MEGHMANI ORGANICS LIMITED

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2 CONTENTS Corporate Information 03 Chairmans' Statement 06 Directors' Report 09 Management Discussion and Analysis 15 Corporate Governance 18 Auditors' Report 29 Balance Sheet 33 Profit and Loss Account 34 Schedules Forming Part of Balance Sheet and Profit and Loss Account 35 Cash Flow 62 Auditors' Report on Consolidated Financial Statements 66 Consolidated Balance Sheet 67 Consolidated Profit and Loss Account 68 Schedules Forming Part of Consolidated Balance Sheet and Profit and Loss Account 69 Consolidated Cash Flow 84 Meghmani Energy Limited 86 Meghmani Finechem Limited 103 Meghmani Europe BVBA 117 Meghmani Organics Inc. USA 123 Secretarial Audit Report 128 Notice of Annual General Meeting 130

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4 Corporate Information Board Of Directors Jayanti M. Patel Ashish N. Soparkar Natwarlal M. Patel Ramesh M. Patel Anand I. Patel Ashvin Raythatha Chinubhai R. Shah Balkrishna T. Thakkar Jayaraman Vishwanathan Foo Meng Tong K N Venkatasubramanian Chandan Bhattacharya (Appointed on ) Audit Committee Balkrishna T. Thakkar Foo Meng Tong Chinubhai R. Shah Nominating Committee Jayanti M. Patel Foo Meng Tong Chinubhai R. Shah Remuneration Committee Chinubhai R. Shah Balkrishna T. Thakkar Natwarlal M. Patel Shareholders / Investors Grievance Committee Company Secretary Chinubhai R. Shah Balkrishna T. Thakkar Ashish N. Soparkar K. D. Mehta Registrar & Share Transfer Agent Intime Spectrum Registry Limited C-13, Pannalal Silk Mills Compound, LBS Road, Bhandup (West), Mumbai India. 3

5 Corporate Information Singapore Depository Shares Tricor Barbinder & Co. Pte. Ltd. ("SDSS") Registrar And SDSS Office 8 Cross Street # 11, PWC Building, Singapore Registered Office Plot No. 184, Phase II, G.I.D.C. Vatva, Ahmedabad Telephone No Fax No helpdesk@meghmani.com Corporate Office Meghmani House Shreenivas Society, Off: Vikas Gruh Road, Paldi, Ahmedabad Mumbai Office 22 / 23, Vellard View, 1st Floor, Tardeo Road, MUMBAI

6 Corporate Information PLANT LOCATION 1. Pigment Green - Division Plot No. 184, Phase II, G.I.D.C. Vatva, Ahmedabad Telephone No Fax No helpdesk@meghmani.com 2. Agro Division - I Plot No. 402,403,404 & 452, Village Chharodi, Taluka Sanand, District :- Ahmedabad Telephone No Fax No helpdesk@meghmani.com 3. Pigment Blue - Division Plot No. 21,21/1, G.I.D.C. Panoli, District :- Bharuch Telephone No Fax No helpdesk@meghmani.com 4. Agro Division - II 5001/B, G.I.D.C. Ankleshwar, District :- Bharuch Telephone No Fax No helpdesk@meghmani.com PRINCIPAL BANKERS State Bank of India, Overseas Branch, Navjivan Trust Building, Ahmedabad HDFC Bank Limited 3rd Floor, HDFC Bank House, Mithakhali, Ahmedabad ICICI Bank Limited JMC House, Opp. Parimal Garden, Ambawadi, Ahmedabad AUDITORS M/s Patel & Khandwala 204, Akik, Opp. Lions Hall, Mithakhali, Ahmedabad

7 Chairman's Statement Dear Members, Before I proceed further to present our Annual Report 2008, I would like to thank all the investors for their overwhelming response to the Initial Public Offer of the Company on Indian Stock Exchanges. Without your support it would not have been possible to have issue oversubscribed over 26 times, underscoring investors' recognition of the Company's business model, investment merits and established track record. With this listing, the responsibility of the Company has increased tremendously towards Indian as well as Singapore Depository Shareholders. I would also like to thank our Singapore Depository Shareholders for their continued support and trust in the Company and the Management. It is with my great pleasure that I share with you our signature milestones and highlights for the year ended 31 March 2008 [FY2008]. We are heartened to report that Meghmani continued to deliver robust financial numbers and highly commendable margins. Despite the ever-escalating increases in the cost of crude oil and other raw materials seen in FY2008, the Group has continued to deliver, both operationally and financially. It is indeed my firm belief that we have emerged stronger and in better competitive shape than ever. Our announcement on the setting-up of a Caustic Chlorine Complex in Dahej in October 2007 marks the other important thrust of our growth plans. This large-scale integrated complex will commercially produce caustic soda, chlorine gas and hydrogen gas in the first phase, and moving on to caustic/chlorine derivatives in subsequent phases. After highly successful listing of our shares on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) of India, our shares will also enjoy two-way fungibility between Singapore and Indian Stock Exchanges starting from 28th June, This will not only enhance the liquidity of our shares but also give an option to our investors to benefit from more vibrant stock exchanges of the two. The Year in Numbers For the 12 months ended 31 March 2008, the Group turned in after tax profit of 306 million rupees on the back of approximately 6.0 billion rupees. These compared with profit after tax and revenue of 409 million rupees and 4.7 billion rupees, in the preceding 12-month period. In spite of rising costs in raw materials and crude oil, Meghmani was still able to demonstrate strong profitability. The Group recorded gross profit of over 1 billion rupees, while gross profit margin came in at 17% compared to 22.8% previously a fair achievement when compared to industry peers. Growth in Group's revenue was spearheaded by our Agrochemicals business segment with a contribution of approximately 2.58 billion rupees - this marked a 12.6% increase from a revenue of almost 2.27 billion rupees in FY2007. Our Pigments division contributed almost 2.29 billion rupees to Group revenue, against 2.36 billion rupees in the year ago period. Moving in parallel with revenue growth, distribution and administrative expenses grew by 22% and 9.7% to 87.2 million and 12.5 million rupees, correspondingly. The bulk of distribution expenses are attributed to increase in freight (marine), clearing, forwarding charges and packing material costs. Finance costs for FY2008 witnessed an uplift of 28.9% to million rupees, brought about by a higher utilization of working capital facilities, increase in sales and funding for Meghmani Finechem Limited ("MFL"). Earnings per share stood at 1.27 rupees compared to 2.04 rupees in the earlier period, while the earnings per SDS came in at 0.63 rupees as at 31 March 2008, versus 1.02 rupees as at 31 March The earning per share came down due to infusion of new share capital base because of India Listing. Net asset value per share surged almost 25% from rupees to rupees. Review of Core Business Segments Our Agrochemicals division turned in a revenue of 2.58 billion rupees, up 12.6% from the year ago period of 2.27 billion rupees. Contribution from Pigments slipped 3% to 2.29 billion rupees versus 2.36 billion rupees in FY2007. Review by Geographical Markets The Group's export sales grew by 35.7% to reach 4.4 billion rupees, up from 3.3 billion rupees previously. Revenue contributions from Pigments and Agrochemicals edged up 1.1% and 4.4% respectively to 1.9 billion and 1.35 billion rupees. The increase in export sales of Agrochemicals was mainly attributable to heightened quantity sale of Acephate Technical and Chlorpyriphos. 6

