Appraisal Note for Working Capital Assessment of:

MRF Tyres LTD.

Project Aim: Increase WC by 20 cr
.

2
PROCESS NOTE

(To be forwarded by Branch to Zonal Office in respect of Credit Limits of Rs.

1.00 Crore and above)

Ref. No.: MOB/Assignment—01

Date: Dec. 10/2007

Date of receipt of Proposal at the Branch: Nov. 25/2007

Branch: IIM KOZHIKODE

Credit Risk Code : A

Zone: Kerala

Asset Classification : Standard

NAME OF THE BORROWER: MRF Tyres Limited

I. PRESENT PROPOSAL: For sanction of Fresh

(√)/Renewal/Enhancement of Credit facilities as follows:

Nature of facility Existing Limits Limits Applied Limits now

proposed
Secured From banks - SOD-Rs.20 SOD-Rs.20
Overdraft 616 crores crores crores
(Cash Credit)

Note: It is assumed that the Term Loan enhancement proposal has been sanctioned separately .

SOD: Secured overdraft (also secured cash credit)

Also Summary of deposit
OCC: open cash credit
TL: Term loan
DPG: Deferred Payment Guarantee

3
II. PARTICULARS OF THE BORROWER:

1. Constitution : Limited Company

2. Address of Registered Office : New No 114, Greams Road, Chennai,

Tamil Nadu 600006
Telephone : 044 2829 2777
Website: www.mrftyres.com

3. Address of Factory/Unit at : Tiruvottiyur — Tiruvottiyur, Chenna

The Company has plant locations at the following sites:

India-
Goa — Usgao, Ponda, Goa, Kottayam – Vadavathoor, Kottayam, Kerala, Icchiputhur,
Arkonam,Tamilnadu, Sadasivapet, Medak, Andhra Pradesh, Eripakkam Village, Nettapakkam
Commune,Puducherry, Sadasivapet, Medak,Andhra Pradesh, Naranamangalam Village &
Perambalur District, (Near Trichy) Tamilnadu.

Group to which the Co. belong :

4. Date of Incorporation : 1946

5. Sector : Private

4
 6. Line of Activity
Division
Tea Division
 Coffee and other Division
 Mineral Water Division
Line of Activity Date of
commenceme-
nt of comm.
production
Cultivation & manufacture of black 1983
tea and instant tea, tea buying/
blending and sale of tea in bulk or
value added form indifferent brands
Growing of coffee, pepper and other 1991
plantation crops and conversion of
coffee into value added products such
as roasted and ground coffee &
instant coffee. And, other minor
crops and curing operations of coffee
and trading of items required for
coffee plantations.
Packing and marketing natural 2007 expected
mineral water
5
7. Products manufactured : The company manufactures the following
products

Capacity
Products Licensed Installed Present
Operating
(Kgs. in Lakhs)
NV Series Not Not
applicable ascertainable 799.23

Z Sport Not Not Not available

applicable ascertainable

Aero Muscle
Not Not Not available
applicable ascertainable

SUV Radial
Not Not Not available
applicable ascertainable

Truck Radial Not Not 0.58

applicable ascertainable

Mo Grip Series Commercial Commercial Commercial

production production production not
not yet not yet yet started
started started

6
III. OWNERSHIP AND MANAGEMENT:

BOARD OF DIRECTORS

Name Designation/Area

K.M. MAMMEN Chairman & Managing Director

ARUN MAMMEN Managing Director
K.M. PHILIP Whole-time Director
K.M. PHILIP Whole-time Director
RAVI MANNATH Company Secretary
Dr. K.C. MAMMEN Director
V. SRIDHAR Director
VIJAY R. KIRLOSKAR Director
N. KUMAR Director
RANJIT I. JESUDASEN Director
Dr. SALIM JOSEPH THOMAS Director
JACOB KURIAN Director
M. MEYYAPPAN Director

MANAGEMENT:

Chairman: Mr. Tata, B.Sc. (Architecture), AMP (Harvard) joined the Tata Group in 1962. Mr.
Tata is the Chairman of Tata Sons Limited since 1991, the apex holding company of the Tata
Group and is the Chairman of major Tata Companies and Tata Trusts. He is the Chairman of the
Investment Commission set up by the Government of India. He is also a member of several
international boards/committees. He was also on the Central Board of the Reserve Bank of India.

Vice-Chairman :Mr. Krishna Kumar, M.A. served as the Managing Director of the Company from
May 1991 to January 1998. He was appointed Vice Chairman and Managing Director in 1997. In
1998 he ceased to be the Managing Director to take over as the Managing Director of The Indian
Hotels Co. Ltd. He is also on the Boards of a number of Tata Group companies including Tata Sons
Ltd. and Tata Industries Ltd. He is also trustee of several important Tata Trusts. Mr. Krishna
Kumar is associated with the Tea industry for over 40 years. He has long experience of overall
business management of Indian and overseas corporate bodies.

Managing Director: Mr. Siganporia is a Graduate in Science and holds a Post Graduate Diploma
in Business Management from Xavier Labour Relations Institute, Jamshedpur. He joined the Tata
Group as a Tata Administrative Services Officer and was deputed to your Company in 1974. Since
then, Mr. Siganporia has held several senior positions in the marketing and sales functions of the
Company including General Manager- Packet Tea Division, Vice President – Marketing and Senior
Vice President – North India Plantation division before being appointed to the Board as a
Wholetime director from 16.6.2000. With effect from 19.2.2001, Mr. Siganporia was designated as
Deputy Managing Director of the Company by the Board. Mr. Siganporia has over 29 years’ work

7
experience. At present, Mr. Siganporia has the overall charge of the North India Business Division
of the Company and is also the Managing Director of the Company.

Director -Business Management & Finance.: Mr. Kavarana, B. Com. FCA (Eng & Wales) MBA,
USA has very long experience of management and administration of several large Tata companies
both in India and abroad. Mr. Kavarana oversees the insurance business of the Tata Group as
Chairman.

Director- Marketing:Mr. Pringle, B.Sc. (Economics) is the Vice Chairman & Chief Executive
Officer of the Tetley Group Ltd. He was earlier Marketing Director of Joshua Tetley & Sons Ltd.
He became Marketing Director of Lyons Tetley in 1988. He held several Senior Management
positions in The Tetley Group. He is the Managing Director of Tetley GB since 1995.

Addl. Director- Financial Advising: Mr. Gandhi, B.Com, FCA (England & Wales) is a reputed
Chartered Accountant and also a Member of the Chartered Institute of Taxation, London. Mr.
Gandhi as an Executive Director of Tata Sons Ltd. has been assisting the Tata Group in acquiring
diverse assets and companies across the globe. Mr. Gandhi’s professional career spans nearly 40
years and he has handled numerous mergers and acquisitions, both crossborder and domestic. He is
a Member of the various committees constituted by industry forums and regulatory bodies such as
SEBI’s Takeover Panel Exemption Committee and the Accounting Standards Board of the Institute
of Chartered Accountants of India.

Director:Mr. Engineer, B.A. (Hons.), LL.B. is a senior Advocate and Solicitor of the Bombay
High Court and a senior Partner in Crawford Bayley & Co., a leading firm of Solicitors. He
specializes in Indirect taxation, Arbitration, Litigation and various facets of Corporate Law. He is
the former President of the Bombay Incorporated Law Society and has served on the Governing
Council of the Bar Association of India. His expertise are in the areas of laws, regulations, taxation
etc. A practising solicitor for several decades, Mr. Engineer has been associated with various
Chambers of Commerce.

Director: Mr. Malegam, Chartered Accountant, till recently was the Senior Partner of S. B.
Billimoria & Co., a leading firm of Chartered Accountants of India. Mr. Malegam is an expert on
issues relating to Finance, Taxation, Capital Market, Securities Laws and Regulations. He is a
member of the Governing Board of the Reserve Bank of India and has served many important
committees set up by the Government/SEBI as Chairperson/Member. He is the Chairman of the
National Advisory Committee on Accounting Standards set up by the Government of India. He was
the Chairman of the SEBI Committee on Disclosure Requirements in Offer Documents. Mr.
Malegam is a member of the Indian Institute of Bankers.

Director: Dr. Patel, Bachelor of Veterinary Science & Animal Husbandry, is an eminent
professional in the field of Dairy Development, Co-operatives, Rural Management, Animal
Husbandry, Ecological & Environmental matters. She is currently the Chairman of National Dairy
Development Board, Mother Dairy Fruit & Vegetable Ltd. and several other companies as
mentioned below. She has been conferred the Padma Bhushan by the Government of India.

Solicitors and Legal Advisors -Khaitan & Co. , Orr, Dignam & Co.

8
Auditors - SASTRI & SHAH, Chennai , M.M. NISSIM & Co., Mumbai

Particulars of present Key personnel/executives and the area supervised by

them:

Group CFO : Mr.L Krishna Kumar

GM – Sales & Marketing -Dubai: Mr. S Deshmukh

GM – Instant Tea Operations : Mr. S Ravi
GM- Mktg & Sales – South: Mr. P P Dant
GM- Head - Tea Blending: Mr. Hazarika Abhijeet
GM- Tata Tetley Division: Mr.Hazarika Asim
GM- Business Excellence : Mr. Sunder Ramakrishna
GM- Head - Sales : Mr. Vyas S

VP & Secretary : Mr. D K Sen

VP Tea Buying Blending & Bulk Tea Sale : Mr. K N Desai
VP & Head North India Plantation Opera: Mr. D Borah
VP – Finance : Mr. K Venkataramanan
VP- Special Projects: Mr. J Bhatt
VP -Projects & Commercial :Ms Madeka A
VP- HR : Mr. Sengupta A

DGM-Production NIPO : Mr. Datta R

DGM-NIPO : Mr. Sikand S S
DGM-Head - Supply Chain Management : Mr. Tandon A

Chief Internal Auditor : Mr. Mathai J

Chief Executive Officer- Special Projects: Mr. Poddar P
Director - Special Projects : Mr. Swaminathan S

9
Organizational Structure:

Group Companies Holdings:

Nature of Holding Company Ownership %

Directly or
through a
subsidiary
Subsidiary Tata Tea (GB) Ltd,UK 98.58
Companies Tata Coffee Ltd, India 50.67
Tata Tea Inc, USA 100.00
Tata Tetley Ltd, India 99.29

Associate Estate Management

Companies Services Ltd, Sri Lanka 49.00
Rallis India,Ltd 24.52

10
Majority of the present team of management is working together since 2000 and the junior level are
mostly from the TCS and during the period the company has registered impressive growth in all
financial parameter indicating that the company is managed by well experienced and capable
managerial personnel. There is no resignation from the current team of management professional
except due to normal retirements.

