includes Rs. 3.35 crores (2013 : Rs. 3.23 crores) for Pension Fund, ESIC and Labour Welfare Fund. Note 19 includes ''Insurance'' Rs. 1.62 crores (2013 : Rs. 1.31 crores) for Medical Insurance benefits and post retiral medical benefit scheme. Salaries, wages and bonus in Note 18 includes Rs. 2.34 crores (2013 : Rs. 2.30 crores) for Sharematch.

General description of defined benefit plan Gratuity

The Company operates gratuity plan wherein every employee is entitled to the benefit equivalent to fifteen days/one month salary last drawn for each completed year of service depending on the date of joining. The same is payable on termination of service, retirement or death, whichever is earlier. The benefit vests after five years of continuous service.

Provident fund

The Provident Fund (administered by a trust) is a defined benefit scheme whereby the Company deposits amounts determined as a fixed percentage of basic pay to the fund every month. The actuary has provided a valuation and determined the fund assets and obligations as at December 31, 2014. Further, it has been determined that the yield on the investments of the trust is adequate to meet the obligation towards the payment of the interest rate notified by the government.

Survivor protection scheme

Till 2012, the Company provided an exgratia payment to the employee''s family/survivors over and above any survivor benefits payable to the employee under the retirement schemes, in the unfortunate event of an employee''s death whilst in service. In 2013, the Company has terminated the said plan and taken a life cover for all its employees.

Pension benefit to past employees

under the Company''s pension scheme, certain categories of employees, on retirement, are eligible for monthly differential pension which is accounted for on an actuarial basis as on the Balance Sheet date.

Amounts recognised as an expense

Defined benefit plan

Gratuity in note 18 includes gratuity cost of Rs. 4.45 crores (2013 : Rs. 4.34 crores). Contribution to provident and other funds in note 18 includes Rs. 1.53 crores (2013 : Rs. 6.97 crores) for provident fund. Salaries, wages and bonus in note 18 includes survivor protection (death benefit), pension benefit to past employees, Rs. 0.13 crore (2013 : Rs. (0.13) crore).

Basis used to determine expected rate of return on assets:

Expected rate of return on investments for all defined benefit plans is determined based on the assessment made by the Company at the beginning of the year on the return expected on its existing portfolio since these are generally held to maturity, along with the estimated incremental investments to be made during the year. Expected rate of return on plan assets is 8.20% (2013 : 9.30%)

3. Segment information

The business segment has been considered as the primary segment. The Company is organised into two business segments, Automotive and Non-Automotive.

The above business segments have been identified considering:

- The customers

- The differing risks and returns

- The organisation structure

- The internal financial reporting system

Segment revenue, results, assets and liabilities have been accounted for on the basis of their relationship to the operating activities of the segment and amounts allocated on a reasonable basis.

4. Contingent liabilities & commitments

As at As at December 31, 2014 December 31, 2013 Rupees in Crores Rupees in Crores

(a) Contingent liabilities

(1) Excise/sales tax/service tax demands made by the authorities, in respect of which appeals have been filed [refer note (a) below] 27.68 16.77

(2) Claims against the Company not acknowledged as debts estimated at:

— In respect of third parties - miscellaneous 1.16 0.98

(A) 28.84 17.75

(b) Commitments

(1) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) 17.06 7.33

(2) Long-term advertisement contracts 21.18 44.61

(B) 38.24 51.94

Total (A B) 67.08 69.69

Notes:

(a) The management does not expect these claim to succeed. Accordingly no provision for contingent liability has been recognised in the financial statements.

(b) A shareholder of the Company had filed a public interest petition in the Delhi High Court interalia challenging the allotment of 3,537,862 equity shares on preferential basis to Castrol Limited, UK. The said petition has been dismissed by the Delhi High Court on January 11, 2005. However, the shareholder has gone to appeal by way of a special leave petition to the Supreme Court of India. The appeal has been admitted but no interim relief has been granted. The matter has to-date not come up for hearing.

5. Capitalisation of expenditure

During the year, the Company has capitalised the following expenses which is attributable to the construction activity in general and included in the cost of fixed asset/capital work-in-progress (CWIP). Consequently, expenses disclosed under the respective notes are net of amount capitalised by the Company.

6. Related party disclosures as required under AS-18, "Related Party Disclosures", are given below:

A. Name of the related party and nature of relationship where control exist:

(a) Holding Companies Castrol Limited, u.K. (Holding Company of Castrol India Limited)

Burmah Castrol PLC (Holding Company of Castrol Limited, u.K.)

