1. Revenue

Revenue for the year 2008 was Rs.508.56 Crs.  as against Rs. 430.33 Crs. which is due to improved realization, channel mix and by optimizing investments in the brand building   arena.  

1.1 Break up of Revenues by Business Segments

Detergents & Cleansers business accounted for 64% of total turnover, while Body Care business clocked 23% of turnover and the balance 13% was from ‘others’ comprising Toothpaste, Hair Care and Zeolite.

2. Profit Margin

Profit Before Tax and Extraordinary items for the year stands at Rs.4.19 Crs. as compared to Rs.14.52 Crs. 

3. Costs & Expenses

3.1 Cost of Sales

The increase in cost of sales is mainly due to high input price for all the segments during 2nd and 3rd quarter of the year as a consequence of unprecedented increase in crud oil as well as vegetable oil prices. Consumer price for the products were taken-up in line with competition, however entire increase in input cost could not be passed to the consumers.
 
3.2 Personnel Costs

The increase in the Personnel costs is mainly due to additional provisions made towards retrial benefits (viz. Leave Salary etc) in line with revised AS-15.
 
3.3 Freight and handling cost

The cost increase is on account of higher sales coupled with upward revision in the transportation cost due fuel costs increase.

3.4 Interest

Interest cost have shown an increase due to the higher borrowings and the firming of the interest rates during the year. Efforts are being made to optimize the  interest costs .

4.  Tax Expenses

In view of carry forward lncome tax loss no provision for income tax has been made.  Tax Expenses represents Minimum alternative Tax.

1. Net Worth

     Net worth of the Company has increased by Rs.3.72 Crs. during the year.

2. Debts

Average debt continued to show an increasing trend due to the high working capital requirements.

3. Fixed Assets & Capital Expenditure

The Gross Fixed Assets has marginally increased due to the selective investments in plant & machinery for upgradations in addition to computer hardware updations.

4. Current Assets

4.1 Inventory

Inventory of Raw materials shows significant increase due to strategic buying of certain key materials and overall increase in the price. Finished Goods recorded increase which is commensurate with the increase in the sales.

4.2 Sundry Debtors

The increase in the level of  sundry debtors is attributed to higher receivables. 
 
4.3 Net Current Assets

The increase in the net current assets to Rs.265.74 Crs. is on account of enhanced business. 

Export Turnover has registered a substantial growth from Rs.5.48 Crs  in 2007  to  Rs.10.98 Crs.  in 2008.

The Financial Statements prepared are in conformity with the Indian Accounting Standards and Generally Accepted Accounting Principles (GAAP) in India.  The above statement fully meet the requirements of Companies Act, 1956.    

The Management of Henkel India Ltd. accepts responsibility for the integrity and objectivity of these financial statements, as well as for estimates and judgment relating to matters not concluded by the year end.  The management believes that the financial statements reflect fairly the form and substance of transactions and reasonably present the Company’s financial condition, and results of operations.

To ensure the above, the Company has installed internal control system across the organisation which is reviewed, evaluated and updated on a regular basis.  Periodic Internal Audits have been conducted to ensure that the Company’s established systems, policies and procedures have been followed.

M/s CNGSN & Associates, Chartered Accountants, Chennai have audited the Financial Statements enclosed.  M/s Henkel KGaA has laid  out procedures to ensure that the powers vested in the executive management are used with care and responsibility. 

The Audit Committee periodically meets the Chief Financial Officer, the Internal Auditors and the Statutory Auditors to review the manner in which they are performing their responsibilities, and to discuss audit programme and progress therein, internal controls and financial reporting issues. To ensure complete independence, Statutory Auditors, Internal Auditors / representatives of Internal Audit Department  have full and free access to the members of the Audit Committee to discuss any matter of substance.

The Company has adequate internal control procedures commensurate with its size and nature of business. The internal control manual defines detailed procedures and guidelines, authorisation and approval procedures. Audit Committee meets on a regular basis where the Internal Audit Reports are tabled and detailed discussion take place for implementing corrective actions and recommendation of the Audit Report. 

