videocon inds ltd 2006

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V I D E O C O NI N D U S T R I E SL I M I T E D

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SANSCOSERVICES - Annual Reports Library Services - www.sansco.net

VIDEOCON INDUSTRIES LIMITEDBQARD OF DIRECTORS

Venugopal N. DhootPradeepkumar N. DhootS. K. ShelgikarKuldeep DrabuS. PadmanabhanMaj. Gen. S. C. N. JatarA.L. BongirwarS.P.TalwarDidierTruttJohan FantAjay SarafB . Ravindranath

Chairman & Managing Director 'Wholetime Director

Nominee - Thomson S.A.Nominee - AB Etectrolux (Publ).Nominee - ICICI Bank Ltd.Nominee - IDBI Ltd. ;

COMPANY SECRETARYVinod Kumar Bohra

AUDITORSKhandelwal Jain & Co.Chartered Accountants12-BBaldo taBhavan117, Maharshi Karve Road,Opp, Churchgate Railway Station, M umbai - 400 020

Kadam & Co.Chartered AccountantsAhmednagar College Road, Kolhi,Near Badve Petrol Pump, Ahmednagar - 414 001SOLICITORSMulia & Mulla & Cragie & Blunt & Caroe

REGISTERED OFFICEAuto Cars Compound,AdalatRoad, Aurangabad-431 00 5Maharashtra.

FACTORY14 Km. Stone, Aurangabad - Paithan Road,Village Chittegaon, Taluka Paithan,Dist.-Aurangabad,(Maharashtra)

Village Chavaj, Via Society Area,Taiuka & Distt. Bharuch (Gujarat)E 23 & 24, Electronics Estate,G.I.D.C. Gandhinagar (Gujarat)

Plot No . 10, Udyog Vihar Industrial Area,Gautam Budh Nagar.GreaterNoida (U.P.)Plot No-28, Khasra No-293, Industrial A rea,Selakul, Vikasnagar, Dehradun, (Uttaranchal).

Vigyan Nagar, RICO Industrial Area,Shahjanpur, Districi Alwar, RajasthanA-32, Butibori Industrial Area,Village Ruikhiri, Nagpur

BANKERSState Bank of India

Allahabad BankBank of India

Bank of MaharashtraCentral Bank of India

ICICI Bank Ltd.Indian Bank

Indian Overseas BankState Bank of HyderabadState Bank of IndoreState Bank of MysoreState Bank of PatiateThe Federal Bank Ltd.

Union Bank of IndaVijaya Bank

Punjab National Bank

C O N T E N T S P A G E NO .Notice 1Direc tors ' Repor t 4Corpora te Governance 7Aud i tors ' Repor t 16Ba lance sheet 18Prof i t and Loss Account 19Schedules : 20Notes to Accounts 26Balance Sheet Abstract &Company 's General Business Profile 31Cash F low S ta tement 32Statement Pursuant to Sect ion 21 2of the Compan ies A ct 1956 33Consolidated Financial Statement 35

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SANSCOSERVICES - Annual Reports Library Services - www.sansco.netANNUAL REPORT 2005

NOTICENOTICE is hereby given that the Eighteenth Annu al General M eeting of VIDEOCONINDUSTRIES LIMITED ("the Company") will be held on Friday, 30th March, 2007 atthe Registered office of the Company at Auto Cars Compound, Adalat Road,Aurangabad - 431 005 at 9.30 A.M. to transact the following business:QBDJNAR^BUSJNESS:1 To consider and adopt the audited Balance Sheet as at September 30, 2006,P r o f i t and Loss Account for the ye ar ended on that date and the Rep orts of theBoard of Directors' and Auditors' thereon.2. To declare a dividend on Equity Shares.3. To appoint a director in place of Mr. S Padmanabhan, who retires by rotationand being eligible, offers himself for re-appointment.4. To appoint a director in place of Mr. Kuldeep Drabu, who retires by rotation andbeing eligible, o f f e r s himself for re-appointment.5 . To appoint a director in place of Major General S C N Jatar, who retires byr o t a t i o n and being eligible, o f f e r s himself for re-appointment.6 . To appoint Auditors and to fix their remuneration and in this regard to considera n d i f thought fit, to pass, with o r without modification(s), th e following resolutiona s a n Ordinary Resolution:

"RESOLVED THAT M/s. Khandelwal Jain & Co., Chartered Accountants andM/s. Kadam & Co. , Chartered Accountants, be and are hereby appointed asJoint Auditors o f t h e Company, to hold o f f i c e from th e conclusion o f this AnnualGeneral Meeting until the conclusion of the next Annual General Meeting of theCompany, on such remuneration as shall be fixed by the Board of Directors."

SPECIALBU31NESS;7 . T o consider a n d i f thought fit, to pass, with o r without modification(s) th e followingresolution as an Ordinary Resolution:" R E S O L V E D THA T in accordance with th e provisions o f Section 255, 256, 2 5 7and all other applicable provisions, if any, of the Companies Act, 1956 or anys t a t u t o r y modification(s) or re-enactment thereof, Mr , Johan Fant, who wasappointed as an Additional Director pursuant to the pro visions of Section 260 ofthe Companies Act, 1956 be and is hereby appointed as a Director of theCompany, liable to retire by rotation, under the provisions of the Articles ofAssociation of the Company."

B y order o f t h e Board o f Directors o fVideocon Industries Limited

3 . I n terms o f t h e provisions o f Articles o f Association o f t h e CompanyPadmanabhan, Mr. Kuldeep Drabu & Maj Gen S C N Jatar retire by rotatbeing eligible o f f e r themselves for re-appointment. Further, the Compareceived a notice in writing from a member alongwith a deposit o f R sproposing th e candidature o f M r . Johan Fant f o r t h e o f f i c e o f DirectorCompany under th e provisions o f Section 2 5 7 o f th e Companies Act, 1 9 5resume o f each o f these director(s), nature o f their expertise in specific funareas and names of companies in which they hold directorship and membchairmanship of Board Committees, as stipulated under Clause 49 ofAgreement entered with the Stock Exchanges, in India, is appended to theT h e Board o f Directors o f t h e Company recommends th e appointmenappointments o f t h e aforesaid directors.

4. An Explanatory Statement pursuant to Section 173(2) of the Companie1956, relating to the Special Business to be transacted at the Annual GMeeting is annexed hereto.5 . Members a re requested to bring their attendance slip along with t h e i r cAnnual Report to the meeting.6 . I n case o f joint holders attending th e meeting, only such joint holderhigher in the o r d e r of names will be entitled to vote.7. Relevant documents referred to in the accompanying notice are opinspection at the registered office of the Company on all working days,

Saturdays, between 1 2 Noon to 2.00 P M upto th e date o f t h e Annual GMeeting.