BP PLC (Holding Company of Burmah Castrol PLC), ultimate Holding Company

B. Name of the related party and nature of relationship where transaction have taken place during the year:

(a) Fellow Subsidiaries

(where transaction exists)

AsPac Lubricants (Malaysia) Sdn. Bhd BP Lubricants uSA Inc

BP - Castrol (Thailand) Limited BP Marine Limited

BP (China) Industrial Lubricants Limited BP Mauritius Limited

BP Asia Pacific (Malaysia) Sdn. Bhd BP Middle East (Auto And Marine Lubes)

BP Australia Pty Limited BP Middle East Llc

BP Castrol K.K. BP Oil Belgium - Lubesco

BP Corporation North America Inc BP Oil International Ltd.

BP Europa SE BP Petrolleri Anonim Sirketi

BP Europa SE - BP Belgium (Branch) BP Products North America Inc

BP Europa SE Zweigniederlassung - BP BP Singapore Pte. Limited

Austria

BP Exploration (Alpha) Limited BP Southern Africa (Proprietary) Limited

BP Exploration Operating Company BP Taiwan Marketing Limited

Limited

BP France Castrol (China) Limited

BP France SA Branch Office (Trading as Castrol (Shenzhen) Company Limited BP Middle East)

BP India Services Private Limited Castrol (Shenzhen) Company Limited -

Shanghai Pudong

BP International Limited Castrol BP Petco Limited Liability Company

BP Italia SpA Castrol Industrial North America Inc

BP Japan K.K. Castrol Philippines, Inc

BP Korea Limited Lubricants uK Limited

(b) Key management personnel (where transaction exists)

Ravi Kirpalani Managing Director

Rashmi Joshi Executive Director (w.e.f. from 01.08.2013)

Sujit Vaidya Executive Director (up to 17.05.2013)

Jayanta Chatterjee Executive Director (w.e.f. from 30.10.2014) Bijay Kamath Executive Director (up to 31.07.2013)

7. Forward contracts and unhedged foreign currency exposures:

8. Previous year figures

The Company has reclassified previous year figures to conform to this year''s classification.

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Dec 31, 2013

1. Corporate information

Castrol India Limited (the ''Company'') is a public limited company domiciled in India and incorporated under the provisions of the Compares Act, 1956. The Company is engaged in the business of manufacturing & marketing of Automotive, Non-Automotive Lubricants and related services.

2. Employee benefits

Defined contribution plan Amounts recognised as an expense

Contribution to Provident and Other Funds'' in note 18 includes Rs. 3.23 crores (2012 : Rs. 3.90 crores) for Pension Fund, ESiC and Labour Welfare Fund. Note 19 includes ''Insurance'' Rs. 1.31 crores (2012 : Rs. 1.31 crores) for Medical Insurance benefits and post retiral medical benefit scheme. Salaries, wages and bonus in note 18 includes Rs. 2.30 crores (2012 : Rs. 1.32 crores) for Sharematch.

General description of defined benefit plan Gratuity

The Company operates gratuity plan wherein every employee is entitled to the benefit equivalent to fifteen days/one month salary last drawn for each completed year of service depending on the date of joining. The same is payable on termination of service, retirement or death, whichever is earlier. The benefit vests after five years of continuous service.

Provident fund

The Provident Fund (administered by a trust) is a defined benefit scheme whereby the Company deposits amounts determined as a fixed percentage of basic pay to the fund every month. The actuary has provided a valuation and determined the fund assets and obligations as at December 31, 2013. Further, it has been determined that the yield on the investments of the trust is adequate to meet the obligation towards the payment of the interest rate notified by the government.

Survivor protection scheme

Till 2012, the Company provided an excreta payment to the employees'' family/survivors over and above any survivor benefits payable to the employee under the retirement schemes, in the unfortunate event of an employee''s death whilst in service. In 2013, the Company has terminated the said plan and taken a life cover for all its employees.

Pension benefit to past employees

Under the Company''s pension scheme, certain categories of employees, on retirement, are eligible for monthly differential pension which is accounted for, on an actuarial basis as on the Balance Sheet date.

Amounts recognised as an expense Defined benefit plan

Gratuity in note 18 includes gratuity cost of Rs. 4.34 crores (2012 : Rs. 3.50 crores). Contribution to provident and other funds in note 18 includes Rs. 6.97 crores (2012 : Rs. 2.26 crores) for provident fund. Salaries, wages and bonus in note 18 includes survivor protection (death benefit), pension benefit to past employees, Rs. (0.13) crores (2012 : Rs. 0.13 crores).

Basis used to determine expected rate of return on assets:

Expected rate of return on investments for all defined benefit plans is determined based on the assessment made by the Company at the beginning of the year on the return expected on its existing portfolio since these are generally held to maturity, along with the estimated incremental investments to be made during the year. Expected rate of return on plan assets is 9.30% (2012 : 8.00%).