8 Domestic sales of Pigments decreased 20.7% to 351 million rupees as a result of a stronger focus on the export markets while the domestic sales of Agrochemicals increased by 23.6% due to good monsoon and increased sales of Acephate, Cypermethrin Technical and Imidacloprid Technical. Pathway to Long Term Sustainable Growth The Group's Rs crores [S$191.3 million] investment in the Caustic Chlorine Complex forms the cornerstone to our long term sustainable growth. We view this project as an opportunity to achieve inorganic growth in a diversified yet chemistry-related business with positive growth potential. Sited in a 161-acre piece of land in Dahej, the proposed plant will be set up under a special purpose vehicle, Meghmani Finechem Limited (MFL), employing the latest membrane cell technology to provide a ready and captive source of basic chemicals as the Group consumes significant quantities of caustic soda, chlorine gas and derivatives of chlorine gas for our pigments and agrochemicals operations. The caustic-chlorine chemicals are used in a multitude of industries including Pigments, Pesticides, production of metals and resource materials; pulp and paper; petroleum and natural gas extraction; manufacture of organic chemicals, plastics, industrial solvents, water treatment chemicals and pharmaceuticals. Due to their wide ranging applications across industries, demand for Caustic Soda and Chlorine Gas are increasing. Dahej is widely considered a strategic location for chemical and related industries as it is an approved Chemical Special Economic Zone ("SEZ") with a high concentration of chemicals companies. Dahej also has important infrastructure in place such as communications, effluent treatment, power and water / sanitation facilities. In addition, Dahej possesses a Chemical Port, which has jetties capable of handling gaseous, liquid and solid cargoes and is well-connected by rail, road and sea for easy transportation of raw materials and end products. The Dahej port will be vital to the import of coal from countries such as South Africa and Indonesia amongst others for Meghmani's 40 MW coal based captive power plant. Another benefit of Dahej is its easy accessibility to salt, a major raw material for the plant, and other basic chemicals which are important for chemical manufacturing operations. Hence, the critical success factors in driving the plant, namely, salt and power supply, are both reliably and readily available. The commercial production of the first phase is targeted to commence by December 2008 / January Phase 2 will comprise the production of derivative products with higher value-addition. The annual manufacturing capacity of Caustic Soda will be 113,000 TPA and Chlorine Gas 100,000 TPA. We are honoured that the International Finance Corporation (IFC), a member of the World Bank Group, will be investing 461 million rupees and also provide a long term loan (ECB) of 800 million rupees to MFL for this plant. This solid endorsement by a world renowned institution is certainly heartwarming. IFC will certainly help strengthen the project's technology and environment-friendly operating standards. Industry Prospects Pigments On a global basis, consumption of organic pigments is growing at a rate of 2-3%. Improving economic conditions in Europe and increased growth in Asia Pacific pigments market bode well for the Company. Additionally, countries such as the US, Europe, Central & South America, and Japan are increasing their direct supplies of pigments from India. From Meghmani's perspective, we have bolstered the production capacity of our Pigment Green 7 plant at Vatva to cope up demand in India. We are currently evaluating the possibility of also boosting our Pigment Blue Plant in Panoli. We are also in the process of introducing a new range of High Performance Pigments - Orange, Red and Yellow - to better cater to global customers. Agrochemicals The Group has installed multi-facted production capacities to produce Permethrin, Alpha Cypermethrin and Acephate at the Ankleshwar Plants to meet growing demand for Organo Phosphorous and Synthetic Pyrethroid. Meghmani performed well in the domestic market last year as the Indian monsoon was good. We expect this to continue as we focus on the sale of domestic-branded formulations. Despite threats of global warming and severe flooding in certain parts of the world, we expect Agrochemicals market to remain buoyant this year. Registrations We expect to gain from the new registration received from Brazil and Pakistan - two of the world's fastest growing markets for pesticides. 7

