Directors' Report

To the Members,

Your Directors have pleasure in presenting the Twenty-Third Annual Report together with Audited Accounts of the Company for Financial Year ended 31st March, 2003.

FINANCIAL RESULTS

The summarised financial results for the year are as under :

(Rupees in Lacs)

Sales (including trading operations of Rs.113.52 crores) increased to Rs. 545.97 crores as against Rs.512.27 crores (including trading operations of Rs. 142.11 crores) for the previous year. The operating profit has gone up to Rs. 146.03 crores from Rs. 117.94 crores for the previous year. Profit after tax has improved to Rs.64.11 crores from Rs.48.64 crores for the previous year.

DIVIDEND

Considering improved performance of the Company during the year under review, your Directors recommend a dividend @ 22% (Previous Year 20%) on Equity Shares of the Company for year ended 31st March, 2003.

The proposed dividend (including Corporate Dividend Tax) will absorb Rs. 18.62 crores.

MANAGEMENT DISCUSSION AND ANALYSIS

A report on Management Discussion and Analysis (MDA) which is forming part of this Report, inter alia, adequately deals with the operations as also current and future outlook of the Company.

PLANS FOR EXPANSION / DIVERSIFICATION

During the year under review, the Company has enhanced production capacity of Ammonium Nitrate. Doubling the capacity of Concentrated Nitric Acid plant is underway. Towards growth and diversification the Company has been actively evaluating various PSU disinvestment proposals, value added real estate business etc. More details on this has been discussed in MDA Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to provisions of sub-section (2AA) of Section 217 of the Companies Act, 1956 your Directors confirm that :

(i) in the preparation of the Annual Accounts, the applicable accounting standards had been followed alongwith proper explanation relating to material departures;

(ii) the accounting policies selected had been applied consistently and judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year on 31st March, 2003 and of the profit of the Company for that period;

(iii) proper and sufficient care had been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(iv) the annual accounts had been prepared on a going concern basis.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchange, a separate section titled "Corporate Governance" is attached to this Annual report.

SAFETY & ENVIRONMENT

The Company's efforts on safety have been recognised and in appreciation thereof your Company has been awarded "PRASHANSA PATRA" by National Safety Council of India in the year 2002 for developing and implementing very effective management systems and procedures and achieving very good performance in Occupational Safety & Health for assessment period of three years.

As a part of its continued efforts towards environment protection, your Company has taken measures for reducing wastes, effluent and in conservation of natural resources.

INDUSTRIAL RELATIONS

Industrial Relations during the year under review continued to be peaceful.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

As required by the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 the relevant data pertaining to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo are given in Annexure forming part of this Report.

DIRECTORS

During the year, Shri D. C. Mehta was elevated to the position of Vice-Chairman (non-executive) of the Company and Shri S. C. Mehta was appointed as Managing Director of the Company.

Shri A. C. Mehta was appointed as an Additional Director of the Company and holds office up to the date of ensuing Annual General Meeting and is eligible for appointment.

Shri D. C. Mehta and Shri D. Basu are liable to retire by rotation and being eligible, offer themselves for re-appointment.

AUDITORS

M/s. B K Khare & Co., Chartered Accountants, Mumbai, the Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting. The Company has received a letter from them to the effect that their appointment, if made, by the Company for the year 2003-04 will be within the limit prescribed under Section 224 (1-B) of the Companies Act, 1956. The Board of Directors commends their re-appointment.

PERSONNEL

As required by the provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of employees are set out in the Annexure to the Directors' Report. However, as per the provisions of Section 219(1)(b)(iv) of the said Act, the annual report and accounts are being sent to all members of the Company excluding the aforesaid information. Any member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

ACKNOWLEDGEMENT

Your Directors wish to place on record their sincere appreciation to the financial institutions led by IDBI and the consortium of banks led by State Bank of India and Company's clients, vendors and investors for their continued support during the year.

Your Directors are also pleased to record their appreciation for the dedication and contribution made by employees at all levels who, through their competence and hard work, have enabled your Company achieve better performance and look forward to their support in the future as well.

For and on behalf of the Board,
C. K. Mehta
Chairman
Dated 22^nd May, 2003
Mumbai