Place : Mumbai,Date : 3 1 s1 January, 2007Registered O f f i c e :A u t o Cars Compound ,Ada la t Road ,Aurangabad -431005N O T E S ;1 A M E M B E R E N T IT L ED T O A T T E N D A N D V O T E A T T HE A N N U A L G E N E R A L

MEETING IS ENTITLED TO A P P O IN T A P R O X Y TO A T T E N D A N D V O T E O NA P O L L IN S T E A D O F H IM S E L F A N D T H E P R O X Y N E ED N O T B E A M E M B E ROF T HE C O M P A N Y . T HE IN S T R U M E N T A P P O IN T IN G P R O X Y S HO U L D ,H O W E V E R , BE D E P O S IT E D AT THE R E G IS T E R E D O F F ICE OF THEC O M P A N Y N O T L ES S T H A N F O R T Y - E I G H T H O U R S B E F O R ECO M M E N CE M E N T O F T H E M E E TIN G .

2 . Corporate Members intending to send their authorised representatives to attendthe Annual General Meeting are requested to send a certified copy of the BoardResolution authorizing their representative to attend and vote on their behalf atth e Annual General Meeting.

8 . T h e Register o f Members a n d Share Transfer Books shall b e closeSaturday, March 1 7 , 2007 to Friday, March 30, 2007 ("both days inclusivdetermining th e names o f members eligible fo r dividend o n Equity Shdeclared a t t h e Annual General Meeting. T h e div idend o n Equity Shdeclared a t t h e Annual General Meeting will b e paid o n o r around 1 0 *2007 to those Members whose names appeared on the Com pany's R egMembers on Friday March 16,2007. In respect of shares held in dematef o r m , the dividend will be paid on the basis of particulars of beneficialownfurnished by depositories as at the end of business on Friday, March 169 . The Company has not declared any dividend during financial y e a r ( s ) 12004. T h e unclaimed a n d unpaid dividend in respect o f financial y e a r1 9 9 6 has already been transferred, in the past, to the Investor EducatiProtection Fund (IEPF) established by the Central Government, pursprovisions of Section 205A of the Companies Act, 1 9 5 6 .

The unclaimed dividends, for the financial yea r 1998-1999, in respect of erV i n o d Kumar B o h r a Videocon International Limited (amalgamated with the Company) hasCompany Secretary transferred to the IEPF. Dividends forthe financial y e a r 1999-2000 and t h ewhich remain unclaimed for a period of 7 years will be transferred by the Coto IEPF, as and when due. M embers who have not encashe d dividend w a rfo r th e aforesaid y e a r s a r e requested to obtain duplicate warrant(s) b y wrth e Company's Registrars and Transfer Agents, M/s. MC S Limited. Ma re requested to note that no claims shall lie against the Company or IErespect o f a n y amounts which were unclaimed a n d unpaid f o r a period o fy e a r s from th e dates they first became d u e f o r payment a n d n o paymenbe made in respect of any such claims.1 0 . Members who hold shares in physical form in multiple folios in identicalo r joint accounts in the same order or names are requested to send the

c e r t i f i c a t e s to the Co mpany's Registrar and Transfer Agents, M/s. MCS Lfo r consolidation into a single folio.1 1 . The shares of the company are tradeable compulsorily in electronic foryour company has established connectivity with both the depositoriNational Securities Depository Limited and Central Depository Services Limited. In view of the enormous advantages offered by the Depository sMembers are requested to avail the facility of dematerialization of the comshares o n either o f t h e depositories a s aforesaid.

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SANSCO SERVICES - Annual Re p or ts Library Ser vices - www.sansco.netVIDEOCON I NDUS T RI E S LIMITED

EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956.ITEM NO. 7The Board of Directors of the Company ("the Board"), at its meeting held on January31,2007 has, pursuant to the provisions of Section 260 of the Companies A ct, 1956(the Act) and Articles of Association of the Company appointed Mr. Johan Fant as anadditional director of the Company.In terms of the provisions of Section 260 of the Act, Mr. Johan Fant holds office uptothe date of ensuing Annual General Meeting. The Company has received a notice inwriting from a member alongwith a deposit of Rs. 500/- proposing the candidature ofMr . Johan Fant for the office of Director of the Company under the provisions ofSection 257 of the Act.Mr . Johan Fant is associated with AB Electrolux as Senior Vice President, GroupTreasurer. He has to his credit vast knowledge and e xperience in the field of Finance& Treasury. He is a Board Member of Swedish Indian Business Council, SwedishAssociation of Corporate Treasurers and Aaro System AB. He was chairman of theBoard of erstwhile EKL Appliances Limited.

Keeping in view his rich expertise, it will be in the interest of the CompanyJohan Fant is appointed as a director, liable to retire by rotation, in accordathe provisions of the Articles of Association of the Company.Save and except Mr. Johan Fant none of the other directors of the Companyway, or interested in the Resolution set out at Item No.7 of the notice. Trecommends the Resolution set out at Item No.7 of the notice for the appromembers.

By order of the Board of DirVideocon Industries

Place: Mumbai,Date : 31st January, 2007Registered O ff ice;Auto Cars Compound,Adalat Road,Aurangabad - 43 1 005

Vinod KumCompany S

BRIEF RESUME OF DIRECTORS BEING APPOINTED/RE-APPOINTED, NATURE OF THEIR EXPERTISE IN SPECIFIC FUNCTIONAL AREAS AND NACOMPANIES IN WHICH THEY HOL D DIRECTORSHIP AND MEMBERSHIP/CHAIRMANSHIP OF BOAR D COMMITTEES, AS STIPULATED UNDER CLAUSLISTING AGREEMENT WITH THE STOCK EXCHANGES IN INDIA, IS AS UNDER:1. Brief details of Mr. S Padmanabhan are as under:1 Name of the Director2 Date of Birth3 Education Qualification

4 Date of Appointmenton the Board5 Category o f Director

Area of Expertise/SeniorPosition Held/Work Experience

7 Names of other Directorshipsin Public Limited Company

Mr. S Padmanabhan01.09.1939I.A.S.,B.Sc. Physics (Honors), M.Sc. Physics,Bachelor of General L a w , Diploma inDevelopmental Economics- University ofCambridge, Diploma in Management.01.06.2005Non Executive -Independent D irectorRetd. IAS.In the past, he has held variousprominent positions with governmentauthorities inter alia inculdesfollowing positions:> Director - Depar tment of AtomicEnergy, Government of India, dealingwith projects, power projects, NuclearPower Stations.Purchase, BudgetAdministration, Vigilance> Managing Direc tor - The S ta teIndustrial & Investments Corporationo f Maharashtra Ltd (SICOM).Apart from the above , he has been in thisIndustry for more than 15 years as advisor& consultants to various corporates.1. Videocon Communications Limited2. Kitchen Appliances India Limited3. Applicomp (India) Limited4. Videocon Power Limited5. Desai Brothers Limited6. Asian Electronics Limited7. Premier Automo biles Limited8. Sudarshan Chemical IndustriesLtd.9. Force Motors Limited10. Sanghvi Movers Limited11. Rajkumar Forge Limited12. Videocon VC R Securities Limited13. Videocon Energy Holdings Limited