3. Segment information

The business segment has been considered as the primary segment. The Company is organised into two business segments, Automotive and Non-Automotive.

The above business segments have been identified considering:

- The customers

- The differing risks and returns

- The organisation structure

- The internal financial reporting system

Segment revenue, results, assets and liabilities have been accounted for, on the basis of their relationship to the operating activities of the segment and amounts allocated on a reasonable basis.

4. Contingent liabilities & commitments

As at As at December 31, 2013 December 31, 2012 Rupees in Crores Rupees in Crores

(a) Contingent liabilities

(1) Excise/sales tax demands made by the authorities, in respect of which appeals have been filed [refer note (a) below] 16.77 22.22

(2) Claims against the Company not acknowledged as debts estimated at:

- In respect of third parties - miscellaneous 0.98 1.85

(A) 17.75 24.07

(b) Commitments

(1) Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) 7.33 7.58

(2) Long-term advertisement contracts 44.61 47.44

(B) 51.94 55.02

Total (A B) 69.69 79.09

Notes:

(a) The management does not expect these claims to succeed. Accordingly, no provision for contingent liability has been recognised in the financial statements.

(b) A shareholder of the Company had filed a public interest petition in the Delhi High Court interalia challenging the allotment of 3,537,862 equity shares on preferential basis to Castrol Limited, U.K. The said petition has been dismissed by the Delhi High Court on January 11, 2005. However, the shareholder has gone to appeal by way of a special leave petition to the Supreme Court of India. The appeal has been admitted but no interim relief has been granted. The matter has to-date not come up for hearing.

5. Capitalisation of expenditure

During the year, the Company has capitalised the following expenses which are attributable to the construction activity in general and included in the cost of fixed asset/capital work-in-progress (CWIP). Consequently, expenses disclosed under the respective notes are net of amount capitalised by the Company.

6. For part of the current year and as at the balance sheet date, the Company did not have a full time Company Secretary. This vacancy has been filled subsequent to the balance sheet date. During the period of vacancy, the Company had taken adequate measures to fill up the vacancy and to ensure the regulatory and legal compliances.

7. Previous year figures

The Company has reclassified previous year figures to conform to this year''s classification.

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Dec 31, 2012

1. Corporate information

Castrol India Limited (the ''Company'') is a public limited company domiciled in India and incorporated under the provisions of the Companies Act 1956. The Company is engaged in the business of manufacturing & marketing of Automotive, Non-Automotive Lubricants and related services.

1.1. Basis of preparation of accounts:

The Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in India, mandatory accounting standards notifed under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956. The Financial Statements have been prepared under the historical cost convention on an accrual basis, except in case of assets for which provision for impairment is made and revaluation is carried out. The accounting policies applied by the Company are consistent with those used in the previous year.

All the assets and liabilities have been classifed as current or non-current as per the Company''s normal operating cycle and other criteria set out in Revised Schedule VI to the Companies Act, 1956. Based on the nature of products and time between the acquisition of assets for processing and their realisation in cash or cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current/non-current classifcation of assets and liabilities.

a. Terms/rights attached to equity shares:

The Company has only one class of equity shares having par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. The Company declares and pays dividend in Indian Rupees.

During the year ended December 31, 2012, the amount of per share interim dividend recognised as distribution to equity shareholders was Rs. 7.00 (2011 : Rs. 7.00). The amount of interim dividend distributed to equity shareholders is Rs. 173.10 crores (2011 : Rs. 173.10 crores). In addition, the Company has also proposed a per share fnal dividend recognised as distribution to equity shareholders of Rs. 3.50 (2011 : Rs. 8.00). The amount of fnal proposed dividend distributed to equity shareholders is Rs. 173.10 crores (2011 : Rs. 197.82 crores). Both dividends aggregating to Rs. 10.50 per share (2011 : Rs. 15.00 per share). The said fnal dividend is on the enhanced paid up share capital post issue of bonus shares in the ratio of 1:1.

In the event of the Company being liquidated, since the equity shares of the Company are fully paid-up, there would be no additional liability on the shareholders of the Company. However, post settlement of the liabilities of the Company, the surplus, if any, would be distributed amongst the shareholders in proportion to the number of shares held by each one of them.

Notes:

(a) Deposits with original maturity of more than 3 months can be withdrawn by the Company at any point at a very short notice and without penalty on the principal amount.

(b) These balances are not available for use by the Company as they represent corresponding unpaid dividend liabilities.

(b) Excise duty on sales amounting to Rs. 484.52 crores (2011 : Rs. 445.96 crores) has been reduced from sales in Statement of Proft and Loss and excise duty on increase/(decrease) in stock amounting to Rs. 3.78 crores (2011 : Rs. 0.31 crore) has been considered as (income)/expense in note 17.3 of the fnancial statements.

