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A day in the life of Jyothy…

Jyothy Laboratories Limited


43, Shivshakti Industrial Estate, Andheri-Kurla Road, Marol, Mumbai-400 059
Tel: 2850 2470 / 2852 0283, Fax: 2850 1734
www.jyothylaboratories.com
Annual Report 2005-6
Cautionary statement Corporate information
Statements in this report relating to the Company’s objectives, availability, changes in government regulations and tax
projections, estimates, expectations or predictions may be structure, general economic developments in India and abroad, Board of Directors Internal Auditors
forward looking statements within the meaning of applicable factors such as litigation, industrial relations and other M. P. Ramachandran Vasu & Shivram
security laws or regulations. These statements are based upon unforeseen events.
Chairman & Managing Director A.R. Sodha & Co.
certain assumptions and expectations of future events. Actual
The Company assumes no responsibility in respect of forward- Chartered Accountants
results could however differ materially from those expressed or K. Ullas Kamath
looking statements made herein which may undergo changes
implied. Important factors that could make a difference to the Deputy Managing Director
in future on the basis of subsequent developments, Legal Advisors
Company’s operations include global and domestic demand-
information or events. M. G. Shanthakumari Law & Prudence
supply conditions, selling prices, raw material costs and
M. P. Divakaran V Lakshmikumaran
Jyotindra M. Trivedi Vaish Associates
Josephine Price
Nilesh B. Mehta Bankers
The Federal Bank Ltd.
Company Secretary ICICI Bank Ltd.
M. L. Bansal

Statutory Auditors
S. R. Batliboi & Associates
Chartered Accountants

What this annual report contains


Corporate identity 2 Highlights 2005-6 5 Chairman and Managing Director’s overview 7 Management’s

discussion and analysis 16 Jyothy’s performance analysis, 2005-6 26 Risk management 30 Directors’

report 32 Auditors’ report 37 Balance sheet 40 Profit and loss account 41 Cash flow statement 42

Schedules 44 Balance sheet abstract 64


A PRODUCT
info@trisyscom.com
…is a day in
your life as well!

Annual Report 2005-6 1


Profile Product segments Plants People Prominent brands Penetration
Founded in 1983 Fabric care Thirteen manufacturing Nationwide network staffed Ujala (flagship): Liquid fabric Present in 37% of Indian
facilities in proximity to by over 3000 employees whitener and fabric care brand households
Headquartered in Mumbai Mosquito repellent and household
consumer locations
insecticides 32 depots service customer Maxo: Mosquito repellent coils Products accessible across
One of the fastest growing
Units in Trichur, Wayanad, requirements more than 25 lac Indian retail
fast moving consumer goods Air care (incense sticks/aroma Jeeva: Ayurvedic toilet soap
Bangalore, Pondicherry, outlets
companies in India sticks) Network of more than 2,500
Chennai, Hyderabad, Exo: Dish washing soap and dish
distributors Products also available in 14
Engaged in the complete Surface cleaning preparations Bhubaneshwar, Bankura, washing scrubber
countries (including Sri Lanka,
FMCG life cycle of research, Guwahati, Baddi, Silvassa, Motivated team of more than
Personal care products Vanamala: Oil-based washing Bangladesh, Mauritius,
manufacture, marketing and Salem and Pithampur. 1500 market intelligence
soap Malaysia, UAE, Hong Kong
branding agents
Plants with ISO 9001, 14001 Nebula: Anti-bacterial washing and Saudi Arabia).
Marketing a range of daily and 18001 certifications soap
household and personal care
products. Maya: Incense sticks

Employing more than 3,000 Speed: Detergent washing


enthusiastic individuals. powder

Annual Report 2005-6 3


2 Jyothy Laboratories Limited
Another year in the
Just another day. life of the Company
Just another reason for Jyothy in
your life. Highlights, 14% 64% 86% 63%
increase in increase in increase in increase in
2005-6 revenues EBIDTA to profit after tax cash profit
Just a feeling of happiness to Rs. 302 cr Rs. 54 cr to Rs. 40 cr to Rs. 54 cr

at the end of the day…


Just why Jyothy Laboratories
performed exceedingly well.
The topline grew 15.3%.
The bottomline grew 85.7%.

Net sales (Rs./thousands) EBIDTA (Rs./thousands)

Annual Report 2005-6 5


4 Jyothy Laboratories Limited
Chairman and Managing Director’s overview

“Our sharp
focus on our
existing products’
EPS PAT (Rs./thousands) ROACE (%) portfolio coincided
with the industry
momentum– this
was the Company’s
success rationale.”
Mr. M P Ramachandran, Chairman and Managing Director, Jyothy
Laboratories Limited, reviews the Company’s performance in 2005-6

ROGB (%) EBIDTA (%) Debt-equity ratio

Annual Report 2005-6 7


6 Jyothy Laboratories Limited
We hope to achieve revenues of Rs. 440 cr in 2006-7 and
We believe we possess the right portfolio of everyday-use
Rs. 600 cr by 2009-10, driving our growth through a phased
products; we believe that our products are superior over
spin-off of sub brands, preserving the mother brand and making
competing alternatives.
growth sustainable for all seasons, all regions and all years.

When you grow your topline by 15.3 per cent (as we did competition; growing literacy is enhancing a replicated the strategy across familiar terrain before advertising spend by more than half with doubled
in 2005-6), increase market shares across most product consciousness for quality products. embarking on a pan-Indian presence with our new visibility.
categories of our presence, and outperform your product portfolio.
These conditions are ideal for Jyothy. We believe we We conducted an exhaustive audit of our errors; this
industry average by a factor of three, you have every
possess the right portfolio of everyday-use products; We catered to a market for whiteness (that was on insight prompted a timely implementation of
reason to conclude that it was a year well spent.
we believe that our products are superior over the decline as consumers were shifting to coloureds corrective action, leading to a rationalisation in our
However, our performance means more to us than competing alternatives; we believe that our price-value from whites) by promoting the post-wash fabric overheads; we reengineered our product packaging
mere financial growth. It represents an assurance that is compelling for consumers; we believe that we can quality, rather than our product; we grew the category to control inflation in packaging and bottling costs.
our business model is scalable and that we can indeed provide products just where and when consumers want and captured a 70% share of it.
We invested in our people through training.
outperform the industry growth not just in one year but them; we believe that we possess brands that can
We introduced a greater science in our advertisement
over the foreseeable future. accommodate extensions. We hope to achieve revenues of Rs. 440 cr in 2006-7
spending with precise media profiling, target-centric
and Rs. 600 cr by 2009-10, driving our growth through a
This is more bullish for the company than it may More importantly, I believe that we possess the ability advertising and result-oriented spending.
phased spin-off of sub brands, preserving the mother
appear: India is one of the most under-penetrated to respond to dynamic industry changes:
We evolved from a reactive response to a proactive brand and making growth sustainable for all seasons, all
FMCG markets in the world; our GDP grew 8.4% in
We focused on four major segments (fabric care, approach. We undertook a painstaking market survey regions and all years.
2005-6; there is an increased prosperity among people
fabric wash, surface cleaning and home insecticides); (by outsourcing the service to a reputed brand
that is translating into an enhanced FMCG offtake; the
management firm) for most of our successful brands, Signed
implementation of VAT has helped curb unorganised We entered attractive markets with a soft launch and
arrived at a judicious media mix and reduced our M P Ramachandran

Annual Report 2005-6 9


8 Jyothy Laboratories Limited
Once upon a time
there was a family…

Our products are


essential in the life of
its users and the company.

Annual Report 2005-6 11


10 Jyothy Laboratories Limited
Who had only one wish. To be happy.
Annual Report 2005-6 13
12 Jyothy Laboratories Limited
To be contented. That’s all.
Annual Report 2005-6 15
14 Jyothy Laboratories Limited
In 2003-4, the FMCG size stood at Rs. 47,500 crore which
Management’s increased 16% to Rs 55,000 crore in 2004-5, the fourth
largest sector in the economy.
discussion and analysis

The FMCG industry base of an estimated 300 million people. In The Indian FMCG advantage
2003-4, the FMCG size stood at Rs. 47,500 crore which The competition and relative consumer austerity
The global FMCG market increased 16% to Rs 55,000 crore in 2004-5, the fourth notwithstanding, the Indian FMCG industry has
Global overview
largest sector in the economy creating employment for prospered for a number of reasons:
Even as the Indian FMCG was governed by local,
three million people in downstream activities.
regional and national undercurrents, it worked as a
Raw material availability and low cost labour: Easy
subset of the global FMCG industry as well. The global The industry enjoys strong links with agriculture; 71%
raw material availability and low labour costs have
FMCG market was valued at USD 230 bn. Almost 70% of its sales are derived from agro-based products.
resulted in a lower cost of production. This has
of the global FMCG market (by value) was accounted Besides, it is a significant value creator with a large
encouraged a number of multi-nationals to set up
for by developed geographies like the USA, Europe and market capitalization and a key contributor to the
large production bases in India to outsource for the
Australia. Interestingly, the top five global markets exchequer (towards the late Nineties, India’s FMCG
Indian and export markets.
reported negative or nominal growth; the main industry industry contributed eight per cent of the country’s
driver was the attractive growth emerging from the corporate tax; six per cent of central excise and seven Presence across the value chain: Indian firms also
developing markets. By 2010, consumer spending in per cent of state tax). enjoy a presence across the entire value chain of the
developing and emerging markets is expected to FMCG industry from the supply of raw material to
A distinct feature of India’s FMCG industry is the
overtake the growth in developed countries in terms of final processed and packaged goods, both in the
presence of most global players through their local
purchasing power parity (PPP). According to projected personal care products and in the food processing
subsidiaries, ensuring a continuous pipeline of new
growth rates, India is expected to emerge as the tenth sector.
product launches. Over the decades, while this feature
largest economy in 2007 and the fifth largest in FDI policy: Over the last decade, India has
has helped provide the Indian FMCG space with globally
purchasing power parity. It is this growth – apart from Indian overview relevant products, it has also intensified competition implemented a number of policies like the lifting of
the country being the second largest population in the India is one of the largest economies in the world in quantitative restrictions, reduced excise duties,
and shut out most product categories for intending
world – that interests global analysts and investors. terms of purchasing power with a strong middle-class automatic foreign investment and food laws resulting
entrepreneurs.