Corporate Governance which has become the integral part of business operations encompasses the key elements of corporate governance such as integrity, transparency, fairness, and adoption of highest standards of business ethics to benefit the interest of the stakeholders.   The Company has been practicing the principles of good Corporate Governance by adopting best global practices for corporate governance, disclosure standards while protecting the interests of stakeholders in every business decision. The Company endeavor to achieve highest level of transparency, integrity and equity in all its operations, monitors continuously the developments in the areas of Corporate Governance and leads in developing & implementing the best Corporate Governance Practices to meet stakeholders aspirations and societal  expectations.

HENKEL is managed by the Board of Directors, which formulates strategies, policies, and procedures and reviews its performance periodically. The Chairman, Dr.A.C.Muthiah, is a Non-Executive Director and represents one of the Promoter group. One-third of the Board comprises  Non-Executive Independent Directors meeting the criteria for independence under the Listing Agreement with the Stock Exchanges. Mr.A.Satish Kumar is the Managing Director of the Company and the only Executive Director on the Board. The business of the Company is carried on by the Managing Director under the overall supervision and control of the Board of Directors. There is no pecuniary relationship or transactions of the Non-Executive Directors vis-à-vis the Company during the year under review.

b. The composition of Board and attendance of Directors:

c. Number of Board meetings

The Board Meetings are held atleast four times a year for each quarter.  Board of Directors met 4 times during the year 2008 viz, 27th Feb’08, 20th June’08, 23rd Sept’08 & 10th Dec’08.  The intervening period between two Board meetings was well within the maximum gap of four months as prescribed under clause-49. The annual calendar of meetings is broadly determined at the beginning of each year.

d. Board Agenda

The meetings are governed by a structured Agenda. All Agenda items are backed by comprehensive background information to enable the Board to take informed decisions.  Agenda papers are general circulated seven workings days prior to the Board Meeting. The governance include an effective post meeting follow-up, review and reporting process for action taken/pending on the decisions of the Board and the Committees.

The Board has constituted various committees for smooth and efficient operation of the Company viz., The Finance Committee, Audit Committee, Remuneration Committee, Share Transfer and Investor Grievance Redressal Committee and Capital Issues, Allotment, Investment & Borrowing Committee. The terms of reference of the committees are laid down by the Board from time to time. Meetings of each Board Committees are convened by the Chairman of the respective Committees. The minutes of the meetings of the Committee are placed before the subsequent meeting of the Board. The role, composition of the Committees  and other information of the few Committees are  provided below:

A. FINANCE COMMITTEE

The Finance Committee supervise and monitor the financial performance, control and reporting of the Company. The meetings of Finance committee are also attended by the auditors and other senior personnel of the Company.

Terms of Reference

The Committee was constituted by the Board of Directors and its scope interalia includes the following :

• Considering, recommending the Unaudited/Audited Financial Statements, Segment Report, Limited Audit Review Report and other documents to the Board/Committee for their consideration and to approve the same for publication in the Newspapers whenever the same is warranted
• To make such statement in any document, advertisement or announcement that may be issued, released or published in relevance to the delegated functions.
  

Composition

The Finance Committee comprises Four members, out of which Two are Independent Directors. The members of the Finance Committee have sound financial management expertise.  During the year, the Committee met on four occasions on 27/2/08, 29/4/08, 29/7/08 & 25/10/08. Mr.Rajeeva Prakash, Company Secretary acts as the Secretary to the meeting of the Committee. The meetings of Finance Committee are also attended by the Auditors and other senior personnel of the Company.

The Audit Committee primarily oversees the Company’s financial reporting process and disclosure of its financial information to ensure the correctness and adequacy. The Committee provides reassurance to the Board on the existence of effective internal control system.

Terms of Reference

The Committee was constituted by the Board of Directors on 29th April 2005 and its scope interalia includes the following :

• Overseeing of the Company’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible.
• Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of the statutory auditor and the fixation of audit fees.
• Reviewing, with the management, performance of statutory and internal auditors, and adequacy of the internal control systems.
• Discussion with internal auditors any significant findings and follow up there on.
  

Composition

The Audit Committee comprises 3 members, all being Non-executive Directors of which 2 are independent. All members of Audit Committee have sound financial management expertise.  During the year, the Committee met on two occasions on 27/2/08 & 25/10/08. Mr.Rajeeva Prakash, Company Secretary is the Secretary to the Committee. The meetings of audit committee are also attended by the auditors and other senior personnel of the Company. The recommendations of the Audit Committee are accepted and implemented by the Board.