9 Total pesticides market in Brazil is currently worth about US$3.3 billion and Meghmani wasted no time in selling into the Brazilian market. The first order of Acephate was delivered between July and October 2007, just months after we received registration in June This order accounted for about 30% of Brazilian market share for the Acephate product. Today, we are one of the few players in the Acephate market in Brazil; a market which accounts for between 2000 and 2200 MT (metric tonnes) per year and increasing every year. As for Pakistan, which has a market size for pesticides worth US$250 million, Meghmani is one of the earliest registrants after the Pakistan government opened the doors for Indian pesticides suppliers. It is worth noting that there is a lot of similarity between Pakistan and Indian agrochemicals market as crop patterns and climatic conditions are quite similar between the two countries. So we are confident we will be able to capture market share in Pakistan within a short period of time. Our latest breakthrough in new markets is a vital part of our ongoing strategy to increase our market penetration and raise our profile in the fast growing agrochemicals market, especially in Brazil. We will now be able to embark on marketing activities and sell our products directly to major formulators and distributors in these two markets. The Group will continue to make concerted efforts to secure overseas registrations - which are essentially "passports" which allow us to sell products in those markets. To date, we have received a total of 130 registrations, and currently have 430 pending registrations in different stages across 60 countries. This healthy pipeline span diverse countries such as Australia, Brazil, China, Indonesia, Malaysia, Nigeria, Paraguay, Thailand, Turkey and Vietnam. Dividends The Board is pleased to recommend a final dividend of 0.30 rupee per share, bringing the total distribution for FY2008 to Rs million. Looking Ahead The price of crude oil rose significantly in the course of FY2008, resulting in the higher costs of raw materials which are derivatives of crude oil. There was also a bullish trend in the prices of copper and aluminium. These phenomena have wide ranging effects which cut across myriad industries and sectors - its effects are universal, and not specific to our industry per se. Despite these challenges, we were effective in passing on the added costs to our customers. We expect this trend to continue. The silver lining is that the global market for pigments products have shown signs of recovery in the pricing of some products. Separately, the pressure on pricing for agrochemicals seen in FY2008 is expected to ease in FY2009. Our shareholders can also seek some comfort from our strong financial standing and excellent track record in dealing with price increases in raw materials over the years. Regardless of the external environment ahead, we remain steadfast in executing our growth strategy with fervor as we further strengthen our leadership position in the global arena. Commitment to shareholders The Meghmani board has continued to focus on good governance. This is underpinned by our strong belief that good governance will invariably lead to a more valuable company. With a bedrock foundation in best corporate practices, we are then better able to not only grow Meghmani, but also ensure sustained performance over the long term. We will drive initiatives to expand our business, and will develop people to uphold a culture that is adaptive to the ever-changing macro environment. On behalf of the Board and the management team, we wish to thank you for your unstinting commitment and trust in us. We will continue to build the business and deliver returns for years to come. Jayanti M Patel Executive Chairman Meghmani Organics Limited 8

10 The Members, Your Directors have pleasure in presenting Fourteenth, Annual report and Audited Statement of Accounts of the Company for the Financial Year ended on 31st March, FINANCIAL RESULTS Rs. in Mn PARTICULARS YEAR ENDED ON YEAR ENDED ON MARCH 31, 2008 MARCH 31, 2007 (a) Sales, Other Income & Increase /Decrease in Stock (b) Profit Before Interest & Depreciation (c) Interest (Net)/ Financial Expenses (d) Depreciation (e) Profit Before Tax (f) Payment / Provision for Current Tax and FBT (g) Deferred Tax Expenses/(Income) (3.69) (h) Profit After Tax Profit Available for Appropriation General Reserve Proposed / Final Dividend Tax on Proposed/ Final Dividend Balance carried forward Total of Appropriations Appropriations:- DIVIDEND:- Your Directors are pleased to recommend dividend of 30% i.e. Rs per Equity share of Re. 1/- each on 254,314,211 Equity Shares of Re. 1/- each, for your final approval. The proposed dividend is tax free in the hands of shareholders. ISSUE OF EQUITY SHARES The Company had received the overwhelming response to its Initial Public Offer (IPO) of 53,684,211 Equity shares of Rs. 1/- each at a premium of Rs. 18/- per share aggregating Rs. 102 Crores to list its equity shares on Indian Stock Exchanges. The issue was over subscribed by 26 times. The present share capital after the issue of new equity shares stands to 254,314,211 of Rs. 1/- each. OPERATIONS:- The Net Sales Turn over of the Company increased to Rs Mn in FY 2008 as against Rs Mn in FY 2007, showing an increase of 26.47%. DOMESTIC SALES:- The Domestic Sales of the Company increased by 9.75 % i.e. from Rs Mn to Rs Mn in the year under review. The Domestic Sales of Pigment Division decreased from Rs million in FY 2007 to Rs million in FY 2008 and the domestic sales of Agro Division increased from Rs million in FY 2007 to Rs million in FY EXPORT SALES Directors' Report The Export Sales increased by 33.73% i.e. from Rs Mn in FY 2007 to Rs Mn in FY Export sales of Agrochemicals Division increased by 8.04% and Pigment Division by 12.25%. 9