Annual Report 2005-6 17


16 Jyothy Laboratories Limited
An average Indian
spends around
40 per cent of his
income on grocery
and eight per cent 20 years of age; the young population is set to grow rise in the share of non-farm income
on personal care further.
The younger generation has been deriving income
products. Aspiration levels in this age group have been fuelled from the service and manufacturing sectors, liberating
by greater media exposure. itself from a dependence on agricultural income

Demand-supply gap The annual consumption of FMCG products in a rural


Only a small percentage of the raw materials in India Indian household is Rs. 9400, while in the urban
in a vibrant FMCG industry environment. The removal Enhanced ‘bribing’ of customers through freebies are processed into value-added products, leaving a household it is estimated at Rs. 13000, indicating
of quantitative restrictions and reservations coupled considerable room to be explored adequate room for an increase in penetration
Focus on increasing reach, especially India’s rural
with central and state initiatives have made this
markets In the personal care segment, low penetration India’s rural FMCG market is characterised by the
industry potentially attractive.
indicates significant market potential. following: Frequent product sales, wide and deep
Indian FMCG market expansion presence, increasing preference for value-for-money
FMCG industry features India - a large consumer goods spender
India’s FMCG industry is characterized by the following
India’s rural FMCG market products (as opposed to cheap products) and lower
A large share of fast moving consumer goods (FMCG) There are a number of consumption features that
features: inter-brand rivalry on account of a lower brand presence
in an individual’s total spending along with a large enhance the attractiveness of India’s rural market for an compared to urban India.
A defensive sector with relative inelastic demand population base make India one of the largest FMCG FMCG company:
markets. The base of the economic pyramid (BOP) in India
Time-lag between contraction/expansion of income
It is estimated that if the per capita income of the representing the masses is an over $1.2-trillion market,
and impact on industry An average Indian spends around 40 per cent of his urban Indian household is Rs.20,000 and the per making up the biggest chunk of the global $5-trillion
Low technological barriers in terms of technology or income on grocery and 8 per cent on personal care capita income of the rural household is Rs.10,000, the BOP market excluding China, says a study by IFC and
investments products, leaving room for correction. disposable income of the latter is higher World Resources Institute (WRI). The term ‘bottom of
Imagery and price premium central to FMCG Change in the Indian consumer profile the pyramid’ was coined by management guru CK
According to latest data released by the National
marketing Rapid urbanisation, increased literacy and rising per Prahalad to describe the poor and the underserved
Sample Survey Organization (NSSO), rural India’s
New customer acquisition through smaller-sized capita income have all caused a rapid growth and spending on non-food items is on the rise section of the market. The BOP market in India, about
packaging and low unit prices change in demand patterns, leading to an explosion $1.205 trillion in purchasing power parity terms, makes
The sensitivity of rural demand to rainfall or
High competition at various price points especially at of new opportunities. up 84.8% of the total $1.42-trillion national household
agricultural production is weakening due to a steady
the regional levels market.
Around 45 per cent of the population in India is below

Annual Report 2005-6 19


18 Jyothy Laboratories Limited
The BOP population of 924.1 million people — 78% of between $3,000 and $20,000- represent a $12.5 trillion
them in rural areas— makes up about 95% of the market globally.
country’s population. In the IFC-WRI study that used The outlook for India’s FMCG industry is optimistic due to the
data from national household surveys in 110 countries, Key FMCG market drivers
the BOP was defined as all those with incomes below Income levels/purchasing power: Increased
rise of the Indian middle class, improving Indian infrastructure,
$3,000 in local purchasing power. China was not part of disposable incomes. Companies that are able to taxation corrections and growth in rural income.
the study. influence consumers are likely to grow faster.

In India, BOP accounts for 88.1% of the total national Usage pattern of population: Consumers becoming
household expenditure on food, 87.2% of energy more health conscious, driving the consumption of
expenditure, 85.3% of health spend, 78.8% of effective, safe and quality products. Opportunities Outlook Improving Indian infrastructure leading to faster
household goods expenditure and 52.6% of the hidden in seemingly insignificant behavioral patterns, The outlook for India’s FMCG industry is optimistic for transportation and communication
country’s spend on information and communication which are likely to open up new opportunities for the the following reasons: Increased possibility of using Indian units for
technology. brand
Increasing focus on branded products manufacturing international brands
Sector-wise, food is the biggest BOP market ($2.8- Fragmentation of the industry: Higher advertisement
Increasing consciousness around health, hygiene and A reduction in tax ambiguity, following the
trillion), followed by energy ($433 billion), housing ($332- and promotional spending. Companies with
quality products introduction of VAT
billion), transportation ($179 billion), health ($158-billion), consistent product innovation and ability to spot
ICT ($51-billion) and water ($20 billion). Compared to the trends early are better placed. Products with superior Increasing disposable incomes Growth in rural incomes indicate a growing

BOP, the mid-market segment, those with incomes price-value based on efficacy will continue to grow. opportunity
Increasingly younger population profile

Strengths Weaknesses Opportunities Threats Consuming class Annual income 1995-96 (%) 2006-7E (%)

Well-established Low export levels Large domestic market Imports Very rich Above 215000 0.3 0.9
distribution network
Small scale sector Export potential Tax and regulatory
extending to rural Consuming class 45,001-215000 13.5 25
reservations limit ability structure
SWOT areas Increasing income levels
to invest in technology Climbers 22001-45000 31.6 49
analysis will result in faster Slowdown in rural
Strong brands in the and achieve economies
revenue growth demand Aspirants 16001-22000 31.2 14
FMCG sector of scale
Destitutes 16000 and below 23.4 11
Low cost operations Several ‘me-too’ products
Total 100 100

Source: NCAER
Annual Report 2005-6 21
20 Jyothy Laboratories Limited
India has one of the world’s highest retail densities at six percent
(12 million retail shops for about 209 million households).
The retail industry

Global overview of purchasing power parity (PPP) after USA, China and Characteristics retailing in India is that it is largely an urban
Retail has played a major role the world over in Japan. One of the key developments has been a shift Food and apparel retailing likely to drive growth: phenomenon. Organized retail has been more
increasing economic activity with its impact most easily from agricultural and industrial growth towards Food and grocery are expected to see the highest successful in cities, more so in the south and west of
visible in USA, UK and other developed countries. For services, which accounts for almost 50 percent of the growth, with clothing emerging as the next fastest India. The reasons for this regional variation range from
instance, retail is the second-largest industry in the country’s gross domestic product. India’s services shift growing segment. differences in consumer buying behavior to cost of real
United States in terms of the number of establishments has been marked by a growth in its IT, realty, estate and taxation laws. More than 80 percent of the
Urban-centric: A distinctive feature of organized
and employees; it is also one of the largest world-wide. telecommunication, healthcare and retail sectors, which respondents in the KPMG in India Retail Survey 2005
The retail industry employs more than 22 million has a marked impact on the earning power and FMCG
Americans and generates more than $3 trillion in retail spending.
sales annually. India’s retail sector is fragmented; its organized formats
are only at a nascent stage of development. There are
Global retail about 12 million retail outlets across India. More than 80
1992 2002 2005 percent of these are run by small family businesses that
employ household labour. Consequently, India has one
Total retail
of the world’s highest retail densities at six percent (12
(US$ billion) 150 180 225
million retail shops for about 209 million households).
Organised retail India’s peers like China and Brazil took 10-15 years to
(US$ billion) 1.1 3.3 7 raise the share of the organized retail sectors from five
% share of organised percent (when they began) to 20 percent and 38
Retail 0.7 1.8 3.2 percent respectively. India is accelerating towards retail
maturity and the proportion of organised retail is
Source: CSO, MGI Study
expected to touch 10 per cent by 2015. The faster this
happens, the quicker could be the growth of its FMCG Fastest growing retail Organised retail as a percentage Organised retail as a percentage
Indian overview sector.
segments in India of FMCG sales by city of FMCG sales
India is the fourth largest economy in the world in terms Source: KPMG in India Retail Survey 2005 Source: AC Nielsen 2005 Source: KPMG in India Retail Survey 2005

Annual Report 2005-6 23


22 Jyothy Laboratories Limited
The Indian government is
likely to spend USD$ 150
billion over the next few
years to develop world- India has been ranked second in a Global Retail Development
class infrastructure, driving Index of 30 developing countries drawn up by AT Kearney.
retail growth.

indicated that the largest opportunity for modern retail to 32 percent by 2010. Disposable incomes are Outlook rural segment has been underestimated. India was
is in the urban centers, specifically metros. However, a expected to rise at an average of 8.5 percent per annum Although the organized sector constitutes only three ranked second in a Global Retail Development Index of
number of Indian companies are focusing on rural till 2015. percent of the Indian retail market, it is expected to 30 developing countries by AT Kearney following the
prospects as well. grow 400 percent to over USD$ 30.0 bn by 2010. This observation that retail chains faced a saturated demand
Demographics: More than 50 percent of India’s
population is less than 25 years. optimism is reflected in a KPMG report where India in most western markets. AT Kearney has estimated
Different formats: Organized retailers are implementing
ranks first (ahead of Russia) in terms of emerging India’s total retail market at US$ 202.6 billion which is
a variety of formats ranging from discount stores to
Urbanisation: India’s urban population is projected to market potential in retail, deemed a ‘Priority 1’ market expected to grow at a compounded 30 per cent over
supermarkets to hypermarkets to specialty chains,
increase from 28 percent to 40 percent of the total for international retail. the next five years.
driving the offtake of FMCG products.
population by 2020, driving retail and FMCG prospects.
Much of the growth in India’s organised retail is India has been ranked second in a Global Retail
Drivers of growth Credit availability: Retail loans have doubled to expected to be derived from changing lifestyles, robust Development Index of 30 developing countries drawn
India’s consumer demand is being driven by the USD 38.7 bn in three years by 2005. income growth and favourable demographics. The up by AT Kearney, the list developed as a response to
following factors: structure of Indian retail is developing rapidly with requests from retail chains facing saturated demand in
Shifting mindset: Positive macro-trends are resulting in most western markets. AT Kearney has estimated
GDP growth: According to the Central Statistical shopping malls becoming increasingly common in large
changing preferences in the demand for lifestyle goods, India’s total retail market at US$ 202.6 billion which is
Organisation’s latest estimate, the GDP grew by 9.3% cities. The KPMG report estimates the annual growth of
accelerating the relevance of organized retail. expected to grow at a compounded 30 per cent over
in the fourth quarter of ’05-06 compared to 8.6% growth department stores at 24 per cent, faster than overall
retail. the next five years. With the organised retail segment
in the corresponding period of the previous year. The Mall growth: The number of malls is expected to rise
growing at the rate of 25-30 per cent per annum,
GDP grew in the first quarter of FY05-06 by 8.5%, 8.4% from 158 in 2005 to 600 by 2010. Disposable incomes remain concentrated in urban
revenues from the sector are expected to triple to US$
in the second quarter and 7.5% in the third quarter. areas, ‘well-off’ and affluent classes and the growing
Infrastructure spends: The Indian government is likely 24 billion by 2010. The share of modern retail is likely to
Income growth: India’s middle-class, currently 22 number of double-income households. However, the
to spend USD$ 150 billion over the next few years to grow from its current 2 per cent to 15-20 percent over
percent of the total population, is expected to increase report reveals that the sheer size and potential of the
develop world-class infrastructure, driving retail growth. the next decade, feel analysts.