In fact, Tata Tea Limited (TTL), sensing difficult times for the tea industry in India and wishing to
become a global player, started with the current management in various different positions by
acquiring Tetley, in March 2000, a company two-and-a-half times its size. It was a first in
numerous ways—highest price of £280 mn, an Indian company acquiring a UK company, 3:1
leverage, a ring-fenced structure and investing via a SPV. The approach chosen was to integrate
processes and explore synergies, while maintaining operational independence. Emphasis was on
revenue and growth, and not on cost reduction. The company has a common Mission-Vision-
Values and a common strategy for all its subsidiaries and associates, which are discussed under
quality of management.

The Organizational Structure Flow:

Mr. Ratan Tata

Chairman

Mr. R. K. Krishna Kumar, Vice-Chairman

Mr. P.T. Siganporia,

Managing Director

Group CFO GM – Sales & Marketing -Dubai:

Mr.L Krishna Kumar Mr. S Deshmukh
GM – Instant Tea Operations :
Mr. S Ravi
VP – Finance : GM- Mktg & Sales – South:
Mr. K Mr. P P Dant
Venkataramanan GM- Head - Tea Blending:
Mr. Hazarika Abhijeet
GM- Tata Tetley Division:
Mr.Hazarika Asim
GM- Business Excellence :
Mr. Sunder Ramakrishna
VP Tea Buying Blending & Bulk GM- Head - Sales :
Tea Sale : Mr. K N Desai
& Other respective VPs.
Mr. Vyas S & other GMs.

1. VP- HR : Mr. Sengupta A

Chief DGM-Head s upply 2. VP & Secretary : Mr. D K Sen
Internal Special :Projects
Chain- Mgmnt
Director Mr. :
Auditor : Mr.Tandon
Swaminathan
A S
Mr.
Chief Executive Officer- VP & Head North India Plantation
Mathai J
Special Projects: Mr. Opera: Mr. D Borah
Poddar P

VP -Projects & Commercial DGM-Production NIPO : Mr. Datta R

:Ms Madeka A
11
VP- Special Projects: Mr. J DGM-NIPO : Mr. Sikand S S
Bhatt
 2. Chief Executive: Mr. P.T. Siganporia is working as MD of the company from
16th September 2002.

3. Capital Structure: (See Note 1: ShareIssue)

Authorized Capital: As on 31.03.2014, there were 4241143 Equity Shares of

Rs. 10 each for an amount of Rs. 9.00 Crores

Paid up Capital: As on 31.03.2007, there were 590,29,857 (562,19,857) Equity

Shares of Rs.10 each, fully paid-up for an amount of Rs.
5902.99 lacs.

4. Share holding patterns: (See Note 2: Distribution of shareholding)

Ownership No. of shares % Face Value of Shareholder

Pattern as on Shareholding Shareholding
31.03.2007 (Rs)
Foreign 0 0 0 0
(Promoter &
Group)
Indian 19088319 32.34 190883190 32.34
(Promoter &
Group)
Total of 19088319 32.34 190883190 32.34
Promoter
Non Promoter 24758327 41.94 247583270 41.94
(Institution)
Non Promoter 15159539 25.68 151595390 25.68
(Non-
Institution)
Total Non 39917866 67.62 399178660 67.62
Promoter
Total 59006185 99.96 590061850 99.96
Promoter &
Non Promoter

12
Custodians 23672 0.04 236720 0.04
(Against
Depository
Receipts)

Grand Total 59029857 100 590298570 100

5. Quality of Management :

The purpose in Tata is to improve the quality of life in India through leadership in targeted
sectors of national economic significance to which the Group can bring a unique set of
capabilities. Its past success in delivering such purpose provides the basis for the belief in
the future and the role in it. The Tata Group size and scale will provide management and
financial resources to profitably, cater to the emerging opportunities and to develop globally
competitive skills to succeed in this endeavour. The long-term success requires them to
considerably focus on its portfolio, management efforts and investment priorities so that the
Group synergy is brought to bear at the point of delivering value to the customer. The
enormous Group resources : in people and finance is re-architectured so that the whole is
larger than the sum of its individual parts.

The Tatas heritage invokes trust among consumers, employees, shareholders and the
community. This is a precious heritage, unique in India, preserved and enriched by
formalising the high standards of behaviour expected from employees and the companies in
the years to come. The Tata name is a unique asset representing Leadership with Trust.
Leveraging this asset to unify its companies is the route to long-term success and delivery of
returns to the shareholder in excess of the cost of capital.

Tata TeaLtd. -Vision-Mission-“Challenging for leadership in tea around the world”

• Challenging…
A state of mind throughout the organization, never being satisfied with the status quo, constantly
striving to be better and to do new things, in new ways. And a principle by which we manage our
brands in the market place, creating relevant differentiation and confidently projecting clear brand
identities.

• Leadership…
Not just in size, but more importantly in the eyes of our customers and consumers, through our
thoughts, ideas, behavior, and achievements. Through innovation, which will enable us to build
stronger relationships with our existing consumers, reach out to new consumers and keep the
category vibrant.

• Tea…

13
The product scope of our vision, encompassing the widest definition of the category, the production
and marketing of black and green teas, specialty fruit and herbal teas, ready-to-drink teas, tea
serving systems and retailing of tea.

• The World…
The geographic scope of our vision; building a global business by leveraging and building our
brands and forging partnerships to mutual advantage.

Tata Tea Ltd. Values:

We believe that our customers and consumers define the success of our organization and that they
should be top-of-mind in everything that we do.
We believe that our people are at the heart of our organization, and that we should give them the
freedom to achieve, through clarity of direction and the creation of an informal, barrier-free culture.
We believe in tea and in our products, and their role in adding to the well being of people the world
over.
We believe in earning the respect of all those who know us.
We believe in making a positive contribution to the people and communities our business touches.
We believe that by striving to deliver our vision and by living our values, we shall create more
valuable business and hence, over the long-term, increase returns to our shareholders.

Tata Tea Ltd. Strategic Focus:

•Strengthen business in existing geographies

•Expansion into new geographies
-New initiatives and project growth through enhanced value.
•New product development and building business in
–Black Tea
–Fruit and Herbal Infusions
–Ready to Drink Teas
–Out of home
•Building operational capability to enable the commercial business to achieve growth
-Multiply innovation led growth
•Management Strength

14
The Management Strength:
Financial Mgt –

The company has two directors dedicated to this area, besides top executives assigned for projects
and expansion.. The financial management of the company is satisfactory. This is due to the fact
that the company has not only registered continuous growth in turn over for last 5 years without
any problems on financial management of the company but also its M&A and global expansion
programme have been succesful. (See Note 3: Strategic Management & EVA)

Technological Mgt –

The Company is in this line of business for more than 44 years and has well established reputation
in this line of business. It has well established R&D centers. The company has technical expertise
to execute large global expansion and M&A and accordingly it is managing the technology
satisfactorily. To save on cost of production it is constantly improving on the latest technology
which has resulted in huge savings. (See Note 4: Conservation of Energy)

Marketing Mgt –

In the current scenario of ever changing environment and competition, to survive and grow needs a
good marketing department with a constant dynamic cross functional coordination with finance,
technology, strategy, R&D and HR. The company’s growth is totally based on acquisition and
global expansion with new differentiated products into new geographical areas. Hence, the
company has more GMs in this area than in any other functional area. This ensures continuous
improved sales turnover in the given SWOT context besides meeting any unforeseen & adverse
eventualities. (See Note 5: Managing Innovation)

Personnel Mgt –

Initiatives taken by the company in the area of human resource development include adoption of
Balanced Score Card (BSC) approach for aligning individual goals with organizational goals.
Several key initiatives such as mapping competencies of key positions outside the plantations and
reform of Performance Management system for executives and junior management staff are being
implemented now. There is a positive attitude of all plantation employees of the North India
plantations towards the reconstruction agenda which , it is hoped, would augur well for the

15
employees. (See Note 6: Restructuring of NIPO). The Company is having a strong personnel
management department headed by VP-HRD assisted by dedicated personnel managers looking
after the personnel and staff welfare issue of each operating divisions of the company. As on 31st
March 2007 the company had 34506 employees, out of which 33226 were employed in the
Plantation divisions. Barring a 11-day lock-out at Borjan tea estate, the industrial relations during
2006-07 were generally peaceful. This indicates the strength of the Personnel Management.

6. Integrity of key personnel:

The integrity of the Key Personnel is well established. This is due to the fact that there have
been no financial irregularities of the company as well as there has been no negative opinion of
the key personnel in the society.

7. Whether the Co./Firm has suitable Cost accounting system?

The company has adequate internal cost accounting system headedby theChief Internal
Auditor, Mr. J Mathai which is in commensurate with the volume and complexity of business
spread and holdings of the company. (See Note 7- Internal Audit). Besides that the company has
also periodic independent management audit conducted and Annexure to the Auditors’ Report-
(Referred to in paragraph 3 of the Auditors’ Report of even date to the members of Tata Tea
Limited on the financial statements for the year ended 31st March, 2007) gives no negative
comments in its report.

IV. BANKING ARRANGEMENTS:

1. Dealing with our bank since:

As a borrowing customer since 2006-2007.

2. Have the Co powers to borrow:

Yes. The relevant clause of Article of Association of the company permits the company to
borrow from banks and financial institutions. There is no negative covenant on the borrowing of
the company. This is assumed on the basis of the auditor’s report, the company having
borrowed from different banks though the primary/collateral securities are different in each
case. (See Note 8-Loans from Banks)

3. Present banking arrangement :

List of present Bankers:

Bank of Tokyo

16
ICICI Bank
HDFC Bank
Mizuho Bank

Complete details of the company’s banking arrangement is not available in the Annual
Report of the company.

V. DETAILS OF EXISTING CREDIT FACILITIES (Details as per

Annexure I):

a) With our Bank:

The company is enjoying the following credit facility with our bank.