11 OTHER INCOME Other income increased substantially, due to Merchant export of Pigment and Agro products. The other main drivers are increase in DEPB (Duty Entitlement Pass Book) Rate, higher dividend income due to investment of surplus amount of Initial Public Offer and gain on foreign exchange. Profitability:- During the year, profit came under pressure due to :- (1) Intermittent stoppage of Pigment -Panoli Plant on leakage of effluent pipe line of GIDC out side our factory premises. (2) Increase in input costs due to crude oil prices. (3) Pressure on export realisation due to strengthening of rupee. (4) The pressure on profitability of the Agro Division was much higher than Pigment Division. FUTURE STRATEGIES:- Pigment Division :- To position itself better from increased demand from local market, the Company has increased the production capacity of its Pigment Green 7 plant at Vatva and Beta Blue at Panoli. To meet the demand of its global customers' base, the Company is in the process of introducing new range of High Performance Pigments. Agro Division :- To meet the growing demand for Organophosphorous and Synthetic Pyrethroid, the Company has installed multifaceted production facilities to produce Permethrin, Alpha Cypermethrin and Acephate at the Ankleshwar Plants. The Company continued to make its concerted efforts to obtain overseas registrations to sell its agro products and sent registration dossiers to 60 countries. The Company has received 130 agro registrations worldwide. The registrations efforts of the Group are in countries such as Argentina, Australia, Brazil, China, Indonesia, Malaysia, Nigeria, Paraguay, Thailand, Turkey, USA, and Vietnam. SUBSIDIARY COMPANIES The financial statements have been prepared in accordance with Accounting Standard 23 issued by Institute of Chartered Accountants of India and it includes the results of the following Subsidiaries :- (1) Meghmani Energy Limited (MEL) (2) Meghmani Europe BVBA (Meghmani Europe) (3) Meghmani Organics Inc. USA. (4) Meghmani Finechem Limited (MFL) The audited accounts of the Subsidiaries and the Auditors' report thereon form part of the Annual Report. CAPITAL EXPENDITURE:- Capital expenditure incurred during the year aggregated to Rs million. FIXED DEPOSITS:- The Company has not accepted the fixed deposits during the year under report. MANAGEMENT & DISCUSSION ANALYSIS REPORT In terms of clause 49 of the Listing Agreement with the Stock Exchanges, the Management and Discussion analysis, is appended to this report. CORPORATE GOVERNANCE:- On listing on Indian Stock exchanges, the Company has complied with the Corporate Governance requirements as per Clause 49 of the Listing Agreement with the Stock Exchanges. This report also forms part of the of Singapore Stock Exchange listing requirements. DIRECTORS' RESPONSIBILITY STATEMENT:- In compliance of Section 217 (2AA) of the Companies Act, 1956 as amended by the Companies (Amendment) Act, 2000, the Directors of your Company confirm: 10

12 a) that the applicable accounting standards have been followed in the preparation of final accounts and that there are no material departures; b) that appropriate accounting policies have been selected and applied consistently and such judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at March 31, 2008 and of the profit of the Company for the year ended on March 31, 2008; c) That proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) That the annual accounts have been prepared on a going concern basis. ENERGY, TECHNOLOGY, AND FOREIGN EXCHANGE The information to be disclosed under Section 217 (1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in The Report Of Board Of Directors) Rules, 1988, with respect to energy, technology, and foreign exchange is annexed separately to form part of this report. DIRECTORS Mr. Chandan Bhattacharya was appointed as an Additional Director on the Board of Directors of the Company on 30 July, 2007 as an independent Director. He ceases to be a director on the date of this annual General Meeting. Notice under Section 257 has been received in respect of his appointment as Director on the Board. In accordance with the provisions of the Companies Act, 1956 and the Articles of Association, Mr. J Vishwanathan and Mr. Jayanti Patel, retiring by rotation at this Annual General Meeting and being eligible offers themselves for re-appointment. Mr. Foo Meng Tong, has resigned from the Board as well as from Nominating and Audit Committee. The Board takes on record the valuable contributions made by Mr. Meng Tong. As required under Clause 49 of the Listing Agreement with the Stock Exchanges, the details of Directors seeking reappointment at the ensuing Annual General Meeting is provided in the Notice of the Annual General Meeting, forming part of the Annual Report. EMPLOYEE RELATIONS & PARTICULARS OF EMPLOYEE The information required under Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, forms part of this report and is enclosed separately. AUDITORS M/s. Patel & Khandwala, Chartered Accountants, retire at the conclusion of the forthcoming Annual General Meeting and being eligible have offered themselves for re-appointment. ACKNOWLEDGMENT Your directors express their sincere thanks to all customers, vendors, investors, bankers, insurance companies, consultants and advisors for their continued support throughout the year. Your Directors sincerely acknowledges the contribution made by all the employees for their dedicated services to the company. Place: Ahmedabad Date : for and on behalf of the Board Jayanti Patel Executive Chairman 11

13 Section 217(i) (e) of the companies Act, 1956 read with Companies (Disclosure) of particulars in the report of Board of Directors Rules 1988 Annexure To The Directors' Report 1. Conservation of Energy A Energy conservation measures taken (1) Variable Frequency Drive: Motors of some reactors and pumps were identified in both the plants as well as in utility areas and installed VFD. This has resulted in 20% saving in power. (2) Automatic Street light Controller We have installed automatic photo cell operated device for street light which has resulted in 12% power saving in street light. (3) Metal halide Light-Energy efficient light We have installed energy efficient light fitting in incinerator plant. The power saving in plant light. (4) We have maintained good power factor as & achieved rebate of Rs. 7.5 lacs in electricity bill during the year at - Chharodi Plant. (5) We have replaced 750 KVA Transformer by 1250 KVA Transformer. The copper losses in transformer have been reduced & the transformer works at maximum efficiency at - Chharodi Plant. B Additional investments and proposals if (1) Synchronization Panel - Chharodi any being implemented for reduction of At present the overall cost of DG power generation is consumption of energy coming higher due to old DG set & all generators are running in solo. As a result the cost of DG Power is coming very high to the tune of Rs 12/unit which can be lower to the extent of Rs /unit. Approximate cost of synchronization panel shall be in the range of Rs 20 lacs. (2) Variable Frequency Drive We have identified more motors for installation of VFD. (3) Power Control Centre - Chharodi The balancing of transformers load is required for trouble free operation. There is some bottleneck in PCC. As a result one Transformer is getting overloaded & the other is under loaded. This causes frequent maintenance problems & increases down time also. If we go for Synchronization Panel then the modification in PCC is required. The cost may be around 20 lacs. C Impact of the measures at (a) & (b) above As a result the cost of DG Power will be of for reduction of the energy consumption Rs /unit at Chharodi and consequent impact on the cost of production of goods. D Total energy consumption and energy As per Form - A consumption per unit of production 12