8 Names of committeesin which Chairman

9 Names of Committeesin which Member

10 Number of Sharesheld in the Company

Nil1 . Videocon Communications L

(Audit Committee)2. Videocon Communications L

(Shareholders Committee)3. Applicomp (India) Limited

(Audit Committee)4. Videocon Power Limited

(Audit Committee)5. Kitchen Appliances India Lim

(Audit Committee)6. The Premier Automo biles Ltd

(Audit Committee)7. The Premier Automobiles Ltd

(Remuneration Committee)8. Asian Electronics Ltd

(Audit Committee)9. Videocon Industries Limited

(Shareholders Committee)10. Rajkuma r Forge Limited

(Audit Committee)11. Rajkumar Forge Limited

(Remuneration Committee)203

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SANSCO SERVICES - Annual Repor ts Library Services - www.sansco.netA N N U A L R EPO R T 200

2. Brief details of Mr. Kuldeep Drabu are as under:123456

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Name of the DirectorDate of BirthEducation QualificationDate of Appointmenton the BoardCategory of DirectorArea of Expertise/SeniorPosition Held/Work Experience

Names of other Directorshipsin Public Limited Com panyNames of committeesin which ChairmanNames of Committeesin which MemberNumber of Shares heldin the Company

Mr. Kuldeep Drabu13.09.1958FCA, LLB01.06.2005

Non Executive- Non IndependentHe has vast experience in the fields ofFinance & Commercial L aws. He hasbeen associated with variousCorporates as consultant & advisor for:> Mobilisation of Funds -Domestically and Internationally.> Strategic planning an d advisory.> - Amalgamation & Acquisitions.> Setting up of Joint Ventures abroad> International operations.> Finance an d Treasury.Dhoot Secu rities LimitedVideocon Power LimitedVideocon Energy Holdings LimitedNilVideocon Power Limited(Audit Committee)5,000

3. Brief details of M ajor General S C N Jatar are as under:1 Name of the Director2 Date of Birth3 Education Qualification4 Date of Appointmenton the Board5 Category of Director

Area of Expertise/SeniorPosition Held/Work Experience

Major General S C N J a t a r03.09.1932BE (Civil), FIE, MICA, Qualified at theDefence Services Staff College01.06.2005No n Executive- IndependentHe is presently:> Consultant to ICICI Bank Limited(Upstream operations, Oil & NaturalGas)> Member, Arbitrat ion Panel of theInstitutions of Engineers> Member , S tee r ing Com mi t tee o fNational Gas Hydrates Programme,> M e m b e r , Indian Counci l ofArbitration> Associate, Security & Political RiskAnalysis S A P R A India Foundation> Member, Senate, U niversity of PuneHe has served on various posit ionsas hereunder:> Consultant, Hindustan PetroleumCorporation Limited> Pro ject Advisor, StandingConference of Public Enterprises,> Member, Governing Board, PuneStock Exchange,> Managing D irector , GarwareShipping Corporation Limited,> President (Co-ord inat ion) R P GPetrochem Ltd

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Names of other Directorshipsin Public Limited CompanyNames of committees inwhich C hairman

Names of Committees inwhich Member

Number of Shares heldin the Company

> Chairman, Standing C onferePublic Enterprises> Chairman & MD, ONGC V k J e> President, Petroleum Sports Board> Chairman & MD and ResidenExecutive, Oil India LimitedServed with Indian Army He hArmy profile to his credit.Prize Petroleum Limited1. Videocon Industries Limited(Shareholders Committee)2. Video con Industries Limited(Remuneration Committee)1 . Videocon Industries Limited(Audit Committee)2. Prize Petroleum Limited -(Audit Committee)Nil

4. Brief details of Mr. Johan Fant are as under:123456

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Name of the DirectorDate of BirthEducation QualificationDate of Appointmenton the BoardCategory of DirectorArea of Expertise/SeniorPosition Held/Work Experience

Names of other Directorshipsin Public Limited CompanyNames of committeesin which ChairmanNames of Committeesin which MemberNumber of Shares heldin the Company

Mr. Johan Gunnar Michael Fant19.09.1959MBA31.01.2007Non Executive - Non IndependenVast experience in the fields of F& Treasury.He is presently SenPresident , Group Treasurer Electrolux (Publ).In the past, he as held va rious poas under> Ericsson, Corporate TreasuV Ericsson T elecom AB , Trea> Ericsson Treasury S ervicesPresidenty Assa Abloy,C FO> Ericsson, Corporate FinancControl, SVP, Corporate CoV Enskilda Secu rities, ExecutiPresident, COO.> Electrolux, SVP Finance anStrategy, CFO, Electrolux HProducts International.> Chairman of the Board ElecKelvinator Ltd, IndiaHe also holds board mem bership> Swedish Indian Business Co> Swedish Association of Cor> Treasurers> Aaro System A BNilNil

Nil

Nil

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SANSCO SERVICES - Annual R e p o r t s Library Services - www.sansco.netV I D E OC ON I N D U S T R I E S LIMITED

DIRECTORS' REPORTTh e Shareholders,o f Videocon Industries Limited (the Company)The Board of Directors are delighted to.present the 18" Annual Report together withthe Audited accounts, Auditors' Report and the Audited consolidated financialstatements for the year ended S eptember 30,2006.FINANCIAL RESULTS:The performance of the Company, on standalone basis, for the financial year endedSeptember 30, 2006 is as summarized below:

Rs. MillionsParticulars

N e t S a l e sO t h e r I n c o m eTotal IncomeProfit before Interest, Depreciation and TaxInterest & Finance chargesDepreciationP r o f i t b e f o r e Exceptional Items and TaxationExceptional ItemsP r o f it b e f o r e T a xP r o v i s i o n f o r TaxationP r o f i t a f t e r T a x

Year ended30.09.200672,188.17

1,654.4473,842.6114,750.932,258.803,355.479,136.67

Nil9,136.67951.65

8,185.02

Period ended30.09.200554,494.03

704.8755,198.908,884.352,042.462,323.604,518.30

(1,901.79)2,616.51(1,660.34)

4,276.85During the y e a r under review, the Total Income & Profitability of the Company werehigher as compared o t he previous period. This was on account of normal growth inthe business of the Com pany as well as due to addition ol business on account ofvarious mergers & amalgamations, as mentioned in the Management Discussion &Analysis R e p o r t .OPERATIONS:S o m e of the highlights of the year under review are as under:1. Acquis i t ion:

O n December 13, 2005, Eagle Corporation Limited became a Wholly OwnedSubsidiary of the Company after the Company acquired the balance 81 % equitys t a k e in Eagle Corporation Limited.E a g l e Corporation L imited is an offshore entity which acquired Colour PictureTube businesses from Thomson S.A having manufacturing facilities in Poland,I t a ly , M e x i c o and China along with support research and development facilities.In pursuit of mission to become a global major in consumer electronics and homea p p l i a n c e s with large scale and low cost base for critical components, the companymade its f i r s t footprint n acquirin g global sized colour picture tube manufacturingfacilities across the wo rld from Thomson S A. It was also an exercise to completethe v a l u e chain in CTV vertical as the Company had already a critical mass ofg l a s s panel manufacturing acility, a substantial part of bill of material of CPT inIndia. By adding this acq uisition the Company become a major player with totalvertical integration in the CPT vertical. Am ong st others, the principal philosophybehind this acquisition was to make this acquisition yield handsome gains byadopting a three fold strategy viz.1 . Cost cutting2 . Vertical Integration3 . Rationalisation o f Product ProfileS o far in the past f o u r quarters, the Company had been successful in makingsubstantial dent in all these three aspects, the Com pany had been in a position tor e d u c e the costs by re location of certain activities fro m high cost countries to lowcost countries, also by reshuffling the material procurement from more efficientsources and by e f f e c t i v e l y leveraging the capability to integrate glass panel facilityback home to the CPT manufacturing facilities so acquired from Thomson S .A.The Company also made decent progress in reshuffling the product profile tomatch the needs of the market by shifting the production of very large size picturet u b e s to medium and smaller size picture tubes, thereby reducing the impact ofthe pressure of competit ion on VLS. Th e pursuit of threefold strategy ofrationalization of c o s t , capacity and production profile has given decent dividends

in last year by converting the cash losing acquired business into cash salbeit in a token way. Th e company intends to further pursue the same so f cost cutting and rationalizations and product profile rationalizations slaunch of Slim and Extra Slim versions of Colour Picture Tubes and garnestrength by integrating its activities and operations covering all aspects ochain. The company believes that the pursuit of these strategies would goto further its aim of becoming a globally integrated player in the CTV ver2. Merger:

On July 21,2006, EKL Appliances Limited (formerly: Electrolux Kelvinator Lamalgamated w ith the Company, with retrospective e f f e c t from January 01pursuant to the Scheme of Amalgamation of EKL Appliances Limited with ViIndustries Limited, as sanctioned by the Hon'ble High Court of JudicaBombay on 30th June 2006. The Scheme resulted in all of the assets and iaof EKL Appliances Limited being transferred to the Company.3. Issue/Allotment of Securities:

On December 21, 2005, the Company issued 217,200 GDRs representing 2equity shares of the Company ("equity shares") at a price of US$10 each to Gala Thomson Group entity against subscription money received on September 30On January 31, 2006, the Company has allotted 14,242,488 equity sharesshareholders of erstwhile Videocon International Limited pursuant to SchAmalgamation of Videocon International Limited with the Company, as sanb y Hon'ble High Court of Judicature at Bombay on November 25,2005.On February 7,2006, the Company issued Foreign Currency Convertible ("FCCBs") of an aggregate am ount of US$ 90,000,000 (United States DollarMillion). These FCCBs are listed on Singapore Exchange Securities TLimited.On March 31,2006, the Company has allotted 4,158,870 preference shR s . 1 0 O / - each to the Preference shareholders of erstwhile Videocon InternLimited pursuant to Scheme of Amalgamation of Vid eocon Internationalwith the Company, as sanctioned by Hon'ble High C ourt of Judicature at Bon November 25, 2005.On July 24, 2006, the Company issued Foreign Currency Convertible ("FCCBs") of an aggregate amount of US$105,000,000 (United States DollHundred Five Million). These FCCBs are listed on Singapore Exchange SeTrading Limited.On July 31, 2006, the Company has allotted 441,990 preference shaRs.100/- to Life Insurance Corporation of India.

APPROPRIATIONS:Dividend:Your directors have pleasure in recommending a dividend of 35% (Rs. 3.50 peron equity shares for the financial year ended on September 30, 2006, subapproval by shareholders at the 18th Annual General Meeting. The equity diamounting to Rs. 881.93 Million, including taxes, if approved by the Equity shareat the ensuing Annual General M eeting, would be paid out of the profits for thThe dividend is free of tax in the hands of the shareholders.Transfer to reserves:Your directors propose to transfer Rs. 1,500 Million to the General Reserve. An ao f Rs. 8,380.87 Million is proposed to be retained in the Pro fit and Loss A c c oFIXED DEPOSITS:The company has not accepted any deposit within the meaning of Section 58ACompanies Act, 1956.CQNSEBVATIONJ3FENIRSY:The Company continues to emphases on conservation of energy, power andenergy sources. The Company has formed a team of the expert engineers enin the production activity for taking up detailed study by attending seminars, obexpert opinion, research, on the possibilities of use of various methods of opuse of energy without affecting the productivity. This is done under guidanceManagment.A s a part of continuous e fforts, your C ompany has taken the following steps:i. Utilization of unconventional ene rgy source such as Solar Energy.ii. Adoption of the latest technique of production wh ich helps better productivityiii. Timely maintenance & upgradation of m achinery & equipments to ensuthe energy consumption is as minimal as possible,iv. Educating the production team mem bers as well as whole of the s t a f f to coenergy.

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SANSCO SERVICES- Annual Reports Library Services - www.sansco.netA N N U A L REPORT200

R E S E A R C H & DEVELOPMENT A N D T E C H N O L O G Y ABSORPTIONThe Company gives utmost importance to the R & D activities, which are carried outa t in-house R & D Centre located in Aurangabad. T h e R & D i s also carried o u t a tcentres located at Italy and China.1. Specific a r e a s In which R & D carried out b y the Company.

Th e Company has carriedoutResearch and Development in the following areas:> Innovation of newproducts with more features.> Improvement in the productivity.> Launch of innovative products in the same category.> Improvement in the quality of products

2 . Benefits derived a s a result o f t h e above R & D .Th e Company has derived the following benefits as a result of Research andDevelopment:> The productivity andcapacity is increasing on same existing lines.> The Quality has improved resulting in more acceptance of the products.> Development of new design in products and launch of various newmodels> Reduction in cost thereby providing little support to the bottom line.

3 . Future plan o f actionIn the coming days, the Company isaiming toachieve development in the followingareas through Research andDevelopment:> Launching of NewBrands under Videocon umbrella.> To work on overall display development.> To workon new technology to attan in break through in Flat Panel TVssuchas Plasma & LC D so as to reduce th e cost of production an d thereby resultingin lowering of prices of flat panel TVS.> Reducing the electricity consumption for consumer electronics and homeappliances.> Introducing the newer models having lowpower consumption.Your Company is using the latest advances in technology fo r production. Takinginto consideration th e advancements in technology, th e Company continues toupgrade its technical base to meet th e needs of the consumers.