Facility Limit Date of Balance Overdues Rate Secur

docume as on of ity
nt ………. Intere
st
Fund Based Nil
Non-Fund
Based
(excluding
DPG)
Term credit
facilities Rs. 2250.00 lacs
(including DPG)

4. Total indebtedness to our Bank (1+2+3):

a) Fund based Rs.2250.00 lacs

b) Non-fund based Nil

TOTAL Rs.2250.00 lacs

b) With other Banks:

The details of the credit facilities has been mentioned in Annexure I and Note 8. Brief
Summary of limits are as follows:

Term Loan- HDFC: Rs. 4500.00 lacs

BridgeLoan- Rs. 55000.00 lacs
WC finance- Rs. 8949.77 lacs

c) Date of last Sanction/Renewal/Review : N.A

d) Sanctioning Authority for last sanction : N.A

17
 e) Validity of existing limits : N.A

Provisional extension, if any -Nil

VI. BRIEF HISTORY including current profile (See Note 9- History of the Company)

Tata Tea - Historical Milestones

Pre 1963 James Finlay

Tata Finlay established to develop value added Tea
1964
Tata Finlay takes over tea production and marketing operations of James Finlay
1976
James Finlay sell their shareholdings to Tatas heralding the "Dawn of a new Era" - Tata Tea is
1983 born

A wholly owned subsidiary, Tata Tea Inc, set up in the U.S.A.

1987
Acquisition of 52.5% shareholding in Consolidated Coffee Ltd (Tata Coffee Ltd.)
1991
Joint Venture in Sri Lanka, Estate Management Services (P) Ltd. formed.
1992
Joint Venture alliance with Allied Lyons plc - Tata Tetley established.
1993
65% share Lankan JVC acquires 51% shareholding in Watawala Plantations Ltd.
1995-96
Sri Lankan JVC acquires 51% shareholding in Watawala Plantations Ltd.
1996
Tata Tea acquires The Tetley Group Ltd., UK.
2000

Profile:

Set up in 1964 as a joint venture with UK-based James Finlay and Company to develop value-
added tea, the Tata Tea Group of Companies, which includes Tata Tea and the UK-based Tetley
Group, today represent the world's second largest global branded tea operation with product and
brand presence in 40 countries. Among India's first multinational companies, the operations of Tata
Tea and its subsidiaries focus on branded product offerings in tea but with a significant presence in
plantation activity in India and Sri Lanka.

The consolidated worldwide branded tea business of the Tata Tea Group contributes to around 86
per cent of its consolidated turnover with the remaining 14 per cent coming from Bulk Tea, Coffee,
and Investment Income. The Company is headquartered in Kolkata and owns 27 tea estates in the
states of Assam and West Bengal in eastern India, and Kerala in the south.

Products and Brands:

18
The company has five major brands in the Indian market - Tata Tea, Tetley, Kanan Devan,
Chakra Gold and Gemini -- catering to all major consumer segments for tea. The Tata Tea brand
leads market share in terms of value and volume in India and the Tata Tea brand is accorded "Super
Brand" recognition in the country. Tata Tea's distribution network in the country with 38 C&F
agents and 2500 stockists caters to over 1.7 million retail outlets (ORG Marg Retail Audit) in India.
The company has a 100% export-oriented unit (KOSHER & HACCP certified) manufacturing
Instant Tea in Munnar, Kerala, which is the largest such facility outside the United States. The
unit's product is made from a unique process, developed in-house, of extraction from tea leaves,
giving it a distinctive liquoring and taste profile. Instant Tea is used for light density 100% Teas,
Iced Tea Mixes and in the preparation of Ready-to- drink (RTD) beverages. With an area of approx
15,900 hectares under tea cultivation, Tata Tea produces around 30 million kg of Black Tea
annually.

R&D:

Tata Tea and the Tetley Group have full-fledged R&D Centres that focus on the branded business.
In addition, Tata Tea has an R&D Centre at Teok (Assam) and a product development centre at
Bangalore focused on the entire gamut of tea operations.

Overseas Business:

The Tata Tea and Tetley portfolios of branded offerings caters specifically to the Australian,
Middle East, West Asia, North Africa, Poland, Russia and Kazakhstan markets. This is independent
of the manufacturing and supply operations of its Tetley and other subsidiary companies.

Subsidiaries & Associates:

Tata Tea has subsidiaries in Great Britain, United States and India. The Tetley Group has been a
member of the Tata Group since March 2000 and now contributes around two thirds of the total
turnover of Tata Tea Ltd. Headquartered in Great Britain, its footprint is global: Tetley has offices
in Australia, Canada, Poland, Russia, South Africa and the US, as well as joint ventures in Pakistan
and Bangladesh. Today, Tetley is the second largest tea bag brand in the world, and Tetley products
are on sale in over 40 countries. Tetley is the no.1 tea bag brand in Great Britain and Canada and
has significant market shares in the United States, Australia, Poland and France. Beyond these
markets Tetley is steadily growing its presence in Eastern Europe, Russia, through to Bangladesh
and Pakistan, and recently launched in South Africa.

Tetley has a customised portfolio of offerings for each country, ranging from Black, Green, Fruit &
Herbal Teas, Iced Ready-to-drink Teas and an extensive range of exotic Speciality Tea. Established
in 1837, Tetley was the first British tea company to introduce the tea bag to the UK in 1953, and
the company continues this tradition of innovation. The tea bag was followed by the first round tea
bag in 1989, and the 'no drip, no mess' Drawstring bag in 1997. A stream of successful packaging
formats include the resealable 'soft pack' format for Tetley teas in the UK, and a unique 'stay fresh'
round canister for green, fruit and herbal and speciality tea ranges in Canada, the UK and Australia.
A fully-owned manufacturing facility based at Eaglescliffe, in the North East of England.
Established since 1969, currently occuping 220,000 square feet and is the largest tea bag factory in
the world.

Tata Coffee with Instant Coffee manufacturing facilities, R&D capability and plantation assets of
around 8000 hectares, producing over 9000 MT of Coffee annually, is the largest coffee plantation

19
company in Asia. The company grows both the Robusta and Arabica varieties of coffee and
markets both instant and "ground" coffee. Its curing facility has the Certificate of Approval for
Quality Standards ISO 9002, the first curing unit in Asia to receive this certification. The
Company's operations also have the SA:8000 & UTZ KAPEH accreditation / certification with
effect from January 1st, 2006, the company has taken over 5 tea estates and one coffee estate of
Tata Tea in the Annamalai tea growing region of Tamil Nadu.

Tata Tea Inc. in the United States processes and markets Instant Tea from its facility in Florida,
based on sourcing of Instant Tea products out of Munnar, Kerala. Tata Tea has a substantial
interest in the Sri Lankan tea industry through Watawala Plantations Limited, Sri Lanka, where it
focuses on production and marketing of Tea, Rubber and Palm Oil. Kanan Devan Hills Plantation
Company Pvt. Ltd., established at the close of business on 31st March 2005, has major interests in
production and manufacture of black tea at its 17 estates in Kerala. Tata Tea has a minority stake in
the entity.

Welfare:

Tata Tea contributes significantly to social and community development on its estates through
comprehensive labour welfare programmes that offer free housing, healthcare and other benefits.
The company has set-up and manages hospitals, adult-literacy centres, childcare centres and
schools to educate the children of its nearly 34,000 employees. In addition, the company has special
facilities to look after "differently abled" children of the workers who are taught how to operate in
the environment by enhancing their skills and abilities. Tata Tea has institutionalised a process of
Annual Welfare Audit conducted by renowned WHO experts, among the first Indian companies to
do so. The Tetley business is managed in the spirit of trust and good corporate citizenship for which
Tata Group companies are justly renowned. The environment policy is focused on managing the
nature and quantity of waste created, and on the energy it uses in its facilities and in the movement
of goods and people. It was a significant achievement for the UK-based sites when they were
awarded ISO 14001 certification for environment management systems in March 2005.

Project DARE's- The Strawberry Project:

The Strawberry preserve making unit of DARE offers vocational rehabilitation to the elder children
of the project. As part of the rehabilitation programme, a strawberry preserve-making unit is
maintained by the centre where the children are not only involved in the collection, cleaning and
making of strawberry preserve but are also encouraged to grow strawberries, which are then bought
by the centre. This becomes an additional source of income for the children. The preserve consists
of farm fresh strawberries preserved in sugar and lime juice; no artificial preservatives or colouring
agents are used. During the first year, the centre made 900 bottles of preserve; this year, the number
has increased to 1.35 lakh bottles. The preserve, priced at Rs 67 per bottle, is available at all Taj
and Patisserie shops and Westside department stores. In Bangalore, the preserve can also be bought
from Nilgiris and Foodworld outlets. It is also locally available in Munnar. All proceeds from the
sale of the preserve go towards the rehabilitation of  project DARE's industrious children.

Tata Coffee Limited

Tata Coffee Limited (TCL) is the largest Coffee Plantation Company in Asia with estates located in
Coorg, Hassan & Chickmagalur districts of Karnataka. The Company also grows Pepper and
Cardamom in its Coffee Estates. The Company's Timber resources include Rosewood, Silver Oak
and other miscellaneous trees. During the financial year 2000/2001 TCL acquired a contiguous
Coffee Estate in Coorg district of 534 Hectares namely "Coovercoolly estate". With this, the

20
current area under Coffee is around 8000 Hectares producing over 9000 Metric Tonnes of Coffee
annually. Both the Robusta and Arabica varieties of Coffee are grown in the estates.

The Company has a modern state of the art Curing Works at Kudige near Kushalnagar in the state
of Karnataka with a curing capacity of 22000 Metric Tonnes per annum. This unit has been
awarded the prestigious certificate of Approval for Quality Standards ISO9002 and is the first
Curing Industry in Asia to receive this certification. Effective 1st April'1998 a Company having a
capacity to produce 2000 Metric Tonnes of Instant Coffee (erstwhile Asian Coffee Limited) and
three Plantation Companies (including erstwhile Coffee Lands Ltd.,) were amalgamated into the
Company.

The Company's production capacity of 2000 Metric Tonnes per annum of Instant Coffee was
augmented to the extent of 2500 Metric Tonnes through Contract Manufacturing Operations. Tata
Coffee Ltd., commissioned an agglomeration unit at the Instant Coffee factory thereby creating
facilities for a diverse range of product offerings in the Instant Coffee business. Export of Instant
Coffee grew significantly. TCL also has five major Value Added Coffee brands "Coorg 100% Pure
Coffee" and "Coorg Double Roast" (Coffee Chicory mix) in R & G segment and "Tata Cafe" for
the North and "Tata Kapi" in the Southern Coffee segment Land Mr. Bean. Company also markets
branded Tea as "Coorg Tea". Effective 1st April '01 the entire Marketing operations related to R &
G brands have been transferred to its parent Company Tata Tea Ltd.