Annual Report 2005-6 25


24 Jyothy Laboratories Limited
Jyothy’s performance
analysis, 2005-6

1 Material management
Introduction of a second line of vendors to serve
2 Research and
development
Reduction in HDPE consumption, saving Rs 2 cr
3 Quality
Inspection of vendor sites to ensure that the raw
4 Distribution
Widening of the distribution network (2500 direct
as an effective and itemised supply backup material complied with all process specifications; distributors)
Introduction of a 9 ml bottle of Ujala to tap the
system all incoming material was tested by the R&D
untapped LUP market Reduction of the incidence of counterfeit products in
department across stringent parameters
Introduction of a system of monthly schedules to certain states through direct patrolling by the field
Substitution of caps on Ujala bottles with flip
define raw material requirements before any Initiation of a number of in-process parameters to force
covers, minimising leakage
shortfall ensure that the operational process adhered to
Increase in direct retail outlets to one million in 2005-6
Concentration on the scientific construction of the quality specifications; besides, plant automation
Sourcing cheaper substitutes like EBT (in place of
Ujala bottle, reducing packaging grammage from ensured negligible quality variation between The ‘bundling’ of stockists (five to six in each
pynamin) in the manufacture of Maxo.
16 gms to 8.5 gms batches workgroup), reducing costs and working capital
Reduction in the grammage of Ujala packaging outlay; supplying stocks in accordance with a pre-
Setting up of two plastic blow-moulding units in Scrutiny of end products for leakage, quality of
bottles, reducing HDPE consumption specified inventory schedule per stockist/dealer
Pondicherry to manufacture bottles for Ujala packaging and chips (for soap cakes)
The development of a scientific distribution evaluation
Substitution of raw material used to make Maxo All manufacturing facilities operated under the
system, based on the index of investment capacity,
mosquito coils from pynamin to EBT, saving raw purview of ISO 14001 and ISO 9001 certification
coverage, stock keeping and service leading to better
material cost mandates
performance evaluation
Product differentiation; introduction of Ujala ‘Stiff
Increase in batch sizes following the introduction of
‘n Shine’ and Exo liquid dishwash in select
direct stocking, saving freight
markets

Annual Report 2005-6 27


26 Jyothy Laboratories Limited
5 Human resource
Evolution to a systems-driven environment;
6 Marketing
Distinctive brand positioning to avoid positioning
introduction of an ERP system for the advertising, overlaps; Ujala positioned as an aspirational brand
HR, finance and inventory modules
Scientific advertising and promotion, aided by the
Introduction of periodic accounting and profit recommendation of a reputed brand consultants and
reporting, making it possible to correct strategy in media-planning agencies
real-time as opposed to retrospective action
Resisted from advertising spillovers or overlaps;
Responsible grading of the company’s facilities concentrated on mono-focus on specific target
based on production cost, resulting in healthy inter- groups
worker and inter-plant competition
Figured among principal sponsors of the nationally
Effective ‘growing from within’, the managerial acclaimed KBC-2 aired on prime time Star Plus on
structure comprising executives who started as weekdays
market intelligence assistants and evolved into
Reduction in the total advertising spend from 9% of
decision-makers
gross sales in 2004-5 to 7% in 2005-6, liberating
Speedy responsiveness to market developments Rs 6.2 cr of precious resources
following a neat demarcation of hierarchical
Introduction of a greater science in advertisement
responsibilities
spending comprising precise media profiling, target-
Enhanced people effectiveness through the centric advertising and result-oriented spending
introduction of a disaster recovery system
Brand revamp plan for Jeeva and the development of
a line of new products

Promotion of a new commercial for Maxo based on


the ‘encounter specialist’ theme on national
channels across prime time slots

Redefining and repositioning of the Company’s


personal care brands; widening of the product
basket
Annual Report 2005-6 29
28 Jyothy Laboratories Limited
Risk management

1 Risk identification
New product risk
Risk explanation
2 Risk identification
Quality risk
Risk explanation
3 Risk identification
Costs risk
Risk explanation
4 Risk identification
Brand awareness risk
Risk explanation
The company’s new products may not perform well Even a marginal drop in quality could affect Any increase in the price of raw materials and The FMCG industry is crowded by an increasing
in the marketplace. consumer perception, off take and market share. packaging materials could affect profitability. number of brands. There is always the fear of a new
product being drowned in the clutter.
Risk mitigation Risk mitigation Risk mitigation
The Company follows a structured approach in new Jyothy follows a total quality approach – compliance The Company procures raw material through stable Risk mitigation
product selection. It conducts an exhaustive with quality norms across every area of operation sourcing contracts, effective substitution towards The products were extensively promoted through
research into consumer needs, product efficacy, raw from raw material purchase to packaging and the lower cost alternatives and a reduction in the above-the-line and below-the line initiatives. They
material availability, affordability and differentiation. delivery of finished goods. grammage of packaging bottles. were also differentiated in terms of offerings, which
The ground reality is closely assessed by the helped differentiate them from same-category brands.
Mitigation measurement Mitigation measurement
Company’s marketing, operations and research and
All the company’s units are ISO 9001 and The company increased its material cost by 5% Jyothy brand managers focused on the following:
development team. The Company enjoys a
14001 certified. from Rs 136.9 cr in 2004-5 to Rs 143.2 cr in Greater visibility through timely brand extensions of
successful track record in the introduction of
2005-6. The company’s raw material cost as a popular brands
differentiated products in niche categories. This is
proportion of net sales declined from 52% in Updated packaging and promotional campaigns that
supported by a pilot study in select markets
2004-5 to 47% in 2005-6 made them look contemporary
replicated in mass promotions across the country.
Introduced attractive consumer schemes
Mitigation measurement
During the year under review, Jyothy introduced Customised brands and promotions according to
Ujala ‘Stiff ‘n Shine’, Ujala Detergent powder and local preference in local languages
Maxo liquidator. Introduced value-added products

Mitigation measurement
All brands were marketed aggressively. In 2005-6,
advertising and promotional as a percentage of net
sales was 9% compared to 11% in 2004-5.

Annual Report 2005-6 31


30 Jyothy Laboratories Limited
Directors’ report

Your Directors have pleasure in presenting the Annual Report and the audited accounts for the year ended 30th June 2006 Dividend Ujala priced at Rs.1.50 for rural distribution system all over the
together with the Auditor’s Report. The Company declared an interim market. country, strategically located
(Rs. in thousands) dividend of Rs 10 per equity share manufacturing facilities and sales
(b) Ujala detergent powder is doing
(face value Rs 10 each) on 72,56,880 depots spread across the country.
Financial results For the year ended For the year ended well in Kerala.
30 June 2006 30 June 2005 equity shares. The Board has now With extremely buoyant economy
(c) test-launched Ujala Stiff and Shine
Gross sales 3,661,538 3,175,514 proposed a final dividend @ Rs. 2.50 poised for overall growth in every
in Kerala for post-wash application
Profit before depreciation 577,089 391,046 per equity share. The total dividend sector such as agricultural, industrial,
with the objective to impart stiffness,
Depreciation 51,714 44,081 for 2005-6 is thus @ 125% per equity services, IT, health services,
crispness and shine to all types of
Profit before taxation and prior period items 525,375 346,965 share, rewarding investors with Rs. telecommunication, shipping,
fabric and with the objective of
Prior period item 35349 – 9,07,11,000/- on an equity capital of surface transport and aviation
Provision for diminution in investments – 60,000 ushering in a revolution in the post-
Rs. 7,26,68,800/-.The dividend pay sectors, the GDP and per capita
Profit before tax 490,026 286,965 wash product category.
out ratio works out 22.67%. income has commenced showing
Provision for tax (d) is in an advanced stage of extremely healthy growth. It is only a
– Short provision for the earlier years – 6,997 Performance discussions to market pure instant beginning and the growth is
– Current tax 53,500 22,500 During the year ended 30th June coffee and other coffee blends to expected to sustain for years to
– Deferred tax reversal/(charge) 30,333 40,169 2006, the gross sale of the Company mark the company’s entry into the come. With increased managerial,
– Fringe benefit tax 5,700 1,800
was Rs.3662 million as against food and beverages segment by the
– Wealth tax 425 112 technical and general education with
Rs.3175 million in 2004-5.Sales the first quarter of 2007.
Net profit after tax 400,068 215,387 high degree of specialization, the
increased by 15% over the previous
Balance as per the last Balance Sheet (e) expects to undertake expansion growth of the economy and
year. Profit before taxation showed a
– Brought forward 96,169 155,502 of marketing territories of Exo in the purchasing power is expected to be
Balance available for appropriations 496,237 370,889 significant increase of 71% to Rs.490
cleaning segment in 2007 augmented multifold.
million compared to Rs.286 million in
Appropriations:
2004-5. The profit after tax grew 86% With more than 100 crores of
Interim dividend on equity share capital 72,569 10,885 Outlook population for consumption at home
Corp. dividend tax 10,178 1,423 over the profit of the previous year.
Jyothy is operating in FMCG sector
and financially empowering youth
Final dividend on equity share capital 18,142 10,885 with fabric care, home care,
Corp. dividend tax 2,544 1,527 New business bubling with high aspirations, with
household insecticide and personal
Transfer to General Reserve 300,000 250,000 Your Company rural economy also keeping pace
care products, with well knit
Balance carried forward (Profit and Loss Account) 92,804 96,169 with all round progress on account of
(a) successfully launched the 9ml

Annual Report 2005-6 33


32 Jyothy Laboratories Limited
rural employment guarantee ISO-14001 Certificate and a ISO the date of forthcoming Annual The Audit Committee meeting was 4. the Directors have prepared the has initiated effective steps to:
schemes and expenditure on 9001 certification for all of its General Meeting of the Company. held on 8th November 2006 and the annual accounts on a going concern
a) enter into written agreements with
infrastructural developments, manufacturing facilities & R & D The Board proposes their outcome of the said meeting was basis.
all major Super Distributors, and
contract foarming etc. the Centre situated at Pannissery at appointment as Directors of the noted by the Board at its meeting
fixation & monitoring of credit limits,
disposable income in rural, semi Koonammoochy, Thrissur, in Kerala. Company at its forthcoming Annual held on 8th November 2006. Subsidiary company and
urban and urban India is growing General Meeting. The wholly owned subsidiary of the
fast. The result is seen in the Employee relations Directors’ responsibility Company, namely, M/s. Sri Sai b) ensure payment of all statutory
Ms. M. R. Jyothy was appointed as
spending habit of common man of Employee relations remained cordial statement Homecare Products Private Limited, dues including TDS of Income tax on
Whole Time Director of the
India. Once upon a time almost 70% during the period under review. In compliance with the provisions of is engaged in the manufacture of or before due dates.
Company at the Annual General
of the total earnings used to be Your Company has extremely loyal Section 217(2AA) of the Companies mosquito repellant coils. As required
Meeting of the Company held on
spent on food which is now personnel who dream high for Act, 1956, the Directors of your under Section 212 of the Companies Particulars of
8th December 2005. The Board
between 35-40% which means fastest growth by making the Company confirm that: Act, 1956, the Audited Statement of conservation of energy,
proposes at the forthcoming Annual
substantial expenditure on non food organization grow faster. 1.in the preparation of the annual Accounts of the Subsidiary Company technology absorption
General Meeting of the Company,
products aimed at enhancement of accounts, the applicable accounting along with the Report of the Auditors and foreign exchange
her reappointment as Whole-time-
the standard of living. Here lies our Fixed deposits for the year ended 31st March 2006 In accordance with the requirements
Director of the Company for 5years standards have been followed;
ever increasing business The Company did not take any fixed are attached herewith. of Section 217(1)(e) of the
with effect from 1st December 2006 2. the Directors had selected such
opportunity – the bright future for deposits from the public during the Companies Act, 1956, read with the
to 30th November 2011 at a salary accounting policies and applied them
FMCG product companies. The period under review. Auditors and their Companies (Disclosure of Particulars
of Rs. 1,00,000/- per month in the consistently and made judgements
outlook for the Company appears observations in the Report of the Board of
time scale of Rs. 1,00,000 – 20,000 and estimates that are reasonable
bright. Directors M/s S. R. Batliboi & Associates, Directors) Rules, 1988, being
– 2,00,000 pm plus perquisites as and prudent so as to give a true and
Mr. Jyotindra M.Trivedi, Ms Chartered Accountants, Statutory measures of conservation of energy
The retail in the organized sector per details given in the Notice of the fair view of the state of affairs of the
Josephine Price and Mr. Nilesh B. Auditors of the Company, hold office are not applicable as our company
spreading its wings is poised to Annual General Meeting and the Company as on 30th June 2006 and
Mehta, Directors of the Company, until conclusion of the forthcoming does not fall within the ambit of any
grow faster from urban to semi- Explanatory Statement pursuant to of the profit of the Company for the
retire by rotation, being eligible , Annual General Meeting and are of the industries listed under the
urban to rural destinations. With section 173(1) of the Companies financial year ended 30th June 2006;
offer for reappointment. eligible for re-appointment. The schedule to the rules.
quality assured, well packaged Act, 1956, attached thereto.
3. the Directors have taken proper Company has received a letter from
commodities are bound to Mr. Sriram Hariharan, representing
Audit Committee and sufficient care for the them to the effect that their
penetrate and reach the consumers ICICI Bank, Canada and Mr. G.
The Audit Committee of the maintenance of adequate accounting appointment, if made, would be
at their doorsteps. Srinivas, representing ICICI Bank
Company comprised the following records in accordance with the within the prescribed limits under
U.K. Ltd, United Kingdom were
Yes, the opportunities in front of provisions of the Companies Act, Section 224 (1-B) of the Companies
appointed as Additional Director on members:
your Company are plenty. 1956, for safeguarding the assets of Act, 1956.
the Board of the Company at the Mr. M. P. Ramachandran, Chairman
the Company and for preventing and
ISO certification Board meeting held on this day (8th Ms. Josephine Price, Member With regards to the observation by
detecting fraud and other
Your Company was awarded the November 2006) to hold office up to Mr. Nilesh B. Mehta, Member the Auditors in ‘CARO’, the Company
irregularities;