14 Form-A Form for disclosure of particulars with respect to conservation of Energy Particulars Pigment Agro Pigment Agro A Power Consumption 1 Electricity Consumption (a) Purchased Unit KWH Total Amount Rs Rate/Unit Rs (b) Own Generation Through Diesel Generator Unit KWH Unit per Liter of Diesel KWH Cost/Unit Rs (c) Through Gas Unit KWH Unit per cubic meter KWH Cost/Unit Rs Coal Steam Generated Consumption of Fuel Oil (in MT) Gas Consumption (In M3) Cost per unit (kg) Steam Purchase Kg. of steam per unit of Fuel Kg. of Steam per unit of Gas Kg. of Steam per unit of Purchase Others / internal generations NA NA NA NA B Consumption per unit of Production in MT , Electricity (Rs. / Mt)

15 A. Research & Development 2. Technology Absorption Form-B Form for disclosure of particulars with respect to technology absorption 1 Specific areas in which R & D is carried out by the Company. Pigment - High Performance Pigment Agrochemical - Insecticides Process Improvement & New Product Development 2 Benefits derived as a result of the above R & D. Two new products Developed. New HPP developed. 3 Future Plan of Action Consolidation of New Product development and quality improvement. 4 Expenditure on R & D Rs. 10 million B. Technology Absorption, Adoption and Innovation: A Efforts, in brief, made towards technology absorption, : During the last five years, no technology has been adaptation and innovation. imported by way of foreign collaboration or otherwise for the existing products of the Company. B Benefits derived as a result of the above efforts - e.g. Product improvement, cost reduction, product development, import substitution etc. C Imported technology (imported during the last 5 - years reckoned from the beginning of the financial year. C. Foreign Exchange Earnings And Outgo The particulars with regards to foreign exchange earnings and outgo appear in Schedule 23 forming part of Annual Report and Account. For and On behalf of the Board Place : Ahmedabad Jayanti Patel Date: 23/05/2008 Executive Chairman Information as per Section 217 (2-A) of the Companies (Particulars of Employees) Rules, 1975 and forming part of Director's Report for the year ended 31st March, 2007 Sr. Name Age Qualification Date of Designation Gross Net Experience Last No. re-appointment Employment Rs. Rs. (years) Employment 1 Jayanti M. Patel 56 B.E Executive Nil (Chemical) Chairman 2 Ashish Soparkar 56 B.E Managing Nil (Chemical) Director 3 Natwarlal 55 M.Sc Managing Nil M. Patel (Chemistry) Director 4 Ramesh 52 B.A Executive Nil M. Patel Director 5 Anand I. Patel 46 B.Sc Executive Nil Director Note: Except Mr. Jayanti Patel, Mr. Natwarlal Patel, Mr. Ramesh Patel and Mr. Anand Patel are related to each others. 14

16 Agrochemicals - Industry Outlook Management Discussion And Analysis Agriculture is the backbone of Indian economy. Ensuring food security for more than 1 billion (bn) Indian population with diminishing cultivable land resource is a mammoth task. This necessitates use of high yielding variety of seeds, balance use of fertilizers, judicious use of quality pesticides along with education to farmers & use of modern farming techniques. It is estimated that India approximately loses 18% of the crop yield valued at Rs. 900 bn due to pest attack each year. The use of pesticides help to reduce the crop losses, provide economic benefits to farmers, reduce soil erosion & help in ensuring food safety and security for the nation. The Indian pesticide industry with MT of production for is ranked second in Asia (behind China) and twelfth globally. In value terms, the size of the Indian pesticide industry was estimated at Rs 68 bn for 2006, including exports of Rs. 28 bn. Globally, due to consolidation in the industry, the top 5 global MNCs control almost 60% of the market. In India, the industry is very fragmented with about large manufacturers and about 400 formulators. Per hectare consumption of pesticide is low in India at 381 grams when compared to world average of 500 grams. Low consumption can be attributed to fragmented land holdings, low level of irrigation, dependence on monsoons, low awareness among farmers about the benefits of usage of pesticides, etc. India, being a tropical country, the consumption pattern is also more skewed towards insecticides which accounted for 67% of the total pesticide consumption in FY06. India due to its inherent strength of low cost manufacturing and qualified low cost manpower is a net exporter of pesticides to countries such as USA, European Union & African countries. Exports formed 41% of total industry turnover in FY06 and have grown at a CAGR of 18% from to Prior to 2005, i.e. in the process patent regime, Indian companies focused on applied research and concentrated on marketing generic and off-patent products. Due to this R&D expense by Indian companies was lower at approximately 1% of turnover. Global companies focused on high-end speciality products and dominated the market for patented new molecules. However, with onset of product patent regime in India since 2005, Indian companies will need to increase R&D expense to meet competition from MNCs. In Agrochemicals all markets are regulated, and hence require data registrations. Data files are required to be submitted to obtain registrations. However, in some markets registrations are faster in terms of time. In some markets like the US and the Latin America, data requirements may be more tedious, thus involving huge cost and time. The future looks bright and progressive. The Global crop protection and non crop protection Industry has grown from USD 30.4 bn to USD 38.7 bn during last two years at user level, which shows robust 9.7%. Agrochemicals - overview of the Company The Company's Agrochemical manufacturing facilities are situated at Plot No. 402,403,404,452 & 455, Village Chharodi, Taluka Sanand, District: - Ahmedabad and at Plot No B, GIDC Ankleshwar. The Company produces a broad spectrum of commonly used pesticides for crop and non-crop applications such as public health, insect control in wood preservation and food grain storage. The Company counts amongst its customers leading pesticide manufacturers from North America, Europe, Latin America and Asia. The production processes of the Company Agro businesses are vertically integrated. We also manufacture Pesticides, Intermediates which are used in the manufacture of our Pesticides Formulations. Such vertical integration allows us to effectively manage our raw materials costs and assures us of a constant supply of such raw materials at a consistent quality and consequently, has reduced our reliance on third party suppliers for such raw materials. Particulars Domestic Agro - Chharodi (Agro - I ) Agro - Ankleshwar (Agro-II) Total Export Agro - Chharodi (Agro - I ) Agro - Ankleshwar (Agro-II) Total Grand Total