TCL has firmed up a number of initiatives to enable it to steadily move up the Coffee Value chain
thereby improving its margins.TCL is currently the exclusive supplier of Coffee Blends to Barista
for its entire range of offerings. This alliance would give TCL access to the Value Added Market
through Barista's expanding consumer base while Barista would get an access to TCL's Technical
and Blend experience on speciality coffee. TCL has initiated setting up of a Joint Venture Company
with its Russian partners for marketing its Instant Coffee in Russia. TCL is the first plantation
company selected by STAR BUCKS as suppliers in India.

Organisational set up/particulars of present key personnel and the

area supervised by them:

Refer: III. Ownership and Management

Technical Aspects:

The Company’s businesses have been classified into broadly four heads viz. The Tata Tea GB, The
Tata Cofee Ltd. The Tata Tea Inc. and the EMSPL overlooked by the Tata Tea Board through the
Management Committees and the Executive Committees whose members are from the BOD. There
are ten directors in the BOD which include the Chairman,Vice-Chairman, MD, Director-Finance,
marketing and executive directors.The Tata Tea GB looks after the Tata Tetley Inc.and its
subsidiaries, The TCL looks after its subsidiaries , The Tata Tea looks after ythe global operations
in terms of marketing and the EMSPL looks after the plantations and operations.

21
The Operating Divisions have GMs looking after various functions like Instant tea operations, tea
blending, business excellence, Tata Tetley divisions, besides CFO looking after the finance
aspects,CEO for special projects, R&D, DGMs looking after the NIPO and the SIPO, VP for HR,
chain management and a CIA who are further supported by respective VP/ AVP/Area managers.

Marketing arrangements:

The company’s manufacturing divisions are divided into NIPO and SIPO headed by VPs and the
marketing is separated from it headed by GMs which is divided into sales general, marketing and
sales-south, sales and marketing-Dubai and looks after basically two types of marketing- customer
based prodoct differentiation under the instant /bulk tea .

Major developments if any that have taken place in the company:

New Initiatives in a nut shell

1. Plantation Restructuring
2. A path breaking sustainable model through employee ownership.
3. Outright sale.
4. Alternative cropping and land use models being tested in order to enhance revenue.
5.
Refinancing in Tetley lowers finance costs by £ 2.5 mn per annum
6.
Brands
7. Fruit & herbals new launches in various geographies across the globe
8. Test marketing of iced teas in UK
9. Existing brands restaged in India
10. Launch of Kanan Devan Strong leads to a major jump in market share
11. Sania Mirza brand endorsement drives double digit growth of Tata Tea
12. Tata Gold captures 5% of market share within 26 months of launch
13. Increased market share in developing markets Success in opening up of new markets like
Bangladesh, Pakistan, South Africa, Russia and Kazakhstan.

Market Outlook – India

-Indications of higher crop, lower exports leading to sub optimal prices

22
-Indian domestic consumption of tea grows at 1.5% pa irrespective of competition from other
beverages
-Whilst minimal there are indications of increasing trends in consumption of
-Tea bags
-Speciality Teas

Tetley - Market Share

Tetley - Market Share

GB–Tetley continues to outperform major competitors with brand leadership at 27.5%

Canada –Specialty tea market leader; black tea at 42.3%
Australia – Growing market share of tea bags at 11.3%
USA –USA share up year on year. Value share of black tea 10.4%.
France – Growing market share of tea bags at 11.3%
Poland, Portugal, Spain, Jamaica & Baltic’s improve performance during the period
Russia, Pakistan, Bangladesh,Kazaksthan & South Africa - new market entry shows promising
results

Challenging for Leadership in Tea

-The competitive canvas is now global with the Tata Tea operations strategically integrating with
Tetley, to address opportunities for growth and manage the risk of address as a composite team

-Consumer mindsets for tea will determine our opportunity for growth rather than tea as defined by
our current plantation holdings, black tea, packet and teabag formats and formulations

23
-We may be No. 3 today in size globally, but, we must be No. 1 in the way we address the global
opportunity for growth and building customer relationships with sustainability

Backbone to success Key Enablers

-SAP implementation to drive Management by Fact

-Real-time, on-line data and information leads to enhanced agility and customer-driven innovation
-Tata Business Excellence Model
-Drives Process Perspective across the organisation
-Committed personnel trained to introduce and implement process changes
-Sustainability of operations and adherence to TATA values
-Sustainability Organisation Structure in place
-Commitment to Social Responsibility a key facet of operations
-Balanced Score Card used as a Strategy Deployment and Performance Review tool and for EVA
-Alignment in operations
-Individual goals synchronised with overall company objectives
-Cultural pillars for employee behaviour articulated with concomitant work environment :
-Lean, empowered & team-worked
-Passionately proactive
-Creative & Innovative

Global Opportunity for ‘Tea’

-Growing Black tea markets define opportunity for geographical expansion of portfolio in overall
Black tea
- Potential sector revenue of Rs 48,000 Crs.
-Top 30 ‘Tea’ markets account for 90% of the market volume in the packaged black tea segment
-Tata Tea & Tetley present in only 35% of this market – with a combined revenue of Rs 3000 Crs.
-Green / Fruits & Herbal / Flavours / Specialty tea account for 49% value of all global packaged tea
revenues
-RTD operates in a beverage arena that is at Rs 128,000 Crs.

Product-Bulk Tea categories:

All grades of CTC Teas, All grades of Orthodox Teas, Organic Tea - Orthodox grades. Teas are
supplied in packaging as per ISO norms as well as customer requirements viz. 4-ply Kraft Paper
Sacks, Multiwall Paper Sacks, Rigid T--Sacks, Polywoven Sacks, Currugated Fibre Carlons,
Polylined Jute Bags etc.

Product-Instant Tea categories:

All products are cold water soluble. Instant Tea Division caters to customer specific product and
are used for light density 100% Teas, Iced Tea Mixes and in the preparation of Ready to Drink
(RTD) beverages. Instant Tea powder is packed in bulk packages of 20/25/35 kg each. The
different types of products are: Intant tea powder - heavy density, institutional density, grocery
density, Micro milled instant tea powder, for RTD, (Green Tea), (decaffeinated), Micro milled
decaffeinated instant tea. Acidified green instant tea, Instant tea pre mix for iced tea mixes, Carbo
instant tea – Decaffeinated, Institutional density, Heavy density, Pre acidified, 100% instant tea in 3
oz. Jars, Nutrasweet instant tea mix in 3 oz. Jars, Nutrasweet decaff. instant tea in 3 oz. Jars, In
addition, customer specific products can be developed and supplied.

24
THE ECONOMY - AN OVERVIEW

A brief review of key economic factors impacting operations, opportunity and growth for the Tata
Tea Group is highlighted below. While global output expanded by 5.4% during 2006 and is
expected to moderate to 4.9% during 2007, with advanced economies expected to grow at 2.5% and
emerging markets at 7.5%, mainly, driven by strong growth in developing Asia at 9.4%, growth in
emerging markets in 2007 is expected to be led by developing Asia. China’s real GDP grew by
11.1% during the first quarter of 2007. It is expected to decline marginally to 10.0% due to tight
monetary policy and rising inflationary pressure.

Factors like slowing exports, rising inflation, tight credit policy and higher interest rates are likely
to take a toll on Indian GDP. Real GDP is expected to grow at around 8.0% - 8.5% during 2007-08,
down from 2006-07. The interest rate regime continues to harden from 2006 onwards in India while
steps are being taken to manage the economy to target levels of inflation rate (4.5% to 5%), money
supply (17% to 17.5%) and NFC (24-25%).

Further strengthening of interest rates is expected. The recent price surge in food groups are mainly
driven by supply side constraints and the poor monsoon of 2006. According to the advance
monsoon forecast, rainfall is expected to be close to normal during 2007. Estimated inflation shall
be in the range of 5.25% to 5.6% in 2007-08. These key economic factors indicate a higher
inflationary cost of supply of all elements in the supply chain to consumer for the Company’s cost
to market for 2007 compared to the previous year, apart from the favourable lower procurement
cost of tea commodity which will ease the inflationary impact of other costs.

INDUSTRY STRUCTURE AND DEVELOPMENT

The global supply and demand equation for the tea commodity is undergoing a significant shift in
terms of understanding of past metrics and current realities. Compared to the statistical evidences
provided earlier by the market, better coverage and understanding of multiple origin source
production data and consumption trends leads to a recast of the forecast of sectoral tea price trends.
The pace of growth and degrowth in key consumption areas is shifting the balance of purchase and
price trend setting power from earlier years. While the Western economies have shown a steady
decline in conventional black tea consumption, despite the higher order values of formats and
variants of sales, there is a surge in ambient black and green tea consumption in Asia, specifically
across China, India, the Middle East and certain areas of the erstwhile CIS. In the Western markets,
the resurgence of green tea consumption led by enhanced consumer awareness of green tea
polyphenol health benefits, merging with well being lifestyle and food group consumption pattern
changes is leading to a sharp increase in consumption of green tea, green tea extract inclusive
products and establishment of significantly higher value and variety of such offerings.

The same driving factors, enhanced by global youth market trends escalate the impact of such
pattern in arena of beverage consumption in Western markets. In Asia and in the Far East, the
preference shift from carbonated beverage consumption towards healthier lifestyle and nutrient rich

25
beverages with multiple additive natural taste enhancers now finds increasing acceptance across
youth and mature consumers. Concurrent to such development is the slow and steady dissemination
of evidence of the well-being and antioxidant properties of black tea. While it has not yet led to any
significant shift of consumption pattern in Western markets, there is now increasing comfort in
black tea consumption amongst youth in Asia and selected global markets.

The growth rate of ambient black tea consumption led by India and ambient green tea consumption
led by China has still not capitalized on the significant out-of-home beverage potential in these
countries. Even in Western markets hot tea vending is yet to achieve the convenience and variety of
options offered by competing beverages. Lifestyles changes increasingly lead to greater quantum of
consumer pattern spend in out-of-home consumption. Black and Green tea catering to such demand
will drive consumption patterns in a significant manner. The entire role play for tea in this
consumption pattern shift assumes significant potential and commercial opportunity.