Annual Report 2005-6 35


34 Jyothy Laboratories Limited
AUDITORS’ REPORT

To
The Members of
Jyothy Laboratories Limited

1. We have audited the attached Balance Sheet of JYOTHY iii. The balance sheet, profit and loss account and cash flow
Foreign exchange earnings and outgo LABORATORIES LIMITED (‘the Company’) as at June 30, 2006 statement dealt with by this report are in agreement with
(Rs. in thousands) and also the Profit and Loss account and the Cash Flow the books of account;
Statement (‘the financial statements’) for the year ended on
2005-6 2004-5 iv. In our opinion, the balance sheet, profit and loss account
that date annexed thereto. These financial statements are the
and cash flow statement dealt with by this report comply
Foreign exchange earnings 68,478 54,622 responsibility of the Company’s management. Our
with the accounting standards referred to in sub section
responsibility is to express an opinion on these financial
(3C) of section 211 of the Companies Act, 1956;
Foreign exchange outgo 73,325 19,555 statements based on our audit.
v. On the basis of the written representations received from
2. We conducted our audit in accordance with auditing
the directors, as on June 30, 2006, and taken on record by
Particulars of employees standards generally accepted in India. Those standards
the Board of Directors, we report that none of the
require that we plan and perform the audit to obtain
The information required to be published under the provisions of Section 217(2A) of the Companies Act, 1956, read with directors is disqualified as on June 30, 2006 from being
reasonable assurance about whether the financial statements
Companies (Particulars of Employees) Rules, 1975, as amended, regarding the employees is given below. appointed as a director in terms of clause (g) of sub-
are free of material misstatement. An audit includes
section (1) of section 274 of the Companies Act, 1956;
examining, on a test basis, evidence supporting the amounts
Name of Directors/Employees Age in years Designation Total remuneration Experience and disclosures in the financial statements. An audit also vi. In our opinion and to the best of our information and
includes assessing the accounting principles used and according to the explanations given to us, the said
Mr. M.P. Ramachandran 60 Managing Director Rs. 1,87,43,688 32 years accounts read together with the notes thereon, give
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We information required by the Companies Act, 1956, in the
Mr. K. Ullas Kamath 43 Deputy Managing Director Rs. 1,53,03,792 21 years
believe that our audit provides a reasonable basis for our manner so required and give a true and fair view in
Mr. M.L. Bansal 58 Vice President - Finance Rs. 30,00,000 36 years opinion. conformity with the accounting principles generally
and Company Secretary accepted in India:
3. As required by the Companies (Auditor’s Report) Order, 2003
(as amended) issued by the Central Government of India in a) in the case of the Balance Sheet, of the state of
terms of sub-section (4A) of Section 227 of the Companies affairs of the Company as at June 30, 2006;
Acknowledgement
Act, 1956 (‘the Act’), we enclose in the Annexure a statement b) in the case of the Profit and Loss account, of the
The Board of Directors express their appreciation and gratitude for the services rendered by all employees, bankers,
on the matters specified in paragraphs 4 and 5 of the said profit for the year ended on that date; and
distributors, suppliers, service providers, media and shareholders during the year under review, translating into attractive
Order.
c) in the case of Cash Flow Statement, of the cash
growth for the company.
4. Further to our comments in the Annexure referred to above, flows for the year ended on that date.
we report that:
For and on behalf of the Board of Directors For S. R. Batliboi & Associates
i. We have obtained all the information and explanations, Chartered Accountants
which to the best of our knowledge and belief were
Jyothy Laboratories Limited necessary for the purposes of our audit;
Per Sudhir Soni
S/d
ii. In our opinion, proper books of account as required by Mumbai Partner
M.P. Ramachandran law have been kept by the Company so far as appears November 8, 2006 Membership No.: 41870
Mumbai, 8 November 2006 Chairman and Managing Director from our examination of those books;

36 Jyothy Laboratories Limited Annual Report 2005-6 37


JYOTHY LABORATORIES LIMITED
ANNEXURE TO THE AUDITORS’ REPORT
Annexure referred to in paragraph 3 of our report of even date c) According to the records of the Company, the dues outstanding of income tax, sales tax, wealth tax, service tax, customs duty,
Re: Jyothy Laboratories Limited excise duty and cess on account of any dispute, are as follows:
(Rs in million)
i) a) The Company has maintained proper records showing section 301 of the Act that need to be entered into the Period to Forum where dispute is pending
full particulars, including quantitative details and register maintained under section 301 have been so Name of Statute which the Commissi- Appellate High Court Total Amount
situation of fixed assets. entered. (Nature of Dues) amount onarate authorities
b) All fixed assets have not been physically verified by the b) In our opinion and according to the information and Relates & Tribunal
management during the year but there is a regular explanations given to us, the transactions made in Sales Tax (Tax / Penalty/ Interest) 2000-01 0.12 – 0.98 1.10
programme of verification which, in our opinion, is pursuance of such contracts or arrangements exceeding 2001-02 to
reasonable having regard to the size of the Company and value of Rupees five lakhs have been entered into during 2004-05 2.15 2.77 – 4.92
the nature of its assets. As informed, no material the financial year at prices which are reasonable having 2005-06 15.65 – – 15.65
discrepancies were noticed on such verification. regard to the prevailing market prices at the relevant Sub-total (a) 17.92 2.77 0.98 21.67
time. The Central Excise Act, 1944 2001-02 – 0.22 – 0.22
c) There was no substantial disposal of fixed assets during
2004-05 to
the year. vi) The Company has not accepted any deposits from the public
2005-06 0.21 – – 0.21
to which the directives issued by the Reserve Bank of India
ii) a) The management has conducted physical verification of Sub-total (b) 0.21 0.22 – 0.43
and the provisions of section 58A, 58AA or any other relevant
inventory at reasonable intervals during the year. Total (a+b) 18.13 2.99 0.98 22.10
provisions of the Act and the rules framed there under apply.
b) The procedures of physical verification of inventory
vii) In our opinion, the Company has an internal audit system x) The Company has no accumulated losses at the end of the which the loans were obtained.
followed by the management are reasonable and
commensurate with the size and nature of its business. financial year and it has not incurred cash losses in the
adequate in relation to the size of the Company and the xvii) According to the information and explanations given to us
nature of its business. viii) We have broadly reviewed the books of account maintained current and immediately preceding financial year. and on an overall examination of the balance sheet and cash
by the Company pursuant to the rules made by the Central xi) Based on our audit procedures and as per the information flow statement of the Company, we report that no funds
c) The Company is maintaining proper records of inventory
Government for the maintenance of cost records under and explanations given by the management, we are of the raised on short-term basis have been used for long-term
and no material discrepancies were noticed on physical
section 209(1)(d) of the Act for the manufacture of soaps and opinion that the Company has not defaulted in repayment of investment.
verification.
detergents and are of the opinion that prima facie, the dues to a bank.
iii) As informed, the Company has not taken/granted any loans, xviii)The Company has not made any preferential allotment of
prescribed accounts and records have been made and
secured or unsecured from/to companies, firms or other xii) According to the information and explanations given to us shares to parties or companies covered in the register
maintained. We have however not made a detailed
parties covered in the register maintained under section 301 and based on the documents and records produced to us, maintained under section 301 of the Act.
examination of the records with a view to determine whether
of the Companies Act, 1956. Accordingly, provisions of the Company has not granted loans and advances on the xix) The Company did not have any outstanding debentures
they are accurate.
paragraphs 4(iii) (b), (c), (d), (f) and (g) of the Companies basis of security by way of pledge of shares, debentures and during the year.
ix) (a) The Company is regular in depositing with appropriate other securities.
(Auditor’s Report) Order, 2003 (as amended) are not
authorities undisputed statutory dues including wealth xx) The Company has not raised money through public issues
applicable to the Company. xiii) In our opinion, the Company is not a chit fund or a nidhi /
tax, custom duty, sales tax, excise duty and cess except during the year.
iv) In our opinion and according to the information and mutual benefit fund / society. Therefore, the provisions of
provident fund, employees’ state insurance, service tax xxi) Based upon the audit procedures performed for the purpose
explanations given to us, there is an adequate internal control clause 4(xiii) of the Companies (Auditor’s Report) Order, 2003
and professional tax, where the Company has been of reporting the true and fair view of the financial statements
system commensurate with the size of the Company and the (as amended) are not applicable to the Company.
generally regular. In case of income tax, the Company and as per the information and explanations given by the
nature of its business, for the purchase of inventory and for has not generally been regular, though the delays in xiv) In our opinion, the Company is not dealing in or trading in management, we report that no fraud on or by the Company
the sale of services. The internal control system for sale of deposit have not been serious. shares, securities, debentures and other investments. has been noticed or reported during the course of our audit.
goods needs to be further strengthened to make it Accordingly, the provisions of clause 4(xiv) of the Companies
b) According to the information and explanations given to
commensurate with the size of the Company and the nature (Auditor’s Report) Order, 2003 (as amended) are not
us, no undisputed amounts payable in respect of For S. R. Batliboi & Associates
of its business. Subsequent to year end, the Company has applicable to the Company.
provident fund, investor education and protection fund, Chartered Accountants
initiated steps to strengthen the internal control system for
employees’ state insurance, income tax, wealth tax, xv) According to the information and explanations given to us,
sale of goods.
service tax, sales tax, customs duty, excise duty, cess the Company has not given any guarantee for loans taken by
v) a) According to the information and explanations provided and other undisputed statutory dues were outstanding, others from banks or financial institutions.
Per Sudhir Soni
by the management, we are of the opinion that the at the year end, for a period of more than six months xvi) Based on information and explanations given to us by the Mumbai Partner
particulars of contracts or arrangements referred to in from the date they became payable. management, term loans were applied for the purpose for November 8, 2006 Membership No.: 41870