2. Employee benefts

Defned contribution plan

Amounts recognised as an expense

Contribution to Provident and Other Funds in note 18 includes Rs. 3.90 crores (2011 : Rs. 4.17 crores) for Pension Fund, ESIC and Labour Welfare Fund. Note 19 includes ''Insurance'' Rs. 1.31 crores (2011 : Rs. 1.45 crores) for Medical Insurance Benefts and Post Retiral Medical Beneft Scheme. Salaries, wages and bonus in note 18 includes Rs. 1.32 crores (2011 : Rs. 1.04 crores) for Sharematch.

General description of defned beneft plan Gratuity

The Company operates gratuity plan wherein every employee is entitled to the beneft equivalent to ffteen days/one month salary last drawn for each completed year of service depending on the date of joining. The same is payable on termination of service, retirement or death, whichever is earlier. The beneft vests after fve years of continuous service.

Provident fund

The Company manages provident fund plan through a provident fund trust for its employees which is permitted under The Employees'' Provident Fund and Miscellaneous Provisions Act, 1952. The plan envisages contribution by employer and employees and guarantees interest at the rate notifed by the provident fund authority. The contribution by employer and employees, together with interest, are payable at the time of separation from service or retirement, whichever is earlier. The beneft under this plan vests immediately on rendering of service.

Survivor protection scheme

The Company provides an exgratia payment to the employee''s family/survivors over and above any survivor benefts payable to the employee under the retirement schemes, in the unfortunate event of an employee''s death whilst in service.

Pension beneft to past employees

Under the Company''s pension scheme, certain categories of employees, on retirement, are eligible for monthly differential pension which is accounted for on an actuarial basis as on the Balance Sheet date.

Amounts recognised as an expense

Defned beneft plan

Gratuity in note 18 includes gratuity cost of Rs. 3.50 crores (2011 : Rs. 3.19 crores) [net of recoveries of Rs. nil (2011 : Rs. 0.03 crore) towards employees on secondment from group companies]. Contribution to provident and other funds in

note 18 includes Rs. 2.26 crores (2011 : Rs. 2.43 crores) for provident fund. Salaries, wages and bonus in note 18 includes survivor protection (death beneft), pension beneft to past employees, Rs. 0.13 crores (2011 : Rs. 0.05 crores).

Basis used to determine expected rate of return on assets:

The major portion of the assets are invested in debt instruments. Expected rate of return on investments for all defned beneft plans is determined based on the assessment made by the Company at the beginning of the year on the return expected on its existing portfolio since these are generally held to maturity, along with the estimated incremental investments to be made during the year. Expected rate of return on plan assets is 8.00% (2011 : 8.00%).

Notes:

(a) The Company has made provisions for known litigation cases and pending assessments in respect of taxes, duties and other levies, the outfow of which would depend on the cessation of the respective events.

(b) A shareholder of the Company had fled a public interest petition in the Delhi High Court interalia challenging the allotment of 3,537,862 equity shares on preferential basis to Castrol Limited, U.K. The said petition has been dismissed by the Delhi High Court on January 11, 2005. However, the shareholder has gone to appeal by way of a special leave petition to the Supreme Court of India. The appeal has been admitted but no interim relief has been granted. The matter has to-date not come up for hearing.

3. Previous year fgures

Till the year ended December 31, 2011, the Company was using pre-revised Schedule VI to the Companies Act, 1956 for preparation and presentation of its fnancial statements. During the year ended December 31, 2012, the Revised Schedule VI notifed under the Companies Act,1956 has become applicable to the Company. The Company has reclassifed previous year fgures to conform to this year''s classifcation.

---

Dec 31, 2010

1. The Company has allotted bonus shares on 13th April, 2010 in the ratio of one equity share for every one equity share of Rs. 10/- each held in the Company on the Record Date. The Basic and Diluted EPS has been calculated for all periods presented after taking into account the bonus issue.

2. Estimated amount of contracts (net of advances) remaining to be executed on capital account and not provided for Rs. 7.47 Crores (2009 : Rs. 2.41 Crores).

3. Contingent Liabilities not provided for in the accounts :

31st December, 31st December, 2010 2009 Rupees Rupees in Crores in Crores

(a) Guarantees and Counter Guarantees given by the Company 34.45 6.68

(b) Excise/Sales Tax Demands made by the authorities, in respect of which appeals have been filed 19.81 18.07

(c) Claims against the Company not acknowledged as debts estimated at :

(i) Income Tax - 1.17

(ii) In respect of Third Parties - Miscellaneous 1.63 1.43

Future cash outflows in respect of (b) above are determinable only on receipt of judgements/decisions pending with various forums/authorities.