The convergence of youth consumer driven trends and patterns of beverage and nutrient intake for
well being opens up space for tea, coffee, water based products and services to reconstruct their
business ambition and remain relevant to emerging consumer requirements and emanating
customer servicing formats and channels. These macro trends emanate from key Western markets
and increasing evidence of a similar global pattern behavior is now visible. The pace of such
innovation driven change drives the consumer food and beverage intake pattern behavior,
accelerating the pace of decline in existing formats of product and service offerings.

OPPORTUNITIES, THREATS AND RISKS

The key driver for competitive brand growth, for Tata Tea is its ability to constantly track and
deliver better consumer and customer relevant value ahead of competition. The sustained
investment in brand building activity in congruence with the above has lead to a steady increase in
the market share of the Company’s portfolio brands across different geographies. This effort has
enabled the brands enhance penetration in markets across India, Pakistan and Bangladesh and grow
market share in Great Britain, Canada, India and Bangladesh.

The shift in focus to provide specialty tea offerings, green tea variants and acquire capability to do
so through organic and inorganic growth routes have helped enhance the speed of address of such
opportunity. The strategic decision to focus on the beverage and branded business by Tata Tea even
as the company reconstructs sustainable business models for its plantation operations has gathered
momentum and allowed it to focus and drive the value add streams of brand and beverage
opportunity.

Tata Tea and Tetley continue to maximize revenue and growth through black tea offerings in key
markets. During 2006 it attained leadership of specialty and green tea market share in Canada and
increased the contribution of such portfolio to our overall business in Great Britain, Australia and

26
other Tetley markets. It is through growth in development of a significant business in this sector of
the tea market that stave the threat of declining black tea consumption based product offerings in
Western markets. The pace of such effort needs momentum and investment to fuel growth ahead of
the impact of the black tea sector decline in these markets. Concurrently, the company has gained
significant start up learning in the beverage arena through acquisitions and organic product
launches of RTD formats in select global markets.

The ability to enhance market share and be the global No. 2 player in tea, provides them
competitive edge to face the threat of declining gross margins even as the sector stagnates or
declines in western markets. The company continued to increase market share in major markets.It
retained market leadership in GB and Canada. In India Tata tea was ranked 10th in the superbrand
rankings by The Economic Times, a significant improvement and ahead of its largest competitior.
The company energize innovation and enhance the pace of new consumer offerings to overcome
the lack of growth of the ambient black tea category in certain markets. Its speed growth utilizing
acquisitions to do so to supplement the efforts of organic brand development.

It has inculcated increased focus on business excellence and process driven activity to optimize
resource utilization for the business. Commitment to the Tata Business Excellence Model and track
of its journey on it, tables prioritized opportunities for improvement for address and improves our
ability to compete and utilize resources. It is increasingly adopting and adapting learning from its
partners across the globe from within the businesses and benchmark practices that enhance levels of
performance. This enables them to change mindsets, lead innovation and growth and overcome the
threat of managerial inertia and obsolescence. The exposure to commodity through a vertical
integrated Supply Chain was an inherent threat in the business a few years ago. The company is
now steadily moving to a stage where it can globally compete for Supply Chain capacity and
capability to drive better value for its business.

Outlook for 2007-2008

The outlook for the operations in 2007-08 will largely depend on the ability to enhance the pace of
innovative and competitive response to opportunities for growth even as the company is constantly
addressing its cost of operations.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company’s Internal Audit Department is responsible for periodically carrying out audit of the
transactions of the Company at the tea estates, branches and offices in order to ensure that
recording and reporting are adequate and proper. The Internal Audit Department also verifies
whether internal controls and checks & balances in the system are adequate, proper and up to date.
They also periodically verify safeguarding of Company’s assets and ensure that there is no
unauthorized use. The Company has also engaged Management Auditors to independently examine
specific areas of operation and suggest methods to improve efficiencies and controls.

The Audit Committee of the Board reviews all important Internal Audit and Management audit
reports and suggests corrective actions for the management to implement. The company also has a

27
system of periodic review of risks and control systems. It has developed a risk register, which
forms the basis for review. The Internal Audit team also assesses the risks facing the company,
steps taken to mitigate the risks and holds discussions with management on the subject in order to
create awareness of the risks and to take appropriate actions for reducing the impact and frequency
of occurrence of the risks. Company’s internal control system and its effectiveness are also verified
periodically by the Statutory Auditors and reported to the Audit Committee of the Board.
Corrective actions for any weaknesses in the system that may be disclosed by such audits are taken.

FINANCIAL & OPERATING PERFORMANCE

The Company recorded commendable growth in performance during the financial year. Total
Income at Rs 1146 crores increased by 10% despite exit from a part of South India plantation
operations. The growth was driven by strong performance of the company’s branded tea portfolio.
Profit before tax, exceptional and nonrecurring items at Rs 243 crores grew by 18%. After
exceptional items, which principally related to profit on sale of investments , the profit after tax at
Rs 307 crores grew by 64%. The strong performance of the branded tea portfolio was higher than
market growth with increased market share. Plantations performance was better relative to previous
year due to restructuring of South India operations and improved operating performance in North
India. This excellent performance reflects volume and value growth and effective cost
management. The Earnings per share improved from Rs 33.25 to Rs 53.56, an increase of 61%.

CONSOLIDATED FINANCIAL PERFORMANCE

The company’s consolidated turnover at Rs 4103 crores increased by 30% compared to the
comparable period in the previous year. Profit before taxes and exceptional items at Rs 456 crores
has however increased by only 11%, principally in view of the impact of interest on loans taken for
acquisitions . Profit after tax at Rs 443 crores was higher by 48%. Consolidated Basic Earnings per
share was significantly higher at Rs 77.46, an increase of 46%. As per Indian GAAP, the
Company’s 77.78% foreign subsidiary, TTGB Ltd, registered a turnover of Rs 2298 crores, which
was higher than the previous year turnover by 13%. Profit before tax, interest on loans taken for
acquisitions and exceptional items at Rs 253 crores was higher by 25%.

The following table summarises segment wise turnover of the Tata tea group. With the acquisition
of Eight O’ Clock Coffee company through Tata Coffee Ltd and commencement of production of
instant and freezed dried coffee by Tata Coffee Ltd, the coffee business will be a more significant
part of the the overall consolidated performance.

28
TREASURY AND LIQUIDITY

The Company had a net debt to equity ratio of 0.41 as on 31st March 2007, an increase over the
previous year’s levels, driven by bridge loans availed for acquiring a stake in Energy Brands Inc
(EBI). The bridge loans are being liquidated through augmentation of share capital and accrual of
own resources resulting from the plantation restructure. On a consolidated basis the net debt equity
ratio was 1.57 . The current levels of debt represent an increase as compared to the previous year’s
levels, in view of the refinancing for acquiring a stake in EBI. Significant reduction is expected
from these gearing levels in view of the conditional agreement entered into, by the Group, for
divesting the stake in EBI.

CAUTIONARY STATEMENT

Certain statements made in the Management Analysis and Report relating to Company’s objectives,
projections, outlook, expectations, estimates, etc. may constitute ‘forward looking statements’
within the meaning of applicable laws and regulations. Actual results may differ from such
expectations, projections etc., whether express or implied. Several factors could make a significant
difference to the company’s operations. These include climatic conditions, economic conditions
affecting demand and supply, Government regulations and taxation, natural calamity, etc. over
which the Company does not have any direct control.

Strategic plan:

Refer: Quality of Management- company strategicfocus, Note- 3a, 3b, 5 & 6.

Points to consider

After restructuring operations and debt, Tetley is in a sound financial position and will now focus
on growing the business at an accelerated pace. With the UK subsidiary accounting for over 70 per
cent of the consolidated earnings of Tata Tea the Indian tea major should do well going forward.

Tata Tea, along with its subsidiary companies, has a significant presence in over 45 countries. The
Group's global branded business amounts to just under US$ 1040 million. The combined sales of
Tata Tea and its subsidiary The Tetley Group would in aggregate represent the second-largest
branded tea portfolio in the world. Tata Tea's operations span the entire value-chain in tea,
including research and development, tea cultivation, manufacture of black and distribution. The
company has 6 major brands in the Indian market - Tata Tea, Tetley, Agni, Kanan Devan, Chakra

29
Gold and Gemini, spanning every price point from Premium to Economy. The Brand Tata Tea is
today the largest in the country in terms of value market-share. To a large extent the market will be
on the outlook for Tetley, which in turn will decide sentiment in the Tata Tea.

As far as Tetley is concerned the company after restructuring operations and debt, is in a sound
financial position to focus on growing the business at an accelerated pace. It plans to achieve
organic annual sales growth of 10 per cent. To do this the company plans to expand its footprint to
cover wider geographies. The company has also entered the US Ready-to-Drink (RTD) tea
segment. Further, it is contemplating acquiring a niche player where Tetley’s competencies can be
leveraged. Given the strong backing of the Tata group, Tetley is unlikely to face financial
constraints in developing new opportunities.

In the domestic market, Tata Tea’s volume growth is likely to continue having withstood
competitive pressures from regional brands and the relaunched Brooke Bond. The increased
consumption of tea in domestic markets and improved outlook for exports augur well for auction
prices.

Tata Tea’s fortunes do not completely depend on tea auction prices. The company will log a steady
performance even as tea auction prices hit lows. Despite lower prices the branded business will
register healthy growth and protect the bottomline. Tetley’s profits and free cash flows are also
likely to register strong improvement. Considering Tetley’s strong brand equity being the world’s
second largest tea brand, high free cash flow generation and rapid drop in gearing, valuations for
Tata Tea appear attractive.