17 Management Discussion And Analysis (Contd...) During the year despite higher sales of Agrochemicals in domestic as well as international market, the profitability has come under pressure due to increase in raw material cost and pressure on pricing. The crude price has also made the impact. Risks & Concern:- Besides international Agrochemical producers, there are competitors in India having similar products as our Company. We compete against our competitors on our quality, technical competence, distribution channels, logistics facilities, after sales service and customer relationships. We sell our products to customers from various countries in North America, Europe, Central and Latin America, and Asia- Pacific. As a result, our business and future growth is dependent on the political, economic, regulatory and social conditions of these countries. Any change in the policies implemented by the governments of any of these countries which result in currency and interest rate fluctuations, capital restrictions, and changes in duties and tax that are detrimental to our business could adversely affect our operations, financial performance and future growth. Strategy of the Company:- To compete with the MNCs and other Indian players and to meet with the growing demand for Organophosphorous and Synthetic pyrothid types of Insecticides, we have installed multifaceted production facilities to produce Permethrin, Alpha Cypermethrin and Acephate at our Ankleshwar Plant. The backward integration in the manufacturing facility has helped us to offer better pricing and assured quality to our customers. At the domestic front we have our own sales force in Andhra Pradesh, Maharashtra, Madhya Pradesh, Rajasthan and Gujarat. We have consciously developed our intellectual property rights in the form of trademarks for our products, as well as our logo and corporate name. Our logo and name, viz. "MOL" and "Meghmani" have been registered as trademarks. In addition, we have filed 31 applications for trademarks, of which 14 have been already registered. We believe that our trademarks have significant value and are important to our brand building efforts and aid in the marketing of our products. In recent years, we have focused on increasing the number of product registrations in countries such as United States of America, Australia, Brazil, Bangladesh, China, Mexico, Malaysia, Turkey, Taiwan, etc. We currently hold 130 registrations worldwide and have 430 registrations pending in 60 countries around the world. Being a manufacturer and distributor of existing molecules with expired patents, we consider registration as crucial and considerable investments for our future growth. Our focus on research and development has also led to an increase in the number of products developed, which has translated, into numerous applications for registrations for our products. In addition to overseas registrations, we also have 96 registration of Central Insecticides Board (CIB) of India. Pigment Industry Overview The global market of Dyes and Organic Pigment industry is estimated to be at US$ 8.4 billion. (Source: We believe that out of this, the size of Organic Pigment market would be around US$ 5.5 billion. The global demand for organic pigments is expected to grow at the rate of 4.9% annually through (source: The three major drivers of Pigment Industry are printing ink industry, paint industry and plastic industry. The ink, paints and plastics industries continue to witness steady and sustained growth in demand. India's ability to provide high quality manufacturing is also attracting a higher level of outsourcing from more companies from the developed countries. In addition, companies in US, Europe, Central and South America, and Japan are also increasing their direct supplies of Pigments from India. The Indian ink industry is also expected to consume more Pigments. Pigment: - Over view of the Company We have two manufacturing facilities for the manufacture of our Pigment products, one located in Vatva, Ahmedabad where we manufacture our Pigment Green 7 products, High Performance Pigments and Pigment Additives and the other located in Panoli, near Ankleshwar where we manufacture our CPC Blue and Pigment Blue products. 16