4. (a) The Company had received in prior years, show cause notices from Excise Authorities in respect of input and Finished Goods stock differences at some of its plants aggregating to Rs. 18.30 Crores (2009 : Rs. 18.30 Crores). There have been three orders in favour of the Company though department has filed appeals against two of them. The orders were passed upholding the Companys contention that the stock differences have been almost fully reconciled/explained. The pending demands on account of stock differences aggregate to Rs. 4.66 Crores (2009 : Rs. 4.96 Crores) including the amounts involved in the cases where department has filed appeals. Considering that favourable orders have been received setting out a ratio that minor differences are condonable, the demands at other plants are also likely to be eventually dropped. The Company has also obtained legal opinions which concur with this view. However, as a matter of abundant caution, the Company has upto date made a provision of Rs. 0.47 Crore and payments of Rs. 1.40 Crores relating to excise cases of stock differences as on 31st December, 2010.

(b) Certain disputed demand notices relating to Indirect Taxes amounting to Rs. 106.74 Crores (2009 : Rs. 100.50 Crores) have neither been considered as contingent liabilities nor acknowledged as claims, based on expert legal opinions obtained/ internal assessment. The Company is of the view that the possibility of the demands materialising is remote.

5. A shareholder of the Company had filed a Public Interest Petition in the Delhi High Court interalia challenging the allotment of 3,537,862 equity shares on Preferential basis to Castrol Ltd., UK. The said Petition has been dismissed by the Delhi High Court on 11th January, 2005. However, the Shareholder has gone to appeal by way of a Special Leave Petition to the Supreme Court of India. The Appeal has been admitted but no interim relief has been granted.

6. Segment Information :

The business segment has been considered as the primary segment. The Company is organised into two business segments, Automotive & Non-Automotive.

The above business segments have been identified considering :

- The customers

- The differing risks and returns

- The organisation structure

- The internal financial reporting system

Segment revenue, results, assets and liabilities have been accounted for on the basis of their relationship to the operating activities of the segment and amounts allocated on a reasonable basis.

7. Employee Benefits :

General Description of Defined Benefit Plan

Gratuity

The Company operates Gratuity plan wherein every employee is entitled to the benefit equivalent to fifteen days/one month salary last drawn for each completed year of service depending on the date of joining. The same is payable on termination of service, or retirement, whichever is earlier. The benefit vests after five years of continuous service.

Provident Fund

The Company manages Provident Fund plan through a Provident Fund Trust for its employees which is permitted under The Employees Provident Fund and Miscellaneous Provisions Act, 1952. The plan envisages contribution by employer and employees and guarantees interest at the rate notified by the Provident Fund Authority. The contribution by employer and employee, together with interest, are payable at the time of separation from service or retirement, whichever is earlier.

The benefit under this plan vests immediately on rendering of service.

Survivor Protection Scheme

The Company provides an exgratia payment to the employees family/survivors over and above any survivor benefits payable to the employee under the retirement schemes, in the unfortunate event of an employee dying whilst in service.

A. Amounts recognised as an expense : (i) Defined Benefit Plan

Gratuity in Schedule J includes gratuity cost of Rs. 4.77 Crores (2009 : Rs. 0.91 Crore) (net of recoveries of Rs. 0.21 Crore (2009 : Nil) towards employees on secondment from group companies). Contribution to Provident and Other Funds in Schedule J includes Rs. 3.93 Crores (2009 : Rs. 2.93 Crores) for Provident Fund. Salaries, wages and bonus in Schedule J includes Leave encashment, survivor protection (death benefit), pension benefit to past employees, Rs. 0.15 Crore (2009 : Rs. 0.36 Crore).

(ii) Defined Contribution Plan

Contribution to Provident and Other Funds in Schedule J includes Rs. 4.90 Crores (2009 : Rs. 4.63 Crores) for Pension Fund, ESIC and Labour Welfare Fund and Insurance includes Rs. 1.15 Crores (2009 : Rs. 0.81 Crore) for Medical Insurance benefits and post retiral medical benefit scheme. Salaries, wages and bonus in Schedule J includes Rs. 0.93 Crore (2009 : Rs. 1.09 Crores) for Share Match.

B. Basis used to determine expected rate of return on assets :

The major portion of the assets are invested in debt instruments. Expected rate of return on investments for all defined benefit plans is determined based on the assessment made by the Company at the beginning of the year on the return expected on its existing portfolio since these are generally held to maturity, along with the estimated incremental investments to be made during the year. Expected rate of return on plan assets is 8% (2009 : 8%).

8. Related Party Disclosures :

A. Name of the related party and nature of relationship where control exists :

(a) Holding Companies

Castrol Ltd., U.K. (Holding Company of Castrol India Ltd.)