VII. FINANCIAL POSITION:

Detailed analysis of financial statements for the last 3 years is enclosed as Annexure III.
(See notes at the bottom of all the Forms-II, III, IV, V, VI)
Gist of the same is as follows:

Company’s financial position as per balance sheet

Sep '14 Sep '13 Sep '12 Sep '11 Sep '10

Investment Valuation Ratios          

Face Value 10 10 10 10 10
Dividend Per Share 50 30 25 25 50
Operating Profit Per Share (Rs) 4,545.80 4,165.48 2,973.26 1,918.68 1,971.80
31,117.9 28,603.5 27,988.1 22,910.1
Net Operating Profit Per Share (Rs) 17,596.06
8 2 6 9

30
Free Reserves Per Share (Rs) -- -- -- 5,365.51 3,976.38
Bonus in Equity Capital 41.98 41.98 41.98 41.98 41.98
Profitability Ratios          
Operating Profit Margin(%) 14.6 14.56 10.64 8.37 11.2
Profit Before Interest And Tax Margin(%) 11.34 11.46 8.07 5.81 7.7
Gross Profit Margin(%) 11.4 11.48 8.09 5.82 7.71
Cash Profit Margin(%) 9.95 9.66 7.34 4.72 8.02
Adjusted Cash Margin(%) 9.95 9.66 7.33 4.72 8.02
Net Profit Margin(%) 6.8 6.61 4.82 6.37 4.73
Adjusted Net Profit Margin(%) 6.76 6.59 4.81 6.36 4.73
Return On Capital Employed(%) 24.79 28.04 22.09 15.21 22.01
Return On Net Worth(%) 19.87 22 20.02 26.95 20.93
Adjusted Return on Net Worth(%) 19.87 22 20.02 9.23 20.04
10,651.9
Return on Assets Excluding Revaluations 8,594.71 6,738.28 5,417.81 3,986.38
4
10,651.9
Return on Assets Including Revaluations 8,594.71 6,738.28 5,417.81 3,986.38
4
Return on Long Term Funds(%) 27.47 30.94 25.04 17.04 24.72
Liquidity And Solvency Ratios          
Current Ratio 0.99 0.99 0.91 0.94 1.08
Quick Ratio 0.82 0.7 0.67 0.64 0.72
Debt Equity Ratio 0.4 0.39 0.57 0.66 0.56
Long Term Debt Equity Ratio 0.27 0.26 0.39 0.48 0.39
Debt Coverage Ratios          
Interest Cover 6.78 7.26 6.25 6.24 9.22
Total Debt to Owners Fund 0.4 0.39 0.57 0.66 0.56
Financial Charges Coverage Ratio 8.61 9.16 8.14 8.9 13.35
Financial Charges Coverage Ratio Post Tax 6.7 7 6.5 10.32 10.74
Management Efficiency Ratios          
Inventory Turnover Ratio 7.33 6.76 7.94 7.35 7.68
Debtors Turnover Ratio 8.09 8.06 8.58 9.17 10.73
Investments Turnover Ratio 7.33 6.76 7.21 7.35 7.68
Fixed Assets Turnover Ratio 2.09 2.22 2.35 2.55 2.22
Total Assets Turnover Ratio 2.09 2.39 2.65 2.56 2.84
Asset Turnover Ratio 2.31 2.54 2.86 3.01 3.47
           
Average Raw Material Holding -- -- -- 32.08 41.6
Average Finished Goods Held -- -- -- 23.29 17.31
Number of Days In Working Capital 37.27 30.19 27.19 29.16 35.64
Profit & Loss Account Ratios          
Material Cost Composition 65.42 67.08 72.37 78.37 71.22
Imported Composition of Raw Materials Consumed 45.89 42.95 40.17 33.79 32.17
Selling Distribution Cost Composition -- -- -- 4.78 5.95
Expenses as Composition of Total Sales 9.35 10.16 10.79 8.47 8.97
Cash Flow Indicator Ratios          
Dividend Payout Ratio Net Profit 2.36 1.58 1.85 1.71 5.98
Dividend Payout Ratio Cash Profit 1.6 1.08 1.21 1.22 3.44
Earning Retention Ratio 97.64 98.42 98.15 95.01 93.75
Cash Earning Retention Ratio 98.4 98.92 98.79 97.7 96.47

31
AdjustedCash Flow Times 1.37 1.22 1.87 3.3 1.59
Earnings Per Share 2,117.09 1,891.49 1,349.54 1,460.50 834.63
10,651.9
Book Value 8,594.71 6,738.28 5,417.81 3,986.38
4

Performance/Financial Indicators (As per Form III)

(Rs. in Crores)

  Sep '14 Sep '13 Sep '12 Sep '11 Sep '10

         
Income
Sales Turnover 13,197.58 12,131.16 11,870.18 9,743.17 8,104.31
Excise Duty 0 0 0 0 641.57
Net Sales 13,197.58 12,131.16 11,870.18 9,743.17 7,462.74
Other Income 65.62 29.03 32.01 429.54 20.59

Stock Adjustments -19.18 26.73 17.83 305.11 158.36

10,477.8
Total Income 13,244.02 12,186.92 11,920.02 7,641.69
2
Expenditure          

Raw Materials 8,635.06 8,137.76 8,590.59 7,615.20 5,315.14

Power & Fuel Cost 664.67 600.11 618.51 436.91 405.08

Employee Cost 732.69 603.49 513.69 446.75 378.17
Other Manufacturing Expenses 0 0 0 0 110.92
Selling and Admin Expenses 0 0 0 0 535.89
Miscellaneous Expenses 1,218.04 1,049.89 904.22 740.01 39.63

Preoperative Exp Capitalised 0 0 0 0 0

Total Expenses 11,250.46 10,391.25 10,627.01 9,238.87 6,784.83

  Sep '14 Sep '13 Sep '12 Sep '11 Sep '10

1,927.94 1,766.64 1,261.00 809.41 836.27

Operating Profit

PBDIT 1,993.56 1,795.67 1,293.01 1,238.95 856.86

Interest 231.58 195.94 158.78 97.67 63.1

32
 PBDT 1,761.98 1,599.73 1,134.23 1,141.28 793.76
Depreciation 423.09 372.93 301.11 247.63 260.75
Other Written Off 0 0 0 0 0
Profit Before Tax 1,338.89 1,226.80 833.12 893.65 533.01
Extra-ordinary items 0 0 0 0 0.82
PBT (Post Extra-ord Items) 1,338.89 1,226.80 833.12 893.65 533.83
Tax 441 424.59 260.76 274.23 179.85

Reported Net Profit 897.89 802.21 572.36 619.42 353.98

Total Value Addition 2,615.40 2,253.49 2,036.42 1,623.67 1,469.69

Preference Dividend 0 0 0 0 0

Equity Dividend 21.2 12.72 10.6 10.6 21.2

Corporate Dividend Tax 4.19 2.15 1.73 1.73 3.52
Per share data (annualised)          
Shares in issue (lakhs) 42.41 42.41 42.41 42.41 42.41

Earning Per Share (Rs) 2,117.09 1,891.49 1,349.54 1,460.50 834.63

Equity Dividend (%) 500 300 250 250 500

Book Value (Rs) 10,651.94 8,594.71 6,738.28 5,417.81 3,986.38

Comments on working results and

financial position On working results
A. Production (for the previous Financial
Year)
: The performance of the company
improved by 9.14% during the year
2013-2014. Gross Revenues stood at
14,714 crores.

In an unsure business
environment and state of economy
this can be considered a good
performance
B. Sales turnover :
Actual for the year Qty: : Rs 14,714 Crores
Value:
2014
Percentage increase over previous year : 9.14% increase over last year sales
Reasons for not achieving the : The company beat the projections as
projections/ decline in sales its fundamentals of doing business is
strong and also biggest by market
share
C. Profitability for the year : Is similar to previous year

33
2014
Operating profit for the year 2014 : Rs 1928 crores
Actual operative profit fortheyear 2013 : Rs 1766 crores
Reasons for variation : Improved by 9.17%
On financial position (See notes
under Individual Forms)

Remarks on retained profits Two interim dividends of `3 each per

share (30% each) for the year
ended 30th September, 2014 were
declared by the Board of Directors on
23.07.2014 and on 30.10.2014.
b) Remarks on tangible net worth : The networth has increased by 24% in
2014
c) Remarks on net working capital : Net working capital of company has increased
which is due to an increase in the current asset
due to an increase in stock of raw material to
meet project demands and also due to increase in
number of advances in the expansion process.
There is significant increase in 2014 to 151
Crore
d) Remarks on current ratio : The current ratio is a healthy .99 and
no change from 2013
f) Remarks on investments/advances : The parent company is the main entity with
to associate concerns small subsidiaries in Singapore and Sri Lanka.
The investment in subsidiaries is a small amount
Rs 6 Cr
g) Remarks on diversion of funds : There is no diversion of funds. Retained earnings
are being used to investment in future projects
that would increase earning potential
h) Remarks on borrowing from friends : There is no borrowing from friends as MRF is a
and relatives professionally run company

VIII. ASSESSMENT OF TERM LOAN/DPG (Fill up Annexure – III if there

is a request for term loan/DPG:

Not Applicable since it is assumed that the increase in the Term loan by 10% is already
sanctioned. Further, the company already has a sanctioned limit of Rs.2250.00 lacs with
ICICI bank, information with respect to it is provided at Note 8.

IX. ASSESSMENT OF WORKING CAPITAL REQUIREMENTS

PROJECTIONS FOR THE ENSUING YEAR/NEXT YEAR:

The actual production/sales for the last 2 years and estimation/projection for
the ensuing/next year.