38 Jyothy Laboratories Limited Annual Report 2005-6 39


JYOTHY LABORATORIES LIMITED
BALANCE SHEET As at June 30, 2006 PROFIT AND LOSS ACCOUNT For the year ended June 30, 2006
(Amounts in thousands of Indian Rupees) Schedule 2006 2005 (Amounts in thousands of Indian Rupees) Schedule 2005–06 2004–05
SOURCES OF FUNDS INCOME
Sales (gross) (net of returns pertaining to earlier years Rs Nil, 2005 - Rs 80,000) 3,661,538 3,175,514
Shareholders’ Funds
(refer note 9 in schedule 22)
Share capital 1 72,569 72,569
Less: Sales tax recovered (194,441) (203,500)
Reserves and surplus 2 2,452,850 2,152,770 Less: Excise Duty recovered (58,648) (45,402)
2,525,419 2,225,339 Less: Trade discount (includes Rs 17,541, 2005 - Rs Nil pertaining to previous year sales) (389,154) (273,134)
Loan Funds Net sales 3,019,295 2,653,478
Secured loans 3 11 10 Other income 15 121,139 60,289
Unsecured loans 4 1,166 328 3,140,434 2,713,767
EXPENDITURE
1,177 338
Material costs 16 1,431,934 1,368,901
Deferred Tax Liability, Net 5 57,374 27,041
(Increase)/ decrease in inventories 17 1,390 16,046
2,583,970 2,252,718 Excise duty 26,680 25,207
APPLICATION OF FUNDS Employee costs 18 294,985 249,645
Fixed Assets 6 Other expenses 19 806,919 661,026
Gross Block 1,078,579 956,532 Miscellaneous expenditure written off 14 – 1,103
Less: Accumulated depreciation and impairment (244,733) (197,106) Depreciation 6 51,714 44,081
Net Block 833,846 759,426 Interest and finance charges 20 1,437 793
2,615,059 2,366,802
Capital work-in-progress (including capital advances) 75,291 85,636
Profit before prior period item, exceptional item and Tax 525,375 346,965
909,137 845,062 Prior period item - Advertisement expenses 28,500 –
Investments 7 17,065 26,064 Prior period item - Trade discount expenses 6,849 –
Current Assets, Loans and Advances Exceptional item - Provision for dimunition in investments (refer note under schedule 7) – 60,000
Inventories 8 236,020 180,393 Profit before Tax 490,026 286,965
Sundry debtors 9 294,480 334,098 Provision for tax
Cash and bank balances 10 1,277,230 891,585 – Current tax (including short provision for current tax of earlier years Rs Nil, 2005 - Rs 6,997) 53,500 29,497
– Deferred tax charge 30,333 40,169
Other current assets - Sales promotion items 3,249 2,849
– Fringe benefit tax 5,700 1,800
Loans and advances 11 137,873 240,290 – Wealth Tax 425 112
1,948,852 1,649,215 Profit after Tax 400,068 215,387
Less: Current Liabilities and Provisions Profit and Loss Account, beginning of the year 96,169 155,502
Current liabilities 12 229,184 227,379 Profit available for Appropriation 496,237 370,889
Provisions 13 61,900 40,244 Appropriations
291,084 267,623 Interim dividend to equity shareholders 72,569 10,885
Dividend tax on interim dividend 10,178 1,423
Net Current Assets 1,657,768 1,381,592
Proposed dividend to equity shareholders 18,142 10,885
2,583,970 2,252,718 Dividend tax on proposed dividend 2,544 1,527
Notes to accounts 22 Transfer to general reserves 300,000 250,000
Profit and Loss Account, end of the year 92,804 96,169
The schedules referred to above and notes to accounts form an integral part of the financial statements. Earnings per share (EPS)
Basic and Diluted (Rs) 55.13 29.68
Nominal value per share (Rs) 10 10
Weighted average number of shares outstanding for calculation of Basic and Diluted EPS 7,256,880 7,256,880
Notes to accounts 22
As per our report of even date
For S. R. Batliboi & Associates For Jyothy Laboratories Limited The schedules referred to above and notes to accounts form an integral part of the financial statements.
Chartered Accountants As per our report of even date
For S. R. Batliboi & Associates For Jyothy Laboratories Limited
Per Sudhir Soni M. P. Ramchandran K. Ullas Kamath M. L. Bansal Chartered Accountants
Partner Chairman and Managing Director Deputy Managing Director Company Secretary Per Sudhir Soni M. P. Ramchandran K. Ullas Kamath M. L. Bansal
Membership No. 41870 Partner Chairman and Managing Director Deputy Managing Director Company Secretary
Membership No. 41870
Mumbai, November 8, 2006
Mumbai, November 8, 2006
40 Jyothy Laboratories Limited Annual Report 2005-6 41
JYOTHY LABORATORIES LIMITED
CASH FLOW STATEMENT For the year ended June 30, 2006 CASH FLOW STATEMENT (Contd.) For the year ended June 30, 2006
(Amounts in thousands of Indian Rupees) 2005–06 2004–05 (Amounts in thousands of Indian Rupees) 2005–06 2004–05
A. CASH FLOWS PROVIDED BY/(USED IN) OPERATING ACTIVITIES C. CASH FLOWS PROVIDED BY/(USED IN) FINANCING ACTIVITIES
Net profit before taxation 490,026 286,965 Repayment of loan funds – (33,637)
Adjustments for: Accrued interest on loan funds 1 –
Depreciation 51,714 44,081 Deferred sales tax loans 838 328
(Profit) / Loss on discarded/sale of fixed assets, net 3,247 (817) Interest paid (1,437) (793)
Provision for dimunition in the value of investments – 60,000 Dividend paid (83,454) (10,885)
Profit on sale of investment (4,524) – Dividend tax paid (11,705) (1,423)
Miscellaneous expenditure written off – 1,103 Net cash used in financing activities (95,757) (46,410)
Dividend received (87) (117) Net increase in cash and cash equivalents (A+B+C) 385,645 292,258
Interest expense 1,437 793 Cash and cash equivalents at beginning of year 891,585 599,327
Interest income (72,253) (37,633) Cash and cash equivalents at end of year 1,277,230 891,585
Excess provision written back (10,476) (249) Components of cash and cash equivalents
Sundry advances written off (net of provision) 4,856 759 Cash in hand 1,174 917
Bad debts written off (net of provision) 75,000 – Balance with scheduled banks – Current account 81,382 43,383
Provision for doubtful advances – 3,589 – Deposit account * 1,194,674 847,285
Provision for doubtful debts 660 31,091 1,277,230 891,585
Operating profit before working capital changes 539,600 389,565
* Includes deposits provided as securities against bank guarantees - Rs 4,118, 2005 - Rs 2,665.
(Increase) /Decrease in current assets, loans and advances
Inventories (including sales promotion items) (56,027) 12,761
Trade receivables (36,042) (24,089)
Loans and advances 93,076 (33,203)
Increase in current liabilities / provisions 17,623 51,166
Cash generated from operations 558,230 396,200
Taxes (paid) / refund (47,100) 2,251
Net cash generated from operating activities 511,130 398,451
B. CASH FLOWS PROVIDED BY/(USED IN) INVESTING ACTIVITIES
Purchase of fixed assets including capital work-in-progress and
As per our report of even date
capital advances (121,964) (94,852)
Receipt of investment subsidy 3,445 1,067 For S. R. Batliboi & Associates For Jyothy Laboratories Limited
Proceeds from sale of fixed assets 2,928 3,541 Chartered Accountants
Purchase of investments – (100)
Proceeds from sale of investments 13,523 – Per Sudhir Soni M. P. Ramchandran K. Ullas Kamath M. L. Bansal
Interest received 72,253 30,444 Partner Chairman and Managing Director Deputy Managing Director Company Secretary
Dividend received 87 117 Membership No. 41870
Net cash used in investing activities (29,728) (59,783) Mumbai, November 8, 2006

42 Jyothy Laboratories Limited Annual Report 2005-6 43


JYOTHY LABORATORIES LIMITED
SCHEDULE TO THE FINANCIAL STATEMENTS As at June 30, 2006 SCHEDULE TO THE FINANCIAL STATEMENTS As at June 30, 2006
(Amounts in thousands of Indian Rupees) 2006 2005 (Amounts in thousands of Indian Rupees) Charge/(Credit)
1 SHARE CAPITAL 2005 for the year 2006
Authorised Capital 5 DEFERRED TAX LIABILITY, Net
10,000,000 (2005 - 10,000,000) equity shares of Rs 10 each 100,000 100,000 a) Deferred tax liability
100,000 100,000 Depreciation 73,635 10,809 84,444
Issued, Subscribed and Paid up capital 73,635 10,809 84,444
7,256,880 (2005 - 7,256,880) equity shares of Rs 10 each 72,569 72,569 b) Deferred tax assets
72,569 72,569 Technical royalty 2,053 (514) 1,539
Gratuity 7,431 1,137 8,568
Provision for doubtful debts 11,638 (11,375) 263
Provision for doubtful advances 10,817 (9,361) 1,456
2 RESERVES AND SURPLUS Provision for leave encashment 1,256 860 2,116
Provision for impairment losses 13,128 – 13,128
Share premium 1,065,313 1,065,313
Others 271 (271) –
Investment subsidy
46,594 (19,524) 27,070
Balance, beginning of the year 3,144 2,077
27,041 30,333 57,374
Add: Subsidy received during the year 3,445 1,067
Balance, end of the year 6,589 3,144
General reserves
6 FIXED ASSETS
Balance, beginning of the year 988,144 764,016
Gross Block Depreciation and Amortisation Impairment Net Block
Add: Transfer from profit and loss account 300,000 250,000
Particulars As at July, Additions Deletions As at June As at July For the Deletions As at June As at July For the As at June As at June As at June
Less: Impairment loss (net of deferred tax of Rs Nil, 2005 - Rs 13,128) – (25,872)
(refer note 12 in schedule 22) 1, 2005 30, 2006 1, 2005 Year 30, 2006 1, 2005 Year 30, 2006 30, 2006 30, 2005
Balance, end of the year 1,288,144 988,144 Freehold land* 52,056 2,226 – 54,282 – – – – – – – 54,282 52,056
Balance in profit and loss account 92,804 96,169 Leasehold land 7,594 – – 7,594 455 117 – 572 1,037 – 1,037 5,985 6,102
2,452,850 2,152,770
Building 399,566 62,608 – 462,174 44,840 14,317 – 59,157 14,335 – 14,335 388,682 340,391
Plant and machinery 372,426 48,846 3,229 418,043 62,258 23,677 935 85,000 21,502 – 21,502 311,541 288,666

Dies and moulds 24,563 3,761 – 28,324 23,048 3,209 – 26,257 – – – 2,067 1,515
3 SECURED LOANS
Furniture and fixture 22,988 1,232 100 24,120 3,780 1,618 57 5,341 520 – 520 18,259 18,688
Term loan from bank # 10 10
Office equipments 31,787 5,862 1,197 36,452 12,272 4,108 881 15,499 1,255 – 1,255 19,698 18,260
Accrued Interest 1 –
Vehicle 31,349 7,474 5,736 33,087 8,308 3,099 2,214 9,193 351 – 351 23,543 22,690
11 10
Trademark 14,203 300 – 14,503 3,145 1,569 – 4,714 – – – 9,789 11,058
# Term loan from bank is secured against first charge on standing crops on land, receivables, investments and other movable assets
Total 956,532 132,309 10,262 1,078,579 158,106 51,714 4,087 205,733 39,000 – 39,000 833,846 759,426

Previous year 754,376 205,109 2,953 956,532 114,503 44,081 478 158,106 – 39,000 39,000 759,426

4 UNSECURED LOANS *Includes land acquired in current year from customer at agreed value of Rs 1,000 against recovery of dues and is held for disposal. (Also refer note under schedule 9)