Burmah Castrol Holdings Ltd. (Holding Company of Castrol Ltd., U.K.)

BP PLC (Holding Company of Burmah Castrol Holdings Ltd.)

(b) Other Related Parties

(where transaction exists)

Arabian Prod. & Marketing Lub. Co. Ltd.

Aspac Lubricants (Malaysia) Sdn Bhd

Aspac Lubricants Malaysia

BP China Aspac HKD Lub.

BP France

BP (China) Industrial Lubricants Ltd.

BP Alternative Energy International Ltd.

BP Australia Pty Ltd.

BP Castrol (Thailand) Ltd.

BP Castrol KK

BP Castrol Lubricants (Malaysia) SDN

BP China Holding Ltd.

BP Corporation NA Inc.

BP Egypt Company

BP Egypt Oil (335 GUPCO)

BP Energy India Pvt. Ltd.

BP Europa SE

BP Europa SE - BP Belgium (Branch)

BP Exploration (Alpha) Ltd. - CBM India

BP Exploration (Alpha) Ltd.

BP Exploration (In Salah) Ltd.

BP France SA Branch Office

(Trading as BP Middle East) BP India Services Pvt. Ltd. BP International Ltd. BP Italia SPA

BP Japan KK BP Korea Limited BP Lub. Shanghai SIBU BP Lubricants USA, Inc. BP Marine Ltd. BP Mauritius Ltd. BP Middle East BP Oil Head Office BP Oil International Ltd. BP Oil UK Ltd. BP Shipping Ltd. BP Singapore - LSC Regional BP Singapore Marine BP Singapore Pte. Ltd. BP Singapore Spec Ind. Lubes BP South Africa BP South West Pacific Limited BP S. W. Pacific OAZ BP Southern Africa (Proprietary) Limited BP Turkiya OEU BPOI - 1ST HO Costs BPSA Lubes

Burmah Castrol Australia PTY Ltd. Castrol (Shenzhen) Co. Ltd. Castrol (Shenzhen) Company Ltd. (Shanghai Branch)

(b) Other Related Parties (where transaction exists) (Contd.)

Castrol (UK) Ltd.

Castrol Australia Pte. Ltd.

Castrol Austria AG

Castrol Austria GmbH

Castrol BP Petco Ltd.

Castrol BP Petco Limited Liability Company

Castrol Industrial North America Inc.

Castrol Ltd. UK.

Castrol Offshore

Castrol Pakistan Private Ltd.

Deutsche BP

Deutsche BP AG

First Energy India Limited

Lubricants UK Ltd.

Nordic Lubricants AB

Nordic Lubricants AS

Premier Lubes Aspac Ltd.

Premier Lubricants (S) Pte. Ltd.

PT Castrol Indonesia

Tata BP Solar India Ltd.

(c) Associates (where transaction exists)

Castrol India Ltd. Employees Provident Fund Castrol India Ltd. Staff Pension Fund Castrol India Ltd. Employees Gratuity Fund

(d) Key Management Personnel (where transaction exists)

N. K. Kshatriya Managing Director Upto 8th May, 2009

R. Kirpalani Director-Automotive From 8th May, 2009

& Chief Operating

Officer

A. S. Ramchander Executive Director Upto 30th April, 2009

A. P. Mehta Executive Director Upto 15th November, 2010

S. Vaidya Executive Director From 16th November, 2010

S. Malekar Executive Director From 1 st May, 2008

15. Research and Development expenses amounting to Rs. 8.02 Crores (Net) (2009 : Rs. 8.26 Crores) are included under relevant heads of expense.

9. Previous years figures have been regrouped wherever necessary.

---

Dec 31, 2009

1. The Company had entered into transactions for rendering of services and secondment of personnel with two private limited companies incorporated in India which are a part of the BP group of companies worldwide. The said agreements attracted the provisions of Section 297 of the Companies Act, 1956 as there were common Directors between the Company and the two private limited companies. The Company is applications to the Regional Director (Ministry of Corporate Affairs) for necessary approvals. The Regional Director (Ministry of Corporate Affairs) has sought clarifications and requested the Company to make fresh applications with additional information. The Company has made fresh applications in relation to both the private limited companies to the Regional Director (Ministry of Corporate Affairs) and is currently awaiting approval.

2. Estimated amount of contracts (net of advances) remaining to be executed on capital account and not provided for Rs. 2.41 Crores (2008 : Rs. 2.08 Crores).