34
 Year Sales ( Rs Crores)
Quantity Values

2011-10 9743.17
2012-11 11870.18
2013-12 12,131.16
2014-13 13,197.58

Achievability of estimated/projected production/Sales:

(Describe the constraints faced, if any, in achieving the projections in previous
years and steps taken to achieve the projections)

Tyre Industry Structure and Development

The Indian economy had a challenging year in fiscal 2013-14, ending with an
annual growth rate of around 4.7%, fractionally higher than in the previous
year. The growth was subdued because of poor performance of the mining,
manufacturing, construction, trade, hotels, transport, storage and
communication services sectors. According to CMIE, the growth in India’s real
GDP is expected to improve to 5.5% in 2014-15 with the Industrial sector
projected to show an acceleration. Investment demand in India is likely to pick
up gradually in 2014-15 as more projects are cleared and land acquisition
process becomes easier post implementation of the new land acquisition act.
Fast tracking of new projects is expected to boost construction activity,
generate new employment and create fresh demand for cement, steel and
machinery. Consequently, this is expected in turn, to boost demand for the
automotive sector especially for commercial vehicles. Since the demand for
tyres as a category is a function of the overall growth of the economy,
particularly growth in the automotive and transportation sectors, this augurs
well for the tyre industry in the new fiscal. The turnover of the Indian tyre
industry is estimated to be around `47,000 crore in 2013-14 and is dominated
largely by the commercial vehicle segment consisting of heavy, light and small
commercial vehicles. The next largest segment is passenger vehicles
constituted by cars, SUV’s, motorcycles and scooters. The Farm and Off The
Road (OTR) segments consisting of the tractor front and rear tyres, tractor
trailers and OTR tyres are the other important segments in the market.
Traditionally, tyres are classified as cross-ply (bias) and radial based on the
technology deployed in their manufacture. In India, the commercial tyre
segment continues to be dominated by cross-ply tyres due to road conditions,
loading patterns and the high initial cost of radials. There is a s Tyredy growth
in radialisation across segments with the highest in passenger cars (98%)
followed by heavy commercial vehicles (25%) and light commercial vehicles
(22%). The tyre industry consists of three distinct markets namely
replacement, institutional/OEM and exports. By value, replacement accounts
for approximately 60% of the industry with Institutional/OEM and exports
making up 22% and 18% respectively. While in the commercial and farm

35
segments replacement sales forms a major chunk, both Institutional/OEM and
replacement sales play an almost equal role in the passenger segment. Of the
total tyres produced in
India, the top ten tyre companies account for nearly 90% of the volume. The
tyre industry provides direct and indirect employment to more than a million
people, comprising of dealers, retreaders and truck operators. The trucking
business is controlled by nearly 2.6 million small operators. The major factors
affecting the performance of the Indian tyre industry are the sluggish growth
of the economy, interest rates, fuel prices, natural rubber prices and import
duty on rubber.The tyre industry is also directly affected by the performance
of the vehicle manufacturing sector which in turn is dependent on the overall
economic growth. During 2013-14, there has been a dip of 8% in the
production of both light and heavy commercial vehicles while the drop was a
sharp 37% in the newly emerging small commercial vehicle segment.
Passenger car production also saw a decrease of 3%, whereas SUV’s
registered an increase of 9% over the previous year. In two wheelers, scooters
witnessed a 33% increase whilst motorcycle production grew at 12%. The
farm sector also recorded an 8% increase in production over 2012-13.

Detailed operating statements for achievable level of production/sales

are enclosed as annexure – VI

Assessment of Working Capital Requirements:

(Rs. in Crores)

See Form IV and V with notes.

Comments on the
levels of current assets
projected:
a) Raw material The raw material mainly consists plucked Tyre
leaves.
b) Stores & Spares: Stores and spares are in the form of spares
required for the heavy machinery used in the
operations/processing of Tyre leaves.

c) Semi finished goods: The company’s SIP mainly consists of the

Tyreleaves, coffee beans being processed
with/without herbs etc.
d) Finished Goods Stock of finished goods is in the form of Tyre and
Coffee packed.
e) Receivables

36

f) Other current assets
The receivable level consists of mainly the
domestic receivable and the holding period is going
to increase slightly by taking advantage of the
increase in sundry creditors holding period.
The other current assets consist of a significant
portion of the current asset. This is due to the fact
that in the sufficient advances and security
deposits are needed for various purposes when
one expands globally.

Comments on current
liabilities

a) Creditors for purchase The company purchases material on credit and this
consists of the major trade creditors of the
company. In recent years the company has been
able to realize higher credit from its supplier
vendors and this trend is going to be maintained
since company’s expansion into new markets are
continuously increasing.
b)Advances from Nil.
customers

c) Other current liabilities The other current liability is expected to be in line

with the historical trend.

Build up of NWC (Rs. in Crores)

See Form V with Notes

Non-Fund Based Limits: Not Applicable to the company as company is

taking fund based Working capital loan.

a) Letter of Credit Limits:

Sight Usance Total
Existing
Applied

Assessment of sight LC:

Assessment of Usance LC:

As the company is importing as well as exporting , There is a huge

scope for such facility which should be explored. This will also
reduce the cost of borrowing by saving on interest cost.

37
 b) Guarantee Limit:
Existing
Applied

Assessment

(Separate assessment shall be made fro performance guarantee, advance

payment guarantees, guarantees in lieu of EMD, and other guarantees)

x. OTHER TERMS OF SANCTION:

Security: Particulars of securities are as follows:

Existing Proposed
Description Value Description Value
( Rs ( Rs
crores ) crores )
Primary First Charge on 89.50 First Charge on Current 102.92
Current Assets of crores Assets of the company
the company ranking pari passu with
ranking pari passu the other working
with the other capital bankers.
working capital
bankers
Collateral Not Applicable Not Applicable

Margin:

The margin for the existing limits and proposed limits are as follows:
For Existing Limits For Proposed Limits
Facility Margin Facility Margin
Receivable SOD 20% SOD 20%

Guarantors: This is not applicable to the company

Name and Address

Net worth as on
----------
Whether assessed for
IT/WT

38
 Whether copies of
ITAO /WTAO
obtained and
enclosed
Total Income
Direct/Indirect
Liabilities
Liabilities with other
banks

Rate of Interest: Particulars of rate of interest charged /recommended

are as follows:

Charged for existing limits Recommended for proposed

limits
Facility Rate of Facility Rate of
Interest Interest
SOD 13% SOD Rs 20 0.5% above
Crores PLR subject to
a minimum of
13.50 % p.a.
payable at
monthly rates.

XI. SUMMARY OF EXISITNG AND PROPOSED CREDIT LIMITS FROM OUR

BANK:

Facility Existing Proposed

a) Fund SOD TL-Rs. 616 20 Crores
Based crores
To
tal 20 Crores
b) Non Fund None NIL NIL
based
Tot
al

XII. SHARING OF FUND BASED AND NON FUND BASED CREDIT LIMIT IN
CASE OF CONSORTIUM. The proposed fund based limit is within the
MPBF of the company.

39
 XIII. OTHER LIABILITIES OF THE COMPANY/DIRECTORS/PARTNERS TO THE
BANK: Nil

XIV: PARTICULARS OF ASSOCIATE/GROUP CONCERNS DEALING WITH

OUR BANK: Nil

XV: PARTICULARS OF ASSOCIATE/GROUP CONERNS DELAING WITH OTHER

BANKS: N.A.

XVI. POSITION REGARDING OUR EXPOSURE: Our proposed exposure will

be within the prudential norms of the Reserve Bank of India.

XVII.A. PROSPECTS OF THE LINE OF ACITIVITY :

It is a growing industry when we look at it globally and the company has

well strategic focus in this area with 43 years of experience and
continuously growing. Hence, has good prospects.

B. COMPETITIVE POSITION OF THE COMPANY:

The company because of its inherent strength in global expansion success and
EVA implementation at the organisatiuon level. The company EVA grew by Rs.
100 millin in 2007 with well R&D has sustainable competitive advantage.

XVIII. OTHER BENFITS DERIVED BY THE BRANCH FROM THIS ACCOUNT: The
Company is a good client with which long term relationship can be developed
which will help bank in realizing more deposits by attracting company’s
account as well as that of extending non fund based facilities in future
alongwith cash management facilities.

(Indicate the extent of ancillary income, deposits maintained with us etc.)

XIX. ANY OTHER OBSERVATIONS/REMARKS OF THE BRANCH :None

XX. WHETHER THE COMPANY /PRMOTERS/ASSOCIATE COMPANIES ARE

FIGURING IN THE LIST OF DEFAULTERS CIRCULATED BY RBI. IF SO
FURNISH DETAILS: None

40
 XXI. RECOMMENDATION

We recommend sanction of the following credit limits on the terms and

conditions mentioned against them, valid up to for a period of 12 months.
Facility Limit (Rs in ROI/Commn Margin Security
Crores )
SOD 13.42 0.5% above 25% on 1st Charge on all
PLR subject Receivable current assets of
to a the company
minimum of ranking pari passu
13.5% p.a. with other
working capital
banker.

Collateral Securities: Nil

Name of guarantors: None

Other terms of sanction: None

Asst/Sub Manager Sr Br. Manager

Date of forwarding the Proposal to ZO

10.12.2007

41
ANNEXURE I
Based on the information available in the annual report

1. Name of the Borrower MRF

2 Details of existing credit facilities
I With Our Bank
Facility Limit Date of Balance Overdues Rate Securi
Document as on of
Int
A Fund Based Nil
1) ODH
2) DBD
3) DATBD
4) DLSB/ ODSB
5) CDD
6) ODBD
ODD
B Non Fund Based Nil
1) BG
2) ILC
3) FLC
4)
C Term Credit Rs. 2250.00 lacs as per annual report 2006-2007
Facilities
Total Indebted Rs.2250.00 lacs
ness to our Bank
( A+B+C)
II With other TL- Rs. 4500.00 with HDFC; Bridge Loan-Rs.55000.00(Bank N/A
Bank/Institutions WC Finance- Rs. 8949.77 lacs from HDFC
3.a) Asset N/A
Classification
b) Amount of N/A
Provision/Interest
Reversal
Review of Operations : NIL
1. Comments on utilisation of
ODH Limit:
2 Comments on bills
discounted:
Whether the Bills are paid on
time
No of Bills returned during the
above period and amount
Details of Present overdue
bills( such as date of
discount, amount, drawee
name, due date)
Steps taken for Regularisation N/A

42
3 Letter of Credit N/A
4 Guarantees ( last 12 month N/A
period ended)
No of Guarantees Issued
Total Value of Guarantee
Commission Earned
Particulars of Invocation of
Guarantee
Particulars of Guarantee
outstanding beyond validity
period
Steps taken for cancellation
of the guarantee
5 Value of Account ( For 12 Term loan of ICICI had not been utilized
Months Period Ended) Due to insufficient time.
Interest Earned
Discount Earned
Exchange Earned
Commission Earned
6 Term Loans/DPG Funds not utilised per annual report 06-07
7 Foreign Exchange Business N/A
Total Foreign Business Import Export-Rs.16150 lacs
Rs. 3034 lacs Acquisition-
handled by the Co for
Rs.55000 lacs
the year ended 31.3.07
Business Routed through the N/A N/A
bank during the said
period
Whether Company’s entire exports are Directly / through subsidiaries
effected directly or any part thereof is
routed through another agency
Comments
8 Other Ancillary Business No information
No Amount Commn Earned
Bill Sent on Collection
MTs/TTs/DDs purchased
IBCs received
Others
9 Deposits
10 Dividend /Interest Payment
/Warrants handled/income
11 Others( Merchant Banking
Business Income etc)
12 General
Are documents in order and in Creation of charge is pending for the term loan
force?
Whether joint documentation is N/A
done ( in case of consortium
advance )

43
 Date of Search Report
Are Charges in Creation of charge is pending for the term loan

Order?
Details of terms of existing No information except insuffiecient time.
sanction which are not complied
with and reasons
Is Insurance cover available N/A
and are policies current and
particulars duly recorded
/policies held in custody as
applicable?
Any Unsatisfactory features
from inspection report of

a) Reserve Bank of India

b) Branch Inspection
c) Statutory Auditors Nil See Note below
d) Manager ( Audit/Concurrent
Auditors)
QUARTERLY INFORMATION
SYSTEM

Note:

Annexure to the Auditors’ Report- (Referred to in paragraph 3 of the Auditors’ Report of even date to the
members of Tyre Limited on the financial statements for the year ended 31st March, 2007)

Point 16. In our opinion, and according to the information and explanations given to us, on an overall basis, the
term loans have been applied for the purpose for which they were obtained except for one term loan of Rs. 2250
lakhs drawn from a bank towards end of the year. According to the explanations given by the management it
was not possible to apply the loan immediately for the purpose for which it was taken.