FOREIGN EXCHANGE EARNINGS A N D OUTGO;During th e year under review, th e earnings in Foreign Exchange amounted toR s. 4,578.31 Million (previous year Rs. 2,196.46 Million) and outgo in ForeignExchange was Rs. 25,697.51 Million (previous year 5,175.02 Million).INFORMATION TECHNOLOGY:Your company believes that Information Technology is the backbone of any industryin today's environment. T he Company ha s taken i t as a tool to improve productivity,eff ic iency and reliability. A s such, m y S A P , a Customized ER P Module, ha s alreadybeen substantially implemented at manufacturing facilities and branches of theCompany, in India and at i ts foreign operations. It is in final stages of being fullyi m p l e m e n t e d .HEALTH, S A F E T Y - A N D ENVIRONMENT:Your company recognizes its role in health an d safety, as well as its responsibilitytowards environment a nd society. T h e health an d medical services a re accessible toallemployees through well-equipped occupational health centers at all manufacturingfacilities. Safety an d security of the personnel, assets an d environmental protectionare also on top of the agenda of the Company at its manufacturing facilities.Clean environment andsustainable development integrated with the business objectiveis the focus of operations of the Company. Th e projects an d activities ar e plannedand designed with environment protection as an integral part to ensure a safe andclean environment for sustainable development.A P P OI N T M EN T / R E- A P P OIN T M EN T OF DIRECTORS:During theyear under review, Mr:DidierTruttwas nominated byThomson S .A on theBoard of the Company and he was co-opted on 29* October 2005. Mr. S P Talwar &M r. A LBongirwar were appointed as additional directors by the Board of Directors on8 th December 2005. On 17* January 2006, Mr. Claes Johan Bygge was co-opted asnominee of AB Electrolux (publ). Mr. Claes Johan Bygge appointed Mr. Peter Birchas his alternative on the Board. On 30" January, 2006, Mr. M Chittaranjan Kumarwa s co-opted on the Board as nominee of IDBI Limited. Th e Board of Directors at itsmeeting held on 19th November, 2005 appointed Mr. Pradeepkumar N Dhoot as aWhole Time Director, Mr.Kuldeep Drabu & Mr. S K Shelgikar as ExecutiveDirector(s),subject tonecessary approval of the members at the ensuing Annual General Meeting.Subsequently, Mr. Kuldeep Drabu & Mr. S K Shelgikar ceased to be ExecutiveDirector(s).At the annual general meeting held on 31" March 2006, the members approvedappointment of Mr. Kuldeep Drabu, Mr. S Padmanabhan, Maj Gen S C N Jatar,

M r . S P Talwar, M r . A L Bongirwar, M r. Claes Johan Bygge & M r . Didin repect of whom notice(s) were received U/s. 257 of the Companies AFurther, th e members also approved appointment o f Mr . Pradeepkumar N .a Wholetime Director.O n 31" July 2006, Mr . B Ravindranath w as appointed as nominee of IDBI substitution of Mr. M Chittaranjan Kumar. The rich expertiseof Mr. B Ravindth e fields of finance & banking shall be o f immense help in the g rowth of the CTh e Board places on records its sincere appreciation for the valuable guidancef rom Mr. M Chittaranjan Kumar during hi s tenure as a member of the BoaCompany.Further, af ter end of the financial year under Report, M r. Johan Fant w as aas- nominee of AB Electrolux (Publ), in place of Mr. Claes Johan Bygge. MFant w as co-opted as an additional director on 315 January 2007. T he Boaon records its sincere appreciation for the valuable guidance received fromJohan Bygge during his tenure as a member of the Board of Directors of the CM r. Johan Fant holds office upto th e date of Annual General Meeting. T he Cha s received a notice in writing from a member alongwith a deposit of Rs. 500 pth e candidature o f Mr . Johan Fant for the officeof Director of the Company provisions of Section 257 of the Companies Act, 1956. T he B o a r d recoappointment of Mr . Johan Fant as a Director of the Company.Interms of the provisions ofSection 255,256of the Companies Act, 1956, thof Association of the Company, M r. Kuldeep Drabu, Mr . S PadmanabhanG e n S C N Jatar ar e liable to retire by rotation at the ensuing Annual Generaand being eligible, they have offered themselves for re-appointment. Threcommends their re-appointment(s).Th e brief profiles of directors being appointed/re-appointed at the ensuinGeneral Meeting forms part of notice of the ensuing Annual General Meet iDIRECTORS' RESPONSIBILITY STATEMENT:In terms of Section 217(2AA) read with Section 292A of the Companies Aw e, th e Directors of VIDEOCON INDUSTRIES LIMITED, state in respectofYear 2005-06 that:a) in the preparation of annual accounts, th e applicable AccountingStandabeen followed along with proper explanation relating to material departb) the Directors have selected such accounting policiesan d applied themcon

and made judgments and estimates that are reasonable and prudentgive a true an d fair view of the state of affairs of the Company at the efinancial year and of the profit of the Company fo r that period;

c) th e Directors have taken proper a nd sufficient care for the mainteadequate accounting records in accordance with th e provisions of thsafeguarding th e assets of the Company and fo r preventing an d detecandother irregularities;

d) the Directors have prepared th e annual accounts on a going concern be) the Board ha s constituted an Audit Committee comprisingof Three inddirectors, inter alia fo r holding discussions with th e Aud i to rs , periodicalof quarterly, half yearly an d annual financial statements before submBoard, review of observations of Auditors and to ensure compliance ocontrol systems;f ) The Audit Committee ha s also been delegated with authori ty for invean d access fo r full information an d external professional advice fo r disth e functions delegated to i t by the Board;g) the Board agrees that th e recommendations of the Aud i t Committee on a

relating to financial andmanagement including the audit report wouldbon the Board; and

h) based on the above and the Internal Audit System, th e Audit CommBoard opines that th e Company ha s internal control system commensuthe size of the Company and the nature of its business.

P A R T I C U L A R S QF.EMPLQYEES;Th e details of employees drawing remuneration in excess of the monetaprescribed under Section 217(2A) of the Companies Act, 1956, readCompanies (Particulars of Employees) Rules, 1975, during th e financialy e2006 is annexed to this report.LISTING:Th e Equity Shares of the Company ar e listed on Bombay Stock Exchangan d National Stock Exchange of India Limited. T he Global Depository Reclisted o n T h e Luxembourg Stock Exchange. T he Foreign CurrencyConvert ibar e listed on Singapore Exchange Securities Trading Limited.