18 Management Discussion And Analysis (Contd...) The Company specializes in the manufacture of green and blue pigment and certain High Performance Pigment products that span multiple applications such as printing inks, plastics, paints, textiles, leather and rubber. Its pigment customers comprise mainly MNCs who are leading players in their respective industries. The production processes of our Pigments businesses are vertically integrated. We manufacture CPC Blue which is the primary raw material required in the manufacture of our Pigment Green and Pigment Blue products. Such vertical integration allows us to effectively manage our raw materials costs and quality standards. The performance of the Pigment division business wise during the year under review is as under:- Rs. in Millions Particulars Domestic Pigment - Vatva Pigment - Panoli Total Export Pigment - Vatva Pigment - Panoli Total Grand Total During the year despite higher sales the profitability was affected due to leakage in effluent channel pipeline of GIDC outside the Company premises of Panoli Pigment division. As the raw material used is the derivatives of the Crude oil, the increase in crude price has also made the impact on profitability. Strategy of the Company:- There is a move towards High Performance Pigments and Additives as customers upgrade their products and the technical performance requirements of the pigments and additives they incorporate in their formulations. In recent years, environmental pressure to replace heavy metals such as cadmium and lead has led to an increased demand in organic pigments. The impact of the low volatile organic content ("VOC") regulations is prevalent outside India. The solvent usage is being reduced in the printing ink and coatings industries with alternative technologies, such as water-based systems coming in place. Currently, our portfolio includes High Performance Pigments like Pigment Green 36, Pigment Blue 60, Yellow 181, Yellow 183 and additives which have been successfully commercialized, and have an additional range of pigments like Pigment Red and Pigment Orange, which are under development in various stages. We believe that with our existing portfolio and products under development, we are well placed to take advantage of these trends. To position ourself better from increased demand, we have increased the production capacity of our Pigment Green 7 plant at Vatva, CPC Blue Crude and Beta Blue at Panoli. We are in continuous process to introduce new range of High Performance Pigments, to meet the demand of our global customers. Human Resources :- The Company will be investing substantially, in Human resources from recruitment, training and retention view point. The Human Resources Department is committed to improve employee satisfaction at all levels and create an accountable and committed organization. * * * * * 17

19 Corporate Governance 1. The Company's Philosophy on Code of Governance The Directors and Management of the Company and its subsidiaries are committed to maintain high standards of corporate governance in conducting its business and ensure that an effective self regulatory mechanism exists to protect the interest of our Stakeholders (Investors, Customers, Suppliers and Government) and Singapore Depository Holders. In India, Corporate Governance standards for listed companies are regulated by the Securities and Exchange Board of India (SEBI) through Clause 49 of the Listing Agreement of the Stock Exchange. The Company has complied with the requirements of the Corporate Governance in terms of Clause 49 of the Listing Agreement. The Company has also complied with Corporate Governance requirements under Singapore Listing requirements. The Board of Directors presents a composite Corporate Governance report on the compliance of the Indian and Singapore Listing requirements in the following paragraphs. 2. Board Composition :- The Directors of the Company are persons of eminence having vast and varied experience in manufacturing, marketing, finance and corporate administration. As on 31 March, 2008, the total strength of Board of Directors consists of 12 directors, comprising Mr. Jayanti Patel is an Executive Chairman, Mr. Ashish Soparkar and Mr. Natwarlal Patel are Two (2) Managing Directors, Mr. Ramesh Patel, Mr. Anand Patel and Mr. Ashvin Raythatha are (3) Executive Directors and Mr. Chinubhai R Shah, Mr. Balkrishna T Thakkar, Mr. Foo Meng Tong, Mr. J Vishwanathan, Mr. K N Venkatasubramanian and Mr. Chandan Bhattacharya are Six (6) Non Executive Independent Directors. The Composition of Board is complying with the requirements of Clause 49 (I) (A) i.e. more than 50% of the directors are non executive and more then 33% of the directors are independent directors. The Composition of the Board is also complying with Guidance Note 2.1 of the Code of Singapore states that independent directors should make up at least one-third of the Board. 3. Board Meetings :- Minimum four Board meetings are held in each year. Apart from the four prescheduled Board meetings, the meetings are also convened by giving appropriate notice to address the specific needs of the Company. The Company in consultation with the Directors prepares and circulates a tentative Schedule for the meeting of the Board and Committee in order to facilitate the Directors to plan their schedules. During the financial year ended on 31 March, 2008 nine meetings of the Board of Directors were held on: ; ; ; , , , ; and The meetings are normally held at Meghmani House, Shreenivas Society, Vikas Gruh Road, Paldi, Ahmedabad. Agenda and Notes on Agenda are circulated to the Directors in advance in the defined Agenda format. All material information is incorporated in the Agenda papers for facilitating meaningful discussion. Where it is not practicable the same is tabled before the meeting. The Company Secretary records the minutes of the proceedings of each Board and Committee meeting. Draft minutes are circulated to the members for their comments. 4. Attendance And Other Directorship :- The details of composition of Board of Directors and of attendance of the Directors at the Board Meeting during the 18

20 Corporate Governance (Cont...) year and at the last annual General Meeting held on 29 June, 2007 and also the number of other Directorship, membership and office of Chairman of Board Committees as on 31 March, 2008 are given below: Name of Position Board AGM Directorships Committee Board Director Meeting Attended in other Membership Committee attended Public Limited of other Chairmanship during the Companies companies of other year companies Mr. Jayanti Patel Executive 8 Yes 4 Nil Nil Chairman Mr. Ashish Soparkar Managing 9 Yes 4 Nil Nil Director Mr. Natwarlal Patel Managing 9 Yes 7 Nil Nil Director Mr. Ramesh Patel Executive 8 Yes 5 Nil Nil Director Mr. Anand Patel Executive 8 Yes 3 Nil Nil Director Mr. Ashvin Executive 3 No - Nil Nil Raythatha Director (Int. Mkt.) Mr. Chinubhai Independent 8 Yes R Shah Mr. Balkrishna Independent 9 Yes - Nil Nil T Thakkar Mr. Jayaraman Independent 3 No 1 Nil Nil Vishwanathan Mr. Foo Meng Tong Independent 4 No - Nil Nil Mr. Pankaj H. Shah* Independent - No Mr. K. N. Independent 4 No 6 Nil Nil Venkatasubramanian Mr. Chandan Independent Nil Bhattacharya ** * Ceased to be a Director w.e.f ** Appointed as a Director w.e.f Information placed to the Board :- The following are generally tabled for information and review of the Board. Quarterly results of the Company and operating divisions or business segments. Minutes of meeting of Audit Committee. Materially important show cause Notice, demand prosecution and penalty notices. Any materially significant effluent or pollution problems. Any material relevant default in financial obligations to and by the Company or substantial non payment by the customer for goods sold. 19