44
 ANNEXURE II

Particulars of operations in ODH account :

1. Not applicable since application for 1st loan from bank.

2. There is no negative comments on the existing WC loan from other bank by the auditors.

3. (Assumed)- Confidential report and opininon report from other banks have no negatiuve
comments on the company as well as the promoters and the directors from other banks in
terms of debit/credit summations, outstandings and net worth of the directors/promoters.

Note: Annexure to the Auditors’ Report-(Referred to in paragraph 3 of the Auditors’ Report of even date to
the members of Tyre Limited on the financial statements for the year ended 31st March, 2007)

10. The company has no accumulated losses as at 31st March,2007 and it has not incurred any cash
losses in the financial year ended on that date or in the immediately preceding financial year.

11. According to the records of the company examined by us and the information and explanation
given to us, the company has not defaulted in repayment of dues to any financial institution or bank
or debenture holders as at the balance sheet date.

12. The company has not granted any loans and advances on the basis of security by way of pledge
of shares, debentures and other securities.

13. The provisions of any special statute applicable to chit fund/nidhi / mutual benefit
fund/societies are not applicable to the company.

14. In our opinion, the company is not a dealer or trader in shares, securities, debentures and other
investments.

15. In our opinion and according to the information and explanations given to us, the terms and
conditions of the guarantee given by the company in a previous year and released during the year,
for a loan taken by a party from bank, are not prejudicial to the interest of the company.

16. In our opinion, and according to the information and explanations given to us, on an overall
basis, the term loans have been applied for the purpose for which they were obtained except for one
term loan of Rs. 2250 lakhs drawn from a bank towards end of the year. According to the
explanations given by the management it was not possible to apply the loan immediately for the
purpose for which it was taken.

17. On the basis of an overall examination of the balance sheet of the company, in our opinion and
according to the information and explanations given to us, there are no funds raised on a short-term
basis, which have been used for long-term investment. For this purpose bridge loans from banks for
acquisitions have not been considered as the same are being replaced by long term finance.

45
 ANNEXURE V

ASSESSMENT OF TERM LOAN/DPG REQUIREMENTS

Not applicable (assumed done separately).

Not Applicable since it is assumed that the increase in the Term loan by 10% is already
sanctioned. Further, the company already has a sanctioned limit of Rs.2250.00 lacs with
ICICI bank, information with respect to it is provided at Note 8.

REMARKS ON BALALNCE SHEET AND WORKING RESULTS

OPERATING RESULTS:

1. Segment: Sales figure for the last three years is as follows for the
three segments of the company as consolidated:

Segments 2004-05 2005-06 2006-07

Tyre Segment Rs. 2849.50 Rs. 2944.01 Rs. 3332.19
Crores Crores Crores
Coffee Segment Rs. 186.4 Rs. 162.22 Rs.692.26
Crores Crores Crores
Others segments Rs. 20.7 crores Rs.18.33 Rs. 18.79
crores crores

2. Sales: The sales for the company have been registering a consistent
increase over a period of last three years and the same is expected to
continue.

2004-05 2005-06 2006-07

Rs 896.32 Crores Rs. 968.20 Crores Rs. 1054.47 Crores

Operative Profit: The PAT for the company has been increasing
consistently over the years.

2003-04 2005-06 2006-07

Rs. 128.93 Crores Rs. 186.93 Crores Rs. 306.56 Crores

46
 Actual figures for quarter period ending Sept.2007

  Quarter ended Year ended Rs. cr

year   2007/09 2006/09 var %   2007/03 2006/03 var %
Sales Income   319.05 274.00 16.44   1,070.35 982.05 8.99

Other Income   18.40 48.78 -62.28   75.76 57.96 30.71

Expenditure   243.38 202.65 20.10   872.67 806.26 8.24

Interest   2.49 3.85 -35.32   11.63 8.97 29.65

Gross Profit   91.58 116.28 -21.24   261.81 224.78 16.47

Depreciation   5.31 4.79 10.86   18.54 19.43 -4.58

Tax   19.51 15.57 25.31   43.20 43.59 -0.89

PAT   64.81 163.92 -60.46   306.57 186.93 64.00

Equity   61.84 56.22 10.00   59.03 56.22 5.00

OPM (%)   23.72 26.04 -2.32   18.47 17.90 0.57

GPM (%)   22.94 24.64 -1.70   17.38 16.99 0.39

NPM (%)   20.31 59.82 -39.51   28.64 19.03 9.61

3. Depreciation: The depreciation has been charged as per Indian Company Act 1956.

FINANCIAL POSITION:

1. The Net Worth of the company has increased by Rs 404.3 Crores owning to ploughing back
of net profit, fresh capital and share premium.

2. The current ratio of the company as on 31.03.2007 was 1.12 as against 1.27 as on
31.03.2006 considering the bridge loan as longterm liability sinceitspurposeisforlong term
and that it was issued against a long term loan that isit being replaced by long term
financing. (per Auditors report-point17), (See Note-12, point-21). Further, this makes the
financial more conservative because the CR has now improved and slipping back in future
will effect its market cap as well as the breaking of standard covenants of WC finances.

47
 3. The total outside liabilities to tangible net worth has increased from 0.46 to 0.73 which is
still below 1.00 and hence can be termed as very impressive. The increase is mainly due to
the bridge loan of Rs. 55000.00 lacs for acquiring the EIB.

4. Receivables other than export and deferred receivables expressed in Month’s domestic sale
is at 0.71 and including exports is 0.87, an increase of 5 days, which is reasonable whereas
only exports is also 0.87 which is very reasonable.

5. The level of raw material expressed in Month’s consumption as on 31.03.2007 is at 2.59

inclusive of imports and 2.55 exclusive of imports which is reasonable considering the fact
that the plucking follow a cycling/seasonal trend. Hence, inventory building will be a normal
trend in this industry.
6. The level of finished goods expressed in Month’s cost of sales as on 31.03.2007 is at 1.53
which is reasonable considering the fact that the plucking follow a cycling/seasonal trend.
Hence, inventory building will be a normal trend in this industry.

7. The level of Stock in Process expressed in Month’s cost of production as on 31.03.2007 is at

Nil position which is in tune with the processing time being low.

8. The level of Creditors for purchase of raw materials expressed in Month’s purchase as on
31.03.2007 is at 4.45.

9. The investment in the subsidiaries, group companies & integrated joint ventures as on
31.03.2007 is Rs 1788.77 Crores.

10. The company is investing in subsidiaries through global expansion in order to increase the
Net worth, its global sales account for 75% of the total sales & as per Annual report
company plans to continue with this , at the same time it is slowly restructuring its Indian
operations particularly in the plantation sector..

11. The Key financial ratios for the last five years are as follows:

Key Financial Ratios

  2007/03 2006/03 2005/03 2004/03 2003/03
EPS 51.93 33.25 22.93 16.28 12.56
CEPS 55.08 36.71 26.84 20.20 16.59
Book Value 257.81 202.67 182.70 169.58 170.18
Dividend/Share 15.00 12.00 10.00 8.50 7.00
OPM 17.54 17.12 14.95 11.27 9.90
RONW 10.97 14.36 13.15 9.18 6.71
Debt/Equity 0.73 0.46 0.18 0.20 0.23
Ratio 1.12 1.27 1.12 1.09 1.31
Interest Cover 5.80 13.63 14.23 8.61 5.06

48
 12. The shares of the company are traded in Stock Exchanges and the movement of the
share price during the last 24 months was as follows:

Performance in comparison to broad-based indices:

49
13. AUDITORS COMMENT ON COMPANY’S BALANCE SHEET :

AUDITORS COMMENTS: (See Note-10, 11, 12)

How the auditors comments have been treated in analysis of Balance Sheet.

i) On Revaluation of Fixed Assets: No revaluation has been carried out during the
current year.

ii) On Change of method of Depreciation: No change in the method of depreciation.

iii) On loans and Advances given to concerns within the group: The Company has not
granted any loans, secured or unsecured, to companies, firms and other parties
covered in the register maintained under section 301 of the Companies Act, 1956
during the year. Accordingly, paragraphs 4(iii)(b), (c) and (d) of the Order are not
applicable.

iv) The Company has not taken any loans, secured or unsecured, from companies, firms
and other parties covered in the register maintained under section 301 of the
Companies Act, 1956. Accordingly, paragraphs 4(iii) (f) and (g) of the Order are not
applicable

v) On position of unserviceable stores/obsolete stocks : No such stock.

vi) On position of overdue/irrecoverable debtors: Such debtors above six months have
been seperated.

vii) On disputed liabilities not provided for: No such liabilities as per our knowledge
based on company’s declaration.

viii) On valuation of Inventories: At cost or Net Reliasable value whichever is lower.

ix) Others: No adverse comment can be found in the audited balance sheet.

50
 x) There are no funds raised on a short-term basis, which have been used for long-term
investment. For this purpose bridge loans from banks for acquisitions have not been
considered as the same are being replaced by long term finance.

The Overall Financial Position and working results based on the above analysis is satisfactory

Manager Chief Manager

Date:

Name of theBranch/Place:

51