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SANSCO SERVICES - Annual Reports Library Services - www.sansco.netVIDEOCON INDUSTRIES LIMITED

SUBSIDIARY COMPANIES:On December 13, 2005, Eagle Corporation Limited became a Wholly OwnedSubsidiary of the C ompany after the Company acquired the balance 81 % equity stakein Eagle Corporation L imited.During the year under review, Sk y Billion Trading Limited, Trend Limited, VideoconIndustrial Finance Limited, Gruhaupyogi Electronics Appliances Private Limited andVideocon (Caym an) Limited ceased to be subsidiaries of the Company. Further, duringthe year under review, Venus Corporation Limited became a subsidiary of theCompany.A s such, as on 30th September 2006, the Company had 11 subsidiaries viz.,Paramount Global Limited, Middle East Appliances LLC, Mars Overseas Limited,Videocon Global Limited, Powerking Corporation Limited, Gajanan Electronics andSupply Pvt Ltd, Mayur Household Electronics Appliances Pvt Ltd, Godavari ConsumerElectronics Ap pliances Pvt Ltd, Videocon (Mauritius) Infrastructure Ve ntures Limited,Eagle C orporation Limited and Venus C orporation Limited.The Com pany has received an exemption f r o i T i the Central Government under Section212(8) of the Companies Act, 1956 with regard to attaching of the Balance Sheet,Profit and Loss account and other docum ents of the subsidiaries for the y ear 2005-2006. The Company undertakes that annual accounts of the subsidiary companiesand the related detailed information will be made available to any member of holdingand subsidiary Company seeking such information at any point of time upon receipto f request for the same. Further, the annual accounts of subsidiary companies willalso be kept for inspection at its registered office and also at registered of fice of therespective subsidiary.A summary of the key financials of the Company 's subsidiaries is included in thisAnnual Report.CONSOLIDATED FINANCIAL STATEMENTS:The Directors also present the consolidated financial statements, duly incorporatingthe Com pany's 100% ownership interest in Paramount Global Limited, Middle EastAppliances LLC,Mars Overseas Limited, Videocon Global Limited, PowerkingCorporation Limited, Gajanan Electronics and Supply Pvt Ltd, Mayur HouseholdElectronics Appliances Pvt Ltd, Godavari Consumer Electronics Appliances Pvt Ltd,Eagle Corporation Limited, Venus Corporation Limited w.e.f. (18*November 2005),Videocon (Mauritius) Infrastructure Ventures Limited, Videocon (Cayman) Limited(Upto 29* September 2006), Trend Limited (Upto 29* September 2006), Sk y BillionTrading Limited (Upto 28* February 2006), Videocon Industrial Finance Limited(Upto 29* September 2006) and Gruhaupyogi Electronics Appliances Private Limited(Upto 29* September 2006).The Consolidated financial results also includes interest through Eagle CorporationLimited (subsidiary) in Technologies Display Americas LLC,Thomson DisplayMexicana S.A. de. C.V, VDC Tecnologies S.P.A, Thomson Tubes & Displays S.A,Thomson Displays Polaska S.P.Z.0.0, Thomson Displays Italy Sri. ThomsonGuandong Displays Co. Ltd and Thomson Display R & D Asia.The Com pany holds 41.67% equity interest in Evans Fraser & Co (India) Ltd.Thesame has been accounted in the consolidation.

The C onsolidated financial results have been prepared in line with the requo f Accounting Standard 21 "Consolidated Financial Statem ents", Accounting27 "Financial Reporting of Interests in Joint Ventures" and Accounting 23 "Accounting for Investments in Associates in Consolidated Financial StaCASH FLOW STATEMENT:A s required under Clause 32 of the Listing Agreement with the Stock ExchIndia, a Cash Flow S tatement, as prepared in accordance with the Accountingon Cash Flow Statement (AS 3) issued by the Institute of Chartered AccouIndia, is given along with Balance Sheet and Profit and Loss Account.AUDITORS' REPORT;The Auditors' report is unqualified. The notes to the Accounts referred to in theReport are self explanatory and therefore do not call for any further clarunder Section 217(3) of the Companies Act, 1956.AUDITORS;M/s. Khandelwal Jain & Co., C hartered A ccountants, Mumbai and M/s. KadaChartered Accountants, Ahmednagar, Statutory Auditors of the Company huntil the conclusion of the ensuing Annual General Meeting. The Compreceived certificates from these Statutory Auditors to the e f f e c t that their reappif made, would be w ithin the prescribed limit under Section 224(1 -B) of the CoAct, 1956. The Board recommends their appointment.

C O R P O R A T E GOVEflNANCE:A s required under clause 49 of the Listing Agreement with the Stock ExCorporate Governance and Management Discussion and Analysis Reporto f this Report. The Company is in full compliance with the requirements and disthat have to be made in this regard. The Auditors' certificate confirming coo f the Corporate Governance is attached to the Report on Corporate GoveACKNOWLEDGEMENT:The Directors would like to express their grateful appreciation for the assistco-operation received from the Financial Institutions, Banks an d GovAuthorities.The Directors are happy to place on record their gra titude to the employelevels for their commitment and dedicated efforts.The Directors are also thankful to the shareholders for their continued suppCompany.

For and on Behalf of the Board of D

V.NChairman & Managing

Place: MumbaiDate: 31st January, 2007ANNEXURE TO DIRECTORS' REPORT

STA TEM ENT O F PARTICULARS OF EMPLOYEES PURSUANT TO TH E PROVISIONS OF SECTION 217(2A) OF THE COMPANIES ACT.1956, READ WITH TH E COMPANIES (PARTICUEMPLOYEES) RULES, 1975 AN D FORMING P ART OF THE DIRECTORS' REPORT FOR THE YEAR ENDED 30* SEPTEMBER 2006.

Name of the Employee

M r. Rahul SethiMr. Pawan KalraM r. Jaideep RathoreM r. Shekhar JyotiMr. Sunil TondonMr. Sunil Mehta

Designation/Nature of Duties

Vice President

Joint PresidentAssociate Vice PresidentVice PresidentVice PresidentJoint President

Remuneration

2,807,535

5,168,8082,674,7561,429,3043,646,3603,792,072

Qualifications

B.C o m.B.Com.,Dip.in Computer

B . S C . . M . B . A ,B.Com.,M.B.A.

I.C.S.E.,I.SC,M.Sc,D.B.M.M.A.,P.G.D.Marketing

Management

Ag e

553836444546

Experience

32 Years

20 Years5 Years

21 Years21 Years26 Years

Date ofCommencementof Employment

01.02.1987

12.12.200102.11.200301.04.200601.10.199920.02.2001

Last EmploymentName of theEmployerGedor Ltd.

Baron Industries Ltd.Paramount Global Ltd.

Macotax Consultants Pvtltd.DHL Worldwide Express

BPL Ltd.