3. Contingent Liabilities not provided for in the accounts :

31st December, 31st December, 2009 2008 Rupees Rupees in Crores in Crores

(a) Counter Guarantees given to Banks 6.68 5.67

(b) Excise/Sales Tax Demands made by the Authorities, in respect of which appeals have been filed 18.07 10.46

(c) Claims against the Company not acknowledged as debts estimated at ;

(i) Income Tax 1.17 --

(ii) In respect of Third Parties - Miscellaneous 1.43 1.23

4. (a) The Company had received in prior years, show cause notices from Excise Authorities in respect of input and Finished Goods stock differences at some of its plants aggregating to Rs. 18.30 Crores (2008 ; Rs. 18.30 Crores). There have been three orders in favour of the Company though department has filed appeals against two of them. The orders were passed upholding the Companys contention that the stock differences have been almost fully reconciled/explained. The pending demands on account of stock differences aggregate to Rs. 4.96 Crores (2008 : Rs. 7.87 Crores) including the amounts involved in the cases where department has filed appeals. Considering that favourable orders have been received setting out a ratio that minor differences are condonable, the demands at other plants are also likely to be eventually dropped. The Company has also obtained legal opinions which concur with this view. However, as a matter of abundant caution, the Company has upto date made a provision of Rs. 0.47 Crore and payments of Rs. 1.70 Crores relating to Excise cases of stock differences as on 31st December, 2009.

(b) Certain disputed demand notices relating to Indirect Taxes amounting to Rs. 100.50 Crores (2008 : Rs. 95.32 Crores) have neither been considered as contingent liabilities nor acknowledged as claims, based on expert legal opinions obtained/ internal assessment. Further, the Company has been consistent in adopting the policy of assessing risks as set out in their health check report from reputed Tax Advisors. The Company is of the view that the possibility of the demands materialising is remote.

5. A shareholder of the Company had filed a Public Interest Petition in the Delhi High Court interalia challenging the allotment of 3,537,862 equity shares on Preferential basis to Castrol Ltd., U.K. The said Petition has been dismissed by the Delhi High Court on 11th January, 2005. However, the Shareholder has gone to appeal by way of a Special Leave Petition to the Supreme Court of India. The Appeal has been admitted but no interim relief has been granted.

6. Segment Information :

The business segment has been considered as the primary segment. The Company is organised into two business segments,

Automotive & Non-Automotive.

The above business segments have been identified considerihg :

- The customers

- The differing risks and returns

- The organisation structure

- The internal financial reporting system

Segment revenue, results, assets and liabilities have been accounted for on the basis of their relationship to the operating activities of the segment and amounts allocated on a reasonable basis.

7. Employee Benefits :

General Description of Defined Benefit Plan

Gratuity

The Company operates gratuity plan wherein every employee is entitled to the benefit equivalent to fifteen days/one month salary last drawn for each completed year of service depending on the date of joining. The same is payable on termination of service, or retirement, whichever is earlier. The benefit vests after five years of continuous service.

Provident Fund

The Company manages Provident Fund plan through a Provident Fund Trust for its employees which is permitted under The Employees Provident Fund and Miscellaneous Provisions Act, 1952. The plan envisages contribution by employer and employees and guarantees interest at the rate notified by the Provident Fund Authority. The contribution by employer and employee, together with interest, are payable at the time of separation from service or retirement, whichever is earlier.

The benefit under this plan vests immediately on rendering of service.

Survivor Protection Scheme

The Company provides an exgratia payment to the employees family/survivors over and above any survivor benefits payable to the employee under the retirement schemes, in the unfortunate event of an employee dying whilst in service.

A. Amounts recognised as an expense :

(i) Defined Benefit Plan

Gratuity in Schedule K includes gratuity cost of Rs. 0.91 Crore (2008 : Rs. 4.47 Crores, 2007 : Rs. 3.14 Crores) (net of recoveries of Rs- 0.28 Crore towards employees on secondment from group companies). Contribution to Provident and Other Funds in Schedule K includes Rs. 2.93 Crores (2008 : Rs. 2.18 Crores, 2007 : Rs. 3.33 Crores) (net of recoveries of Rs. 0.19 Crore towards employees on secondment from group companies) for Provident Fund.

Salaries, wages and bonus in Schedule K includes Leave encashment, survivor protection (death benefit), pension benefit to past employees, credit of Rs. 0.36 Crore (2008 : Rs. 1.79 Crores, 2007 : Rs. 2.50 Crores).

(ii) Defined Contribution Plan

Contribution to Provident and Other Funds in Schedule K includes Rs. 4.63 Crores (2008 : Rs. 4.74 Crores, 2007 : Rs. 4.30 Crores) for Pension Fund, ESIC and Labour Welfare Fund and Insurance includes Rs. 0.81 Crore (2008 : Rs. 0.73 Crore, 2007 : Rs. 0.71 Crore) for Medical Insurance benefits and post retiral medical benefit scheme. Salaries, wages and bonus in Schedule K includes Rs. 1.09 Crores (2008 : Rs. 1.05 Crores, 2007 : Rs. 1.03 Crores) for Share Match.