The Committee was constituted on 29th Apr’05 to decide the Company’s policy on specific remuneration packages for executive and non-executive Directors on the Board. The Committee has also been empowered to recommend the periodic increments in salary and annual incentives of the Executive Directors. The Committee did not meet during 2008. 

Composition

The Remuneration Committee comprises of Three members. All the members of Remuneration Committee are Non-Executive and Independent Directors. Mr.N.Rajeeva Prakash, Company Secretary acts as Secretary to the Committee.

Terms of Reference

The terms of reference of the Share Transfer & Investor Grievance Redressal Committee includes monitoring the work related to transfer, transmission, dematerialization, rematerialisation,  sub-division  and  consolidation of shares of the Company and also to ensure that all the investor’s grievance  and complaints are redressed expeditiously to strengthen the Investor’s relations.

Composition

The Committee comprises Three members, of which Two are Non-Executive Independent directors. The Committee met on 24 occasions during the year. 

Related party transaction during the year has been disclosed in the annual report elsewhere  as required under Accounting Standard 18 issued by the Institute of Chartered Accountants of India. There have been no non-compliance by the Company or penalty or strictures imposed on the Company by the Stock exchange or SEBI or any statutory authority, on any matter related to capital markets, during the last 3 years.  In the preparation of the financial statements, the Company has followed the Accounting Standards issued by the Institute of Chartered Accountants of India. The significant accounting policies which are consistently applied are set out in the Annexure to Notes to the Accounts.

The Financial results of the Company are published  in compliance with the requirements of  Clause 41 of the listing agreement. The financial results and the press releases are posted on the Company’s website. i.e.,  www.henkel-india.com.

Details of publication of Quarterly Financial Results during the year 2008 are as follows:

The Board of Directors of the Company had laid down a Code of Conduct for all Board Members and Senior Management of the Company and this Code of Conduct was adopted as the Henkel India Code of Conduct at the Board Meeting held on 15th Dec’05. This code is derived from the principles of good corporate governance, good corporate citizenship and high ethical standards  and is applicable to all  Directors,  Senior Management and Employees of the Company.  All Directors and Senior Management Personnel of the Company have affirmed compliance with the Henkel’s Code of Conduct for the financial year ended 31/12/08 as required under Clause-49 of the Listing Agreement.

Management’s Discussion and Analysis Report is given elsewhere in this report.

The Company has one unlisted subsidiary Company namely Henkel Marketing India Limited with its Registered Office at Chennai. As required by Clause 49 of the Listing Agreement, Mr.Sukhendu Ray, an Independent Director of Henkel India Limited, the Holding Company has been appointed as a Director on the Board of the subsidiary. The minutes of the Board Meetings of unlisted Subsidiary Company are considered and taken on record in the Board Meetings of the Holding Company.

The Company has adopted Risk Management Procedures under the guidance of its Promoter namely, Henkel KGaA, Germany known as Corporate Standard Risk Reporting Process according to which detailed procedures are laid down for risk assessment and minimization. The Company ensures that the executive management controls risks through means of a properly defined framework. Mr.Satish Kumar, Managing Director of the Company has been nominated by the Board to ensure compliance with the procedures laid down and reporting process.

• Registered Office of the Company        
  TPL House,  No.3,
  Cenotaph Road, Teynampet, Chennai 600 018.
  Phone :044-24330089
  E mail: www.henkelindia.com
  
  
  
• Forthcoming Annual General Meeting 
  September 2009

Book Closure Dates

• 19th June 2009 to 26th June 2009 (both days inclusive)

Listing on Stock Exchanges

• The shares of the Company are listed on Bombay and Madras Stock Exchanges. The Annual Listing fees in respect of the shares of the Company for the financial year 2007-2008 has been paid by the Company promptly.

• National Securities Depository Limited (NSDL)
  Central Depository Services (India) Limited (CDSL)
  ISIN : INE099H01019

A Committee constituted for this purpose interalia approves transfers in the physical form.  As per the directions of SEBI, the Company immediately on transfer of shares, sends letters to the investors, in the prescribed format, informing them about the simultaneous transfer and dematerialisation option available for the shares transferred in their names.