PosiHe

C o mmMana

General MGeneral MGeneral MRegionalProject RHe

a) Remuneration includes Basic Salary, Ex-Gratia, H.R.A., Mktg.Allowance, Special Allowance, C.A., L.T.A., Leave Encashment, Medcal Reimbursement, Contribution to Provident Fundb) The Employees are in whole time employment of the Company and the employment is contractual in nature.c) None of the employees listed above is a relative of any director of the Company.Place: M u m b a iDate : 319 January, 2007

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SANSCO SERVICES - Annual Rep or ts Library Se rvices - www.sansco.netA N N U A L R EPO R T 200

CORPORATE GOVERNANCEI. COMPANY'S miQSQP_HYJ3N CQBPOBATE_GOyEBNA(JCE:

Corporate Governance is all about comm itment to values and ethical business conduct. Itis all about how an organization is managed. The C ompany believes that sound corporategovernance is critical to enhance and retain investor's trust.The Company 's philosophy on Corporate Governance is based on:1. Transparency & maintaining high disclosure levels.2. Accountability.3. E q u i t y .4 . Compliance with the laws in all the Countries in which the Company operates.5 . Sustainability.The objective is to institutionalize Corporate Governance practices that go beyondadherence to the extant regulatory framework. In fact, our corporate structure, businessand disclosure practices are aligned to our Corporate Governance philosophy.A s trustees of the Company's shareholders, we relentlessly endeavor to enhance theshareholder wealth while sparing no e f f o r t to deliver long term value to all stakeholders.The Company is in compliance with all the requirements of the corporate governancecode, enshrined in Clause 49 of the Listing Agreement.II. BQAHD_QE_DIBECIQRSi1. Composit ion (as on September 30, 2006)

CategoryPromoter- Executive Director

Non-Executive Non-independentDirector

Non-Executive IndependentDirector

Nominee Director

DirectorsMr. V N Dhoot(Chairman & Managing Director)Mr. P N Dhoot(Whole Time Director)Mr. S K ShelgikarMr. Kuldeep DrabuMr. Didier Trutt( N o m i n e e o f T h o m s o n S . A . )Mr. Claes Johan Bygge(Nominee o f A B B e c t r o l u x ( P u b l . ) )M r. S PadmanabhanMr. S P TalwarMr. A L BongirwarMa j Gen S C N JatarM r. A j ay S a r a f(Nominee ot ICICI Bank Limited)M r. B Ravindranath(Nominee of IDBt L imited)

No. ofDirectors2

4

4

2

The Board comprises of eminent persons having versatile experiences in the field ofmarketing, finance, technical and administration.2. Board/Committee Meetings and Proceedings:

a. Institutionalized decision making process:With a view to institutionalize all corporate affairs and setting up systems andprocedures fo r advance planning for matters requiring discussion/decisions by

Details of Attendance and other Associations:

t h e B o a r d , the Company has defined guidelines for the meetings of theD i r e c t o r s and Committees t h e r e o f . These guidelines seek to systemdecision making process at the meetings of Board/Committees, in anand efficient manner.b . Scheduling an d Selection of Agenda Items:All Board/Committee Members are given notice of the meetings in advmeetings are governed by structured agenda. Th e agenda alone x p l a n a t o r y notes are distributed well in advance.c . Availabili ty o f Information to the Members:

Th e Members have unqualified access to all information availableCompany. In fact, all items in the agenda are supported by detailed bainformation to enable the members to take informed decisions. The ingenerally provided to the Members include:> Annual operating plans an d budgets> Quarterly and Half Yearly and financial results;> Minutes of the meeting of Audit and other Committees to the Boa> Notice of Interest;> Material important litigations, s h o w cause, demand, prosecution annotices;> Sale of material nature, of investments, subsidiaries and assets, not in the normal course of business;> Establishment, operations and Set up of Joint Venture, Subscollaboration etc.,> Divestment of Joint Ventures, Subsidiaries;> Acquisitions/Amalgamation etc.;> Minutes of the Board Meeting. Annu al Genera l Me etings of SCompanies and significant transactions if any;> Details of utilisation of Issue proceeds;> Related Party Transactions.

d. Recording minutes of the proceedings:Minutes o f t h e proceedings o f each board/comm ittee meetings a re recorminutes are circulated amongst all members for their comm ents. The mth e proceedings of the meetings are entered in the minutes book.e. Follow up mechanism:The guidelines fo r the Board/Committee meetings facilitate an e f f e cmeeting follow-up, review and reporting process for the actions decisions of the Board and Committees.f. Compl iance:T h e board periodically reviews the compliance reports to ensure adhall applicable provisions of law, rules and gu idelines.g . Code of conduct:The Company has laid down code of conduct which binds all tmembers a n d senior management o f t h e company. A declaratioChairman and Managing Director to this e f f e c t is appended to this Board Meetings and At tendance:1 7 Board Meetings were held during the year 2005 -06 on the following29.10.2005. 11.11.2005, 19.11.2005, 08.12.2005, 13.12.2005, 2117.01.2006, 30.01,2006, 31.01.2006, 28.02.2006, 20.03.2006, 3120.04.2006, 27.04.2006, 26.05.2006. 10.07.2006 and 3t.07.2006

SI. No.

1234567 I89

10111213

Name of Director

Mr. Venugopal N DhootMr. Pradeepkumar N DhootMr. S. K. ShelgikarM r. S Padmanabhan*Maj. Gen S C N Jatar'M r. A j a y SarafM r. Kuldeep Drabu*Mr. A r u n L. Bongirwar*Mr. S P Talwar*Mr. Claes Johan Bygge*Mr. Peter Birch"Mr. M Chittaranjan K u m a r * *Mr. B Ravindranath"Mr. Didier Trutt*

Whether attendedAGM held on31.03.2006

NoNoN oYe sN oNoNoNoNoNoNoNoNo

Attendance inBoard MeetingsTotal

1717171717 J1717 |1313119

Nil16

Attended1713131544 '7 J5421

Nil2

Other Board

Directorship*.1314N il1313319

Nil11

N il

CommitteeChairmanship*i N il

1N ilN ilNil

" NilNil1

NilN ilNilNil

ComMembNN

NNNN

* Appointed as Director U/s. 257 of the Companies Act, 1956, at the Annual General Meeting held on 31s1 March, 2006."Mr. B Ravindranath was appointed as Nominee of IDBI Ltd., on the Board of the Company on 31" July, 2006 in place of Mr. M Chittaranjan Kumar.* Mr. Peter Birch was appointed as an alternate director to Mr. Claes Johan Bygge. He ceased to be alternate director on 31" March, 2006.+ In accordance with Clause 49 of the Listing Agreement, Membership/Chairmansnips of only the Audit Comm ittees and Shareholders'/Investors Grievance Committee of all Public Limited Companies have been co9 The Directorship held by Directors as mentioned above, do not include Alternate Directorships and Directorships ol Foreign Companies, Section 25 Companies and Private Limited Companies

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SANSCO SERVICES - Annual Rep or ts Library Services - www.sansco.netVIDEOCON IN D U S TR IES LIMITED4 . Brief Details o f Directors seeking appointment/re-appointment:The brief details of directors retiring by rotation and seeking re-appointment and additionaldirectors seeking appointment U/s.257 of the Companies Ac t , 1 9 5 6 , is appended to theNotice convening the 18* Annual General Meeting.III. BOARD COMMITTEES:T h e Board has constituted three committees i.e.,Audit Committee, Shareholders/InvestorsGrievance Committee and Remuneration Committee.1 . Audit Committee:i. Composit ion ( A s o f 3 0 " September, 2006)

Meetings and Attendance:During the financial year under consideration, five meetings of the Committee won 28.10.2005, 08.12.2005, 30.01.2006, 27.04.2006 and 31.07.2006.