Deferred sales tax loan 1,166 328


1,166 328

44 Jyothy Laboratories Limited Annual Report 2005-6 45


JYOTHY LABORATORIES LIMITED
SCHEDULE TO THE FINANCIAL STATEMENTS As at June 30, 2006 SCHEDULE TO THE FINANCIAL STATEMENTS As at June 30, 2006
(Amounts in thousands of Indian Rupees) Face Value Number (Amounts in thousands of Indian Rupees) 2006 2005
(Rs) of Shares 2006 2005 8 INVENTORIES
7 INVESTMENTS (Long term, at cost)
Raw and packing materials (including goods in-transit Rs 442, 2005 - Rs 1,326) 99,253 82,421
Trade Investments (Unquoted) Work in progress 7,281 8,466
Investment in Sri Sai Home Care Products Private 10 1,039,550 7,901 7,901 Finished goods (including goods in-transit Rs 3,777, 2005 - Rs 8059) 113,269 80,779
Limited - a wholly owned subsidiary (refer note 9 in schedule 22)
Non Trade Investments (Quoted) Stores and spare parts 16,217 8,727
Investment in Shares 236,020 180,393
Contech Soft Limited 10 27,500 1,178 1,178
Infosys Technologies Ltd. * 5 400 – 856
Punjab Tractor * 10 3,000 – 712
Zee Telefilm Ltd.* 1 2,500 – 1,540 9 SUNDRY DEBTORS
Shri Adhikari Brothers Ltd. # 2 658,194 70,852 71,368 Secured, considered good
(662,985 shares were received on split of shares in the ratio 1:5, Outstanding for more than six months* 13,257 –
of which 4,791 shares are sold during the year) Unsecured
MTNL* 10 5,000 – 1,086 a) Outstanding for more than six months
Satyam Computers Ltd.* 2 500 – 322 Considered good* 1,813 –
Wipro Ltd.* 2 300 – 307 Considered doubtful 782 4,575
Sab Nife Power Ltd. * 10 27,500 – 1,141 Less: Provision for doubtful debts (782) (4,575)
Tata Motors Ltd.* 10 2,000 – 2,259 1,813 –
(During the year on account of merger, 2000 shares in Tata b) Other debts
Motors Ltd. were received for 25,000 shares in Tata Finance Ltd.) Considered good 279,410 334,098
Mphasis-BFL SW Ltd. * 10 8,000 – 505 Considered doubtful – 30,000
(Includes 4,000 bonus shares received during the year) Less: Provision for doubtful debts – (30,000)
Sub Total 72,030 81,274 279,410 334,098
Less: Provision for dimunition in the value of investments (63,000) (63,245) 294,480 334,098
Total 9,030 18,029
No investments have been purchased during the year. * Sundry debtors include receivables of Rs 15,070 from a customer with whom transactions has been discontinued. Of the total
* All the shares are sold during the year. outstanding, Rs 13,257 is considered as secured against the market value of land acquired from the customer. Management has
Indira Vikas Patra 2 2 filed litigation against the party. (Refer note under schedule 6)
National Saving Certificates 132 132
(Market value of quoted shares - Rs 9,059, 2005 - Rs 19,734)
10 CASH AND BANK BALANCES
17,065 26,064
Cash in hand 1,174 917
# The Company has an investment of Rs 70,852 (2005 - Rs 71,368) in the equity shares of Shri Adhikari Brothers Limited (SAB). The Balance with scheduled banks – Current account 81,382 43,383
management has in past considered this investment as strategic and long term in nature. The market value of SAB over past few – Deposit account * 1,194,674 847,285
years has been substantially lower (as of June 30, 2006 the market value was Rs 8,919, 2005 - Rs 10,256). During the previous year, 1,277,230 891,585
on evaluation of its investment in SAB, the management had recognised the dimunition in value to be other than temporary and has
* Deposit includes Rs 384,985 (2005 - Rs 390,504) unutilised out of issue of 2% Fully Convertible Debentures converted into 1,656,880
provided Rs 60,000.
equity shares of Rs 10 each at a premium of Rs 572.42 per share on October 1, 2003.

46 Jyothy Laboratories Limited Annual Report 2005-6 47


JYOTHY LABORATORIES LIMITED
SCHEDULE TO THE FINANCIAL STATEMENTS As at June 30, 2006 SCHEDULE TO THE FINANCIAL STATEMENTS For the year ended June 30, 2006
(Amounts in thousands of Indian Rupees) 2006 2005 (Amounts in thousands of Indian Rupees) 2005–06 2004–05

11 LOANS AND ADVANCES 15 OTHER INCOME

Unsecured considered good Dividend received 87 117


Advances to wholly owned subsidiary 35,122 43,883 Interest on fixed deposit (tax deducted at source - Rs 14,260, 2005 - Rs 7,189 ) 72,253 37,633
Deposits 11,269 9,183 Export incentives 3,069 1,803
Processing income 7,248 8,431
Advances recoverable in cash or in kind 20,821 10,630
Profit on sale of investment 4,524 –
Quantity discount receivable 5,520 5,048
Excess provision written back (includes Rs 10,000, 2005 - Rs Nil for sales promotion) 10,476 249
Advance to suppliers (refer note 10 in schedule 22) 47,991 144,668
Sales tax incentives 13,429 6,313
Balance with excise authorities 12,867 17,762
Credit balances written back 3,504 –
Staff loans 4,283 4,155
Profit on sale of fixed assets (net) – 817
Advance tax (net of provisions) – 4,961
Miscellaneous income 6,549 4,926
137,873 240,290 121,139 60,289
Unsecured and considered doubtful
Advance to suppliers 4,327 31,331 16 MATERIAL COSTS
Loans to employees – 806 Raw and packing materials consumed
Less: Provision for doubtful advances/ loans (4,327) (32,137) Opening stock 82,421 84,822
137,873 240,290 Add: Cost of purchases (including freight, net of freight subsidy (Rs 3,422, 2005 - Rs 1,826)) 542,874 474,590
625,295 559,412
Less: Closing stock 99,253 82,421
12 CURRENT LIABILITIES
Sub-total (A) 526,042 476,991
Sundry creditors Cost of trading goods
– Small scale industries 3,166 16,163 Opening stock 42,697 40,130
– Others 49,733 52,583 Add: Cost of purchases 936,773 894,477
Other current liabilities 158,752 142,035 979,470 934,607
Security deposits 5,035 5,055 Less: Closing stock 73,578 42,697
Advances from customers 12,498 11,543 Sub-total (B) 905,892 891,910
229,184 227,379 Total (A+B) 1,431,934 1,368,901

17 (INCREASE)/DECREASE IN INVENTORIES
13 PROVISIONS
Proposed dividend 18,142 10,885 (Increase)/ decrease in inventories
Closing stock
Dividend tax on proposed dividend 2,544 1,527
Finished goods (refer note 9 in schedule 22) 39,691 38,082
Provision for gratuity 25,453 22,189
Work in progress 7,281 8,466
Provision for leave encashment 6,285 3,731
46,972 46,548
Provision for wealth tax 425 112
Opening stock
Provision for income tax (net of advance tax) 7,551 –
Finished goods 38,082 52,060
Provision for fringe benefit tax 1,500 1,800
Work in progress 8,466 10,000
61,900 40,244 46,548 62,060
Sub-total (A) (424) 15,512
14 MISCELLANEOUS EXPENDITURE (to the extent not written off or adjusted) (Increase)/ decrease in excise duty
Software development expenses Excise duty on closing stock 3,098 4,912
Balance, beginning of the year – 1,103 Excise duty on opening stock 4,912 5,446
Less: Written off during the year – (1,103) Sub-total (B) 1,814 534
Balance, end of the year – – Total (A+B) 1,390 16,046

48 Jyothy Laboratories Limited Annual Report 2005-6 49


JYOTHY LABORATORIES LIMITED
SCHEDULE TO THE FINANCIAL STATEMENTS For the year ended June 30, 2006 SCHEDULE TO THE FINANCIAL STATEMENTS For the year ended June 30, 2006
(Amounts in thousands of Indian Rupees) 2005–06 2004–05 (Amounts in thousands of Indian Rupees) 2005–06 2004–05
18 EMPLOYEE COSTS 20 INTEREST AND FINANCE CHARGES
Salaries, wages and bonus 220,093 182,438 Interest on loans from banks 271 3
Contribution to provident and other funds 17,824 15,196 Bank charges and commission 1,166 790
Gratuity 4,239 5,432 1,437 793
Staff welfare expenses 30,410 26,478
Directors' remuneration 22,419 20,101 21 CONTINGENT LIABILITIES
294,985 249,645 Contingent liabilities not provided for in respect of:
i) Amount outstanding in respect of guarantees given by the Company to banks 2,945 2,665
19 OTHER EXPENSES ii) Tax matters
Conversion charges 7,629 14,436 a) Disputed liability in respect of income-tax demands - matters under appeal 1,648 2,171
Power and fuel expenses 46,017 37,404 b) Disputed sales tax demands - matters under appeal 21,669 2,512
Rent 11,979 9,525 c) Disputed excise duty and service tax demand - matter under appeal 428 1,847
Insurance 1,467 1,474 iii) Claims against the Company not acknowledged as debt 12,000 –
Repairs and maintenance 38,690 9,195
– Building 3,414 3,268
– Plant and machinery 19,893 3,821
– Others 7,772 5,881
Research and development 849 1,087
Printing and stationery 3,356 2,163
Communication costs 8,822 9,523
Legal and professional fees 83,270 18,889
Rates and taxes 49,368 51,437
Commission to directors 13,838 9,388
Directors' sitting fees 148 131
Vehicle maintenance 7,555 5,906 22 NOTES TO THE FINANCIAL STATEMENTS
Donation 370 1,814
1. Background
Loss on discarded/sale of fixed assets, net 3,247 –
Jyothy Laboratories Limited ('the Company') was incorporated on January 15,1992. The Company is principally engaged in
Provision for doubtful debts 660 31,091
manufacturing and marketing of soaps, detergents, mosquito coils and incense sticks.
Provision for doubtful advances – 3,589
Sundry advances written off 32,190 2. Basis of preparation of Financial Statements
Less: Provision written back 27,334 4,856 759 The financial statements of the Company are prepared under the historical cost convention on accrual basis of accounting, and in
Bad debts written off 109,453 accordance with the mandatory accounting standards issued by the Institute of Chartered Accountants of India and referred to in
Less: Provision written back 34,453 75,000 – Section 211(3C) of the Act and generally accepted accounting principles in India.
Exchange loss, net 106 337
Advertisement and publicity 266,907 292,336 3. Summary of Accounting Policies
Sales promotion and schemes 18,279 13,381 The significant accounting policies are as follows:
Carriage outwards (net of freight subsidy Rs 775, 2005 - Rs 708) 50,343 31,559 a) Fixed assets
Field staff expenses, incentives and awards 70,941 56,431 Fixed assets are stated at cost, less accumulated depreciation and impairment losses if any. Cost comprises the purchase
Travelling and conveyance 17,565 15,886 price and any attributable cost of bringing the asset to its working condition for its intended use. Cost of shares of Co-operative
Brokerage on sales 8,010 9,214 society has been added to the cost of office building. Borrowing costs relating to acquisition of fixed assets which takes
Miscellaneous expenses 25,258 30,296 substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such
806,919 661,026 assets are ready to be put to use.

50 Jyothy Laboratories Limited Annual Report 2005-6 51


JYOTHY LABORATORIES LIMITED
SCHEDULE TO THE FINANCIAL STATEMENTS For the year ended June 30, 2006 SCHEDULE TO THE FINANCIAL STATEMENTS For the year ended June 30, 2006
22 NOTES TO THE FINANCIAL STATEMENTS (Contd.) 22 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
b) Depreciation cost or net realisable value, whichever is lower. Cost is ascertained on First-in-First out ('FIFO') basis and includes all applicable
Depreciation is provided using the Straight Line Method as per the useful lives of the assets estimated by the management, costs incurred in bringing goods to their present location and condition. Cost of work in progress and finished goods includes
or at the rates prescribed under schedule XIV of the Companies Act, 1956 whichever is higher. materials and all applicable manufacturing overheads. The Company accrues for excise duty liability in respect of manufactured
The estimated useful life of the assets is as follows: finished goods/intermediary inventories lying in the factory.