21 Corporate Governance (Cont...) Details of any joint venture or collaboration agreement. Transaction that involves substantial payment towards goodwill, brand equity or intellectual property. Significant labour problem and their proposed solutions. Any significant development on the Human resources / Industrial relations front like signing of a wage settlement. Foreign exchange exposures and steps taken by management to limit the risks. Any fatal or serious accident. Any issue which involves possible or Public liability. Sale of material nature of investments, subsidiary assets which are not normal course of business. Non compliance of any regulatory, statutory or listing requirements. The Board periodically reviews all statutory compliance reports of all laws applicable to the Company. 6. Details of compensation paid to Directors :- Particulars of Remuneration of Directors for the year ended 31st March, 2008: Name of Director Salary & Performance Total Perquisites Rs. bonus Rs. Rs. Mr. Jayanti M. Patel 5,382,660 4,500,000 9,882,660 Mr. Ashish Soparkar 5,382,660 4,500,000 9,882,660 Mr. Natwarlal Patel 5,382,660 4,500,000 9,882,660 Mr. Ramesh M. Patel 4,737,540 2,700,000 7,437,540 Mr. Anand I. Patel 4,737,540 1,800,000 6,537,540 Mr. Ashvin R. Raythatha 1,620, ,000 2,156,000 Particulars of sitting fees of Directors for the year ended 31st March 2008: Name of Director Sitting Fees Total Rs. Rs. Mr. Chinubhai R. Shah 1,50,000 1,50,000 Mr. Balkrishna T. Thakkar 1,20,000 1,20,000 Mr. Jayaraman Vishwanathan - - Mr. Foo Meng Tong 80,000 80,000 Mr. Pankaj H. Shah - - Mr. K. N. Venkatasubramanian 40,000 40,000 Mr. Chandan Bhattacharya 20,000 20, Independent Directors shareholding :- Mr. Balkrishna T Thakkar, independent director holds 2000 equity shares of Rs. 1/- each of the company. 8. Code of Conduct :- The Company has adopted a code of conduct for its directors and designated senior management personnel. All the Board members and senior management personnel have agreed to follow compliance of code of conduct. 9. Committees of the Board :- 1.1 Audit committee The Audit Committee comprises of three independent Directors - Mr. Balkrishna T Thakkar, Mr. Chinubhai R Shah and Mr. Foo Meng Tong who are eminent professionals. There were four Audit committee meetings held during the year to review annual audited results, half yearly and quarterly results and to review internal control systems and operational aspects. 20

22 Corporate Governance (Cont...) The Committee acts as a link between the management, auditors and the Board and has full excess to financial information. The Committee met four times during the year on 18th May, 2007, 30th July, 2007, 30 October, 2007 and 25th January, 2008 and particulars of meeting attended by Members of the Committee are given below: Name of the Director Status No. of No. of Meetings Meetings held attended Mr. Balkrishna T. Thakkar Chairman 4 4 Mr. Foo Meng Tong Independent Director 4 4 Mr. Chinubhai R. Shah Independent Director 4 4 The terms of reference of the Audit Committee are as set out in Clause 49 of the Listing Agreement with the Stock Exchanges. The Statutory Auditors were also present at the time of all audit committee meetings. The Company Secretary, Mr. K. D. Mehta acted as the Secretary to the committee. 1.2 Remuneration Committee The remuneration committee comprises of two independent directors viz., Mr. Chinubhai R. Shah and Mr. Balkrishna T. Thakkar and one executive director viz., Mr. Natwarlal Patel. The role of the Remuneration Committee is to facilitate the transparency, accountability and reasonableness of the remuneration of Director and Senior Management Personnel. The Remuneration Committee will recommend to Board a framework of remuneration for the Directors and determine specific remuneration packages for each Director. All aspects of remuneration, including but not limited to directors' fees, salaries, allowances, bonuses, options and benefits-in-kind shall be covered by the Remuneration Committee. Each member of the Remuneration Committee shall abstain from voting any resolutions in respect of his remuneration package The Committee met on 18th May, 2007 and particulars of meeting attended by members of the Committee are given below: Name of the Director Status No. of Meetings held No. of Meetings attended Mr. Chinubhai R. Shah Chairman 1 1 Mr. Balkrishna T. Thakkar Independent Director 1 1 Mr. Natwarlal Patel Executive Director 1 1 The Company Secretary, Mr. K. D. Mehta, Company Secretary acted as the Secretary to the committee. 1.3 Shareholders'/Investors' Grievance Committee The Shareholders' / Investors' Grievance, Share Allotment and Share Transfer Committee of our Board were constituted at our Board meeting held on 11 August, The Committee currently consists of three Directors Viz., Mr. Balkrishna T Thakkar and Mr. Chinubhai R Shah Independent Director and Mr. Ashish Soparkar. The current terms of reference of the Committee are as follows: To allot the equity shares of the Company, and to supervise and ensure: i. Efficient transfer of shares; including review of cases for refusal of transfer / transmission of shares and debentures. ii. iii. iv. Redressal of shareholder and investor complaints like transfer of shares, non-receipt of balance sheet, nonreceipt of declared dividends etc. Issue of duplicate / split / consolidated share certificates. Allotment and listing of shares. v. Review of cases for refusal of transfer / transmission of shares and debentures. 21