Name of the Committee MemberM r . S P TalwarC h a i r m a nM r. A L BongirwarM a j . Gen S C N Jatar

CategoryNon Executive - IndependentNon Executive - IndependentN o n Executive - Independent

During the year under review, the Audit Committee was reconstituted on 8 "1 December2005. Mr. A L Bongirwar & Maj Gen S C N Jatar were appointed in place of Mr. KuldeepDrabu and Mr. S K Shelgikar under the Chairmanship of Mr. S Padmanabhan.Subsequently, again on 31.07.2006 the same was reconstituted where by Mr. S PTalwar was appointed as member and consequently Chairman of the Audit Committeein place o f M r . S Padmanabhan.The Audit Committee comprises of independent directors and financial literate personsh a v i n g vast experience i n t h e area o f finance a n d accounts.Scope of Audit Committee:T h e terms o f reference a re broadly a s under:a. Overall assessment of the Compan y's financial reporting p r o c e s s and the disclosureo f it s financial information to ensure that th e financial statement is correct, sufficienta n d credible.b . Recommending th e appointment o f external auditor, fixation o f audit f e e a n d alsoapproval fo r payment f o r a n y other services rendered b y t h e Auditors.c . Reviewing with management the annual financial statements before submission toth e board, focusing primarily o n :

> Matters required to be included in the Director's Responsibility Statemen t to beincluded'in th e Board's report in terms o f Clause (2AA) o f section 2 1 7 o f t h eCompanies Act, 1956.> Changes, ifany, in accounting policies and practices.> Major accounting entries based on exercise of judgment by management.> Observations if any, in draft audit report.> Significant changes/amendments, if any, arising out of audit.> The going concern assumption.> Compliance with accounting standards.> Qualification in the draft audit report.> Compliance with stock exchange an d legal requirements concerning financials t a t e m e n t s .> Any related party transactions i.e. transactions of the company of material nature,w i t h promoters or the management, their subsidiaries or relatives etc., that ma yhave potential conflict with the interests of company at large.

d . Review of Q u a r t e r l y / Half Yearly unaudited financial results before submission to theAuditors and the Board.e . Reviewing w i t h the management, external and internal auditors, the adequacy ofinternal control systems.f. Reviewing h e adequacy o f internal audit function , including th e structure o f t h e internalaudit department, staffing and seniority of the official heading the department, reportingstructure coverage and frequency of internal audit.g. Discussion with internal auditors any significant findings and follow up there on.h . Reviewing th e findings, if any, o f a n y internal investigations b y t h e internal auditorsi n t o matters where there is suspected fraud o r irregularity o r a failure o f internal controls y s t e m s of a material nature and reporting the matter to the board.i. Discussions with external auditors before the audit commences nature and scope ofaudit a s well a s have post-audit discussion to ascertain a n y area o f concern.j. Reviewing the company 's financial and r i s k management policies.k . T o look into th e reasons fo r substantial defaults, if any, i n t h e payment t o t h e depositors,

debenture holders, shareholders (in case of non-payment of declared dividends) andc r e d i t o r s .I. Financial Statements and Investments made by Subsidiariesm . T o review th e functioning o f Whistle Blower Mechanism, i f a n yT h e Audit Committee also reviews:> Management discussion and analysis of financial conditions and results of operations.> Statem ent of significant related party transactions, if any.> Management Letters/Letters of internal control weaknesses issued by the StatutoryA u d i t o r s ;> Internal Audit Reports relating to internal control weaknesses; and> The appointment, removal and terms of remuneration of the Chief Internal Auditor.

Name of theCommittee Member

M r. Kuldeep Drabu(Upto 8 lh Dec., 2005)M r . S K Shelgikar(Upto 8* Dec., 2005)Mr. S Padmanabhan( u p t o 31 !1 July 2006)Maj Gen S C N Jatar( w e f . , 8 th D e c . , 2005)Mr. A L Bongirwar( w s f . , 8 lh Dec., 2005)Mr. S P Talwar*(wet., 31" July 2006)

Category

Non Executive Non IndependentN o n Executive -Non IndependentN o n Executive - IndependentN^in Executive - IndependentNon Executive - IndependentN o n Executive - Independent

Meetingsheld duringrespectivetenure1

1

5

4

4

N il

Meatt

* Appointed a f t e r committee meeting held on 3 1 st July 2006The Statutory Auditors and the Head of Internal Audit attended and participatemeetings, o n invitation. T h e Company Secretary i s t h e de-facto Secretary o f t h e ComREMUNERATION COMMITTEE:Com p os i t ion (A s o f 3 0 * S ep tem b er , 2 006 )

Name of the MemberMaj Gen S C N JatarChairmanM r. S P TalwarMr . A L Bongirwar

CategoryN o n Executive - IndependeN o n Executive - IndependeNon Executive - Independe

The Committee was reconstituted on 8* December 2005 and 3 1 SI JulyMr. P N D h o o t ceased to be member of Committee w . e . f . , 31" July 2006.Scope of Remuneration Committee:The following ma tters are refe rred to the Remuneration C o m m i t t e e ,> Fixing the remuneration payable to the Directors,> Determining the remuneration policy of the Company; an d> Reviewing the performance of employees an d their compensation.D i r e c t o r s ' Remuneration:(a) The Promoter Directors, Executive Directors, Non-Executive Non-inded i r e c t o r s are not paid any sitting fees. Mr.V.N.Dhoot, Chairman & MDirector and Mr. P.N.Dhoot, Whole-time Director are entitled for remunerterms of their respective appointment(s). However, Mr.V.N.Dhoot and Mr.P.are not drawing any remuneration.(b) The No n-Executive Independent Direc tors are paid only sitting fees for aBoard/Committee meetings. The details of sitting fee paid to Non EIndependent Directors during the year under review are as follows:

Name of DirectorMr. S PadmanabhanMajor General. SCN JatarM r . S P TalwarM r . A L BongirwarMr . A j a y Saraf (favouring:ICICI Bank Limited)Mr. M Chittaranjan Kumar (Favoring: IDBILTD)

Sitting fee paid (Rs)252,250160,500110,000130,25060,25020,000

M e e t i n g s a n d Attendance:One meeting was held on 9* January 2006

Name of the MemberMaj Gen S C N JatarMr. S P TalwarMr. A L Bongi rwarMr. P N Dhoot

Meetings held1111

Meetings att1101

(v ) Stock Opt ions:The Company has not issued any stock options to its Directors.
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