SEBI mandated compulsory dematerialization of shares for all purpose of trading through registered channels. As of date 5,26,54,564 Shares of the Company held by the Shareholders are in demat form aggregating 45.21% of the total equity Paid Up Capital. Out of balance 55% of shares, 51% of shares are held by the company's Foreign Promoter Henkel KGaA on physical mode and as such only 5% of shares are in the physical mode with the public shareholders.  The Company has signed agreements with both National Securities Depository Limited (NSDL) and with Central Depository Services (India) Limited (CDSL) to provide the facility of holding equity shares in dematerialised form.

The Company has not issued any Global Depository Receipt / American Depository Receipt / Warrant or any convertible instruments pending conversion or any other instrument likely to impact the equity share capital of the Company.

Certificate from the practicing Company secretary M/s. N.Sridharan Associates, Chennai confirming compliance certificate with the conditions of corporate governance as stipulated under clause 49 of the listing agreement forms part of the Annual Report.  

N.Rajeeva Prakash.
Company Secretary,
Henkel India Limited
‘TPL  House, No. 3 Cenotaph Road,
Teynampet, Chennai 600 018
Phone: 044-24330089
E-mail: rajeeva.n.prakash@henkel.com

The Company Secretary confirms that the Company has

1. Maintained all books of accounts and statutory registers
2. Filed all forms and returns and furnished all necessary particulars to the Registrar of Companies, and / or authorities as prescribed under the Companies Act, 1956
3. Issued all Notices required to be given for Board Meetings and General Meetings within the time limit prescribed by the Act
4. Conducted the Board Meetings and Annual General Meetings as per the Companies Act, 1956
5. Effected Share Transfers and dispatched the certificates within the time limit prescribed by various authorities
6. Not exceeded the borrowing powers

The Company has also complied with the regulations prescribed by the Stock Exchanges, SEBI and other Statutory Authorities and also the Statutory requirements under the Companies Act, 1956 and other applicable statutes in force.

N. Rajeeva Prakash
Company Secretary

Place  :   Chennai
Dated :   31st Mar’09
 

To The Shareholders of Henkel India Ltd

We have examined the compliance of conditions of corporate governance by Henkel India Ltd, for the year ended on 31st December, 2008 as stipulated in clause 49 of the Listing Agreement of the said Company with Stock Exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to review of  procedures and implementation thereof, adopted  by the Company for ensuring the compliance of the conditions of corporate governance as stipulated in the said clause. It is neither an audit nor an expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied in all material respects with the conditions of Corporate Governance as stipulated in clause 49 of  the above-mentioned Listing Agreement.

We state that no investor grievances are pending for a period exceeding one month against the Company as per the records maintained by the Shareholder Grievance Committee.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

N.SRIDHARAN ASSOCIATES
PRACTISING COMPANY SECRETARIES

Chennai
Dt. 31st Mar’09

To The Shareholders of Henkel India Ltd.

Pursuant to Clause 49 (1) (D) (ii), I hereby confirm that, for the financial year ended 31st December 2007, all the Board Members and the Senior Management Personnel have affirmed compliance with the Code of Conduct framed by the Company. 

A.Satish Kumar
Managing Director

Place : Chennai         
Dated : 31st Mar’09     

Mr.A.Satish Kumar, Managing Director and Mr.Debasis Saha, Chief Financial Officer of the Company have certified to the Board that:

1. review of financial statements and the cash flow statement for the year  ended 31/12/07 had been done and that to the best of their knowledge and belief:

i. these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading;

ii. these statements together present a true and fair view of the company’s affairs and are in compliance with existing accounting standards, applicable laws and regulations.

2. to the best of their knowledge and belief, no transactions entered into by the   Company during the year which are fraudulent, illegal or violative of the Company’s code of conduct. 

3. they accept responsibility for establishing and maintaining internal controls for financial reporting and that they have evaluated the effectiveness of internal control systems of the company pertaining to financial reporting and there are no deficiencies in the design or operation of internal control. 

4.  they have indicated to the Auditors and the Audit Committee, that there are no

i. significant changes in internal control during the year

ii. significant changes in accounting policies during the year

iii. instances of significant fraud of which they become aware of or the involvement therein, if any, by the management or an employee having a significant role in the company’s internal control system. 

      

Debasis Saha    
Chief Financial Officer   

A.Satish Kumar
Managing Director

Place : Chennai     
Dated :31st Mar’09