B. Basis used to determine expected rate of return on assets :

The major portion of the assets are invested in debt instruments. Expected rate of return on investments for all defined benefit plans is determined based on the assessment made by the Company at the beginning of the year on the return expected on its existing portfolio since these are generally held to maturity, along with the estimated incremental investments to be made during the year. Expected rate of return on plan assets is 8% (2008 : 7.50%, 2007 : 7.50%).

8. Related Party Disclosures :

A. Name of the related party and nature of relationship where control exists :

(a) Holding Companies

Castrol Ltd., U.K. (Holding Company of Castrol India Ltd.)

Burmah Castrol Holdings Ltd. (Holding Company of Castrol Ltd., U.K.)

BP PLC (Holding Company of Burmah Castrol Holdings Ltd.)

(b) Subsidiary

None

(c) Fellow Subsidiaries with which the Company has transactions.

Air BP Lub. Sales Office

Arabian Prod. & Marketing Lub. Co. Ltd.

ASPAC Lubricants (Malaysia) Sdn Bhd

Aspac Lubricants Malaysia

ASPAC Oil (Thailand) Ltd.

Aspac Oil Korea

BP China Aspac HKD Lub.

BP (China) Industrial Lubricants Ltd.

BP Alternative Energy Ltd.

BP Alternative Energy International Ltd.

BP Australia Pty. Ltd.

BP Belgium NV/SA

BP Belgium - LUBESCO

BP Castrol KK

BP Castrol (Thailand) Ltd.

BP Castrol Lubricants (Malaysia) SDN

BP China Holding Ltd.

BP Corporation NA Inc.

BP Egypt Company

BP Egypt Oil (335 GUPCO)

BP Energy India Pvt. Ltd.

BP Exploration (Alpha) Ltd.

BP Exploration (IN SALAH) Ltd.

BP France

BP India Services Pvt. Ltd.

BP International Ltd.

BP Italia SPA

BP Japan KK

BP Korea Ltd.

BP Lub Shanghai SIBU

BP Lubricants USA, Inc.

BP Marine Ltd.

BP Maritime Services (ISLE OF MAN) Ltd.

BP Maritime Services Singapore Pte. Ltd.

BP Mauritius Ltd.

BP Middle East

BP Oil France

BP Oil Head office

BP Oil International Ltd.

BP Oil UK Ltd.

BP Sharjah Oil Co.

BP Shipping Ltd.

BP Singapore - LSC Regional

(c) Fellow Subsidiaries with which the Company has transactions (Contd.)

BP Singapore Lubes

BP Singapore Marine

BP Singapore Pte. Ltd.

BP Singapore Spec Ind. Lubes

BP South Africa

BP South West Pacific Ltd.

BP Turkiya OEU

BPOI - 1ST HO Costs

BPSA Lubes

Burmah Oil GMBH

Castrol (UK) Ltd.

Castrol Australia Pte. Ltd.

Castrol Austria AG

Castrol Austria GMBH

Castrol BP Petco Ltd.

Castrol Industrial North America Inc.

Castrol Industries GMBH Castrol Italiana Castrol Ltd. UK. Castrol Offshore Castrol Shenzhen Co. Ltd. Castrol Switzerland Deutsche BP Deutsche BP AG First Energy India Ltd. Lubricants UK Ltd. Nordic Lubricants AB Nordic Lubricants AS Premier Lube M ILS Premier Lubes Aspac Ltd. Premier Lubricants (S) Pte. Ltd. PT Castrol Indonesia

(d) Associates

Castrol India Ltd. Employees Provident Fund Castrol India Ltd. Staff Pension Fund Castrol India Ltd. Employees Gratuity Fund

(e) Key Management Personnel

N. K. Kshatriya Managing Director Upto 8th May, 2009

R. Kirpalani Chief Operating From 8th May, 2009 Officer

A. S. Ramchander Executive Director Upto 30th April, 2009 A. P. Mehta Executive Director

S. Malekar Executive Director From 1 st May, 2008

(g) (i) Consumption includes adjustments for shortage/excess, etc. and the effects of reduction of inventory to realisable value.

(ii) Quantities of turnover, consumption, production, opening and closing stocks of additives and chemicals are made up of Kilolitres and Metric Tons, but the constituent units of measurement of the items have not been separately identified and indicated.

(iii) As the Company manufactures and trades, the information required by Clause 3(ii) (a) of Schedule VI Part II of the Companies Act, 1956 is interpreted to require total amounts to be disclosed in respect of opening stock, closing stock and purchases of traded items.

9. Previous years figures have been regrouped wherever necessary.