Category Estimated useful life h) Revenue recognition


(in years) Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue
Buildings 30-60 can be reliably measured.
Plant and machinery 3-21 Sale of Goods
Electrical installations 20 Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. Excise
Furniture and fixtures 12 Duty, Sales Tax and VAT deducted from turnover (gross) is the amount that is included in the amount of turnover (gross) and
Dies and moulds 1-3 not the entire amount of liability arised during the year.
Computers 6 Interest
Office equipments 20 Revenue is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.
Vehicles 8-10
i) Miscellaneous Expenditure
Trademarks 9
Miscellaneous expenditure comprises preliminary expenses for software development expenses for the in-house developed
Leasehold land is amortised over the period of the lease on a straight-line basis. software package. Software development expenses are amortised over a period of three years.

c) Impairment j) Foreign currency translation


i. The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on i) Initial Recognition
internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceed its Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the
recoverable amount The recoverable amount is the greater of the assets net selling price and value in use. In assessing exchange rate between the reporting currency and the foreign currency at the date of the transaction.
value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. ii) Conversion
ii. After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life. Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of
historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction; and
iii. A previously recognised impairment loss is increased or reversed depending on changes in circumstances. However the
non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported
carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual
using the exchange rates that existed when the values were determined.
depreciation if there was no impairment.
iii) Exchange Differences
d) Operating Leases Exchange differences arising on the settlement of monetary items or on reporting company's monetary items at rates
Lease payments on operating leases are recognised as expense on a straight-line basis, over the lease term. different from those at which they were initially recorded during the year, or reported in previous financial statements, are
e) Government grants and subsidies recognised as income or as expenses in the year in which they arise. Exchange differences arising in respect of fixed
Grants and subsidies from the government are recognised when there is reasonable assurance that the grant/ subsidy will be assets acquired from outside India are capitalised as a part of fixed asset. Exchange differences on liability relating to fixed
received and all attaching conditions will be complied with. assets acquired within India arising out of transactions entered on or before March 31, 2004 are added to the cost of such
When the grant or subsidy relates to an expense item, it is recognised as income over the periods necessary to match them assets in line with Old Accounting Standard 11 (1994).
on a systematic basis to the costs, which it is intended to compensate. Where the grant or subsidy relates to an asset, its value k) Income-tax
is deducted in arriving at the carrying amount of the related asset. Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is measured at
f) Investment the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income taxes
Long term investments are stated at cost. Provision, where necessary, is made to recognise a diminution, other than reflects the impact of current year timing differences between taxable income and accounting income for the year and reversal
temporary, in the value of investments. of timing differences of earlier years.

g) Inventories Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date.
Inventories of raw materials, packing materials, work-in-progress, finished goods, stores and consumables items are valued at Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income

52 Jyothy Laboratories Limited Annual Report 2005-6 53


JYOTHY LABORATORIES LIMITED
SCHEDULE TO THE FINANCIAL STATEMENTS For the year ended June 30, 2006 SCHEDULE TO THE FINANCIAL STATEMENTS For the year ended June 30, 2006
22 NOTES TO THE FINANCIAL STATEMENTS (Contd.) 22 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
will be available against which such deferred tax assets can be realised. If the company has carry forward of unabsorbed A) Managerial remuneration* (Contd.)
depreciation and tax losses, deferred tax assets are recognised only if there is virtual certainty that such deferred tax assets
2006 2005
can be realised against future taxable profits. Unrecognised deferred tax assets of earlier years are re-assessed and recognised
Calculation of net profit in accordance with Section 349 of the Act
to the extent that it has become reasonably certain that future taxable income will be available against which such deferred tax
Profit before tax 490,026 286,965
assets can be realised.
Add: (Profit) / Loss on discarded/sale of fixed assets, net 3,247 (817)
In the year in which the Minimum Alternate tax (MAT) credit becomes eligible to be recognised as an asset in accordance with Add: Provision for dimunition in value of Investments – 60,000
the recommendations contained in the Guidance Note issued by the Institute of Chartered Accountants of India, the said asset 493,273 346,148
is created by way of credit to the Profit & Loss Account and shown as MAT Credit Entitlement. The Company reviews the same Add: Remuneration debited to Profit and loss account
at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer Remuneration 22,419 20,101
convincing evidence to the effect that Company will pay normal Income Tax during the period. Commission 13,838 9,388
l) Retirement and other employee benefits Net profit as per Section 198 of the Act 529,530 375,637
Retirement benefits to employees comprise payments for gratuity, leave encashment and provident fund. Contributions to
Total remuneration paid to the directors is within the limits specified in schedule XIII of the Act.
provident fund are charged to the profit and loss account as incurred. The liability for gratuity and leave encashment is provided
for based on valuation by an independent actuary at the year end.
B) Earnings in foreign currency
m) Sales promotion items
Sales promotion items are valued at cost or net realisable value, whichever is lower. Cost is ascertained on First-in-First out FOB value of exports 73,327 54,622
('FIFO') basis and includes all applicable costs incurred in bringing goods to their present location and condition. C) Expenditure in foreign currency (cash basis)
n) Provisions a) CIF value of imports
A provision is recognised when an enterprise has a present obligation as a result of past event; it is probable that an outflow i) Raw material/components 2,479 5,199
of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not
ii) Capital goods 14,722 10,707
discounted to its present value and are determined based on best estimate required to settle the obligation at the balance
sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. b) Professional fees/expenses 30,650 215

o) Excise duty c) Membership & subscription – 111


Excise duty on turnover is reduced form turnover. Excise duty relating to the difference between the opening stock and closing
stock is recognised as income/expense as the case may be, separately in the Profit and Loss account. D) Net Dividend remitted in foreign currency
Period to which it relates
p) Use of estimates
The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to July 1, 2005 to July 1, 2004 to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets June 30, 2006 June 30, 2005
and liabilities at the date of the financial statements and the results of operations during the year end. Although these estimates Number of non-resident shareholders 3 3
are based upon management's best knowledge of current events and actions, actual results could differ from these estimates. Number of equity shares held on which dividend was due 2,215,130 2,215,130
4. Supplementary Information Amount remitted * 25,474 3,323
A) Managerial remuneration* * Remitted in equivalent United States Dollars
2006 2005
Salaries 22,419 20,101 E) Amount receivable in foreign currency on account of the following
Commission 13,838 9,388 Particulars Rs. in 000’ Amount in Foreign
36,257 29,489 Foreign Currency
* Exclusive of provision for future liabilities in respect of retirement benefits (which are based on actuarial valuation done on Currency
overall Company basis). Export of goods 13,722 324,999 US $
Advance for Capital goods 2,161 48,000 US $

54 Jyothy Laboratories Limited Annual Report 2005-6 55


JYOTHY LABORATORIES LIMITED
SCHEDULE TO THE FINANCIAL STATEMENTS For the year ended June 30, 2006 SCHEDULE TO THE FINANCIAL STATEMENTS For the year ended June 30, 2006
22 NOTES TO THE FINANCIAL STATEMENTS (Contd.) 22 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
F) List of Small Scale Industrial undertakings to whom amounts are outstanding for more than 30 days as on June 30, 2006. 2. It is not practicable to furnish quantitative information in view of the large number of items which differ in size and nature,
Allied Electrical Services, Dynamic Material Handling Systems, Gogia Chemical Industries Pvt. Ltd., Kavitha Offset Printers, each being less than 10% in value of the total.
Latest Packaging, NMT Packaging Pvt. Ltd., Parbhat Industries, Safety Poly Sacks, Swan Packaging, Wheel Packaging. 3. The above Raw and Packing materials are all indigeneously purchased.
G) Payment to auditors K) Opening and Closing Inventories, production, purchases and sales in respect of each class of goods manufactured and
2006 2005 traded
Statutory audit fees 2,245 1,984 Item Traded / Mfg Units Opening Inventory Production Purchases Sales Closing Inventory
Tax audit fees 1,066 882 Quantity Amount Quantity Quantity Amount Quantity Amount Quantity Amount
Other services 1,476 1053 Home Care Traded Dozen 212 6,771 – 4,057 118,541 3,759 129,788 510 13,402
Out of pocket expenses 107 119 288 6,310 – 2,842 80,829 2,918 87,518 212 6,771
4,894 4,038 Traded Nos 23,462 34,027 – 996,383 751,814 952,834 972,884 67,011 54,092
38,541 25,531 – 1,081,336 794,497 1,096,415 936,870 23,462 34,027
H) Donations to political parties Manufactured Nos 9,522 9,216 171,229 – – 174,644 49,487 6,107 3,717

Name of the Party Amount 25,302 15,867 156,303 – – 172,083 115,661 9,522 9,216
Soaps & Detergents Traded Kgs 27 1,899 – – – 27 1,768 – –
Communist Party of India (Marxist) 22
76 6,364 – 253 19,151 302 (10,823) 27 1,899
DMK 3
Manufactured Kgs 1,086 28,866 30,406 – – 30,446 1,804,776 1,046 30,208
Others 7
1,187 38,118 27,396 – – 27,497 1,524,252 1,086 28,866
32
Others – – – 618 66,418 509 60,592 109 11,850
I) Licensed Capacity, Installed Capacity and Actual Production – – – – – – – – –

Unit Licenced Capacity* Installed Capacity* Actual Capacity Total 34,309 80,779 201,635 1,001,058 936,773 1,162,219 3,019,295 74,783 113,269
65,394 92,190 183,699 1,084,431 894,477 1,299,215 2,653,478 34,309 80,779
2006 2005 2006 2005 2006 2005
Detergents & Soaps Tons/Ltrs NA NA 151,009 162,699 26,008 16,360 1. All Figures are in 1000's
Home Care No (1000's) NA NA 180,000 180,000 171,229 156,303 2. Figures in italics are in respect of the previous year
* As certified by the management 3. Sales quanties are netted off for sales promotion items and other adjustments
J) Consumption of Raw and packing material 5. Segment Reporting
Units Consumption Business segments
Group Quantity Value The primary segment of the Company has been determined on the basis of business segment. The Company is organised into two
2006 2005 2006 2005 business segments - Soaps and Detergents and Home Care. Segments have been identified taking into account the nature of the
Synthetic Dye Tons 985 914 64,065 61,185 products, the differing risks and returns, the organisation structure and the internal reporting system.
Dyes & Chemicals Tons 2,835 2,525 52,274 44,033 Soaps and Detergents includes fabric whiteners, fabric detergents, diswash bar and soaps including ayurvedic soaps. Home Care
Fatty Oils & Perfumes Tons 11,928 5,962 148,319 96,006 products include incense sticks and mosquito coils.
Plastic Tons 2,976 2,901 167,605 167,176 Secondary segment
Others Tons 775 4,880 17,728 31,755 The Company mainly caters to the needs of the domestic market. The export turnover is not significant in the context of total
Packing materials turnover. As such, there are no reportable geographical segments.
Tons 84 152 12,628 11,426
Segment revenue and result
Rolls (1000s) 62 54 1,652 1,457
The income/ expense that are not directly attributable to the business segments are shown as unallocated corporate costs.
No (1000s) 99,641 100,901 61,771 63,953
Total 526,042 476,991 Segment assets and liabilities
Segment assets include all operating assets used by a segment and consist principally of debtors, inventories, advances and fixed
1. All values are in 1000's

56 Jyothy Laboratories Limited Annual Report 2005-6 57


JYOTHY LABORATORIES LIMITED
SCHEDULE TO THE FINANCIAL STATEMENTS For the year ended June 30, 2006 SCHEDULE TO THE FINANCIAL STATEMENTS For the year ended June 30, 2006
22 NOTES TO THE FINANCIAL STATEMENTS (Contd.) 22 NOTES TO THE FINANCIAL STATEMENTS (Contd.)

assets. Assets at corporate level are not allocable to segments on a reasonable basis and thus the same have not been allocated. 6. Related party Disclosures
a) Parties where control exists
Segment liabilities include all operating liabilities and consist principally of creditors and accrued liability.
Individual having control
Information about Business Segments
M. P. Ramachandran
Soaps and Detergents Home care Others Unallocated Total Wholly Owned Subsidiary
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 Sri Sai Home Care Products (P) Limited
Revenue (net of returns b) Related party relationships where transactions have taken place during the year
pertaining to earlier years Rs Nil, Relatives of individual having control are partners in the firm
2005 - Rs 80,000) (net of trade Beena Agencies
discount of Rs 17,541, 2005 - Rs Nil Quilon Trading Co.
pertaining to previous year sales) 1,806,544 1,515,544 1,152,160 1,137,934 60,602 – (11) – 3,019,295 2,653,478 Travancore Trading Corp.
Results 621,422 461,349 11,293 (41,180) (3,557) – (1,724) – 627,434 420,169 Sree Guruvayurappan Agencies
Unallocated expenditure (182,094) (113,807) (182,094) (113,807) M. P. Agencies
Income 81,343 41,312 81,343 41,312
Tamil Nadu Distributors
Interest & finance expenses (1,308) (709) (1,308) (709) Proprietor - Relative of individual having control
(Loss)/ Profit before prior period Deepthy Agencies
item, exceptional item and tax (103,783) (73,203) 525,375 346,965 Sahyadri Agencies
Prior period item - Sreehari Stock Suppliers
Advertisement expenses (28,500) – Sujatha Agencies
Prior period item -
Shanti Industries
Trade discount expenses (6,849) – Relative of individual having control
Exceptional item - Provision for Sahyadri Agencies Ltd.
dimunition in investments – (60,000) M. P. Sidharthan
Profit before tax 490,026 286,965 M. P. Divakaran (Director)
Provision for tax (89,958) (71,578)
M. R. Jyothy (Director w.e.f. October 24, 2005)
Profit after tax 400,068 215,387
Ananth Rao T
M. G. Santhakumari
Other Information
Segment assets 1,085,484 1,093,643 378,938 454,220 17,913 – 1,392,719 972,478 2,875,054 2,520,341 Key management personnel (includes directors of the Company)
Segment liabilities 133,151 102,130 70,152 78,245 18,801 – 106,845 102,215 328,949 282,590 K. Ullas Kamath, Deputy Managing Director
Addition to fixed assets including As the Managing Director of the Company is an individual having control and hence not separately disclosed as a Key
capital work in progress 71,095 62,367 12,582 18,713 – – 38,287 13,772 121,964 94,852 management personnel.
Depreciation 41,763 32,304 3,290 3,522 – – 6,661 8,255 51,714 44,081
Impairment loss – 39,000 – – – – – – – 39,000
Non cash expenses other
than depreciation 48,175 21,090 30,725 13,341 1,616 – 83,833 59,463 164,349 93,894

58 Jyothy Laboratories Limited Annual Report 2005-6 59


JYOTHY LABORATORIES LIMITED
SCHEDULE TO THE FINANCIAL STATEMENTS For the year ended June 30, 2006 SCHEDULE TO THE FINANCIAL STATEMENTS For the year ended June 30, 2006
22 NOTES TO THE FINANCIAL STATEMENTS (Contd.) 22 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
c) Transactions with related parties during the year d) Related party balances
2006 2005 2006 2005
Wholly owned subsidiary Amounts receivable
Purchase of finished goods 98,069 114,659 Subsidiary Company 35,122 43,883
Individual having control Enterprises in which relatives of individual having control are interested – 341
Remuneration 10,800 10,800
35,122 44,224
Commission 7,943 5,633
Amounts payable
Assignment of premises under construction (at book value) 7,854 –
Individual having control 7,943 5,633
Purchase of Fixed Assets 20,321 –
Key management personnel 5,295 3,755
Dividend 35,010 5,251
Relatives of individual having control 66 –
Enterprises in which relatives are interested
Enterprises in which relatives of individual having control are interested 10,510 7,670
Sale of finished goods
23,814 17,058
Beena Agencies 67,043 64,931
Sree Guruvayurappan Agencies 48,135 50,341
7. Operating Leases
Sreehari Stock Suppliers 59,017 55,805
The Company has entered into lease agreements for premises, which expire at various dates.Lease rental expense for the year
Sujatha Agencies 60,834 59,073
ended June 30, 2006 was Rs 11,979 (2005 - Rs 9,525).
Tamil Nadu Distributors 42,966 47,654
Others 168,469 155,886 2006 2005
Claims for reimbursement for sales promotion expenses
Future lease payment under operating leases are as follows
Sreehari Stock Suppliers 2,502 2,394
Payable not later than one year 8,986 7,399
Sujatha Agencies 1,843 1,790
Payable later than one year and not later than five years 9,819 7,049
Tamil Nadu Distributors 1,459 1,705
Payable later than five years 39,566 44,902
Beena Agencies 669 1,618
58,371 59,350
Others 1,910 3,081
Write off of old outstanding
Shanti Industries – 284 8. Capital Commitments (Net of Advances)
Relatives of individuals having control 2006 2005
Remuneration Estimated amount of contracts remaining to be executed on
M. R. Jyothy 600 300 capital account and not provided for 69,947 11,648
M. P. Sidharthan 1,200 1,200 69,947 11,648
M. P. Divakaran 1,200 1,200
Ananth Rao T 51 – 9. During the previous year, the Company had initiated voluntary withdrawal of one of its product. Consequently, the Company had
Dividend 15,408 2,311 issued credit notes aggregating Rs 80,000 for returns pertaining to sales of earlier years. The recalled stocks were destroyed.
Assignment of premises under construction (at book value) 10. Advance to suppliers include Rs 8,500 (2005 - Rs 8,500) for which the Company is in the process of entering into an arrangement
M. G. Santhakumari 6,050 – for the recovery of advances. Accordingly, the advances given are considered good and no provision has been made against these
Purchase of Fixed Assets advances.
M. G. Santhakumari 5,180 –
11. During the year, the Company has made sale of goods, to parties in which the directors are interested, aggregating Rs 85,487, the
Key management personnel
payments in respect of which were received on the following day or on the next day (maximum outstanding at any point of time
Remuneration 10,008 8,101
was Rs 1,472). Considering the nature of transactions, the Company believes that this is sufficient compliance with Section 297 of
Commission 5,295 3,755
the Companies Act, 1956.

60 Jyothy Laboratories Limited Annual Report 2005-6 61


JYOTHY LABORATORIES LIMITED
SCHEDULE TO THE FINANCIAL STATEMENTS For the year ended June 30, 2006 SCHEDULE TO THE FINANCIAL STATEMENTS
22 NOTES TO THE FINANCIAL STATEMENTS (Contd.) Balance Sheet Abstract and Company’s General Business Profile

12. During the previous year, depreciation/ impairment on assets includes impairment losses representing the amount by which the I. Registration Details
carrying amount of the asset exceeds its recoverable amount. Such impairment losses were due to adverse market conditions for
Registration No. 1 2 8 6 5 1 State Code 1 1
the one of its Cash Generating Unit pertaining to the 'Soaps and Detergents' segment. The pre-tax discount rate used for evaluation
of the present value was 8% per annum. In accordance with the transitional provisions of the new Accounting Standard (AS 28) Balance Sheet Date 3 1 0 6 2 0 0 6
relating to 'Impairment of Assets' that became effective from April 1, 2004, the Company has recorded accumulated impairment Date Month Year
loss of Rs 25,872 (net of deferred tax credit of Rs 13,128) as an adjustment to the general reserves.
II. Capital Raised during the year (Amount in Rs. Thousands)
13. The prior year figures have been reclassified where necessary to confirm with current year's presentation.
Public Issue N I L Rights Issue N I L
Bonus Issue N I L Private Placement N I L
Signatures to Schedules 1 to 22
III. Position of mobilisation and deployment of Funds (Amount in Rs. Thousands)
As per our report of even date Sources of Funds
For S. R. Batliboi & Associates For Jyothy Laboratories Limited Paid-up Capital 7 2 5 6 9 Secured Loans 1 1
Chartered Accountants Reserves & Surplus 2 4 5 2 8 5 0 Unsecured Loans 1 1 6 6
Share application pending N I L Deffered Tax Liability 5 7 3 7 4
allotement
Per Sudhir Soni M. P. Ramchandran K. Ullas Kamath M. L. Bansal Application of Funds
Partner Chairman and Managing Director Deputy Managing Director Company Secretary Net Fixed Assets 9 0 9 1 3 7 Investments 1 7 0 6 5
Membership No. 41870
Net Current Assets 1 6 5 7 7 6 8 Misc. Expenditure N I L
Mumbai, November 8, 2006
Accumulated Losses N I L

IV. Performance of Company (Amount in Rs. Thousands)


Turnover/Gross Receipt 3 1 4 0 4 3 4 Total Expenditure 2 6 1 5 0 5 9
(including other incomes)
Profit/Loss before Tax 4 9 0 0 2 6 Profit/Loss after Tax 4 0 0 0 6 8
Basic earning per share (Rs.) 5 5 . 1 3 Dividend Rate (%) 1 2 5

V. Generic Names of Principal Products/Services of Company


Item Code No. Product Description
N A F A B R I C W H I T E N E R
3 8 0 8 9 0 . 0 1 M O S Q U I T O R E P E L L A N T
3 4 0 2 2 0 0 0 . 1 0 W A S H I N G P R E P A R A T I O N S

62 Jyothy Laboratories Limited Annual Report 2005-6 63


JYOTHY LABORATORIES LIMITED

Statement Pursuant To Section 212 of Companies Act, 1956

1. Name of the Subsidiary Company Sri Sai Homecare


Products
Private Limited
2. Financial Year of the Subsidiary Company ended on 31st March 2006
3. Numbers of shares in the subsidiary company held by Jyothy
Laboratories Ltd at above date. 1,039,550
Extent of the holdings 100%
4. Net aggregate amount of profits/(losses) of subsidiary's company so far it concerns the
members of Jyothy Laboratories Limited Rs Thousands
a) Not dealt with in the accounts of Jyothy Laboratories Limited
i) For the subsidiary's financial year ended March 31,2006 1,127
ii) For the previous financial years of subsidiary since it became subsidiary of Jyothy Laboratories Limited (2,580)
b) Dealt with in the accounts of Jyothy Laboratories Limited
i) For the subsidiary's financial year ended March 31,2006 Nil
ii) For the previous financial years of subsidiary since it became subsidiary of Jyothy Laboratories Limited Nil
Changes in the interest of Jyothy Laboratories Ltd between the end of the subsidiary's
Financial Year and 30th June 2006
Nos Of Shares acquired Nil
Material changes between the end of the subsidiary's financial year and 30th June 2006
I) Fixed asset 11
II) Investments Nil
III) Moneys lent by the subsidiary Nil
IV) Moneys borrowed by the subsidiary company other then for meeting current liabilities Nil

M. P. Ramchandran K. Ullas Kamath M. L. Bansal


Chairman and Managing Director Deputy Managing Director Company Secretary

November 8, 2006
Mumbai

64 Jyothy Laboratories Limited